Conversation 111-004

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Is everybody?

I've already checked that out, sir.

Everyone looks pretty good now.

You can see me.

This is a tiny channel.

If you could lean forward one inch.

That's it, bud.

That's Marcus.

Now, I'm going to make three shots.

I'm going to make one right now.

Look at me.

Now, what are you trying to do?

The gentleman below me is doing black and white, and I'm doing it in color.

So pay attention to me now.

And there it is again.

And this will be the final shot, sir.

Stand by.

All right.

Stand by that, Atkins.

Fine.

Are you going to hold the rest of them?

Yes, sir.

Alright, let's try one more gentleman.

And number three will be the last one, gentlemen.

Notice I'm standing under the cell phone cabinet.

Every member of the cabinet will receive one when we have the bill.

Because we have the budget on.

We are starting late at night because of my unfortunate appointment.

And I'm just getting started.

We'll have to leave at 3 or 6.

So I've never heard of budget freezing.

It didn't take more than three hours.

So would you do this right now?

That's why you have to take more time.

But before we do so, I would like to say a word in this regard to what you have in front of you here.

This is looking a little good.

It's very nice to meet you.

Have a nice day.

The vet stronger I knew, which is what I've been attending over the last four years, is a four-year count.

And, uh, I, uh, uh, also learned that you can't see people here, although it's good to know.

We used to have a calendar on the wall which simply indicated how many days to the election.

So it comes down to 60 days, 50 days, and so on.

So the whole purpose of that of course is to indicate that every day counts and you only have this many days left.

Now, it happens that from the 20th of January, we had 4,361 days, not one day more, not one day less, in the office to do everything we have to do, and that isn't very much time.

We've already wasted three to four days.

I don't think yesterday was the least of it.

But anyway, today that we've got 14 and 57 days, you don't have to use this counter-incursion system, no matter what you want.

But I am going to use it this way.

We'll look at that day and I'll say, now, what did I do today?

I just, without any, without any say, I don't want the Vice President to get any ideas about what I'm about now to say.

I just...

Frankly, when President Johnson died of a vaccine, I found that this is the first time since January the 5th, 1973, 20 years ago, that we have not had a former president living.

That was the day that a coolie died.

Also, checking former presidents of the United States, I find that the day of the greatest mortality happened to be in the 60s.

And having just passed that threshold, Bill, just approaching, and I should tell you, some of you may not remember this, but it, uh, but, uh, T. Barr died in 1969 when he was only 61.

He left the country.

Uh, not, uh, Coolidge was 61.

He, uh, Wilson was 61 in 1924.

And, uh, while we all think that the, uh, supporters are impressive, Chris Jackson was quite impressive.

He was 63.

So, uh, it's, it's, so when anybody is 60, you know, it's, uh, it's Bill and I, and you know, it's, uh, you're, you're about past the age that, uh, you is now.

Whenever you're 60, it means your days are numbered.

So that's what I'm thinking of.

Because here we are looking forward.

So I think that every day, maybe, I think we should think of this cabinet room and everything we do now, that every day could be the last.

I don't say this in any sense of, well, it's going to be terrible, but it's great.

If you think that every day is going to be the last, you won't wait.

So that's why you get these calendars, and I'll send you the bills on those too.

They're not over the hill.

But, uh, now in regard to the budget, uh, fortunately, about half of the cabinet here has sat through most part of the session.

Bill and I have sat through the darn things.

It's the most boring.

It is an interesting exercise in the world to hear about the budget.

You never have enough, no matter whether the budget is an expansionary budget or, as we call them, a state budget.

Now, I'm concerned that unless there's a budget of $250 billion, it's never going to be.

And I can point out that the budget for 73, although it's a cutback, is $15 million more than the budget for 72, and the budget for 74 is $15 million more than the budget for 73.

And yet, because the way everything grows and grows and grows, particularly in the parking lot of Elliott, which is on the left, and which is uncontrolled, we have a terrible problem.

And also the way things are added to the economy.

In order to get this thing presented properly, I'll subscribe and read again.

Let me tell you what I, from a political standpoint, we all have to remember.

Government spending is a lousy issue.

People earn more spending.

They really are for it because they like this program or that.

And anybody who's a smart politician will figure what is going to be spent.

If it's a spending, they say, well, it's my program.

I put in all those things to take care of it.

I put in water for those personalities and all the rest, and so forth and so on.

Raising taxes, however, is allowed because they're a good issue.

In other words, being against March spending is a lousy issue.

Being against March taxes is a good issue.

Now, looking for a balanced budget isn't a possible issue.

It's only good for those who have got no choice but to go for a second.

So, the balanced budget we do, whether it's a balanced full employment budget, which is ours,

shall we say, mirror games to justify having an unbalanced budget, or whether it is an unbalanced budget in a traditional sense, in a conventional sense that we used to talk about when we were out of power.

Whatever the case might be, what we have to remember is that the balanced budget, the reason we are for it is that it

This is the only way we can avoid, particularly as the economy is expanding, the inflationary pressures that will raise prices.

And at the present time, that means it's the only way we can avoid higher taxes.

However, as all of you present this thing publicly, within your own shop, it's going to be in there.

There's going to be cuts made.

Perverts are being cut.

There's going to be hard-heartedness.

But in terms of presenting the public with

Whenever the issue comes up, you can never win fighting on the issue of whether or not you ought to have schools, health care, or families that earn $30,000 a year or more, which we now provide.

You'll never win on that issue.

As people say, when you even know they aren't $30,000, the kid's only half pound.

It's good for their team.

Probably isn't, but very good.

So, I think of all my life, I have more dentistry than anybody else.

The other papayas, you plan on it, and the other guy says,

kids, regardless of whether or not they are playing.

You say, okay, fine.

But you add all that up together, and the question is, do you want all those programs and higher taxes?

Or do you want us to make some cuts and avoid higher taxes?

On that issue, you can win.

If you ever get caught debating the programs, you will lose.

Unless it is a particularly lousy program.

And most of them are lousy, but it's hard to convince people of them.

I'm just trying to put it in the political context as best I can.

Now, Cap, of course, will now go over this budget and tell us that this is some sort of a bizarre, but I'd simply say that all of us must constantly seek the attention, if we're going to do this in one second, that the purpose of our budget is to avoid an attack.

We, by cutting our budget back, we are avoiding putting more taxes on the backs of the American people for 1973, for 1974, and even for 1975.

And that is worth doing.

The people don't want to pay more taxes.

They do like more government programs if they are for them.

And that's about the way it's set up now.

Having said that, can't you tell us why you think we should debate it on the other ground?

I'm trying to balance it out a little.

And Rod was a politician of your grade?

Oh, absolutely.

How about you, George, of your grade?

It's the fact that you understand that you can't win on the fact that the president is.

Yeah.

Well, the fact is by the purpose, too.

Mr. President, Mr. Vice President, Mr. Chairman, I think that pretty well completes the budget briefing.

I don't know if I need to say anything else on this really terrible subject.

I agree it is pretty difficult.

I told the President I thought three federal budgets were enough, and he agreed to the end.

I thought I was going home, but here we are.

And Roy is right in front of me.

He's kind of...

get some of the labor, I'm afraid, of the problems involved.

This is the standard when we can't open a budget briefing without this department.

This is the one that shows the rate of injuries you are speaking of.

Outlays are still seen.

A bit ahead of receipts.

We are still running at about a $24 billion deficit actual.

Just about $3 billion in full-appointment deficit for the current fiscal year.

That $24-$22 billion deficit may be cut to $12 billion in 1974.

And we have prepared the figures for 1975.

It will show that we are just about exactly even in 1975.

We'll come to that in a moment.

It will be balanced in full employment in 1974.

Your directions to be in July in this room were to pull this through 50 and to hold the 1974 budget to full-blown balance and nowhere to the economic advisor.

I'm only doing this so that people will have the answer.

The economic advisor is telling us that 1974 will not be a year until we will have full-blown.

Yes, sir.

They are.

What's the matter with that?

That's what I was wondering while you were...

I think they're doing very well.

We will be...

where the estimates range from 5 to 4, 6 through the fiscal year.

And we will be at full employment balance as directed.

We will be at the action rate of just about 12% compared to 24% in the previous year.

Let the record show, incidentally, that the Secretary of Labor and the Bureau of Labor, which is now under his, I trust, watchful eye, had to revise their on-plan figure down in the last month, 5.2 to 5.1.

There was kind of a loss in the last, what was that, a seasonal deal?

Well, they had an approach that would only come out with our report.

Oh, right.

That's what it is.

That'll be a big amount of reports in the last month's figure.

It makes her a little less of a liar.

5.2, the neighborhood's got to be real big.

5.1, it really is the neighborhood.

The budget is for at least Monday, June, January 29th.

This chart shows that we are not spending more of the gross national product.

In fact, a little bit less than we have over the period over the last decade.

So that we went up as the Vietnam War escalated.

We had peaked about a little bit for the jump there for fiscal stipulations.

Now we're down right about, just about at that 20% of the GMT is the federal budget.

State and local government takes us to about 34%.

So 34% of the GMT is government.

This shows the results of the President's directions.

Could I just say there, trying to make a philosophical point, that people do a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and a lot of good, and

And you've got to start watching out if you want to know that.

The number creeps up to 40% to 45%.

It's just another reason why people are going to be working more for the government than for themselves.

So that's another reason to keep this down.

Now, the purpose of my group is to make the medicine plus the plant, which nevertheless, I think is a good point.

34% of everything we produce goes for government.

That's another reason for holding the line on taxes.

Not spending, not spending.

But Mr. President, they'd also like to work and pay taxes.

That's right.

They've got a job.

That's right.

That's what's fine, sir.

This shows the results of the President's direction to...

all the all the all the all the

by June, we knew from the bills pending and from the attitudes of the Congress that it would probably go to 260.

If we spent everything that had been appropriated when the Congress adjourned October 27, it would have been 261 billion, which instead of a $24 billion deficit would have been a $35 billion deficit.

And we moved back down to 250 as a result of the actions taken in this budget.

And that's what we're now looking at for the balance of this year.

This shows, again, what would have happened if we left the 73 alone.

If the 73 had gone 261 bit instead of 250, we're now reporting.

then just on a straight continuation basis with no new programs, we would have gone to 288.

But because we made that $11 billion saving this year, that has the effect of a $19 billion saving on fiscal 74, the budget that's going on Monday.

And if that in turn had been allowed to go unconstrained, then we would have gone to 312 with a deficit again of about $30 billion, a little over $30 billion in actual deficit this year.

So that's saving, that shows how it functions from 11 to 19, 24 billion, just because we did make this very typical reduction exercise here in 1973.

And as a result of that, we were looking at a full fund balance instead of 288, 269 for 1974, 268, that's 268 actually.

And I can't, because we did something this year we had not done before, and which incidentally is the principle I have in the budget that hasn't yet leaked, Mr. President, and we hope it will not between now and Monday, and that is we did a very complete estimate of 1975, much more so than normal.

And that shows that we will encamp all the 288, which again will be in full employment balance, actually a small full employment surplus.

And as far as I can see, we have the normal growth of revenue taxable dollars during that year.

If we hadn't done it, we would have had a $312 billion outlays with no new programs, just because of the growth of what would have happened if we'd left this figure alone.

And that's my take.

It's related to what the paper on this slide is.

That means the actual balance is what we really want.

Actual balance is what we really want.

Okay, now let's go see tax reduction.

Mr. President, can I interject?

That is a tremendous innovation in the budget process.

And it was very tempting, as we argue about this, remember, to try to protect the economy and say, well, we'll be involved by then.

And therefore, we can project a balanced plan and maybe even a surplus or something of that kind.

But the fact is everybody who's observed economists knows we have enough trouble trying to predict what the economists are going to do a year from now, not a lot, two, three years from now.

And so it was very deliberately done to try to

put a forecast in place, but to leave ourselves with the flexibility to try to manage the budget in accordance with whatever the economic problems turn out to be.

As we approach the budget, we don't see it as something that we're not smart enough to predict.

This figure is going to be in the budget in the 75 figure.

This whole climate outage will be outward, but we will not predict a prediction.

or what the receipts will be.

Because that might be, as we were saying, we are forecasting what the economy is going to be like.

We want it where it has to be.

The normal growth of the actual revenues for this year, this would just about do that.

So within this room, we can say we would be just about, as far as we can tell now, at actual value.

This shows the other form of stimulation that we

We stimulated the economy by expanding expenditures.

We also stimulated it by reducing taxes.

And again, though it's not all that easy to figure, it's exactly what the total tax taken would have been in 74 if we had left the tax rates alone.

We have made this deep a reduction.

And given certain assumptions, which I think are fair enough, we can say that we have had a reduction in the individual income taxes.

of $25 million a year.

We would actually, as far as we can tell, GMT and other things that run just about the same, we would have taken in $25 billion more in taxes this year than we are now, which, oddly enough, is just about exactly the size of the actual tax.

Have we not had our tax bill from 1989?

Yes, sir.

And the other reductions that were made since the result of the 71 college shows that it isn't all quite that good, because there has been an increase in payroll taxes, social security taxes,

It had gone up just about, in 1974, it had gone up just about $20 billion.

So at the very least, it had been a reduction of $5 billion in total taxes.

Individual income taxes down about $25 billion, Social Security taxes.

At the end of this, in fiscal 74, it will be up just about $20 billion.

Benefits have gone up just about the same, about $21 billion.

And Social Security benefits have actually increased something like 87% since 1970.

And going back for a moment to that $25 billion figure you said, I think, that had taxes remained at the earlier higher level,

they would have been enough to eliminate the death row.

Isn't it also conjecturally true that tax taxes would have had a higher rate of economic growth, and therefore the EU would not have been enough to...

I think that's right.

It's based on a lot of, quite a lot of different assumptions, but I'm still projecting myself back to October.

It's still fair enough to say that we did cut individual income taxes.

President, we were asking a question that turned off the theory behind the desirability in the standpoint of economic growth, and so on, of having reduced taxes.

It isn't, and many people, myself included, think it's a better way of simulating because it leaves the dollars in the people's pockets to spend as they wish.

Let me ask you this, actually.

What is the...

I'm not sure if you've talked to me about this.

I don't know, of course.

I'm thinking of the social security.

Are they aware of that?

Is that?

Of course, it is a take-home pay, but I'm just wondering.

Remember, when we went and we put this in, we said, this is a tax bill.

I'm just wondering, I want you to react, what did your own foal tell you?

Did they, where they were, did they mind it?

Did they know it was more?

Most of them didn't like it when it happened this year.

Uh-huh.

They were aware.

They saw that chunk come out of their face.

They're more sophisticated in these areas now than they have been 10 years ago.

But they didn't like it because they saw the money come out, and they knew it was going to come for something far down the road when they might have gotten it around.

About 8 million beneficiaries of Social Security and about 60 million and 70 million contributed to it.

And it's now a little over half of the income tax.

So it totaled pay.

In some brackets, it's almost as much as or more than the income tax.

You see the great... What is the income tax?

What is the income tax?

The great attempt to take something out of Congress, and of course we signed this with Mike Winkler and I didn't consider it reluctance.

But we want to take a hard look at the future.

Congress always jacks up that position.

But let's remember that every time we jack up those things, that social security, the arrest and so forth and that, it takes us right out of those people who are, and they're earning here, around 25 to 40 bucks a decade.

That's really gets them hard, especially, I don't think it's due to the, especially the self-employed that pay all the money off.

Well, a very good example is the president of the problem that we've been talking about with congressional procedures, that they've never taken an overall look at the whole thing.

We talked about the $20 million increase.

12 billion of that $20 billion increase in Social Security benefits so that you have...

If anybody looked at it overall and said, should we put that much of the available new money that we can spend without having a tax increase into Social Security benefits on top of all that it had done before, probably the answer would have been no.

But nobody in the Congress looks at me overall.

This one shows the changing priorities in terms of dollars.

Defense has remained just about level since 1960-69, almost exactly level with dollar amounts.

It will again this time, although it will go up about $3.5 to $4 billion from 73 to 74, entirely because of pay and price increases, mostly associated with the oil law and fair arms force.

Human resources has gone from about 60

to about 112,000 in that kind of range.

And for cities, it's again exactly the reverse.

So that you have from about 45% events now down to under 30 human resources programs from about 32 now up to about 20,000.

The people who don't know it can tell it to themselves.

They don't believe me.

And be perfectly frank with me.

I don't think you like it.

Go to hell.

Harris defends all the new members of the cabinet because I sometimes say they kind of want to vote it on by this rule.

Because they write this into my school.

Yeah, every time I say it.

Great.

It will go to 79 in 1974.

No new activity.

Fewer minutes.

But that is entirely the result of pay and price increases within the department.

So that we are staying level on, actually a little lower, actually.

And that's where the so-called piece of it came from, right in that little blue line there.

Now, here we have the problem explained a little bit more.

In 1968, the average pay and allowance on active duty was $5,500.

It is now $10,000.

We have 3.5 million men in the Army, in the events in 1968.

We will have 2.2 million, and yet they will cost us more.

And another way to look at this is the chart that we had last year.

How many men in the Armed Forces will a billion dollars pay for?

In 1964, it would pay for 219,000 men.

So that's the effect of pay raises and inflation within the Department of Defense.

In fact, on the human resources side, this is the increase in benefits to the elderly.

I'll put up the tables.

A model under 40 million, 37.1 in 1970.

In 1974, it goes to 63.5.

A very tight budget.

It does not need to extend it up from 57 to 63, between 73 and 74, but these are the differences.

These parts will all be collected in a smaller quota and distributed to everybody weekly by Saturday.

Does it make any sense in Paris to cap on that as you did in the military as to the number of people involved in the 67 versus the 31?

Yes.

I don't have the number of participants here, but we can do that.

It does increase.

Don't even use that, man.

It's about 17 million now, and it was somewhere in the middle of the top.

I forgot the line.

Okay.

We can get it.

Okay.

Food assistance has had an enormous increase starting in 69.

Food stamps jumped way up and other school lunch and other programs, special health programs, is leveling out just a little bit but still going up.

Food stamps leveling out between 73 and 74.

We're now up to over 4 million.

200% increase in the number of children receiving free and reduced school lunches.

65% rise in the

areas participating in the food stamp program.

All of these are things that you never can gather when you read about criticisms of the budget, but there is no disputing the figures, and you can see the size and rapidity of those increases.

But at least we do care about the hungry.

I bet you, Tommy, aren't you surprised to see these figures?

What about the new people?

these figures in the food sector.

For example, food assistance is a really good low in there.

That's 40% of my budget.

One thing, Mr. President, is that it's considerably complicated for our welfare cause.

It means that we remember when you originally proposed it, to include the good and poor as part of the wage incentive.

Now, if you keep working rather than going on welfare,

The food stamp program was quite small, so that the extension of benefits to the working poor had a significant potential impact.

But the growth of the food stamp program is now such that these families are growing benefits, in effect, at least as much as they would have received as the program originally conceived.

From $200 million to $2.5 million in three years.

Mr. President, this is an area that will potentially increase also.

Take the school lunch, for example.

Last year, the Congress added two sentences to the Constitution, and they took every school lunch right at the time of the Constitution.

They're going to send them out there for free school lunches for everybody to have school breakfast.

It's perfectly absurd.

This is not a focus program.

This is for everybody.

This does not go to these schools.

This goes to all the schools, no matter how wealthy the school district or how poor the school district is.

youngster now in school every one of them gets an eight cent contribution towards employment we have between six and seven million who get free or partially subsidized lunches depending on their parents economic status the pressure is to give the free lunch to everybody we're putting currently capital up two billion dollars and that this is potentially a 10 or 12 billion dollars

The government program, of course, was a free lunch and a free breakfast for every child in the school system.

This shows the additional amounts that we are now putting into both minority assistance and enforcement of civil rights activities.

And this has had a very steady growth during the entire administration, and we look to see that growth in 1974.

Enforcement of a little more than the previous year's jump, minority assistance, small business, minority business enterprise, all of those activities.

Yes, sir?

What's in the yellow, basically?

Well, the Department of Commerce and the- 43 Medicare.

43 Medicare.

As to the minority business enterprises, the schools, particularly?

Oh, yeah, the schools and all the other, I guess.

And that's a lot of the education.

Oh, yes, very much so.

These are the- I don't think one of us should have declined.

This wasn't happening.

$3 million for the purposes of civilization.

This is the federal outlaw law.

The direct federal outlays are almost matched now by, due to LEAA and other grants to state and local governments.

And that is now 2.6 billion.

And it's a smaller jump for next year, but that was planned in the previous year.

Now, brought up, the state and local government, they do a point where it's just about equal.

On that point, Mr. President, I would say that in three or four years, you will not have a necessity for increases in governmental assistance.

Well, actually, if you keep the civil rights by your hands, it's an action.

That's another point where you'll never solve the problem.

Another of the areas of the budget is environmental control, environmental quality.

This takes us up very sharply in pollution control in the basement as a result of the Clean Water Act.

This is at the level at which we plan to spend.

If Congress had its way, we wouldn't have enough room on the paper for this one,

made very substantial increases, right straight through.

Smaller increases, but steady increases in recreational expenditures.

Pollution control in Bigman had a very marked increase from well under a billion.

Actually, this was approximately 200 million, a little less than that when the first turn started.

And as you can see now, it's way up over 2.8 billion for the pollution control.

It will continue to increase as the Clean Water Act spins out.

Here is the chart that shows what food prices are selling.

Farmer cash has gone unsettling, and they're now close to 60 billion.

That's farm income.

Price support programs are going down, and the inventory owned by the CCC is way down as we sell off in the various grain sale programs and the others.

But this is a very significant drop, and Earl cooperated magnificently in helping us

I can interrupt for one moment.

Maybe this figure also .

But I was interested to know that the CPI figure was two-tenths for the .

And also the food.

of course they don't expect any more of those that's gonna be going up to average

Well, the question I raised there is that I remember when everybody came in and said, well, when price went up one and one-hundred percent in one month, then we've got to do a lot of drastic things on the next one that took off.

I assume that you were projecting on, but just show that you can't.

Let's not always jump too fast and put them on speaker.

Let's not jump on that zero.

The zero is the answer.

That's the truth.

The problem's before us.

Nobody's got it now.

That's the truth.

This one has significance because of course it's a lot lower storage costs.

It means we're doing a lot less company fees.

The farmers are selling more privately than sales and open markets.

Here, what we're doing... One second, I don't want to delay the meeting.

Earl and two members of the cabinet should also hear the point that you have made and that John Connors often made too.

That there's presently, in the rising standards in the world, this is a good sign, there's a world majority of the right

And that's a real problem.

It's just going to continue to go on.

May I say, as we said here, a meat purveyor in Britain is importing prime beef from the United States because the market is better than the American market on prime beef.

But all over the world, people are eating more and better and so forth.

So it's going up.

So the other side of that coin is to go someplace and raise cattle.

I run a very real risk of surplus, which would jack up CCC costs of existing ones.

It will also have the effect of

11, that's correct.

That is correct.

I read 11 out of the other costs.

And I work in .

We do that with 5% of our people.

Isn't that right, about 5% of our people?

Yes, on farms.

In China, it's 80%.

In Russia, it's over 50%.

Very good.

Yeah.

But if I had to say, we do it now in the world, we could get $3 billion at surplus to our balance of trade banks today.

That's the Soviet and all the rest of Japan, Soviet Union, and so forth.

There'll be more.

Urban transportation, again, we've still been showing increases.

We've not had rapid increases in previous years, but considerable growth.

Rapid transit will stay just about the same.

Highways will increase a bit as we pay off from previous years.

programs and airport stays about level with the airport construction funds as a special fund now.

So that is up over two billion in outlays in that year.

We do not yet have a highway bill, but that's the estimated outlays that will be made when that bill is passed.

In terms of the improvement in housing conditions and some of the reasons why it seems feasible

temporarily some of those programs.

In 1950, the federally subsidized housing has grown from about less than $200 million up to $1.2 million.

Standard housing, occupied standard housing is now at that kind of level and substandard housing has gone very steadily and rapidly down.

The language on the chart here, the basic economic forces providing major stimulus for dramatic improvement.

And they have, as the economy has improved, we've had a very substantial improvement in housing all over.

And with the problems involved in those programs, and with this kind of record, this number of reductions from substandard housing, and this kind of increase in people in standard housing, and this sort of increase in federally subsidized housing,

And with all the problems involved in those programs, it seemed that this was a piece of the year to do that.

There is no problem about our assistance to state and local governments.

That is still growing up very rapidly with the extra six billion this year of general revenue sharing.

That levels off a bit because there are factors that push it up this year, retroactive payment that came into this this year.

The grants, however, are all still up.

So the argument that we use revenue sharing to reduce grants is not correct.

And we can see that while there is a leveling, it is still very high, $45 million to all of these state and local governments.

There is one other point that I think is important that isn't charted, and that's on federal civilian employment, which is another subject of very specific direction from the President.

We have moved down in federal civilian full-time employment from two million six in 1969

$2.5 million in 1972, $2.4 million at the end of 1974, based on the ceilings that will come out with the allowance letters that will be mailed Monday at the same time the budget is sent.

There will be most interest, I suspect, in the various program reductions and terminations.

And we have a rather complete section that will be in the budget that will list

on five pages in great detail, the individual savings that have been made.

We'll have briefing material as to the reasons for those, the selection of those programs for the savings.

And most important, the figure I mentioned at the beginning, the out-year effects of those savings, the $6 billion savings in reduction and termination of programs this year, the balance of this year,

produces about 17 billion in 1974 and up again about 22 billion in 1975.

These are the amounts we would be spending if we continued the program.

We're recommending reductions and terminations.

Not too many of these require legislative legislation.

We've broken the tables down between those that do require legislation and those we can do administratively.

And this is really the reason why there have been and will be some difficulties, some problems in individual programs because we frankly are reducing programs.

There's no way of doing this kind of reduction and maintaining it through the next three to five years without some sharp reductions and terminations.

We do have supporting material for each one.

As the President says, the point of this exercise is not just to end up with a surplus or to end up with a good-looking last line.

It is literally the only kind of drastic action that can prevent a tax increase.

If you have a $35 billion actual deficit this year and roughly a $10 or $12 billion full and full deficit this year, that climbs, as we saw on the other chart.

You have to have more taxes.

You'll get inflation, too.

and then it gets worse as it multiplies out and then you're in the remaining fiscal year and it has a very sharp geometric rate of progression as it gets up.

So the time to make savings is three years ago.

We have to start now if we're going to do it at all and that's why there haven't been such drastic reductions this year in compliance with the residence instructions and it was only because of that that we were able to get a full employment balance in 74 and that we could get very close to

actual balance, again, with the whole purpose in mind of trying to keep at this reduced rate of taxation that we've been able to produce since 1969.

So we'll have these presentations with press on Saturday and to the Congress on, I think, Friday.

And then the members of the Cabinet will get their budgets, I hope, on Friday.

And it's all in part going to Carson Hill for Monday night.

He was a really honest singer to be honest.

He really liked singing, didn't he?

Yeah, did you hear what I said?

He said, that wasn't his word.

He was talking about dying in his sixties.

Right, but they had a pretty good foundation, yeah.

Let me ask a question here to George.

We all know that the first was necessary and the second did contribute to the expansion of the economy.

Now, with this

rather sharp contractions, leaving out the inflationary and all this, you know.

To what extent do you believe that it's going to be damaged?

Now, I know the argument is, well, if you don't do it, then people on Wall Street are going to worry, and the bankers are going to worry, and all we do worry, and the Europeans are going to worry, because they're letting their houses get out of order, and so forth and so on.

And so, I guess, being a devil's advocate for a moment, I'm supposed to probably say, well, now, you've got this too sharp a turnaround, and by that sharp a turnaround, you...

Well, it's not that sharp a turn around.

The sharp cut is from the campus made is from things that were prospective not that we ever had and it shows an increase.

The increase in spending this year is $18 billion, next year is $19 billion, the year after is $20 billion, so it's a fairly steady rate of growth of spending.

And the decline of the full budget, which is

In my dictionary, it's not just an excuse for deficit, but the decline of the full market budget is very small.

And we think, obviously, that the economy, as mentioned by the TMP, has been rising at a rate like 10% per annum.

Well, it can't go on rising at that rate for very long without giving us another big explosion.

So we've got to slow that down.

And it's appropriate for the purpose of slowing that down

But in turn, the sum of restrictive directions, just as it was appropriate in the beginning of the 19th century, proved, too, that it should turn from expansive directions.

So we think that Cap's instincts turned out to be right at this moment.

You expect the economy to be expanding very strongly in the 1970s during the period of jurisdiction.

That's everybody's projection when we subscribe to that.

And this budget is consistent with an expanding economy.

How does this differ, may I ask, George, from the year 1960?

I recall that these magazines, I can't really hear very well, earlier in the year, these magazines came out and put both times, as you call them, a soaring 60s.

And all the rest of the 60s are going to be a great year.

And the 60s turned out to be a lousy year.

Now, in many ways, but part of the matters are being announced, but what I'm getting at is, do you see, do you see looking forward, shall we say, this year in 1974, which a number of our colleagues are interested in, as well as George Bush, are we doing things here now that are, you know, have us pay a 1974 with more unemployment?

Well, we think that if we don't have a slowing down of the expansionary force of the federal budget, what will happen is that the economy will just soar up beyond bullet points, so to speak, and we'll have a tremendous inflationary outburst.

And we will have to somehow deal with that.

The only way to deal with it at that time is the way it was dealt with in 68, 69, namely to have a tremendous budget turnaround and create a precise monetary situation and put the economy through a crunch, which would be coming along in about 1974.

So what we're trying to do is to

have a policy that allows the economy, in a sense, to go into a sustainable orbit where it doesn't get so expensive so fast that it goes right up through a possible orbital path and kind of comes on to the full appointment stream a little bit more gradually so that it can be sustained.

President, it seems there's a difference to me between now and 60 in that we have the wage and price controls, which when removed will give a psychological forward thrust to the economy.

So that if the vanity does occur more than is projected, it isn't.

It seems to me we'd be a little shot forward from that.

Well, on that contrast, do you remember those

budget charts we used to use on the full appointment budget to show the whole decade and in the in the in 1960 there was a fairly substantial full appointment surplus and spending has been held way down below what the revenues would be at full appointments and an effort was made in those days to balance the budgets

No matter what.

And the hard good job was done.

In fact, it was too good in the sense that it was way below what it was.

And what, in effect, the...

the Eisenhower administration wound up doing was to, in fact, hand the Kennedy administration an opportunity to cut taxes, stimulate the economy, and be off the rails on the basis of the restraint they had exercised.

We also had, in those days, an extraordinarily tight money policy.

which combined with the budget business to give us that downturn.

We have had a monetary policy that has been very expensive throughout 1972, and I think most people would say right now it's too expensive.

It's going to have to be tightened up some money.

So we're going to have to keep going.

That is getting a lot of attention.

Mr. President, I think one thing as far as the political aspects of what you're concerned, I believe there are enough people beginning to become concerned about it in energy.

In the presentation that we are making with the emphasis on changes in priorities as far as military versus giving resources of concern, at some point, because I think we've got a good record

We ought to display the efforts that are being made in the R&D areas, particularly free reactor and all the other things that we're doing in terms of cranking up our domestic energy base.

I would hope that that aspect, if the record is

one that is comparable.

We ought to display that along with what we're doing in agriculture, what we're doing in the federal and local government systems because people are really concerned and they are concerned that we are not moving far enough or fast enough.

I think a study of the record

would show that this is not true.

This is one of the big problems that I think we have in our congressional relationships because people are just saying, you're not doing anything about it.

The facts are we're doing a lot about it.

And those things will begin to actually show up on the ground.

I think it's something we can't ignore and read the press and all the rest.

But we will.

We have completed the research quite quickly.

There is a chart on energy R&D that will be ready by Saturday and will be in the chart book that will be distributed to everybody.

That's a very good point.

We've got about a hundred charts and I didn't want to display them all because they aren't all made up yet, but that is a very good one to have and it would be enough for us.

Mr. President, I think we all know that this is a good, solid budget.

Well, some of the Congresses might be able to see it, but they always have and they will issue it.

It may include something like the land base is suspended.

You're not talking about service because that's what we haven't had in a very long time.