Neither Extravagant Nor Miserly

THE BUDGET

It would be well-nigh impossible, complained President Johnson during his long sessions with Budget Director Kermit Gordon at the LBJ Ranch, to squeeze Government spending next year to less than $100 billion. There was no magic in the arbitrary $100 billion figure. Having mentioned it, however, Johnson was able to display a flourish of frugality when he sent Congress a budget this week calling for $99.7 billion.

That was still a record high. But, wrote the President, "the budget provides reasonably for our needs. It is not extravagant. Neither is it miserly." As the vehicle meant to take the U.S. on its first mile toward the Great Society, it was rather remarkable. It called for an increase of $2.2 billion above total spending; yet it anticipates a deficit of $1 billion lower than this year's estimated $6.3 billion. It included vast new spending requests for health, education and poverty programs, adding up to a total increase of $3.6 billion, or 48.6%, in Government spending for general welfare; yet it promised substantial cuts in consumer excise taxes.

Whittling. And just how might this bit of fiscal sleight of hand be accomplished? For one thing, Johnson has whittled away $300 million from military spending (see Defense), bringing his yearly request to $49 billion.*

Cuts in nondefense spending amounted to a hefty,$2.1 billion. Some $730 million was trimmed from Veterans Administration expenditures alone, including a proposed shutdown of 14 VA hospitals ("heartless" and "an outrage," said Senate Majority Leader Mike Mansfield). Other economies ranged from a $430 million cut in agricultural price supports to an estimated $4,000,000 saving from a ban on purchases of new filing cabinets by federal agencies.

In addition, Johnson proposed to raise some $240 million in new revenues by hiking certain "user" taxes--including an additional 2-c--per-gallon levy on commercial aviation gasoline and a new 2% tax on air freight. But above all, the President is counting on increased spending, both private and governmental, to keep the economy in high gear and thus generate increases in taxable personal income and corporate profits.

One Down, One Up. New consumer spending, for instance, should result from the President's proposed $1.8 billion cut in excise taxes. Likely to be eliminated are taxes on such items as leather goods, furs, toiletries and cameras.

The economy should also be stimulated by certain Government expenditures that, under Washington bookkeeping conventions, do not show up in the headline-making administrative budget, but do appear in the "national income account budget"--in effect, a separate working budget that includes Government trust funds for special purposes. Among these: the social security trust fund, which would increase its outlays by $2.1 billion next fiscal year, partially financed by a 1.25% increase in the employer-employee payroll tax. While the administrative budget anticipates a decreased deficit, the "national income accounts budget" will show a deficit increase of an estimated $1 billion.

All this, according to Administration economists, will help boost gross national product to $660 billion, a $37.7 billion gain. Personal income is expected to rise by $28.6 billion to $520 billion, and corporate profits by $3.9 billion to $61 billion--that is, if the economy steams ahead past mid-1965, the point at which the extra fuel provided by last year's tax cut will be all but spent.

*Such semimilitary expenditures as armed-services support of the Atomic Energy Commission and Selective Service administration bring the total national defense request to $51.6 billion.

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