95th Congress 1 2d Session COMXITTEE PRINT HOUSE OF REPRESENTATIVES COMMITTEE ON THE BUDGET VIEWS AND ESTIMATES OF COMMITTEES OF THE HOUSE AND TIlE JOINT ECONOMIC COMMITTEE (Together with Separate, Minority, Additional, Dissenting, and Supplemental Views) ON THE CONGRESSIONAL BUDGET FOR FISCAL YEAR 1979 SUBMITTED PURSUANT TO SECTION 301 OF THE CONGRESSIONAL BUDGET AND IMPOUNDME`NT CONTROL ACT OF 1974 MARCH 15, 1978 24-0M 0 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1978 CP 95-17 Best Available Copy A j6g--'5
Transcript
95th Congress 12d Session COMXITTEE PRINT
HOUSE OF REPRESENTATIVESCOMMITTEE ON THE BUDGET
VIEWS AND ESTIMATESOF
COMMITTEES OF THE HOUSEAND TIlE
JOINT ECONOMIC COMMITTEE(Together with Separate, Minority, Additional, Dissenting,
and Supplemental Views)
ON THE
CONGRESSIONAL BUDGET FOR FISCALYEAR 1979
SUBMITTED PURSUANT TO SECTION 301 OF THECONGRESSIONAL BUDGET AND IMPOUNDME`NT
CONTROL ACT OF 1974
MARCH 15, 1978
24-0M 0
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1978 CP 95-17
Best Available Copy
A j6g--'5
COMMITTEE ON THE BUDGETROBERT N. OIAIMO, Connecticut, C'bems
JIM WRIGHT, TexaTHOMAS L. ASHLEY, OhioROBERT L. LEOGETT, CallomriPARREN 1. MITCHELL, MarylandOMAR BURLESON, TeasmLOUIS STOKES, OhioELIZABETH HOLTZMAN, New YorkBUTLER DERRICK, South CarolinaOTIS 0. PIKE, New YorkDONALD M. FRASER, MinnesotaDAVID R. OBEY, WisconsinWILLIAM LEHMAN, FloridaPAUL SIMON, luncosJOSEPH L. FISHER, VirginiaNORMAN Y. MINETA, CaliforniaJIM MATTOX, Teas
DELBERT L. LATTA, OhioJAMES T. BROYHILL, North CArulnaBARBER B. CONABLE, JR., New YorkMARJORIE S. HOLT, MarylandJOHN H. ROUSSELOT, CaliforniaJOHN J. DUNCAN, TennesseeCLAIR W. BURGENER, CaliforniaRALPH S. REGULA, Ohio
Appropriations--..... IArmed Services.53Banking, Finance and Urban Affairs --------------------------- 89District of Columbia -------------------------------------- 113Education and Labor.-119Government Operations.-133House Administration----139interior and Insulai Affairs ------------------------------------- 141International Relations_--295Interstate and Foreign Commerce- --------------- 359Judiciary.. - -- 375Merchant Marine and Fisheries --------------------------------- 383Post Office and Civil Service ------------------------------------ 397Public Works and Transportation-421Science and Technology ------------------------------------ 47Small Business ------------------------------------------- 487Veterans' Affairs ----------------------------------------- 491Ways and Means ----------------------------------------- 519Ad Hoc Committee on Outer Continental Shelf. 583Permanent Select Committee on Intelligence ---------------------- 591Select Committee on Aging---------------------------------593Select Committee on Population------------------------------ 613Joint Economic ------------------------------------------ 625
*At time of printing the information was not received.(IU)
INTRODUCTION
The Congressional Budget and Impoundment Control Act of 1974sets up a timetable for various phases of the Congressional budgetprocess, prescribing the actions to take place and setting the dates fortheir completion.
One of these steps, set forth in section 301 (c) of the act, calls for thesubmission of the views and estimates of each standing committee ofthe House and Senate on spending which relates to its jurisdiction.These reports are due Marc h 15 1 month in advance of the reportingd ate of the first concurrent resolution on the budget.
The reports are important to the proper functioning of the congres-sional budget process and, accordingly, are made manadatory by theact. They provide the Budget Committees in the House and Senatewith an early and comprehensive indication of committee legislativeplans for the next fiscal year. These reports contain the committees'estimates on those items which are required to be contained in thefirst budget resolution for the next fiscal year.
Section 301(c) states:(c) Views and Fmiimatea of Other CommiUees.-On er before March 15 of each
year each standing committee of the House of Representatives shall submit tothe Committee on the Budget of the House, each standing committee of the Senateshall submit to the Committee on the Budget of the Senate and the Joint EconomicCommittee and Joint Committee on Internal Revenue 'Taxation shall submit tothe Committees on the Budget of both Houses-
(1) its views and estimates with respect to all matters set forth in subsec-tion (a) which relate to matters within the respective jurisdiction or functionsof such committee or joint committee; and
(2) except in the case of such joint committees, the estimate of the totalamounts of new budget authority, and budget outlays resulting therefrom,to be provided or authorized in all bills and resolutions within the jurisdictionof such committee which such committee intends to be effective during thefiscal year beginning on October 1 of such year.
The Joint Economic Committee shall also submit to the Committees on theBudget of both Houses, its recommendations as to the fiscal policy appropriate tothe goals of the Employment Act of 1946. Any other committee of the House orSenate may submit to the Committee on the Budget of its House, and any otherjoint committee of the Congress may submit to the Committees on the Budget ofboth Houses, its views and estimates with respect to all matters set forth in sub-section (a) which relate to matters within its jurisdiction cr functions.
On February 9, 1978, the Chairman of the House Budget Commit-tee, Mr. Giaimo, sent a letter to House committee chairman, request-ing these views and estimates. A copy of that letter is reprinted here.
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Honorable Robert N. GialmoChairmanCommittee on the BudgetHouse of RepresentativesWashington, D. C. 20515
Dear Mr. Chairman:
In accordance with Section 301 of the Congressional Budget Act
of 1974, enclosed herewith is the Comittee on Appropriations'
report on Views and Estimates on the Budget Proposed for Fiscal
Year 1979.
i incerely,
3
HOUSE OF REPRESENTATIVES
COMMITTEE ON APPROPRIATIONS
VIEWS AND ESTIMATES
ON THE
BUDGET PROPOSED
FOR FISCAL YEAR 1979
SUBMITTED PURSUANT TO SECTION 301 OF THECONGRESSIONAL BUDGET ACT OF 1974
TO THIE
BUDGET COMMITTEE
TOGETHER WITH ADDITIONAL VIEWS
A
MAICII 14, 11)78
U.8. GOVERNMENT PRINTING OFFICE24-604 WASHINGTON : 1978
1 health_ ------------------------------------------------------ :2Inc'o m el• St't'u it y -----------------------------------------------. .5Vet erans Benefits and Servic.'- .---------------------------------- 38Admini-trnation of Ju.ti'e--------------------------------- 40( General (o'ernnent --.- ------------ 41(.':zerld Purpo.,c I"iM.eal .\s-istance ------------------------------- 43
The Committee on Appropriations submits the following report incompliance with Section 301(c) of the Congressional Budget andImpoundment Control Act of 1974.
The committee emphasizes that this report identifies certain con-tingencies and areas of the budget that need further examination andthat the report should not be interpreted as recommendations of theCommittee on Appropriations.
At this time the committee has only begun the fiscal year 1979budget process. Hearings, during which hundreds of witnesses from theExecutive branch, the congress, and the public will be heard, have notbeen completed and much information remains to be developed beforeany recommendations can be made. Thus, it is not possible at this timeto make specific recommendations in this report. However the com-mittee has identified areas and contingencies that may possibly lead tochanges in the budget and that deserve further consideration. TheCommittee on Appropriations, of course, will make its own specificrecommendations to the House when it reports the various appropria-tion bills that are now being developed by the individual subcommit-tees. Thus the final determination of-the items and totals will not likelybe completed until June when all appropriation bills are expected to bereported to the House.
The committee emphasizes that the contingencies identified hereinin no way reflect an overall recommendation on the Federal budget asto its size or its priorities. These views and estimates reflect what mighthappen if certain events take place. It is felt that by identifying suchcontingencies, this report will provide the Budget Committee and theHouse with additional information on factors that may affect thePresident's budget request now before the Congress.
COMMITTEE PROCEDURE
The Budget Act requires that the Congress adopt by May 15 of eachyear a concurrent resolution setting forth the appropriate target levelsof total budget authority and total outlays, the level of revenues, thelevel of debt, and the appropriate amount of surplus or deficit in the"budget. The report of the Budget Committee on this concurrent resolu-tion is also to include an estimate of budget authority and outlays foreach major functional category in the budget. Accordingly, this reportis presented on the basis of major budget functions. It incorporatesthe views of the thirteen appropriation subcommittees with respectto the programs and activities under their respective jurisdictions.These views and estimates were drafted and approved by the sub-committees prior to March 1 and the consolidated report by functionswas approved by the full committee on March 14.
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THE BUDGET RESOLUTION-A FOCAL POINT FOR TAXING AND SPENDING
The committee reiterates the fact that one of the principal objectivesof the Budget Act was to create a mechanism for the Congress torelate consciously the two sides of the Budget-revenues provided bytaxes and spending generated by various appropriations and otherdevices. In previous years, the committee has stated its opinion thatthis objective has not been adequately met. In studying the contentof re ports accompanying concurrent resolutions on the budget andin reflecting on markup sessions and staffing patterns, the committeehas gained the impression that disproportional attention is directed tothe spending side of the budget as opposed to the tax side. Perhapsthis is natural.
But this year, much more so than in recent years, the focal point ofthe budget is the President's tax proposals. The centerpiece of thebudget is the so-called $25 billion tax cut-an aggregate figure com-posed of a wide variety of tax increases and decreases. These proposalsare complex and there are many alternative courses of action availableto the Conress which should be thoroughly considered and illuminatedconcurrently with the spending totals, the functional priorities and thedebt level. the co nmittee believes that the Congress now has its bestrecent opportunity to focus on macroeconomic considerations in work-ing its will on the fiscal year 1979 budget. The spending proposals inthe budget generally do not represent sharp departures from previousbudgets. While there are certainly differences of opinion in regard toappropriation requests, it is more or less business as usual.
This year the critical decisions-avid those which promise to impactmore immediately on a recovering economy are on the revenue sideof the budget. Certainly, these two equally important aspects of thebudget deserve the equal and concurrent consideration of the Congress.
TIMELY AUTHORIZATIONS FOR APPROPRIATIONS
For the last two years the committee has called attention in thisreport to the need for more timely enactment of bills providing author-izations for appropriations. The budget control legislation mandatesthat a well-ordered sequence of events occur so that the objectives ofthe budget act may be met. It was contemplated that authorizationsbe in place before the appropriations were marked up each year.Experience of the last two years has produced evidence that the May15 reporting deadline for authorization bills is just too late to permitthe process to work as envisioned.
Due to the time constraints inherent in the budget control legisla-tion the committee has found it necessary during the last two years tomarti up appropriation bills in late Aprif and early May. The plan isthe same this year. Obviously, legislation not reported by this period-let alone legislation passed by the House and agreed to by committeesof conference--cannot be adequately taken into consideration indrafting appropriation bills. Among other consequences, the com-mittee has been obliged in June of tie last two years to seek waiversof the rules on more than half the appropriation bills due to the lackof authorization for appropriations.-
While the progress on hearings on authorizing bills in legislativecommittees suggests that there may be some improvement in the
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overall situation this year, the committee continues to be concernedthat the congressional budget process is weakened by this lack oftimeliness.
CONTROL OF FEDERLAL CREDIT PROGRAMS
The committee has observed with increasing concern the continuedgrowth in size and scope of Federal credit programs. Federal loansand loan guarantees outstanding will grow froin some $285 billion inthe fiscal year which ended last September 30 to $360 billion nextfiscal year. These loans and guarantees represent an increasinglyimportant factor in total Federal resource allocation and have asignificant impact on the Nation's financial markets. It is noted thatmost direct federal obligations are reviewed by Congress in the budgetprocess but that some of the direct loan prograins and all loan guaran-tee progr.anms are not included in the budget and not subjected to thesame review.
The budget states that the administration will propose to Con-gress a set of control procedures for Federal credit programs withthe objective of achieving a systematic method to consider such pro-grains in concert with other PeAleral fiscal activities. It is indicatedthat the administration's recommendation may include Presidentialrequests for al~pproval of limitations in the annual appropriation billson the specific amounts of loans and loan guarantees for each programtogether with the suggestion that Congress adopt similar controls inits budget process including in the budget resolutions. The committeebelieves this entire matter is worthy of careful study and is prepared towork with the Budget Committee and other committees in developingeffective procedures.
CONCERN AIOUT FEDERAL FISCAL DIIIE.CTION'
On the first day of March of this year the federal debt subject tolimit stood at $72"9 billion. In fiscal year 1979 it is estimated thatthe debt will rise to $867 billion. During this fiscal year and next fiscalyear alone it is estimated that thel debt will increase by about $167billion. It is also estimated that during this period there will be an in-crease in outstanding federal credit in the form of loans and loanguarantees of some .$85 billion.
The federal government has incurred a string of huge budget deficitsand increases in the national debt in recent yeas. During tiqe serverrecession of 1974-75. iustification for such a fiscal posture could bereasonably entertained on the grounds that strong, economic stimulusmeasures were required to reverse the worst recession since thedelpression of the 1930's. The economic philosophy which calls forheavy deficits in depressed times also calls for surpluses or at leastequilibrium in iml)roved times. The country is in its third year ofeconomic recovery and while the recovery hasi not been equally sharedin all segnients of the economy and in all regions and localities, therecontinues to be reasons for encouragement.
In view of recent patterns and at a time of economic recovery,the Congress and the Executive Branch must be especially careful indeliberating spending and tax decisions which will dictate'irreversibleFederal fiscal direction for the immediate future. It may be in(I'catedthat the proper and prudent course of action at this time is to continue
8the heavy deficit pattern of the recent past in the interest of sustain-ing economic recovery. Certainly, such a course is appealing if it leads toanticipated balance or surplus somewhere just ahead. But the historyof projected margins of surplus or balance is that they tend to fadeand then disappear. Examination of projections contained in priorbudgets under other administrations will show this. Those balance orsurplus projections proved to be mirages.
Z view of the $65 billion deficit, the $89 billion increase in thepublic debt, and the $25 billion tax cut, the Congress must very care-fully consider the direction of federal fiscal policy and the ability andwillingness of future Congresses to change course.
Thi following sections of this report identify the major contin-gencies that will impact on the fiscal year 1979 budget.
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NATIONAL DEFENSERECAPITULATION OF THE PRESIDENTS 1979 BUDGET
lin thousands of doilarsi
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
This function includes those programs directly related to the common defenseand security of the United States. It includes the raiding, equipping, and main-taining of armed forces, including civilian supporting activities; and developmentand utilization of weapons systems, including nuclear weapons.
The function provides direct compensation and benefits paid to active militaryand civilian personnel; contributions to their retirement, health and life insur-ance funds; military retired pay; the conduct of defense research, development,testing, and evaluation; and procurement, construction, stockpiles, and otheractivities undertaken with the direct objective of fostering our national security.Included are the military activities of the Department of Defense, atomic energydefense activities, and the defense related activities of civilian agencies includingthe GSA and the Selective Service System.
Excluded from national defense are military assistance programs to other na-tions since these have become predominantly a foreign aid program; and benefitsor compensation to veterans and their dependents since these are provided whenthe recipient is no longer actively contributing to our national defense. Also ex-cluded are the conduct of foreign relations, foreign economic development and hu-manitarian assistance, subsidies to business by civilian agencies which may bepartially justified as promoting national security, and research and operations ofagencies such as space research whose program could result in some significantbenefits to our national security.
COMMITTEZ VIEws
DEFENSE PROGRAMS
Any recommendations by the committee on the fiscal year 1979Defense budget must be considered to be preliminary at this time.The committee had not had the opportunity to completely reviewthe new budget at the time at which this report is being submitted.
10
However, some hearings have been held, including hearings with theSecretary of Defense, the Chairman of the Joint Chiefs of Staff, theService Secretaries, and the Chiefs of Staff of the Services. Thus, therecommendations of the Committee at this time have some foundationbut many assumptions must be made and much additional examinationwill be conducted during the next six weeks.
The estimates submitted for the part of the "National Defense"budget function carried annually in the Defense App ropriation Acttotal $119.3 billion in budget authority and $109.9 billion in outlays.This compares with appropriations of $109.8 billion in budget au-thority for fiscal year 1978. The increase of approximately $10.5billion is about twxo-thirds related to economic inflation and! aboutone-third to real growth in military prel)aredness.
In addition, the Budget includes contingencies for both fiscal years1978 and 1979 primarily for pay increases granted, or to be granted,by law. The sum for 1978 related to the Defense Appropriation Billis $2.8 billion and the sum for 1979 is approximately $2.3 billion.The budget resolution must include a reasonable amount for antici-pated pay increases.
In the committee's view the level of budget authority requested iswithin a reasonable range of what is required. Reports of continuedmilitary build-ups by the Soviet Union require some continuedincreases in real growth by the United States. Also, the requestincludes additional funds for our increased commitment to NATO.The committee may differ with the Administration as to some of theindividual programs and projects to be funded. There are probablysome programs for which no funds are requested in the budget whichthe committee will consider to be worthy of support. There are alsoprobably soine budgeted programs which the committee will considerto be unnecessary and will recommend be deleted. Although it is tooearly to speak with certainty, it appears that the committee's recomi-mended additions and deletions will roughly, within a few percentagepoints, balance and the total sum recommended will be close to tilebudget request.
LEGISLATIVE PROPOSALS
Pursuant to the requirements for implementation of the BudgetControl Act, the committee must set forth budgetary contingencies.The listing of these contingencies does not necessarily Indicate supportby the Committee on Appropriations of any of the legislative pro-posals. Among the contingencies included in the fiscal year 1979Defense estimates are legislative proposals which, if enacted, willreduce budget authority a net $82 million. The net reduction resultsfrom proposed incieases of $84 million for such items as increasedfamily separation allowances for enlisted military personnel, par-ticularlv in the Army and Air Force; increased sea pay and( quartersallowance for Navy personnel; and other minor items. A decrease of$166 million would result from enactment of blue collar civilianpersonnel pay reform legislation and the elimination of dual compensa-tion for reservists undergoing active duty training. It is too early totell whether or not the proposed legislation will be enacted. To theextent enactment is not forthcoming on any of the proposals, allow-ances in budget authority must be made in the budget resolution.
. I
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M ILITARY CONSTRUCTION
The fiscal year 1979 military construction request of $4,253 millionrepresents an increase of $1,275,280,000 or 43 percent over the fiscalyear 1978 appropriated Pamount. This increase results from a partiallifting of the teml)orar3 moratorium that was imposed in order that
a review could be conducted of the overall base structure of theServices.
The level of funding proposed for fiscal year 1979 is generallyadequate to accommflodate the highest. priority andl most importantmilitary construction projects. Although the funding level as proposedappIear's prIoper, the committee may, after a more detailed review,make adjustlments that reflect more current information or differentpriorities. The following areas will be carefully reviewed:NA2' TO
This year's request of over $600 million is the largest -:ngle requestfor military construction in the history of the NAT() alliance. Thecommittee will addre.,.s the questions of the Services' ability to properlyexecute a program of this size, the lropose(l refinancing oi projectsunder NAM') infrastructure criteria, and the ability of our NATOallies to bear a greater share of these costs.Energy conservation
The total request for energy conservation in fiscal year 1979 is$140 million. The committee has up.-i )orte(l efforts to conserve energyin the pa.st and will continue to do so. However, a more careful scru-tiny of acconiplishments to date and the co.st-benefits of this invest-ment is warranted.Security of nuclear and chemical weapons storage
The committee continues to b)e concerned about. the storage ofnuclear and chemical weapons. Recent media reports inldicate thatdeficiencies may exist in tihe security of storage facilities for theseweapolii. Additional funding may be necessary to address this problem.No estimate of these costs hias been made at this time.
OTHER MILITARY CONSTRUCTION CONTINGENCIES
In addition to the above areas, allowances should be made for theother contingencies which have not been included in the militaryconstruction budget.
The Department of Defens•e has proposed extending overseastravel privileges to junior enlisted personnel. This is intended toreduce the financial burden imposed on these enlisted mien by payingthe costs of transporting their dependents to overseas stations. Inquestioning DOD witne-,ses on the financial impact of this programin terms of additional construction requirements (family housing,hospitals, commissaries etc.) and other costs that may result iromthe proposal, the commiittee was not satisfied that the full implicationsand costs have been thoroughlv reviewed an(l pre.•ented to the Con-gress. Because of this, and because there may be significant futurecosts that are uncertain at this time, the committee has reservationsabout the entension of this benefit.
24-066 0 - 78 - 2
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The budget does not include funds to implement the President'sproposal to relocate the 2d Infantry Division from Korea to theUnited States. Should this proposal begin in fiscal year 1979, fundswould have to be added as necessary for the first increment of con-struction. This could be $50 million in fiscal year 1979.
The Panama Canal treaty requires that certain U.S. militaryinstallations be turned over to Panama shortly after ratification. Thismay result in a requirement for military construction funds to accom-modate realignments of U.S. forces. Funds in the amount of $10million in fiscal year 1979 may be required.
The Department of Defense has indicated that it will submit toCon-ress a proposed list of military base closures and realignments.Because these may require construction of facilities at permanentinstallations for activities that are being relocated from bases thatare being closed, additional funding may be required in fiscal year 1979.No estimate can be made at this time of funding required for thiscontingency.
There are requirements for minor construction, alterations andrepairs that can be undertaken on many military installations withoutextended periods of planning or design. These activities can be usedto create employment fairly rapidly in areas where critical unemploy-ment exists.
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INTERNATIONAL AFFAIRSRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
(in thousands of dollars|
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
This function is concerned with the establishment and maintenance of peace-ful relations, commerce, travel, and development between the United Statesand the remainder of the world. It includes the conduct of foreign affairs, mem-bership in international organizations, foreign information and exchange activities,economic assistance programs military assistance programs, and grant and loanprograms designed to foster foreign commerce.
These activities are carried out through the Funds appropriated to the Presi-dent, Agency for International Development, the Departments of State, Agri-culture, Transportation, and independent agencies, including ACTION (PeaceCorps). the United States Information Agency, the Export-Import Bank, theArms Control and Disarmament Agency, and the International TradeCommission.
COMMITTEE VIEWS
FOREIGN ASSISTANCE PROGRAMS
The budget authority requested for items in the foreign assistancebill amounts to $8,409,820,919 for fiscal year 1979 as compared to$6,772,654,000 which has thus far been appropriated in fiscal year 1978.This is an increase of $1,637,166,919 or 24 percent over the currentfiscal year. In addition to the 1978 supplemental just recently approvedby Congress, there are also pending before Congress, other fiscalyear 1978 supplemental requests which will change the fiscal year 1978base amount according to final actions by the Congress. The outlaysfrom current authority associated with the budget authority requestedfor fiscal year 1979 amount to $2,623,065,000.
The major part of the $1.6 billion increase over fiscal year 1978 canbe attributed to the international financial institutions (Asian De-velopment Bank, Inter-American Development Bank, World Bank,
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International Development Association, International Finance Cor-poration, African Development Fund). The fiscal year 1979 requestsfor these institutions total $3,504,597,919 which compares to $1,925,-500,000 appropriated for fiscal year 1978, an increase of $1,579,097,919or 82 percent.
In addition to these increa-ses requested for foreign aid in fiscal year1979, the budget states that "The administration is firmly committedto increasing economic aid levels substantially over the next 5 yearsand to improving aid effectiveness."
Contract authority of $12.3 billion is requested in fiscal year 1979for the Foreign Military Sales trust fund which compares to $11.1billion in fiscal year 1978. This is a cash account and finances the cashsales of defense articles to foreign countries but does not requireappropriation action.
Also, $5,360,860,000 is requested in fiscal year 1979 for limitationson the use of corporate funds for the Export-import Bank. The limita-tions are carried in the Foreign Assistance Appropriation Bill but noappropriation of budget authority is required.Historically, the foreign aid requests have been reduced and the
committee feels the fiscal year 1979 budget requests will not be anexception. However, the amount of this reduction will depend on thecongressional support of the Middle East peace settlement, its sup-port of the development assistance initiatives it helped to establishand its support of the International Financial Banks because a greatdeal of the funds requested in fiscal year 1979 are in these areas.
A large part of the budget authority requested in fiscal year 1979will require authorization. Of the total budget authority of $8,409-820,919 requested for fiscal year 1979, $3,634,417,919 is presentlyauthorized. The authorized programs are as follows:
Programs Budget oauhority1. Payment to the Foreign Service Retirement and Disability
Fund --------------------------------------------- $24, 82), 0002. Sahel Development Fund -------------------------------- 90, 000, 0003. U.S. Emergency Refugee and Migration Assistance Fund_ ... 15, 000, 0004. International financial institutions ---------------------- 3, 504, 597, 919
Total ---------------------------------------------- 3, 634, 417, 919
In addition to the regular fiscal year 1979 requests transmittedto Congress and mentioned above, there are a number of areas whereincreases could and, in some cases, no doubt will be included.
Some programs that could be increased in fiscal year 1979 follow:(a)'The amount included for Southern Africa under supporting
assistance is substanitally below fiscal year 1978 so this itemcould be increased in light of the support expressed last year.
(b) There is no request under supporting assistance for Lebanonin fiscal year 1979 and funds may be added to the bill to correctthis situation.
(c) A small amount is included for Cyprus ($5 million) infiscal year 1979 under supporting assistance and this could beincreased.
(d) The American Schools and Hospitals Abroad programwill be increased above the $8 million requested for fiscal year1979.
(e) There may be a budget amendment submitted to coverthe movement of additional Indochinese refugees to the UnitedStates and other parts of the world.
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(f) The military assistance progam includes no funds infiscal year 1979 for Greece and Turkey. If the defense coopera-tion agreements are approved during the year, additional mili-tary assistance funds would be requested.
The committee cautions that potential increases are not limitedto these areas.
All contingencies cannot be foreseen or predicted during a particularfiscal year. Additional amounts could be requested in fiscal year 1979depending on how particular political and economic situations pro-gress during the year. For example, additional funds could be requestedby the administration, or providled by Congress, for reconstruction,disaster relief or a special assistance effort in a particular countryor area. Also, some disaster (famine, flood, earthquake, etc.) mayoccur during the year which would require additional funding.
PUBLIC LAW 480
For the Public Law 480 program the committee believes the$805,900,000 in budget authority and $1,06s,680,000 in outlays, thesame as the budget request is realistic. These funds would providefor a total availability in fiscal year 1979 of $1,413,280,000, or $26,-832,660 more than was available for fiscal year 1978. T'he projectedvolume of commodities to be shipped in fiscal year 1979 under PublicLaw 480 is proposed at the same level as in fiscal year 1978-5.1million tons under title I and 1.6 million tons under title II. However,because of expected increases in ocean transportation costs, an increasein overall Public Law 480 program costs of $26.9 million is requested.The difference between totaY budget authority ($1.4 billion) andnew budget authority ($805 million) results primarily from carryoverfunds and loan repayments.
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GENERAL SCIENCE, SPACE, AND TECHNOLOGYRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[in thousands of dollars
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
This function includes science and research activities of the Federal Govern-ment where the goal is man's general advancement of knowledge. In addition,research programs that have diverse goals and cannot readily be classified intoone specific function are also placed here to avoid detailed splitting of accounts.
Included in this function are general scientific research programs that are notan integral part of the programs conducted under another function. This includesspace research and technology, except aeronautical technology of NASA; re-search conducted by the National Science Foundation; and the broad-based sci-entific activities of the Department of Energy.
Research programs that are an integral part of the achievement of other majorfunctions--e.g., health, national defense, energy-are excluded from this function.Only if a research program cannot readily be included in other functions is itclassified in this function.
COMMITTEE VIFWS
The National Aeronautics and Space Administration and theNational Science Foundation make up the largest share of the generalscience, space, and technology function of the budget. The total re-quest for NASA in 1979 is $4,371,600,000. This is an increase of$353,660,000 above 1978. Although there may be some readjustmentswithin the total requested, the amount appears reasonable for fiscalyear 1979.
The National Science Foundation is requesting $934,000,000 in 1979,an increase of $72,700,000 above 1978. The committee expects thatultimate actions taken on the 1979 request will be well within thebudget as proposed for this agency.
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ENERGYRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[In thousands of dollars
Fiscal year 1979 outlays
Budet From prior From newauthority year balances current Total
This function includes those programs whose primary purpose is to promote theconservation and development of energy resources through research and appli-cations of nuclear power, fossil fuels, solar and other energy resources. It encom-passes development of additional energy resources and technologies; that willincrease production from domestic energy resources; energy conservation programsinvolving energy saving technology and grants to promote conservation practices;emergency energy preparedness; and energy information and regulation. Agenciesthat carry out these activities include the department of Energy, Nuclear Regu-latory Commission, Environmental Protection Agency and the Department ofAgriculture.
COMMITTEE VIEWS
ENERGY SUPPLY PROGRAMS
The administration's budget requests reflect a decrease of over$396 million from 1978 funding levels fcr energy supply programs,as follows:Research and technology development ---------------------- $112, 108, 000Production demonstration and distribution. -- 281,050, 000Environmental research ----------------------------------- -8, 703,000All other programs --------------------------------------- + 5, 633,000
Total- .....-- 396, 228, 000
These reductions reflect, in part, administration emphasis on con-servation programs to reduce demand. However, most nonadminis-tration analyses (GAO, CRS, OTA, CBO) indicate that administra-tion projections of reduction in demand through conservation programsare much too optimistic and believe that additional supply optionsare needed to reduce oil imports and balance demand.
18
ReductionA have been niade in pi ograms which have had stro)Icongressional suljport in the pa.st, for instance solar energy, hydr'o-electric power development. nuclear. en(ergv and energy-related en-vironniental researrch. In adhlition, the budget reflects only iodlerateincreases in key programs which have large potential for near andmid terin addition to energy supplies including geothermal energy,biomaass conversion and others.
For the past three years, ('ongres has increased fundinc" over ipro-posed b1)11Iget levels for solar energy, geotherml energy, environmental
research and other re:,earch j)rogram'n. here is a growing lislm)tebetween the Congre.ss and the administration with respect to the policyand direction of the nuclear breeder program, which was reduced $150million in fiscal year 1979 following a reduction of $144 million in.1978. While there has been some sentiment for a shifting of fundsfrom nuclear to nonnumclear research, indications are that the ('on.re-.will not accept the administration's proj)o.als entirely and fundingfor nuclear research rumay well be a proved at a higher'level than tilebudget provides. The DOE regulatory program has also beencriticized as inadequate to meet the delnands of a ,rowing energyproblem.
While it is too early to make a definitive asses.sment, of the-e con-tingencies, the most likely upward pressures on 1979 funding_ for energysupply, conservation and regulatory funding will be in tTie order of$300 million in the programs identified above.
PETROLEUM RESERVES AND OTHER ENERGY
The committee believes that exploration of the national petroleumreserve in Alaska mayv be increased. The original drilling piograim calleulfor 26 wells by 1979 but has been cut back to 19. It may be desirableto fund it closer to the original plan level.Conservation
This program has increased 50 percent over fiscal year 1978 ($317million), mainly for grant programs, such as weatherization and schooland hospital conservation. The committee expects pressure to increaseR. & D. considerably, particularly in electric vehicles. Reductionsmay be made in some energy conservation areas because of slippagein the timing of passage of National Energy Act provision-s and delaysin subsequent implementation.Emergency preparedness
The bulk of funding is for the strategic petroleum reserve which as-sumes a future 1978 supplemental ($415 million), full funding of 500million barrels of oil in 1979 and start on facility construction to reach750 million barrels of storage. The 1979 appropriation request is $4.25billion. Since the President's plan is to reach 500 million barrels ofstorage by the end of calendar year 1980, the oil funding appears ex-cessive, and could possibly be reduced by up to $1.8 bil ion. Thiswould have no outlay effect in fiscal year 1979. The 1978 supplementalproposed to be submitted ($415 million) does not appear necessary.
he critical path is facility construction. Reductions here are not realsavings, just delay to future years, since there is a commitment to thereserve.
19
Outer Coid;inenal Shdelf leasinigThe fiscal year 1979 estimate is $1.S billion, which is the most real-
istic estimate in years. 'The fiscal year 1978 estimate is $2 billion,down $1.1 billion' froin the 197s budget estimate of $3.1 billion. Thatdirop-off is because of the reschedtuling of four sales and lower receipt,on sales that were held.RIural Electrification
Budget authority and outlays for the Rural Electrificttion Adluin-istration appear to be reasonably in line with requiirements. Someupward adjus;tment miay be neces,;ary in the REA loan prograin.-,however, this should not, necessarily impact on budget authority oroutlays in fiscal year 1979.
ENERGY LEGISLATIVE PROPOSALS
The budget also identifies legislative. Iroplosals to increase the priceof uranium enriching services which would add $163 million in off-setting revenues to the DOE budget. The $163 million is reduced bya second legislative proposal to fund remedial work at former Go(o-eminent andi Government contractor facilities at a cost of $5 millionin 1979 and additional funding as yet unidentified for future years.
The uranium enrichment pricing proposal has ;been before theCongress for three years. While it has been favorably considered byboth the House anli Senate on two occasions, in each case the Con-gress included important qualifying provisions unacceptable to theadministration.
The proposal is bound to be exaniined in depth, with potentialopposition from utilities, trade associations and foreign governments.Based on past experience its passage is very im,,rtain. Passage ofthe second legislative proposal is more likely, but also uncertain.These poposal s result in a contingency of $158 million which wouldadd to the budget amounts submitted by the Administration.
In addition, the President's proposed fuel efficiency initiative mayresult in additional funding requirements. The budget estimate is$1,833 million of which $500 million is within this function.
20
NATURAL RESOURCES AND ENVIRONMENTRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
fIn thousands of dollaril
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
This function includes those programs whose primary purpose is to develop,manage, and maintain the Nation's natural resources and environment. It en-compases development and management of water resources and hydroelectricpower; protection and enhancement of environmental quality; development andmaintenance of recreational resources; promotion of the prudent use of forest andmineral resources; the fostering of conservation practices on both public andprivate lands and management of the public domain.
Agencies that carry out these activities include the Corps of Engineers, theDepartments of Agriculture, Interior, and Commerce, the Environmental Pro-tection Agency and the Tennessee Valley Authority.
Excluded from this function are urban water supply programs, basic sewersystems, and waste treatment plants that are an integral part of a Federal facility(such as a military installation) unless they are an integral part of an environ-mental protection program and are specifically funded as environmentalprotection.
COMMITTEE VIEWS
PROTECTION OF LAND FOR FOOD PRODUCTION
The committee is convinced that adequate protection of the soil andwater of this Nation is of the highest priority. Our rivers, streamsand harbors are the repository of the millions of tons of top soil thaterode away annually. Increased conservation efforts can protect thetop soil and help to reduce the sediment in our rivers, streams andharbors. Such efforts can help to preserve the agricultural resourcebase for present and future generations. To assure adequate conserva-tion efforts, we must continue to fund at current levels essentialconservation programs, such as the agricultural conservation program,resource conservation and development, the forestry incentivesprogram, the Great Plains program and the work of the Soil Con-
21servation Service. Accordingly, the committee has identified con-tingencies in the 1979 budget for such purposes in the amount of$394 million in budget authority and $85.6 million in outlays.
ENVIRONMENTAL PROTECTION AGENCY
A total of $1,127,600,000 is requested for the operating budget ofthe Environmental Protection Agency in 1979. This is $278,797,000above the current level. The 1979 budget proposes substantial increasesin grants to States for implementation of the Clean Air Act and otherEPA programs. Overall, State program grants increase from $159,-200,000 in 1978 to a proposed level of $187,600,000 in 1979. In viewof the large surpluses currently projected in State budgets, somemodest decrease in this activity may be possible.
In addition, the budget proposes $4,500,000,000 for the waste waterconstruction grants program. This is the same amount as requestedand included in the 1978 supplemental bill and $575,000,000 less thanthe level authorized in 1979. With the supplemental enacted so re-cently, the $4,500,000,006 request for 1979 cou/d be potentially re-duced. Providing the full $9,000,000,000 requested within a short timeframe may overToad EPA's, the States, and municipalities ability tomanage adequately the program.
Although there are substantial increases in EPA's 1979 operatingbudget and no shortfalls should occur in this area, it is important tonote that there remain large unappropriated authorizations in thenew Clean Air, Clean Water and Solid Waste Acts.
PUBLIC WORKS PROJECT
The budget for 1979 contemplates a further termination and stretch-out of the ongoing Corps of Engineers and Bureau of Reclamationprojects. To restore the ongoing programs to an adequate level in1979 could take an additional $350 mi-lion.
The administration has not proposed any new planning or construc-tion starts for 1979. If the committee entertains requests for newstarts in 1979, a contingency for an additional $100 million would exist.
A possible requirement in total of $450 million for water resourceprograms over the Administration's proposed budget is identified as acontingency. The fiscal year 1979 outlays associated with this con-tingency amount to about $248 million.
The administration has slowed the water resource developmentprogram down substantially in 1978 by proposing that some $57milion be transferred from the ongoing construction program to coverthe pay raise supplemental. Further a substantial portion of the 1977unobligated balance has been applied to reduce the 1979 budgetrequest instead of accelerating the projects in the current year ascontemplated in the 1978 appropriation bill.
This is particularly true with the Corps of Engineers where there isa minimum of $85 million applied to reduce the 1979 budget requestrather than being used in 1978 to keep project completion on schedule.
The Office of Management and Budget has required the Corps ofEngineers to absorb increases in workload with an ever decreasingemployment ceiling. For example:
22
1. As a project is completed and moved into the operatingstatus, the corps has had to transfer personnel spaces to operationand maintenance from their other activities.
2. T'ie corps has had to absorb much of the section 404 permitwork within existing ceiling.
3. The corps is expected, by OMB, to absorb the Dam Safetyprogram within existing personnel ceilings.
4. The corps has been designated to supervise the Environ-mental Protection Agency's water quality construction program,and OMB has told them to do it within existing employmentceilings. This will require between 400 to 600 personnel.
If the administration's proposals for the Corps of Engineers areadopted for the next 5 years, the Corps of Engineers will not havean ongoing civil works program after 1985.
FOREST SERVICE PROGRAMS
The 1979 budget ;s approximately at the 1978 level for forest landmanagement and below the 1978 level for forest research and Stateand private cooperation. The major change in the Forest Servicebudget is the inclusion of approximately $152.2 million in the 1979budget for fighting forest fires which would normally be fundedby a supplemental appropriation. It appears the 1979 budget level willbe adequate if significant, program adjustments are made within theoverall budget, particularly in forest land management activities andthe state and private forestry cooperation activities. The committeeis presently of the opinion that any increase can be accommodatedwithin the overall budget by changing budget priorities.
The forest roads program appears to be adequate although theprogram may have to be adjusted upwards if significant changes aremade in the timber sales and harvest programs. One major problemarea is in permanent positions, which are more than 200 bekow the1978 level.
LAND MANAGEMENT
The 1979 budget for the Bureau of Land Management is $42.9million above the 1978 enacted level. However, this increase is mis-leading because about $25.2 million of the increase is for advancefunding of fighting forest fires which is normally included in a supple-mental appropriation. The balance of the increase is made up of pay-ments-in-heu of taxes, revenues received to offset costs of rights-of-wayand other monitoring costs. Also, there is a significant decrease inOuter Continental Shelf baseline environmental studies whick is morethan offset by increases in range, soil and water, wildlife, recreationmanagement, and other smaller increases in the management of landsand resources account. Overall, the committee believes the budget isadequate with a few possible deficiencies in energy and minerals,developmncnt of management plans, and cadastral survey work.
OTHER NATURAL RESOURCES PROGRAMS
The committee notes there is a budgeted increase of $125 million inthe Land and Water Conservation Fund over the 1978 level. There is a$63.7 million State program to implement acquisition of national heri-
23
tage areas. The request will leave a $175 million unappropriated butauthorized balance. If the Redwoods Park expansion is enacted theremay be a $125 million (lraw(lown.
'the Fish and Wildlife Service bu(lget appears to the committee to begenerally adequate. There may be moves to fund more wetland acqui-tsition and hatchery construction. A
With respect to the National Parkl.ervice, there will be strong pres-sure to increase funding for the Historic Preservation program to the$100 million authorize(l level for fiscal year 1979 which would representa contingency of $55 million.
The Park Service land heritage construction budget is $50.7 millionbelow the level previously planned. The committee is presentlyawaiting the results of an investigative stuly on this subject.
The budget of the Bureau of Mines reflects the same level of effort asfiscal 1978. There may be some inclination to increase health and safetyresearch andl development."With respect to the Geological Survey, estimates for earthquake
research are lower than the level recommended in the National Planan(l the committee feels that a(ditional funds for this program as wellas water research may be provided.
With respect to the Office of Surface Mining and Enforcement, thebudget reflects a large increase over the fiscal year 1978 supplemental(from $67 to $108 million). However, receipts for abandoned landreclamation are estimated at $200 million above plans for spending.Pressure may be to add more reclamation projects to use the $200million surplus in the fund. There may also be pressure to add moneyfor State mineral institutions.
AGRICULTURERECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
fin thousands of dollarui
Fiscal year 1979 outlaysBudget From prior From new
Proposed legislation, not through the appropriation proc."s .---------------------------------------------- -4,031,342 --------------- 1080 -1,080Permanents, tbust funds and revolving funds ..-...---- 4,124. 428 2.745.590 1.078.324 3.823.914Offsetting receipts --------------------------------- -65.107 -------------- 65.107 -65. 107President's budget requests -------------------------- 7,196,566 3,447,819 1, 985, 46 5.433.165
FUNCTIONAL DESCRIPTION
This function includes those programs that promote the economic stability ofagriculture and the capability to maintain and increase agricultural production.These are carried out through farm income stabilization activities that maintainagricultural markets, regulation of agricultural markets and practices, inspectionof agricultural products, and losses from the disposal of surplus commuditis.It also includes programs that provide research and technical, Pconomic, andmarket information services to farmers, processors, distributors and consumers.
The function (toes not include programs which, though related to rural devel-opment, are not directly related to agriculture. Examples are rural environmentaland conservation programs which are under the natural resources function.
COMMITTEE VIE•ws
PRICE SUPPORT PROGRAMS
The commodity price support, export credit sales, and storagefacility loan programs are financed through the Commodity CreditCorporation. The outlays for any fiscal year generally relate to theprevious crop year, in other words, fiscal year 1979 costs primarilycover the 1978 crop year. The 1978 crop is the first to be planted underthe provisions of the Food and Agriculture Act of 1977. The 1978 cropyear outlays (fiscal year 1979) are based on an anticipated 20 percentset-aside pro lam for wheat and 10 percent for feed grains.
Because of the uncertainties of weather conditions and marketprices throughout the world, it is impossible to determine in advancethe cost of USDA's commodity price support programs. For this rea-son CCC is authorized to borrow money irom Treasury, up to a limitof $14.5 billion, to finance its operations. Outlays for the price supportprograms are from the Commodity Credit Corporation and under the
25
jurisdiction of the Agriculture Committee. Appropriations to restoreCCC losses are made 2 years after the fiscal vear in which the lossoccurs and are under the jurisdiction of the Appropriations Committee.A total of $990,900,000 in budget authority is requested in the budgetto restore losses which occurred through fiscal year 1977.
The Department has requested legislation in fiscal year 1978 toincrease CCC borrowing authority by an additional $5.5 billion.This legislation will require tan implementing appropriation of $5.5billion which is not reflected in the appropriation request totals. Thecommittee wishes to call attention to this contingency.
AGRICULTURAL RESEARCH AND MARKETING PROGRAMS0
The budget proposes a number of program increases in the Agri-culture function. However, the committee notes that these increasesare at the expense of other high priority ongoing programs.. Many ofthe programs proposed for deletion are programs of direct benefit tothe farmer.
For example, the budget proposes the termination of the wholesalemarket development program of the Agricultural Research Service.This is the program that has brought modern wholesale markets toBoson, New Orleans, Los Angeles, New York, Baltimore/Washingtonand other large cities. These markets represent what the Departmentshould stand-for: higher prices for the farmer and lower prices for theconsumer, resulting from increased efficiency of modern wholesalemarkets, as opposed to the inefficiency of many of our older wholesalemarkets. Many major cities in this country are in need of new wholesalemarkets, yet the budget proposes to delete this prognam.
The budget proposes to delete funds for research and extension workin the area of rural development. The budget proposes to delete fundsfor the widely popular urban gardening program and the new farmer-to-consumer direct marketing program.
Budgets many times in the past have proposed high priority pro-rams for deletion with the full expectation that the programs would
be restored by the Congress.Based on the initial review of the budget, the committee identifies
contingencies of $51,848,000 in budget authority and $50,812,000 inoutlays in this area. These contingencies are associated with relativelysmall yet important programs in research, extension and insect ordisease control, which are proposed for termination or reduction or insome cases underfunded.
26
(C)OMMERCE AN) IH)USING CIREI)ITRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
tin thousands of dollatsl
fiscal year 1979 outlays
Budget Flom plior From ne.'authority year balances current TotWl
The function included colteic nction i 1i.i-iiil:t jilt) dof Social :andi I 'COnmlolic dtitaunless this is an integral pjrt of n•, t:r rnjipr" fIIwti' in .h :a.,, hcail II) Imi't g:ig(credit :mn! thrift istisr:snc'e, :mid Ilo.ins, si0.ii(1i(', in-o'1':1ic(, andI r(igilni ion ofbusiness unless these :ire an integral part ()f aniitl-i futart timi.; :mid thle .Ii li•ifiyto the Postal Sei ice. Ag(-ncivs imvoivc'i in this fiiiieti•i• itileide C('mimerce,Agriculture, liousiiig and Urlban l)we.(lopamewi, lite Sinaill Bia.iurss A, Ittihitra-tion, the Securitic, andi IExchange CmiIhIIissiom, a11 the 1',,stal Ser'ice.
Excluded from this function :ire. subsidiz,.tj im I h .iiuig I)rgr-n hinh are con-sidered as an integrntl part of bioad-scale welfare reform and tl ercft-,e bieongin the income security function.
COMMITTEE VIEWS
EM ERGENCY MORTGAGE I1URCIASE ASSISTANCE
The Emergency Housing Act of 1975 authorize(I $10,000,000,000for the Emergency Mortgage Purchase Assistance program. The 1976Appropriation Act provided an appropriation of $5,000,000,000against the total authorization. In view of the (ontinued vitalityof the new housing market, it is not expected, that any additionalborrowing authority under this program will be nece.-.•ary in fiscalyear 1979.
HOUSING WEATHERIZATION
The National Energyx Act which has passel the House and theSenate and is pending in conference includes $3,000,000,000 for theGNMA weatherization program. No funding has been included in the1979 budget for this activity. If the energy bill ultimately becomeslaw, there may be some requirement for budget authority under thisprovision in 1979.
27
RURAL HOUSING
Rural housing loans and grants are projected at more than $4 billionin 1979. Tile housing prograuns for fiscal year 1979 propo.-e to maximizehousing assistance to families withl the lowest incomes. For this reasonsubsidlized rural housing programs are proIposedl to be increased from1978 levels, with a shift to new construction from purchase of exist-ing dwellings. The nonstibsi~ilied r .programs are proposed to be de-Creased from 197S levels. Approximately 76 percent of the housing
loans made under this program are ir';ilosed at subsidized interestrates in 1979 compared witli 64 percent in 1978.
The commit tee has not identified cont ingencies at..,0sociate,! wit II thisfunction since loan programs under ctrrent budget treat ment (1o notnecessarily implact on Ibudget authority or outlays in t1me budget year.
SMALL BUSINESS AI)MINISTIHATION
The budget pIrOi(.-es a reduction of $184 million froil the programfundiing levels provided to the Smuall Businc.,,s Adhini.,tration forfiscal year 1978. This amount includes a delrea.,e of $16;4 million indirect business loans. As in thi l).-,t, the Adlmini,,t ration has ju..tifiedlthis program redltction in favor of an expandletl guaranteed loanprogram. llowev'er, the olininitte( feels many .,,naller buI.ine.,sescannot be adequately served by complete de )eldence o01 gutaranteedloans. Therefore, the estimate for the direct, loan p rogram nmay needto be increased by as much as $300 million.
U.S. POsTrAL r SERVICE
The budget request included full funding to finance the extendedphasing authorized by Public Law 93-328. The total amount ant hor-ized under existing legi.-lation has been requested and the committee,at this time, anticipates that no significant change will be made.
24-066 0 - 78 - 3
28
TRANSPORTATIONRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[in thousands of dollars|
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
Tran-portation includes all programs with the, primary aim of providing for thatransportation of the general public and/or their property, regardless of whetherlocal or national and regardless of the particular mode of transportation. Itincludes the construction of facilities; purchase of equipment; research, testing,and evaluation; provision of communications directly related to transportation(for example, air traffic control by the FAA); and operating subsidies for trans-portation. Transportation includes regulatory activities directed specificallytoward the transportation industry rather than toward general commerce. Inaddition to the Department of Transportation these programs are carried out bythe Maritime Administration, the U.S. Railway Association, and NASA.
Excluded from this function are the provision of foreign economic assistancewhich may take the course of assisting transportation facilities or programsabroad; the construction of roads, trails, etc. as an integral part of the opera-tion of public lands, parks, forests, or military reservations, unless they arespecifically funded as a part of a broader transportation program; the constructionof roads or other transportation facilities as an integral part of a broad communityfacility or regional development program where the clear intent of the programis regional development and the provision of transportation facilities is only anincidental tly-product or means to attain the objective of regional development.
COMMITTEE VIEWS
AVIATION PROGRAMS
The committee believes that, in general, the budget requests foraviation programs represent reasonable targets. '[here is, however,pen -ing legislation involving aircraft and airport noise reductionwhich, if enacted, could require some additional funding. In addition,the Congress has, for the past 5 years, prohibited the imposition ofnew administrative user charges 63y the Department of Transporta-tion. The budget assumes the deletion of this prohibition and the
29
collection of about $25 million of additional aviation user charges,which would be used as an offset against outlays. If the Congress doesnot agree to the administration's proposal to delete this language,there would be a net outlay increase.
HIGHWAY PROGRAMS
The budget proposes a reduction below fiscal year 1978 of almost$200 million for those highway programs financed with direct appro-priations. The committee believes that the new highway legislationmay continue to authorize the financing of certain unbudlgeted high-way programs with direct appropriate ions and that an increase of ap-proximately $50 million might be necessary for these programs.
As in the past 2 years, the budget proposes that a limitation onobligations be included in the appropriation legislation for certaintrust fund programs financed with contract authority. The committeecontinues to support the concept of placing an annual ceiling on high-way obligations and believes that a $7.8 billion program level representsa reasonable target for fiscal year 1979, unless the Congress increasestaxes to provide additional revenue for the Highway Trust Fund.
RAIL PROGRAMS
With respect to rail transportation programs, the committee be-lieves that up to an additional $600 million might be necessary in fiscalyear 1979 to provide adequate financing for the Consolidated RailCorporation (ConRail) and for the Northeast corridor improvementprogram. Although no funds are contained in the budget for ConRail,the Corporation's recently submitted 5 year business plan indicatesthat $1.283 billion of direct government funding will be requiredthrough December 31, 1982. This includes $585 million for calendarear 1979. This contingency is being included because the committeeelieves that the Federal support for ConRail should be clearly identi-
fied and not provided through backdoor financing mechanisms, suchas loan guarantees which have a relatively high probability of resultingin substantial future costs to the Federal Government.
COAST GUARD
The budget includes approximately $1.5 billion for the CoastGuard. The committee believes this founding level represents a reason-able target, unless legislation is enacted establishing a new oil pollutionliability and compensation fund. About $50 million could be neededfor such a fund in fiscal year 1979.
PANAMA CANAL
The ratification of the pending Panama Canal treaties probablywould require some adjustments, but until the implementing legisla-tion is enacted the extent of the budgetary impact is uncertain.
30
COMMUNITY ANI) REGIONAL I)EVEILOPMEINTRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
lIn thousands of dollars
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
Thi.i function con.ists of ibroad-Ibatsed common ity and regional developmentl)rogratns and programs concerned with urban and rural renewal for the preser-vation and revitalization of communities and regions.. It includes water supplyand sewer systems (except those specifically funded as environmental protectionprograms), urban renewal programs, regional economic development programs,l)road-ba-sed pul)lic facility construction progran:s, and rehabilitation of publicfacilities in the event of natural dlisa.sters. Agencies which administer these pro-grams include the Farmers Hlome Administration, the Economic I)evelopmentAdministration, the Bureau of Indian Affairs, the Community Services Adminis-tration, the Appalachian Regional Commission, the Small Busine.ss Administra-tion, and the Department of Housing and Urban Development.
COMMITTEE VIEWS
FEDERAL DISASTER ASSISTANCE ADMINISTRATION
The Federal Disaster Assistance AdMiinistration apl)propriation for1978 is $150,000,000. A supplemental request of $150,000,000 is cur-rently pending before the Congre.-s.. In addition, a further $150,000,000is currently under review at the Office of Management and Budget.'the 1979 request for this ac tivity is only $200,000,000. In view of the$450,000,000 p)lus requirement for this activity in 1978 and the$300,000,000 requirement in 1977, the committee believes FDAA isprobably some $100,000,000 to $200,000,000 short-depending, ofcourse, on the frequency of disasters.
COMPREHENSIVE PLANNING GRANTS
The committee is of the opinion that the request of $57,000,000 forthe comprehensive planning grants program may offer some potential
31for reduction in view of the fact that substantial increases are pro-vided in the community development block grant program.
RURAL DEVELOPMENT
Rural dlevelopmnent loans and grants for 1979 are estimated at$2.,425 million. This includes funds for water and waste ulisposalsystems, community facilities, and business and inI•tistrial develop-ment in rural areas. However, the budget propo.As terminations, andctit-biacks in programs related to several areas of rural development.Failure to adequately fund tlie.e programs would result in continuedinequitable treatment for rural America in tile fields of employmentand general community development. For rural development pro-gramts the ('ommittee has identified contingencies of $43,500,000in budget authority and $21,300,000 in outlays. Included in thecontingencies ijlentifiedl are funds for rural grant pIograms and addi-tionad loan servicing personnel for the Farmers loiome Admiinistration.
SBIA DISASTER LOANS
There was a total appropriation of $1,515 million in fiscal year1978 for disaster loans. The budget propo.,es $190 million for theregular disaster loan prograit. of the Small Business Administrationand4 that obviously is not all adequate amount. However, it is extremelydifficult to as.sess the adeqtuacy of the estimate for 1979 at this timebecause of unknown factors which could affect the demand fordi:,aster loans. Therefore, tile committee recommends that appropriatedconsideration for such a possibility be taken into account in thebudget resolution.
ECONOMIC DEVELOPMENT ASSISTANCE
The budget includes $627,425,000 for the economic developmentassi.stance programs of the Department of Commerce. This amountis an increase of $244,925,000 above appropriations enacted to datefor fiscal year 1978. Tile budget also includes a fiscal year 1978sulpplemental request of $117 million which along with the increasefor 1479 will provide for new program initiatives. These includea special emphasis on aid to cities and urban areas. Although thecommittee generally would expect to stay within the total requestfor EDA, some adjustments in specific program areas within thetotal may be madie.
Witl respect to the Local Public Works Program, the budgetincludes $10,607,000 for administrative costs only. However, outlaysfrom the $6 billion, the full authorization, which was appropriatedfor this program in fiscal year 1977, are expected to be $2,:300 millionin 1978, $2 billion in 1979 and J$1,100 million in 1980. The committeebelieves that these funds should provide for a significant number ofjob opportunities in construction and related industries and provideneeded public facilities to State and local governments.
OTHER REGIONAL PROGRAMS
The Appalachian Regional Commission's highway program isproposed for $221 million in 1979. This is $79 million below the
32authorized level and $177.2 million below the level the 13 Governors,of the States involved, have identified as an unfunded need. Thecommittee has identified a contingency of $79 million in budgetauthority and $5 million in outlays based on the need for highwaysin the Appalachian regional program.
The budget request for the Tennessee Valley Authority is $17.3million below the appropriation for 1978. For one water resourceproject alone the budget is $20 million below the TVA capability.There is little or no growth projected in the budget for fertilizerdevelopment or the national energy demonstration program. Thecommittee has identified a contingency of $21 million in budgetauthority and $15 million in outlays for the TVA programs.
Under the Bureau of Indian Affairs, the committee believes thatfunding for the Indian Financing Act may be provided althoughthere is no request in fiscal year 1979. There may also be a shortfallin the BIA contract support program which will have to be accor-modated.
33
EDUCATION, TRAINING, EMPLOYMENT AND SOCIALSERVICES
RECAPITULATION OF THE PRESIDENTS 1979 BUDGET
[in thousands of dollars|
Fiscal year 1979 outlays
Budget From p=ior From newauthority year balances current Totl
This function includes programs designed to promote the general extension ofknowledge and skills and/or to assist individuals to become self-supportingmembers of society. It includes the elementary, secondary, and vocational edu-cation and higher education programs; manpower training programs; and grantsto States for social services and rehabilitation services. It includes the provisionof education or training services, income support directly related to training oreducation, child care, and general social services provided to individuals andfamilies. It includes cash payments (scholarships, loans, or stipends) to personswhen such payments are provided to enable a person to participate in educationor training programs. It also includes research directly related to the provisionof said services.
These programs are administered largely by the Department of Health, Edu-cation, and Welfare, the Department of Labor, and the Bureau of Indian Affairs.
The provision of social services-child care, employment counselling, and voca-tional rehabilitation-are included in this function unless they are restricted to,and are an integral part of, another function.
The function excludes education or training undertaken as an integral part ofthe achievement of another functional end (such as training of military per-sonnel; veterans education, training, and rehabilitation; or training of healthresearch workers in a health program) and also excludes general purposes scientificresearch.
COMMITTEE VIEWS
EMPLOYMENT AND TRAINING PROGRAMS
The increase of almost $10 billion in budget authority f - educa-tion, employment, and training programs is associated primarily with(a) $7 billion for continuation at the current levels of CETA publicservice employment and youth employment and training programs
34
which are funded throughout fiscal year 1978 by aIppropriations;providled in tile 1977 economic stimiullus supillemen'tal app)ropriationact, (b) a budget estimate of $400 million foi a new program to imcread.eemployment in private sector job.- and (c) a budgeted increase ofabout $2.5 billion for programs administered b)y the U.S. Office ofEducation. The President's budget does not contem )late additionalfiscal 1978 a appropriations for advance funding of CEIA programs forfiscal 1979. Noteworthy is the fact that the present legislative authorityfor almost all CETA programs expires at the end of fiscal year 1978.Failure to extend the Comxprehensi-ve Employment and l raining Actin the next 2 months is likely" to result in d(hlayed appropriations lorthese key programs which now supl)ort jobs and training Slots forover 2.3 million needy persons, each %'ear. There is general agreementthat a critical review of CETA I;rogramns should fe undertaken bylegislative committees, but whether such a review could be completedin time to ineet fiscal A"ear 1979 appropriations deadlines seemsquestionable.
UNAUTHORIZED EMPLOYMENT AND TRAINING PROGRAMS
The situation with respect to ('ETA funding for fiscal year 1979 isa further illustration of the fact that the Budget Control Act May 15deadline for reporting of authorization legislation simply does notinsure that the legislation will be enacted in time to avoid the neces-sity for continuingr resolution and/or supplemental appropriationbills. The committee will continue with its review of the 1979 Budgetestimates for programs lacking authorization. When anti how the com-mittee will be able to act on these estimates is problematical. Thebudget essentially maintains 1978 pro ram levels for most employ-ment and training proranis. An exception to this rule is the summeryouth jobs program, For which a decrease of 165,000 jobs from the1978 approved level is proposed.
The budget also includes increases over 1978 program levels of$400 million for a new private hector Jobs program, $50 million forwelfare reform planning grants to CE IA prime sponsors, and $200million for 10 pilot employment programs to test welfare reformconcepts. All of these proposals require authorizing legislation forfiscal year 1979.
EDUCArION PROGRAMS
The budget proposes an increase of $2.5 billion or 23 percent forprograms administered by the Office of Education. Some of the keyissues in the education budget will be:Education for the handicapped
The budget proposes to fund the State grant program based onmeeting 12 percent of the excess costs of educating handicapped chil-dren. Even though this represents an increase of $279 million over theprevious year, it fails to meet the requirements and commitmentexpressed in the basic law which is 20 percent of the excess costs. Tofully fund based on present law would require an additional $400million over the budget.Implementing section 504 regulations an the handicapped
The budget proposes $50 million in construction grants to helpcolleges and universities meet the cost of renovations concerning the
35removal of structural barriers to the handicalpped to comply withsection 504 of the Rehabilitation Act. Also $30 million is requested forthis pur1)ose in a 1978 supplemental, to be derived from existingbalances in the construction revolving fund. Higher education andother groups have been advocating a higher amount ranging from$500 million to $2 billion.Basic educational opportu nity grants
Tfie budget Iproposes $2.2 billion or about the same amount as in theprevious year. It is based on raising the maximum grant, per studentfrom $1,600 to $1,,S00 and liberalizing eligibility to help middle incomefamilies. Ilowever, the White House recently announced that ani addi-tional $1.2 billion is earmarked for education as part of the budget forcontingencies. This amount is identified with alternatives to the use oftax credits for tuition relief. If Congress should-in its wisdom-enact tuition tax credits, the President will probably withdrawproposed expansion of existing student aid programs.Pro grain reduction and terminations
Although significant, increases are proposed for many educationprograms, reductions annl terminations totalling $124 million are pro-posed for others. Many of these reductions and terminations involve,,rogr-ams which have many dedicated advocates in Congress.Impacted area aid
The budget proposes advance funding and reform for the impactedarea ai( program. Efforts to reform this program have not beensuccessful in the past.Elementary and secondary education
An increase in budget authority of $644 million is proposed for thetitle I program, of which $400 million depends upon the enactmentof new authorizing legislation.
Other programs falling within this functional category, anti whichrequire authorizing legislation for fiscal year 1979 include Head Start,programs for the aging, Follow Through, vocational rehabilitation, daycare, teacher corps, ACTION, Community Services Administration,foreign language and area studies, and public broadcasting facilities.Problem areas in the budget for ACTION appear to be the proposed50 percent increase for the Vista program and the proposed cut in theretlrel senior volunteer program. In the Community Services Admaini-stration budget the committee will carefully review the justificationfor the increase in local initiative funds demonstrations and evalua-tion, decreases for State economic opportunity offices, communityfood nutrition, and community economic development, and the pro-poased, transfer of emergency energy conservation services to otheragencies.Bureau of Indian A1ffairs
Funds may be added for school construction to continue existing,unbudgeted projects now underway.
36
HEALTHRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
Itn thousands of doilarsi
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
This function includes those programs that have as their basic purpose thepromotion of the physical and mental health of the Nation's population, includ-ing the prevention of illness and accidents. It includes research into the causesand cure of disease; promotion of consumer and occupational health and safety-planning, financing, and provision of medical care; the financing of specializedprograms for training of health workers and researchers; and food (includingmeat), drug, and other product safety inspection programs. The major programsincluded in this function are medicare. medicaid, the National Institutes ofHealth, other health research and education, prevention and control of healthproblems, and health planning and construction. In addition to the Departmentof Health, Education, and Welfare, these programs are administered by theCivil Service Commission, the Animal and Plant Health Inspection Service ofAgriculture, and the Occupational Safety and Health Administration.
MEDICAID AND MEDICARE
The committee notes that the budget includes an increase of$1,885,000,000 for medicaid and payments to medicare trust fundsunder current law. This amounts to a 10.5 percent increase over thebudget authority provided for these programs for fiscal year 1978.The increase in funding for the medicaid program results from esti-mated price increases and increased utilization of services. The numberof people participating in the program is expected ro remain about thesame. The increase in payments to medicare trust funds reflects thecontinuing increase in the Federal share of costs for physicians servicesunder the medicare program. The Federal Government now supports72 percent of the costs rather than the 50 percent originally envisagedwhen the program was enacted in 1965. Estimates of funding require-ments for these "uncontrollable" programs have not been accurate inthe past.
37
Last year, the Congress was able to cut the medicaid budget esti-mates by more than $1 billion as a result of revised estimates of fiscalyear 1977 and 1978 costs. The committee, with the assistance of theCongressional Budget Office, intends to review the 1979 estimates andto arrive at an independent judgement as to their validity before itsmarkup of the 1979 appropriation bill.
PROPOSED LEGISLATION-HEALTH PROGRAMS
The President's budget indicates that 1979 appropriation require-ments for the medicaid program could be reduced by $112,900,000 ifproposed legislation is enacted. Included in this estimate are a total of$534 million in savings estimated to accrue if legislation relating tohospital cost containment, quality control, anW common audit isenacted, partially offset by a total of $421,iOO 000 in increased costsif proposed legislation authorizing a child health assessment progam,extending eligibility to low income pregnant women, increasing limitsand matching for Guam, Puerto Rico, and the Virgin Islands, andmandatory coverage of migrants is enacted. Enactment or nonenact-ment of any or all of these legislative proposals could have a significantimpact on the total budget authority required for medicaid in fiscalyear 1979.
CONTROLLABLE HEALTH PROGRAMS
The President's budget proposes a total of $7,114 million for certain"controllable" health programs, an increase of $454 million over 1978funding levels. The increase is more apparent than real, since itincludes $446 million for initial advanced funding of grants to Statesfor maternal and child health and for comprehensive health programs.The committee and the Congress has in the past been sympathetic tothe concept of advanced funding for State and local education grants,and will undoubtedly give careful consideration to the budget proposalto extend the practice to programs in health. When advance fundingis excluded from the computation, the true increase for these "con-trollable" health programs is about $8 million or one tenth of I percent.
Included in the totals for the "controllable" health programs is anincrease of $18 million for Professional Standards Review Organiza-tions. The committee will review this estimate very carefully in thelight of recent evaluations raising questions about the effectiveness ofthe program.
The overall budget for "controllable" or "discretionary" healthprograms includes increases for some programs and decreases or levelfunding for others. The budget again proposes substantial cuts insupport for training of health professionals. The Congress has notbeen persuaded of the wisdom of reductions in these programs in thepast, and unless very powerful arguments for such a policy are pre-sented by the administration, it is likely to remain unpersuaded. Thebudget proposes a small increase in support for biomedical research ofthe National Institutes of Health, over one-third of which is forresearch on maternal and child health and population control. In-creases proposed for other areas of biomedical research are less thanamounts necessary to cover increases in prices, and substantially lessthan Congress normally provides.
38
The committee's review of discretionary health programs fordisease prevention, health services, and alcoholism, drug abuse andmental health may well reveal areas in which the budget ap pearseither excessive or inadequate. In the health services and diseaseprevention programs, the committee continues to be concerned abcitthe extent of program integration and coordination at the Federal,State and local level, and believes that every effort should be made toreduce fragmentation and duplication and to maximize return on theinvestment of the Federal tax dollar.
UNAUTHORIZED HEALTH PROGRAMS
Authorizing legislation for many health programs expires at theend of fiscal year 1978. A large share of the 1979 health budgetdepends upon extension of these authorizations. The extent to whichthe current laws may be changed is unknown at this time. It appearscertain that, when it marks up the appropriations bills in May, thecommittee will again be faced with the choice of (a) recommendingappropriations without authorization or (b) deferring appropriationsuntil authorizations have belin enacted.
INDIAN HEALTH PROGRAMS
For the Indian Ihealth Service the fiscal year 1979 budget is $42.7million above the enacted 1978 level. The operating, budget a)pearsadequate, particularly in view of the fact that the Indian l1ealthService will be receiving for the fit'st tine additional monies frommedicare and medicaid payments. The committee feels there maybepressure to increase the construction budget to complete the ongoingfacilities and to initiate new projects of high priority. The increase
could possibly range from $15 to $25 million.
FOOD AND DRUG ADMINISTRATION
There continues to be a great deal of congressional interest in thescope of activities of this agency. The budget request includes con-tinuing increases under the recent medical devices legislation andsignificantly expanded buildings and facilities requests. Programdecreases in the areas of food economics and cosmetics regulation areproposed.
The committee has identified contingencies of $2,737,000 in budgetauthority and $2,731,000 in outlays under this heading.
39
INCOME SECURITY
RECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[In thousands of dollars
Fiscal year 1979 outlays
Budget From prior From newAuthority year balances current Total
This function inchldes payments to persons for which no current service isrendered by recipients, such .as retirement (excluding military retired pay), dis-ability, uncmployment, and welfare payyments and associated administrativecosts. Also included are the food sta-mp, special milk, and child nutrition pro-grains; both Federal and trust fund unemployment compensation and workmen'scompensation; pul:lic a: distance ca.-h payments; benefits to the elderly and tocoal miners; and low- and modherate-income housing aids.
This function includ(es such retirement and disability programs as old-age,survivors and disability inrmrance (S'cial Security), railroad retirement. specialbenefits for (disal)led coal miner., and federal employee retirement disability.
These programs are a(lministere(d by the Departments of Health, Education,and Welfare, 11U1D), Agriculture, Labor, an1d the Civil Service Commission.
Excluded from this function are financial assistance for educational purposes,child care services, vocational and manpower training and vocational rehabilita-tion services and stip)en(ds, niedical care (whether in cash or kind), subsidies tobusiness (such as farm price supports) even though they may end up as incometo persons, and income security programs restricted to veterans and their de-pendcnts.
COMMITTEE VIEWS
NUTRITION PROGRAMS
For the domestic feeding programs, the proposed budget is under-stated by at least $84 million, largely as a result of the budget'sfailure to provide for an adequate reserve of Section 32 funds.
The new food stamp program authorization takes effect this yearand the implementation of the no-purchase requirements provisionmay increase funding requirements through increased participationbeyond the level projected in the 1979 budget, although this con-tingency is not included in the $84 million figure above. The 1979
40
level of this program is, of course, closely tied to whatever generaleconomic conditions may prevail over the next 18 months.
The budget proposes to transfer the $30 million elderly feedingprogram to the Department of Health, Education, and Welfare, andcombine the commodity supplemental food program with the specialsupplemental food program (WIC). The budget request also proposesto reduce funding for the child nutrition equipment assistance programto $20 million. The direct distribution of commodities to needyfamilies is proposed for termination in certain areas of the countryin the amount of $1 million.
The budget also proposes to delete $75 million of the reserve balanceof section 32 funds. Sufficient section 32 funds must be available toprovide stability and orderly marketing as originally contemplated inthe authorizing legislation. To shift production-related funds to con-sumption is to invite the day when there is too little to consume be-cause there was not enough produced.
LABOR-HEV PROGRAMS
The major programs included in this category are Federal unemploy-ment benefits and allowances, grants to States for unemploymentinsurance services, and benefits for Federal employees compensation,disabled coal miners, and longshore and harbor workers, all adminis-tered by the Department of Labor; maintenance assistance, paymentsto social security trust funds, special benefits for disabled coal miners,supplemental security income, assistance for Cuban and Indochineserefugees and departmental management functions in the Departmentof Health, Education, and Welfare; payments to railroad retirementtrust funds, and the Regional Rail Transportation Protective Account.
Out of the total 1979 budget estimate of $16,203 million for thoseprograms in this category $15,858 million represents appropriationswhich are generally considered "mandatory' or "relatively uncon-trollable". Determination of the amount which will be required for anygiven fiscal year involves a certain amount of educated guessworcoupled with assumptions about the state of the economy 12 to 18months in the future. The budget estimates for these programs arerarely 100 percent accurate. A small percentage variation in theestimate can produce a substantial reduction or increase in the dollaramount required. Last year, the Congress was able to appropriate lessthan the amount budgeted for public assistance and supplementalsecurity income because requirements for those programs were over-s.ated in the budget. The committee with the assistance of the Con-gressional Budget Office, intends to make a careful review of the esti-mates for all of the income security programs before making its recom-mendations on the amounts to be included in the 1979 appropriationbill.
HOUSING PROGRAMS
While there are a number of factors that could affect the budgetauthority requirement in fiscal year 1979 for annual contributions forassisted housing, including the actual carryover, if any, from 1978-itwould appear that the 400,000 subsidized units and $24,650,950,000of budget authority is a reasonable estimate for this activity in 1979.
41
The requests for housing payments, housing for the elderly or handi-capped, and payments for operation of low-income housing projectsappear to be reasonable at this time.
The proposed request of $74,000,000 to begin a new programentitled "Troubled Projects Operating Subsidy" will be reviewedcarefully by the committee in terms of long-term commitments.
LEGISLATIVE PROPOSAL
The President's proposed fuel efficiency initiative may result in ad-ditional funding requirement of $1,333 million for this function.
42
VETERANS BENEFITS AND SERVICESRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
1i n thousands of dollars
Fisril year 1979 outlays
Budget From prior From newaut!.orty year balances current Total
This function con • if prigr:'m. providig hinefits inrd srvic-.., thoe -]i-i-i)ilitv for which i. r,.h iit d 1, nklit tr" :- r.% i4c. hu t whit'h :i i. v 14t alr ini, gi .1 ip:1rtof nationall dvfnse. It inelud.s \'ter:in. r iC.-oulmicti.d coiros lnsoithioi; n,,itl-servicc-coniu.ict.d pcnsiuns; rvi(1justinctit bermniits; housing; ind incdical careprogr:lns.
As :L normal rule, the outl:iys in tlis funeti•n a re sitnilar to t hos-e in th1 bro~dcrgoenr:nId irpo",,-, functions t!:uch ats incoine -. curity or health) but arc restricted toveterans and their dependeuts.
COMMITTEE I'IEWS
COMPENSATION AND PENSIONS
The President's proposed budget for 1979 includes an aU.ticipatedcompensation and p .ensions cost-of-living in'cren e of approxi-niately 5 l)ercent. Ilowever, cuselow I i lroje,.t ioJs .t,,sget tilliatthis account will have a shortfall in 1979 of from $50,000,000 to$100,000,000.
READJUSTMENT BENEFITS
An appropriation of $2,193,300,000 is requested for this program in1979. The amount recommended for 1979 is predicated on allroxi-mately $560,000,000 of unused funds in 1978 carrying forward into1979. However, it is now estifiated that this carryover will be about$200,000,000 less than was anticipated in the 1979 budget. A].o, thecommittee further suggests that tile 1979 estimate may be tilder-stated by at least $200,000,000. In addition, it is expected tile com-pensation and pensions caseload in 1978 will be approximately $50,-000,000 short including the assumed enactment of the $489,600,000supplemental now pending before the (Congress. That fact wouldfurther reduce the carryover by an additional $50,000,000.
43
Therefore, the committee now estimates that the readjustmentbenefits account for 1979 is understated by approximately $450,-000,000.
In addition, the 1979 budget includes no funds for anticipated cost-of-living increases. However, the committee I)oits out that the totalimpact of what is available in educational assistance benefits for theVietnam era veteran is somewhere between $6,000 and $7,000 eachyear if the student takes maximum advantage of the full program.Bet ,een February 1969 and October 1977, there has been a 141 per-cent increase in educational allowances under this program. In viewof that, the committee suggests that the current levels for the G1benefit program are sufficient and no additional budget authorityshould be required for this activity in 1979.
MEDICAL AND CONSTRUCTION PROG RAMS
Although there may be some requirement for additional funds abovethe levels .,rroi)o5ed in the 1979 l)udget for these activities-PllrtIiC-larly in the area of medical research-the committee expects thatincreases inl these areas will be offset bly corresponding decreases inthese and other VA l)rograms. If adlditional reso-rce :ire required illthese areas, they should not exceed a range of from $25,000,000 to$50,000,000 above the 1979 budget request.
LEGISLATIVE PROPOSALS
The 1979 budget request as.,umes that apliroxiniat el .$250,000,000
will be saved through legislation l)rop)osed for -elarate trunsiuittl. Ifthe.-e prol)o-als are not ad(,pted b)y the Congress, the additional fieldswill be required in 1979.
24-U66 0 . 78 - 4
44
ADMINISTRATION OF JUSTICERECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[In thousands of dollars
Fiscal year 1979 outlays
Budget From prior From nowauthority year balances current Total
This function includes those programs designed to provide judicial services,police protection, law enforcement (including civil rights), rehabilitation andincarceration of ci iminals, and promotion of the general maintenance of domesticorder. The major programs and agencies administering this function include theFederal Bureau of Investigation, the Customs Service, Justice Department lefalactivities, the Federal Judiciary, Federal Bureau of Prisons, and the Law En-forcement Assistance Administration.
COMMITTEE VIEWS
LAW ENFORCEMENT ASSISTANCE ADMINISTRATION
The budget request for the Law Enforcement Assistance Admini-stration is $641,488,000, a decrease of $5,762,000 from the appro-priation for fiscal year 1978. While it is probable that the committeewill stay within the total budget request for LEAA for fiscal year1979, some adjustments within the total may be made.
LEGAL SERVICES CORPORATION
The request for the lkgal Services Corporation submitted in thePresident's budget is $255 million, which is an increase of $50 millionabove the .lnotnt al)propriated for fiscal year 1978. The estimatesubmitted by the Corporation directly to the Congress, as provided bylaw, is $304,032,000. This amount represents an increase of $99,032,000above the level for fiscal year 1978. The committee plans to examinethis estimate with great care since the amount re( uested for thisprogram in the President's budget is significantly less than the amountrequested by the Corporation.
45
GENERAL GOVERNMENTRECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[in thousands of dollars
Fiscal year 1979 outlays
Budet From prior From newauoty year balances current Total
This function includes the general overhead costs of the Fled(eral Governmentincluding legislative and executive activities; provision of central fiscal per-sonnel and property activities; and the provision of services that cannot reason-ably be classified in any other major function. As a normal rule, all activitiesreasonably or closely associated with other functions are included in that func-tion rather than listed as a part of general government.
Included in this function is the Legislative Branch, the White House and Exec-utive Office of the President, the Internal Revenue Service and other fiscal man-agement activities of the Treasury Department: the general property, supplyoperation, and ri-cords management activities of the General Services Adminis'tration; federal personnel management activities of the Civil Service Commis.sion;territories and possessions; and claims and judgments.
COMMITTEE VIEWS
EXECUTIVE BRANCH
The proposed appropriation for the Department of the Treasurymay have to be modified because of a pending reorganization. Thedetails of the reorganization have not yet been fina sized and, untilthe President makes the final decision, the committee is reluctantto suggest contingencies in this area. Also the committee notes thatshould the President's proposed energy legislation be enacted, addi-tional appropriations in the range of $30 million will be required forthe Internal Revenue Service.
Two, other large executive agencies under this function are theCivil Service Commission and the General Services Administration.These agencies perform certain administrative tasks that are essentialto the operation of Government. Again, while the committee has
46historically been able to identify areas where savings can be realized,it must be recognized that significant reductions cannot be madewithout adverse effects on government operations.
Some $175 million has been requested for stockpile acquisitions.A review of stockpile levels has recently been completed and theadditional funds are being requested to bring the stockpile up toappropriate levels. The committee will carefully review this requestbut at this time cannot make any judgments as to exact amountsrequired.
The committee has identified an addritibnal contingency of $90million above the President's budget tinder this healing which willprovide somIe limited flexibility.
LEGISLATIVE 13RANCII
The committee also identifies a contingency under this functionin the legislative branch associated with a s special study on economicchange Ey the Joint Economic Committee. The additional fiscalyear appropriations has been estimated at $553,000.
47
GENERAL PURPOSE FISCAL ASSISTANCERECAPITULATION OF THE PRESIDENT'S 1979 BUDGET
[in thousands of dollars
Fiscal year 1979 outlays
Budget From prior From newauthority year balances current Total
This function includes Federal aid to Statt, loc:d, and territorial governmentsthat is available for general fiscal .hipport or is available for distribution among)Iograms involving two or uuore major budgetary functions when the distribu-
tion among those function., is at t1w discretion of the recipient jurisdiction. It in-cludes payments in lieu of taxc-;, broad-purpose shared revenues, General andCountercyclical Revenue Sharing, the Federal payment to the district of Colum-bia, and payments to States of rct'eipt; fromi the Forest Service and land manage-nient activitieý of the Department of the Interior. In addition, the department ofTreasury returnA to Puerto Rico and the V'irgin I.lands most Federal taxes andother revenues collected theoe.
CoMM!1i-TTEE VIEWS
URI AN r l'UATEGY I'iOGIIAM
The 1979 budget in(cluCs no -;pecific funding for a new urbanstrategy plro(gram. Ilere is a $ o; ,O(Jo.o( -O) nt i1(rei•'v ill the lrcs"-dent ' budget which, if itilpat I o)itt col b1 appli.r , , 11)1)] ed to
any- I'iban strategv- fl()•,lboMls .- l)M'rjltiCIltl\" ý.•|tiittted to te 1 1 ( (,1._'re>.Also p)art of tin urban stratetgv )rogIra~ul i. the budget ])r( ):-l)- of
$1,040,000,000 for the antir et iorIll r, veln e sharing I)1r(oia~n . A tloouhthis amount hnau been requested for t'hat program in 1979, the ('ooJ ilt-tee notes that the bud(lget (1o0'1un10t Clharll-k- 1gMV,.t; thlat tIN p)rogralnis under very careful review andi n may be (r1opjl)ed. In addition, be(ca•u-eof the p)roblenms addre..,ved in a (;.ýO report covering- variout :-pe',sof the (counter-cv('lical revenue Aiarinhr prog.rail and becau-e of titelarge Wid su1btanitial -tirjpli.e., ill --tate l)ud,:,t. l)rojectcd for I 7S and1979, this program .-hould have a lower fume tg joloritv. The comi-mittee atIo notes that if the current atlthorizarion for the aittireuCe",ion
48
financial assistance program is extended, the requirement for 1979should be approximately $600,000,000 less owing to an anticipatedcarryover of such amount from 1978 to 1979.
NEW YORK CITY SEASONAL FINANCING FUND
The fiscal year 1979 budget did not request funding for the NewYork City Seasonal Financing Fund but it did indicate that additionallegislation might be proposed. The administration now requests thatthe Federal Government guarantee up to $2,000,000,000 of New YorkCite securities. It is not clear at this time that New York City requiresfurther financial assistance. The committee notes that the report onthe New York City loan program from the Senate Committee on Bank-ing, Housing, and Urban Affairs indicates that "the committee findsthat New York City should be able to cover all of its seasonal financingneeds on its own, through a combination of measures to reduce seasonalrevenue shortfalls and inancing obtained from local sources, includingthe banks and the State pension funds." The report also statesthat "a maximum of $1.4 billion in fiscal year 1979 and less there-after-should be forthcoming from sources other than the FederalGovernment." However, if it is determined that additional assistanceis necessary, and depending upon the form of assistance provided, ashortfall of up to $2,000,000,000 could occur.
DISTRICT OF COLUMBIA
Only the Federal funds portion of the District of Columbia budgetfor fiscal year 1979 is included in the President's budget. The Districtof Columbia funds budget has not yet been sent to the Congress, thusmaking it difficult to project an accurate estimate of Federal fundsrequired. The Federal funds estimate totals $457,922,000 in budgetauthority and $448,632,000 in outlays including a Federal paymentof $317 million. The Federal payment request includes $17 millionwhich requires additional authorizing legislation.
Until such time as the city's budget is formally submitted to theCongress and detailed hearings are held, it is impossible for thecommittee to project Federal fund needs either above or below theamounts set forth in the budget.
LEGISLATIVE PROPOSAL-MUNICIPAL BOND OPTION
Included in the budget is $7,094,000,000 for a taxable municipalbond option in 1979. Outlays are estimated at $99,000,000 for thisprogram but could be offset by increased taxes. This item is proposedor later transmittal under proposed legislation. There are a numn ber ofimportant questions that must be asked in connection with this pro-posal; and, if it is not ultimately enacted, the budget authority requestor 1979 is overstated by $7,094,000,000. The committee would suggestthat because of the size and uncertainty of this proposal, the BudgetCommittee examine the veracity of both the budget authority andoutlay request.
49
ADDITIONAL VIEWS OF HON. JOSEPH P. ADDABBO
The defense budget for fiscal year 1979 continues the upward spiralof defense spending. Not only has there never been a "peace dividend"as a result of the ending of the war in Southeast Asia, it now appearsthat peace is more costly than war to the Defense Department. Therequest of the Department of Defense for $126 billion for fiscal year1979 is $9.2 billion more than the $116.8 billion provided for fiscalyear 1978 and $17.9 billion more than was provided for the samepurposes for fiscal year 1977. The annual increases in defense spendingexceed the rate of economic inflation. In real purchasing power aswell as in dollars, the defense budget is growing.
We can adequately provide for our national defense requirementswithout increasing spending every year. In the huge defense establish-ment there are savings which could be made through the applicationof better management. Money is spent on programs which providelittle or no military strength. Large sums are spent on programs whichfail or become obsolete before they are deployed. Personnel are usedin meaningless "make work" efforts.
Tighter budgets and reasonable budget reductions would improve,not weaken, our national security. Congress must carefully reviewdefense requests and eliminate waste wherever possible. Congresscannot abandon its constitutional role and leave national defensedecisions to the executive branch. Careful legislative branch reviewwould reveal ways to reduce defense spending substantially withoutadverse effect. This review should be made and every effort made toreduce the burden of defense expenditures on the American people.
NORTH ATLANTIC TREATY ORGANIZATION (NATO)
While I am concerned about the steady growth in Warsaw Pactconventional forces, I have certain reservations about the NATOenhancements proposed in this budget to correct that imbalance. Inhearings held by the committee to date, the U.S.-financed enhance-ments have been partially identified as costing over $2 billion. It isnot clear to me that the fiscal year 1979 defense budgets of ourNATO alliance partners will in fact reflect a real growth of 3 percent,as was generally agreed to during the NATO defense ministers confer-ence held last year. Nevertheless, the fiscal year 1979 U.S. defensebudget does reflect our part of the agreement with a 3-percent realgrowth increase in NATO enhancements.
We are told again this year that "hopefully" NATO defense minis-ters will approve the purchase of as many as 18 E-3A AWACS aircraftwhich they feel is essential to the defense of Western Europe. Whilewe have been waiting for several years for NATO to agree to purchaseAWACS, the United States has spent about $2.8 billion developingand producing 22 AWACS aircraft. There are three more AWVACSaircraft proposed for funding in the U.S. defense budget for fiscal year
50
1979, anfi nine more l)rOl)OSed for funding beyond that fiscal year. Ido not consider it fair for the Unit,', Stat(,s to fund the entire NA'IrOrequirement for AWACS aircraft. We have waited too long for a firmfunding commitment from NATO with respect to this matter.
This budget propo.-es additional expenditures in the areas of co-located operating airlbies for the Air Force and storage facilities forArmy equipment which could be funded through the NATO infra-structure program. In fact, the United States has 1)retfinanced abolitl$400 million in NATO infrastructure projects for which we have notbeen reimbursed. Ihis budget lp)rpos-5 an additional $135 million insuch Jpre!itian'ing ef'fort - for t li Arm\y alone. While' it appears t hat theU.S. Air Force cost of inlprov'emcnt-; at coloca ted oljrat ing Iba-isshould be funded from the NA'() infra~tructure prograifl, thei'e hasbeen no commitment vet by NA'iTO to do so.
The committee plrop~oses to conduct si'veral days of hearings on theforegoing lprOl)os.als for NA'T). It is far too early to lirejiidge oranticipate the outconw of tilil- review. I lowever, I initentd to (dlve intothese proposed NATO vnllamice(metst rail her t!iorotllylv (lluring5., the.;:hearings, and1111 may have some recon•,minodations with re.slpict to rnvadjustments I feel may be in order (luring the markup of the li.-calyear 1979 defense app)rol)riations budget.
VNOI1LIGVATE'D IA ALA N C ES
In the committee'- report to tie Budlget Committee on the fiscalyear 1978 budget proposal, I j)eilntuI(t out, regarding the tlf{n-irequest, that the unol pigated balance's of appropria tid finds availableto the D)epartment were substantially growing. This I felt was theresult of the fact that the C_'egross was providing too much monev tothe Dep)artment. I reiterated this position cery clearly and strongly inthe committee's repl)ort on the defense appropriation bill for 1978. (Seepage 344,, of l[ouse Report 95-451.)
I cannot but take the ,,amue position again this year. I must point outthat conditions are even worse thisyear than I envisioned in JIiv viewscontained in these two reports last year. I noted tlen that budgettfigures for unobligated and unexlpedletl balances are aln'ost allaysunderstated and often grossly un(Ierstate(l."
What I stated proved to be correct. Let me cite a few examples.Last year in the report to the Bu(lget (C'ommittee I pointed out thatthe estimated unobligated balance related for all defense programsother than foreign militam- sales on September 30, 1978, was projectedat $18.S billion. This veal the revised estimated balance of unobligatedfunds at September 30, 1978, is projected at $20.2 billion, an increaseof $1.4 billion, and this is still a projected estimate which is mostlikely understated. Last year the estimated unobligated balance atSeptember 30, 1977, wvas projected at $16.3 billion, excluding foreignmilitary sales. Now, the unobligated balance at September 30, 1977,was actually $19 billion, an increase of $2.7 billion above the estimatelast year. 'I'hat is why I have stated that unobligated balances arealmost always understated.
Current projections are that unol)ligated defense appropriated fundswill grow from an actual balance of $1 1 billion at the end of fiscal year1972 to $20.4 billion at the end of fiscal year 1979, an increase of $9.4
51
billion. This means that in 7 years these balances have just aboutdoubled.
Last year Defense witnesses used the argument that its unobligatedbalance position wa, no worse than the combined total of otheragencies of the Federal Government. However, current projectionsindicate while the unobligated balances of ap)propriated funds of otheragencies are substantially decreasing, Defense is on the rise. I believethat the Department of Defense should only ask for those funds for afiscal year that can actually be obligated (hiring that year. Th'liere is noquestion in my mind that defense has been overfunled in prior years.Our goal for fiscal year 1979 should be to hold defense fundIing to thatlevel which can actually be obligated. This recolumen(lation woul, ifseriously considered, reduce the requests for national defense functionsby bcveral billion dollars.
JosEPH P. AD)AIIJO.
53
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Honorable Robert N. GiaimoChairmanHouse Committee on the BudgetU. S. House of RepresentativesWashington, D. C. 20515
Dear Mr. Chairman:
At the direction of the Committee on Armed Services, I amsubmitting herewith the committee's report pursuant to Section301(c) of the Congressional Budget Act of 1974.
The report contains the committee's reconmendation for theNational Defense Function (functional category 050).
In addition to a brief narrative, the report includes tableswhich provide the committee's recommendations on the President'sbudget by major appropriation accounts.
On behalf of the committee, I would stress that this isa preliminary estimate of the requirements for national defense.The committee has been conducting hearings on three authoriza-tion bills within its jurisdiction: the Defense Departmentappropriation authorization, the military construction authori-zation, and tne authorization for nuclear energy programs relatedto national defense. Additional hearings will be required beforethe committee completes its work on these bills and furtherrefines its recommendation with regard to the large portion ofthe Defense budget directly or indirectly affected by authori-zation.
In addition to its recommendations on budget totals, thecommittee again addresses itself in this year's report to theappropriateness of certain budgeting procedures and I wouldcall these recommendations to your attention.
54
Honorable Robert N. Giaimo -2- March 13, 1978
The accompanying report has been prepared pursuant to thevote of the full Committee on Armed Services after a committeereview of the total budget request of the President and, there-fore, represents the views of the majority of the committee.The vote on the recommendation was 25 to 5.
The report is accompanied by separate views of severalMembers.
Melvin Price
Chairman
MP:jfc
Enclosure
55
REPORT OF THE HOUSE COMMITTEE ON AR4ED SERVICESTO TIlE
HOUSE COMMITTEE ON THE BUDGETON
THE NATIONAL DEFENSE FUNCTIONMARCH 13, 1978
The Committee on Armed Services recommends a total in new
budget authority for the National Defense Function for the First
Concurrent Budget Resolution of $131.1 billion and recommends
outlays of $118.2 billion.
The committee's recommendation is $2.6 billion above the
request for new budget authority contained in the budcet submitted
by the Administration for fiscal year 1979 and $441 million abve
the request for outlays.
The Committee on Armed Services is in the process of
considering in detail the various clertunts of the Defense
budget and has been conducting hearings on military posture
and Defense authorization since late January. The-;(- hearings
are expected to last another month and a half. Approximately
70% of the Defense budget is affected directly or indirectly
by authorization legislation considered by the Co-mittee on
Armed Services. The co.mm.iittee's recou:mmendation on overall
budget requirements reflects anticipated modificatioriL; in a
number of areas subject to authorization. As the Conqrýs.-
works its will on the budget through the authorizatior/a.proipria-
tion process, it is possible that some reduction to th' bud.-c~t
requirements may be considered in th, Second Budt,,t i, .-;o itt ion.
56
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The preliminary estimate submitted by the committee at
this time is regarded as an appropriate target for Defense in
the First Budget Resolution since it provides for needed program
enhancements without prejudging the merits of programs proposed
by the Department of Defense.
Procurement Not Subject to Authorization
The fiscal year 1979 budget as submitted included approxi-
mately $9 billion for categories of procurement not subject to
authorization. Generally, these are such items as non-tactical
vehicles, communications and data processing equipment, ammuni-
tion and a variety of other procurement items. An examination
of the budget shows that the request for these items represents
a 25% increase over the fiscal year 1978 appropriation. In
terms of real growth after deducting for inflation, therefore,
the budget contemplates an increase of over 18% in these areas.
The committee believes that a growth rate of around 11% should
be adequate since the material to be procured is generally of
lower priority than needed combat systems; thus, the committee
recommends a general reduction to reflect that lower rate.
Procurement Subject to Authorization
By contrast, the committee, on examination, found that
the budget provides no real growth in the overall area of
procurement subject to authorization, which principally includes
the purchase of major weapon systems. The committee's recom-
mendation allows for possible increases in two major areas of
57-3-
procurement, naval ship construction and procurer nt of combat
aircraft. The committee's allowance for increased funding in
these areas, if confirmed by later authorization and appropria-
tion action, would result in a consistent rate of real growth
for all of the categories of procurement of approximately 11%.
The two areas where the committee made allowance for in-
creases in procurement are areas where the Administration either
submitted incomplete programs or slowed the rate of procurement
below what was projected in last year's budget. The committee's
action represents, for the most part, a refusal to concur in
a slow down of needed modernization of forces pending further
study by the committee during the authorization process.
The committee particularly notes that in the area of ship
construction, the Administration proposals are incomplete.
The Defense Department is still analyzing the results of a
study of naval aviation platforms directed by P.L. 95-79; this
study was not completed at the time the budget was submitted.
Also awaited are the results of a Naval Force Planning Study
under review by the Department of Defense. It is possible,
therefore, that the Administration might make a supplemental
request related to aircraft carriers and other ships.
The committee's recommendation contemplates thtee major
changes in the ship building budget as submitted; provision
for a nuclear aircraft carrier with full funding at a cost of
$2.1 billion; addition of a fully funded ruclcar cruiLer for
which long lead funds were provided last year; and for one
C.
58
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Tridi.nt submarine lonj ]had fundii.c only. The President's
budqgt had recoTTU-infd-.d full funding for the submarine. In
view of the delays in the Trident [rocvram, it is the corrmittee's
judgnrent that the program could only use the long lead funds
in fiscal year 1979.
In the Defensue budget categories of RDTbE anid mi itary
construction, the committee's preliminary judgment is that
the amounts proposed in the President's budget are sufficient.
Although the coIramittce expects to recom:,end program changes
(including both authorization reductions and additions), at
the present time if supports the budget authority and outlay
levels requested.
Similarly, in tho.se prograums administered by the Department
cf Energy over which the Committee on Armed Services has
legislative jurisdiction, involvingj the military application
of nuclear energy, the conwnitteo reco;•r'tends no change at this
tir,.e from the budget recorumendation of the President.
The cor•nittee has allowed for an increase in budget
authority for the Defense Civil Pr-,eparedness Agency from the
budget request of $96.5 million to $137 million.
Personnel
The committee recommends increases in the military personnel
and operations and maintenance accounts to offset certain pro-
posed program reductions in fiscal year 1979. The programs
affected are training in the active duty forces, the Selected
59
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Reserve strength of the Naval Reserve, and a reduction in the
civilian strength of the Department of Defense. These programs
will be further examined by the committee in the authorization
process.
The committee has endorsed sufficient funding to provide
travel and transportation entitlements to junior enlisted
personnel assigned within the Continental United States, as
well as overseas.
Based on a number of oversight hearings over the past
year, the committee is recommending an increase in funding
for enhanced medical support services, and an increase in the
funding of the Selective Service System to again permit regis-
tration and classification in light of the current inadequate
state of the system to meet Depart;.ent of Defense ri-quircments.
Committee Initiatives
The committee reconu..cnds incrc• sed budget authority in
a number of accounts to cover initiatives not included in the
President's budget. These include providing funds in anticipa-
tion of an extension of the existing authority for recruiting
incentives in the Selected Reserve; funding for H.R. 8647, as
reported by the Armed Services Committee, which would raise
payments under the allowable physician's fee schedule of the
Civilian Health and Medical Progran for the Uniformed Services
(CHAIPUS) from the 75th to 90th percentile; providing improvements
to the military Survivor Benefit Plan as contained in H.R. 3702,
24-066 0 - 78 - 5
60
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which has passed the House; providing for a revision to the
Defense Officer Personnel Management System as contained in
H.R. 5503, which has passed the House; and funding of a numb.i-r
of other personnel and compensation bills which have be.:n cr
will be considered by the committee.
Revolving and Management Funds
The President's budget request included $100.8 milliun
in new budget authority for the Army ($74 million) and Air
Force ($26.8 million) stock funds. The co:%7ittee found that
presently there are substantial inventory Lalanc.es and the
proposed additional budget authority would be a.,ppli(ed to
increase reserve stocks of non-critical items. In view 5f
the many higher priority procurciment r ~qLirere.ts, the co.utte
recommends deletion of this $100.8 .-'illio)n uf :, dt
authority.
Financing Adjustmtents
The committee reco:mjends a q;r.eril iedtn inbuet
authority of $500 million with the Frovislon that a co:dt~ on
of lapsing prior-year funds and other transfers fro uncblcated
prior-year funds be n.adc avai!ible v.a the cqpro•,riation. pro.:ess
to finance an equival,?nt portion of the ±=sc-i yc'r 1079 Dcfcnrse
budget. This use of p:ior year b zLt a~th:Nriy, which 'on1i
otherwise lapse, is consistent w ith .,p;,ror:c-tlf n prdct.- -ts of
long standing aihd .ill ,lluw tht L~J•t to mcrc ,: y
rcflect the funding to be actually lic.ttx fur bc.fensc.
§!
--7--
Budgeting P'rocedures
Ihe Co'u-,.ttee on Armed Servic-s h Is, - the pdFt t4o cars,
recormmended revisior.s in bugetinq cate.;ozs so that those
categoric s ::7re prPer Iy convey t.. -lr ti -Ourpose. The com-
mittee stated in its report last y.-ar:
"T'-e conmittee b-elves "-at dwhat is labeld
'the Lefense budget' should rt!iect the amount of
dcler.se capability to be pur:.: • and believes
further that the Ameic1 .in p•c- le a i cej. it as s,.i:h.
When a citizen rears .'f a $12' h111ion Defcýr,-e b,:d-
get, he reasonc!Lly conclijles -. , e ý.re spcx.d:r.4
$120 bilkorn to buy system ss r c :s to increa e
the future military c.±.1bi"liv cf thl Unitcd States.
Bzt F.och is not t.ýXc c'ie."
The cc1n.Ittee at that .t'.med the Natio:,.al cafense
Fuactoin I.C, LS- a n cLr vf actl ". s whav.h, while -•t~sfyr
necessary ouligations or w-rthy ax , ae unrelated to
future defense ciAbality. The zo-.1:týe specific,.ýlly -enr.tloned,
among others, foreign military aýst•.-.ce. The CAnuh7ittee is
ple4sed to note that foreiq-i mii1tury as--,stance hzs b-en
transferred to a moxe • r'riate "-q.ztio:.jl category. Like-
wise, the co~m.,ttee notes that sove prcranis which relate to
nuclear vapons applicato,.. have Ln t:i:srrcd fror the
Natural Resourccs and Lncrgy ctegry to t.; 'atioznal De1nze
Functicr.. The cu=-"ittce c:.crs iv nK.s rezrn Lince th'
62
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N ati cna I D cfv,.:.•e F anction mr:rc! a i.ir -ýr i• .t(- l dc Scr i ,t's t, o
purpbsds ( ifc whiuh the fu I to be prc'.ý-ided.
There continic-s to be inclu.2Lc in the :'atirr.al Defenr,e
Function category the account for m.i2:tary refired pay, which
in fiscal year 1979 is estiamted tD rt:uizxc $10.1 LIllon in
budget authority. Tz±e com.,ittce xczz.s that this itmrl be
tiansferred to the more al-'rc",priate finztion.,l cateqCry of
Income Security (600).
Additionally, the conrwnittee r-cm s that tn.e funding
of overseas de;,cn.]4r.t sch;oos, which rejuircs new budget
authority of $307 million in the z-.cal year 197? budget, be
transferred out of the ,.at ional D.feL.e F}unction to the function-
al category of Eiuation, Trainin:>, L:,i oyrTnt and Social
ir.icts . lt is no*cd tha* r:hois lKcatc3 on militiiy
installatzcs in thl. United Stat'cs are fur., J uni:cr the Depjart-
mnret of Health, Eductition and Wcif.re. The C-.r.iMLtee's recorDmen-
dation for overEuas -(-pend-nt sch ts, therefore, wuuld moan
greater consLstcncy in budgeting p.ocudhro.
One fial note. H. Rus. 653, 95th Congress, established
the House Peranent Select Co.Tmittee on Intollk,]ence, and
vested in that select corr-ittee, ,urisdictLon over all intelli-
gence age:icies, including the CIA, DIA, NSA, Department of
State and the FBI, as well as intelligence an3 intelligence-
related activitirs of the DeF.artr-.t of Defcnse, and authorizd-
tions thurefor.
9
63
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At the present tirz, this com.-ittee is in the process of
establishing precisely wh&t Defense intelligence and intelligence-
rclated pro.ra7,s are involved, in ord-er to sort out those areas
which are cu-rrently being consideri,3 in b-°th the Select Comminttee
and this cuttec. Since s'bLstanti.a! amounts of money are
xecz.-entcd in both the overall Def'.nse bud;et and that portion
of the bucket subject to authorization, this area of possible
duplication is called to the attention of the Budget Comrittee.
-10-NVTIONAL OLrFNSE FUNCTION
FISCAL YEAR 1979
dollarss In Millions)
President's Budget Total HASC Chanmes Recomuended TotalITEM
Outlays ............ 13.9 ,.0 -10.0 -16.0 -4.0 separation, fnd retirer.entof officers of the ArmndServices
Co:.ii tteu, reco emendationnCommittee Recommenda- reflects action taken bytion: House in passing H.R. 5503
Budget Autnority.,. 32.0 28.0 3.0 -1.0 9.0
Outlays ....... ... 32.0 27.0 4.0 0.0 9.0
C43
II. PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPA-ED PRGR;.,.,SWHICH WOULD RLQ11IRE AUTHORIZING LEGISLATION
FOR FISCAL YEAR 1979(In millions of dollars)
Co,•mentLegislative Proposal
1979 1980 198! _1982 19,93
Retired Serviceman'sFamily ProtectionPlan
President's request:Budget Authority...
Outlays ............
Corini tteeti on:
Recomrenda-
Budget Authority...
Outlays ............
7.2
7.2
0.0
0.0
7.2
7.2
0.0
0.0
8.0
8.0
0.0
0.0
8.0
8.0
0.0
0.0
8.0
0.0
0.0
Legislation providescost of living increasesto certain annuitantsund2r the Retired Service-man's Famfil Protection Plai
Cor'i ttee recoixiendationreflects action taker bythe House in passingH.R. 3702 which incorporate!the Defense proposal (SeeLegislative Initiatives)
-21-
IV. Legislative Initiatives of Congress for Fiscal Year 1979(In millions of dollars)
Identify initiative Fiscal YearComment
1979 1980 1981 1982 1983
Retired Serviceman'sFamily Protection Plan and The House has passed H.R. 3702Survivor Benefit Plan improving the survivor beroefit.R. 3702) plans available to militaryBudget authority ..... 21.0 30.0 38.0 49.0 61.0 retirees
Outlays ............ 21.0 30.0 38.0 49.0 61.0
C00
0
-.4CA'
-2 -
IV. Legislative Initiatives of Congress for Fiscal Year 1979(In millions of dollars) I
Identify initiative Fiscal Year ______
- -980 Comment1979 1980 1981 11982 11983i i i li iI . -ii |
Survivor BenefitsReservists
for
Budget authority.....
Outlays........*.....
3.0
3.0
5.2
5.2
7.0
7.0
8.6
8.6
9.5
9.5
Committee plans to considerlegislation that would extend survivorbenefit coverage to reservists whohave completed 20 years of service butwho have not yet reached age 60
I ~ i 4 I I I
-2 1-
IV. Legislative Initiatives of Congress for Fiscal Year 1979(In millions of dollars)
Identify initiative Fiscal Year Corment
1979 1980 1981 1982 1983
CHIAMPUS physician fee H.R. 8647, House Reportschedules 95-815, would set upper
limits of fee schedulesat the 90th percentile,
Budget authority......15.0 16.5 18.2 20.0 22.0 vice the 75th, and re-
IV. Legislative Initiatives of Congress for Fiscal Year 1979(In millions of dollars)
Identify initiative Fiscal Year
Comment1979 1980 1981 1982 1983
Resrv Recruiting|| L
Reserve RecruitingIncentives
Budget authority.
Outlays ..............
32.8
32.E
27
27
39
39
40
40
43
43
Committee pans to extend existingauthority for incentives toassist recruiting in the SelectedReserve. (Financing method:annual appropriations.)
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IV. Legislative Initiatives of Congress for Fiscal Year 1979(I'n thou:nds of dollars)
I I
Identify initiative
CHAMPUS care forretirees with service-connected disability
Budget authori ty .....
Outlays ..............
1979
500
500
Fiscal Year
1980
550
550
1981
605
1982
665
665
"1983
731
Comment
H.R. 572, not reported bycommittee to date, wouldamend law to allow suchcare under CHAMPUS, aswell as through V. A.
N
mmi I |
i i i i i .
C, n r,
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IV. Legislative Initiatives of Congress for Fiscal Year 1979(In millions of dollars)
Identify initiative Fiscal Year Comment
1979 1980 1981 1982 1983• I L| | - - - I II -
Miscellaneous Initiatives
Budget authority.....
Outlays....,.........
5.05.0
5.05.0
5.05.0
5.05.0
5.05.0
The Committee has reported and expectsto report several low cost legis-lative initiatives. Total budgetimpact is small for any of theseInitiatives. (Example: H.R. 10341,to authorize reserve enlisted membersof the Army and Air Force to retireafter 20 years of active duty.)
V. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH Do NOT REQUIRE AUTHORIZING LEGISLATION FOR FISCAL -27-
YEAR 1979
(In thousands of dollars)
President's Request Committee Recoweendation
Major issue or program Budget Budget Commentauthority Outlays authority Outlays
(difference) (difference)
Federal lund.Department of Def ense-Military
Military ConstructionMilitary Construction, Army Reserve $ 0 $ 500 $ 0 $ 500
Department of Defense--Civil Soldiers'and Airmen's Rome
Payment of claim 5 5 5 5
Department of the TreasuryOffice of the SecretaryP ?ershing Hall memorial fund 7 7 7 7
Department of TransportationCoast Guard
Coast Guard general gift fund 30 30 30 30
TOTAL TRUST FUNDS-- $9,934 $19,042 $9,934 $19,042
82
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DISSENTING VIEWS OF HON. BOB CARR, HON. THOMAS J. DOWNEY, ANDHON. PATRICIA SCHROEDER
The Armed Services Committee's report contains certain elements
of fantasy, which we will briefly explain.
First among these is the fantasy that the Department of Defense
is an emaciated and undernourished infant eager and willing to soak
up every drop of nourishment it can get. On the contrary, the
Pentagon more closely resembles a blubberpot into which so many
calories have been stuffed that part of the latest dose will be
unconsumable and will dribble down its chin.
To state the problem in less metaphorical terms, the Pentagon
can't spend all the committee would like to give it. In previous
years, actual outlays have consistently and substantially lasged
behind Congressionally approved levels: $2.4 billion in FY 77 and
expected $2.5 billion in FY 1978. While we would not like to
add to the "spend this money on anything, quick before we lose it"
mentality which already prevails in certain elements of the Armed
Forces, nevertheless it seems the Budget Committee would relate
well to reality if it were to impose an outlay ceiling reflecting
the probability that traditional procedures would probably approve
about $2.5 billion extra, unspendable outlays for FY 79. The
Armed Services Committee has recognized part of this problem by its
commendable action on the Trident submarine. But the Budget Committee
should deal with the whole problem.
The second fantasy assumes that Administration requests translate
directly into funds available to the Pentagon. The last four years
have seen annual reductions ranging from $2.7 billion to $8.1 billion,
83
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most of which have been achieved at the Appropriations stage. The
Armed Services Committee report, in contrast, adopts a largely
additive approach: Funds are added for unrequested programs
favored by the Committee, but there is no significant subtractive
allowance -- with the exception of the Trident submarine -- for
cancellation or deferral of submarginal or premature weapons
requests. These cancellations and deferrals will nevertheless
occur, and tthieBudget Committee should take them into consideration
It is not our intention here to go into line items,
other than to point out that the Armed Services Committee has
added unrequested funds for a large aircraft carrier already
rejected tj the House; we will deal with other line items in the
authorization bill. But in the aggregate there is clear basis
for a budget figure at least $2.5 billion below that recommended
by the Armed Services Committee and equal to or below the
President's budget.
(. - j
84
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ADDITIONAL VIE,9IS UF CONGRESSMAN JOHN B. BRICKI;RIDGERE: RLOUSE AR1.'ED SERVICES C'T.'7TEE FY 1979 BUDGET RECOT.INDATIONS
During the House Armed Services C.mmittee's considerations of thefiscal 1979 budget reconvendations, I sought unsuccessfully to increasethe obligational authority for the Department of Defense by $15 billion.I urge the Budget Com:nittee to no: give favorable consideration to whatI consider to be a very strong case for this action.
''.7e have tried since the birth of our nation to promote our loveof peace by a display of weakness. This course has failed us utterly."The.-e words are as true today as when they were first expressed by GeorgeC. Marshall, architect of our nation's victory in World War Il and cha-pion of the peace as Secretary of State under President Truman.
Throughout the ages -- and most notably during this century -- his-tory has taught that peace is more akin to strength than to weakness. iiQa-sonable common sense and prudence -- guided by a steadfast and righteousconviction -- require that any political strategy the objective of whichis to guarantee peace and security must maintain the state's po::er inpeacetime.
Winston Churchill, warningg an appeasement-minded England that adetermined and growvlng Nazi war-waphlne would lay Europe in ruins, express-ed this principle In the following way: "Virtuous motives, traorelled byinertia and timidity, are no match for armed and resolute wickedness. Asincere love of peace is no excuse for muddling hundreds of millions ofhumble folk Into total war. The cheers of weak, well-meaning assembliessoon cease to echo, and their votes soon cease to count. Doom marches on."
The failure to pay heed to this warning led, relentlessly, to theuntold suffering .f a world that laid in ruin and ashes -- burying a re-ported 30-50 million of its peoples.
Forty years later, former Secretary of Defense, James R. Schlesinger,wrote of the present danger as follo:;s: "A specter is haunting Europe....the specter of Soviet hegemony. The specter arises from the steady ex-pansion of the military power of the Soviet state .... Other margins of theEurasian continent -- Japan, Korea, the middle e East -- are similarly ex-posed to the growing reach of Soviet militar-y power and (the) psy'chologi-ual aura it increasingly conveys .... The underlying reality is that at nopoint since the 1930's has the Western worldd faced so formidable a threatto its survival. As then, the military balance is deteriorating .... A con-tinuation of such trends over a period of years would leave the UnitedStates markedly inferior to the Soviet Union in gross military po:,er."
Clearly the philosophical and hictoric.l tradition of Western man Isbecoming imperiled and the danGer grc.,s "ith emery passing year. And yet, a com-
85
-31-
BRECKINRIDGE (cont)
parison of the budgetary and military trends of the two societies showsthat it Is the Soviet Union, and not the United States, which is the moredetermined to make the necessary sacrifices to win that "long twilightstruggle" prophesized so long ago by President Kennedy.
Consider the following facts about US/USSR Defense Budgets:
1) In 1954, at the height of Western political determination, the UnitedStates allocated 12% of GNP for national defense. Today it has fallen to5.2% and is projected by the Administration at 4.8% in 1983.
2) The percentage of GNP to Soviet defense expenditures was between 10-12%in 1970, rose to 15% in 1975, and is now projected at 18% for 1980.
3) Since 1958, the Soviet Union has doubled the share of its GiP devotedto defense, while the U.S. has reduced its share by nearly 50%.
4) In 1954, 65% of the total Federal budget was targeted for defense. To-day that figure has fallen to 22%.-
5) In 1954, out of a total Federal budget of $70,890,000,000, the defensebudget was $46,290,000,000. In 1979, out of a projected Federal budget ofover $500.0 billion, $126.0 was allocated to defense.
6) Since the SALT talks began, Soviet defense expenditures have increasedmore than 50%, both absolutely and as a share of the Soviet GNP.
7) The Soviet Union is outspending the United States in total militarycapability by $50 billion or more a year.
8) If the United States invested the same percentage of GNP to defel.se asthe Soviet Union, the United States defense budget for FY 1978 would havebeen between $250 and $300 billion.
9) The rate of growth for Soviet defense expenditures was 10% between 1958and 1970 and remained at 8-10% between 1971 and 1975. In an effort to In-crease real spending for defense, the FY 1979 defense budget proposes toincrease U.S. spending by approximately 1.80.
10) The defense budget projected by President Ford deemed necessary toguarantee our national security requirements was set at $136.0 billion.This figure was supported by the Joint Chiefs of Staff. Secretary of De-fense, Harold Brown, recommended a defense budget of $131.0 billion. Thesefigures were cut even more by the Office of Management and Budget to $126.0and that bottom figure became the offici-l recor.mended defense budget for-FY 1979.
86
-32-
BRECKINRIDGE (cont)
Consider the following facts aboAt US/USSR Strate;ic Forces:
At present, the Soviet Union deploys 1477 ICBM's to 1054 for theUnited States, and 909 SLBM's in 82 submarines to 656 in 41 submarinesfor the U.S. Compare this with the situation ahich existed in 1966 whenthe United States led 90i4 to 292 in ICB.!'s and 592 to 107 in SLB:A's.These figures do not include qualitative Soviet improvements such as gainsin accuracy, a throw weight advantage ".which will soon oe 4 to 1, and cur-rent Soviet MIRVing rates.
Since 1973, the Soviet Union has been testing and deploying VIRVedmissiles, which will be able to mount a substantially larger number ofMIRVed warheads because of the larger size of the new generation missilesand their huge payloads. In addition, these warheads will be larger thantheir American counterparts. The SS-18 alone can carry up to ten tv.o-Mgatonwarheads. The American Minuteman, by vway of contrast, deploys only threewarheads of 170 kilotons apiece. (1000:1).
Since SALT I, in 1972, the United States has completed and deployednot one single major new strategic offensive or defensive weapons system.We have terminated production of I!Sntite.:an III and Poseidon missiles, butfollow-on weapons have not been forthcc.ninig. The B--T-sb-e-r has been cAn-celled, the IAX-ICBP, has been delayed for still another year, and the oi lyABM system that was deployed has since been dismantled. Conversely, duringthe same period, tho Soviet Union has developed an entire new family offour ICBM's (three of which are MIRVed); a new class of missile-carryingsubmarines; a new SI.D'A (the SSN-8); and, a supersonic belaber (Backfire)capable of controlling the vital sea lanes of the North Atlantic and 1. edi-terranean, of constituting a threat to N:ATO land forces and territory,and of operating against the United Otates. The Backfire is currently be-in, produced at the rate of 36 to 53 per year anid by tie early 1980's theSoviet Union will have approximately 4GO in place. For the firjt time,the Soviet Union will have wore ne:" strategic bombers than the United Stateshas with its 20 year old B-52's -- a fact as unprecedented as it is ominous.
Trends in the area of Civil Defenre are at least equally startlingThe Soviet Union has reportedly spent a:;proximrately $1 billion a year overthe past 20 years on civil defense, while the United States budget forFY 1979 requests only $97 million. The Soviets have a longstanding andmassive civil defense program, which has been expanded and intensified dur-ing the 1970's. This includes the hard-_ned establishment of stand-by alter-nate power sources, and strategic industrial and foodstuff stockpiling;shelters and conmrunicatlon centers; Lhe dispersal and hardening of industrialfacilities; a major shelter-building programs a::d widespread trairnng forpopulation evacuatir:n.
The United States has no signlficz.nt civil defense program and, com-pared to the Soviets, we appear to hive abandoned the concept altogether.
87
-33-
BRECKINRIDGE (cont)
The Soviets claim that their Civil Defense efforts would limit fatalitiesfrom a U.S. attack to between 8 and 12 million people (against a projectedU.S. loss in the range of 100-140 million). VInether this is true or notcan be debated. lhat cannot be debated is that Soviet emphasis on civildefense constitues a new and fourth leg in their strategic system whichcould be exploited tremendously in future political and military crises.The threat inherent in an alleged 72 hour evacuation capability needs noexposition.
It is entirely conceivable that the Soviet Union will have four es-sential and secure components in its strategic arsenal (a quadrad Cocept)compared to the distinct possibility that the United States will shortlybe reduced to one.
In Conventional Forces, Soviet production rates are much higherthan those of the U.S. in most weapons categories. They have 6.5 timesmore main battle tanks deployed than the U.S., including 3,000 T-72'swhich are considered better than any tank in the current NATO arsenal.They have more than three times as many armored personnel carriers; 4 timesas many artillery tubes; and, nearly 3 times as many tactical combat air-craft. Although U.S. tactical aircraft has always been considered better,the Soviets have been closing the qualitative gap as well. Finally, theyhave a significantly superior air defense system in Europe to that of NATO,with 3,500 air defense guns and 1,500 S.AM launchers in Eastern Europe alone.
In Seapower, the United States has reduced its Navy by over 50% inthe last ten years from 976 to 453 ships, while the Soviet Navy has re-gistered the greatest gains in its entire history. In 1977 the SovietNavy was estimated to have over 1,403 ships. From what was historicallya coastal defense force, the Soviets have built and launched a true "bluewater" capability of global proportions.
Between 1965 and 1973, Soviet "out of area" operations grew at anannual rate of 25%. Soviet Naval incursions into the Carribbean Sea, theIndian and Pacific Oceans, and other vital water-ways, constitute a directthreat to historic Western and U.S. sea lanes. The Soviet capacity to sup-port military'land operations in areas such as the Middle East, SoutheastAsia, and Africa, have already profoundly influenced the course of politicalevents in those areas. Based upon their newly-found maritime and sea-airlogistic muscle, tLe Soviet Union has established a string of bases andallies throughout the Mediterranean and Indian Ocean areas which, unlessarrested, will make the U.S. a secondary strategic power. Soviet supportof the revolutionary forces In Angola and, more recently the Horn of Africa,compared to the near-complete lack of Izmerican strategic resolve, offersthe most compelling recent evidence of the shift in the balance of globalpolitical power.
88
-34-
BRECKINRIDGE (cont)
To permit the adverse trends ½' `e past 10-15 years to continuewould be tantanount to a conscious -- z!r. by the American people toallow the United States to become r! .. :" inferior to the Soviet Union.
Should this continuing trend 1m. ;.lersted, our national iridepen-dence and free institutions will be:-.:-e .•-cea.Angly hostage to Sovietcommunism in a threatening world at ::..e .-- re h.stile and less compromis-ing than any we have knovn in our le-z.e.
In conclusion, it should not be rgotten that today the grandsweep of history faces us with the •..so:e f- that a misjudgment onour part about the nature and inten-.-:.-3 .f Soviet power -- and what isnecessary to confront and to neutra'-tze ;he power -- could well be fatal,not only for America but also for the b-sic -a1ies of 2500 years of !cs-tern civilization of which we are th*. -- i rcle defenders.
Let us make no mistake -- in t:. .-.: ) .rid no one country, or coa-lition of countries, could assist us if :;e snould falter or fail.
It is for the above reasons ths : rec.-...end that the Defense Bud-get for FY 1979 be Increased a mini.,-.._. :f 2!5 billion over that proposedby this Corwmittee and to be increase: in -ne ar-unt of 10% per annum inreal 1978 dollars over the next deca"__, bear'n; in mind the $27 billionceiling figure proposed in Arms, ?.:en :.alid y Budgets -- Issues forFY 1979, edited by Francis Hoeber, t.;:.' Kslnr., arid William Schneider,Jr.
John B. Breckinridge
89
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March 15, 1978
Honorable Robert N. GiaimoChairman, House Committee
on the BudgetRoom 214 HOB Annex IWashington, D. C. 20515
Dear Mr. Chairman:
I am enclosing the projections of the Committee onBanking, Finance and Urban Affairs with respect to legis-lative programs within this Committee's jurisdictionaffecting the 1979 Fiscal Year Budget.
The projections represent the views and estimates ofthe subcommittees on programs and initiatives within theirrespective jurisdictions. Additional comments of CommitteeMembers have been included at the end of the report.
Sincerely,
Henry S. ReussChairman]
Enclosure
(89)
L 7RSZDRS MM3UD2 RU38T3 701 ZZZSIG 1•3,13 WZIUC ,,m A2SOM z o = 23fEtLC KZaT 1 aanna5 10 n"onR17
• - I I IIIDepartment of Housing and Urban
Subsidized Housing Programs(86-0139-0-1-604)
Payments for Operation of LowIncome Housing Projects(86-0163-0-1-604)
Federal Housing AmnsrtoFund(86-4070-0-3-371)
Comprehensive Planning Grants(86-0104-0-1-451)
24.691 3v577 24,691 8,577(0) 0D)
729 686 729"(0)
"68(0)
451 221 465 290 The PHA Fund will require an athorizat for(+14) (+69) restoration @f losses of $52 million In BA (
million in outlays). The Committee expects thatbucdt authrity and outlays In the Fund will behigher dtn esdtimted by th President due to owerlyoptimistic projections Ofe e of the troubledproperties strategy and genral housing markettrends.
57 60 65 60 Th. Committee epcts to increase the President'al(+6) (40) request by $8 million for S. 701 compreesv - Plan-
ning grants. The Committee believes tat compre-hensive planning for the otmal development of com-munit ies 1. absolutely necessary and dat increasedfunding will allow this program to be available tocommunities of all sizes.
Community Development Grants(86-0162-0-1-451)
4,150 2,803 4,150 2,921(0)) (+118)
The Committee estimates th outlays for the CDBGprogram will be $118 million hi than te Presdent'sestimate. This estimate is based on an anlysia ofcurrent spending trends In the program.
0
Z. 1U•T 3•G UQT 10 BZZWW fOGRAX 11101 RR,•JU AUTI0R1GZZGZ2LAJZ01 30 ToXMM UUM In 01MAIIRORIMIN mAI mAVMlL 22= 4
07 In in= I=.=, -t " -I I-I.I n
0-I
o.
Urban Homesteading(86-0171-0-1-451)
20 10 25 12(45) (+2)
The Committee believes that communities have thecapacity to effectively employ this program to pro-vide needed hoIeownuesp opportunities in theinner city. The dditional $5 million recommendedby the Committee will allow additional communitiesto participate In the program.
Rehabilitation Loan Fund(84-4036-0-3-451)
95 85 115 93 This program has been, etremely effective In020) (+8) rejuvenating declining ne boyhood. With the
increasing capacity of comnmunies to effectivelyemploy ti program the Committee believes thata toal program activity level of $150 million($115 In noew B) is warranted.
1,500 S 1.500 The Committee believes that this Initiative Is extremelyImportant to the cbntnued success of the listedd housingprograms. However, It is not clear whether or not thesefunds can be made available from recaptured authority.
Less than $500 thousand
0
IL IRSZNTI U•, DGT R2UUrST 701 EXISTING PRtOGRAS WMCK I-QmU AUMTORIMING PXRIOZON fO TO TIMINACTMUT OP APPROPRIATIONS P01 FISCAL IZAR IM
"0I• mm 1;mZdComm
ft4 AI . I...... .-- -- hW
ductivity and Quality ofWorking Life (Public Last94-136)
New York City SeasonalFinancing Act of 1975(Public Law 94-143)
Department of EnergyOrganizat•Jon Act,appropriations (H. R.11137)
• I °
nA rn# 4.
$3 million outlay figure, only $2 million needsto be authorized for FY 1979. Subcommitteewill conduct hearings before any recoumenda-tions will be made.
Authority expires June 30, 1978. Subcommitteeis in process of conducting hearings, at theconclusion of which a determination may bemade as to a recommendation to continue thisauthority.
Subcommittee hearings will be conducted priorto making any recommendations, hearingsto focus on Title IX, Loan Guarantees forEnergy Demonstration.
VD
1
L IIUMWDET BUDGE REZUET FOR EXISTING PROGWCIS WhO!K RZQVIRZ &UTIORIZING PERSIORN110 TO TIMENACTMENT 01 ALIPOIRXATIONS 1"01 YISA TER 170
h~iuuuqsI mm..uum mtus
I - ,.
Export-Import Bank 606 404 The Committee is in the process ofconsidering the Administration'srequest to increase Exim's commitmentauthority from $25 billion to $40billion and to extend its charter from9/30/78 to 9/30/83.
r-i
L lIBminT I mS0OIu 101M 1•l lOUSMW13 WUXU =s AU•TEOR UALLTI INOR 1 011
P~Gomm"
7th quota increase of theInternational MonetaryFund
It is not presently anticipated thatthe next DW quota increase vwil berequested for fiscal 1979. Should therequest be sade, hwever, the Caitteewill certainly consider it.
ii .nmaamaium z A3Dnm Mwu u m
imwoxmainu u aIL 11I 2MM U A=H PA FFM IX M% AZ
Department of Agriculwre
Rural H=osig beaane Fund(12-4141-2-3-71)
Otrlays66
Committee"Budget Auwrity 6Outlays 6
Propam would prso a deep AAb to lowincome borne pardmums mt crm emcessde- service and peratiag cmts.
Mw Caimmiee Will consider dthm -rposa andit -devam-y justifed by pm" wIa recommeed
- - 100042100.
Department of Housing andUrban Development
Urban Extenmsion Program(86-0173-2-1-451)
ftve. kReeatBudget Authorityoutlays
102 8
Committee
.Outlays
Troubled Projects-eng Subsidy(6.-0172-0-1-604)
Press. -euoBudget AudhrityOutlays
74 -a52 22
Committee RaDigetAuhorIty. 74 -
Outlays 5222
Prpoal would hod costs of interchag ofo a a Oulerw bewm ou nmm•iti. t uinas with
a~ ~~OU a1 al MeU ~ t e~mniWa
- e Commitee bakm. d at altsmtdve approach- a a u recmemIded n Table IV wmok be peefeca]"
- -. - tois Initiative.
- a a Pi w.u sMbsedizer operating cots of Aeslted- - - ouing proJfts In, lal, diffu•.
- a The Commite rornmmOds Imcluslon of this program- a a in "hbget remution.
IL BUwD=rs R nU 3W £mmAID EP X N• POG•As wc WOULD MZgUML--ýý " M1AL YIM
On February 23, 1978, the Houseapproved U.S. participation inthis facility by passing H.R. 9214.This bill authorizes the appropriationof the dollar equivalent of 1,450million Special Drawing Rights.Senate committee action has beencompleted on similar legislation.The administration has requestedan appropriation of $200 millionto cover possible losses as aresult of U.S. participation.
Department off H ..-- nd Urban DevelopmentGNMA-°Low Coat Loans for Energ
Budget AuthorityOutlays
Eney Conserving e toExistin Public Hwaftn Projects
Budget AuiworityOutlays
Programs to Improve ManagementCapacity of Local Government
Budget Authoityoutlays
71 pending National Enrg Act co-tains an authorat~onfor GNMA to purch.a TiLe I Insured enerVy couservaon
500 . . . loans which bear a below matt interest rate and are mad40 10 - to borrawers with below media income. The Coammttee
reoP mmends that $5M million out bf the total authorizatdouof $3 bion beeplyeddrlng F• 1979to start up thepr'ogr
210
5015
2
30
The peain Natoml Energy Act also provides an aumorizatio. ad $10 million In contract authorIty (21-year contract
- term produces $210 millie. In budget authority) for enurWD 10 10 conserving ImIrovement- to editing pulic hsouing pro-
jt The Comm'ee believes tt thee fds arecrnuily important to le the burden of high energycosts local audtes
The Cm • te_ will be sminog varkuso alternativemeduds to improve the abily ad local govrments; to
- - efecivey aid emtLciy utilie their resoexros. Thee5 al- rnative wvill emupasizm ai--meat and accoming
systems Omoh hardware and soare). tni programsand orgaIadeal reviMws of progrm And permam.LIt Is aIcpated that uch a program would have a firsyeau bm%"e authority ý r caneft of $W0 Mmion
IV. LSITVZIZIIIU 01•0J010323a101 NISCAL TlIA 18TI a OMIIHFORm1 M• • ! ' a-dWm .41oarn
- I -,,,i -,_d V-W
Human Resources Develop-ment Act (H.R. 8065)
25 40 56 47 49
National Domestic Develop-ment Bank Act (H.R. 8562)
Amendment to the FederalFinancing Bank Act(H.R. 7416 et al)
Subcommittee hearings held in 1977 onpredecessor bill, H.R. 2596, and cleanbill introduced after mark up. Passedby Committee on Banking, Finance andUrban Affairs. Legislation pendingbefore Committee on Education and Labor.
Subcommittee hearings held in 1977.Awaiting recommendations from theAdministration before further action.
Subcommittee hearings held in 1977.Pending before Committee on Ways andWeans.
IT. L 5 UAIMW 01 C00W3 = 1ataL Tn IM?kW1WMW M-
4-I| -O -
National ConsumerCooperative Bank(H.R. 2777)
Budget authorityOutlays
Central LiquidityFacility(H.R. 10778)
16074
The Committee sent to the House lastyear H.R. 2777, the National ConsumerCooperative Bank Act. That bill waspassed by the House on July 14, 1977.The Senate Banking, Housing and UrbanAffairs Committee completed hearings onthis legislation in February 1977 andhas scheduled a mark-up session forMarch 23, 1978. It is anticipatedthat the legislation will proceedthrough the Senate and conferenceand be signed into law in the nearfuture. The Second Concurrent Resolu-tion on the Budget - Fiscal Year 1978as passed by the House contained budgetauthority of $110 million and outlaysof $13 million for this program forfiscal year 1978.
The Committee is considering H.R. 10778,National Credit Union Central LiquidityFacility Act. This legislation wouldestablish a liquidity facility withinthe National Credit Union Administrationto meet the credit or liquidity needsof member credit unions. The billauthorizes the Secretary of the Treasuryto lend the facility up to $500 millionand authorizes the NCU& Administrator toborrow up to $500,000 from the NationalCredit Union Share Insurance Fund for
IT. JWT AUM W WN3 MI Z•CAL UlU IMjkmeI
N~m I 1 m vS I
Central LiquidityFacility(H.R. 10778)continued
Consumer FinancialServices Act(H.R. 8981)
start-up expenses and from any othersource up to 20 times the subscribedcapital and surplus of the facility.
The Committee has pending before itH.R. 8981, the Consumer FinancialServices Act. The Senate bill S. 2055is pending action by the Senate. Thebill authorizes the Federal ReserveSystem to pay interest on requiredreserve balances of member banks main-tained by Federal Reserve Banks.
IS. 1Rfl•AY•A 01 a0Cox"SS 101 IUC*L 112* 1?p. 4bmV
W~VvWUMPvs ~ tft~b7IkIO
Exchange StabilizationFund:
Budget AuthorityOutlays
2323
0inThe Comittee will consider legislationto discontinue use of the ExchangeStabilization Fund for payment ofadministrative expenses ($17.3 millionin 1976). This would require that someTreasury Department salaries currentlypaid from the ESF be included in thefederal budget in the future.
iV. xz•smmVZTZ21AV 0 CwNGM uIM m nu M IM
sa TM cow"
Solar Energy Bank ActH.R. 7800
Bill provides for creation of aGovernment corporation to make long-term, lovw-interest loans to encouragethe use of solar energy in commercialand residential dwellings. The billauthorizes an appropriation of $5billion. Hearings are scheduled forApril 25, 26, and 27.
0-'0
Bum Bau em I ZaU Pa= 1,i fmmMe m DO mm Xff TRi i
-- V- --- I -=out " -WII0eU TFS
IE•artme of Agriculture
Farmers H AdmRurlaats inal 24Housing Inmarance Fwdi(12-4141-0-3-371)
Deartmen of Housing and Urban Developmwnt
Subsidized Housing Program(86-0139-0-1-604)
Revolving Fund 1(86-4015-0-3-451)
Federal Housing Insurance Ftnd(.6-4070-0-3-3711
GNMA--Special Assistance Fuactons Fund 3(86-4205-0-3-371)
1 253 224 Ms COmm e has adopted the estimat of the(+230) (+223) Cogrslm adw Offce.
See Table I for Commdtt ee c-0WA
55 1 55
See Table I for Commitmee wmr commendation.
-55
440
3 -W5
0 440
48 48 48
Manager(86-4016
T. mEsmu2 BUD= RZIUZSTS m ZZZS0G nROi1Xs wmc Do 02 xoZQuxu AUU0RZ1 TZS UOR p FIsC=
aetand Liquldating Function. -28 -28-0-3-371)
(86-4206-0-3-371)
Participation Sales Fund(86-4206-0-3-376)
Participation Sales Fund(86-4206-0-3-451)
Participation Sales Fund(86-4206-0-3-502)
Participation Sales FUnd(86-4206-0-3-552)
Participation Soles Fund(86-4206-0-3-704)
Guarantees of btgage-Baciced Securities(86-4238-0-3-371)
National Invirance Dsveo nt AF• d(86-423M-0-3-376)
"Leoss ba 500 Mdusand
- -l
- 2
- 10
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- -9
- 7
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U.S. HOUSE OF REPRESENTATIVESCOMMITTEE ON RANKING. FINANCE AND URBAN AAIRSA
"ffWaSV4sPTW Come""S
also RAYVOUMR Mowse Oripce. UuAWs
WASHINGTON. D.C. 10515
March 14, 1978
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Honorable Henry S. ReuseChairmanCommittee on Banking. Finance and
Urban Affairs2129 Rayburn House Office BuildingWashington, D. C. 20515
Dear Mr. Chairman:
We have received your memorandum of March 8. 1978.containing projections for major program affecting theFY 1979 Budget. The following comments represent the viewsof the Minority.
Before commenting on-the actual document, we repeata recommendation previously made, namely that we believethe full Committee should meet, discuss, and vote on theserecommendations. While we recognize that the rules do notmandate this form of action we believe the Budget Actcontemplated such action. More importantly in a periodwhen inflation is again accelerating we believe there wouldbe major benefits in joining together in a bipartisan effortto see if we can't trim some Federal expenditures withoutexcessive harm to our program objectives.
We are concerned that the omission of Budget authorityand outlays for several programs (Solar Bank, NationalDomestic Development Bank, ari possible assistance to NewYork City) will force the Rules Committee to waive therovisions of the Budget Control Act relating to spendingimitations. If we realistically expect to act on these
bills, which may well involve several billions of dollars,it is appropriate to alert the Budget Coumittee now so that
106
Honorable Henry S. ReussPage TwoMarch 14. 1978
waivers will not be required later. Failure to do socould result in unrealistic budget ceilings which undermine.the entire budget process, as you well know from the manywaivers that have been granted in the past year.
The I•inority is also concerned about what appearsto be a proliferation of proposals to create new banksand lending facilities. In this report to the BudgetCommittee there are proposals involvin the NationalConsumer Cooperative Bank, a National Domestic DevelopmentBank, and a solar Energy Bank.
We are concerned that these proposals are beingmade without regard to the need to establish reasonablepriorities for the use of scarce funds provided by taxpayersand without regard for the possible inflationary impact ofcontinued massive Federal borrowing or for the danger thatsuch borrowing might "crowd out" private borrowing neededfor continued economic growth in the private sector.
The attached document represents more specificsubcommittee comments.
We request that this letter be submitted along withthe final report to the Budget Committee.
Sincerely,
Enclosure
107
Honorable Henry S. ReussPage ThreeMarch 14. 1978
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BILL GREEN
108
Commentson
Banking Committee'sFY '79 Budget Projections
The Subcommittee on Housing and Community Development
There are several significant questions related to the programs withinthe jurisdiction of the Subcommittee on Housing and Community Development, whichare raised by the Banking Committee's budget projections made pursuant to theCongressional Budget Act of 1974.
In Table I we note that public housing operating subsidies are stillincreasing, and that in all likelihood the subsidies needed will be even higherthan projected due to the lack of sound management. We note with alarm thatthis subsidy has increased from a level of $102,000,000 in FY '71 to a levelof $729,000,000 in FY '79.
While it is recognized that the 312 Rehabilitation Loan Fund is extremelypopular, it is not clear that communities have 4ncreased their capacity toeffectively utilize these funds at the level proposed by the Committee, whichis $20,000,000 above the $50,000,000 increase in program level requested.by.the President:.- 'This is especially true as more communities utilize theircommunity development blcck grant funds for rehabilitation. In addition, sucha large increase in funding might tempt communities to utilize their blockgrant funds in other ways, in anticipation of 312 funds for rehabilitation.
Also under Table I, we question the need for the President's requestfor an additional $1.5 billion GNMA special assistance authority. The currentpurchase authority is $4.875 billion which can be outstanding at any one time.No. justification has been presented to warrant increasing this figure to$6.375 billion in light of the recaptured authority which is available.
Under Table I1, the Committee's rejection of the Urban ExtensionService Program, is appropriate but sufficient justification has not been madefor the recommended alternative (Table IV) and the added $40,000,000 costabove the President's proposal.
In addition, there has been little, if any, justification for the pro-posed $74,000,000 operating subsidy for troubled FHA projects. No detailedanalyses of the scope of the problem or its causes have been presented, norhas there been any indication of management improvement efforts which couldreduce the amount of needed subsidy.
Under Table IV, there has been no justification for the proposed new$50 million program to improve management capacity of local governments. Eventhough this is the Committee's "alternative" to the President's Urban ExtensionProgram, the threshold need for either has not been established.
We also note that the legislative initiatives listed in this tableomitted reference to the $100,000,000 GNMA program for solar energy loans,
109
which is included in the National Energy Act. If the Committee expects thisprogram to be utilized. some dollar figure should be projected for this pro-gram as was done in the case of the GNMA purchase of below market interestloans for energy conservation which was shown with a $500,000,000 start-upauthority.
The Subcommittee on Financial Institutions
Supervision, Regulation and Insurance
Consumer Cooperative Bank Act
It is noted that the cost of this proposal has been signi-ficantly understated. The current Treasury proposal calls for budgetauthority of $100 million for each fiscal year 1979 - 81 for the NationalConsumer Cooperative Bank and for an additional $25 million for each fiscalyear 1979 - 81 for the Self-Help Development Fund. These figures would total$375 million. In addition, the Bank would be authorized to borrow from threeto five times its paid-in capital and surplus, from Treasury or the market,which would be a minimum of $900 million, some or all of which way occurduring the next five fiscal years. Additional sums will be required foradministration.
With respect to the House-passed bill, the Congressional BudgetOffice estimated authorizations for fiscal years 1979 - 82 at $640 million,which authorizes $100 million each for FY 1979 - 82 for the National ConsumerCooperative Bank and $60 million for each FY 1979 - 82 for the Self-HelpDevelopment Fund. The provision of authority for the Bank to borrow, eitherfrom Treasury or the market, up to ten times paid-in capital and surplus wasignored by the CBO because the CBO believed that the impact would not occurduring FY '78 to FY '82, but it could amount to as much as $5 billion.
Consumer Financial Services Act of 1977
Depending upon when this legislation is enacted, there will be abudgetary impact resulting from the provision which authorizes the FederalReserve Board to pay interest on required reserve balances maintained atFederal Reserve Banks. The Senate Banking Committee estimates the impactas follows: Year of enactment - no cost (due to the one year delay in theeffective date after enactment); first year following enactment - 210million dollars; second year following enactment - 278 million dollars;third year following enactment - 285 tdlllion dollars; fourth year followingenactment - 290 million dollars.
110
The Congressional Budget Office estimates the impact as follows:The year of enactment - no cost; first year after enactment - 300 milliondollars; second year following enactment - 320 million dollars; third yearfollowing enactment - 310 million dollars; fourth year following enactment -240 million dollars.
Figures were derived from the cost estimates contained in SenateReport 95-407 to accompany S. 2055.
The Subcommittee on International Development
Institutions and Finance
Export-Import Bank
The Minority feels that the Committee report should include estimatesfor the Export-Import Bank at least equal to the President's request of$606 million in budget authority and $404 million in outlays since it is likelythat the Bank will be given extended authority.
3
111
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March 14, 1978
Honorable Henry S. ReussChairmanCommittee on Banking, Finance and
Urban Affairs2129 Rayburn House Office BuildingWashington, D.C. 20515
Dear Mr. Chairman:
Pursuant to your memorandum of March 8, 1978, 1 request tobe recorded with the following comments concerning the Committee'sprovision for major programs affecting the FY 1979 budget.
I have endorsed and fully support the minority views as sub-*itted by Mr. Stanton, our ranking Minority Member. I would addthe following specific comments:
1. 1 believe that the Committee support for an UrbanExtension Service program and the Committee alter-native to that proposal are unnecessary in thatsuch activities are well within the parameters ofthe Section 701 Comprehensive Planning Program.I do not see the need to create a new statute andwith it another bureaucracy.
2. Whatever the merits of ending Section 312 and usingthe Community Development Block Grant program forrehabilitation activities, it is clear that thisCongress will not do that. Accordingly, I favor ameaningful appropriation for this program.
3. 1 am very concerned that the allocation for theSection 8 existing housing program in New York Cityhas dropped to 2750 units in the current fiscal year.I believe that this program is very useful and stronglyurge that there be an additional Section 8 authoriza-tion earmarked for existing housing programs.
With best wishes,
S)bronely.
VWil~liam Gr~ee~n4Member of Congress
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March 13, 1978
The Honorable Robert N. GiaimoChairmanCommittee on the BudgetHouse Office Building Annex #1Washington, D.C. 20515
Dear Mr. Chairman:
Enclosed is the March 15 report of thiColumbia.
I have circulated it to Members of ouiand comments.
Sincerely,
CHARLES C. DIGGS, JR.ChairmanCommittee on the District of Columbia
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r Committee for their suggestions
(113)
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I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZINGENACTMENT OF APPROPRIATIONS 1`012 FISCAL YEAR 1970
LEGISLATION PRIOR TO THE
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for the federal payment
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11. PRESIDENTS BUDGET REQUESTS OR NZW AND EIPAIDID PROGRAMS WHICH WOULD RQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR. 17.. 6,
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. . .. .in. PRESIDENTS BUDGET REQUESTS PO0 SAVINGS TIRONOH CHANGES IN EXISTING LAWS WHICH MANDATE SPENDING INFISCAL YEAR 1970 WITHOUT FURTHR..ACTION BY CONGRESS; OTHER LEGISLATIVE SAVINGS PROPOSALS
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IV. LEGISLATIVE INITIATIVES 0 CONGRESS P0 FISCAL YETA 1979Ila aUmIW 1uma.1
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Federal contribution to D. C. re-tirement funds
RFK Stadium Bonds
Federal Capital Region EconomicDevelopment Corporation.
Washington Metropolitan Region StudyCoumission
47 47 47 47 46 H.R. 6536 passed the House In 1977 and is pendingin the Senate.
20
100
Bonds are due in December, 1979. Nothing hasaccrued in the sinking fund authorized in 1957by Congress to repay the bonds for constructionof the stadium.
The Committee has under consideration legislationto create this corporation.
Legislation has been introduced to create thiscommission.
1.5
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v. luSmDZNTs UNDGT sUVMGUTS FOR WlNO P1RO1NS WHICH DO NOT RZGUIRI AUMORIZING LEGISLATION FOX FISCALYEAl 1170
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Temporary Comission on financialoversight.
Payment in lieu of charges for -ater,water services and sanitary sewerservices rendered to Federal facili-ties by the District of Columbiaduring 1979.
Treasury loans for capital projects
Loans to Stadium Sinking Fund
WMATA revenue bonds
WIEATA construction funds0
3 5 3 5 -The Comission is letting contracts for financialmanagement systems and an audit.
10 10 10 10 This annual payment was authorized by P. L. 95-122.
130 121 130 121 Continued borrowing for capital projects wasauthorized by P. L. 95-131.
.8 .8 .8 .8 The net stadium receipts cannot meet interest pay-ment.
0 0 32 32 The federal guarantee of Metro bonds should behonored, and the amounts now due should be paidat an 80% federal, 20% local match.
0 0 524 524 The appropriations for the Urban Mass TransitAdministration should include funds equal tothe federal highway funds to be surrendered bythe local jurisdictions.
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CONGRESS OF THE UNITED STATESHOUSE OF REPRESENTATIVESCOMMA II ON EDUCATION AND LADGR
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March 15, 1978
Honorable Robert N. GiaimoCommittee on the BudgetU. S. House of RepresentativesWashington, 0. C.
Bear Chairman Gialmo:
Pursuant to section 301(c) of the Congressional Budget Act of1974, 1 am submitting to the Committee on the Budget the views andestimates of the Education and Labor Committee on the fiscal year1979 federal budget as it relates to matters within the Jurisdictionof the Committee.
This report was approved by theWednesday, March 1, 1978.
Best wishes.
Committee in open session on
I
Enclosures
(119)
120
121
VJEWVS ANI) ESTIMATES
Or TIlE
COMMITTEE ON EDUCATION A)ND LABOR
I'tI:SUAT TO
SECTION 301(c) OFBUD(6ET
THE CONGRESSIONALACT OF 1974
MARCII 15, 197s
24-412
(121)
L.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1978
122
COMMITTEE ON EDUCATION AND LABORCARL D. PBRKINS, Kentucky, Chairman
FRANK THOMPSON, JR., New JerseyJOHN H. DENT, Peunsylvan-aJOHN BRADEMAS, IndianaAUGUSTUS F. HAWKINS, Calik rniaWILLIAM D. FORD, MichiganPHILLIP B U RTON, CaliforniaJOSEPH M. GAYDOS, PennsylvaniaWILLIAM "BILL" CLAY, MissouriMARIO BIAG0I, New YorkIKE ANDREWS, North CarolinaMICHAEL T. BLOUIN, IowaROBERT 3. CORNELL, WisconsinPAUL SIMON, IllinoisEDWARD P. BEARD, Rhode IslandLEO C. ZEFERETTI, New YorkGEORGE MILLE R, CaliforniaRONALD M. MOTTL, OhioMICHAEL 0. MYERS, PennsylvaniaAUSTIN J. MURPHY. PennsylvaniaJOSEPH A. LE FANTE, New JerseyTED WEISS, New YorkCEC HEFTEL, IfawalLBALTASAR CORRADA, Puerto RicoDALE E. KILDEE, Michigan
ALBERT H. QUIE, MinnesotaJOHN M. ASHB ROOK, OhioJOHN N. ERLENBORN, IllinoisRONALD A. SARASIN, ConnecticutJOHN BUCHANAN, AlabamaJAMES M. JEFFORDS, VermontLARRY PRESSLER, South DakotaWILLIAM F. GOODLINO, PennsylvaniaBUD SHUSTER. PennsylvuidaSHIRLEY N. PETTIS, CaliforniaCARL D. PURSELL. MichiganMICKEY EDWARDS, Oklahoma
fIII
123
LETTER OF SUBMITTAL
HOUSE OF REPRESENTATIVES,COMMITTEE ~O EDUCATION AND LABOR,
Hon. ROBERT N. GIAIMFO, Washington, D.C., March 15, 1978.
Committee on the Budget,U.S. House of Repre8entatives,Washington, D.C.
DEAR CHAIRMAN" GIAIMO: Pursuant to section 301(c) of the Con-gressional Budget Act of 1974, I am submitting to the Committee onthe Budget the vieý%s and estimates of the Education and LaborCommittee on the fiscal year 1979 federal budget as it relates tomatters within the jurisdiction of the Committee.
This report was approved by the Committee in open session onWednesday, March 1, 1978.
Best wishes.Sincerely, CARL D. PERKINS,
Chairman.Enclosures.
(II)
24-066 0 - 78 - 9
124
REPORT OF THE EDUCATION AND LABOR COMMITTEEE OF THE U.S.HOUSE OF REPRESENTATIVES TO THE BUDGET COMMITTEE OFTHE U.S. HousE OF REPRESENTATIVES AS REQUIRE) BY SECTION301(c) OF THE CONGRESSIONAL BUDGET ACT OF 1974
The Committee on Education and Labor respectfully submits itsreport as re(;uired by section 301(c) of the Congressional BudgetAct of 1974. rhe President's fiscal year 1979 estimates for programsand activities in the Education and Labor C0oinittee's spenJlding andlegislative jurisdiction represent 6.4 percent of total budget authorityand outlays:
IDollar amounts in billions)
Budgetautholitj Outlays
President's total budget request --- _-------------_---_----.............. $568.2 $500.2President's total for Committee on Education and Labor ............................ 36. 3 31.9
Fiscal year 1979 revenues are estimated at $439.6 billion. Basedon the President's projected total outlays, a deficit of $60.6 billionis forecast for fiscal year 1979. For fiscal year 1978, the President'sJanuary 1978 outlay projection is $462.2 billion, implying a deficittof $61.8 billion for the current fiscal year. Forecasts of high outlaysand of large deficits have an inhibitory effect on total congressionalspending which is no doubt in keeping with the purpose of the Con-gressional Budget Act of 1974. Unfortunately, outlay estimates areimprecise. Outlay errors are invariably over'estimates rather thanunderestimates.
It may be recalled that for fiscal year 1977 the final congressionalbudget resolution adopted a level of outlays of $409.2 billion. Thofiscal year 1977 actual outlay figure is lower by $8 billion. The actualfiscal -ear 1977 deficit which the Congress had contemplated in thethird bud get resolution for fiscal year 1977 as $69.8 billion (with theintention of stimulating the economy to that degree) turns out to be$45 billion.
Now, in the second week of March 1978, reports from the Officeof Management and Budget and the Congressional Budget Officesuggest that fiscal year 1978 outlays as presented to the Congress onJanuary 23, 1978, may be fromn $7 to $12 billion too high.
In light of the difficulties involved in the forecasting of outlays,and the likelihood that overestimates will continue to prevail, thecommittee is recommending an increase in outlays in fiscal year 1979in the amount of $1.36 billion. Such an increase is 4.3 percent over thePresident's estimate of $31.9 billion for outlays in the committee'sspending and legislative jurisdiction. The committee's estimate of
(1)
125
2
outlays is derived from details for fiscal year 1978 and fiscal year 1979contained in the committee print of the House Budget Committeeentitled "March 15 House Committee Report-Request aind Instruc-tions," andl in the appendix to the budget for fiscal year 1979.
The following chart compares the Presi~lent's request with the com-mittee's views for all programs and activities in the committee'sspending andi legislative jurisdiction:
FISCAL YEAR 1979 REQUEST
Iln millions of dollars)
Budget Authority Outlays
Committee Committeeor (+) over (+)
under(-) under (-)President Committee President Presidelt Committee President
Fiscal year 1979 ---------.----- - 28,998 31,574 +2,576
Fiscal year 1980 advance appropiiation. 7,303 12,120 +4,817
Total ........................ 36,301 43,694 +7,393 31,890 33,246 -, 356
5012/3-Education:Fiscal year 1979 ------------------ 9,133 10,038Advance appropriation fiscal year
1980 ---------------------- 6,019 6,119
15,152 16,157 +1,005 11.580 11,917 +33750X4--Training and employment:Fiscal year 1979- -....... -n -11,542 12,265Advance appropriation, fiscal year
Total ------------------------ 36,301 43,694 +7,393 31,890 33,246 +1,356
The charts which follow are numbered I, II, III, IV, and V andsu)lply the detailed information requested by the House Budget Com-mittee. Chart V in addition to stating the total amount in the com-mittee's spending jurisdiction summarizes the committee's estimate onother major existing programs which do not require authorizing legis-tion for fiscal year 1979. Such programs are in the spending jurisdiction
, of the Committee on Appropriations, which may follow its previouspractice of abstaining from identifying levels of funding in its reportto the Budget Committee under 301(c) of the Congressional BudgetAct.
126
3CHART I-PRESIDENT'S REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATION
Department of Agriculture:Food program administration: 12-3508 604 .........................Special supplemental food programs (WIC): 12-3510-604 ............
Total ........... - --................... - ..... - .-.-.-- ....-
H.R. 11259 "To extend and modify the WIC program" propu-as toauthorize $650 million for fiscal year 1979, a level, likely to be supportedby the committee.
New legislation yet to beftroduced is likely to propose a change inthe reimbursement mechanism in the child care food program as re-flected in the committee's estimate.
Department of Health, Education, and Welfare:Elementary and secondary education. 75-0279-501 ..................
H.R. 7577 would amend the Economic Opportunity Act of 1ý,64 andtoposes to reauthorize the Follow through program at $60 million forscale year 1979. The fiscal year 1978 appropriation is $59 million. The
committee is unlikely to recommend phasing out the program as pro-posed by the President. H.R. 10570 would amend the EnvironmentalEducation Act and H.R. 10569 the Alcohol and Drug Abuse Edur..ionAct;their authorization levels for fiscalyear 1979amauntto $11 million.
Total -------------------------------------------------------- 1,210
The Committee reconizes the urgency of providing a solution to themiddle income family s cost of financing college education. Existingprograms fall far short. Tax credit proposals favor only a low. Accord-ingly, the Cof mittee has reported H.R. 11274 the "Middle IncomeStucent Assistance Act". Shown above are the Committee's views ofoptimum f ending of these amendments to student assistance programsas originally provided in the Higher Education Amendments of 1965.
1he chaie in annual income eligibility which proposes to eliminatethe ceiling cn rmccme of participants in the guaranteed student loanprogram would afect entitement authority. As the President favorsprcn'pt ccnsideration cf the legaslaticn by the Congress, the committeesolicits the support of the Budget Committee in a request to the Com-
mittee on Rules for a waiver of sect. 303(a) of the Congressional BudgetAct in order to permit consideration of H.R. 11274 in the House beforethe adoption of the first budget resolution for fiscal year 1979.
Human development services:75-1636-501 ................................................75-1636-506 ................................................
Total --------------------------------------------------------
H.R. 7577 would reauthorize Head Start; H.R. 7905 would amendand extend the Rehabilitation Act of 1973; H.R. 6693 would amend theChild Abuse Prevention and Treatment Act. New legislation will beintroduced to amend the Older Americans Act of 1965, after the hearingschedule now in progress is complete. The committee's recommenda-tion takes into account the need for increased funding for successfuland important programs such as Head Start. child abuse, communityservices anl nutrition for the aging, and rehabilitation teivice andfacilities. In addition, the committee supports the President's requestfor advance appropriations at $1,284 million but with an increase of$140 million.
7012,839
1,373 ..........48 ..........
155155 1,421(+211)
327 795 360991 3,221 1,095
3,540 1,318 4,016 1,455(+476) (+137)
127
4CHART I-PRESIDENT'S REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATION
PRIOR TO ENACTMENT OF APPROPRIATIONS-Continued
lin millions of dollars
Committeerecommendation
President's requestBudget
Bud get authority OutlaysMajor issue or program authority Outlays (differ- (differ-
ence) ence)
Department of Labor:Program administration 16-0172-504 .............................. 57 56 58 57
H.R. 11086 amends ,he Comprehensive Employment and Training (+0) (+1)Act of 1973. The committee is concerned by reports of substitution ofFederal funds for local funds that woulJ otherwise lagtlimateli have tobe spent to provide public services. It recommends the increase of $1million to enable the Department to support the hiring of 45 to 50 newregional investigators to help correct and prevent the abuse of CETAfunds.
The President proposes title VI of H.R. 11086 as a countercyclicalmeasure for public service jobs and his request would fund 725,000slots throughout fiscal year 1979. The committee sees the need also toprovide for public service employment for the hard core unemployedand therefore is likely to support an adjustment in the countercyclicalaccount of 100,000 slots to provide for '625,000 for fiscal year 1979 asreflected in its recommendation. (The 100,000 slots made available bythis adjustment would be provided through additional funds for thestructurally unemployed in title II.)
Employment and training assistance: 16 0174-504 .................. 4,853 3.905 6, 430 5,005Advance appropriation .......................................... 0 4.470
Total ....................................................... 4,853 3,905 10,900 5,005+6, 047 +1,1]00
Several factors contribute to the divergence between the administra-
tion and the committee:As mentioned above, the committee sees a need for public
service jobs for the structurally unemployed and provision is madein this budget account for 100.000 PSE slots in 1979.
It has always been the committee's position that the new specialyouth programs should be funded at the annual rate of $1,500million. The initial appropriation for fiscal year 1978 provided $1billion. The administration subsequently asked for a supplementalappropriation of $500 million for fiscal year 1978 which would havebrought funding to the 51.5 billion level, but its supplemental wasrequested after the Appropriations Committee had acted. Thecommittee urges the administration to increase its efforts in ad-dressing the critical situation of unemployed youth and is con-cerned with the Department's slow progress in building up theyouth enrollments. Despite the Department's record to date, thecommittee still recommends that budget authority room shouldbe provided for $1.5 billion annual funding. The committee wouldalso recommend an increase in funding for the work experienceand training activities for the structurally unemployed under newtitle II if the Committee on the Budget were to decide against in-cluding the $500 million budget room requested for the specialyouth programs.
Finally. the committee suggests that budget authority be pro-v:ded in the concurrent resolution for advance funding in the totalamount of $4,470 million for activities under titles II, IV, and VIII,of H.R. 11086 the "Comprehensive Employment and TrainingAmendments of 1978." The committee emphasizes that theadvance appropriation is not proposed for countercyclical publicservice jobs under title VI.
Community services prograrr.s: 31-0500-506 ----------------.------ 538 312 604 352
H.R. 7577 "Economic Opportunity and Community Services Amend- (+6) (+40)
ments of 1977" proposes to reauthorize the activities administered bythe Community Services Administra•ion. The increase in the commit-tee's estimate would restore certain reductions proposed by the Presi-dent and adjust for inflation. The committee observes that the emer-gency fuel program for which $200 million was appropriated in fiscall ear 1977 and again in fiscal year 1978 is no Ionger under the jurisdic-ion of the CSA, having been transferred to the Department of Energy.
Had the activity continued under CSA, the committee would have beenlikely to recommend continuation of its funding at the same level.
128
CHART I-PRESIDENT'S REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATIONPRIOR TO ENACTMENT OF APPROPRIATIONS-Continued
(In millions of dollars
Committeerecommendation
President's request Budget
Budget authority OutlaysMajor issue or program authority Outlays (differ. (differ.
H.R. 11212 the "Domestic Volunteer Service Amendments of 1978" (+15) (+10)
proposed to reauthorize part of this account. The remainder will becovered in the new legislation yet to be introduced directed at otherOlder American programs. The committee would like to see more fi-nancial support particularly for VISTA and the Older American Volun-teer programs.
CHART II-PRESIDENT'S REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
[in millions of dollars
Estimate Projection
1979 1980 1981 1982 1983
Department of Agriculture:Special supplemental food programs (WIC). 12-3510-604:
The bills to extend and modify the WIC program as introduced inthe Senate (S. 2630) and the House (H.R. 11259) contemplate author-izations for fiscal years 1979 and 1980 as shown above in the com-mittee's recommendation. The committee's projections for thesubsequent fiscal years reflect an adjustment commensurate withCBO's projected increases in the Consumer Price Index.
Department of Health, Education, and Welfare:Elementary and secondary education, 75-0279-501:
The committee expects to support the President's proposal foremployment opportunities, but has not seen the draft legislation.No projections by OMB are contained in the fiscal year 1979 budget.
Department of Agriculture:Special milk program, 12-3502-604 ................................ -112 -95 0 0
(+112) (+95)i.. President proposes to limit reimbursement to institutions that
do nol receive payments for food programs which include milk withmeals. A similar proposal has been made in previous years and thecommittee is unlikely to support It for fiscal year 1979.
Child nutrition programs, 12-3539-604 ............................. -105 -105 0 0(+105) (+105)The committee is unlikely to support the President's proposal to
modify existing law with regard to the school lunch program, free andreduced price meals, child care food. commodity procurement, andsecs. 18 and 19 relating to nutrition education and training.
Department of Health. Education and Welfare:School assistance in federally affected areap, 75-0280-501 ............ -76 -58 0 0
(+76) (+58)The committee concluded its hearings on impact aid on Mar. 6. 1978.
It is unlikely that new legislation to be introduced by the committeewould support reform of entitlement payments as contemplated by thePresident.
CHART IV-LEGISLATIVE INITIATIVES FOR FISCAL YEAR 1979 OF THE COMMITTEE ON EDUCATION AND LABOR
The legislation seeks to make basic operating funds available (sub-ject to annual appropriation) to tribally controlled community collegeswhich provide services in geographic areas where traditionAl collegesdo not function.
Indian Basic Education Act:Budget authority ... . ..........................................Outlays-....-------------------------
The legislation would increase Federal funding (subject to annualappropriation) to reservation-oriented public schools and establish pro-cedures for local Indian and tribal contribution to both public andBureau of Indian Affairs programs.
Meals-on-Wheels (nutrition program for the elderly):Budget authority ..........................................Outlays...........................................
The nutrition program for the elderly would be amended to expandthe collectively served meals with a specific authority subjectt to annualap ropriation) to provide home-delivered meals to elderly and dis-abled people who are unable to attend the collective gathering.
The domestic violence legislation would be directed toward assistingcommunities in providing relief (subject to annual appropriation) tobattered spouses.
Hubert H. Humphrey Institute of Public Affairs Memorial Act:Budget authority -...............................................Outlays -----------.--------------------------------------------
Subject to appropriation, the legislation would provide a single en-dowment not to exceed $5 million to the Hubert H. Humphrey Instituteof Public Affairs for an on going program of research, study, and train-ing in the major fields in which Senator Humphrey spent his 3 decadesof public service.
CHART IV-LEGISLATIVE INITIATIVES FOR FISCAL YEAR 1979 OFLABOR-Continued
THE COMMITTEE ON EDUCATION AND
1979 1980 1981 1982 1983
Full Employment and Balanced Growth Act of 1978:Budget authority...................................
Tne legislation sees to se( short and medium term economic goalsto bring the rate of unamplyment down to 3% for Americans aged20 and over and 4% for all Americans within five years. The bII is ineffect a statement of national purpose aid, while suggesting policiesfor consideration by the Exe:utlive, does not prescribe any new pro-
rams. The estimate of $1 million subjectt to appropiation) in FY979 is to cover poasiole costs of aiviso.y committees and studies.
The Rehabilitation %•ct would be amended in order to establish aprogram (subject to annual appropriation) directed toward serving
adicapped individuals who ave without a vocational potential inorder that they might live an independent life. The program wouldbe administered by the Rehabilitation Service Administration andcarried out through the State agency.
I ...........................1..........................
200 212 225 238 252125 150 180 215 250
CHART V-PRESIDENT'S REQUEST FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZING LEGISLATIONFOR FISCAL YEAR 1979
Committee's spending jurisdiction: Mandatory under existing law (total)..
The committee agrees with the President's estimates as describedin the summary providdd in the Budget Committee's print circulatedwith Honorable Robert N. Giaimo's letter dated Feb. 9, 1978.
1979 current year appropriation ...............................1980 advance appropriation ..................................
Total ....................................................
Further to the ongoing programs in subfunction 501,'213 alreadyidentified in charts I, II, Ill, the committee recommends the netincreases in budget authority and outlays shown above. Major pro.grams for which additional funding is recommended include elemen-tary and secondary education/grants for the disadvantaged, studentand institutional assistance for postsecondary education, career edu-cation, education for the handicapped, vocational and adult education,and library resources. The committee, pending the introduction of newlegislation, is unlikely to support the proposal to provide advanceappropriations for fiscal year 1980 for impact aid.
Subfunction 505 554/7511754: Regulatory activities related to laborservices, safety and health, LEAA, and equal employmentopportunities .................................................
The increase of $27 million in budget authority and outlays reflectsthe committee's concern that additional support is needed in manyimportant regulatory functions. For example, backlog of claims underthe Federal Employees Compensation Act is estimated at 110,000, asubstantial increase over the previous year. The hiring of at least onehundred additional claims examiners with necessary supporting serv-ices is recommended to correct not only the problem of the backlogbut also the possible abuses arising from inadequate examination.Recent disasters in grain elevators demonstrated again the need foradditional compliance officers in the Occupational Safety and HealthAdministration. The committee recommends that 200 complianceofficers with necessary support staff and services be hired to improvethe existing complement which is grossly inadequate. In the admin-istration of justice area, the committee recommends a 10-percentincrease over current level of funds for juvenile justice and delinquencyprevention. Additional headquarters staff positions in the Equal Em-ployment Opportunity Commission are urgently needed to improvethe handling of the increasing number of complaints received fromthe field.
32 29 32 29
7.170 ..........5,619 ..........
12,789 11,056
7,751 ..........5.719 ..........
13,470 11,332(+681) (+276)
1, C52 1,009 1.079 1,036(+27) (+27)
131
8
New entitlement authoruty.-The committee has no legislation whichcontemplates authorizing new programs eligible for entitlement status.Ongoing entitlement programs to be amended or reauthorized in-cluae the guaranteed student loan program ($48 million), childnutrition programs ($167 million) and vocational rehabilitation/basicState grants ($856 million for fiscal year 1979 )lus $933 million ad-vance appropriation for fiscal year 1980). Accordingly, the committeerequests new entitlement authority be provided in the First ConcurrentResolution on the Budget for Fiscal Year 1979 in the amount of$2,004 million.
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The Honorable Robert N. GlaimoChairmanCommittee on the BudgetU. S. House of RepresentativesWashington, D. C. 20515
Dear Bob:
In conformity with the requirements of section 301 (c)of the Congressional Budget Act, there is enclosed the Com.ittee'sestimates on new budget authority and budget outlays to be authorizedby the Committee on Government Operations for FY 1979.
If I can be of further assistance, please let me know.
With best wishes, I am,
#K BROOKS
man
Enclosure
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LnRSIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATION PRIOR TO THEENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1978
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Antirecession Financial "1.4The current program expires on September 30, 1978.Assistance 1,040 1,040 1,040. 1,040 The budget contains a request for the amount indi-
(0) (0) cated herein. However, the budget also indicatesS.... .thutt the auieiisration eApeCtS to review the
• '"program's impact and make specific racr-wopndationcLoncerning its future later this year. Untillegislation is recommended and reported by the" Committee, no specific budget authority or outlayfigures can be recommended. In the interim, thefigures proposed in the budget are repeated.
U. PRESIDED BMSUDGET REUE OR NEW AND EXPANDED PROGRAM WHICH WOULD REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
On February 8, 1978, the Houseof Representatives consideredH.R. 6805, to create an Officeof Consumer Representation,and voted not to pass thebill. At this time it isnot contemplated that thisproposal will be further consideredthis year. Therefore, norecommendations for budgetauthority or outlays are includedherein.
IThe projections of budget authority and outlays shown in the Presidential budget are extrapolationsbased on his stated economic assumptions and the costs of programs proposed in the budget. These projec-tions, then, represent an estimate of the degree to which future resources are committed by currentadministration policy.
IM PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING LAWS WHICH MANDATE SPENDING INFISCAL YEAR 1879 WITHOUT FURTHER ACTION BY CONGRESS; OTHER LEGISLATIVE SAVINGS PROPOSALS
IV. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979Ilai ,Oulm ofdoa~n"
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Legislation has been reported by t0e Committeeto establish Offices of Inspector General withinthe Departments of Agriculture, Commerce, Housingand Urban Development, Interior, Labor, andTransportation, and within the Community ServicesAdministration, the Environmental ProtectionAgency, the General Services Administration, theNational Aeronautics and Space Administration,the Small Business Administration, and theVeteran's Administration. The specific authori-zation for appropriation is not included in thebill and the amount included for budget authorityand outlays is that estimated by the CongressionalBudget Office.
• . .
V. PRESIDENT'S BUDGET REQUESTS rOR EXISTING PRORGAIS WHICH DO NOT REQUIRE AUTHORIZING LEGISLATION :OR FISCAL -YEAR 1979
(In thousands of dollars)(Flow Commenl on programs, for wbIh your colmnolute. presently hts dkeW spewmna mpaoublUUrA.)
General Services AdministrationReal Property ActivitiesExpenses, disposal of surplusreal and related personalproperty
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,854,924 6,852,294
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130(0)
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1000(0)
150(0)
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6,854,924 6,852,294(0) (0)
Comment
The funds contained in the President'sbudgetary requests are accepted withoutadditional comment because the funding iseither self-generating or, in the case ofRevenue Sharing funds, based upon astatutory entitlement. Regarding otherprograms that fall within the Committee'sauthorizing authority and which areoperating under a continuing authorization,the Committee has not included separatecomments at this time. As the principleoversight committee of the House ofRepresentatives, the Committee conductsnumerous investigations and hearingsduring the course of a Congress on theeconomy and efficiency of existing programs.Reports issued as a result of these investi-gations and hearings contain many findingsand recommendations which accuratelyreflect the views and evaluations of theCommittee regarding such programs.
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COMMITTEE ON HOUSE ADMINISTRATIONSwur M.3Z. U.S CArro..
1asuinuon. N.C. 20515
March 15, 1978
The Honorable Robert to. GialmoChairmanCommittee on the Budget214 HOB Annex #1Washington, D.C. 20515
Dear Mr. Chairman:
The Committee is in receipt of your letter of February 9, 1978,regarding the report of budget estimates required of the Committeebefore March 15th under the Congressional Budget Act of 1974.
There is an initiative 4nder report format IV which the Com-mittee wishes to bring to your attention. The Committee antic-ipates the reauthorization of the American Folklife Center in theLibrary of Congress. The reauthorization will be for three years,and will be in the estimated amount of $685,000.00 for fiscal 1979,$1,065,000.00 for fiscal 1980 and $1,355,000.00 for fiscal 1981.The Center is providing an essential function in the gathering to-gether and preservation of materials which have characterized thesocial, ethnic, and regional growth of our nation and the meldingof its peoples for the common good.
Under report format V, the Committee would anticipate authoriz-ing an amount of $8.62 million for the admiinistration and operationof the Federal Election Commission during fiscal 1979. The Presi-dent's recommendation of $8.2 million appears to minimize the needfor more timely action by the FEC, and the necessary increases instaff and budget that that would entail.
Kind regards,
Cordially,
Frank Thompson
FT/chn
(139)
24-066 0 - 78 o 10
95th Con--- } 0 oxuI PRINT NO. 8
REPORTTOTM
COMMITTEE ON THE BUDGET
VIEWS AND ESTIMATESOF TH=
COMMITTEE ON INTERIOR ANDINSULAR AFFAIRS
HOUSE OF REPRESENTATIVESSUBMITTED PURSUANT TO SECTION 301 OF THE
CONGRESSIONAL BUDGET ACT OF 1974
ON THE
BUDGET PROPOSED FORFISCAL YEAR 1979
MARCH 15, 1978
Printed 4or the use of the Committee on Interior and Insular Affairs
U.S. GOVERNMENT PRINTING OFFICE
(141)
142
OOMMME ON INTERIOR AND INSLAR AFFAIRSHousM oF RzwazxAUVxM
MORRIS K. UDALL, Arizona, CbbumsPHILLIP BURTON, ClfoniaROBERT W. KASTENMEIER, WisconsinLLOYD MEEDS, WashingtonABRAHAM KAZEN, JI., TexasTENO RONCALIO, WyomingJONATHAN B. BIN OAM, Now YorkJOHN F. BEIBERLING, OhioHAROLD RUNNELS, New MexicoANTONIO BORJA WON PAT, GuamRON nD LUGO, Virgin IslandsBOB ECKHARDT, TeasGOODLOS Z. BYRON, MarylandJIM SANTINI, NevadaPAUL E. TSONGAS, MassachusettsJAMES WEAVER, OregonBOB CARR, MichiganGEORGE MILLER, California
JOE SKUBITZ, Kaums, RasAol Mimerif MemberDON H. CLAUSEN, CalifornmiPHILIP 3. RUPPE, MichiganMANUEL LUJAN, JI., Now MexicoKEITH 0. SEBELIUS, KanseDON YOUNG, AlaskaROBERT E. BAUMAN, MarylandSTEVEN D. SYMMS, IdahoJAMES P. (JIM) JOHNSON, ColoradoROBERT I. LAGOMARSINO, CaliforniaDAN MARRIOTT, UtahRON MARLENEE, MontanaELDON RUDD, ArizonaMICKEY EDWARDS, Oklahoma
THEODORE IL (TED) RISENHOOVER,Oklahoma
JAMES J. FLORIO, New JerseyDAWSON MATHIS, GeorgiaPHILIP R. SHARP, IndianaJOHN KREBS, CaliforniaEDWARD I. MARKEY, MassachusettsPETER H. KOSTMAYER, PennsylvaniaBALTASAR CORRADA, Puerto RicoAUSTIN J. MURPHY, PennsylvaniaNICK JOE RAHALL II. West VirginiaBRUCE F. VENTO, MinnesotaJERRY HUCKABY, LoluianLAMAR OUDGER, North CarolinaJAMES J. HOWARD, New Jersey
CRANLU CONKLN, Mqa DiredRonszT A. RzvrLns, Ahaoclke aa Diredor
Lzz 1i~cELvAJ, General CounadeSTAMw z ScoVn.LZ, Spedil Cbusd
WnJ.ux M. ANDIERON III, BUdget 091
(II)
143
LETTER OF TRANSMITTAL
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,U.S. HOUSu oF REPRESENTATIVES,
Washington, D.C., March 9, 1978.Hon. ROBERT N. GAImo,Chairman, Committee on the Budget,U.S. House of Representatives, Washington, D.C.
DEAR MR. CHAIRMAN: Pursuant to the requirements of section301(c) of the Congressional Budget Act of 1974, and in compliancewith your letter of February 9, 1978, to committee chairmen request-ing the views and estimates of their respective committees on theCongressional Budget for fiscal year 1979, I am submitting a reportcontaining our estimate of budget authority and outlays for eachfunctional category within the jurisdiction of this Committee.
The report, approved by the Committee on March 8, represents aconsolidated statement of the views and estimates of the relevantstanding subcommittees as well as those of the Full Committee.
To assist allocation of permanent spending authority among therespective authorizing committees, this report also provides informa-tion on permanent budget authority and outlays within the juris-diction of this Committee.
We believe it is of particular interest to note that, with respect toprograms under our jurisdiction, there are offsetting receipts totalingmore than $1.2 billion exclusive of rents and royalties derived fromoil andgas leases on the Outer Continental Shelf lands.
mL'cerely, MORRi K. UDALL, Chairman.
(M)
144
ACKNOWLEDGEMENT
This annual budget report depends on the continuing assistance ofmany men and women in the executive and congressional supportagencies. The Committee extends its appreciation to the GeneralAccounting Office, the Department of the Interior, the ConeionalResearch Service, and especially the Government Printing Office whodevised the means by which this year's budget was printed bycomputer.we particularly wish to thank James K. Kardokus, Roger L.
Sperry, Donna M. Heivilin, James P. Thomas, Teresa J. Renner,Michael Brostek, and Daniel B. Levin, of the General AccountingOffice; Francis M. Wiles and Albert C. Camacho of the Departmentofthe Interior and Wallace D. Bowman, Alfred R. Greenwood, RichardS. Jones, William R. Tansill, Peter B. Sheridan, David M. Lindahl,George H. Siehl, and Duane A. Thompson, of the CongressionalResearch Service.
4,)
145
CONTENTS
panLetter of transmittal -------------------------------------' IIIAcknowledgement ------------------------------------------- VOverview of committee budget recommendations for fiscal year 1979-. - IPresident's budgt requests for existing programs which require reenact-
ment or modification of authorizing legislation for fiscal year 1979- ------ 3President's budget requests for new and expanded programs which would
require authorizing legislation for fiscal year 1979-.... 6Legidative initiatives of the Committee on Interior and Insular Affairs for
fical year 1979 -------------------------------------------- 6President's budget requests for existing programs which do not require
authorizing legislation for fiscal year 1979 -------------------------- 7Permanent spending authority within jurisdiction of Committee on Interior
and Insular Affairs ---------------------------------------- 10Budget recommendations of the subcommittees of the Committee on
Interior and Insular Affairs ---------------------------------- 22Subcommittee on Energy and the Environment-______- 22Subcommittee on National Parks and Insular Affairs -------------- 23Subcommittee on Water and Power Resources------------------- 36Subcommittee on Mines and Mining -------------------------- 39Subcommittee on Indian Affairs and Public Lands-_- 42Subcommittee on General Oversight and Alaska Lands_ - - 56
Appendix: Committee on Interior and Insular Affairs CongressionalBudget ----------------------------------------------- A-1
AVIU)
v
146
OVERVIEW OF COMMITTEE BUDGET RECOMMENDA-TIONS FOR FISCAL YEAR 1979
With respect to the President's budget requests for existingpro-grams which require reenactment of authorizing legislation, the Presi-dent has requested authorization amounts of $2.5 billion for Depart-ment of Energy programs within the jurisdiction of the Committee.While the Committee is unable to make a recommendation with re-spect to budget authority at the time of submission of this report, itnotes that the total authorization of $2.5 billion requested by thePresident provides the order of magnitude for budget authority forthose programs within its jurisdiction.
The Committee wishes to express its concern with respect to fund-ing the full authorized amounts contained in the 4-year authorizationfor H.R. 10787, which authorizes appropriations for the Bureau ofLand Management. When the Congress passed the Federal LandPolicy and Management Act of 1976, it included a section referencingthe Congressional Budget Act of 1974 to require the Secretary to in-clude in his authorization request on or before May 15 to the Congressinformation with respect to the funding levels which he determinescan be efficiently and effectively utilized for each program "notwith-standing any budget guidelines or limitations imposed by any officialor agency of the executive branch."
Since the Secretary was unable to submit his request- by the statu-tory date, and since his submittal to the Congress came after variousreviews by other agencies of the executive branch, the Committeealerts your Committee that the amounts requested in the President'sbudget may not be the unrestrained ones envisioned by section 318(b)of the Federal Land Policy and Management Act of 1976. Accordingly,it feels it is compelled to request a $40 million increase over the Presi-dent's request in budget authority to assure the adequacy of thefunding level for this bureau.
The remainder of the increase is asked for the Office of Water Re-search and Technology, increased personnel for the historic preserva-tion program, and for water and capital projects on the island of Guam.
For the President's budget requests for new programs which willrequire authorizing legislation, the Committee is recommending a $5million increase over the President's request for mineral impact loanassistance to States for the construction of public facilities madenecessary by mineral development on Federal lands.
Legislative initiatives of the Committee on Interior and InsularAffairs will require enactment of new budget authority and outlays of$168 million and $123 million, respectively. Almost ha f of this amountreflects the first year estimated cost for H.R. 39, the Alaska NationalInterest Lands Conservation Act, which the Committee is marking upat this time. The Committee believes that this legislation is one of the
(1)
147
2
most important it has considered in modem congressional history,and it recommends that $76 million in budget authority be accom-modated in a fiscal year 1979 concurrent resolution on the congres-sional budget. The Committee understands that the Secretary of theInterior will request fiscal year 1979 moneys upon enactment of thisbill.
Other legislative initiatives included in this increase are the re-medial action needed with respect to protecting the health and safetyof U.S. citizens living near sites contaminated by uranium mill tail-ings piles. It i3 critically important that this program be enhanced andexpanded to resolve this identified health problem.
The Committee will consider legislation to improve the nationalrangelands which are deteriorating at an alarming rate. It anticipatesthat a program spending $15 million a year for the next 5 years willbegin to control the deterioration process.
Legislative initiatives under the territorial jurisdiction of thisCommittee are expected to be considered. A powerplant for theNorthern Mariana Islands and hospitals, and a clinic for the VirginIslands are planned, as well as ending the delay in reconstructingpublic facilities on Guam damaged in the typhoon of 1976.
The Committee recommends increases of $942 million in budgetauthority over the President's budget, request for existing programswhich do not require authorizing legislation.
In function 270, energy, the Committee is recommending increasesof $24 million in budget authority over the President's request for theexisting exploration program of the national petroleum reserve inAlaska. This increase will restore the program to its fiscal 3"ear 1978funding level of $209 million and will permit the continuation ofdrilling at the level required to successfully complete the 7-yearexploration program. In any event, the Committee cannot endorse theadministration's recommendation to terminate this program at theend of fiscal year 1979. Termination of the program, as pro osed,could cause a delay in realizing benefits which woulH cost the Nationover $300 million. In other words, the modest increase requested bythe Committee has the potential of a tenfold payback to the Nation.
In function 300, natural resources and environment, the Committeeis recommending a $627 million increase over the President's requestin budget authority. Most of this increase reflects the strong concernof this Committee that the administration has not requested full fund-ing of the levels authorized for the Land and Water ConservationFund, for accelerated acquisition of lands for previously authorizedareas pursuant to Public Law 95-42, and for the Historic PreservationFund. Accordingly, the Committee recommends full funding of the Landand Water Conservation Fund at the authorization level of $750million in budget authority, full funding of Public Law 95-42 at its
authorization level of $450 million, and full funding of the HistoricPreservation Fund at its authorization level of $100 million.
Moreover, the Committee is seeking full funding of the authoriza-tion for the railroad right-of-way conversion program pursuant toPublic Law 94-210. Accordingly, it is recoirmending an increase of$15 million in budget authority for this program.
148
3
For National Park Service increases, the Committee is recommend-ing an increase of $79 million for construction and planning with theproviso that the construction moneys be used only for work on im-portant existing park resources and essential sanitation and watersupply facilities. The planning moneys increase will enhance the plan-ning process initiated pursuant to Public Law 91-383, as amended, withrespect to the Secretary of the Interior's nomination of areas which havethe potential of inclusion in the National Park System. Other in-creases will provide for adequate visitor protection at Federal recrea-tion areas.
Finally, in function 300, the Committee recommends that thePresident's request be increased for the Office of Water Research andTechnology by $21 million in budget authority. Also it recommendsincreases of $64 million for water resources projects funded by theBureau of Reclamation.
In function 450, community and regional development, the Com-mittee is recommending increases of $24 million in budget authorityfor existing programs for American Natives. The Committee has ex-pressed its great concern about the inordinate delays in adequate
nding of their needs for irrigation, roads, and housing projects. Inaddition, the Committee believes it is compelled to request full fendingof the authorization level for the Indian business development pro-gram contained in the Indian Financing Act of 1974. Accordingly, itis recommending $14 million in budget authority over the President'srequest.
In function 550, health, the Committee is recommending full fund-ing of the authorization levels contained in Public Law 94-437 (In-dian Health Care Improvement Act of 1976). Accordingly, it isrecommending increases of $49 million in budget authority for Indianhealth services and $61 million for Indian health facilities.
In function 800, general government, the Committee recommendsincreases in budget authority of $64 million for construction projectsin the Northern Mariana Islands, Guam, and the Virgin Islands. Inaddition, it is recommending an increase of $25 million in budget au-thority for compensation payments to Micronesian Natives for WorldWar A deaths and damage, and an increase of $10 million in budgetauthority for contingencies with respect to territorial matters.
Finally, for existing programs not requiring authorizing legislation,the Committee is recommending increases of $44 million in budgetauthority for the Virgin Islands revenue loss reimbursement and toalleviate the shortfall of revenue for the Virgin Islands under function850, general purpose fiscal assistance.
PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICHREQUIRE REENACTMENT OR MODIFICATION OF AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
In function 270, energy, the President has requested authorizationamounts of $2.5 billion for Department of Energy,programs withinthe jurisdiction of the Committee.
Also in function 270, energy, the committee concurs in the requestof the President for $330,670,000 in budget authority and $307,200,000in outlays for the Nuclear Regulatory Commission, and it is conduct-
149
4
ing authorization hearings with respect to specific items within theproposed total request.
In function 300, natural resources and environment, the committeewill authorize additional budget authority of $9,068,000 for fiscalyear 1979 for increased aid for State implementation of the interimprogram pursuant to the Surface Mining Control and ReclamationAct of 1977. We intend to extend authorization for preservation ofhistorical properties and archeological data contained in Public Law93-291, and agree with the President's request of $3,500,000 in budgetauthority and outlays. However, the committee is recommending anincrease of $500,000 over the President's request to provide forincreased preservation staff.
The President's budget has requested $115 million in budgetauthority over ceilings authorized for specific units in the NationalPark Service, Fish and Wildlife Service, Forest Service, and Bureauof Land Management. The committee will be considering authoriza-tion legislation with respect to raising ceilings to accommodate thePresidential request. In addition, we will consider authorizing in-creases in ceilings to accommodate the Presidential request of $9million in budget authority for development in units of the NationalPark service.
The committee concuis in the request for budget authority of $43million which requires additional authorizing legislation by this com-mittee for the San Luis Unit, Central Valley project, the ColoradoRiver bamni~ salinity control project and for dam safety. We intend toaccommodate these amounts in authorizing legislation.
The committee notes that the President's budget requests a $13million authorization for the Office of Water Research and Technology.We intend to increase the authorization over the President's request toreflect increased funding of $6.6 million in budget authority primarilyfor research, development, and demonstrations in the saline waterconversion program.
The President has requested $10.5 million for the Water ResourcesCouncil, and legislation to extend the Council is anticipated from theadministration.
Finally in function 300, the 4-year authorization for appropriationsfor the Bureau of Land Management will be reported by the committeein time to meet the May 15 reporting date for authorizing legislation.The committee recommends a $40 million increase in budget authorityover the Presidential request in order to fully fund the authorizations.for selected programs.
In function 450, community and regional development, the com-mittee concurs in the President's request of $14 million in budgetauthority for the extension of legislative authority for the Pennsyl-vania Avenue Development Corporation.
In function 800, general government, the committee concurs in thePresidential request of $6 million in budget authority for grants torehabilitate the Bikini Atoll so that former inhabitants can safely beresettled. Accordingly, the committee will report authorizing legisla-tion to alleviate this problem. It will also consider legislation to auth-orize water and capital projects for Guam for a total of $12 million,of which $9 million is requested in the President's 1979 budget.
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5
In function 850, general purpose fiscal assistance, the committeeconcurs in the President's request for full funding for the payments inlieu of taxes program in the amounts of $105 million in budget auth-ority and outlays respectively. Legislation to authorize these appro-priations is before the committee in H.R. 10787, the bill to authorizeappropriations for the Bureau of Land Management.
PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTl4ORIZING LEGISLATIONPRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979
fin thousands of dollarll
Committeerecommendation
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
270 Department of Energy ......
270 Nuclear Regulatory Com-mission.
300 Office of Surface MiningReclamation and Enforcement.
300 Preservation of HistoricProperties.
300 Land and Water Conserva-tion Fund.
300 National Park Service .......
300 Bureau Of Reclamation ......
300 Office of Water Researchand Technology.
300 Water Resources Council ....
300 Bureau of Land Manage-ment
450 Pennsylvania Avenue Do-velop ment Corporation.
110o Guam Constr uction grant$s...
800 Bikini rehabiltation ........
350 Payments in lieu of taxes ....
(I) (.) () (2) The President's proposed budgetauthority for DOE has not beenpresented in a form from whichthe committee can readily deter-mine amounts within its juris-diction.i
While the committee is ,nable tomake a recommendation ofbudget authority at this time ofsubmission, it notes that in orderof magnitude the total authiza-tion for items within its jurisdic-tlion requested by the adminis-tration is $2.500.000.000. 3
330,670 307.200 330.670 307. 200 Authorization of appropriations forfiscal year 1979.
9,068 9,068 9,068 9.068 Provides increased authorizationfor fiscal year 1979 for sKc. 712(s)Of the Surface Mining Controland Reclamation Act of 1977.
3,500 3,500 4,000 4, 000 Extend authorization in Public Law(+500) (+500) 93-291 for presevatin of his-
torical and archeological dataplus $500 K to increase preserve-tion staff by 20 personnel.
115,209 115,209 115,209 115,209 Increase authorization ceilings forunits in National Park Service,Fish and Wildlife Service, ForestService, and Bureau of LandManagement funded by the landand water conservation fLnd.
9,297 9,297 9,297 9,297 Increase authorized developmentcedinis for units in the NationalPark Service.
42,825 22,709 42,825 22,709 Authorization of appropriations forwater resources projects.
12,750 11,574 19, 350 17, 514 Budget authority of $13,377,000 is(+6,600) (+5,940) incofrectly referred to in the
President s request as requiringauthorization.
10.513 11,923 10.513 11,923 Does not reflct BA of $1,047,000and outlays of $1.679.00C underjurisdiction Of committee onPublic Works.
263.051 272,696 303,051 312, 696 4-year authorization extension for(+40,000) (+40.000) prograin administered by the
Bureau of Land Managementwith full funding in selectedprograms.
8,6 3,000 12.000 6,000 Authorize appropriations for water(+3. 132) (+3.000) and capital projects.
6.000 3, 000 6,0 3,000 Authorize rants for rehabilitationof Bikini Atoll so that formerinhabitants can safely beresettled.
105.000 105, 000 105, 00 105,000 Authorize appropriations for pay-ments in lieu of taxes to countiesand other units of local govern-ment for Bureau of Land Meanla-ment, Forest Service. Park Sr4'-ice, and other agencies.
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PRESIDENT'S BuDGET REQUESTS FOR NEW AND EXPANDED PRO-GRAMS WHICH WOULD REQUIRE AUTHORIZING LEGISLATION FORFISCAL YEAR 1979
In function 850, general purpose fiscal assistance, the committeerecommends a $5 million increase over the President's request of$40 million in budget authority and outlays respectively for mineraldevelopment impact loans in fiscal year 1979.
These loans would be made to States for the construction of publicfacilities necessitated by mineral development on Federal lands. Re-payments for the loans would be from the State's ,hare of futureFederal mineral leasing receipts. Amendments to exi.,ting legislationare proposed by the administration, including a change in the interestrate from 3 percent to the current treasury borrowing rate.
With respect to the outyear projections for loans under this pro-gram, the committee recognizes that the demand for loans will likelyincrease over the next 5 years in line with the amounts authorized inH.R. 10787, which authorizes appropriations for the Bureau of LandManagement for the next 4-year period. Consequently, the committeeestimates that loan demand in the coming years will be rising by atleast or more than $5 million per year.
PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIREAUTHORIZING LEGISLATION FOR FISCAL YEAR 1979
850 Mineral Impact Loan Assistance:President's request:
Budget authority -------------- 40 40 40 40 40 Loans would be made under this proposalOutlays ---- _--------------- 40 40 40 40 40 to States for the constiuctoa of public
facilities made necessary by miwal de-velopment on Federal lands.
10787. a bill to authorize Bureau of LandManagement appropriation for the en-suing 4-year period.
LEGISLATIVE INITIATIVES OF THE COMMITTEE ON INTERIORAND INSULAR AFFAIRS FOR FISCAL YEAR 1979
In function 270, energy, the administration is expected to proposelegislation providing for the relocation and/or stabilization of 22 in-active uranium mill tailings piles which endanger the health and safetyof citizens living on or near the sites containing the piles. The com-mittee recommends increased budget authority of $3 million over thePresident's request to be combined with $3.5 million in the decom-missioning and decontamination program of the Department of Energyfor a total remedial program of $6.5 million for fiscal year 1979.
In function 300, natural resources and environment, the committeewill be considering legislation to improve the Nation's rangelands.The Rangeland Improvement Act of 1978, which will authorize esti-mated budget authority and outlays of $15 million per year for thenext 5 fiscal years, has been introduced in the 95th Congress.
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Finally, in function 300, the committee is marking up H.R. 39(Alaska National Interest Lands Conservation Act) to designateAlaska lands as units of the National Forest, National Park, NationalWildlife Refuge, Wild and Scenic Rivers, and National WildernessSystems.
In function 800, general government, the committee is recommend-ing construction authority of $12 million for a powerplant for theNorthern Mariana Islands, and $52 million in budget authority forthe construction of hospitals on St. Thomas and St. Croix and a clinicon St. John. Finally, the committee recommends that monies be auth-orized to reconstruct public facilities on Guam damaged by the 1976typhoon. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
270 Uranium Mill Tailings Program:Budget authority .................. 6.5 50 40 25 9 Administration is expected to propose pro.Outays-................... . g 1ram for which legislation will be reported
to solve problems created by inactive300 Rangeland Improvement Act of uranium mill tailings piles.
1978:Budget authority . ........ :: 15 15 15 15 15 Committee will consider legislation to im.Outlays HR-39..Alask..National.Inte prove deteriorating national rangelands.300 MR 39. AlaskaNtonliers
Lands Conservation Act:Budet authority ------------------ 76 56 79 58 57 Cost estimates are preliminary and tents-Outlays .tive ones prepared by the Coingressional
Budget authority-.._--------- - 12 ------------------ Authori-e construction of permanent power-Outlays----------------------6 6 ------------------ plant to replace temporary power barge.
806 Guam Post-Typhoon Reconstruc-tion:
Budget authority .................. 10 10 10 ------------ Authorize monies to rehabilitate, upgradeOutlays -------------------------- 6 1 8 6 ------ and construct public facilities damaGel
by 1976 typhoon.8W Virgin Islands Hospital Construc-
tion:Budget authority ----------------- 52 .------------------------ Authorize construction of 2 hospitals onOutlays .......................... 15 18 19---------- St. Thomas and St. Croix, and a clinic on
St. John.
PRESIDENT'S BUDGET REQUEST FOR EXISTING PROGRAMS WHICHDo NOT REQUIRE AUTHORIZING LEGISLATION FOR FISCAL YEAR1979
In function 270, energy, the committee recommends an increase of$24 million in budget authority and outlays over the President'srequest for exploration of the national petroleum reserve in Alaska.This amount will restore the drilling program to its fiscal year 1978funding level.
In function 300, natural resources and environment, the committeerecommends full authorization funding for the Land and Water Con-servation Fund. The fund is authorized at $750 million for fiscal year1979, but the President has requested $725 million. In order to bringthe fund appropriations in line with the fiscal year 1979 authorizationlevel, the committee is recommending an increase of $25 million inbudget authority. Moreover, to expedite the acquisition of previously
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authorized areas in the national estate, the committee is recommendingfull authorization funding for Public Law 95-42 (amendments to theLand and Water Conservation Fund Act of 1965). Accordingly, werecommend increases of $450 million and $300 million for budgetauthority and outlays respectively. Other increases in the parks andrecreation programs recommended by the committee are $79 millionfor construction work in existing national parks andi for sanitationand water supply facilities, as well as a inodest increase for NationalPark Service planning.
The committee recommends a $55 million increase in budgetauthority over the President's request for historic preservation grantsin order to fully fund the authorization for the Historic PreservationFund.
Visitor safety needs compel the committee to recommend a $3 mil-lion increase in budget authority for the enhancemient of the safetyof. visitors on public lands.
The committee believes that the railroad right-of-way conversionprogram should be fully funded to its authorized level andl, accord-ingly, it recommends an increase of $15 million over the President'srequest.
Finally, in function :300, the Committee recommends increases of$21 million and $64 million in budget authority for the Office of WaterResearch and Technology and the Bureau of Reclamation respectively.
In function 450, community and regional development, the com-mittee has expressed great concern about the ma-,sive backlog withrespect to various Indian irrigation, roads, and housing projects. Itis, therefore, recommending that the Congress increase by $10 millionin budget authority over the President's request amounts to reduceby 5 percent the construction backlog in irrigation projects on reser-vations over and beyond the Navajo irrigation project requirements.Additional amounts of $7 million each in budget authority is recom-mended for Indian road construction and rehabilitation, and foralleviating the $1.2 billion backlog in Indian housing.
Finally, in function 450, the committee recommends full fundingfor the Indian business development program which was reauthorizedby the committee in the first session of this Congress. Accordingly, itrecommends an increase of $14 million over the president's request.
In function 550, health, the committee expre.,ses concern that theIndian Health Care Improvement Act of 1976 be fully funded at. itsauthorized levels. We, therefore, recommend that increases of $110million in budget authority and $84 million in outlays be added to thePresident's request for Indian health services and facilities.
In function 800, general government, the committee is recommend-ing increases of $99 million in budget authority over the President'srequest for the Office of Territorial Affairs programs. This total in-cludes $19 million for the trust territory capital improvement prograin,and $3 million for operations grants for the trust territory. In addition,restoration of the Federal Aviation Administration funding loss of $7million for the Ponape Airfield is recommended.
The committee believes that equity considerations compel it torecommend that the Micronesian claims payment, authorized by thiscommittee be added to the President's request in the amount of $25million in budget authority.
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American Samoa has informed the committee that it requires $3million in budget authority over the President's request, and thecommittee recommends that this increase be accommodated in thefirst budget resolution. The increase will permit the establishing of ahousing program and the American Samoa Economic DevelopmentLoan Fund.
For Guam, the committee recommends an increase of $33 millionin budget authority over the President's request which will allow thepurchase of the Medical Center of the Marianas, provide moneys forthe Guam Economic Development Fund, and compensate for the lossof income tax revenue pursuant to the Tax Reduction and Simplifica-tion Act of 1977.
Finally, in function 800, the committee is recommending an increasein budget authority of $10 million for a Territories Contingency Fund.
In function 850, general purpose fiscal assistance, the committeerecommends a $44 million increase in budget authority for the VirginIslands to compensate for income tax and other revenue losses andshortfalls.
PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
PERMANENT SPENDING AUTHORITY WITHIN JURISDICTION OFCOMMrrrZ2 ON INTERIOR AND INSULAR AFFAIRS
The Congressional Budget Act of 1974 provides that on or beforeApril 15 of each year, the Committee on the Budget of each Houseshall report to its House the first concurrent resolution on the budgetfor the fiscal year beginning on October I of that year. The act requiresthat the report accompanying such concurrent resolution shall in-clude, with respect to each major functional category, an estimate ofbudget outlays and an appropriate level of new budget authority forall proposed programs and For all existing programs (including re-newals thereof), with the estimate and level for existing programs beingdivided between permanent spending authority and funds provided inappropriation acts. In order to facilitate the Committee on the Budg-et's task of dividing permanent spending authority from fundsprovided in appropriation acts, table 1 displays by function all per-manent spending authority for fiscal year 1979 within the jurisdictionof the Committee on Interior and Insular Affairs.
The total amount of permanent budget authority and outlays all&o.cated to this committee for fiscal year 1979 is $809 million and $614million respectively.
24-066 0 - 78 - 11
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TABLE I.-PERMANENT SPENDING AUTHORITY BY FUNCTION WITHIN JURISDICTION OF COMMITTEE ONINTERIOR AND INSULAR AFFAIRS
[in thousands of dollars
Budget authority
1977 1978 1979actual estimate estimate
Outlays
1977 1978 1979actual estimate estimate
270--nerPI: Energy supply:
Department of Enerly Advancesfor Cooperative Work ......... 14.218 5,539 2.500 13.083 5,539 2,500
Total function 270 .......... 14. 218 5,539 2,500 13, 083 5.539 2.500
300-Natural resources and environment:301 Water resources:
Bureau of Reclarleation tustfunds .................. ....
302 Conservation and land management:Bureau of Land Management:
Table 2 lists by subcommittee the total permanent spending au-thority within the jurisdiction-of the Committee on Interior andInsular Affairs for fiscal year 1979.
TABLE 2.-PERMANENT SPENDING AL'THORITY BY SUBCOMMITTEE WITHIN JURISDICTION OF THE COMMITTEEON INTERIOR AND INSULAR AFFAIRS
Office of Territorial Affairs:Office of Controller for Guam ------------------------------------------- 466 196Internal Revenue Collections for the Virgin
Joint Federal-State Land Use Planning Com-misses for Alaska Cooperative Funds ------- 645 586 431 707 588 504
Bureau of Land Management:Miscellaneous permanent appropriations... 140,461 288, 356 324,676 139,455 291,017 324,776Miscellaneous trust funds ---------------- 6 04 600 600 402 550 600
Total, Indian Afatrs and Public Lands... 400, 695 669,172 668,407 375, 437 563,252 577, 793
Completing the )ermanent spending authority section on the Com-mittee report are the narrative descriptions for each of the permanentaccounts listed in table 2.
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DEPARTMENT OF ENERGY-ADVANCES FOR COOPERATIVE WORK
Total ------------------------------------ 14.218 5.539 2,500 13,083 5.539 2.500
Budgfet.authority and outlays are distributed as
Petroleum, natural ps. and oil shale ---------- 81 20 20 81 20 20Washington Public Powe Supply System ------- 493 250 250 481 250 250Construction operation. and maintenance,
Western Ares Power Administration ......... 13,644 5.269 2,230 12.521 5.269 2. 230
1. Petroleum, natural gas, and oil shaue.-The funds contributed byStates, counties, municipalities, and private sources are used toconduct research and investigations to promote the conservation,evaluation, and development of energy resources.
2. Washinqton Public Power Supply System.-Funds are advancedby the Washington Public Power Supply System (WPPSS) to pay forservices furnished in connection with the operation of WPPSS electricgenerating facilities at the Richland, Wash., new production reactor.The services provided by DOE contractors include lease of land, fireprotection, utilities, maintenance of equipment, engineering supportand estimated reactor costs chargeable to WPPSS.
3. Constrzction, operation, and maintenance, Western Area PowerAdministration.-When requested, the WAPA performs investiga-tions or construction work with the funding prov~led by non-Federalentities under the Contributed Funds Act (43 U.S.C. 395, 396).
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT-COMMUNITY DISPOSAL OPERATIONS FUND
tOa ------------------------------------------------------------------------ -69 -s50 -4W
The community disposition program was established by the AtomicEnergy Community Act of 1955 to dispose of federally owned proper-ties.
Budpet program.-All sales under the program have been completed.Servicing of the mortgage inventory currently held by the Secretarywill continue.
Operating results.-The deficit in the fund is expected to be $14.3million at the end of 1979. Funds recovered and transferred to theTreasury are estimated to aggregate $84.2 million by'the end of 1979.
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BUREAU OF OUTDOOR RECREATION--LAND AND WATER CONSERVATION FUND
Public Law 93-179 provided that the American Revolution Bicen-tennial Administration terminate no later than June 30, 1979. Execu-tive Order No. 12001 transferred certain of the American RevolutionBicentennial Administration's functions and funds to the NationalPark Service. This account received these transfers, and now providesfor continuing commemoration by the National Park Service of theevents of the American Revolution.
NATIONAL PARK SERVICE-MISCELLANEOUS PERMANENT APPROPRIATIONS
Total .................................... 518 501 435 318 5W0 435
DIibution of budget authority and outlays by ac-must:
Education uieses, children of employees'elo = 'We agina Park ................. 47 47 5 410 29 47 41
Payment for tax lom ssso land acquired forGSudTetoa National Park ................. 25 25 25 23 25 25
Operation. Management, mantenance, anddemolition of Federally acquired proeties,Independence Natba istoril Park ...... is ...................... 4 .................
1. Educational expenses, children of employees, Yellowstone NationalPark.- Revenues received from fees collected from visitors to the parkare used to provide educational facilities to pt:nils who are dependentsof persons engaged in the administration, operation, and maintenanceof Yellowstone National Park (16 U.S.C. 40a).
2. Payment for tax losses on land acquired for Grand Teton NationalPark.- Revenues received from fees collected from visitors are usedto compensate the State of Wyoming for tax losses on Grand TetonNational Park lands (16 U.S.C. 406d-3).
3. Operation, management, maintenance, and demolition of federallyacquired properties, Independenct National Historical Park. 'Moneyscollected from rentu. perations of the Irwin Building were used for
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the operation, management, and maintenance of this biiilding and itssubsequent demolition, as authorized in the act approved October 26,1951 (65 Stat. 664). There is no activity in this account in 1979.
1. National Park Service, donation&.-The Secretary of the Interioraccepts and uses donated moneys for purposes of the National ParkSystem (16 U.S.C. 6). Donations amounting to $3 million were receivedfrom contributions during 1977. It is estimated that donations of$3 million and $2.2 million will be received during 1978 and 1979,respectively.
2. Preservation, Birthplace of Abraham Lincoln, National ParkService.-This fund consists of an endowment given by the LincolnFarm Association, and the interest therefrom is available for pres-ervation of the Abraham Lincoln Birthplace National HistoricSite, Ky. (16 U.S.C. 211, 212). The amount of $2,540 was receivedin 1977.
3. Jefferson National Expansion Mfoemorial, con tribute iovs.-Pursuantto the act of May 17, 1954 (68 Stat. 98-100), as amended, the Secre-tary of the Interior was authorized to construct upon the JeffersonNational Expansion Memorial National Historic Site, St. Louis,Mo., an appropriate national memorial to those persons %%ho madepossible the territorial expansion cf the United States. Contributionsare accepted from the city of St. Louis or other non-Federal sourcesin the ratio of $1 to each: $3 of Federal appropriations.
OFFICE OF TERRITORIAL AFFAIRS-OFFICE OF THE COMPTROLLER FOR GUAM
To ........................................................................ 46 ..........
Revenues locally collected in Guam, derived from Federal incometaxes, custom duties, and other services were used to finance the costof the Government Comptroller in accordance with the "Guam Elec-tive Governor Act" (Public Law 90-497). Operations of the Comp-troller were included in administration of territories as a reimburse-mont. Public Law 95-134 now provides that effective October 1, 1977,
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the Government Comptroller's salary and expenses shall be paid fromfunds authorized to be appropriated to the Department of the In-terior. Unobligated balances remaining in the account are to be paidto the Government of Guam.
OFFICE OF TERRITORIAL AFFAIRS-INTERNAL REVENUE COLLECTIONS FOR THE VIRGIN ISLANDS
Revenue collected by the Government of the Virgin Islands ismatched, to the extent of the collections less refunds and costs of col-lection, by payment out of quarterly revenue taxes collected by' theUnited States on Virgin Islands products transported to the UnitedStates under provisions of the "Internal Revenue Code" (26 U.S.C.7652(b)(3)) amended. Public Law 94-202 provides for quarterly in-stead of the previously annual payments to the Virgin Islands.
GENERAL SERVICES ADMINISTRATION-VIRGIN ISLANDS CORPORATION LIQUIDATION FUND
Total ------------------------------------------------------------------ -7n -690 -593
Mortgage payments are made to the Government for propertiespurchased from the Virgin Islands Corporation.
BUREAU OF RECLAMATION-MISCELLANEOUS PERMANENT APPROPRIATIO#NS
IIn thousands of dofilsJ
Budget authority
1977 1978 1979actual SUtMIat estimate
Total -- -- - --............................. 4,660 2,700 2,700
DirtibuMan of budget authority and outlays byaccount:
Colordso Rim Dam ueod. Boulder Canyompro 9 ad:parent of interest on advances from the
Treasury (indefnte special fund) ....... 1.133 1, 700 1,500Pn aents to States of Arizona and Nevaed
(einite special fund) ................. 600 600 600Operation, maintenance, and replacement
of project woks, North Platte project(Geing and Fort Laramie. Goshen andPatfinder irrigatin district) (indeftntesocial fund) ........................ 15 30 30
Payments to Farmers' rn l distinct(North Plote project. Non'k-Wy-.
inn8) (iadea•t Special fund) ............... . 8Payments to local unitS, Klanmath Reclama-
1. Colorado River Dam fund, Boulder Canyon project-(a) Payment ofinterest on advancesfrom the Treaeury.-Interest is paid to the Treasuryon moneys advanced for construction (43 U.S.C. 618a(b)).
(b) Payments to States of Arizona and Nevada.-Annual paymentsof $300 thousand each are made to Arizona and Nevada, from opera-tion of the Boulder Canyon project (43 U.S.C. 618a(c)).
2. Operation, maintenance, and replacement of project uorks, NorthPlatte project (Gering and Fort Laramie, Goshen and Pathfinder irriga-tion districts).-Payments are madle for replacement of project worksoperated and maintained by the United States and to supplementfunds advanced by the water users to meet annual costs of operationand maintenance of such works (66 Stat. 755).
3. Payments to Farmers' irrigation district (North Platte project,Nebraka-,Wyoming).-Payments are made to the Farmers' irrigationdistrict on behalf of the Northport irrigation district for water carriage(62 Stat. 273, as amended).
4. Payments to local units, Klamath reclamation area.-Certainrevenues collected from the leasing of Klamath project reservedFederal lands within the boundaries of certain national wildliferefuges shall be used: (a) to credit or pay to the Tule Lake irrigationdistrict amounts already committed, and (b) to make annual pay-ments to the counties in which such refuge-, are located (78 Stat. 850).
5. Refunds and returns.--Overcollections are refunded and unap-plied deposits are returned (64 Stat. 689).
Total ------------------------------------------ 20,221 13,331 4,470 20,762 10, 00 6,770
When requested the Bureau of Reclamation performs investigationsor construction work with funding provided by non-Federal entitiesunder the Contributed Funds Act (43 U.S.C. 395, 396).
To ------------- ----------------------- 452 m 4 W
Funds contributed by States, counties, municipaliti es, and privatesources are used to conduct research and jinestigations to promote theconservation, evaluatpong rwd deltp4 U of mineral resources andhealth and safety of mit.b' throligl research.
The authorized purposes of the Helium Act Amendments of 1960(50 U.S.C. 167) are to locate and develop helium reserves and toproduce, sell, and distribute supplies of helium, and to conserve asustained supply of helium that will be sufficient to provide foressential Government activities.
BUREAU OF INDIAN AFFAIRS--MISCELLANEOUS PERMANENT APPROPRIATIONS
Total ................................... 17,289 15,630 17,200 17. 307 14, M 16,200
Distributio f budget authority and outlays byaccount.
Claims and treaty obligations....... ... 593 200 200 593 200 200Acquisition of lands and loans to Ind•ans in
Okiah- ea. act of June 1936 ............ .. 24 .............................. 140 ..........Operation and maintenance, Indian irrigation
systns ......... ................... 8, 645 9.000 5 000 8. 385 7,300 8,075Power systems, Indian irrigation projects ..... . 8,026 6,430 000 8, 314 7. 160 7.925Indian arts and crafts fund ................ .... I ............... is ....................
1. Claims and treaty obligations.-Payments are made to fulfilltreaty obligations with the Senecas of New York (act of February 19,1831), the Six Nations of New York (act of November 11, 1794), andthe Pawnees of Oklahoma (the treaty of Sep ember 24, 1857); andbenefit claims to the Sioux Indians (acts of larch 2, 1889, June 10,1896, and June 21, 1906).
2. Operation and maintenance, Indian irrigation seystme.-Revenuesderived from charges for operation and maintenance of Indian irriga-tion projects are used to defray in part the cost of operating andmaintaining these projects (60 Star. 895).
3. Power 8y8tems, Indian irrigation projecta.-Revenues collectedfrom the sale of electric power by the Colorado River, Flathead, andSan Carlos power systems are used to operate and maintain the.systems (60 Stat. 895; 65 Stat. 254).
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BUREAU OF INDIAN AFFAIRS-MISCELLANEOUS TRUST FUNDS
fin thousands of dollars
Budget authority
1977 1978 1979actual estimate estimate
Outlays
1977 1978 1979actual estimate estimate
Total ------------------------------------ 241,696 364,000 355,500 217.574 256,294 23S.700
Total ---------------------------------------------------------------- -8 3 13
This fund was transferred from the Housing and Home FinanceAgency to the Secretary of the Interior under the provisions of PublicLaw 85-806. The Secretary will Ilse the funds transferred from theHousing and Home Finance Agency, along with any other revenuesthat mab be received from the Hoonah housing project for the purposeof liquidating said project in accordance with the provisions of thelaw. The deficit is expected to increase as funds are used for the liquida-tion of the project.
JOINT FEDERAL-STATE LAND USE PLANNING COMMISSION FOR ALASKA-COOPERATIVE FUNDS
Total ------------------------------------------ 645 586 431 707 588 504
Section 17(a) (9) (A) of the Alaska Native Claims Settlement Act,Public Law 92-203, limits the Federal share of the expenses of theJoint Federal-State Land Use Planning Commission for Alaska to 50percent. The State of Alaska provides for the remaining 50 percent ofCommission expenses. As projected for 1979, a portion of the State'ssupport share will be provided in-kind through the payment of theState cochairman's salary and benefits, assignment of State employeesto the Commission, and rental of office space. For 1979 the totalState cash and inkind contributions are estimated to equad $594,000.
I BEST COPY AVAABLE
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BUREAU OF LAND MAINAGEMENT-MISCELLANEOUS PERMANENT APPROPRIATIONS
Leasing of grazing lands (receipt limitations)... 1 2 2 I 2 1Pag~ments to Oklahoma (royalties) (receipt".m itatiogis) ------------------------------- ---................... II . . . . . . . . . .Payments to Coos and Douglas counties, Orelg.
from receipts Coos Bay Wagon Road grantlands ------------------------------------ 1.180 1, 900 2, 50 1. 213 1,960 2. 500Payments to counties, Oregon and California
grant ands-------------------------29,563 106,045 113, 000 29,563 106,045 113.000Peyments to States (proceeds of sales) (Rocelpt
limtions) ------------------------------- 404 551 579 207 748 579Payments to States from grazing receipts, etc.,
public lands outside grazing districts ........ 970 1,250 1.483 110 2, 110 1.483Payments Is States from gpraing receipts, etc.,
public lands within grazing districts --------- 578 1,782 2.125 48 2,312 2,125Payments to States from grazing receipts, etc.,
public lands within districts, miscellaneous... 3 5 -------- 1 2Payments to States from receipts under Mineral
LeAsing Act -------------------------- 105,131 173,926 202,043 105. 130 173,926 202,043Payments to counties, national grasslands ...... 181 395 444 259 320 444Expenses. Public Land Administration Act ------------------------------------ 234 69 ----------Expenses, road maintenance deposits ---------- 2,442 2.500 2,500 2,679 3.523 2,600
1. Leasing of grazing lands.-State, county, and privately ownedgrazing lands that are intermingled with public grazing lands aremanaged on a leased basis within the limits of receipts from sucharrangements (43 U.S.C. 315m).
2. Payments to Oklahoma (royalties).-The State of Oklahoma is paid37% percent of the Red River oil and gas royalties in lieu of State andlocal taxes on Kiowa, Comanche, and Apache tribal lands to be usedfor construction and maintenance of public roads and support of publicschools (65 Stat. 252).
3. Payments to Coos and Doug~as Counties, Oreg., from receipts CoosBay Wagon Road grant lands.-Out of receipts from the Coos BayWagon Road grant lands in Oregon, payments in lieu of taxes are madetoCoos and Douglas Counties for schools, roads, highways, bridges,and port districts (53 Stat. 753-754).
4. Payments to counties, Oregon and California grant lands.-Fiftypercent of the receipts of Oregon and California land-grant funds arepaid the counties in which the lands are situated, to be used as othercounty funds (39 Stat. 218; 50 Stat. 876).
5. Payments to States (proceeds of sa/es).-The States are paid 5percent of the net proceeds from sale of public land and public landproducts (31 U.S.C. 711).
6. Payments to States from grazing receipts, e•t., public lands outsidegrazing districte.-The States are paid 50 percent of the grazing feereceipts from public domain lands outside grazing districts (43 U.S.C.315i, 315m).
7. Payments to States from grazing receipts, etc., public land& withingrazing districts.-The States are paid X percent of grazing feereceipts from grazing 4ijl4ct lan• ýkhb• eir boundaries (43 U.S.C.315b, 315i)
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8. Payments to States from grazing receipts, etc., public lands withingrazing districts, miscellaneous.-The States are paid specificallydetermined amounts from grazing fee receipts from miscellaneouslands within grazing districts when payment is not feasible on apercentage basis (43 U.S.C. 315).
9. Payments to States from receipts under Mineral Leasing Act.-Alaska is paid 90 percent and other States 50 percent of the receiptsfrom bonuses, royalties, and rentals resulting from development ofmineral resources under the Mineral Leasing Act (30 U.S.C. 191), andfrom leases of potash deposits (30 U.S.C. 285), on public lands.
10. Payments to counties, national grasslands.---Of the revenuesreceived from the use of submarginal lands, 25 percent is paid to thecounties in which such land is situated, for school and road purposes(7 U.S.C. 1012).
11. Expenses, Public Land Administration Act.--Public Law 86-649approved July 14, 1960, permanently appropriated certain moneys tothe Secretary of the Interior. Timber purchasers or permittees providebond or deposit to assure fulfillment of contracts. Users of roads underjurisdiction of the Bureau of Land Management may make depositsfor maintenance purposes. Moneys received in forfeiture of such bondsor for road maintenance are available for necessary forest improve-ment, protection, and rehabilitation and for road maintenance. Moneyscollected on Oregon and California grant lands are available for thoselands cnly and amounts in excess of the cost of doing the work aretransferred to miscellaneous receipts (74 Stat. 507-508). The appli-cable provisions of Public Law 86-649 were repealed by Public Law94-579, approved October 21, 1976. New deposits for road mainte-nance will become available in the "Expenses, road maintenance"appropriation below. Collections for rehabilitation of damages will beavailable beginning in 1978 in the "Service charges, deposits, andforfeitures" appropriation. (43 U.S.C. 1701 et. seq.)
12. Expenses, road maintenance.-Public Law 94-579 approvedOctober 21, 1976, permanently appropriated certain moneys to theSecretary of the Interior. Users of roads under jurisdiction of theBureau of Land Management may make deposits for maintenancepurposes, and moneys collected are available for necessary road main-tenamce. Moneys collected on Oregon and California grant lands areavailable for those lands only. (43 U.S.C. 1701 et. seq.)
BUREAU OF LAND MANAGEMENT-MISCELLANEOUS TRUST FUNDS
TOM ------------------------------------ 604 600 600 402 550 600
Distribution of budge authority and outlays byaccounts:Land anW resource managment trust fund. 50 5so 599 401 549 591Trustee funds, Alaska twm ..es -------------- 5 1 1 1 1 1
1. LAnd and resource management trust Jund.-Applicants for con-veyance of lands omitted in original surveys pa thi• cost of surveysand the administrative costs of conveyance. Advances are made by
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individuals to pay the costs of other types of surveys requested bythem. Users of the Federal range and others contribute funds or makegifts for conservation practices acquisition, protection, and otherpurposes (43 U.S.C. 315h, 315i, 775, 74 Stat. 506: 31 U.S.C. 711;43 U.S.C. 759, 761, and 887; 48 Stat. 1224-1236; 90 Stat. 2758;(43 U.S.C. 1701).
2. Trusteefunds, Alaska towmsie.-Amounts received from sale ofAlaska town lots are available for expenses incident to the mainte-nance and sale of townsites (31 U.S.C. 725s; Comp. Gen. Dec. ofNov. 18, 1935).
BUDGET RECOMMENDATIONS OF THE SUBCOMMITTEESOF THE COMMITTEE ON INTERIOR AND INSULARAFFAIRS
RECOMMENDATIONS OF THE SUBCOMMITTEE ON ENERGY AND THEENVIRONMENT
NUCLEAR REGULATORY COMMISSION
The NRC budget proposed by the President provides for fiscalyear 1979 budget authority of $330,670,000 to cover salaries andexpenses associated with a variety of activities involving the regula-tion of the commercial nuclear industry. These activities are pri-marily concerned with protection of the public health and safety.They include development of regulations and standards, issuance oflicenses and permits, and inspection and enforcement to assure ad-herence to regulations and licensing conditions. In addition ihe NRCconducts research programs to assess the adequacy of regulations.The NRC also licenses nuclear exports, and is responsible for assuringthat licensees conform to certain antitrust laws.
URANIUM MILL TAILINGS REMEDIAL PROGRAM
It is anticipated that the subcommittee will report legislation pro-viding for relocation and/or stabilization of 22 inactive uranium milltailings piles created under Atomic Energy Commission contract.The increased cost of implementing a remedial program for the tail-ings is projected to be $3 million for the next fiscal year.
The Subcommittee on Energy and the Environment also forwardsfor full Committee consideration the following administration recom-mendation with respect to programs within the jurisdiction of thesubcommittee:
SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977
The administration has requested that the fiscal year 1979 authori-zation for the surface mining program be increased by $9,068,000primarily to provide additional assistance to the States to help themimplement the interim program under the new act.
PAYMENT IN LIEU OF TAXIS
The administration has recommended that the PILT program beauthorized at $105 million for fiscal 1979.
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TABLE 1.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZINGLEGISLATION PRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979
iim thousands of donlIsi
Subcommitteerecommnendatace
President's request (difference)
Budget BudgetMioo issue Or program authority Outlays authority Outlays Comment
270 Nuclear Regulatory Com- 330,670 307, 200 330, 670 307. 200 Authorization of appropriations foWMIssIoN. iscal year 1979.
300 Office of Surface Mining 9.068 9.068 9,061 9.068 Provides increased authorization forReclamation and EnhwcemenL fiscal year 1979 fot sec. 712(s) of the
Surface MiingnConhol and Reclama-tion Act of 1977.
8W Payments In Iseo of taxes... 105.000 105. 000 105,000 105, 000 Authorize appropriations lot paymentsin lieu of taxes to counbes and otherunits of local government for Bureauof Land Mangagement, Forest Service,Park Service. and other agencies.
TABLE 2. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
270 Uranium mill tadings program: Administration is expected to pnpoooe pro.Budget authority .................. 6.5 50 40 t5 9 gam for which legislation will be portedOutlays ------ 40------------------ solve problems created by inwaive
uranium mill tailings piles.
RECOMMENDATIONS OF THE SUBCOMMITTEE ON NATIONAL PARKS
AND INSULAR AFFAIRS
PARKS AND RECREATION PROGRAMS
In reviewing the President's budget for fiscal year 1979, a numberof items have gained the subcommittee's attention over which someconcern has been expressed.
The subcommittee notes the announcement by the administration ofa new "national heritage program" which entails some new and ex-panded program thrusts, along with various program reassignmentsamong agencies within the Department of the Interior. A prominentfeature of the national heritage program is the reconstitution of theBureau of Outdoor Recreation as a new agency of significantlybroadened scope and responsibilities, along with its renaming as theHeritage Conservation and Recreation Service. The subcommittee isnot well-informed about these changes and the new programs, andconsequently at this time can express neither its approval nor disap-proval of this effort. It does strongly caution, however, that recognizedexisting programs continue to be vigorously administered andadvanced without jeopardy front the undertaking of new initiatives.
The subcommittee finds laudable the proposal to fund and staffannually for a continuous Nationwide Outdoor Recreation planpreparation effort, rather than to infuse that effort sporadically andonly shortly prior to the plan's due date every 5 years, as has beentoo often the case in the past.
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The subcommittee notes the extremely slow pace and inadequateprogress of the past in the conduct of and reporting to the Congresson studies of potential new candidates for units of the Wild and ScenicRivers and National Trails Systems. The subcommittee encouragesexpanded funding for this effort, and also notes that considerationshould be given the inclusion of funding for a survey and inventoryprocess to assess the nationwide potential and scope of the completedWild and Scenic Rivers and National Trails Systems.
The subcommittee notes with continued alarm and dismay, the gen-erally very slow progress on, and the repetitive tardiness of, submissionof studies and reports required by law concerning general manage-ment plans and also wilderness studies for various land managementunits authorized by this subcommittee. The solution to the problemappears to be in a combination of need for greater amounts of fundingand manpower to perform the work, but there also appears to be apressing need for increased administrative discipline and commitmentto organize for getting the job done in a timely fashion.
LAND AND WATER CONSERVATION FUNr
There is strong concern on the part of this subcommittee that theadministration is attempting to financially veto the expressed willof the Congress by failing to request full funding for park and recrea-tion programs which Congress has authorized. This failure to coop-erate with Congress is particularly disturbing in that it comes soquickly after resolution of the problem of parsimonious treatment ofoutdoor recreation by an earlier administration.
The subcommittee also notes with some concern that of the four Fed-era! agencies' land acquisition programs funded by the Land and WaterConservation Fund, only the Forest Service is proposed to experiencea decrease (of $12 million) in funding level from the past year, whilethe other three agencies benefit from an increase. The subcommitteefeels such treatment should be fully scrutinized and substantiated.
Specifically, this subcommittee supports:1. Full funding of the Land and Water Conservation Fund at the
authorized fiscal year 1979 level of $750 million rather than at thesomewhat lower level requested;
2. Full funding for the program established by Public Law 95-42for acquisition of lands for previously authorized Federal recreationareas. The act authorized appropriation of $300* million for fiscalyear 1978 and $150 million in fiscal year 1979. This subcommitteerecommends fiscal year 1979 appropriation of the entire $450 million.
3. Increased personnel allocations. The responsible agencies, becauseof manpower restrictions, have a limited ability to process the fullamount authorized for the acquisition of land for recreation purposes asexpressed in Public Law 95-42. Accordingly, this subcommittee recom-mends the authorization and appropriation of an additional $500,000for additional personnel to expeditiously carry out the intent of theCongress, and further recommends the Secretary be directed to hirethe authorized additional personnel;
4. Full funding of remaining unappropriated balance of the au-thorization for the railroad right-of-way conversion program estab-
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lished by Public Law 94-210. A total of $20 million was authorizedfor use by the Secretary over 3 fiscal years in assisting States andlocalities in converting abandoned right's-of-way to recreational uses,but only a fraction of this money was made available. Full fundingof $15 million should be appropriated for this purpose.
This subcommittee further recommends against the earmarking of$63 million of the Land and Water Conservation Fund for the opera-tion of a natural heritage preservation program. This subcommittee isnot opposed to the intent of such a program, but feels that such asubstantive alteration of the distribution allocation of the fund shouldtake place only with the active approval of the Congress.
NATIONAL PARK SERVICE
The budget request for the National Park Service for fiscal year1979 shows a retreat from the program which began only last year torestore the National Park System to a healthy condition followingyears of budgetary neglect. The Bicentennial land heritage programwas perceived as a vehicle whereby long-delayed maintenance andrestoration of important park facilities couhl be undertaken andstaffing could be increased to more adequately deal with increasedvisitor numbers and needs. The construction budget request, forinstance, shows a decrease from the fiscal year 1978 level of $161 to$121 million. This decrease of $40 million is only part of the picture,however, as it was anticipated that this year's construction budgetwould be even higher (about $222 million) as the program gainedmomentum. It should be noted that the label "construction" is mis-leading, as it does not only refer to new projects, but includes the im-portant tasks of stabilizing, maintaining, and restoring existing parkfacilities. Thus, a reduction in the construction budget may meanthat new roads and buildings will not be constructed, and more im-portantly, existing valuable, and in some cases, historically importantstructures may continue to deteriorate. Therefore, it is recommendedthat there be appropriated $200 million for the construction budgetfor the National Park Service in fiscal year 1979, with the provisothat the increase of $79 million be used only for work on importantexisting park facilities and basic sanitation and water supply facilities.
Additionally, the Secretary should develop internal Park Servicebudgetary guidance that will clearly separate new construction ac-tivity from major maintenance functions, and apply such guidanceconsistently throughout the National Park Service.
The subcommittee is disturbed by the inadequacies of funding andresults obtained from the park, recreation, and wilderness planningbudget function of the National Park Service. Several portions ofthat budget activity warrant specific comment.
Pursuant to section 8 of Public Law 91-383, as amended, the Secre-tary is directed to "investigate, study, and continually monitor thewelfare of areas whose resources exhibit qualities of national signifi-cance and which may have potential for inclusion in the NationalPark System." The Secretary is further directed to submit a list of noless than 12 such areas annually to the Congress, along with the studies
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conducted on these areas. He is further directed to monitor all existingnational historic and natural landmarks, and to report annually to theCongess on those which he determines are threatened or being dam-aged. The first submission of this list of potential National ParkSystem areas was received in November 1977 and contained 13 candi-dates. The subcommittee is generally pleased with the effort that wentinto the assembly of this initial list considering the difficulties to besurmounted quickly in developing a process to initially implement thismandate of law. However, the subcommittee expects future reports andlists derived from this effort to be more thoroughly assembled, and isgreatly disturbed over the meager funding request proposed by the
udget to conduct this activity.The subcommittee strongly recommends again this year, as it did
last year, that the budget amount for this activity be $1 million, an in-crease of $750,000, above last year's appropriation. This activity isperhaps of more direct benefit to the work of this authorizing sub-committee than any other program of the Department, in that it isfrom lists and professionally assembled studies of this type that thesubcommittee may draw upon to aid the conduct of its principal reasonfor existence-the scrutiny of potential, and authorization of, newunits of the National Park, Wild and Scenic Rivers, Wilderness andTrails Systems, as well as for general outdoor recreation area establish-ment. When this subcommittee authorizes hundreds of millions of dol-lars a year in new area authorizations, it is absolute folly to shortcutthe investment of a small fraction of that amount to help assemble theraw data from which the selection of where to best spend thosehundreds of millions of dollars is made.
Likewise, the Committee notes the languishing attention to thenational landmarks program, in terms of both the identification andregistration of new natural landmarks, and the monitoring of andreporting to the Congres.s on the welfare of those existing natural andhistoric landmarks which may be threatened or damaged, pursuantto Section 8 of Public Law 91-383, as amended. The Committee notesthat, from information obtained from the Department on March 1,1977, 1,202 sites have been identified through departmental studies aspotentially worthy of landmark designation status, vet most of these
ave not yet been acted on by the Department. This Committee, lastyear, recommended a budget figure of $500,000 to satisfy the needsfor the landmark monitoring program, and so again this year reaffirmsthe need for an increase in that level of funding.
HISTORIC PRESERVATION FUND
The Congress authorized appropriations for the Historic Preserva-tion Fund of $24 million in fiscal year 1977, $100 million in fiscal year1978 and fiscal year 1979 and $150 million in fiscal year 1980 and 1981.These authorizations were intended to provide matching grants tothe States for purposes of preserving our national heritage. The ad -ministration has requested $45 million for fiscal year 1979.
The subcommittee recommends an increase of $55 million, for a totalof $100 million for fiscal year 1979, provided the following guidancebe given the Secretary of the Interior:
24-066 0 - 78 - 12
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1. The Secretary of the Interior implement the 70 percent Fed-eral/30 percent State matching formula for inventory and planningfunctions as authorized by section 102(c) of the Historic PreservationAct of 1966 as amended.
2. The Secretary revise the grant guidelines to: (a) Reward withincreased allocations those States which are aggressively carrying outthe intent of the Congress to conduct statewide surveys of-historicproperties and to adequately protect such properties; (b) provideadvance funding to States for approved programs; (c) assure themanagement of the Department of the Interior grant program in amanner responsive to the intent of the act. The Secretary should pro-vide copies of the new guidelines to the responsible committees within60 days of the budget approval.
PRESERVATION -OF HISTORIC PROPERTIES
The subcommittee recommends an increase of $500,000 to supportan additional 20 persorinol spaces for administration of historic proper-ties. The administration should be directed to support the legislativeintent of this act by increasing personnel allocations by 20 spaces.
VISITOR SAFETY
The GAO recently provided the Congress an assessment of theeffectiveness of visitor protection. The report has pointed out someserious deficiencies in the administration's commitment to protectionof the users of Federal lands. The subcommittee notes, with pleasure,the proposed increase in personnel and funds for the National ParkService. Tho Corps of Engineers and the U.S. Forest Service haverequested funds at fiscal year 1978 levels to support local law enforce-ment agencies; no increases in Federal personnel or funds arerequested.
The Bureau of Land Management administers 450 million acresof land and recorded 80 million recreational visits in 1977. TheBureau reports 12 ranger personnel and 13 full-time law enforcementpersonnel. The Bureau of Land Management request appears inade-quate to carry out the provisions of Public Law 94- 579. The adminis-tration should allocate 100 additional full-time, permanent spaces tothe Bureau for visitor protection and related outdoor recreationfunctions. The subcommittee recommends an additional $1 million beprovided to the Bureau in fiscal year 1979 budget to support theincrease in personnel.
The Corps of Engineers reports 500 ranger personnel with limitedcitation authority allocated to manage 425 lakes with over 400 millionrecreation days of use in 1977. The staffing and funding requestappears inadequate. The subcommittee recommends the administra-tion allocate 200 additional personnel spaces and $2 million be providedto the Corps of Engineers in the fiscal year 1979 budget for visitorprotection and related outdoor recreation functions.
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TABLE L-411ESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQWRE AUTHORIZING LEGISLA-TION PRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979
tIn thousands of dollars]
Subcommitteerecommendation
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
300 Preservation of Historic 3,500 3, 500 4, 000 4, 000 Extend authorization in Public Law 93-Properties. (+500) (+500) 291 for preservation of historical and
archeological data plus $M00000 toincrease pu4servatoa stall by 20Personnel.
300 Land and Water Conserve- 115.209 115,209 115, 209 115. 209 Increase authorization ceilings for unitstion Fund. in National Park Service, Fish and
Wildlife Service, Forest Service, andBureau of Land Managemrnt fundedby the Land and Water ConservationFund.
300 National Park Service ------- 9,297 9,297 9,297 9,297 Increase authorized development ced-ings for units io the National ParkService.
TABLE 2.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
lin thousands of dollars]
Subcommitteerecommendation
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
300 Land and Water Conserva- 725. 000 554,000 1,200.500 854, 500 Provide fuN funding of authorizedtbon Fund. (+475,500) (+300,500) amounts for fiscal year 1979
current appropriation for LWCFand Public Law 95-42, amend-ments to the Land and WaterConservation Act of 1965.
300 Historic Preservation Fund.. 45,000 30,000 100,000 65, 000 Provide fuNl-funding of authorized(+55, 000) (+35, 000) amounts for historic preserva-tion grants.
300 National Park Service:Construction ---------------- 121,328 121,275 200,000 200, 000 Increase amounts over the Presi-
(+78,672) (+78,725) dent's request for NPS construc-Plannin. +1,250 +1,250 tlion and planning
SVisitor Sefety:Bureau of Land Management. 1,200 1,200 2,200 2,200 Increase amounts requested by
(+1,000) (+1,000) President to enhance visitorCorps of Engineers ------------------------------ +2,000 +2,000 safety on public land.
300 Railways conversion pro- .................... -- +15,000 +15:000 Restore full funding for programgram. to convert railway beds to publit
use recreational use.
TERRITORIAL AFFAIRS
GENERAL NARRATIVE
The President's fiscal 1979 budget requests $157,434,000 in appro-priations for territorial affairs activities. This is an increase over thebudget request for fiscal 1978 which was $136,784,000.
Principal categories to be financed in the fiscal year 1979 request are$106,920,000 for the Trust Territory Government, $16,913,000 for
i
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the Northern Mariana Islands Government, $19,421,000 for AmericanSamoa and $500,000 for the Guam Economic Development Fund.
Included in the budget is $2,704,000 for funding the Federal Comp-troller's Office in Guam, in the Trust Territory and the NorthernMarianas, in the Virgin Islands, and in American Samoa. This actionis in accordance with the provisions of Public Law 95-134 (OmnibusTerritories Act), and represents a departure from funding practicesprior to fiscal 1978.
FISCAL YEAR 1979 APPROPRIATIONS FOR TTPI
The fiscal year 1979 estimate of $106,920,000 for the trust territoryrepresents a decrease of $3,747,000 from fiscal year 1978. Part of thisdecrease is accounted for in the $2,989,000 cut in operations by OMB.In fiscal year 1978, operations totaled $50,927,000, whereas the 1979budget request is only $47,938,000. Capital improvements in fiscalyear 1978 totaled $34,012,000 and while the $51,700,000 requested byOMB represents an increase of $17,688,000 over 1978, it falls short ofthe Interior Department's original request of $70,300,000 by$18,600,000.
Additionally, the Trust Territory Government and the Con'-ressof Micronesia requested for fiscal 1978 $10 million for constructionand repair of airfields in Truk and Ponape. This $10 million wasdeemednecessary to offset the loss of FAA funding for these purposes,but it was not included in the 1979 budget request. Since the FAAhas now come up with approximately $3.7 million for the Truk Airport,leaving a balance of $6,740,000 needed for the airfield in Ponape,the subcommittee strongly recommends inclusion of this sum in afiscal 1978 supplemental, or barring that, it would like to see it as anamendment to the 1979 budget.
The subcommittee also seeks restoration of the cuts in both opera-tions and construction. Cuts in operations would affect health services,education, resources and development, transportation and com-munications, and public works. In the critical area of education, forexample, the fiscal vear 1978 appropriation was $12,757,000 whereasthe fiscal year 1979"figure requested is only $12,023,000, a decrease of$734,000.
The original $70,300,000 figure for construction in fiscal year 1979was an amount recommended by the Navy OICC, the Trust TerritoryGovernment, the Congress of Mlicronesia and the Department of theInterior. Funding must be at this level in order to maintain theschedule to have in place by the end of fiscal 1981 the basic infra-structure required in the six districts of the Marshall and CarolineIslands to provide a basis for sound economic development.
If the trusteeship is to be terminated, and the administration hasset 1981 as'a target date, it is imperative that full funding requestsbe honored. Any attempt to shortchange the operations and capitalimprovement funds for fiscal 1979 will only result in increased costs,and an unconscionable delay in affording full opportunity for economicand'educational growth for the people of the trust territory.
30
RONGELAP, UTIRIK, AND BIKINI
Between 1946 and 1954, residents of these atolls were removedfrom their islands and the areas were used by the United States forthermonuclear testing. As a result, the three atolls were made unin-habitable and the people of Rongelap and Utirik suffered thyroidabnormalities from the radioactive fallout. Additionally, to date, oneyoung man has died as a result of exposure to the radioactivity.
Pending before the House Appropriations Committee is a fiscal1978 supplemental which includes $600,000 in medical and deathcompensation payments for residents of Rongelap and Utirik, asauthorized in Public Law 95-134 (O:nnibus Territories Act). Addi-tionally, Public Law 95-134 authorized $300,000 for the island com-munities of Rongelap, Utirik, and Bikini, to be used for such purposesas the municipal councils of these communities determined mostbeneficial.
Since this $300,000 was not included in the above-mentioned sup-plemental, and since it is needed to assist these communities inrehabilitating their atolls, the subcommittee will seek this additionalfunding in either a fiscal 1978 supplemental, as an amendment to the1979 budget or in a 1979 supplemental.
The separate sum of $6,000,000 requested in the fiscal year 1979budget for Bikini is for the construction of housing and communityfacilities, and for replanting of the area. This request is part of along-range U.S. commitment to restore the Bikini Atoll islands sothat the people may return there, and the subcommittee stronglyrecommends approval of this authorization requested by theadministration.
MICRONESIAN CLAIMS
Public Law 92-39 (Micronesian Claims Act) provided for variouspayments to Micronesians for death and damage caused by WorldWar II military action and by the immediate postwar aftermath.The initial appropriation has proved, however, to have been insuf-ficent to render full justice to valid Micronesian claims. The Micro-nesian Claims Commission completed its work on October 15, 1976,but many claims are still outstanding.
Payment of these outstanding Micronesian claims, although nota part of th t trust territory budget, was authorized under Public Law95-134 (Omnibus Territories Act), and an appropriation of an esti-mated $24,600,000 to complete U.S. payments of adjudicated claimsand final awards was requested by the Trust Territory Government,the Northern Marianas Government and the Congress of Micronesia.However, it was not included in the fiscal 1979 bud get.
Thirty-some years have elapsed since the end of World War II andfull payment of these claims is long overdue. If the subcommittee isunsuccessful in having this money included in a fiscal 1978 supple-mental, it will endeavor to get it approved by either an amendmentto the fiscal 1979 budget or an addition to a fiscal 1979 supplemental.
FISCAL 1979 APPROPRIATIONS FOR NORTHERN MARIANA
The Commonwealth of the Northern Marianas, for administrativepurposes, came into being on January 9, 1978. On that date, article
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VII of the Covenant To Establish a Commonwealth of the NorthernMariana Islands in Political Union with the United States (PublicLaw 94-241) also became effective.
Article VII of the Covenant provides for direct multiyear appropria-tions to the Government of the Northern Marianas for an initialperiod of 7 years. To this end, the following funds are requested forthe Northern Marianas:Operation-- -- $9,967,000Economic development loan fund----------------------------2,114,000Construction -.-.-.------------------------------------------- 4,832,000
While this represents an increase of $849,000 over that of fiscalyear 1978, and an increas.,e of $2,913,000 over the original amountguaranteed in Public Law 94-24!, it is a yearly cost-of-living adjust-ment provided for in an indexing formula contained in Public Law94-241.
NORTHERN MARIANA ISLANDS POWERPLANT
The Northern M.Iariana Islands are dependent for power on a35-year-old military power barge on loan, under a year-to-year leaseagreement, to the Government from the U.S. Army Corps of Engi-neers. While generating problems are always recurring with theoperation and maintenance of the barge itself, the existing standbyplant to which the islands must resort when the barge is drydocked,overhauled, and retuned in 1979 to the Corps of Engineers for theiruse elsewhere, is even more inadequate to meet the needs of the people.This standby plant consists of an assortment of aged, military surplusdiesel engines incapable of meeting the anticipated peak powerdemand in 1979 and the years beyond,
The development of economical, efficient, and reliable generatingcapability is essential to assist the Northern Mariana Islands in thediversification of both commercial and industrial activities throughlocal and foreign investment and to support a broader economic basefor the islands.
Qualified consultants to the Northern Marianas Government haveestimated that $12 million is needed to provide a new permanentpowerplant. The subcommittee will seek approval of this authorizationand recommends inclusion of this money in the fiscal 1979 budget.
HOSPITAL PURCHASE FOR GUAM
Public Law 95-134 authorized a grant of $25 million to enable theGovernment of Guam to purchase the Medical Center of the Marianasto provide acute care treatment. Purchase of this modem facilityrather than rehabilitation of the outdated and typhoon-damagedGuam Memorial Hospital was determined to be the best solution tosolving Guam's health care problems.
The subcommittee intends to seek the money authorized in PublicLaw 95-134, plus another $5 million through a fiscal 1978 supple-mental. Any delay beyond fiscal 1978 in appropriating the funds forthe purchase can only result in the need for additional money tocover the prohibitive costs incurred by this delay.
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GUAM ECONOMIC DEVELOPMENT FUND
The Guam Development Act of 1968 was enacted in order to pro-vide capital investment funds for local enterprises. It authorized ayearly appropriation of $1 million for 5 vears. In addition, Public
aw 95-134 (Omnibus Territories Act) authorized $1 million an-nually for 5 fiscal years beginning with fiscal 1976.
Under the authority contained in the 1968 act, Congress appro-priated only $500,000 for the fund in fiscal 197S, $500,000 short ofwhat the annual appropriation had been up to that time. Since theneed for investment funds has escalated over the years due to factorsuch as the damage caused by the 1976 super-typhoon, and theerosion of the dollar due to inflation and the decline in balance-of-payments posture, the subcommittee intends to seek-through a fiscal1978 supplemental-another $1 million as authorized under PublicLaw 95-134. Additionally, it will work to increase from $500,000(the remaining authorization in the 1968 act) to $1 million the moneyrequested for the fund in the fiscal 1979 budget.
GUAM POST-TYPHOON RECONSTRUCTION AND UPGRADING
Public Law 95-134 (Omnibus Territories Act) authorized $15 millionin funds for rehabilitation, upgrading, and construction of publicfacilities in Guam due to severe damages suffered during the 1976super-typhoon. These funds, over and above the long-range capitalimprovenleazi program, should be included in a fiscal 1978 supplementaland the subco;iimittee so recommends.
Additionally, we repeat our 1977 recommendation for $10 milliona year in budget authority and outlay for fiscal 1979, 1980, and 1981.
GUAM CAPITAL IMPROVEMENTS PROGRAM
As we stated in our 1977 budget report, the administration andthe subcommittee in 1976 recognized the need for Congress to providefunds for an emergency capital improvement program to meet long-time and rapidly growing future needs for roads, sewers, schools, andpublic facilities. Such a program was developed and wai to beginin fiscal 1977 to cover a period of 5 years at a total cost of $12 millionper year. However, it became involved with other issues concerningGuam and OMB did not approve it at that time nor since.
Therefore, we repeat our recommendation of the last few yearsfor a $60 million 5-year capital improvement program for Guam. Wenote that 0MB did approve in the fiscal 1979 budget $8,868,000 forwater pro ects in Guam. We support this request and will seek toincrease the total appropriation to the desired $12 million level. Tothis end, we will work for approval of authorizing legislation.
REIMBURSING VIRGIN ISLANDS AND GUAM FOR INCOME TAX REVENUELOSS
Any tax revision acts that the Congress enacts generally have aserious impact on the finances of the Virgin Islands and Guam. Thisis because the income tax provisions of the Internal Revenue Codeapply to these territories and allow, such revenues to be returned tothe governments of these territories and used as local revenues. Thuswhen Congress legislates tax reductions, the loss to the treasuries
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of these territories and hence to their budgets and programs isconsiderable.
In our 1977 budget report, we noted that the President had rec-ognized the equity of the territorial governments' requests for reim-bursement of this loss and recommended the inclusion of this provisionin the Tax Reduction and Simplification Act of 1977. Acting on awaiver of the Interior Committee, the Ways and Means Committeehad approved this.
We also recommended in 1977 that this same authorization be maderelative to the income tax revision acts of 1974, 1970, and 1976 andwe repeat this request in 1978.
Under a provision in Public Law 95-134 (Omnibus Territories Act),$14 million was authorized to reimburse the Virgin I. ands for lossessuffered as a result of tax revision acts of 1975 and 1976. We stronglyurge that this money be included in a fiscal 1978 supplemental.
Additionally, the Pederal Comptroller for Guam has just completedan audit of tax revenue losses suffered in Guam as a result of Federaltax revision laws. His audit indicates that Guam sustained, at a mini-mum, an additional loss of $2,300,000 because of the Tax Reductionand Simplification Act of 1977.
We recommend that the Guam Government be reimbursed for thisloss.
VIRGIN ISLANDS REVENUE SHORTFALL
The Virgin Islands, which under the Organic Act is required tomaintain a balanced budget, is facing a serious fiscal crisis which hasbeen building for some time. The territorial budget for the currentfiscal year, which expires June .30, has been balanced with the $14million grant authorized by Public Law 95-134 but yet to be appro-priated, one-shot Federal revenues, and capital fund transfers. More-over, the Governor's request for a $20 million budget supplementalto maintain a minimal level of government services was rejected bythe legislature for lack of revenues. Additional taxes on the islands'already burdened low-income residents may have to be imposed toclose the remaining gap. Absent the extension of these one-time onlyrevenues, together with additional tax revenue losses expected as aresult of President Carter's proposed 1978 tax reduction, legislationthe projected deficit for fiscal 1979 could well exceed $30 million.
The subcommittee believes it is time to seek a permanent solutionto the worsening Virgin Islands fiscal situation. Under section 28(b)of the 1954 Organic Act, excise taxes collected on rum have been re-turned to the Virgin Islands Treasury. Since 1966, substantial volumesof gasoline refined in the Virgin Islands have been shipped to theUnited States for consumption, but the U.S. Treasury has not rebatedthe 4-cents-per-gallon claimed by the Government of the Virgin Islands.Accordingly, the subcommittee believes that the validity of theVirgin Islands claim ought to be determined.
On the basis of past shipments to the mainland, it is estimated thatwere Treasury to apply the provisions of section 28(b) to gasoline, theVirgin Islands would be due in the range of $25 to $40 million annually.Accordingly, the committee believes the law should be clarified toinsure that gasoline excise falls within the scope of section 28(b), thusaffirming the original congressional intent and enabling the VirginIslands Government to obtain self-sufficiency.
If neither the Congress--through legislation-nor the administra-tion-by Executive order-rapidly approves the transfer of these
b-ier• m•-' *e 1Thr~a_ A:•_s Gr =.aztic m. s :e .S• E.1Ne .- a.x• g'.
and zczz4 n a on •. :John.~;ra.U:'~
rjkeThe ommitte reo £ns L&in Z It.•Spa~o of~ a f &ua bdeAn st•dr c'Ci th , with ouecys of t 15 m *" h!id f" t\e.Qr
rns i19,421,000, of which"i a45,0 is allocated as direct conr.•ina
Appropriatonsfo the judicial breech of .b N:rnneriar a oa
and is b0g resrew ed by the Departnez of the I or &Ad tohe Gov-Inorf. The stedy recomenri baoperationsin to teo o rn
hoddta oiona-loalcreve: One hosprial on 1S-A. Thomare : etne on S-1 levela d ainic on St. John.The comm,0 "ttee recommends. in anticipation of a floraal budget
request, new budget authority of U.2 nidilion for hc'sp-ital srh~Min the Virgin Wsands, with outlays of Si15 million for fiscal yvar [email protected]
AXLERZCAY_ SAMOA&
The President's fiscal year 1979 budget request for American S n-is $19,421, 00, of which $418,00 is located as direct congrezasitnapappropriations for the judicial branch of American SAnoa. and$19,003,000 as a grant-in-aid provided by the Departp, ent of sheInterior to be used to cover basic operations of the local government.
Additionally, local revenues for fiscal 1d79 are estimated at a level of$13,576,000. the subcommittee is of the opinion that local revenue pro-jections for fiscal year 1979 appear overly optimistic, given am in-consistent pattern of past assessments that have been made on local ap-propriations.
As an incentive to improve and expand local enter bses, the subcom-imittee recommends an increase of $3 million in both budgetary au-thority and outlays for American Samoa. The increase is to pvideinitial capital to establish an economic development loan fund and ahousing construction program for the local inhabitants. The subcommit-tee further recommends that the Secretary of the Interior within hisexisting authority, provide appropriate guidelines to ini leinent thetwo needed programs. It should be noted that no new autIgorizatioti isneeded for the $3 million increase recommended by the subcommiittee.Sufficient authorityv exists under 48 U.s.c. 1661; 46 Stat. 4 (ExecutiveOrder 10264, 16 C.F.R. 6419).TABKE L--PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLA.
TION PRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1373fIn Utoimads of dunlaal
hoo luqsod Subcommitteerscommendatmoe
(ddh-,'nm)61Budget Sudgat
Majr nu orpm au &tbsi OvUays auvw'ty 0~my Commest(+ IrI0010
Guam capiti improvemet Pre- . 3,m 2000 3JD , 009 Thme .... itt auppe a UoW.oooinM (32) (+%-W) Imro CIP • •pa 6 M. (0aS
Narrative.)Sikia l Mbdit ............... 6,000 3,000 6,000 .006 The admiaidruoift raquasta. nd the• ', commonly •,is, Nowimlln, muhms I Speta. aOM, lafl IaiIhm see mfor Pr tutu""
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TABLE 2.-LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
Northern Marianas Power Plant:Budget authority ------------------ 12 ........................ To build permanent powerplant In theOutlays -------------------------- 6 6 ------------------ Northern Marianas to replace powe rbarge on loan. (See narrativee)
Guam post-typhoon reconstruction:Budget authority-...-...... . 10 10 10 -------- To rehabilitate, upgrade and constructOutlays --------------------------. 8 8 6 ------ public facilities damaged by 1976 typhoon.
Virgin Islands hospital construction:Budget authority ------------------ 52 ------------------------ To bein construction of a hospital on St.Outlays ----------------- 15-------- 13 19 -- Croax. a hospital on St. Tho-nas, and a
diic on St. John. (See narrative.)
TABLE 3.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
IIn thousands of dollars
Subcommitteerecommendabon
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
Trust Territory:Capitalimprovement program. 51,700 .......... 70.300 ............ Restore OMB cuts to DOI original
(+18600) (+& 003) request.Operations grants ........... 47, 938 47,938 50,927 50.927 Restore program to fiscal yo 1973
(+6,740) (+6,740) sible fiscal year 1978 supple-mental).
Rongelap, Ubrik, and Bikini ..................... 300 300 $100,000 per island community to003 (+300) be used for rehlaiilitation por-
(+.60 poses as directed by municipalcouncds of these communities
uosible yew 1973 sup-
Micronesian claims .............................. 24.600 24. 600 Paysmnts to Micronesinas for(+24,600) (+24,600) World War II death and damage-
Guam:Hospital purchase ........... 0 0 30.000 30,000 Purchase Medid Cantor of the
(+30,000) (+30,000) Marianas in Guam (likely fiscalyear 1973 supplementsl).
Economic development fund. 500 500 1,000 1.000 Provide capital investment funds(+500) (+500) for local enterprises.
Income tax revenue loss re------------.. +2,30 +2. 300 Pursuant to Tax Reduction sadImbursement. Simplification Act of 1977.
Virgin Islands:Income tax revenue loss re- -------------- +14,000 +14,000 Pursuant to Public Law 95-134,
imbursement. Omnibus Territories Act (likelfscal year 1978 su4 lemental).
Remus +30,000 +30,000 Possible adminiatr we lon;o rmseo n require substn-
Amercan amo...ý. 1%21 %421 22 tive kIs '31tiod (See narrative.)American Samoa............. -19421 19,421 22,241 22, 241 To estaisi a critically needeif
(+3;000) (+3,000) housing construcon programand an economic developmentloan fund. (See narrative.)
Territories contingency fund-...-........... +10,000 +10,000 To Provide for continmen trinela affairs prorams
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RECOMMENDATIONS OF THE SUBCOMMITTEE ON WATER ANDPowER REsouRcEs
The Subcommittee on Water and Power Resources observes thatthe President's budget for fiscal year 1979 is approximately the sametotal magnitude as the request submitted to the Congress for theactivities coming within the subcommittee's jurisdiction during fiscalyear 1978. The budget for the Bureau of Reclamation is slightly re-duced, while the requests for power marketing activities, research, andwater resource planning coordination are somewhat increased. Con-sistent with recent years there is no commitment to the initiation of newprograms and the subcommittee would note that to continue the "nonew-starts" policy much longer will erode the Government's capa-bility to engage in action programs. This is a circumstance that shouldnot be allowed to occur.
The subcommittee notes with approval that the President'sbudget does not propose major deletions of funds for ongoing programsas occurred in fiscal year 1978, and considers the President's actions inproceeding with the funding of ongoing programs to be constructiveand a welcome change from the posture taken last year.
Most of the appropriations items in the budget are deemed to beadequately accommodated and no increase in either budget authorityor outlays is recommended. Activities in this category include:
(a) Programs of the Water Resources Council and River Basincommissions
(b) Power marketing agencies of the Department of Energy;and
(c) The following appropriations of the Bureau of Reclama-tion-
(1) Colorado River Basin Project,(2) Colorado River Basin Salinity Control Project,(3) Operation and maintenance,(4) General administrative expense, and(5) Permanent appropriations.
APPROPRIATIONS RECOMMENDED FOR AUGMENTATION
General Investigations, Bureau of Reclamation.-The subcommitteerecommends augmentation of this activity by a total of $7,185,000,representing an increase of about 33 percent. This activity is used tofinance the study of future projects as well as a source of funding formajor mission-oriented research programs. Most of the increase ($5,-925,000) is intended to be used to accelerate research in atmosphericwater resource management research and development (weather modi-fication); wind and solar power integration with hydroelectric powerproduction; and acceleration of the ongoing geothermal energy invest-igation near Susanville, Calif. The remaining increase will be used toinitiate seven new studies and to augment the rate of progress on fourother specific water resource projects.
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Construction and Rehabilitation, Bureau of Reclamation.-The Sub-committee on Water and Power Resources recommends an increaseof $18,800,000 for the Construction and Rehabilitation appropriation.Of this amount $11 million would be utilized to expedite constructionof Auburn Dam to get this important program back on schedule ifand when seismic investigations are satisfactorily resolved. The in-crease would be used in part to initiate advance planning studies onthe Kanapolis Unit, Pick-Sloan Missouri Basin program, Kans.;start construction on the Oroville-Tonasket Unit, ChiefJoseph Damproject, Wash.; and to initiate construction on McGee Creek project,Okla. These are three highly feasible, noncontroversial water programsauthorized by legislation initiated by the Subcommittee on Waterand Power Resources in the 94th Congress. The remaining increasein this activity would fund a fish and wildlife and recreation study ofFDR Lake in the State of Washington and expedite work on correc-tive measures being undertaken at Tiber Dam in Montana. In total,the subcommittee increase for this activity is about 7 percent.
Upper Colorado River Baein Project, Bureau of Relamation.-Thesubcommittee recommends an increase of $10,700,000 for this activity(about 15 percent). These funds would be used to initiate constructionon the Animas-La Plata project in New Mexico and Colorado, toinitiate construction on the Uintah and Upalco Units of the CentralUtah project Utah, and to accelerate completion of the BonnevilleUnit, Central Utah project.
Loan Program, Bureau of Reclamation.-The most significantrecommended increase by the subcommittee for fiscal year 1979 ison behalf of the loan program (Small Reclamation Projects Act) wherethe President has not recommended the funding of a single new loan.The committee increase of $16,528,000 (about 65 percent) wouldenable the start of construction on eight new loan projects. Theseprograms by their nature are completely reimbursable, have noacreage limitation complexities, and are accomplished by the borrowerswith minimal Federal overhead. By this recommendation, the sub-committee endorses the funding of small reclamation projects asrapidly as loan processing is completed and the financial soundnessof the loans is established.
Offce of Water Research and Technology.-The subcommittee alsorecommends a major increase in the funding levels for the Office ofWater Research and Technology. This agency administers the generalwater resources research programs conducted by State water researchinstitutes through grants to investigators together with the salinewater conversion research development and demonstration program.The magnitude of the subcommittee recommendation. is $20 881,000representing an increase of almost 75 percent. This sum breaks downas follows: saline water research and development-$3,200,000;saline water demonstration (authorized in the first session of the 95thCongress)-$10 million; and general research and information dis-semination-$7,681,000.
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38TABLE i.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING
LEGISLATION PRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979
[in thousands of dollars]
Subcommitteefecommendatmor
President's request (difference)
Budget Outlays Budge.Major issue or program authority authority Outlay Comment
W4TER AND POWER RESOURCES. DOIBUREAU OF RECLAMATION (301)
Colorado River Basin salinity control 20, 899 3,000 20, 899 3,000rIocL
Construction and rehabilitation (San 18.860 18,809 18,860 18.809Luis, drains and distribution system).
Dam safety ........................... 3,066 900 3.066 900
Total (301) Bureau of Recla- 42,825 22,709 42,825 22,709motion.
Office of Water Research and Technology. 12,750 11.574 19.350 17,514
Total, DOI ...................... 55,575 34,283 62,175 40.223Water Resources Council ............... 10,513 11,923 10,513 11, 923 Budget authority of $1,047.000
and outlays of $1,679,000 areauthorized pursuant to FederalWater Pollution Control Actamendments under the juris-diction of the Committee onPublic Works and Trans-portation. and are not reflectedin the amounts shown here.
POWER MARKETING ADMINISTRATIONDOE (301)
Operation and maintenance:Southeastern Power Administration.. 1,212 1,210 1,212 1,210Southwestern Power Administration. 19,909 16,909 19,909 16,909Alaska Power Administration ------- 2,614 2,582 2,614 2.582
Bonneville Power Administration fund ----------- 39,80......... 39,300Western Area Power Administration ----- 103,73 102, 238 103,738 102,238
Total, DOE (301) ................ 127,473 162,739 127,473 162,739
TABLE .--PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
[In thousands of dollars)
Subcommitteerecommendation
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
WATER RESOURCES AND POWER,DEPARTMENT OF INTERIOR BU-REAU OF RECLAMATION (301)
Construction and rehabilitation --------- 248,636 269, 168 267, 436 286, 988Upper Colorado River Basin project ...... 66,249 62,420 76, 949 72,028Colorado River Basin project .....-- 73,770 69,547 73, 770 69,547Colorado River Basin salinity control 21,416 25,494 21.416 25,494
RECOMME:NDATIONS OF THE SUBCOMMITTEE ON MINES AND MINING
BUREAb OF MINES
With respect to the section of the budget related to mined landdemonstration, the Bureau of Mines appears to have taken the posi-tion that all of the research on the subject should be moved over tothe new Office of Surface Mining which was established by' the SurfaceMining Control and Reclamation Act of 1977 (Public Law 95-87).
Section 709 of the Act, however, provides for a single study to beprepared under the direction of the Chairman of the Council onEnvironmental Quality and authorizes only $500,000 for the studywhich is to be submitted with respect to sand and gravel) no laterthan 12 months after the date of enactment of the act. With respectto these developments, the research on the reclamation of landssubjected to other types of mining may be "falling through a crack,"especially when considering that a recent report issued by the SoilConservation Service of the Department of Agriculture clearly re-veals that much of the land in the United States requiring reclama-tion has not been subjected to coal mining operations, but rather,the extraction of sand and gravel and other minerals. A single report,with a total authorized outlay of $500,000 may be insufficient todetermine the postmining uses that can be applied to this land.
Another area of concern in the budget is the Bureau's perceptionof the problems related to the development of domestic suppliesof critical mineral resources. In the budget justifications, the Bureauhas presented a standardized chart ot the net import dependenceupon certain critical minerals (p. BM-8). Of the total of 35 mineralsthat are imported in significant quantities, 18 of these minerals areimported in quantities of 50 percent or greater. Yet, the Bureauexcludes many of these same minerals from a category of mineralsthey feel should be developed domestically.
Of the list that are imported in quantities of 50 percent or heater,only 10 are included in the list entitled "Lack of Incentive to Exploreor Develop Domestic Resources". Furthermore, only 6 of the 18minerals are included in the Bureau's list, "Lack of Access to MineralLands." No reason is given, and one is certainly needed, for theBureau's perception of the desirability of maintaining import depend-ence on these critical minerals at the expense of developing ourdomestic resources by denying access to public mineral lands and bynot providing sufficient incentives to private industry.
U.S. GEOLOGICAL SURVEY
The fiscal year 1979 budget request of the U.S. Geological Surveyfor surveys, investigations, and research (SIR) is $398,363,000, anincrease of more than 10 percent over the actual appropriation forfiscal year 1978 ($374,749,000). This increase is consistent with therequest of a year earlier, which was approximately 11 percent above theprevious appropriation. Very little of this amount will go to new po-sitions (12), resulting in an employment level of 7,514.
The subcommittee is alarmed by the proposed reduction in thefunding level for the exploration of the national petroleum reserve in
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Alaska. The reduction is approximately $24 million from the fundinglevel in fiscal year 1978 and $30.5 million below that which the U.S.Geological Survey estimated would be required to properly exploreand evaluate the area.
Public Law 94-258 directs the Secretary of the Interior to conducta petroleum exploration of the reserve, which was transferred from theSecretary of the Navy on June 1, 1977.
The original exploratory program planned by the Navy called forthe drilling of 26 wells by the end of fiscal year 1980. The USGSdetermined that a minimum acceptable sampling could be accom-plished by the drilling of 20 to 21 wells, plus followup confirmationwells which might be indicated as a result of the fiscal year 1978 andfiscal year 1979 drilling. The fiscal year 1979 budget proposes to reducethe exploratory program to 19 wells, add to terminate the program atthe end of 1979.
The reserve contains about 37,000 square miles (roughly the size ofIndiana). Seismic and geophysical data have indicated the presence ofapproximately 125 prospective structural oil traps which constitutevalid exploration targets.
The subcommittee believes that the Nation's need for petroleumresources mandates the continuation of the search for oil and gas inNPRA. The reserve is, first and foremost, a petroleum reserve. It is apotential energy treasure house and an effort must be made to in-ventory its assets. If the Government is unable to make such an effortin a meaningful way, the only alternative would be to lease the areafor private exploration and development.
In a report to Congress in August 1976, the FEA stated that adelay in the realization of the potential economic benefits from theNPRA would be very costly. FEAt estimated that a 1-year delay inrealizing the net national benefits would cost the Nation about $312million. Termination of the program, as proposed, in fiscal year 1979could cause such a delay. Without the funding capability to acquiredrill pipe, casing, drilling mud, fuel, etc., during fiscal year 1979, itwould be impossible to proceed with followup and confirmation wellsin fiscal year 1980. It would take at least 1-year after the terminationat the end of fiscal year 1979 to execute new contracts and restore theequipment necessary to continue the program.
Although the subcommittee believes that it would be better torestore the entire $30.5 million which would permit the drilling of allof the wells originally contemplated, it accepts the representationsof the Department that funding at the current level would permitcompletion of the 7-year exploration program. Accordingly, thesubcommittee recommends the restoration of $23.993 million to thefiscal year. 1979 budget.
The total budget is for $583,911,000, an increase of $12,823,000(just over 2 percent) compared to the fiscal year 1978 appropriation.
An increase of $1,325,000 is included for topographic surveys andmapping. USGS maps have become invaluable for a wide range ofuses in recent years, and the survey has come under increasing pres-sure to expand its mapping services to update its existing productsand to provide coverage of areas not yet mapped. Much of the pro-posed increase is to be used for development of a program to produce
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41
map data in computer readable form for use by Federal and State-%,gencies in environmental and resource management modeling. Thisshould be particularly useful in facilitating early decisionmaking onprojects of that type. In addition, new topographic maps for certainareas not yet covered, especially those of special interest because ofpotential energy development, land use and coastal zone management,and other activities of national importance, will be given high pri-ority. Automated mapping through computerization could speed pub-lication, permit wider coverage, and lower prices to map purchasers.
Geological and mineral resource surveys and mapping constitutedthe second largest budget activity. These surveys cover geologicresearch, geomagnetism, earthquake hazards reduction, engineeringgeology, environmental aspects of energy, and climate change. Theimplications associated with all of these activities are very great andprobably justify the level of funding requested. The increase beingsought is $5,819,000 (up 5 percent), an amount that seems modestbut may be as much as can be efficiently spent during fiscal year 1979.
The largest single increase ($7,339,000) in program activity isdirected at water resources investigations. With severe water problemsin many parts of the Nation this past year and the economic lossesthey caused, a large increase in this program area appears warranted.The greatest change in funding is for the regional aquifer systemanalyses to determine the qua ity and quantity of ground wateravailable in the regional aquifer systems. Congress, in recognition ofthe need for ground water management, was responsible for addingfunds to the fiscal year 1978 budget for expansion of these systems.The program seeks, among other things, to examine aquifer-systeminteraction and to delineate the area with the greatest conservationpotential for artificial recharge. The Survey plans to use this informa-tion to develop a drought alert system, to develop a pollution alertsystem, to delineate areas that are economically dependent on groundwater, and to evaluate economic growth timetables that will dependon the different water management options. The Survey is also seek-ing funding to prepare flood hazard maps for estimating the magnitudeand frequency of future floods.
An increase of $5,281,000 (up 7 percent is requested for conserva-tion of lands and" minerals, of which $2,400,000 is for OCS landsactivities and $2,881,000 for Federal and Indian lands. This programis of great significance to the Treasury in that it is designed to classifyFederal lands on the basis of existence and workability of leasablemineral deposits, to determine the fair market value of resourcesoffered for competitive leasing, and to regulate and supervise thedevelopment and operation of those leases. The increases requestedare for expanded regulation of oil and gas leases both onshore andoffshore, and for better data acquisition prior to OCS lease tractselection and evaluation. The Survey will also be conducting an assess-ment of coal reserves on Federal lands. These are productive areasfor additional Survey activity and these programs will probablyeventually return more to the Treasury than their cost through bettervalues received for leased minerals.
The Earth resources observation systems, part of land informationand analyses, has not been scheduled for an increase, despite the
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42
favorable publicity it hu received and the generally commendablejob that it has done. In real terms, this amounts to a cut because ofinflation and higher wage costs, and it could reduce program effective-ness.
The intense interest in projects that involve Federal lands has ledto a request for an increase of $1,400,000 (up 56 percent) to handlethe workload of the environmental impact suibactivity and to handlethe workload of preparing environmental impact statements. To theextent that these are initiated by applicants, the funds will be reim-bursable. Much of the work, however, will probably be directed towardthe preparation of OCS lease sales.
The geography program, which has concentrated most of its activ-ities on land-use mapping projects, has requested an increase of$750,000 (up 30 percent). The need for such a large increase is notapparent in the justification, except for the blanket terms "morecooperative cost-sharing agreements" and "much-needed technicalassistance." The compilation of an additional 50,000 square miles ofland use mapping annually would account for only part of the requestedincrease.
Both resource and land investigation (RALI) and Earth scienceapplications have been cut by $125,000 (down 9 percent and 12 per-cent). Considering the beneficial impact that these programs havehad in developing and utilizing resource planning methods, in plan-ning assistance studies, in supporting planning efforts of State andlocal governments in response to Federal initiatives, as a clearinghousefor resource information and techniques, and in application of Earthscience information to practical problems, it is surprising that a cutis sought rather than an increase.
This cut is particularly troublesome when the current level of inter-est in resource development on Federal lands is considered along withthe fact that the funds cut are being redirected to the geographyprogram. As a result, neither RALI or the Earth sciences applicationprogram will be able to take on any new projects in fiscal year 1979,and existing programs will be forced to continue at a reduced level.
TABLE I.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
[in thousands of dollars
Subcommitteerecommendation
Pres•id t's request (difference)
sud:?dB8dstMajor issue or program ty ouly S fty outlays
U.S. Geological Survey ........... 185,548 185,548 209,541 209,541 National Exploration of Petroleum(+23. 993) (+231 993) Reserve in Alaska. Restore pto-gplam to fiscal year 1978 levor.
RECOMMENDATIONS OF THE SUBCOMMITTEE ON INDIAN AFFAIRS
AND PUBLiC LANDS
PUBLIC LANDS
Pursuant to section 318 of the Federal Land Policy, and Manage-ment Act (Public Law 94-579, 43 U.S.C. 1701 et seq.) the Secretaryof the Interior is required to submit to Congress a request for au-
24-O64 0 - 78 - 13
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thorization of appropriations for all programs, functions and activitiesof the Bureau of Land Management to be carried out during the next4 years and for each 4-year period thereafter. This request has beensubmitted, and was before the Subcommittee on Indian Affairs andPublic Lands in the form of H.R. 10787. The subcommittee held ahearing on H.R. 10787 on February 24, 1978, and ordered H.R. 10787reported with several changes and recommendations. The subcom-mittee is in general agreement with H.R. 10787, but will submitseveral funding increases for consideration by the full Interior andInsular Affairs Committee.
The subcommittee was encouraged by the authorization requestincreases for the next 4 years reflected in H.R. 10787, and was espe-cially pleased to see an emphasis placed on upgrading the managementof renewable resources. It is with great disappointment, therefore, thatthe subcommittee notes the President's actual proposed budget for fiscalyear 1979 falls dramatically short of the authorizations requested bythe Secretary for 1979, particularly in the area of renewable resources.The subcommittee sincerely hopes that the Budget Committee will seefit to accommodate in their first resolution the funding levels author-ized by H.R. 10787, as increased by the total of $8.6 million discussedbelow, and that the Appropriations Committee will appropriate thefull amount authorized. The management of renewable resources onBLM lands has been severely neglected in recent years, and increasedfunding is vital to realizing improved range and other BLM land con-ditions. A summary of the shortfalls in the President's request andthe subcommittee's recommendations is shown below (in millions).Comments on each category are made in alphabetical order followingthe table:
(i) Fire management ------------------------------- 8. 3 0 +3.7 NoneMultiple use planning ----------------------------- 7.4 0 +2.5 None
) Data management ------------------------------- 12.6 0 . +4.4 None) Cadastral survey--Lower 48 States ................. 8.1 +.7 +.9 None
(m) Administration and enforcement ------------------ 4.0 +.6 +.2 Nonen) Acquisition and maintenance ---------------------- 13.7 -1.4 +1.3 None
Total ----------------------------------------------------------------- 31.4 8.6
(a) Mining patent applicationsThe subcommittee recommends an increase of $1 million over the
H.R. 10787 level ($1.3 over the President's request) to process agrowing backlog of applications to patent mining claims. Accordingto information the su committee received, many patent applicationsare over 10 years old, and some date back over 20 years--clearly anintolerable situation. While BLM is attempting to eliminate this
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backlog by 1983, the subcommittee feels patent applicants are justlyentitled to a more rapid processing of their applications. The addi-tional $1 million recommended by the subcommittee should enablethe processing of approximately 100 more applications per year andallow the backlog to be eliminated by the end of 1980. If the increaseis not allowed, new patent applications couid increase rather thandecrease the backlog.(b) Alaska Native Claims Settlement Act implementation
The subcommittee disapproves of the delays which have accompaniedthe transfer of State and Native land selections in Alaska and supportsthe full amount requested by the Secretary in H.R. 10787. Additionalfunds may be necessary for this purpose in fiscal year 1980 if H.R. 39,t0-e Alaska D-2 lands legislation is enacted this year.Wc) Mining claim recordation
The largest increase recommended by the subcommittee relates tofunding for the recordation of mining claims. This addition of $4.6million is necessary to allow BLM to expeditiously record miningclaims on the public lands as required by section 314 of the FederalLand Policy and Management Act (FLPMA). Recordation is essen-tial to enabling BLM to determine where claims actually exist andto implement management plans which reflect the existence'of theseclaims. Prior to the passage of FLPMA most claims were recordedonly in State or county offices, making it difficult for BLM to retrieveinformation when it needed to formulate plans, remove clouds ontitle to realty, adjudicate conflicting claims, etc. Since Congress hasdetermined it would be useful to have claims recorded with BLM,it should provide the funds necessary to do the job.(d) W4'ithdrawal review
Investigations by the General Accounting Office and others havedemonstrated that millions of acres of public lands which have beenwithdrawn from mining and mineral leasing for various reasons(including the establishment of military bases, scientific researchareas, stock driveways, etc.) are no longer necessary and should bereturned to multiple use. Section 204(1) of the Federal Land Policyand Management Act requirPs a review of such withdrawals by 1991and their termination if they are found to be no longer valid. Thesubcommittee feels that many withdrawals may merit terminationlong before 1991, and fully supports the Secretary's request to increasewithdrawal review money by $1.1 million in fiscal year 1979. Thesemoneys are especially needed to enable immediate review and termi-nation of several large withdrawals in various Western States.(e, .f, g.) Range, soil, water, air and wildlife management
Even though improvements have occurred in some areas in recentyears, BLM data and numerous other studies show that over 80 per-cent of the public rangelands are in an unsatisfactory condition. Morediscouraging, only 19 percent are in an improving status. These lands,which total over 160 million acres (an area as large as the States ofCalifornia and Oregon combined), have perhaps more than any areain the Nation, suffered from a lack of planning, management, and fund-
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ing. Put simply, the money and personnel necessary to do an adequatejob of improving antl managing these lands, has not been a high pri-ority with past administrations of Congress. The President's fiscalyear 1979 budget request does little to reverse this trend, althoughsome increases are requested for wildlife, soil, water, and air. To bridgethe gap in 1979, the subcommittee feels that it is imperative that thefull amounts requested in H.R. 10787 be appropriated. This amountsto an increase of the President's request of $2 million for wildlifemanagement (including Sikes Act wildlife projects), and $2.5 millionfor soil, water, and wildlife inventories and projects such as erosioncontrol, protection of endangered plant species, and improvement ofwater quality.
Further, the subcommittee places the highest possible priority onappropriation of an additional $3 million in fiscal year 1979 to acceler-ate vegetation, soil, and wildlife inventories ($1 million for eachfunction). This money is critical, since without it, adequate data onwhich to base range land use planning and grazing environmentalimpact statements will not exist. In short, soil, vegetation, and wild-life inventories are the cornerstone for any future rangeland planningand improvements. This is especially true in the preparation of grazingenvironmental impact statements. BLM is currently under a courtorder to complete 212 environmental impact statements coveringover 150 million acres of public grazing lands by 1989. Until such state-ments have been completed for an area, BLM is prohibited from im-plementing any grazing management plans to improve the range. As acorollary of this prohibition, range improvements which may proceedin the absence of such plans are extremely limited.
In 1975, the pilot environmental impact statement implementingthe court's order on the Challis area in Idaho was rejected as unaccept-able because it was not based on adequate soil, vegetative, and wild-life data. Future similar EIS rejections are a serious possibility. It istherefore absolutely vital that soil, vegetation, and wildlife invento-ries be accelerated to provide the data base necessary for environmentalimpact statements to be satisfactorily completed. The additional $3million recommended by the subcommittee will enable BLM to inven-tory approximately 15 to 16 million acres of rangeland per year, andkeep resource inventories on a timetable that will match the court'sorder for completion of the 212 EIS's by 1989. If the additional fundsare not appropriated, the subcommittee fears drastic setbacks inBLM's efforts to finally commence a program to improve the publicrange.
Even if moneys to accelerate inventories and protect soil, vegeta-tion, and wildlife are fully appropriated in fiscal year 1979 and through1982 as presented in H.R. 10787 (as recommended and augmented bythe subcommittee), dramatic increases in range management andimprovement funding will be necessary-especially for on-the-groundrangeland improvements to benefit wildlife, livestock management,and other rangeland values. Legislation to accomplish this has beenintroduced and will be consideredT by the subcommittee shortly. Theseincreases are shown under H.R. 10587 in the "legislative initiatives"table.
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(4) Recreation managementH.R. 10787 provides, and the subcommittee recommends, a total
$3.1 million above the President's request for recreation management.Recreation demands are growing on BLM lands and the additionalfunding is needed to formulate, implement and enforce plans for off-road vehicle use, river and trail systems, unique resources such ascaves, paleontological and biological sites of importance, and pro-tection of the California desert from overuse and vandalism.(i) Fire management
Last summer's fire problems clearly demonstrate why additionalfunds, as requested in H.R. 10787, are necessary to upgrade fire pre-vention and fighting capabildLies.(j) Multiple use planning
Multiple use planning is the next step after soil, vegetative andwildlife inventories have been completed and environmental impactstatements prepared. The $2.5 million increase over the President'sbudget is necessary to meet planning priorities in range, forestry,wilderness and other planning, and to upgrade existing plans.(k) Data management
The data accumulated in inventories will be of lesser value unlessit can be adequately and speedily processed and integrated with dataon mining claims, land ownership and other management programs.The subcommittee therefore supports the increase of $4.4 million overthe President's budget requested by H.R. 10787.(1) Cadastral Survey, Louer 48 States
The subcommittee supports an additional $0.2 million over thePresident's request to complete urgently needed surveys of the pub-lic lands.(m) Administration and enforcement
$0.6 million over the President's request for property management;enforcement of public land laws to prevent overuse, vandalism, tres-pass, etc.; and fiscal, personnel and budget management services.(n) Acquidition and maintenance
Vast segments of the public lands are currently inaccessible to thepublic because access is blocked by private or State lands. The sub-committee supports the increase of $1.3 million in this area to allowfor easement acquisition and for the maintenance of public buildings,recreation sites and related BLM facilities.
SUMMARY
In the areas of renewable resource management, mining claims andpatent recordation and processing, acquisition and maintenance, andother areas discussed above, the subcommittee considers these in-creases ($31.4 million which are contained in H.R. 10787, aid $8.6million constitute subcommittee recommended increases above H.R.10787 levels) as vital "bare bones" increases to make up for years ofneglect of BLM's budget. If the are not forthcoming, the publiclands managed by BLM will fall tar short of realizing their potentialto serve wildlife, recreation, livestock, and soil and water conservation
R EST COP? AVAiLAL
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needs. The subcommittee further notes that H-.R. 10787 also pro-posed increases for mineral leasina, mining law administration aridpayments in lieu of taxes. These are the province of other siubcom-mitteei of the Committee on Interior and Insular Affairs and will bediscussed in their sections of this report. However, the sutcommit-tee points out that it has favorably reported Ih.R. 10787, and there-fore endorses any increases in those budget requests contained in11.R. 10787.
TABLE I.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATIONPRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979
lIn thousands of dollars
Subcommitteerecommendation
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
Federal Land Policy and Manage-ment Act of 1976:
Management of lands and 245,368 253,625 284,060 292,325 Authorization of appropliationes forresources. carrying out the Federal Land Policy
Acquisition, construction and 17,683 19,071 18,983 20.371 and anagenerat Act of1976.maintenance.
TABLE 2.-PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIREAUTHORIZING LEGISLATION FOR FISCAL YEAR 1979
Mineral impact loan assistance:President's request:
Budget authority .............. 40 40 40 40 40 Loans would be made under this ProposalOutlays ...................... 40 40 40 40 40 to States for the construction of public
Subcommittee recommendation: facilities made necessary by mineralBudget authority .............. 45 50 57 65 70 development on Federal lands. Repay.Outlays ...................... 45 50 57 65 70 ment would be from the State's share of
future Federal mineral leasing receipts.Amendments to existing legislation areproposed, including a change in the in.tarest rate from 3 percent to the currentTreasury borrowing rate.
TABLE 3.-LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
Tho President's hlidgoet. request. for Blur'eau of Indian Aflairs; pjro-grains for fiscal year 19J79, excluding education programs not fallingwithin the legislative jurisdiction of the Subcommittee on Indian
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Affairs and Public Lands and permanent and trust funds of Indiantribes which are not appropriated Federal funds, is $678,440,000. Thisrepresents an overall increase of $80,939,000 or approximately 14percent over the fiscal year 1978 appropriation of $597,501,000.
With minor exceptions, the President's request contains modestincreases in each of the various program categories of BIA authori-ties falling within the subcommittees jurisdiction. However, as thecommittee noted last year, the increase in program money over fiscalyear 1978 is indeed modest and basically serves to meet increasedoperating costs due to inflation.
The President's request for the Indian Health Service for fiscalyear 1979 is $472,852,000 for health services and $69,955,000 forfacilities construction as opposed to $442,657,000 and $71,257,000,respectively, for fiscal year 1978. As will be noted, this is a $30,917,000increase in health services and a $1,302,000 decrease in facilitiesconstruction.
Here again, however, where modest increases are made, they onlyserve to meet increased operating costs from inflation or, as the Officeof Managemel and Budget euphemistically denotes it, mandatorycost increases.
As noted by the subcommittee last year, the subcommittee dev edconsiderable time and attention to Indian health needs in considdlingthe legislation which became the Indian Health Care ImprovementAct (Public Law 94-437). The quantum inercase in funding authorizedby that act was in recognition of the dismal health conditions amongIndians and the need for an incremental approach in bringing Indianhealth standards up to a par with the rest of the Nation. $48 550,000of the authorization for health services and $61,252,000 for facilitiesconstruction contained in the act for fiscal year 1979 has not beenrequested by the President. The subcommittee can only again urgethat the full authorization of the Indian Health Care ImprovementAct be funded.
With respect to the Bureau of Indian Affairs budget, the sub-committee will limit its recommendations to four functional areas:Indian irrigation projects, Indian housing, Indian business develop-ment, and road construction.
The subcommittee recommends that $10 million be added to therequest for Indian irrigation programs. The budget contains a requestfor $43,829 000 of which $28 million is for the Navajo irrigationproject and the remainder for maintenance of existing irrigationprojects. No money is included for rew construction of non-Navajoprojects, some of which have been authorized for over 100 years.The $10 million increase would represent less than 5 percent of theconstruction backlog (excluding the $254.504 million for Navajoconstruction) identified by the BIA in 1975.
The subcommittee recommends an increase in the BIA housingimprovement program request of $7 million. The President's requestfor this program is $19.541,000. The BIA indicates that the averagecost of renovation of a home 's $10,000, while the average cost for anew home constructed by the Bureau is $25,000. Using these figuresand the total "unmet need" in number of housing, we can determinethe amount of money needed to meet the backlog. $289,300,000 isneeded for renovation and $994 million for new construction.
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The subcommittee recommends an increase in $7 million for BIAroad construction and maintenance activities. This is a modest recom-mendation in view of the enormous backlog in this area. The BIArequest for fiscal year 1979 for road construction is $71,410,000 or adecrease of 5.2 percent from fiscal year 1978. The BIA estimates that73 percent of aliBureau roads are unimproved and the present con-dition of roads on Indian reservations can be compared to the roadsof rural America in the early 1930's, with only 2,307 miles of 28,000miles of BIA roads being improved.
The subcommittee recommends the full funding of the IndianBusiness Development program under the Indian Financing Act.Congress extended the authorization for this program in the firstsession of the 95th Congress at a $14 million a year level. The sub-committee understands and supports the efforts of the AppropriationCommittee to improve the administration and implementation ofthe Indian Financing Act, but urges that funding of those programs,including the IBDP, go forward. In fiscal year 1977, the last yearthe program was funded, approximately 1,000 applications for assist-ance were received, which totaled $19 million. 420 applications wereapproved for a total of $5.5 million. This money generated an addi-tional $11.5 million in investment capital and created or sustained1,500 jobs. The estimated payroll, annually, generated by the pro-gram in fiscal year 1977 was $6.7 million.
TABLE I.-PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIREAUTHORIZING LEGISLATION FOR FISCAL YEAR 1979
Oin thousands of dollarsil
Committeerecommendation
President's request (difference)
Budget BudgetMajor issue or program authority Outlays authority Outlays Comment
Indian irrigation plooicts ......... 70, 303 70, 091 0,303 80,091 The $10.000,000 increase recom-(+10,000) (+10,000) mended would be used to reduce
by 5 percent the non-Navajoconstruction backlog documentedby BIA.
Indian business development..... 84,719 84, 436 719 9, 436 This recommendation would Pro-(+14,000) (+14,000) vide full funding for the IOOP
under the Indian Financing Actwhich was reauthorized at$14,000.000 in the 1st sess.Indian reservation roads con- 71, 410 71, 552 78. 410 76. 552 This is a modest recommendation
struction. (+7,000) (+7,000) considering that 3 percent ofBIA roads on reservations areunimproved and severely ha1*-per school transportation.
Indian health services ........ 472,852 462.956 521, 402 511,506 The depth of unmet nesds in(+48 550) (+48,550) Indian health care was fully
Indian health facilities .......... 69, 955 95, 587 131, 207 131. 207 documented by the subcommit-(+61,252) (+35,620) tee n the course of the uas
of Public Law 94-437. This in-crease over the President'sbudget request for health serv-Ices 9nd health facilitiesmodeinization assures fundingat the levels authorized for fiscalyear 1979 in the act. Specifically$600 COO would be earmarked forthe Oiitis Media early interven-tion program.
Indian housing ............ 194,656 194,007 201,656 201.007 The S170&0.C0 increase recom-(+7,000) (+7.000) menCed by the subcommittee is
modest considering a $1,200,-000,000 housing constructionand improvement backlog onIndian reservations.
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OPEgRATION OF INDIAN PROGRAMS
Natural Resource. Development
Fiscal year 1979 President's Budget-$70,303,0001978 appropriation-$61,283,000
lncrease--$9,020,000
ForestrI.--(Forest management, 25 U.S.C. 466)The purpose of the forestry program is to develop Indian forests as
a perpetual resource and a source of economic benefit for the Indianpeople. The program concomitantly creates employment for Indiansthrough forestry operations such as forest inventory, survey work andforest protection.Agriculture.--(Snyder Act, 25 U.S.C. 13)
The agriculture program is a diverse effort including the followingelements: Assistance to Indian tribes in making soil and range resourceinventories; planning conservation programs and projects; and plan-ning for beneficial use of reservation land i (farm, ranch, waterslhed, forexample). The water resource program, a subcategory of the agricul-ture program, provides assistance to Indian tribes in the inventory,conservation, development, and use of Indian water resources. 'R'hewildlife and parks program, another subcategory, provides assistancein the survey of wildlife resources, development of game unit plans,improvement of game habitats, wildlife management, and developmentof campgrounds and parks.Minerals and mining.-(Mineral lands, 25 U.S.C. 399) (Mining lands,
25 U.S.C. 396)The minerals and mining program provides an Indian mineral re-
source data base for Indian tribes in order for the Bureau to effectivelydischarge its trust responsibilities in protecting Indian mineral re-sources. The program includes a BIA mineral inventory carried outunder interagency agreements with the Bureau of Mines and theGeological Survey. This includes collection of existing data and rec-ommendations for mineral development.Irrigation and power.-(Snyder Act, 25 U.S.C. 13)
The irrigation and power program is designed to assure the operationof Indian irrigation water delivery systems in accordance with ap-plicable standards. The ongoing objective is to execute an efficientoperation and maintenance system.
Indian Service.
Fiscal year 1979 President's budget-$194,656,0001978 appropriation-S$173,663,000
Increase-$20,993,000Tribal government eervices.-(Snyder Act, 25 U.S.C.. 13) (Public Law
93-531; 88 Stat. 1712)
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The tribal government services program provides technical andfinancial assistance to recognized tribal governments for activitiesrelated to tribal governmental functions. This includes governmentorganization, elections, maintenance of membership rolls, and thegeneral conduct of tribal business. Included also is assistance in theoperation, establishment, and improvement of tribal judicial systemsin compliance with the Indian ( ivil Rights Act of 1968. (It is esti-mated in 1979 that the 134 Indian courts will process approximately125,000 cases.)Social services.-(Snyder Act, 25 U.S.C. 13)
The objective of the social services program is to provide necessaryfinancial assistance and social services for Indians on or near reserva-tions and in BI3A jurisdictions in Alaska and Oklahoma, when suchassistance and service's are not available throtigh State or local publicwelfare agencies. The social services program includes general assist-ante, chi1(1d welfare assistance, social set'vices and other miscellaneousassistance. The general assistance caseload will average 61,500 personsper month in fiscal year 1979, while an average of 3,300 children permonth will require child welfare assistance during this period. Also,the Bureau plans to provide counseling and other non-financial assist-ance to an estimate([ 15,800) persons per month in fiscal year 1979.Lat, enforcement-(Snyder Act, 25 U.S.C. 13)
The BIA law enforcement and detention programs affect over380,000 Indians living on reservations in 19 States where there istribal/Federal jil'Iis(Iiction. The funds are usedl to develop and operatecriminal justice programs mncessary to the reduction of violent crimesin Indian country. Tribes are currentlv com)leting dletailedl criminaljustice plans for each reservation under a p1 inning program fundedby the Bureau.Homs8ing.-(Snyder Act, 25 U.S.C. 13)
The Bureau of Indian Housing program is designed to eliminatesubstandard housing on Ilndian reservations. To achieve this goal willrequire the construction of 59,760 new homes and the repair of 28,930existing houses. The Bhreau's housing Iroposal for fiscal year 1979 isto provide, through the housing improvement program (HIP), 430new homes andi 2,650 renovations and/or enlargements.
In addition, statutory set asides (in terms of units) for Indianhousing construction fiGanced by the Department of H ousing andUrban Development were amuthorlzedl by the Iloutsing and C(ommunityDevelopment Act of 1974. The Bureal'u muist be prepared to providestaff and technical assistance to approximately 152 local Indianhousing authorities andI numerous tribal housing committees involvedin II UD activities. The 1979 housing prograiln expects to provide 600HUD-assisted new houses for Indian occupants.Selj-determination serricts.-(Public Law 93-638; 88 Stat. 2203)
The self-determination services program enables trib,:s to developeffective delivery of services to niemberns through tribal operation ofFederal programs (under authority of Public Law 93-638, the IndianSelf -Determination a Id A..istamce Act). Included in this program arecontract support for tribal operation of Federal programs; trainingand technical assistance to participating tribes; and grants to tribalgovernments for the purpose of increasing tribal ability to operatesuch programs under contract authority.
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Navajo-Hopi settlement program.- (Public Law 93-531, 88 Stat. 1712)This program, as authorized by Public Law 93-531 (enacted in
1974), will be continued in-fiscal year 1979 Included are stock reduc-tion and fencing activities necessary to reduce stock and restore therange capacity on lands lying within the former Navajo-Hopi joint-use area.
Economic Development and Manpower Programs
Fiscal year 1979 President's budget estimate-$84,719,000Fiscal year 1978 appropriation-$75,081 ,000
Increase-$9,638,000
Employment development.-(Snyder Act, 25 U.S.C. 13)The objective of the employment development program is to
increase the level of professional skill, and hence, of employment,among Indian people living on reservations and in Indian communities.Included hereunder are adult vocational training, direct employment,on-the-job training, and the Indian Action program.Business enterprise development.--(Public Law 93-262).
The purpose of the business enterprise development program is toprovide technical and financial assistance to Indian tribes, organiza-tions and individuals with the aim of increasing employment andincome levels. This is to be accomplished by stimulating the develop-ment of trade and commerce (including tourism and recreation) onIndian reservations and in Indian communities. Included in thisprogram are commercial enterprise development, credit and financialservices, and promotion of Indian arts and crafts.Road maintenance.- (Indian reservation roads, 25 U.S.C. 318 a)
The road maintenance program exists in order adequately to main-tain the existing BIA road system on Indian reservations. The programprovides for maintenance and repair of 25,852 miles of BIA roads and7 airstrips on 180 Indian reservations.
Trust Responsibilities
President's fiscal year 1979 estimate-$42,364,000Fiscal year 1978 approl)riation-$:32,268,000
Increase-$ 10,096,000
Indian rights protection.-(Snyder Act, 25 U.S.C. 13, and NationalEnvironmental Policy Act (NEPA) of 1969) (83 Stat. 852)The Indian rights protection program exists to implement the
Bureau's trust responsibilities on behalf of Indians, ircludini p rotec-tion of Indian property, water, hunting, and fishing rights. r he pro-gram also provides services required by the National EnvironmentalPolicy Act of 1969. An increase in 'funding for rights protectionactivities requested for fiscal year 1979 reflects tribal priorities in thi sarea.Real estate services.-(Snyder Act, 25 U.S.C. 13, 151)
The real estate services program provides assistance to Indianlandowners in the acquisition and disposal of property; land-use
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planning; land record maintenance; rights-of-way matters; andeasing, appraisal and surveying activities.
General Management and Facilities Operation
President's fiscal year 1979 estitnate-$98,173,000Fiscal year 1978 appropriation-$85,718,000
Increase-$1 2,455,000
Management and administration.--(Snyder Act, 25 U.S.C. 13)The. management and administration functions provide policy
direction and management control over all Bureau programs. Includedhereunder are funding for the immediate staff of Ate Assistant Secre-tary for Indian Affairs and other adininistrative support functions.The program also provides technical assistance and training for tribalparticipation in the Bureau's budget develo pment process; tribes canthus identify their priorities with regard to Bureau programs throughwhat has become known as the "band analysis" process.Program SUleport serrice.- (Safetv Program, 5 U.S.C. 7902; Employ-
ment compensation , Public Law 86-767)Included in this category is the safety numagement program which
develops and maintains a Bureauwide effort to insure safe and health-f ul work locations for Bureau personnel. Assistance under this programis also given to tribes in establishing and maintaining tribal andhealth programs.Facilities manageement.-(Snyder Act, 25 U.S.C. 13)
The objective of the facilities management program is to insureadequate physical facilities for the operation of Bureau programs.This includes furnishment of necessary utilities and other operationalservices, as well as facility repair and maintenance.
CONSTRUCTIONBuildings and utilities
President's fiscal year 1979 estimate--$40,165,000Fiscal year 1978 appropriation--S19,376,000
Increase-$20,789,000
The buildings and utilities program provides funds for the con-struction of diverse types of buildings and utilities on Indian reserva-tions and in Indian communities, including education facilities,rehabilitation facilities, sanitary facilities, irrigation services buildings,fish hatcheries, agency offices, water treatment systems, fire towers,and wells.
Irrigation systems.--(Snyder Act, 25 U.S.C. 13)
President's fiscal year 1979 estimate-$46,650,000Fiscal year 1978 appropriation-$44,677,000
Increase-S$1,973,000
The budget estimate of $46,650,000 will provide a program of $28million for the Navajo Indian irrigation project being constructed bythe Bureau of Reclamation; a program of $17,954,000 for the improve-
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meant, rehabilitation, betterment, and extension of a number of spec-ified Indian irrigation projects and related power systems; and$696,000 for "Common Program Services" (functions or services whichare in support of programs but for which costs cannot be readilyidentified directly in relation to the program benefiting therefrom).Road construction.-(25 U.S.C. 318 a)
President's fiscal year 1979 estimate-$71,410,000Fiscal year 1978 appropriation-$75,335,000
Decrease-$3,925,000
There is a total of approximately 50,000 miles of public roads onIndian reservations, of which the Bureau is responsible for the improve-ment of about 28,000 miles. The objective of this program is to improveall arterial highways, all community streets, and 50 percent of localroads within the Indian road system. A secondary benefit of the pro-gram is the employment of Indian people on road construction projects.
An add-on of $5 million to the initial fiscal year 1978 appropriationfor improvement of Federal aid roads in the Four Corners area accountsfor the decrease reflected in the fiscal year 1979 request.
MISCELLANEOUS APPROPRIATIONS
President's fiscal year 1979 estimate-$.7,200,000Fiscal year 1978 appropriation-$45,630,000
Increase-$1,570,000
Alaska Native jund.- (Public Law 93-203; 85 Stat. 688)The Alaska Native Claims Settlement Act of 1971 provided for
conveyance of both property title and monetary award to AlaskaNatives in settlement of their aboriginal land claims. Section 6 of thisact established the Alaska Native Fund, into which $462,500,000 wasdeposited from the general fund of the U.S. Treasury, and authorizedto be appropriated as follows: $12,500,000 (luring the fiscal year inwhich the act became effective (1972); $50 million during the secondfiscal year; $70 million during each of the third, fourth, and fifth fiscalyears; $40 million during the sixth fiscal year; and $30 million duringeach of the next 5 fiscal years.Claims and treaty obligationv.-(Act of Feb. 19, 1831; Act of Nov. 11,
1794; Act of Sept. 24, 1857; Act of March 2, 1889; Act of June 10,1896; Act of June 21, 1906).
Payments under this entry are made to fulfill treaty obligationswith the Senecas of New York (Act of Feb. 19, 1831); the Six Nationsof New York (Act of Nov. 11, 1794), and the Pawnees of Oklahoma(Treaty of Sept. 24, 1857), and to fulfill certain obligations to theSioux Indians (Acts of Mar. 2, 1889, June 10, 1896, and June 21, 1906).Operation and maintenance, Indian irrigation systeins.-(60 Stat. 895)
Revenues derived from charges for operation and maintenance ofIndian irrigation project are used to defray in part the cost of operatingand maintaining these projects.
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Power systems, Indian irrigation projects.-(60 Stat. 895; 65 Stat. 254)Revenues collected from the sale of electric power by the Colorado
River, Flathead and San Carlos power systems are used to operate andmaintain these systems.
President's fiscal year 1979 estimate-$370,500,000Fiscal ycar 1978 appropriation-$390,000,000
Decrease-$ 10,500,000
Tribal funds are dleposited into the U.S. Treasury pursuant tovarious acts of Congress, to be made available for expenditures for theuse an(d benefit of the respective tribal groups. In addition, fundsderived from the management of tribal trust properties are availablefor tribal use in accord with approved budgets under permanent,annual definite, or annual indefinite authorizations.
Other trust funds include miscellaneous revenues derived fromagencies and schools and appropriations from the U.S. Treasury madein satisfaction of section 6(a)(1) of the Alaska Native Claims Settle-ment Act (Public Law 92-203) (85 Stat. 688) and income depositedpursuant to section 6(a)(3) and section 9 of the same act.
NAVAJO-HOPI RELOCATION COMMISSION--(PUBLIC LAW 98-581, 88STAT. 1712)
President's fiscal year 1979 estimate-$13,129,000Fiscal year 1978 appropriation-$2,455,000 2
Increase -$10,674,000 3
Section 12(a) of Public Law 93-531 established the Navajo-HopiIndian Relocation Commis.sion as an independent entity within theexecutive branch (Public Law 93-53"1 provides a legislative solutionto the land dispute in Arizona between the Navajo and Hlopi Tribeswhich began more than a century ago). Sections 13, 14, and 15 ofPublic Law 93-531 assign several functions and responsibilities to -theCommission, including preparation of a report containing the namesand members of the Navajo and Ilopi Tribes who will have to relocateunder ternis of the act. TIhe report must also contain specific plans forrelocation of these households. Presently, the Commission is engagedin the development of this report and the implementation of voluntaryrelocations.
INDIAN HEALTH SERVICE
President's fiscal year 1979 estimate-$472,852,000Fiscal year 1978 amount available-$441,935,000
Increase-$'S0,917,000
The Indian Health Service is the primary health resource for ap-proximately 700,000 Indians and Alaska Native people living on ornear Federal Indian re.ervations in Oklahoma and Alaska. It providesa comprehensive program of preventive, curative, and rehabilitative
I The request for operation of the Commission ($1 million) exceeds the current authorize.tion of 500.000. tIa•islation in to be proposed to Increase the administrative limitation.
2 Includes the fiscal %'eor 1078 supplemental appropriation of 8405.000.s This figure in based upon the request to be submitted rather than upon the current
authorization.
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services. Under provisions of Public Law 94-437, the Indian HealthCare Improvement Act, the Service may also provide limited assistancetoaapllroximately 500,000 urban Indians in order to enable them togain access'to community health resources. The IiS mission i. two-fold: First, to assure Native Americims of the availability of com pre-hensive health services; second(, to provide opportunity for 1ndianmanagement and operation of IllS health programs pursliant toauthority under Public Law 93-638, the Indian Self-Determinationanti Education Assistance Act.Indian health .faciltie&.-(Snyder Act, 25 U.S.C. 13; 68 Stat. 674);
(Public Law 86-121; Public Law 94-437 (90 Stat. 144) (title 111)).
President's fiscal year 1979 estimate-$69,955,000Fiscal year 1978 amount available-$83,947,164
Decrease- $13,992,164
The Indian health construction program provides medical andhealth facilities needed to provide health services to Indians andAlaska Natives. Under title III of Public Law 94-437, the IndianHealth Care Improvement Act, 11s has been oble to initiate a newProgram of construction and modernization of Native American
ealth facilities.In addition, the health construction program provides assistance to
Native Americans in the construction of sanitation facilities (underauthority of Public Law 86-121). It is estimated that approximately110,600 Indian homes have been providledl with water suppl)ly anlsewage disposal facilities (as of the end of fiscal year 1977). Includedin the fiscal year 1979 budget request is $50,240,000 for sanitationfacilities in an addition 7,500 housing units now being comistructed orimproved by the Department of Housing and Urban Development,the BIA, and Indian tribes, and in some 700 existing homes locatedwithin or adjacent to these housing program sites.
RECOMMENDATIONS OF THE SUBCOMMITTEE ON GENERAL OVER-SIGHT AND ALASKA LANDS
Objectives of the Alaska mineral assessment program of the U.S.Geological Survey are to evaluate Alaska's mineral endowment,identify areas where increased mineral resources might be anticipated,furnish mineral resource information for long-range national mineralspolicy planning, and supply information for decisions on the useof Alaska lands. The primary focus of the program is to obtain mineralinformation on D-2 lands pursuant to the Alaska Native ClaimsSettlement Act of 1971.
There is a continuing and definite need to update mineral dataon Federal lands in Alaska. H.R. 39, as reported by the subcommittee,mandates continued mineral assessment and evaluation on all publiclands in Alaska including lands within Conservation System units toimprove the Nation's mineral data base. Because in 1. A. :19 conserva-tion system unit boundaries have been drawn to exclude the majorityof areas of mineral potential, it is particularly important that themineral assessment and evaluation program be continued on otherpublic lands.
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LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
H.R. 39-Alaska National Interest LaidsConservation Act:
Budget authority ............. .. 76 58 79 58 57 (Cst estimates are tentative and for pro.Outlays .......................... liminaiy estimates only, and were pro-paed by the Congressional Budget Office.
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APPENDIX
Committee on Interior and Insular Affairs CongressionalBudget
(A-1)
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n -oa COnmTr ON nZM ANDlIAR DmAFlAt90080 AWMP e6 801W I Id 6O IV h- -- 4 - ,mmp, bwf% mdJ• lobbodW me'-d Aslf MICIP 8ee vndurcummoni mbodkof
AGINCIr. UJIAIU AIumln1U3011 . wsu ucu Au*ASSd blim on go o b N W N w. s u
Appe- hdm -*=n Aud -vlxom~n u. = Pie boi D Msemd lbmiow clg= oor. C'.m, a olo.S U Nq"m Nw I 1l 33n IFT f33 aim.
AMPSIPgUM. ACYITEIT _ _ . 7 mn- US7 ANN7 mm-mm- b mm
Ard Ybim% 8mOM MM m UT VT on 3 an" sm 33 m317 u53 153 asmo 33im im a .m SIEW
mAia~inminvmý
"am .Vimmc m madm3mmm3&.8.47. alokbw d DIPmINSOO
IU *. 8 .C. a457. 0 &M. Uk 45UsC 1047. P ommmLB.. 4.. S "DwilO d
hmwm,. 43 U.. 1451.5 OWL m, 48U.S.C. 1457. I. .. ........
3. 4a7. nbwmbmd Domu Sd- *. 48 U.S.C. 1451., 3 SUL SM 4
Uc.S.c, 14.. Sini b md
I1hb, U..C. "u. bia mmdUJQ "401. alowdmrsi
baut olpmO &4n1 do ssaM •isSOPIMmt
14433 --a - f ..4....17 3 --er 5.313 5,1 8.31
14-0108 .. _ ................ ______ 3.13 lA SA,41
--. -- A -
30.23 n.m
am urn
UNS S0,1S 5,85
2.06 t.380 t.AM
3j. 1L1S l1os
2.M fmui %M
.m- =AN son "M 3.3 sk5
~II
ML O3.410. a mmk". I UsO. lift a
BU 4w4 ften -M 0=
L&~ Ia. s dD.vsmaM1W. 43 U.&C. 1411. 3 b U48
US.SC. 1467. OE O I5mip md
lu*g 348. I Otam d Iqmt7t
L& .487. amim d D.pumw d1.43 U'4 .C. 3411,. 3IM n48,UV.C. u4s. Oas d lamah" " -"
L.5 427. BobemtO dDmpwuadImu. 43 U.S.C. 1481. 31.4 k 4USC. 348. Oawnd Imb twaSSOM 41r/ A-nov- id ]L imd
L5 4M. 3M dUlM OF ma
Imuww. 43 U.SC. 3483.0 =W142
USC. 1481. oNM pqusnAL& 4#7. 3mm6 d Dqs,,m d
*,,,', 4. U.S.C. 145. 0 SL.43U.A.¢. i~m. omm d Abu gwin.
USC. 4 S/mbbkmm m d dbti. 48 UJLc. 1461. 0 DUL Oft ,8IuLC .145. - au q pd ooh"
ILA. 427. NWmblimft 4d ipmemim dU3 W. 3433. 1. IM
.L-Ilf, -. I f 8d@=•_--IAm•mhm lAsd IMFl. 80 UAL.N1&II iL III0I, Xim• Km• Rodlh Ml
14.01 No meminL. 3.yw(is O
14..oWl~40-f
(i0,411114..11
14.00warn
14.4(loe.O
144.MtO
N IAN LI
SAO GAII On3
1.17 1,1 & .M5M
lAN lit l
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2AS
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U.S
T-~~~lx KqmM -MAN143 ILN mum1 31A33
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bf Dqftm w •o_-- ..........
MOUS COMMIT ON InTERIOR AND INSULAR AFFA•M-C n--m-hdS A~si1d-- O~iv bbh.L 1w UlblsmNhs. A . 3imm. mb hidii.amd~m. m, Aiu Fm Piu Umi ciba ..- "- m-
II m id p mmmi Omiqs• s am •- mMi
ASICT. DURIAO- hddmhm in 6=0Cm Aoibp-IUNCTM5. BURFUNCTION b,--w It weilm'o gt cal cm~' ~dm ow--WO NEm - l . FrT lfor . TMines for VFT 3mi .me
AMiOPRIATI0. ACTVIT N. diNO aft In?_ mm.- 0 mm"--mm =am Im0 rAit. 5M. m a. Mm. lT T T 3om Olva 1.maw1 lm" um1077 3814 1073l i eams l1373 ai aii SISF
OFFWR OF TIUI 8ICIAITT-
SAINSl• 110Uý ANSD UMOO
cOamd mOlir AiN4A o m Of do
nL& 41. se m m Of nopmwo - dd 14-mon sm smi ............................. ..... No Yel, .......... .............................. 6 .............. .......liu. 48 UAC. 1401. 9 830; 48 (10-4UAC. 1417. Omimsid Wob 6 VW
HOUSE COMMN'TrK ON INIUIOR AND INSULAR AlDO CUM --u-odsf tAumdi md Oubom Tob, y, -hMuUm%, ,m. bumI6 fihnal., hb"MOh Md ASAmM Fm Ploopi Unmi I• •Cu l- gel
F.L $m4i. O Dswdspm Fim Am 1 -4)-12 --4...... 1,o INo 0/o20/n -- ........... 10oo 500 so .oS MS MSl tM .48 U.SC. 1426, U SOL I I72. (10-1 )
GPJ %W%. -o BU Map~w 14wk4 mwlmmmo - Gu m .y (10-U)
IM U-N, aq im I _,, - - w 14-OIS 10,700 ....... 29. 070 .. ....... 70 kmI -
VIF 1577; mimh hG (10-U)
P,& .i691 SO 8 1163. as$n 2019 14-4 12 15,00 ...... ................. ,.... ............. 1-83 Om ip (10-4t
.Ium S4mm, 46 UJSLC. 3-01; 4-8W. 4 14--412 S , , as my be y . -... )- .................... 2011 I 21.161 11M&. ON&. Is6 @% X/W&I, i6 I.3L (I0*-"6419.k. Aawm A Rq damnqpud pnamr,,-- mI m 6w
AGrUCT. BUlEAD o &i d ' •4dk i *MS@" OadAaiiu isi•dmb im dwomsd Audmi-FUNCTION. 8UBFUINCIION im 1"mi,, how" a Bee c, tid•m I
Stum mpm Ia hsrl F I. sT 17 Fir IM owes 3079 mimAmSOn T.IATII, ACTVIVTT N& it" & 107 _eem- 1071/ "mm-Am. , m. Isqem MWm. FT F mo T 3916 1tr9 d 1 19r6 1b=m dbion
HOUM~ COMMN ON DfBW AND IHOULAR Arg t -••nowa. Bounrum oi usothuhow asnd esa whj-bw ui
~i Ady ~0 1~~ 3~s~m. ~.mm, mdhm3ut.• o~ V_______
99VINOK. su3FUNCNO3 im" -eob a- Sao -wl.am anim frm" T am mime F "I' on
A___O___TI_. AOTI. da 1077 mmma. Ir _.breed} ~- am- at a-
AN. fTU m, m P V egT FT VT 133 tint I*"m I*" riks
Cu mOa3m ON NATIONALPAMK AND DIKJLAR AIVAI.-
On= omneua AW&M-
GOE" ýu RD6L ninm
IW inmum ammfir doas m
ML ".NI. l ovmm Emm Cads. M 14-138 0nm -m b ha ma mmM. bes ...... -...- 11 MW MW sW 13N 1"0mmod by ML 94-3M. U8 UALC. (16-42?SNA AL w7a. :=-*ea Vi~ idsd bm Iamum1 3mmm
I, sun. b bind" mwa 4-1 "738 ,10/01/77 . Si1Gmaium= A" as m@ by P.L 5.134 (1048)46 U.C. no. a &a soak OMPudW,.. do vi* lam@&.
T1'mA Odw pind pipm h6 m .......... 20,26 203m sum 18,64 20,00 28no
TftL GENERAL PUEICIE 1UCAL S ......-.......-- -.-.. 3.8 AmW AmW MAU1 Am0 SUDS-rAN Of• l
I ~
Tov z OwT 5m or w AL A. .. ............. .. .................... ................................ . .. ............ ......... ........... 18 8 i 81 177.4"
App. Wen is twom Autber.FUNTOMN. SUUUUNCTION isin amas., a he4 Pviiem' 3.4gw cow.-" But~set4g. CAW
-I T MPII FT hr FT t9m9 sim FT hfor F r9 omwsANhOI'ZrATION. ACTIVITY 3h& 13977 _ _ _ _k- 3977 __ mw
Aw im.. USSee" Fh NAM IT FTFT13978 397 dbum. 3931979 budois.1977 1973 397 0s61ma elial 1079 Seinas sslm 3In9
SUD• MMITI3 ON NATIONALPARKS AND INSULAR AFFAIRS-
Urnmm S*Tsa Caourao sumnc.-
W3OL PUR3o MACAL AFAiiWc
0imr pmpm baooC d m Mb.--
Muinab 1 fwfwe aniftme mi0-
M 5-1391.4 US.C. 740 Sod P.L. 6e O-.0 . .... .... ........... ..... .......... .................... 80.311 75.000 80.000 80497 7500 S .0..48 U.8C. 79", A ,in. .maml (.15-1,)
ad apsem d spumism. Pu. Rms
T m IF......p.... .............................................................................................. 2 J*3 67.000 230&000 U3 67000 t .
a. mm a................. ..................................................... .................... .................... 239*J3 267.0 22w0 S2 .M• 67.000 2 m .amu.
.w Badumvy "game a *VANNm Oadp Wienm Is dowse"AGiNoCI, BUIsU A amhusm
FUNCTI, suuarox m 1 i look.", Amu
lrommmAml roper" FT hfor n Fm 137 m FT bf FT 7173 awl"APlOMUATWION. ACTIVITY . dNa. 1971 rese. 1377 a.Astl. TWIso. Pimp. Nsa.e FT 7 FT 1978 1979 barn 1976 im-am
It" 1176 1373 ..1om soomme" 1979 nora s nlolt 7im9
sUucx rrur ON WATUM ANDPOW=S *"M*'CE Cult
PW. NAm .O AmamxonoA.-CMm
sma ss w u-ýma
cob" nor baso. pinr -Oh I4Ws'uua Arm Aomo Aim..aebofas
IiP541.Depa38umI.1of .pe' A d of 1977. Tl• L SepsmJON5.h Oshmad Saver Basis.
€?mmm mahmbM• eps, ahm m•d
m misms. Wams. Arm Pmr
P* 9&1 ~Amm of Romp •1•
5a upm0 IAA Wow* dArm Prom,
ML 981. Dpatmami of Iawm
SIa np o) .........................
.. ....... I LOW l.613 2.2n14-4452411-80
14-sopS19-40t
.4").
14-3M60It*-"
9.273 2.215 7n
91.004 89,217 101.162 6.9i0 N0.217 101.12t
SI ... . . S.. .. ..... ..... o no
1M4.177 100.187 1i7.479 I1I.IT2 lIN.13 l3.,78
C,.
% t I YW O ......... ................ ... .......... ....
VAL. P ... ............
WAIM MMOUB COOMM
Wi in wl
IL 4101i Us...... LadUK 0 noodA 43 US C. 90W is6~1a 555Th 1eI Wow Sm.uma .b 1ai. 303. Aw W
omJbm 88 d do AesuOLPm •IA 55Wmmmom -ftad
-~ -?.-L @04K Wdo aws phnif. LAds
105Ua mid. 41 U.S.C. lose" 793m. m. 1id• U 3i . MOblow m, 7ai n 3•owmader
IM. 46411kWo. -Ina Wig LAMdISM. a I.d 42 US.C. 136IOMA. 73&AL 161. WIN MI Phod Agw Ift., blow= 101. nS
.Lb 016460 Usiud WoMin~Omd Lak mondw 58I U.S.C. 331W.WARM i6 l as -swom
TOvr .,, Bun au or Imemn AmpAnom ........... ................. ....................................................... .................... ... ........... ... 1.077"/.9M 1,29 .906 1.346.181 I.M4.181 1.030.374 1~ld.16 0W 1.230, 4 1.,NBS.J8
Joan, aMuA&ftATm LANM Ua PLANNIMMOOiENoU Me ALMASK
aUrNUam AIMD IBOIOAL DRVIIIh1PIWTNom
Am.. sad - 2-dspinsw-m 100SAim -&asaw
Absm Nged" CI 8 masg.mmn Am. P.L 48-0056 Not a. ................................... 00/•0/79 ..... (t) .......... 737 711 Si 5"4 ee1 64292.-03 (86 BUL. 66, 43 U.S.C. 1616). m (38-11)ammded. Sem.i. I(AONMA). lami-UsmPbmmg As " CW ,
Ab" N46" Claim Soelament As, P.L 41-4061 o . .............................................. (..... ( ) .......... ................... 645 566 431 707 588 5049-306 (656 SOL o86,4 U.S.C. 16o16), a (-&11)
smmisk. Ssei 17(AMA). lemiUmsbg A m 0krn Cas
T &Ar.Am sad r ds m. (464) ... ................. ....................................................... .................... .................... 1.382 . 6 1025 I.'m 1.479 1U4G
TOWa. COMMUNiTY AND RIOIONAL .. 1.62 Lm 1.025 1252 1.479 1.344DBVILOPM (4m0.
TorAl, JOINT P 5Dm AL.8?Av3 LAx U8 ................. 6. ....................................................... .................... .................. 1.382 1.290 1,045 I62 1.469 i.44aMw ComBoM FM A .
t0
HOUSE COMMO IZE ON INTERIOR AND INSULAR AFFAIRS-Contia.n
A3..Igsroe.immm• s r m oy ndsa' b Odin9. (dis ~ dim
FL e 744.18 C I amml bmldaA8l. •s7 Agme d 1188 a* Ui;1.liig. ?dad Wom ml amidaadsmai ispmd h
F.L 844. lbmuad Riau Fae mdA It d d e1 12 U 48U1C. 1731,30 .9MA 801, mod 403e ml WamM
fMllmmkA GOqm =PbMM pbre
Pla4.. Odmm..,w- andmlsl
quisy Am eal IM. asomamis 1
make " put vad foramlbl
of dqim " -ol mle me
polty l iehladi1
14-1103(1-"0
14-110l
14-I1m0(10-4
14-1101(1f.0
14-1100(10."
14W-110(,40
14-1100(10.0
14-1103(10.0
de. .... d-.......
~Ae~
de.. .~-
?AN00 o0f80/n
R803/0/6 Name,
Oal/so/w .- ALk .... ....
03/30/U .... .de....
al/O8I ...... ........
17.600 O/8l ...............
0t1/0/63 NaM
03/80N .... A& ........
111" m188 1MOM 11,300 31187 15.57
CA
... As .. .. .do. •.
HOUSB C1OMMIT'Ir ON INTERIOR AND INSULAR AFFAIU Cti-u'-liudft Aibief -ai Out lTell IbO. hb eMi--- A .mm, Ih.. h.t, Suudvm., mi Au mm, Padm V, Ps Fi-v un CQuonua
AammC. sun" 3lU3U ask"iml 3iM a"N Owdoe mI-I in shbmeodwJAUCm. Tir. is &SU,"U8
fulrm mFUCJm M -ni 14wao hods C'I coww P eDdge coGes" Wmpn m FTn hr fr VT in m FTe hr lT 199 ims
,AOiin. dam 1977 d_ t___ _ ew- 1977 _esub.WMWQ ,Me- mm401 0-Ask Ib. &3em, IJ.m Nrm FT FT pT 1978 19m 7 dio iim I9 M9 i.
1977 1968 1979 .inwiu emws 1979 u.auw uswo 0929
CUI-COMMGI!3 ON INDIANA&AIR ANM PD C LANOS-
c•--OmlmdkWworLns Miuni
&mW f mh mdad w-
PI1 M479w• 1t. himl Me so- A -a im• 48 192 C. list,
1781. 90 W 8748. sm 806. iimasobedv Minur i pWo&ssrnnn mod'hr ain
P-L Tb4 . OmimmWonomf mri
Conrmhlm h 0Im.. ,i d 1f90; 48UAC. 1101.840 Sism 974, Bowel"GAi , lmusnm w.miera
FP L 784 bb. g LAA of iof. -ommkM 4UJ. C.IHaw 48SUL1sr, Io,,m Minpssok Adm
m of md mobA ts~sis
14-1109 .... 49.. .)....(104"
14-110• N NNO
4410 40 .-.,. ........ ....
(10•"
09/80/68 Now.
09180/82 .o, ...........
09/soI/3 ..... do ...........
e~4d•
m~l msm.-, - - I -,a m tiU.&C. 2. 2 oeL5. Roo. m"
IM R1.130 Minimol 3frommal w sANd of3;. 48 USC. 4811.44831.4884841.4847). 3amemifmm•bagm4Im a d v*.m ROn
IM ft4Uk Wi ad seemme Rivwm La ofIM3 am smiAmi 16 U.S.C. 3171.ImmumMmgm.~ Aqm ml
.L "8.4I1. Lmid w Wingir Cmv amiFnd LAd9o 1335. inmmu.o 16 U.SC.40". -adimh aml id hamefo mum admim W&
ML 30448. Neid" 7nd8 Symm Ad1ow.; is U.&C. 1941-194, Rmrem.
Umm 3Ama~h mE 6
Im $46 mt o i r, isrIL .e435 Kgi &ap Lad ta3. 16U.S.C. 40%. itmmin NmgmLaqiim ml mdmmiglaZ qi
.L 83477. Widamm As d 1964; 18U.&C. 11814 .ni.. 7 3.m.. 3.
JF.OL 9 P h- 'Lmd - dq adM---m Adt d tWK W Bin, ISN
smIft 344% modLad WN oUmsC 783
d p6W 10 i , m si
PIIL umN. ft 41mh Lad an rSd~U -A-C a 44 3.ar. to. ls .
a~deqed sohMbem. mm
I~~nlnll8 ~o Olld l0 IefJ •.... lw Guw 'i A as al ISO a
w18 ma unbmdso. M
Fb law 4 Itu Lud lms LPluwd 1A 3ofISM ULD.,
tul. ~ 4 tow 1343. Isi
Afmd iwu3~M -
F-. tam Laftd 33,43 MYs.ad.bsi. mm.. --. 1711.
Sason amd mob~ d h
L& 3M4.33ow , AskI alhiON
0a~ - - Lad
ga3my i alma. 43 U.AC. 5.~ isy. C~himdmspm
1 ..1133 ).a ...... d-....'I 330130U
14-1133 owsas .. .....s
(104w
14--1 tO
14-1103
(10-00
14-1133
14..1133
(w0-0o
30/3083 Nam
k USAW
3,730
8^2
4,730 8030
7.*m k,1m *A"S
7,35 81178 $AM4
3M. 4,170 SON0
6"31 7,7'7 %is
110Or
a - I *%= o0/su
HOUB3 COMoMUrzu ON IN'RMIOR AND INSULAR AFFlAI--Ce-lJtdkl.IotAmhOt mi0u:* Y•Iinb, by 5~moflm, hpmuv 3m, Vudm h3unmt.. mi Am.um V., Pv Umdw Ci.•m '._. C ..
AS==. iLMUU dp - - 4) h i Oubsd ..•. sfdoolu s is d omem"
HAMisib &ONOW" Auw-wummn ismin Bowsi 988 cow•tah
Annm upwb FT hr lT IV* smm hT pf ownmAkm. 1)77. _____ me, ale _O_"_ as. 1977 _s...
,lbb, sMoob lhTpm Nm FT FT 18m 1979 kAm 1nm 1979 b1it" me sotmme so=" lin almme olmas Ir
womlUKNMMqI ONl DCLAVAiM AND MINC LAXNM--
i1um 3 mm r L
43 U.S.C. 3LNl immirmsy.
1.1k U4U, Ahia Lad ,hdli.. a•mmli 4 U.S.C. ab S. at, Oshmni
d w 3m
LIL ".803 1" NUIW k S3sd~Ld17;48 U.S.C.190, 1011.
pol W& 6 =.s ~=J". - O. f • ob 1•e soft
lmo1 Ad 1371; 43 USC. 11t1.Ckbod &rmy. bw" of Ahd Noubod•br snmp to A-d- Naiee
&Podmd"l~bdlo •
Am oft 19ri, 48 UJA.C. 1711,MI7. 1111. 0 Sw ULN, SMm. a 01,
33,313am,01. Fhm mod Dam- IP~I , Ismsr
00
14-1100 Not Nat
(10-fI011.000
14-110• .... . . .(1O0Ot)j
14-1100(I04"
09/20/ . ........... ......
09/$/82 Nome
00/8/U .... ............
0/30/3 ._.41. ........ 9.423
.O063 11.301
C.m4 %.0O
9AW I.14 1ll4
3.800 9,4133 10.887
it
-,4)..... -M•).- 9i
14-1106(10-6
14-1106(10-6
ML. 97,61, idi Lid PAMj iM~mau8 - Ag of 19;74.48 UJJ.(. 1711.
1721, 170, 560 . 272 sm. sm 201.6. S.ol sm So1, hMbg md DaisEouma.. Plumb, hr wiipi...mmgu id amim., 2i. IeDas
HOUSE COM~Mrz ON uImTIIOa AND INSULAR AFFAIDS.-CmlI...iUmig As*8~ ml Ofta Y06i, ToId% eei. -k mq, hinue, lUuMUs. F W ml Amumt eerw Prepsm, Ue COmMIUM J. C--_
AGUCT. 3UU3 Aumbmde bioo 6mi6 1' -im h lmbMdb Owiep Wdm i dismmem
Yvon=3'id. ?mldaO la a- huIP 'm Bd#* Os-, me .imas 1qu VT hr VT Sion FT hr VT 1957 VA•"AO T__1_ in. 3.72 P&_1__________n _ sam-e
(a"M- ~WMA loThis, ana. luuim, saw FT IFT FT 1578 19 do". 1918 1979 dels.
1917 Ms7 im sedo admis IM7 UawmeS NOW&a 35M
* u~comnu~ON oMUwAAWMM M M WC LANDS-
COommnlMOMa OF Las MA.AOinuWF-
CiCa mlt•. hal miu~
pL 15-405, caimaue4 d Tihaw asC-N LImb in Ouqaa. Ass 41 W7; 48U.S.C. 33t1.06 W4, MWmmml ind sumoniwk to signq dOACt. VMS lib.
IPL. 67415. TkAr P Ad 1On2.If UASC. 506,42 BULn 687N.sadmbw bum f^ Wmss, ml &imeasu
App*- 0911210 is sdowmda Author.IUMam ON, S N. Required Promiduia, Budge cam- Psmmids'a Bedge CAW
Mout wrmalmbi reports VT CAV 17 im ass FT for nT 1971 win"sIs ______A_____ ___•_ _. dwm 1977 -_ recm- 1977 - uSC..A.. ThiS.am ftqmo Noma VT FT lT 1978 1979 dodom leis 1979 diam
31o 218 106 301 318 3in11-1010 I t ..... . .... AN) .......... .................. .4o5-78)
wn . be" bqdnd On call.
one"l~l•1 numodo ImeI IAN n=o a mmmcomf" $slowJ
AVVAIM AND UUC LAND@-ogmd r ,
Aqmm# ak IVNO" *Pink o?
=aO
Vdidea hes Iý - '-AMs 15.4M besh dme a~ 1.q be - --(a)-...~ we NB N aS NBIM.ON 75.555 747. U44. U •ISJSIi -fPIL 75454. h I I~ lm oCvPam aI ad3 mm d IawDamp
AFFAIRS AND FUUJC LANDIMP, Nova coum OKN S -- A OAU14 ?AUX& 6I7 OU 6061S4 $AMUI 1~1flffhUR AND D4BLAAVFAM&
"* 47.3muu VE AT Ono1?~nh ON JM. ML 564K. gogb Al* IL 0640k. on"
No dme, 6=O0 Sol 69 iph mmOi==au!Ih
0
SUp ao 50 pmeem of uand Samt8dmapm UA AMh 1im ldo Few im 1.703 =m Can& as ho dob dmann"&iAb n : my be h 3 bams si m e nmd m imn- b~duib - a-,b. mmaw,* 1.yew =aa. -Ma=SLS no" rea ow.M Sam itse
aolina osow, • km m .Sm dk be Ip, i" as dass •bd byC: • dldmet eaed &i . dei sefa owd to 60 1p -pm d I*lip ani t pqb•
"5 pmem iaIs imma d ia "h wea. buan edksdm midw W ia1 apedm dogp tint U~mmd 1m4Pe -m~ to P.L N~MI we riim I* $2t.175AWeNMI swl ~m maim "W i onu @my aYr. li somw mlpt an m"PdiNM am so A "d toqi 103du Le.C..m. •Amt m auwm v:: --- lo~l••a_ coveld bow dw hio.
* Aeb.IlMm IM e id w 1 p3.- Tid mlkuusiwma agul. a yewrS kii
. M7 thavm•ad hraeded wml uhqa,As hdfb m adi3l km bar ha badu dOd7 IM eav m
so haba•
a bys0 dhmamas. 5bm5mi imem Al. hridommasoi
Salqs t do e mmm adm mol Cup m A 1. ISISA ftd eIdikm imelSbu yeew.
*m
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Bew sm mme a i$750.M p; bwsO U Cmai1* Lump m vkwbma alto yaw
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ADDENDUMThe following entries were unavailable when the above table was set to type. Adjutmtents for these entries have
been made in the appropriate totals above.NlOMq C3OMMTIq'M ON UNTIIt=O AND iGlAWR~d AIFFAMN
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4
95th Congrs 1.2d Session COXXITTEZ PRINT
VIEWS AND ESTIMATES OF THE COMMITTEE ONINTERNATIONAL RELATIONS ON THE
BUDGET FOR FISCAL YEAR 1979
REPORT
SUBMITTED TO TIlE
HOUSE COMMITTEE ON THE BUDGETPURSUANT TO SECTION 301(c) OF THECONGRESSIONAL BUDGET ACT OF 1974
MARCH 9, 1978
Printed for the use of the Committee on International Relations
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 19782i-0m 0
(295)
296
COMMITTEE ON INTERNATIONAL RELATIONSCLEMENT J. ZABLOCKI, Wisconsin, Cairma.
L. H. FOUNTAIN, North CarolinaDANTE B. FASCELL, FloridaCHARLES C. DIGGS, in., MichiganROBERT N. C. NIX, PennsylvaniaDONALD M. FRASER, MinnesotaBENJAMIN S. ROSENTHAL, New YorkLEE H. HAMILTON, IndianaLESTER L. WOLFF, New YorkJONATHAN B. BINGHAM, New YorkGUS YATRON, PennsylvaniaMICHAEL HARRINGTON, MassachusettsLEO J. RYAN, CalifornbiCARDISS COLLINS, IllinoisSTEPHEN 3. SOLARZ, New YorkHELEN S. MEYNER, Now JerseyDON BONKER, WashingtonGERRY E. STUDDS, MassachusettsANDY IRELAND, FloridaDONALD J. PEASE, OhioANTHONY C. BEILENSON, CaliforniaWYCHE FOWLER, JR., GeorgiaZ (KIKA) DE LA GARZA, TexaGEORGE E. DANIELSON, CaliforniaJOHN J. CAVANAUGH, Nebraska
WILLIAM S. IROOMFIELD, MichiganEDWARD 3. DERWINSKI, llinisPAUL FINDLEY, IllinoisJOHN H. BUCHANAN, JR., AlabamaJ. HERBERT BURKE, FloridaCHARLES W. WHALEN, 3i., OhioLARRY WINN, JR., KansasBENJAMIN A. GILMAN, New YorkTENNYSON GUYER, OhioROBERT I. LAGOMARSINO, CaliforniaWILLIAM F. GOODLING, PennsylvaniaSHIRLEY N. PETTIS, California
JoUN J. BRADY, JI., ChE0JoSkjARoazR? K. BOYRs, StaI Cbiudans
EMILY CLURz Howia, Research AuimartROXANNS P&SUGINO, Staff Assigant
Juuz A. ILsLzY., StIAff sistan(13)
297
LETTER OF SUBMITTAL
CONGRESS OF THE UNITED STATES,HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERNATIONAL RELATIONS,
Hon. ROBERT N. GIAIMO, Washington, D.C., March 9, 1978.
Chairman, Committee on the Budget, U.S. House of Repre8entative8,Washington,
D.C.
DEAR MR. CHAIRMAN: By direction of the Committee on Inter-national Relations, I submit herewith the views and estimates reportrequired by section 301(c) of the Congressional Budget Act of 1974 inconnection with the First Concurrent Resolution on the Budget,Fiscal Year 1979.
The report was considered by the committee in open session onFebruary 28 and March 1, 1978, and approved by voice vote.
In accordance with your instructions, the items in the President'sfiscal year 1979 budget requests which come under the jurisdiction ofthe committee, have been subdivided as follows:
(1) Requests for existing programs which require authorizinglegislation prior to the enactment of appropriations for fiscal year1979;
(2) Requests for new and expanded programs which requireauthorizing legislation;
(3) Requests for savings through changes in existing laws whichmandate spending in fiscal year 1979 without further action byCongress; other legislative savings proposals;
(4) Legislative initiatives of the Congress; and(5) Requests for existing programs which do not require au-
thorizing legislation.The committee notes that it has either legislative or special over-
sight jurisdiction over all of the budget requests in the InternationalAffairs function (150) except the Foreign Claims and SettlementCommission and the International Trade Ccmmission. The commit-tee recommends that the budget authority and the outlay levelsrequested by the President for these two agencies be included in theFirst Concurrent Resolution.
Sincerely yours, CLEMENT J. ZABLOCKI,
Chaimnarn(M)
298CONTENTS
FagLETTER OF SUBMITTAL --------------------------------------------- III
INTRODUCTION ----------------------------------------------------- 1PRESIDENTS BUDGET REQUEST FOR EXISTING PROGRAMS WHICH REQUIRE
AUTHORIZING LEGISLATION PRIOR TO ENACTMENT OF APPROPRIATIONSFOR FISCAL YEAR 1979: -------------------------------------- 3
Intermational Security Assistance:Grant Military Assistance ------------------------------- 5International Military Education and Training ----------------- 5Foreign Military Sales Credits.-6Security Supporting Assistance ------------------------------- 6President's Foreign Assistance Contingency Fund -------------- 7International Narcotics Control Assistance- ______ 7
International Development Assistance:Functional Development Assistance Program ------------------ 8American Schools and Hospitals Abroad --------------------- 10International Organizations and Programs ------------------- 11International Disaster Assistance-------------------------- 12Operating Expenses of the Agency for International Development. 12
Department of State, International Communications Agency, andBoard for International Broadcasting:
Administration of Foreign Affairs-.....- 13International Organizations and Conferences ------------------ 14Migration and Refugee Assistance ------------------------- 15Foreign Buildings Operations ..............- 16International Commissions-------....................-16International Communications Agency: Salaries and Expenses_. 17International Communications Agency: Center for Cultural and
Technical Interchanges Between East and West- 17International Communications Agency: Aquisition and Con-
struction of Radio Facilities ---------------------------- 18Board for International Broadcasting ----------------------- 18
Other Programs:Arms Control and Disarmament Agency -------------------- 19Peace Corps ----------------------------------------------- 20Energy --------------------------------------------------- 21Atomic Energy Defense Activities..-_- 22Nuclear Regulatory Commission-....- 23Overseas Private Investment Corporation------------------- 24Export-Import Bank ---------------------------------- 24
PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMSWHICH WOULD REQUIRE AUTHORIZING LEGISLATION FOR FISCAL YEAR1979 ----------------------------------------------- 25
PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES INEXISTING LAWS WHICH MANDATE SPENDING IN FISCAL YEAR 1979WITHOUT FURTHER ACTION BY CONGRESS; OTHER LEGISLATIVE SAV-INGS PROPOSALS----27
LEGISLATIVE INITIATIVES TO EXTEND PROGRAMS WHICH REQUIRE AU-THORIZINo LEGISLATION FOR FISCAL YEAR 1979 -------------------- 29
Africa Foundation --------------------------------------- 31Institute for Human Rights and Freedom ----------------------- 32Commission on Peace Academy and Center for Conflict Resolution.- 32
(V)
V1299
PRESIDENT'S BUDGET REQUESTS TO EXTEND PROGRAMS WHICH Do NOT PageREQUIRE AUTHORIZING LEGISLATION FOR FISCAL YEAR 1979 ---------- 33
International Security Assistance:Advances, Foreign Military Sales-..........-_-35Advances, Foreign Military Sales; Proprietary Receipts. 35Foreign Military Sales Credits: Proprietary Loan Receipts- 36Military Assistance, South Vietnamese Forces ----------------- 36Liquidation of Foreign Military Sales Fund ------------------- 37
International Development Assistance:Sahel Development Program--------...............-38Housing and Other Credit Guaranty Programs ---------------- 39Inter-American Foundation -------------------------------- 40Darien Gap Highway- ----------------------------------- 40Payment to Foreign Service Retirement Fund (AID Payments) 41International Development Assistance-Consolidated Working
Disaster Relief Assistance --------------------------------- 43Assistance to Portugal and Portuguese Colonies ---------------- 43Prototype Desalting Plant --------------------------------- 44Social Progress Trust Fund--------............-44Development Loan Fund ---------------------------------- 45International Fund for Agricultural Development -------------- 45
]Department of State and International Communications Agency:Payment to the Republic of Panama ------------------------- 46Department of State Working Capital Fund_ 46Department of State Miscellaneous Trust Fund --------------- 47Gifts Bequests, National Commission on Education, Scientific,
and Cultural Cooperation----------................-47International Center, District of Columbia-..........-48Department of State: Payment to Foreign Service Retirement
Fund ----------------------------------------------- 48Foreign Service Retirement and Disability Fund ------- ------- 49Eighth Pan American Games-------------------------------49State Department Proprietary Receipts and Interfund Transfers:
U.S. Emergency Migration and Refugee Assistance Fund -------- 52International Communications Agency Trust Fund Net.. 53International Communications Agency: Miscellaneous Expired
Special Foreign Currency Program ------------------------- 53Export Promotion and Control:
Domestic and International Business Administration ----------- 54Miscellaneous Trust Fund --------------------------------- 55
Food for Peace Program (Public Law 480)-56International Financial Institutions..-- 57Other Programs, Trust Funds, and Offsetting Receipts:
International Trade Commission...-58Japan-United States Friendship Trust Fund ------------------ 58Foreign Claims Settlement Commission ---------------------- 59U.S. Customs Service-------------------------------------59Peace Corps: Miscellaneous Trust Fund (Net) ................- 60Department of Transportation: Miscellaneous Trust Fund (Net).- 60Miscellaneous Receipts: International Affairs ------------------ 61
TABLE OF ESTIMATES FOR FISCAL YEAR 1979.-65
24-066 0 - 78 * 20
300
INTRODUCTION
The Committee on International Relations recommends that theFirst Concurrent Resolution on the Budget for Fiscal Year 1979allow for net budget authority and outlays amounts for the inter-national affairs function (150) as follows:
1 The committee notes that the President's fiscal year 1979 budget request hastransferred military assistance accounts from the national defense function (050)to the international affairs function (150). While this action increases the budgetauthority and outlay amounts under the international affairs function, the trans-fer does not represent an increase in the overall foreign assistance budget request.In fact, the President's fiscal year 1979 request for military assistance is actually$98.8 million less than the fiscal year 1978 appropriation.
2 The committee has either legislative or special oversight jurisdiction over allof the budget -requests in the International Affairs function (150) except theForeign Claims and Settlement Commission and the International TradeCommission.
The above total for international affairs represents an increasein the President's request for budget authority and outlays of $539.1million and $466.1 million respectively. The bulk of this recommendedincrease, $348 million in budget authority and outlays, is for the Food-for-Peace program (Public Law 480). The committee estimate reflectsboth the recent history of the program which has consistently involvedupward reestimates and testimony received by the committee fromthe Department of Agriculture and the Agency for International De-velopment. The justification for the remainder of the recommendedincrease is based on expected committee authorization actions andcongressional intent with respect to foreign economic and financialassistance, the conduct of foreign affairs, and foreign information andexchange activities.
In addition to the international affairs function, the committee alsohas jurisdiction over certain programs and activities which fall undervarious other budget functions. The individual budget accountsinvolved in these functions are discussed in the following pages.
(1)
PRESIDENT'S BUDGET REQUEST FOR EXISTING PROGRAMS WHICHREQUIRE AUTHORIZING LEGISLATION PRIOR TO ENACTMENT
THE PtISIDEwT*S REQUEST WOO FISCAL YEAR 1979 WOULD PROVIDE GRANT MILITARY ASSISTANCE To FouR .OsTRIES COMPARED WITH THE IElNT -COUNTRI&S AUTHORIZED TO RECEIVE SUCH ASSISTANCE 10 FISCAL YEAR W10T. THE REQUEST IS CONSISTENT WITH THE CONGRESSIONAL 1MANATE TO Pft-ASE OUT GRANT MILITARY ASSISTANCE EXCEPT IN INOIVIDUAL CASES EWRE SUCH ASSISTANCE IS RELATED TO THE SECURITY INTERESTS OF THE (el?-ED STATES AND SPEC¢IFICALLY APPROVED YV CONGBKUS. THE PESMIOMT MAS PROIOPES A RECESSION OF $&.a MILLION PIR FT t18 910 ? AUNWRI-TV FOR THIS PIOGllM.
IMT9I0ASIONAL WELITMR IUCA1IIf *40 TRAINING (1-10-0S1-0-1-l53
THE FISCAL YEAR 197?-77 AUTHORIZATION FOR INTERNATIONAL SECURITY ASSISTANCE CREATED A SEPARATE AUTHORITY FOR THE GRANT MILITARY-EDUCATION AND TRAINING PROGRAM. THE PROGRAM WAS SEPARATED FROG THE AUTHORIZATION FOR GRANT IATIRIAL AI0 ON THI GROUNDS THAT THE T-
RAINING PROGRAM IS IMPORTANT TO U.S. INTERESTS AND SW)ULO K CONTINAO WHILE THE GRANT WILTltARV ASSISTANCE PROGRAM GENERALLY IS WI-NG PHASED OUT. FOR FISCAL YEAR 1076. THM SAICUTIVE SMANCH WAS PomRdo 4 45 (iuRTRISS To GRA1v N NmT IKLIIARV MINING, -m 9PR1-ATl FUNING FO T?" CMNAL ON SCHOOLS.
S
I
FP00616 MILITARY SALES CREDITS (1-l603---15)
I IN THOUSANDS OF DOLLARS)
BUDGET AUTHORITY OUTLAYS
PRESIDNT*S COMMITTEE COITTEEBUDOGT FT 971 I9t" RECOMMENDATION FY 1979 RECOENOATION
THE PRESIDENTS BUKOGET REQUEST FOR FISCAL YEAR 1979 FOS FIRS CREDITS WOULD SUPPORT A TOTAL SALES PROGRAM OF $2.067.5 MILLION AS C-OMPAREo TO A PROGRAM LEVEL OF S2.IS MILLION FOR FISCAL YEAR 1976. THE 976 PROGRAM LEVEL INCLuDES $10 MILLION FOR LEBANON ACTHORI-ZATION OF WHICH STILL REQUIRES SUPPLEMENTAL LEGISLATION BY CONGRESS TO PROVI0E AN ADDITIONAL 55 MILLION IN BUDGET AUTHORITY FOR PlS-
CREDITS. AS IN PRIOR VYARS. S6M MILLION OF TH9 0U1OET AUTHORITY BEQUEST 1S TO FINANCE SAno S 10 toIaEL LEAVwlN $182.b 1ULLION -TO WTHIR COUNTRIES.
OVER 9S PERCENT OF THE PRESIOENT S BUDGET REQUlST FOR SECURITY SUPPORTING ASSISTANCE. OR S.779.700.M00. IS RELATED TO U.S. PEA-CE INITIATIVES IN THE MIDDLE EAST. THE AMOUNTS SLATED FOR MIDDLE LAST COUNTRIES ARE: ISRAEL. S176 MILLION. EGYPT. 5750 MILLION. JO-ROAN. 693 MILLION. SYRIA. S90 MILLION. THE MAQARIN DAM AND JORO&Ai VALLEY IRRIGATION SYSTEM. SO MILLION. AND THE SINAI SuPPORT MISS-ION. 511.7 MILLION. IN ADOITICN. SS MILLION IS REQUESTED FOR THE NIDOLE EAST SPECIAL RlEultRMENTS FUND TO iEET UNEXPECTtD CEEOS. S3-
MILLION FOR ACTIVITIES OF PRIVATE VOLUNTARY AGENCIES IN THE MIDDLE EAST. ANO S1 MILLION TO FINANCE STUDIES AND OTHER ACTIVITIES RE-LATED TO THE DEVELOPMENT AND SUPPORT OF SECURITY SUPPORTING ASSISTANCE PnOIECTS. THE BALANCE Of THE SUPPORTING ASSISTANCE REQUEST -IS PROGRAMED FOR COUNTRIES IN SOUTHERN AFRICA. FOR SPAIN AND FOR UN FORCES IN CYPRUS. THE CO•MITTEE RECOMMENOS AN ADDITIONAL 920 US*LLION IN BUDGET AUTHORITY AND OUTLAYS FOR PROGRAMS IN SOUTHERN AFRICA AS FOLLOWS ST.S MILLION - ZMBIA. T7.5 MILLION -REMIONAL. 52.5 MILLION - BOTSMANA. SI. MILLION - LESOTHO. $1.6 - SMAZILAND.
pBISEINT'S PFOSION ASSISTANCE COITIMGENCY UN (l1-tlO7-t-t-hllm
FUNCTION AUTNORIZATION 11T370 u TiST (OIpfastuCt) p so?& REQUEST (DIFPERENCE)IN 11,04)010,040 Go"* i•I4 4,61"l 4,.44 4,844
THE PRISIDINT'S EWuEST IS CONSISTENT WITH LAST VIAR'S LEGISLATION WHICH AUTRHOIZIE SS BILLION FOR A CONTINGENCY FUND. SUCN FU.NO REQUIRES ANNUAL AUTHORIZATION. THIS AMOUNT IS TO I UMO AT IN& Pa151315S ISCIAT IOll INm wMLuxCT oIva I ASaSIStwca a -
SECURITY ASSISTANCER NUES WORLOI19E.
IIITUERATIONAL NASCOTI 10 CONTROL ASSISTANCE (11-1022--1-1-11
FUNCTION AUTHORIZATION FV 1973 REQUtSt ISI1FRIINCE) iF 1373 REQUEST (ODIFFIINCA)
37o.. 1stt0 4.70.0 40.000 32.81S 3i.i1 %3.747
THE PRESIDENT'S BUDGET AUTHORITY REQUEST OF 40 MILLION PON FISCAL VIEA 1S?$ IS St MILLION ABOVE TE AMOUNT REQUESTED IN FT I?-SAND $2.9 MILLION ABOVE THE ACTUAL APPROPRIATION F04 FISCAL vEAX 1373. TE RECOMMENDATION REFLECTS TH1 COmMITTIK'S CONTINUING CON-
CCRN ABOUT THE DOUG ABUSE PROBLEM IN T71 UNITED STATES AkO SUPPORT FOR T1i1 INTERNATIONAL EFFORT TO CONTROL T14 ILLEGAL PRODUCTION 0-f £1D TRAFFICKING IN NARCOTICS £N0 DANGEROUS ORUGS. TNH LANGEST INCAEAS1 IN PLANNED PROGRAM EXPENDITURES WILL OCCUR IN HIE FUNCTION-AL ACTIvITV OF CROP REPLACEMENT. IT IS PROPOSED THAT Tr. CROP REPLACEMENT RPMGAN, OR INCREASE PROM 53 MILLION TO $4.1 MILLION. I-HE LARGEST INCREASE IN COUNTRY PROGRAMS WILL 00 TO BURMA. INCREASING FROM 34.O MILLION IN FISCAL VIYA 1373 TO SO BILLION PROPOSED F-OR FISCAL YEAR 1379. TIN PAKISTAN VIOGRIAM WILL ALSI IIWISAGA ORUMATICALLY tool SO.6O In FISCAL VIlU 13Th TO $I MILLUIM P "f305FOR FISCAL YEAR 197t.
CA%3
INTERNATIONAL DEVELOPMENT ASSISTANCE
PwUNTIMAL DEvLOPULNT aSSISTANCI P1tOG/t R tI-12-O-1-lSI)
The functional development assistance program proposed for fiscal 1979 includes the following items:
Food and Nutrition ($673 million): The largest single increase proposed in the function development 00assistance account is for food and nutrition, for which the Administration's fiscal 1979 request if $673million, compared with $580 million authorized and $515 million appropriated in fiscal 1978. Food andnutrition is the account under which the U.S. bilateral assistance is extended to poor countries, with emphasison self-help, for raising their agricultural production, for rural development, and for improvingnutrition. The account includes financing of the Title XII program for participation by U.S. agriculturaluniversities in this effort. The Committee and the Congress had repeatedly stressed the importance ofthis form of assistance as a prime element in the campaign against hunger and malnutrition abroad.
Population Planning ($205 million): Continued rapid population growth undercuts all other effortsto improve the quality of life in developing countries. There are indications that birth rates have begunto fall in some countries and in an effort to support this trend, the Administraticn has proposed to increasepopulation assistance funds from the FY 1978 level of $162 million to $205 million in fiscal year 1979.These funds are authorized to support population planning programs which include education in responsibleparenthood and encouragement of smaller families, as well as delivery of family planning services and relatedresearch and demographic studies. The importance of population Impact is also required to be consideredin the design of AID projects in other functional accounts.
Health ($149 million): The availability of adequate preventative and curative health care is an essentialcomponent of development, relating to the basic quality of lift. efforts to limit population growth, andattempts to improve Individual productivity. AID health programs provide for low-cost health deliverysystems, and support preventive programs such as malaria control and provision of clean water. TheAdministration request for a $149 million program in fiscal year 1979, up for $126 million in fiscal 1978,appears to be well justified.
Education ($109 million): Although the number of children in school in most developing countries hasrisen substantially in the last 20 years, countries have not been able to keep pace with population increases,and the numbers of children not in school have also risen, with education available to a diminishing percentof the population. Funds In the education account will help provide some basic education to millions ofchildren for whom it would otherwise be unavailable, and will also assist developing countries to maketheir education systems, both formal and nonformal, more relevant to the needs of their people. In termsof program level, the Administration proposal of $109 million for fiscal 1979 appears to be a modest, ,but
warranted, increase above the $98 million for fiscal year 1978.
Selected Development Activities ($116 million): This account addresses a variety of assistance activitiesof benefit to poor countries which do not fit into the above functional categories, but are essential todevelopment. The activities include technical assistance, small-scale energy programs, economic research,environment, urban development, appropriate technology, post-disster reconstruction, support for U.S.private and voluntary organizations and cooperatives, and reimbursable development programs. TheAdministration's request of $126 million for these activities in fiscal 1979, up from the $105 millionauthorized In fiscal 1978, should be supported.
In view of the above considerations, the Comlttee recommends a total of $1,262 million for budgetauthority for functional development assistance programs in fiscal 1979 and $889 million in outlays forthis purpose.
ARICAi SCHO ILS ANI HOSPITALS AUROAD I1i-10i2-0-11si)
THIS PROGRAM PROVIDES GRANTS TO AMERICAN SPONSORED PRIVATE INSTITUTIONS IN FOREIGN COUNTRIES TO HELP SEHONSTRATE AMERICAN IDAS-PRACTICES. ANO NIECN° PROGRESS IN S9UCATION ANDO IOICINE. THE FULL AMOUNT AUTHORIZE IN EACH OF THE LAST 3 FISCAL YEARS. s$s MIL-
LION. CONTINUES TO OE NHEWED TO CARRY OUT THIS MORTHWHILE PROGRAM. TME PRESIDENT'S REQUEST REPRE•ENTS A SHARP REDUCTION IN THE LEV-IL OF FUNDING PROVIDED FOR THIS PROGRAM OVER THE PAST SEVERAL YEARS. THE CONGRESS IN THE PAST NAS PROVIDED SUBSTANTIALLY MORE FUNDS-
THAN THE EIECUTIVIK ilUJTIE FOR THIS PIRAM. AIS INS C ITEIE RLIiLVES, THAT WISES UI&1" RPPOiT RUM MR INCRCAS AGAIN I PIS-CAL YEAR 1Oi.
oi
lwirmvso"l UlAMIZAZTIOiS "a iMDOGEIES 41 )1* 00-i-Sl)A
(INi T4OUSAMU OP DOLLARS)
seAU T HtORIlTY OUTLAYS
10ii1,I01"Ts CO €MMITTEE[ COMMIIITTEEBUDGET FT 1979 197 RECOMMiENOATION PV le RECOMMENDATION
FUNCTION AUTHORIZATION PV 071, s0u"ST taiFplekcI) Pv 107i *&"uIS1 (DIFF141MCI)
0.300) (aon*)
COMMENT
Twi FUNDS IN THIS ACCOUNT Alf FOR VOLUNTARY CONhISUTIOkS BY THE UNITED STATES TO VARIOUS INTER•ATIONAL ORGANIZATIONS ANO P1iG065LAs. ?I" commuiTI ASCoMsTIOAlO MOULD ICRMA ITS PSSSZOSS.NT'S PV US SMe4 9 PeO UMTOG AUlTHOlTY 1V S61109.0eO. 4811 ATTAICHTA6lS. I
VOLUNTARY CONTRIBUTIONS TO INTERNATIONAL ORGANIZATIONS AND PROGRAMS
(In Thousands of Dollars)
Budget authorityPresident's Committee
FY 79 Request Recommendation Difference
United Nations Programs'UN Development Program (UNDP)---------------------------UN Capital Development Fund ......................................FAO Post Harvest Losses Fund..FAO World Food Program (FAOjWFP) .................. .. ..UN Children's Fund (UNICEF). -.----UN International Year of the Child (IYC). .UN Relief and Works Agency for Palestine Refugees (UNRWA) ..-... ..UN Decade for Women. .. .... ..UN Disaster Relief Organization (UNDRO). ...........................World Meteorological Organization (WMO)International Atomic Energy A ency (IAEA)... .......................UN nwviror.mental Program (UNEP) ---------. ...... . . .UNESCO Wcrld Heritage Trust Fund .UN Educational and Training Program for Southern Africa (UNETPSA)." . ... .UN Institute for Namibia....UN Institute for Training and Research (UNITAR) . .. ...-..UN University (UNU) ................. ........UN Trust Fund for Southern Africa .........
Subtotal .. ....Organization of American States (OAS).. .Central Treaty Organization (CENTO). .. ..
FUNCTION AUTHORIZATION FT 1ov nRuEST (DIFFERENCE) FT 1976 REQUEST (DIFFPPRNC|)
Siooo ".60 W.OOD ts.ooo MUX 44.612 44.6.1(0) (B)
COMMENT
THIS ACCOUNT PROVIDES FuNDS FOR THE UNITED STATES RESPONSE TO NATURAL AN4 MAN-MADE DISASTERS AROUND THE WORLD. CONGRESS HAS AU-THORIZID S1S MILLION FOR THIS PURPOSE EVERY YEA* SINCE 15S7. AND THE ADMINISTRATION IS RECOMMENOING S1S MILLION GAIN FOR FISCAL 19-79. THIS RELATIVELY SMALL AMOUNT IS BASED ON PAST EAPERIENCE IN PROVIDING FUNDING FOR ROUTINEN" DISASTERS. THE COMMITTEE RECOmiN-OS AUTMOSIZING THE FULL $2S MILLION AGAIN THIS TEAR. OUT WISNES TO REAFFIRM ITS CONTINUING POLICY IN BEHALF OF SEPARATE. SPECIAL AU-THORIZATIONS IN LARGER DISASTER SITUATIONS WHERE NECESSARY. SUCH SITUATIONS NAVE OCCURRED 3m RECENT TIMES IN THE SAHEL, CYPRUS, QU-ATEDALA, ITALY, LIBANON AND ROMANIA. FT tTS7 TOTAL OF 666 MILLION INCLUDE $29 BILLION IB A SPM|IAL AUTNONRIATEON FOR "24STAXCi w
ITALY EARTYQUA4E VICTIMS.
OPERATING EXPENSES OF Tod AGENCY FOR INTERNATIONAL OEVELOECNT (IS-tOO--*-I5l)
CEMENTTHIS ACCOUNT COVERS THE COST OF ALL OPERATING EXPENSES OF THE AGENCY FOR INTERNATIONAL DEVILOPIENT. OPERATING COSTS INCLUDE ND-
T ONLY THE TRADITIONAL ADMINISTRATIVEE EAPENSES', BUT ALSO THE SUBSTANTIAL COST OF SUPPORT AND MANAGEMENT OF PROGRAM AND PROJECTS (-SUCH AS TECHNICAL PLANNING AND MANAGEMENT OF SPECIFIC PROJECTS. CONTRACTING. PROCUREM0NT OF CMMODITIES. ENGINEERING SERVICES, AND -HANDLING OF TRAINEES FROM ASBOAD). INCREASES IN OPERATING EXPENSES OVER FISCAL YEAR 1970 ARE OUE TO DEICNTRALI ZATION EFFORTS INCL-DING MOVEMENT OF PERSONNEL FROM WASHINGTON TO THd FIELD, COSTS ATTRIB,:TABLE TO ERPANGING MISSIONS IN AFRICA ANDmYL[ IEIOOLE EAST. I-PLEMINTINO MANAGERIAL AND SYSTEMS IMPROVEMENTS. AND INCREASES DUM TO INFLATION. THE IEECUTIVI GRAMMN ABS NWASTgg N FT tMI &UppLEMENTAL APPROPRIATION Of 66.4 MILLION FOR CIVILIAN PAY R:US UDEiR I•OS ACCOUNT.
Ci30d
DEPARTMENT OF STATE, INTERNATIONAL COMMUNICATIONS AGENCY, ANDBOARD FOR INTERNATIONAL BROADCASTING
AOMINISTRATION Of FO ,ION APFAIRS (I0"-1 13-0-1-164, Ill-OSS2-0-1-13. 10-0S40*4-1-15. *0S4i1-153,
THIS SUI I RIVERS SALARIES. EXPENSES. AND ALLOWANCES Of THE OFFICERS AND EMPLOYEES OF THE OEPARTIENT. MOTH IN THE UNITED STATES A-NO ABROAD. PIP.TESENTATION ALLOWANCES ABROAD. EMER10GENCIES IN THE DIPLOMATIC AND CONSULAR SERVICE. EXECuTIVE DIRECTION AND POLICY PON-MULATION. ADMINISTRATIVE AND STAFF ACTIVITIES. AND MONIES FOR TH FOREIGN UILODINGS OFFICE. THE INCREASE RECOMMENDED IY THE CamsI-TTEE INCLUDES S7 MILLION TO EXPEDITE ACQUISITION Of ADDITIONAL HOUSING UNITS IN AREAS 04RE RENTAL COSTS ARE EXTREMELY HICH. 55 SMIL-LION FOR SOLAR DEMONSTRATION PROJECr INCLUSION IN FOREIGN BUILDINGS, S300.00 TO ENHANCE FOREIGN SERVICE LANGUAGE TRAINING. SV WILL-ION TO ENHANCE MID-CAREER AND SENIOR LEVEL TRAINING IN THE POREIGN SERVICE. S1,260.000 TO PROVIDE ADDITIONAL EMPLOYEES TO HANDLE TN-a PEISIOENT'S UNOOCUMENTED ALIEN PROGRAM. $4OO,000 TO BEGIN CONVERTI.G CONTRACT PASSPORT OFFICE EIMPLOYEES TO REGULAR EMPLOYMENT AND-530.000 FOR THE ADDITION OF TNO PEOPLE TO THE OFFICE OF SPECIAL CONSULAi SERVICES. THE RECPAo MNDED INCREASE, IN OUTLAYS IS RELATED-TO THE RECOE DNOE INCREASES ABVE. THE INCREASE INCLUDES S6 MILLION FOR ACQUISITION OF NOuSINSg SI MILLA Pa 6O"A 081ST AkiTI-
ON AND IDENTICAL AMOUNTS TO INS OTAHR RECSBNOEOO FOR INC1R4A IN BUDGE AUTHNiLTY.
THIS SUM DEFEATS THE ASESSMENTS OF TuE UNITED STATES IN INTERNATIONAL ORGANIZATIONS AND PAIS THE COSTS OP U.S. PARTICIPATION I-N INTERNATIONAL CONCRENCES. IT INCLUDES THE U.S. SHARE OF THE COST OF THE UNITED NATIONS AND ITS SPECIALIZED AGENCIES AS WELL AS -11 REGIONAL !*.AMIZATIONS AND 22 SMALLER% INTERNATIONAL ONGANIZATIONS. IT INCLUDES U.S. CONTRIBUTIONS TO INTERNATIONAL PEACEE[PINSO-ACTIY!:iES AND DIFRAYS EmPENSES OF U.S. PARTICIPATION IN INTERNATIONAL TRADE NEGOTIATIONS. PROM THIS ACCOUNT AME PAID THE EXPENSE-
S UP 1I04? MISSIONS WHICH REPRESENT THE UNITED STATES AT TtE HEADQUARTERS Of CERTAIN OF THESE ORGANIZATIONS. THE ABOVE PT 197i UU6O-GET AUTHORITY FIGURE DOES NOT REFLECT A PENDING PT 10,8 SUtPLIEMENTAL AUTHORIZATION REOUEST OP 127.271.,6 TO PAY LADEARAGE TO liNES-CO, NOR DOES 11 REPLECT A TOTAL SUPPLIMMTAL AP4OPOEATSNT EQUEST OF $70.9 IILLON FME TrIS ACCOUNT.
0-4 ca-o
MIOSgATION AND RFU•EE ASSISTANCE (IS-IS14..0.1-153. 55.,146-0-I-ISI).
FUNCTION AUTHORIZATION Fv 1976 REQUEST DIFFERENCEE) FT 1y75 RwUEIST (OIFFILENCIE)"-Tj i 63,1o.64 53,064 S6.56 101•36I U1U 4 .439 10.435
4+50.000) (.5. 000)
COWNT
THIS SUM PROVIDES FOR U.S. ASSISTANCE TO MIGRANTS AND REFUGEES THOUGH CONTRIUTItONS TO THE INTERGOVERNMENTAL COMMITTEE FOR EUR-OPEAN MIGRATION. THE UNITED NATIONS HIGH COMMISSIONER FOR REFUGEES. THE INTERNATIONAL PM ITTEE FOR THE ROD CROSS AND DIRECT ASSIST-ANCE TO OR ON S1EALF OF REFUGEES FROM VARIOUS COUNTRIES THROUGH VOLUNTARY AGENCIES. IN ADDITION. THERE IS A NFw 520 MILLION MATCHI-NG GRANT PROGRAM OF ASSISTANCE IN THE UNITED STATES TO REFUGEES SETTLING HERE. THEo FV 1678 AUTHQORIZATION AND OUTLAY FIGURES INCLUO-9 S20 MILLION AUTHORIZED FOR THE SOVIET ANO EASTERN EUROPEAN REFUGEE PROGRAM. THi PRESIDENT'S FY 1170 FIGURE INCLUDES A REQUEST OF -530 MILLION FOR A NEW MATCHING PROGRAM Of ASSISTANCE IN THE U.S. TO REFUGEES SETTLING HERE. IT DOES, NOT INCLUDE ANY REQUEST FOR T*-I SOVIET AND EASTERN EUROPEAN REFUGEE PROGRAM. THE COMMITTEE RECOMMENDATION (ROTH AUTHORIZATION AND OUTLAY) INCLUDES $25 MILLION FO-R THE SOVIET AND EASTERN EUIIOPEAN REFUGEE PROGRAM TO ACCOUNT FOi AN INCREASE IN THE IUMSERS OF REFUGEES GOING TO ISRAEL AND 525 MIL-LION FOR ASSISTANCE TO AFRICAN REFUGEES. NOTE: NONE Of THE ABOVE FIGURES REFLECTS A PGM0I1G FT 1I57 SUPPIUMEINTAL REQUEST O06M.3 -BIL.ION POR iLSUlTLEIINT Of 15,1)G INQOOCHINSE RIFUUIIS Ii TN1 UMTHI STATES.
PRES IDENTYS 1 COITTEE COiITTEEBUDGET FY 1S76 IS ECOAIONDATION FY 19T9 RECENDATIONFUNCTION AUTHORIZATION FT I RQUIST (DIFFERSNCa) Fv 196 RE9UEST (DIFFEREtnct)
ISO (13I00i4) 1ol) (164646") (136,66) (14.114) (I ol14) (1J2.664)(*IS,*"N) (07.000)
CEMENT
THIS SUM INCLUDES COLLAR AND FORIIGN CURRENCY AUTHORIZATION FOR THE ACQUISITION. OPERATION AND MAINTENANCE OF BUILDINGS ABROAD.-THE OBJECTIVE OF THE PROGRAM IS TO CONSTRUCT OR OBTAIN 6Y PURCHASE 00 LONG-TERN LEASE. APPROPRIATE AND EFFICIENT OFFICE SPACE FOR-
THE FOREIGN SERVICE AND OTHER AGENCIES OF THE U.S. GOVERNMENT ABROAD. AND LIVING QUARTERS FOO AMERICAN STAFF AT DIPLOMATIC AND CON-SULAN POSTS WHERE HOUSING PROBLEMS EXIST. THERE IS A PENDING SUPPLEMENTAL APPROPRIATION REQUEST FOR FT 1978 FOR SO1.209.O00 FOR SA-LARY INCREASES ASSOCIATED WITH THE BUILDINGS OPERATIONS AND FOR ACQUISITION OF ADDITIONAL HOUSING FOR U.S. PERSONNEL. THE AOOITION-RECOMMENOED UNDER BUDGET AUTHORITY WOULD PROVIDE AN ADDITIONAL ST MILLION FOR ACQUISITION OF HOUSING FOR AMERICAN PERSONNEL WHERE -
SUCH HOUSING IS NOW LEASED AT EXCEPTIONALLY HIGH RENTAL RATES. AND SS MILLION TO FINANCE INCLUSION OF SOLAR OfEMONSTRATION ENERGY OR-VICES IN FOREIGN BUILDINGS. THE RECOMMENDED INCREASI UNDER OUTLAYS IS FOR THE PURPOSES OUTLINED ABOVE AND INCLUDES SO MILLION IN P-ROFOSIO OUTLAYS FOR ACQUISITION OF HOUSING AND SI MILLION FOR SOLAR IDNSTSATIGN PSOIECTS. NOTE: TH1 AMOUNTS IF FOREIGN BUILDINGS-A INCLWUD UNDER THE TOTALS FOB AORI ISTRATION OF F6I04,4 AFFAINS.
ISM "T HIML OOISSIOIr S (13--tO-oI-B01 , IO-I?-0-1301* II-02-0-1-301, lI-067-9-1-MO2
FUNCTION AUTHORIZATION FT 10T8 REQUEST (DIFFERNCE) FT19 REQUEST (DIFFREICE)
1 w 5. 5.I 19.971 19.17-3 60619 27.?-91
THESE FUNDS WILL PERMIT THE UNITED STATES TO FULFILL ITS TREATY OBLIGATIONS AND THE ACTIVITIES OF INTERNATIONAL UNIDARY CIS-BIONS WITH MSAICO AND CANADA. TNEY ARE ALSO USIE TO PAT THE U.S. SNARE OF RIGHT INTERNATIONAL FISHERIESCO ISIIMS THE INTRMIAl-
L COUNCIL OR THME BIPUMVTIIM OF TNH SEA AND TOH PIOSO OF VIITED STATES EBWI IGM .
C43
IWNA00"TIONAL COwmMUNCTIONS AGEICY: L I AE9l ENSES (AM N4. 6?-Om-4-l-1*T4).5
&
0
-a
( IN THOUANOS OF DOLLANS)
BUDGET AUTHORITY OUTLAVS
PI1USIDE[NT'S COMMITTEE ITiEIEUDOET FT 19T7 1179 RECokyENOATION FT f719 RECOMMENDATION
FUNCTION AUTHORIZATION FV TOS R104UST (DIFFERENCE) F1 TS REts? AUSIT IFisRENCE)
GO5AM . ii 390. 292 333,666 3176447 RT0r(0I0.S11 (0).ST0)
CoMMENT
THESE SUMS CONTAIN THE BASICC OPERATING COSTS FOR STAFFS AND PROGRAMS OF THE ICA INCLUDING T4E OPERATIONS OF THE VOICE OC ANEWIC-A AN0 EDUCATIONAL AND CULTURAL EXCHANGE PROGRAMS. THE PY 1O7T AUTHORIZATION INCLUDED $260.294.000 FOR THE U.S. INFORMATION AG[NCY.-562 MILLION FOR THE DEPARTMENT OF STATE'S EDUCATION EXCHANGE ACTIVITIES AND S4.360.000 F0R THE USIA'S SPECIAL INTERNATIONAL EfhiII-IONS PROGRAM. THE RECOMMENDED DIFFERENCE IN BUDGET AUTHORITY INCLUDES SS MILLION FOR EXPANSION OF MCA ACTIVITIES RELATED SPECIFIC-
ALLY TO MEOIA EDUCATION. SSO0.000 FOR EXPANSION OF CULTURAL PRESENTATIONS.:st MILLION FOi PROGRAM tIWOVvEWENT IN0 CARRYING OUT EOUCA-TION EXCHANGE PROGRAMS AND PROGRAM INCREASES. S10g"0.000 IN WESTERN EUROPE. 57SO.000 IN AFRICA. 1100.000 IN EASTERN EUROPE. SSOO.00-0 1N LATIN AM[RICA. AND $6500.000 IN THE NEAR EAST. THE RECOMM1UNDE INCREASE IN OUTLAYS IS FOR THE EXPANDED PROGRAM& iECOMIDES As-ONE. 54 MILLION WOULD 8E FOR THN IRMIA PROGRAM EXPANSION AND T11 "MINING 031.ST170,60 F1 THE OTHER 1INCAEASU.
INTERNATIONAL COMMUNICATIONS AGENCY: CINTER PFO CULTURAL AND TECHNICAL INTERCHANGE ETHEjEN EAST AND WEST(6T-0202-0Io-ISA)
THIS SiN PROVIDES FOR THE OPERATION AND MAINTENANCE IN HAWAII OF A CENTER FOR CULTURAL AND TECHNICAL INTERCHAGE ISETWEEN [AST A-NO WEST. THE CENTER IS A NATIONAL EDUCATIONAL INSTITUTION OPERATED BY A PUBLIC. NON-PROFIT CORPORATION. ITS PURPOSE IS TO PROMOTE -BETTER RELATIONS AND UNOERSTANDING BETWEEN THE uNITED STATES AND THE NATIONS OF ASIA AND THE PACIFIC. IT CONDUCTS COOPERATIVE Pt00G-RAMS OF RESEARCH. STUOT AND TRAINING. WHICH @RING QUALIFIED PERSONS FROM THE COUNTRIES OF THI AREA TO WORNK jOITLV ON PRtOginS OF WoUTUAL CONCERN. THE INWAASE OVER FT IOTS IS REQUESTEO PRINCIPALLT TO MET INCAEASD COSTS FOG STAFF AN pRO*AMS.ft
- CApCU
t01TEINCTASML COUINICATISIS £613T1 ALO ISITION AM CONSTRUCTION Of "D610 PAUILtTISS T04 66S-t114)
FUNCTION AUTHORIZATION PT 1SOT RqIuS? (SIPPSRINCE) Py Sto ImSmuES (SIPP"IsCI)
Ile la. e.Fo$ l"W.s 0.3t4 6.04 6.42S
THIS SM IS NECESSARY TO PSISIT THE CONTINUING PR000 0P OF9MAJOR IMPOVEMMITS, NtPLAClSNTS AN0 REPAIRS TO MINTAIN £ND IEQ --TME DEFICIENCY OF LISTING FACILITIES AS WILL AS ENGINEERING RESEARCH FOP THE IIUPOvEUENT Of IOADCASTINS TECHNIQUES aN COMUPONTS-
THE PISIDNT'S FT 167O REQOUEST INC.UOES S6.636.00 PFOR CONSTRUCTION I" ITit PISUiPPINfNO 6 57.96M4.60 P6 ETOIIVSM IN LiI5KiA. TIHS 8UNAL&II 18 PON MUNISNAAC11 NS IWPROVISM T Of UISTIN8 FUILITVIU.
FuNCTION AUTHORIZATION PT I "TS BEQUEST (0IPPFCINCI) PFT I"sI RE&ST (DIFUEENCE)
S 0 86.166 00.110 43.016 61.O11.o(03.000) (03,0001
COMNT
THESE SUMS POViOg PUNOS pan THE OPIRATIONS OPl THI SCADO FOR INTERNATIONAL SbOAOCASTING AN£ FOR GRANTS St THE BOARO TO RAOIO PF-gg SUSRPEI0ADIO SIERT. INC. WHICH SIOAOCASTS TO EASTERN0 EUROPE *NO THE SOVIET UNION. THEISE IS A PENDING SUPPLEMENTAL AUT1S2ZATI-ON PFOR SO.46.000 TO OFPSET THE UNANTICIPATED U•0 4 110 ININN& SOLAM. THE 63 USLL30 1D35t t hMEMKOG &V TINE CoTESI IS To TOWES P0tTNU3 P06V6SI4 OAISSME Of It I01.1*R.
t- -aC
OTHER PROGRAMS
"INS6 CONTROL, AMe ISAENSMT AIMMeY 04RO--
(lot TNOOMIS OF DOLLARS)
uSEaiT AUTHORITY OTLAYS
PUSIDEWN S COMMITTEE COMMITTEEBUDGET FT lT9 W$ RECOMMENDATION FT 1t19 RECm EWATIONFIlNCO AUTHlIZATIOW FT 08 RUSIT (OZFFEREWCE FY IWFS REuET IOIFFEAEWCE)
liT 191 6U•TjifI
COMENT
THE AM CONTROL ANO DISARMAMENT AGENCY'S PRIMARY ACTIVITY INVOLVES PARTICIPATION IN ANO SUPPORT OF A VARIETY OF ARMS CONTROL W-ROOTIATIONS. IN ADDITION, THE AGENCY IS IESPONSISLE GEWERALLY FOR THE FORMULATION. COOROINATION. DIRECTION,. AN IMPLIMENTATIOIN OF -U.S. ARMS ANALYSIS AND EVALUATION OF ITS OWN RESEARCH AND THAT CARRIED OUT IT OTHER U.S. GOVERNMENT ORGANIZATIONS IN TEI ARIA OF ANIS CONTROL ANO DISARMAMENT. IN TRMS OF TIME MANPOWER. AND BUDGET RESOURCES REQUIRE. THE CHIEF NEGOTIATIONS WI1CH ACDA SUPPORTS A-NO IN WHICH IT PARTICIPATES ARE SALT. THE STIATEGIC ARMS LIMITATION TALKS. YCIOND THAT. THE AGENCY PROVIDES SEARCH AND OTHER SAC-SUP SUPPORT FOD NUMEROUS OTHER CONVINTIONAL AND REGIONAL AIRMS CONTROL EFFORTS. INCLUO0D IN THIS LATTER CATEGORY All THE MUTUAL BAL-ANCID FORCE REDUCTIONS (MOFR). THE CONFERENCE COMMITTEE ON DISARMAMENT ICCO). THE STANDING CONSULTATIVE COMMISSION (SCC). CONFERENC-E ON SECURITY AND COOPERATION IN EUROPE (CSCE). CONVINTIOIAL AMS CONTROL AND AMS TRANSFERS. CHEMICAL WEAPONS. AN0 NUCLEAR PROLIFICRATION. TO CARRY OUT THIS PROGRAM ACDA IS REQUESTING A FISCAL YEAR 197t AUTHORIZATION Of SIG.2S.000 MHICH REPRESENTS A REDUCTION 0-F 1201.000 FROM THE FISCAL YIEA 191S AUTHORIZATION OF S.S.0.SO0. THE FISCAL YEAR TS?0 TOTAL CONSISTS OF AN INCREASE OF S1.314.0-0 IN PROGRAM OPIEATIONS AND REDUCTION IN EXTIRNAL" RSIANCH (INCLUDING MONIES ALLOCATED TO SUPPORT THE INTERNATIONAL ATOMIC IENEGY A-
EINCY'S NUCLEAR SAFEGUA•OS PROGRAMS AND RELATED ACTIVITIES) OF APPROXIMATELY 1100.000. (THE INCREASE IN PRO GNA FUNDS IS PARTLY TO -COVEI THE COST OF THE SALT NEGOTIATIONS FOR A MoRE PROTRACTED PERIOD T0AN WAS ANTICIPATES IN FISCAL YEAR 19S". AS WILL AS AN INCRIA-SC IN ACDOIS ACTIVITIES CONNECTED WITH THE CONFERENCE OF THE C•RMITTEE Of DISARMAMENT. THE UNITES NATIONS SPECIAL SESSION ON SISAIM-AMINT, TNI VARIOUS BILATERAL DISCUSSIONS ON CONVENTIONAL ARMS TRANSFERS RESTRAINT, CONTINUES PREPARATION Of ARMS CONTROL IMPACT STA-TEMINTS, PUBLIC INFORMATION ACTIVITIES. AS WILL AS INFLATION. IN ADDITION TO THE PRESIDENT'S REQUEST. THN COMMITTEE RECENSS TNAT ACDA 99 AUTHORIZED AN ADDITIONAL 112,000,00 TO CONTINUE ITS VIGOROUS SUPPORT OF THE IAA'S NUCLEAR SAFEGUARDS PROGRAM AiD ILATS"* A6TIVITI1S. TNIE EASTIV SIMW MA REQUESE AM FT 1990 SiPPLEMETAI APOOPRJAI TOMF 58.6 I.ILLM IO T1E AREGB .
1-Acc -
PEACE COoPS (44- a0 * -I-S)
(t1 TNOUSAMOS OF OOLLMA)
UOT AUTHORITYTV CLATS
PUSO$mT'IS COmITTEE COMMITTEEBUDGET FT 1976 1179 IcOCRENOATIOt FYT 179 RICOIMWMOATION
FUNCTION AUTHORIZATION FT 197O KOUAST (DIFFERLNCE) FT Son OIGsAST (DIFF6441CI)
THE PRESIDENT'S RIOUEST FOR ToE PEACE CORPS REPRESENTS A $1.2 MILLION INCEA$SE IN OUIGT AUTlORITY OVEt FY 1IMS. THE INCREASE*WILL PROVIDE FOR 0l MORE VOLUNTE(O TEARS THAN IN FT 70, OR A TOTAL OF 6122 VOLWITIES YEARS. IN ADDITION TO THE POESIOINT's 1i41-
St. THl COMITTIE RECOMMEND AN INCREASE OF $I MILLION 1M SUSUT AVTHORITV FOR TOO PUROPM OF P9ACE CORPS GOMTRUINTINS TO TMI V.N.-VOImlTE.O PAOGSM.
SEVERAL PROGRAMS ARE MONITORED WITHIN THIS ACCOUNT BECAUSE Of THEIR IMPORTANT SEARING ON U.S. INTERNATIONAL NON PROLIFERATION I-FFORTS. THE PROGRAMS ARE: 1) FUEL CYCLE RESEARCH AND DEVELOPMENT. 2) BR1EEDE REACTORS. 3) NUCLEAR RESEARCH ANO APPLICATIONS. AND -4) INTERNATIONAL SPENT FUEL OISPOSITION. MAJOR RESOuRCE REALIGNMENTS CONTINUE TO SE MADE IN EACH OF THESE CATEGORIES AS PART OF TN-t DEPARTMENT OF ENERGY'S GENERAL EFFORT IDENTIFY AND DEVELOP MORE PROLIFERATION RESISTANT NUCLEAR FUEL CYCLES. THE COMMITTEE HAS L-ONG ENCOURAGED SUCH A REDIRECTION OF NUCLEAR A A 0 AND IS PLEASED BY THE DEPARTMENT'S INITIATIVES. QUESTIONS HICH 00 WARRANT CONT-INUED BUOGETARY OVERSIGHT. HOWEvER. ARE THE FOLLOWING: 1) THE EATENT TO WHICH REPROCESSING &NO SAFEGUARD EVALUATIVE EFFORTS AT SARNWELL. S. C. COULD SE AS EFFECTIVELY PERFORMED AT OTHER EXISTING LASS. 2) THE EFFECT OF CONTINUE ACTIVITY AT BARNWELL ON THI U.S. -INTERNATIONAL NON PROLIFERATION POSTURE. 3) THE EXTENT TO WHICH RESEARCH ON RPROCESSED WASTE CONTINUES TO DOMINATE WORK ON LONG T-ElM SPENT FUEL STORAGE. 4) THE NATIONAL FOR AND INTERNATIONAL IMPACT OF NEW FUNDING FOR THE ADVANCED INTEGRATED TEST FACILITY AND-
THI IS MILLION DOLLAR BREEIDE OESIGH STUDY. 5) THE EXTENT TO WIlCH CONTINUED SUPPORT FOR THE LIGHT WATER BREIEIR REACTOR (LMSR) -IS CONSISTENT WITH THE REfORIENTATION OF U.S. NON PROLIFERATION POLICY. GIVEN THAT THE REACTOR IS FUELED WITH 9ACLUSIVELY WIAPONS-O"RADI MATERIAL ANO. 6) THE ADEQUACY OF THE EXISTING ALLOCATION Of RESOURCES AND PER9SONNIL WITNN THE INTERNATIONAL PUEL CYCAL EW&LUVATi1k (INFC9) AND MO-PROLIFRAITION ALTERNATIVE SVSTEMS ASSESSMENT PNOGRAM (NaSA).
FUNCTION AUTHORIZATION PF 1973 RIIEUST (DIFFERENCE) pF 1013 RtlUIST (DIFFERENCE)
0P0 PENDin . 2.1136403 3.o.063 3.30.3 m.a4o) (6)
COMMENT
THE TWO PROGRAMS WITHIN THIS ACCOUNT H41CH ARE OF CONCERN TO THE COMMITTEE ARE: 1I INTELLIGENCE AND AUMS CONTROL AND 2) NUCLE-AR MATERIALS AND SECURITY AND SAFEGUARDS. THE PURPOSE OF THE INTELLIGENCE AND ARMS CONTROL PROGRAM IS TO PROVIDE RESEARCH amD ANALY-SIS RELATED TO TEST BAN VERIFICATION AND OTHER ARMS CONTROL AND DEFENSE ACTIvITIES. THIS PROGRAM IS TO 31 INCREASED my S3.1 MILLIO-N OVERl 7Y 3 TO A FOTAL OF S20.4 MILLION. THE PROJECTED INCREASE REFLECTS IN LARGE PART THE EXPANDED ACTIVITY ASSOCIATED WITH THIE -PROPOSED COMPREHENSIVE TEST BAN TREATY. THE NUCLEAR MATERIALS SECURITY AND SAFEGUARD PROGRAM ENCOMPASSES ROTH DOMESTIC AND INTERiAT-IONAL SAFEGUARD ACTIvITIES. THIS PROGRAM IS SCHEDULED TO RECEIVE AN INCREASE Ilk BuDGET AUTHORITY OF 11.23 MILLION TO A TOTAL OF $43-MILLION. THIS INCREASE RELATES IN PART TO THE U.S. ODCISION TO SUBMIT VOLUNTARILY TO IAIA SAFEGUARDS ON DOMESTIC FACILITIES. FUm-
*S WITHIN THE NUCLEAR MATERIALS PROGRAM ALSO GO FOR THE DIRECT SUPPORT Of THE IAEA's INTERNATIONAL SAFEGUARDS EFFORT. THIS SuPPORT-IS TRANSLATED INTO 1) TECHNOLOGY TRANSFERS AND 2) SAFEGUARDS TRAINING PROGRAMS. THE MAGNITUDE OF THIS EFFORT IS APPROXIMATILY 11-1.1 MILLION. A SUM THAT HAS REMAINED RELATIVELY CONSTANT OVER THE LAST FEN YEARS. THE ANTI-PROLIFERATION ACT Of 1073 REQUIRES THE -NUCLEAR MATERIALS PROGRAM TO ESTABLISH A COORDINATED SAFEGUARDS AND PHYSICAL SECURITY TRAINING PROGRAM FOR THE INTERNATIONAL COMMU-ITY. NO ADDITIONAL RESOURCES NAVE BEIN REQUESTED FOR THIS EFFORT IN FV 7T AND THE BULN OF ANY REQUIRED ADDITIONAL SUPPORT IS lXPEC-TED TO COME FROM A STRETCH-OUT OF CERTAIN LONERI-PRIORITY PHYSICAL SICURITY PROGRAMS AT SANDIA LA9S. AN ITEM OF CONTINUING CONCERN -IS THE EXTENT TO WHICH RESEARCH ON SAFEGUARDS FOR PROCESSING AND PROCEISSING-RELATED FACILITIES DOMINATU SAFEGUARDS MORN ON VERIPFI-D SPENT FUEL REPOSITORIES. THE ENTIRE mSS PROGA WILL BE REVIEWED BY THE COMITTEE DURING THE CONING YEAR IN CONNECTION WITNH£ A0AUNR EAAMINATION OF I"d 9FIFETIVtNISS OF INTENATISOAL WAGUAR. TNIS B1UM MAY NAVE IPL"TIM PN TUG EV FY I30 MYT.
CMLSa REIrLATOR? CNISSIOM ($I-,o10o4i--TS)
(EM THOUSAMOS OF ODLLAIS)
AJ4T AUTHORITY OUTLAYS
P ESI IEMT IS COMMITTEE yCcoNEI TT1ESUOGET FY 19TS 1IT9 RECOMEENOATDOM lT' ON¢ENDATIOM
FUNCTION AUTHORIZATION FV I9TS REQUIST (DIFFEENCuE) F? Tson smuMST (DIFFERENCE)
RELEVANT PROGRAMS WITHIN THIS ACCOUNT ARE I) NUCLEAR MATERIAL SAFETY AND SAFEGUARDS (NMiSS) AND 2) PROGRAM TECHNICAL SUPPORT. T-H NMESS PROGRAM E3ORACES SAFEGUARDS WORM THAT IS SOTH DOMESTIC A&NO INTEANATIONAL IN NATURE. RESOURCIS ALLOCATED TO THIS PlOGRAM Im-
FY TO CONSISTED OF il PERSONNEL AND S14.0000 FOR TECHNICAL ASSISTANCE ANO PROGRAM SUPPORT. THE PROJECTIONS POR Fv TI PEmMIT NO I-NCREASES IN MANPOWER AND REDUCE TECHNICAL ASSISTANCE FIUOING TO S",000. THESE CuTSACKS COME AT A TIME OF INCREASING CONCERN OVEm -THE EFFECTIVENESS OF THE EXISTING INTERNATIONAL SAFEGUAROS SYSTEM. THE CUTS REDUCE THE CAPABILITY OF MUSS TO IDENTIFY INTIRNATIONA*L SAFEGUARD PROBLEMS AND TO FORMULATE CORRECTIVE MEASURES. MOREOVER, THE CUTS ARE LIKELY TO *ETARD SIGNIFICANTLY THE EFFORTS OF TN-I U.S. IN IMPLEMENTING IAEA SAFEGUAROS ON DOMESTIC FACILITIES. THE PROGRAM TECHNICAL SUPPORT CATEGORY INCLUDES THE INTERNATIONAL F-ROGRAWS OFFICE. AMONG ITS VARIOUS RESPONSIBILITIES THIS OFFICE HELPS TO PROVIDE THE COMMISSION WITH CRITICAL EVALUATIVE INFORMATIO-N RELATED TO NUCLEAR EXPORT LICENSING DECISIONS. AT THE END OF LAST YEAR. THE CONITTIE INITIATED. WITH THE COOPERATION 00 THE Cm-MITTEU ON INTERIOR ANM INSULAR AFFAIRS. A REPROGRAMMING ACTION DESIGNED TO EXPAND THE PROFESSIONAL STAFF CGAPALITT OF Two? OFIF&.-
TNE COMTTEE WILL ASSESS TNE AOSOUACV OF THAT ARIAN4EM OVER THE MOURSE Of TNE CORS ' "AL. VAM.
OVERSEAS PIAVATIlE INVESTNT CORPORATION (TI -A -llS)
(IN THousamO Of DOLLARS)
lUOGIT AUTHORITY OUTLAYS
PRESItDENTS COMMITTEE COMMITTEEBUODET FY 1970 1970 RECOMMENDATION FT '9790 RECOMnMEOATION
FUNCTION AUTHORIZATION FY tOTS 84U"iT IGlltpIF CE[) FY 1970 IEu"ST llIrFER[uI-)
10it 0 0 S -'43 -44.41 -44.74A40)
COMMENT
THE OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC) IS THE OUASI-GOVERNMENTAL CORPORATION WHICH PROvIDES POLITICAL SISK INSURAMC-9 FOR U.S. INVESTMENTS IN DEVELOPING COUNTRIES IN ORDER TO PROUMOT THOSU COUTRIIES DEVELOPMENT. OIPIC FINANCIAL REQUIREMENTS ARE N-J OW OF THE FaES IT CHARGES FOR ITS INSURANCE. THE MINUS 644.74 MILLION FIGUIIES REPRESENTS NiT OPIC RI9VENUES PROM FEUS ANDi 15151g-T'. aMISLATHEO. N.I. 91T, TO EATIaG OPIC AUTnORITY, "" p"jSa4 OOT" Ous ANID IS Pl5jG IN.CO INGI.
AaPORT-IMOR"T SANU (03-40A7-0-2ISl) I
(IN THOUSANDS Of DOLLARS)
WSORST AUTHORITY OUTLAYS
PRESIDENTIVS COMMITTEE COMMITTEEIDGET FY 0970 0979 IECOENOATION FV 1970 RECOEINDATIONFUNCTION AUTHORIZATION FV iTO REQUEST (DIFflENmCl) FT IIS REQUEST (DIFFERmENC)
i" o se669. 6slo. es 4.. "oe o.076(0) a (0)
THE EXPORT-IUPONT BANK OF THE UNITED STATES WAS ORGANIZED IN 1934. ITS PROGRAMS ARE AUTHORIZED UNIER THE EEPORT-IMPORT SANK AC-I OF 194S. AS AMENDED. THE PURPOSE OF THE SANK IS TO AID IN FINANCING AND TO FACILITATE U.S. ERPORTS. THE PRESIDENT'S FT II9 SiiOET AUTHORITY ANG OUTLAY REQUEST REFLECTS HIS ESTIMATION OF THE AMOUNT REQUIRED TO SUPPORT "AN ACTIVITY THIS FISCAL YEAR. BECAUSE OF-AN UNUSUALLY LOW LEVEL OF SANK ACTIVITY IN FY 197? NO NEW 860GET AUTHORITY WAS REQUIRED IN F" ISS. IN ADDITION TO THE PESIDENT*S-BUDGET R1OUIST FOR FT 1079 THE BASIC OPERATING AUTORITY OF THE SANK REQUIRES REAUTHORIZING LEGISLATION THIS YEAS. NOTE: TIE PIlma-
IT LEGISLATIVE .URISOICTION FOR THE EXPORT-IMPORT SANK IS ASSIGNED TO THE COMMITTEE ON OSMUNS6 FIJISC1 NO MAN AFFAIRS. AM SF00.1,1. IVEOSION? dURISGICTION IS ASAI5I05 TO THE CMITTEE ON IeTEIAMTIONRL ILATISIS.
PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDEDPROGRAMS WHICH WOULD REQUIRE AUTHORIZING
LEGISLATION FOR FISCAL YEAR 1979
(The President has submitted no requests in this category which come under the jurisdiction of theCommittee on International Relations.)
m
PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGESIN EXISTING LAWS WHICH MANDATE SPENDING IN FISCAL YEAR
1979 WITHOUT FURTHER ACTION BY CONGRESS;OTHER LEGISLATIVE SAVINGS PROPOSALS
(The President has submitted no requests in this category which come under the jurisdictionof the Committee on International Relations.)
LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
FUNCTION AUTHORIZATION FT 1979 ROuEST (DIFFEAENmC) F1 lOTS RaQUEST (DIFPS,0N9C)
30.000 2.000(#30.00) 402.000)
COMMNT
THE PURPOSE OF THE COMITTIE'S RECOMMENDATION IS TO ESTABLISH AN AFRICAN FOUNDATION WHICH WOULD HAVE AS ITS PURPOSE THE E*PANSI-ON OF ECONOMIC AND SOCIAL DEVELOPMENT THROUGH THE FUNDING OF PROJECT$ GROWING OU1 OF LOCAL PRIVATE INITIATIVES. DESIGNED TO STIMULA-TE INDIVIDUAL PARTICIPATION IN THE DEVELOPMENT PROCESS. THESE FUNOS WOULD UNOERWRITE TWS EFFORTS TOO SMALL FON £10 FUNDING. TNI -OUTLAYS FOR FISCAL 1979 WOULD K UED PRINCIPALLY FOR PLAMSNG AND STARTUP COSTS.
THE LEGISLATION TO ESTABLISH AN INSTITUTE FOR HUMAN RIGHTS AND FREEDOMS IS EXPECTED TO BE CONSI0ERED iY THE SUSCOOITTEE ON INT-MRNATIOMAL OPERATIONS CURING ITS DELIBERATIONS ON THE FOREIGN RELATIONS AUTHORIZATION ACT FOR FISCAL YEAR 1079. THE INSTITUTE PoM-
IOU FUNDING TO PRIVATE ORGANIZATIONS WORMING IN 6NALF OF NWAN 30.44S FOR POLITICAL RtIGHTS AROUND TIME WORLD. -
COISSION ON PEACt ACADEMY AND CENTERn PO CONFLICT RESOLUTION
FUNCTION AUTHORIZATION FY 1578 REQUEST (DIFFERENCE) FIS1S7 REQUEST (DIFFERENCE)
IsO Soo s00(0S64) (.1So)
CEMENT
THIS SUM WOULD PROVIDE FUNDS FOR THE ESTABLISHMENT AND OPERATION Of A COMMISSION TO STUDY THE FEASIBILITY OF ESTABLISHING A NAT-IONAL PEACE ACADEMY AND CENTER FOR CONFLICT RESOLUTION. LEGISLATION TO ESTASLISK SUCH A COISSION HAS PASSED TH S"NATE AND 1I Pl-ESENTLY PSNDING UPEORE THE SUOCO•ITTTU On INTERNATIONAL RELATIONS.
c.z C~3
PRESIDENTS BUDGET REQUESTS TO EXTEND PROGRAMS WHICHDO NOT REQUIRE AUTHORIZING LEGISLATION
FOR FISCAL YEAR 1979
INTERNATIONAL SECURITY ASSISTANCEROVANCE$. FOREItGN MILI~TARY ALE (115i$ 2-'M42*T-tS$)
(IN TmOUSaANS OR DOLLARS)
SUOGIT AUTHORITY OUTLAYS
BUOGET FT 1978FUNCTION AUTHORIZATION
IlO PERMANENT-INOEFINITEa
PRESIOENTIS COMMITTEE1707 RICONMENOATION
FT 1T0 RtiUE[ST 40IFFEalNCE)
1.100.000 23 .00,O00 12.300.000(0)
COMMITTEEFy 1919 SE€COMMIENDATION
F1 1TOT REQUEST (DIFFERENCE)
49566,000 90500.600 9.150.000(0)
COMMENT
THE FOREIGN MILITARY SALES TRUST FUND At ESTAELISHED TO FACILITATE GOVERNMENT TO GOVERNMENT SALES OF DEFENSE ARTICLES AND SERV-ICES AS AUTHORIZED YT SECTIONS 21 AND 22 OF THE ARMS EXPORT CONTROL ACT. INCLUDING THOSE SALES FINANCED WITH FOREIGN MILITARY SALES-
CREOITS IN ACCORDANCE WITH SECTION 23 OF THAT ACT. ORDERS PLACED IV FOREIGN GOVERNMENTS THOUGH THE TRUST FUND CAN BE COMBINED MI-TN PROCUREMENT FOR U.S. ARMED FORCES, RESULTING IN SAVINGS SHARED BOTH BT THE UNITED STATES AND FOREIGN GOVERNMENTS. THE PRESIDENT.-S GROSS BUOGET AUTHORITY RIEUEST OF $12.200.000 FOR FISCAL YEAR 19?S REPRESENTS THE DEPARTMENT OF DEFENSE ESTIMATE OF ACTUAL OSLtGA-TIONS (CONTRACTS MADE VITN AMEICAN SUPPLIERS ON SE4ALF OF FOREIGN GOVERINMNTS) WMICN ILL SE INCURNI[D ST TNIS PROGRAM DLURINGNTMS C-
ADVANCES, FOREIGN MILITARY SALES. PROPRIETARY RECEIIPTS
(IM THOUSANDS OF DOLLARS)
BUOD"T AUTHORITY OUTLAWS
PRESIDENT'S COMMITTEE COMI TTo[BUDGET FT 1978 1979 RECOMMENDATION FT 1979 RECOMMENDATION
FUNCTION AUTHORIZATION FT 1975 REQUEST DIFFERENCEC) FT sell REQUEST (DIFFERENCE)
0 PE[RMlANE[NT-I|NDLFI NI TE -70, 0.000 -5).200.0 -.00 .00 o ----- o -. .200. 00 -5,200 .000(0) (0)
COMNT
THE MINUi $9,200 MILLION FIGURE REPRESENTS THE AMOUNTS WUICH FOREIGN GC'ANMIENTS MILL PAT INTO THE FUND In THE COMING YEAR. AR.L PAYMENTS INTO TNIS FUND ARE RECEIVED FROM FOREIGN O0V9RMENUT$ ONS IMN 804.5 PURPOSE OF MAINS PROGRESS PAYMENTS ON T"4IR Mil' "iTESALES CONTRACTS.
POIula MILITARY SALES CKOITS PROPIRIETARY LOAN RECEIPTS
1o i P|iiANIT-IWNOSINIT --0, 0 -00000 3.000 -20?.000 -29T.000(0) (0)
THIS ITEW INCLUDES IN7NiIST AND PRINCIPAL PAYMENTS R5EI1tVED FROM FOREIGN COUNTRIES ON CREDITS PiOIS01[ Use i TWO AUTHOIITY OF 0 -5CTION 23 OF THN AM SAPOAt? CONTROL ACT. AND IECOVOIILS UNDER TI9 MILITARY ASSISTAMCA Pi0OSUM.
MILITARY ASSISTAMCS. SOUTH V1STASI POFOCES (0?-1067-0-1-162)
(IN THOUSANOS Of DOLLARS)
BUDGET AUTHORITY OUTLAYS
"is I DENT S COIME PmITT[[IUOGST FY 1970 IS0 RICOMMIOAT|0I ry 1979 RiCOMENDOATION
FUNCTION AUTHORIZATION fry l07 KOUS (DOIPPFFERNCI) p? Ion70 IaST (OlFFIrNCA)
ISO 0 0 O9O000 W.000(0) (0)
SUPPORT FOR SOUTH VISTNAMESE FORCES WAS FUNlODE PRIOR TO 1S7 FPtOM APPROPRIATIONS TO THE MILITARY DEPARTMENTS. IN 19715, "it LAS-I TSAR OF THE PROGRAM. FUNDS PFO THIS ACTIVITY WOS| APPROPRIATED TO THE SUMNITARtY OF USPINSM. THI OUTLAYS ISem Asa SPIOOINS PM6 CL-AIMS OUTSTANDOING AGAIST THAT APPROPRIATION.
0-I
.4
No
LIQUIDATION6 OF FONiliM MILITANV SALES FUN (41-4S111-4S-SUI )
( 18 THOUSAMOS OF DOLLARS)
Ki"9i1 AuTHORITYV CILATS
P0iSr!VNTIS • COMMhTTEE cowl TTEEBUDGET r 1910 1974 S COU8?ENOATION FT 1079 OECOE1NOATION
FUNCTIONS AUTHORIZATION FT 1370 tSUES? (OIPFEM86CC) FT 10 NMIESUT (DIPF&REENCA)
s56 e 0 -211.ooo -3.oe -2.00o
THIS LIOuIOATION ACCOUNT WAS ESTABLISIED IV SECTION 624(8) Of THE FOREIGN ASSISTANCE ACT. THE SECTION TERINATED THE SPECIAL F-00E1ON UILITANY SALIS FUND AND tOEUISEO THAT THE FUNOS ASSETS S TRAN$SFE0RE TO "K LIQUIDATION ACCOUNT TO 01 AVAILABLE SOLELY PIN -THE PURPOSE OF SETTLING OUTSTANDING LIASILITIES ANDO 0LIGATIOWS ANII5G FROM CRD01T AGARt1MAXTIS AND SARANTICS ISSUED PRIOR1 TO l -30, 1i". TO SAT AU." SUCH LIAIIILVTl AN SUSATISS SAVE SE GATISFEiD. 551 FUNDS AM TAIIAIN810Sl to 114 UNME L PFUN Op I-Hi TREASUY.
INTERNATIONAL DEVELOPMENT ASSISTANCE
SAMEL SEVELOPUIMT PR00AM (ht-10bs-O-t-16)
(IN THOUSANDS OF DOLLARS)
IUDUGT AUTHORITY OUTLAYS
PESIDoENT'S COITTEE COM ITEEBUDGET Fi 1978 1970 RECOMMENDATION Pr 1910 RECOIMMEOATION
FUNCTION AUTHORIZATION Py 1971 REQUEST (DIFFERENCE) FT 17ST RlQUEST (DIFFPSRSCE)
194 SO 0.000 9600 100.000 11.00 141000 19.000(-10.000) (*1,0)
COMMENT
IN 1076, CONGRESS AUTHO*IZ[O A *NO-YEAR' APPROPRIATION OF $200 MILLION FOR THE U.S. CONTRIIBUTION TO THE SAHIL OEVELOPMENT P3003-AN IN ORDER TO IMPLEMENT THE WUL7ILATERAL EFFORT OF THE CLUB DES AVIS OU SAHEL. A DONOR COMMUNITY ASSISTING THE SAHILIAN COUNTRIES -IN TH1IR DEVELOPMENT. PO. FT 1907. CONGRESS EARARNKED AND APPROPRIATED $50 MILLION FO THIS PURPOSE. NITH RESPECT TO THE REMAINOW-I OF THE AUTHORIZATION. AID OFFICIALS TESTIFIED BEFORE THE SUBCOMMITTEE ON AFRICA THAT THE ANNUAL U.S. CONTRIBUTION TO THE P006343 -WOULD AMOUNT TO 10 TO IS% OF THE TOTAL MULTILATERAL CONTRIBUTION. THE PRESIDENT'S FT 1979 REQUEST OF 900 MILLION REPRESENTS LESS T-HAN A 102 SHARE. THEREFORE. THE COhITTEE RECOMMENDS AN ADDITIONAL $10 MILLION IN @iuOGT AUTHORITY 1M 036 TO ORL1U Too U.S. GWT8-IIUTION UP TO THE PROMISED LEVEL.
HOUSING AND OTHER CoRIT GUARANIW PROGRAMS (73-4340-0-3-IS)
FUNCTION AUTHORIZATION FY I*?S RIQUEST (DIFFERENCE) FV 1673 REQUEST DIFFERENCEE)
ISO * 0 0 2.33 I,3 2,33(0) (o)
CmI-NT
THE HOUSING GUARANTY PROGRAM WAS ESTABLISHED TO INCREASE TNE PARTICIPATION OF PRIVATE ENTERPRISE IN THE DEVELOPMENT OF THE NOUSoING RESOURCES AND PRODUCTIVE CAPACITIES OF LISS DEVELOPED COUNTRIES. THE PROGRAM PROVIDES CREDIT GUARANTIES TO ELIGIBLE INVESTORkS.-TO FACILITATE THE FORMULATION AND EXECUTION OF HOUSING AND COMNITY DEVELOPMENT POLICIES AND PROGRAMS IN LESS DEVELOPED COUNTRIES-* THIS CATEGORY ALSO INCLUDES THE AGRICULTURAL CREDIT AND SELF-HELP COMMUNITY DEVELOPMENT PROGRAM. UNDER W4ICH LOAN GUARANTEES ARE-AUTHORIZED TO NOT MORE THAN FIVE LATIN AMERICAN COUNTRIES TO ENCOURAGE SMALL SCALE LOANS TO AGRICULTURAL AND COMMUNITY SELFHELP P-
ROJECTS. FOR FY 1711. ANTICIPATED REVENUES FROM FEES FOR THE HOUSING GUARANTY PROGRAM ARE SS.635 MILLION ANO ANTICIPATED AOMINISTIA-TIVE COSTS ARE SS.410 MILLION. THE 2.333 MILLION IN OUTLAYS REPRESENTS THE DIFFERENCE SETMEEN NIT ICME AND e'NER EXPENfSES, MNION -INVOLVE PAYMENTS TO U.S. CREDITORS DUE TO CURRENCY DEVALUATIONS AND TO THE RESCNEDULING OF INIS POfISO DEBTS OF SEVEIAL COUNTRIES.
OUTLAVYS PO FISCAL YEARS 1073 AND O0 3 RCOGNIZl THESE PAYMENTS AS LOSSES.
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INTER-AMERICAN FOUNDATION (11-4931-0-311111)
(IN THOUSANDS Of DOLLARS)
BUDGET AUTHORITY OUTLAYS
PitSIDENT S COMMITTEE COMMITTEEBUDGET Fy 1074 179 RECOMMENOATION FV 1970 RCOUNMEoAT ION
FUNCTION AMTNORIZATION FY 175 REQuEST DIFFERENCEE) FT 1973 REQUEST (gIFFIliNCE)
IN 107T THE CONGRESS PROVIDED FOR A SS MILLION AUTHORIZATION FON THE FOUNDATION FOR EACH OF THE FISCAL TEARS 1979 AND 6960. T-HE ADMINISTRATION IS RNEUESTING $7.082 MILLION APPROPRIATION FOR FY 1S79. THE SULK OF IAF'S FUNDING HAS COME FRPo AN ANNUAL m1 uIL-LION ALLOCATION MADE TO THE FOUNDATION FROM THE SOCIAL PROGRESS TRUST FUND OF THE INTER-AMERICAN DEVELOPMENT SANK. "CAUSE THAT 36-NET IS GENERALLY AVAILABLE ONLY IN SOME SIX CURRENCIES (AND THEREFORE FOR ONLY A HANDFUL OF COUNTRIES), THIS ARRANGEMENT HAS NOT PE-RMITTEO THE IAF TO FUNO THE APPROPRIATE PROGRAMS IN SOME OF THE NEEDIEST COUNTRIES. THUS. THE COMMITTEE IS RECOMMENDING A $17.1 IN'CREASE IN THE SUOGET AUTHORITY TO THE FULL AUTHORIZATION LEVEL APPROVED BY THE CONGRESS. THE COITTEE PLANS TO HOLD HEARINGS SUBI-N 079T0 TO SETIONINE THE MST APPROPRIATE MEANS Of FUNDING THE IAF IN FV 1196 AND THEREAFTER.
DARIEN SAP ISv AY .'o4-0s-0-1-151)
(IN THOUSANDS OF DOLLARS)
BUDGET AUTHORITY OUTLAYS
PRES IDEN1ToS COMMITTEE COMMITTEEBUOGET FT 1976 1979 RECOMMENDATION FT 1970 RECOMEENDATION
FUNCTION AUTHORIZATION FT 1970 REQUEST (DIFFERENCE) FY 1097 REQUEST (SIFFERENCE)
1160 ----A-NT 20,000 20,000 0 ii i Eweo 1.160(0) (0)
COMMENT
THE U.S. GOVERNMENT. IN COOPERATION WITH THE REPUBLIC OF PANAMA AND THE GOVERNMENT OF COLOMBIA. IS PARTICIPATING IN THE CONSTRwDACTION OF A HIGHWAY THROUGH THE DARIEN GAP. THE REQUEST FOR FISCAL YEAR 1979 WOULD FUND TWO PROJECTS IN PANUA. THE EACUTIVEC4 HAS ALSO REMQ TE AN FT 1976 SUPPLEMENTAL APPROPRIATION Of 53 MILLION FOR TNIS PURPOSE.
PAYMENT TO P0FR101 SERVICE BETIBINENT FPWO(AID PAYMENTS) (Il-1026"Ool-1SS)
(IN THOUSANDS OF DOLLARS)
SUO30T AUTHORITY OUTLAYS
PRESIDENT I S COMMITTEE COMMITTEEJOGET PY 6i76 19?9 RECOMENOATION FY iS9 ECOMMiENDATIONs
ISO PEtMAtT -INOIIE T1,4k 24,620 24.120 as.4S 249WO 24.02f(0) (0)
THIS AMOUNT IS REQUIRED TO PAY FOR THE FISCAL YEAR 1070 ANNUAL INSTALLMENT NEESES TO COVER THE UNFUNOEO LIABILITY RESULTING FRO-t INCREASES IN BENEFITS Of PARTICIPATION OF AGENCV PO INTEtNATIONAL MSVALOMP T CAREER P06IAM UStVICE lPLOYVS IS 1M P0M11M0 W-RVUIC6 RETiI*EINT ANs DISABILITY SVSTIO.
INTERNATIONAL OEVtLOPUNT ASSISTANCE-CONSOL IOATCO WORKING FUNO (72-3600-O-4-oSl)
FUNCTION AUTHORIZATION IT 10T 3601ST (DSIPFFRNCE) PT ISTO IM016ST (DIPFPIJICA)
ISO PIRMAMAiT-INOSPIWITIE -319.403 -$36.3 -334.900 -$sS,3O3 -auto"6 -mDo4(0) (o)
THIS ITIN PEUP TSaHTi PRINCIPAL. 09PATKUITS FROM FOREIGN COUNTIES a n ANS AND. C0EITs PlOVIosU UMNa U.S. IGNOMIC AssSISTaNo P-3063*65. THE FUNDS5 AM DPOSITID IN THE U.S. T73ASUAY.
THIS IT N tIPtE51NTS INT916ST REVENUE RECEIVED PFOM FOREIGN CMUTI1S ON LANS AND CUDITS PROVIDED U1464 U.S. SCON10 I AMSTA-"NaS Pla063W. THE PFUD6 ASt DEPOSITED Irn TM U.S. TREASURY.
.• cG,t4 €4
OSSSTER RELIEF "SISTANCE (11-9911-0-1-161)
(IN THOUSANDS Of DOLLARS)
SUOGIT AUTHORITY OUTLAYS
PRESIDENT'S COMMITTEE COIITTEIBUOGET FY 1071 1979 RECOMIMENOATION FT 1979 RECOIMNOATION
FUNCTION AUTHORIZATION FY 197S REQUEST (DIFFERENCE) FT 1976 REQUEST DIFFERENCEE)
ISO a 0 33.401 10.193 10.193(0) (0)
COMMENT
THIS ACCOUNT REPRESENTS OUTLAYS FROll FUNDS PROVIDED PURSUANT TO THE FOREIGN DISASTER ASSISTANCE ACT OF 1914.
ASSISTANCE TO PORTUGAL AMO PORTUGUESE CiFIS (11-COL1-0-N-SI)
THIS ACCOUNT REPSNTS THE FISCAL YEAR 969 OUTLAYS FRo PRIOR vYA APPROPRIATIONS PON ASSISIATC TO ORTUOAL we THE NSFES P-ORTUOUSSE COLONIES.
"4b
I
PROTOTYPE DISALTING PLANT (1I-00Il-9-1-1S1)
(IN THOUSANOS OF DOLLARS)
BUOGET AUTHORITY Y OUTLAYS
PRESIDENT'S COMMITTEE Fm ITT[[BUDGET FT 1970 1979 RECOMMEOATION FT 1979 RECOMMENDATIONS
FUNCTION AUTHORIZATION FT 1970 IhQUIST (OIFFSRENCE) FT 1979 INUEUST? DIFFEIRNCI)
19O 0 0 0 0 1o6S -. 0oe 9.000(0) 10)
COMMNT
THIS ACCOUNT REPRESENTS THE FISCAL TVAIM 179 OUTLAYS FROM ASSISTANCE PMItED IN PItOS VWEARS TO ASSIST lla~a. IN CONSTRUCTION A-PROTOTYPE OUSALTING PLANT.
FUNCTION AUTHORIZATION FT 1070 h(UtST (DIFFERISNC) FY 1070 NIUQUST (DIF0f.rN"C)
0 0 1) 0 0 10.000 30.0k 0.000(0) (0)
CIlFNT
THI U.S. CONT4IJTION OF UP TO 0200 MILLION TO THE INTERNATIONAL FUND FOR AGRICULTURAL DaVtLOPIUNT (I|AD) WAS AUTUs"ID tN THE-INTEMNATIONAL DEVILOPNENT AMC F000 ASSISTANCE ACT Of 1071 AND APPft |&BTIWS IN TWAT MEIW Oft PAS" In FISCA 1WO. T"US ACCO
UsT SRP1ISUIS OUTLAYS PUS0 THIS FUN0INS 1STIMAT&D FOR FISCAL 10T7.
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DEPARTMENT OF STATE AND INTERNATIONAL COMMUNICATIONS AGENCY
FUNCTION AUTHOaIZATION FY 1978 REQUEST (DZFFERENCE) pF 1979 REQUEST (DIFFERENCE)
ISO PiiNAN ?2T 2.326 i.2i 11 3,32933 242 1.323(0) (0)
COMWLNT
ANNUAL PAYMENT IS MADE TO TmE GOVERNMENT OF PANAMA IN CONSIDERATION OF RIGHTS GAANTED IN PERPETUITY WITH REGARD TO THE OONSTPUC*TION Of THE PANAMA CANAL. (AUTHORITY: TREATY OF 1903. 23 STATE. 223S. 53 STATE. Ill). NOTE: IN THE EVENT THAT TME PROPOS10 PANAMA C-ANAL TREATIES ARE APPROVED BY THE SENATE. RATIFIED AND THE CONGRESS NACS THE NEESARY IMPLENCTING LEGISLATION REPOSE TM ENS 00-
FY 1979, THE AuTHORITY FOR THIS PAYMENT WOULD S& AbOIS..D.
DEPARTMENT OF STATE MORNING CAPITAL PUND (19-4519-0-4-153)
IOPWiTYV Ogt0 By T1 UNITED STATES IN THEs DISTRICT OF COLUSBIA WILL N SOLD O0 LEASED TO FOREIGN S TMM S FO Blt AS n SmaS-US. UMNrEoS WILL FINAMM TH1t COST OF &SIT PIPAMATION. (AUTAORITtY PUBLIC LAM $*-on)
Ci3
UPAIlMNT OF STATS PATEINT: PAYMENT TO ITH FOOISIGN S~iVIC9 liTIMIMNT FUND (19-6549-0--1t90)
(IN THOUSANDS OF DOLLARS)
SUOGiT AUTHORITY OUTLAYS
PRSSIOINT*S COMMITTEE COMMITTEESUOGET fY 170 ?979 IS CO ItOiATtON fFY 197S NtiMIiOATION
FUNCTION AUTNOAIZATION PY 597T REQUEST (OIFFtSSnCa) pT IIR onE9uIST (DIFFERENCE)
TNE FOREIGN SutViCE ACT REQUIRES THE SICRETARY OF TtE TREASURY . BOINNING IN 1071. TO MAKI ANIMAL PANTS TO THE NTIIUMENT FU-NO ON A SLIOING PERCENTAGE SCALE OF AN AMOUNT EQUAL TO: (1) INTEREST ON INS UNFUNDD LIABILITY, AND (3) AW41l"V OSDS IMu OT ATTSI-UUTAS&E TO MILITARY SEVICE..(AUTHORITYV PUBLIC LAM 79-M4 S&C.OS)
l •i1 iNANINT--fOEPINITE 10.014 111.01? 80iT-.30.i~T i: dmo S1.430
COl Io)
cONSENT
THE PO161GM S94VtCl RETIREMENT AND OtSASILITY FUNDS IS USED PRIMAIILY IN FAYNSNT OP ANUITIES TO P0011W SUNvICE PUN L.-THE FUND IS MAINTAINED THROUGH (1) CObTRIBUTIONS OP EMPLOVES AND IWLOVYUS. (2) tNVSSTMIAT IN4CTm1 AiND (3) AP0PSIMt IATEO uaIWM.L.
FUNCTION AUTHORIZATION FT I978 REQUEST (DIFFERENCE) PY 1970 REQUEST (SIPPOERNCI)
ISO 0 0 0 0 3.10 0.8"40 0.040(0) (0)
THIS APPROPRIATION PROVIDES PFO THE U.S. GOVERNMENTS CONTEIGUTION FOR EXPENSES ASSOCIATED WITHN IN1 EIGHTH SAM AIMEICAN GAN6S T-0 Of HIELD IN SAN JUAN, P.A., IN 1079. THE FUNGS A04 SLING TRANSFPERRE BY THE SIECRETAOT OF STATE TO TIH BECtIAT;ONAL DEVELOPMENT Co-MPANY OF PUERTO RIG0A1 GOVEMISENT CORPORATION OF INS COIMONWEALTH OF PUER61 RICO) AS CONSTRUCTION OF SPORTS FAC4.LIIES FOB TIN GAMK-
S PMOSUESS5.
STATE UPTMT T PROPRIETAY RECEIPTS AND INTiUND TRANSFERS
SO pEMANENT-IHOFINITE -Iss."? -ii- -1T3.T-? -I-6,S? i.T -.iiY(0) is)
COMMINT
THIS ITEM INCLUDES FIIERAL CONTRIBUTIONS TO THE FOREIGN SERVICE RETIIIRENT FUND. THE REIMMURSEMENT ST THE PANAMA CANAL COMPANY -FOR THE ANNUNITY PAYMENT TO THE REDPUIC OF PANAMA. IPAYMIS PROM LOANS VAN TO THE U.N., ANM OTHER UISCULLAN. RCEIUES. Re-UNDS AND RECEIPTS.
STATS SEPARTINT PROPSIETARY RICEIPTS AND INT9RFUND TRANSFERS
(IN THOUSANDS Of DOLLARS)
IUOGET AUTHOWITY OUTLAYS
PMISIDENT S COOMITTEE COMMITTEEBUDGET FT 1976 1979 RCOMENOATION FT 176 RECOMMENOATION
FUNCTION AUTHORIZATION Fy 1t79 REQUEST (DIFFERENCE) pF loll REQUEST (DIFFERENCE)iir• iNNE T-INDFINI TI -10 . 549 *Su i i "h 4 -'140
(o) (o)
COMMENT
THIS ITEM INCLUDES REIPTS FRO THE SALE ANO TRANUISSION OF ELECTRICITY FRM THE FALCON SAN. AN OTHER MECEULAMUU REESIPTOF
STATE SEPARTMNIT PROPRIETARY RECEIPTS AND INTERFUNG TRAS4SFR4S
(IN THOUSANDS OF DOLLARS)
SUOGAT AUTHORITY OUTLAYS
PRISEOSkTS COMMITTEE COMMITTEEBMGET FT 1979 1079 RECOMMENDATION FVT 1070 *ECOMENOATION
FUNCTION AUTHORIZATION FT lOTS IEQuIST oDaFfuasiNca) F 7 IlOt RQUIST (SIFfU piNC)
40) PEliANMT - i1E tIN ITiE -300 -200 -200 -300 W -3204S) (5)
COMMENT
THIS ITSm5 INCLUor R&COVERISi OF ELPE[SES ASSOCIAT90 WITH THE INTEINATIONL SERVICE OF ICE OSSiRVATION ANO PATROL.
STATE SPARTEIT PROPRIETARY RECEIPTS ANO INTERFUNO TRANSFERS
(IN THOUSANDS OF DOLLARS)
MUOGT AUTHORITY OUTLAYS
PenIoENT'S COMMITTEE COMMITTEESUODGT FT 1970 19?, RECOiENDATION FT 107O RECOMENOATtON
FUNCTION AUTHORIZATION FT 197 RaoQuEST (OIFF[MENCE) FY 1076 8 RsEUEST (DIFFAENCE)
THIS 1TEM INCLU049 FUNDS TRANiSFERRE FRUN TNIS FOREIGN SERVICE RETIROmENT FUND TO THE CIVIL SERVICE RETIRIRN? FUND.
C4~CA' 106I-& c
Q
STATS DEPA*TUINT PNOP*IITIAT RECEIPTS ANO INTIPmUNO ftA"SIElS
41" THOUSANDS Of DOLLSS)
DOGM T AuTHORITY OUTLAYS
PRSIDO(NT'S COMMITTEE comhTTle@UOG1T FY 1971 1979 *ICOMMNOATION FT 1919 *ECOMiNONATlO1
FUNCTION AUTHORIZATION Ir s197 NEWiST £fofIEmuCa) Ptr ¶IM IMSOUIST (SaPpilsNCE)
so hEa -NT*tOE9IF N I TE -310 -30 -i3O -3SO -31 -25O10) 10)
T016 CATEGOWv INCUDES INTEREST EARNINGS ON PUBLIC POSITS.
U;.S. WGEIMNCY MI|GiATION AND OfUGEEI ASSISTANCE PINO (FN -0040-0-¶-111)
(IN THOUSANDS Of DOLLAMS)
BUOGET AUTHMNITY OUTLAYS
U T SIOS|INT'S cOmi|?f[| CowIT TE¶U0GIT ry 1974 1979 RSCOMUiNOATION Py t979 etcnE bDATIONFUNCTION AUTHNOIZAtION PT 1970 t|OUlST (ODIPIifNtc) PY 170 REQUEST IOIPPEIENCE)
ISO (UANN-INOPINIT ¶0.00 ¶.00011.000 14,720 100¶00
THE IIEuaGENCY lFuGEE AND UlIOATIC0 ASSISTANCE FUND WAS ESTAGLISMIE It @V THE ¶76 FO1IGN RELATIONS AUTHOIZATIOu ACTEPUOLIC LAW -W4-141) TO SNALS TH1 POISIINeT TO PI#VIO MOGILNCV ASSISTANCE r0o UnUPECTIO. UfGENT SSruG@ ANDIUGIATION NEEOS.
FUNCTION AUINOaIZAIION FT W7# tOUlST DIFFERENCES ) FT 1979 tliaUSS IDIFFIEN"CE)
ISO PESNANENIT- INDEIN UITE 05i Si t3 85T 1i o1(0) 40)
COGENT
FUNDS ADVANCED 9V FOREIGN GOVERNMENTS. |NTENNATIONAL OnGANIZATIONS. PRIVATE ORGANIZATIONS AND INDIVIDUALS ARE USED TO ulTy THE -
EXPENSES OF CARRYING OUT AUTHORIZED ACTIVITIES AND PURPOSES OF THE MUTUAL EDUCATIONAL AN10 CULTURAL EXCHANGE ACT OF 1591 AND TO CABS-v OUT 0THER FUNCTIONS Of THE INTERNATIONAL COUNICATIOS AGENCY (AUTHUITTI PUBLIC LAN 00-402. SECS. 701 AND 00. ULIC LAW 067--"I0. SEC 1916(F)).
IuIEtfNAtIONAL COMMUNICATIONS AGENCY: MISCELLANEOUS EAPIREO SPECIAL fORlEIG CURIENCY PROGRAMS(?7-9911-0-1-1I4)
FUNCTION AUTHIOSIATION FT 1070 NoUEST (DIFFERENCE) FT 1070 BEQUEST ItIFFISINCE)
S0 0 240 so eS(0) (5)
COGENT
THIS ACCOUNT IEP•ESINTS FISCAL VITA 1070 OUTLAYS FROM APPBOPlI&TINS IN PRIOR YEARS FON THE PURCHASE OF FOREIGN CURRENCIES. •H-E FOREIGN CU4MICIS FINANCED SPECIAL INTERNATIONAL ENISITIONS. AIN THE PUS98VATIW AM EIWAL OF CERTAIN l IPLE IN EIGVT A I-"I. SUDAN.
"01
EXPORT PROMOTION AND CONTROL
UEPORT PROMOTION AND CONTROL: DOMESTIC AND INTERNATIONAL BUSINESS ADMINISTRATION (13-1250-0-1-376)
(IN TIOlSAftO OF OOLLAS)
BUoGET AUTHORITY OUTLAYS
PRs I OEMT IS cOMMITTEE Icowl| TTEIBUDGET? p 1F? TO WOTO RCOMEMOATIOM Fv 11179 I? ICOMEINDATION
FUNCTION AUTHORIZATION. Ft 070 REQuEST DIFFERENCEE) pF toft scoutS? 4OIFFERENC&I
OS 7349.434 00,430(0) (0)
COMMENT
THE EXPORT PROMOTION AN1D CONtR*OL ACCOUNT COVERS THE INDUSTRY AND TRADE ADMINISTRATION OF THE DOPARTENIT OF COMMERCE. TH[ ACTtVI-TIES OF WHICH INCLUDE EXPORT OEVELOPMENT. EAST-VEST TRADE PROMOTION. DOMESTIC BuSINESS OEVELOpj[NT. INTERNATIONAL ECONOMIC POLICY A*NO RESEARCH. FIELD OPERATIONS (10 SERVE AS LIAISON WiT" LOCAL BUSINESS COMMUNITIES . AND TRADE RiGULATION (ADMINI STATION Of EXPORT-CONTROLS, FOR PURPOSES OF NATIONAL SECURITY, FOaIIGN POLICY AND DOMESTIC SHOOT SUPPLY AS AUTHORIZED BY THE EXPORT ADMINISTRATION AC-T). THE COMMITTEE IS AWARE THAT THE PRESIDENT'S $UDGET AUTHORITY REQuEST FOR EXPORT CONTROLS IS APPROXIMATELY S47.o000 AIBOV THE F-T 1976 AUTHORIZATION LEVEL. BuT FEELS STRONGLY THAT THE AMOUNT AUTHORIZED SHiOULO If FULLY APPROPRIATED IN VIEW OF THE IMPORTANCE OF-
EXPORT CONTROL AND AWIT-BOYCOTT ENFORCEMENT. THE *EXPORT ADMINISTRATION ADWMNOMENTS Of 1077* PROvIODE AUTHORIZATION FOR EXPORT CO-NTROLS FORt F IT197 AND FY 1iT,. ANO THE OTHER PROGRAMS OPERATE UNDER PERMANENT AUTHORIZATION. THE1 ADMINISTRATION IS lOQUISTING A $-6.272 MILLION INCREASE IN APPROPRIATIONS FOR FY 107. HALF OF THE INCREASE IN APPROPRIATIONS FOP FY 1070. MALF Of THE INCREASE IS-FOR PAY RAISES, ANOTHEi S1 MILLION IS FOR 52 NEW POSITIONS FOR EXPORT ADMINISTRATION (ISAINLY TWN M90 WOYOTT REGULATIONS), Ae TNE
THIRO M0 R CATIATGORY OF INCCREA&SS IS TO COVER &A"E COSTS FOR POSTIAG.
SUODGET 1 1976 IS?,E 1StC IfWMOATIOft iv isto lCOI DOATIOFUNCTION AUTHORIZATION Py 17T MQOUISI IOpfaSnIUCE) P1 lOS EIQUEST (OIFPIiSMA)
S.0 PI3I 1.6lU41HP 115 .SmM 7 T600 7.04(0) 4O)
THIS TRUST PUNSD WAS ESTASLISNSD AS ACCOUNT FOR CONTISOUTIONS RECEIVED PRO COM I CIAL SIM4IITIONS PARTICtPATIMG IN COIMiCISCE O-SMSOSO NDTAORE AlS IOUSTItAL IEIIGITS. TRADE CENTER SHOWS, ANO OTHER OVERSIAS TADE PROWOTISSIS (1T STATE. 631. TS STATE. 1I). 7565 P-UWM A"t USED TO PAY A PORTION OF THlE W535 S Of OP 8910"ING IN0 SUC TOADt PROMION 10 VtATS.
On W*3C.ol~
FOOD FOR PEACE PROGRAMFOOP00 n PREAC PROG"M" (P.L. 4"0) (tB-BT4-¶-lSI)
(IN THOUSANDS OF DOLLARS)
OUDOiT AUTHORITY OUTLAYS
PRES I oINT* S COMMITTEE Com ?T1TE1SUOGET FY 1O971 19t0 RECOMMENDATION FY IT? RECIEKNOATION
0.1 400 - THE FOOO FOR PEACE PROGRAM - IS A MAJOR COMPONENT OF AMERICAN FOREIGN POLICY AND ASSISTAWCE TO DEVELOPING COUNTRIES.-UNERE 1:.IS PROGRAM. U.S FARM GOOS WHICH ARE IN 10CESS OF DOMESTIC U.S. KEEDS AND FOREIGN COMMERCIAL SALES ARE SHIPPED ABROAD ON-
CONCESSIONAL CREDIT TERMS OR AS GRANTS. LARGELY TO POOR COUNTRIES MH1CH 00 NOT HAVE ENOUGH MONYV TO PAY FOR NEEDED FOO IMPORTS. -THI FO00 IS USED FOR DISASTER ASSISTANCE. FOR HUMANITARIAN PURPOSES SUCH AS SCHOOL LUNCHES ANO MOTHEI/CHILD NUTRITION. AND. INCREAS-INGLY. TO STIMULATE ECONOMIC DEVELOPMENT. IT ALSO PROMOTES AMERICAN FARM IMPORTS. THE ADMINISTRATION'S RIEuEST OF $1.0609 MILLION -IN OUTLAWS.. FOR P.L. 4i0 F0R FISCAL 1079 IS APPROXIMATELY THE SAME AS THE CURRENT YEAR FIGURE. AND IS DESIGNED TO CARRY THE PROGRA-N FORiARD ABOUT ?"I SAME VOLUME I4 FISCAL 10?7 - 6.7 MILLION TONS - AS IN FISCAL 1070. HOWEvER. THE COMMITTEE HAS RECEIvEO AUTHORI-TATIVE TESTIMONY INDICATING Tht ADMINISTRATION WILL SEEK INCREASED AMOUNTS FOR P.L. 400 FOR FISCAL 1070. AND THAT THE AOMfItISTRATIO-N'S BUOGET SUBMISSION FOR FISCAL 1070 REPRESENTED A SIGNIFICANT CUT FROM AMOUNTS SOUGHT AND JUSTIFIED RY AGENCIES INVOLVED IN DETER-MINING THE NEEOS OP THE PROGRAM. AND AT THIS TIME Of BOUNTIFUL SUPPLIES IN THE UNITED STATES. THERE0 IS NO DOUBT ABOUT THE AVAILABI-LITY OF AOOITIONAL AGRICULTURAL COMMO0ITIES FPO P.L. 400. BASED ON INFORMATION INDICATING ADDITIONAL IMPORTANT NEEDS FOR P.L. 400 -IN THE COMING YEAR. If THE FUNDING MERE AVAILABLE. THE COMMITTEE RICOMMENDS OUTLAYS OP $1.417 MILLION PFO P.L. 440 IN FISCAL 101, -AN INCREASE OF ABOUT $340 MILLION ABOVE THE ADMINISTRATI010S REQUEST FOR OUTLAYS AND BU0BT AUTNORITY. *0 THI OUTLAY UMI&NT IS THE -REV PIOUNGS IN ISSNTIFYIN 11T P.L. 460 PROGRAM LEVEL.
INTERNATIONAL FINANCIAL INSTITUTIONS
INTERNATIONAL FINAi4CIAL INSTITUTIONS 0I-0010i-0-1-0)
(IN THOUSANDS Of DOLLARS)
96O04T AUT0i0ITV OUTLAYS
PiiS 119 TI*T's COMMITTEE C€OiI TTiEIUOG(T FT 1976 1979 RECOMMENDATION FY 19s9 RECOMMENDATIONFUNCTION AUT0QIZ01ATION Fir lOlt REQUEST (DIFFERENCE) vy sole REQUEST (OIPFERE11CE)
Tfi INT(NNATIONHAL FIJA'4CIAL INSTITUTIONS INCLUDE THE WORLD BANK GROUP IBIDD. IDA. AND IFC). THE INTEiR-AWIERICAN DEVELOPMENT BANK-AND ITS CO CESS IONAL FUNO fRm SPECIAL OPERATIONS. T?" ASIAN DEvELOPMENT BANK AND ITS CONCESSIONAL ASIAN DEVELOPMENT FUND. AND THE
AFRICAN DEVILOPMENT FUND THE LAGE! INCASE IN THE FISCAL YEAR 1979 REQUEST FOR THE IF[$ IS A RESULT OF THE ADMINISTRATION'S DIECI"StOle TO REQUEST APPROPRIATION OF ALL PREVIOUSLY AuTMORIZED F"te. INCLUDING SOME ACCOUNTS IN WHICH THE UNITED STATES IS CURRENTLY CE-
LINQUENT THE LARGE DISPARITY BETWEEN FISCAL YEAR 1979 BUDGET AUTOItlTY AND OUTLAYS IS EIPLAINED AS FOLLOWS: CALLABLE CAPITAL (St.-37 MILLION Of THE RIQUEST) MUST ALSO BE APPROPRIATED EVEN T'OUei IT WILL kOT APPEAR AS AN OUTLAY UNLESS CALLED BY 004 OF THE INSTIT-UTIONS. A POSSIBILITY WHICH HAS NEVER OCCURRED TO DATE, AND CONC'SSIONAL FUNDS APPROPRIATED TO THE IFIS Al1 NOT NECESSARILY DRAWN 0- €COWN RI THE INSTITUTIONS IN THE SAM YEAR AS THEV AlE APPROPRIATED, BiUT MAY BE DISSuRSEO FOR DEVELOPMENT PROJECTS OVER AS IXCH AS 10- CA C.YEAR PIRIODS. THE COMMITTEE ON INTERNATIONAL RELATIONS HAS OVERSIGHT RESPONSIBILITY FOR U.S. PARTICIPATION IN THE INTERNATIONAL F-
INAKCIAL INSTITUTIONS. THE COMMITTEE ANTICIPATES A W0OR VIGOBOUS PURSUIT OF THIS RESPONSIBILITY DURING FISCAL VIAR 137. TO ERPLO*-I THE RELATIONSHIP BETWEEN THE PROGRAMS UNDOETA41N BY THESE INSTITUTIONS TNSHs OF U.S. BILATERAL ASSiSTARIL PI0GRAuS AN OIGINU FAC-TORS AFFECTING U.S. RELATIONS wItH DEVELOPING COUNTRIES. (SEE £ITACoImEiT)
SYNOPSIS OF FY 1979 IF1 BUDGET PROPOSAL
IDo1lr amounts in mUioos|
Institution Fiscal year 1979 request Part previously requested but eat appu•wimaled
Werfi Bank Group:IDA - - -----.- -........ $1.550.0 - -................................ $375.0 In fiscal yew 1978.i .. . ......... ...................... 666.0 (90 percent callable) ...................... 143.0 (90 percent callable)i fiscal ym 178.IFC...... .. . .. ... .. . ... ... .. 40.0 -- i---- - ................ 6.6 in m cal yy a 1197 .
late-Am,•.wAn ev Dopment Bank:Ordinary Capital ... ...... S. (95 percent Callable) ...................... 138.8 (80 percent Callable) in fiscal years 1977-78.Fund for Special Operations 325.3 ......................................... 125.3 Il fiscal years 1977-78.
Asian Development Bank:Ordinary Capital 239.4 (90 percent Callable) ................... 3.6 (90 percent Callable) in fscail yoer 1978&Asian Dvelopment Fund... --........ . ............... 70.5 ................................. 10.5 in fiscal yo 197.
African Development Fund- 25.0............... ............. hone.
OTHER PROGRAMS, TRUST FUNDS, AND OFFSETTING RECEIPTS
IIMTIOUI I MNA, 0 CTO$ 5l2l (01040200001-1-5)
4I1 TNOUSNMIOS OF DOLLARS)
DUoD" AUINOIITY OUTLAYS
PUS IDENT,5 COMM01ITTEE CZlITTElBUDOGET P 1,71 1917 RICOMINO&AIOM Pt 1979 RICOMIIINDATI ON
umCT I ON AUTHORIZATION rT 1070 R"QUIST (OIlPiAlICEl) Pt Ill* REQUEST 401DIPERlNCE)
I1"1.00 II, 13113 1 .113 11T. tsifi- 13.013(0) - (01
C•ENT
THE U.S. INTIRNML T0RD0 COMMISSION INVISTIGAT9S AND REPORTS TO THE PRESIDENT AlO CONIESS ON T11 CONDITIONS. CAUSES. A£0 AFFECT*S Of C IMPETITION ETiEENi DOMESTIC AND FOREIGN INDUSTRY. TlH EXECuTIVE BRANCH WAS REQUESTED An FY 191T SUPPLEMENTAL APPROPIATIOA N O-P $700.006 FOR PAY RAISES. NOTE: ALTHOUGH THE JURISDICTIONAL RESPONSIGILITY FOS T0 1 INTION*L TRADE COMMISSION liSTS MIlH THE WAYS -SIMEANS COMITIE THI InTIENATIONAL RELATIONS CO¢*ITTIA 1 INCLUDING THIS 11r* I4 ITS REPORT IN1 1 1 TO POVIDE A CFPiEIT LISTIIIO-OF "LL A /COJMTS 11 THE INT1 AIIONA.L APPAIRS FUNCTION.
"APAO-U.S. FIIENDSHIP TRUST PUNO (99-0412-O-7-154)
THE JAPAN-UNITED STATES FRIINOSHIP ACT OfP WIS ISIASLISHLD THI JAPAN-UNITED STATES FRIENDSHIP TRUST FUNO. TO OI USED POO THE PR-OMOTION OF SCHOLARLY. CULTURAL. AND ARTISTIC ACTIVITIES BETWEEN JAPAN AND THIE UNITED STATES. THE AMOUNT AUTHORIZED B1 CONGRESS CAM-I TO 524 MILLION, THE INITIAL APPROPRIATION WAS POR i5t MILLION. THE INCOME OF THE FUND. AND NOT TO EXCEED S EINCEWT ANNUALLY OP T-HE PRINCIPAL OF THE PUND. IS AUTHORIZED TO E EXIPINDED TO PAY TH! EXPENSE$ OP THE COMMISSION A£0 TO MAKE GIANTS TO PROVIDE SUPPORT -POR STUDIES. ,ILLONIWIPS. SCNOLARS1IPS. SOOL COLLECTIONS. ART PROGAMS. AMD OTNER CuLTURAL AND IOUCATIONAL ACIVITIUE, PRINARILI Do,TWE UNITED STATES.
CAD
POnt061 CLAIMS SET TALENT COISS ION (4741"0-0-I-Ill)
IlN THOUSANDS OF DOLLARS)
MUD"ET AUTHORITY OUTLAYS
PRESIDENT'S COMMITTEE COWITTEESUOGTFTP 190 7II?, SICOU6m[aTIO p Isis REUST (DENDATION
FUNCTION AUTHOIZATION PY 1076 550uS? IDIPPS6SNCE) FT 6)6 SEGUEST (19FPS6ENCE)
1"- PSMANNT 920 1.41S lO.S 600 630 63040) 46)
CO NT
IN 1919. THE FOPIGw CLAIMS SETTLEMENT COMMISSION WILL ADJUDICATE TNS CLAIMS OF AMERICAN CITIZENS WHOSE PiOPEATTES WERE NATONA-LIZED. EXPROPRIATED. OR OTHERWISE TAKEN ST TH4 GERMAN DEMOCRATIC REPUBLIC. THE COMISSION MILL ALSO PROVIDE INFORMATION AND ADVICE-TO TNt PUBLIC AND FEDERAL AGENCIES ON PAST AND PENOING CLAIMS PROGRAMS. SOTIS ALTHOUGH THE COMMITTEE ON INTERNATIONAL RELATIONS D-
ots NOT NAyS PRIMARY .uRISDICTION OVER THIS ITEM, IT *AS SEEN INCLUSO IN TINS C TTU'5 $mPOT N160606 TO PV|N A£ COUPLTS LIS-TING OF ALL TN9 ACCOUNTS IN TNt INTERNATIONAL AFFAIRS FUNCTION.
THE U.S. CUSTOMS SERVICE ENFORCES LAWS AGAINST SMJGGLING. CONTROLS PERSONS AhD ARTICLES ENTERING AND LgAVINO THE UNITED STATES.-
AND COLLECTS IMPORT DUTIES AND TAXES. BASIC AUTHORITY FOR TwESE ACTIVITIES IS CONTAINED IN THE TARIFF ACT OF 1930 AS AMENDED (16 -U.S.C. 1202 IT $EQ.). NHE COMMITTEE HAS OVERSIGHT .uUISOICTION WITH RESPECT TO CUSTOMS ADMINISTRATION CA"I1O OUT UMOS TONS OU0T ITM. TNS 218CUIIVS BRANN NAS tIQUISTSO ANO FT 6176 SUPPL.MENTAL APPROPRIATIO OP $.204 MILLION.
FUNCTION AUTHORIZATION pY 1971 REOUIST IOIFF||iNCI) PT 1976 REQUEST (IPFFSINICI)
IS PICNiiNT -IeOPFIgN 6 as 0a as 2S a5£0) £0)
€OIWN~T
THESE FUNDS ARE DIERIVED FROM HOST COUNTRY CONTRIBUTZONS AN0 DONATIONS IT PMIVATi GROUPS in THE UNITED STATES AND A USI[O To SPPO9T PILACIg COWDS P60.i0rTS ABROAD.
09PdeTMEMT OF TRANSPORTATION: iMISCE[LLA*I[US TRUST FUN0S(#6.T) (00-11071-6-I7-01)
FUNCTION AUTH"OIZATION FT 1976 REQUEST DIFFERENCEE) FY 1975 eOUIEST IDIlFfeNatC)
1SO PESMANENT-INO|EPIN TE 1,623 2.40O .400 6.234 2.400 1.40040) (03
COMMENT
UNDER THE FOREIGN ECONOMIC ASSISTANCE ACT AND UNOES AGREEMENT WITH THE INTONTATMONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AM-0 THE EIPORT-IMPORT SANK OF WASHINGTON. THE FEDERAL HIGHWAY ADMII|STRATIOm MEND0ERS 19CHkICAL ASSISTANCE AND ACTS AS AGENT FOR THE P-UJCHASE OF EQUIPMENT AN£ MATERIALS PFO CARRYING OUT HIGHWAY PROGRAMS IN FOREIGN COUNTRIES. THE TRUST FUNO CO•MSSTS Of U.S. DOLLARS-
AOVANCED BY FOREIGN GOV9SIKMTS PON SUCN SERVICES. DUAlNG T1E CURRENT V1*4 THE SE V55 IS Aft 4AM 3(316 1RED TO COSTA AI3A. IRAN.-PANAMA. AMD NUWAIT.
THIS ITEM INCLUIAS DOLLAR CONVERSIONS OF FOREIGN CURRENCY LOAN AEPAYMENTS. LOAN RIPAVEKNTS FROM THo U.K.. RECOVERI1S WM0M1 TAE -
LOiD LEAS& PROGRAM, ANM OTHER MISCELLANEOUS IRCEIPTS. RECOVERIES AN10 REFUNDS.
TABLE OF ESTIMATES FOR FISCAL YEAR 1979[in thousands of dollars]
Budget authority
CommitteePresident's recommen-
request datlonProgram and budget function
Outlays
CommitteePresident's recommen-
Difference request datlon
Presideo.'s Bdget Raques" foe Ezintlng Programs Which qtire Autbefiliiig loslatlf POWto Enatmtent of ApWrOlp~tlons Fer Flei Year 171:
instermnaioml Security Amganee:Grant Military Assistance (150)............................International Military Education and Training (150) ............................Foreign Military Sales Credits (150).... ..................................Security Supporting Assistance (150) .................................................Presideet'a ]Foreign Assistance Contingency Fund (150) ---------------------------------International Narcotics Control Assistance (150)-
iatermaiounal Development AsMalanee:Functional Development Assistance Program (150) ..................................American Schools and Hospitals Abroad (150) ........................................ .International Organizations and P'rograus (150) ------................International D)isaster Assistance (1,50) ......... - -..........Operating Expenses of the Agency for International Development (150).__
Department of Slaie, IsatlerAl Commuarn tim i t Apency. and Beard for InternmtloasiBroadcasting:
Administration of Foreign Affairs (150)--------------------------International Organizations and Conferences (150) ....................................Migration and Refugee Assistance (150) ------Foreign Buildings Operations (ISO) ......................................International Commissions (300) .............................International Communications Agency: Salaries and Expenses (150) ... . .International Communications Agency: Center for Cultural and Technical Interchange
Between East and W est (150)..........................................International Communications Agency: Acquisition and Construction of Radio Facili-
ties (150) .------------ -------------------------------------------Board for International Broadcasting (150) ----------------------------------------------
Prgrmn and budget function request dalton Difference request datlou Difference
LEGISLATIVE INITIATIVES TO EXTEND PROGRAMS WHICH DO NOT REQUIREAUTHORIZING LEGISLATION FOR FISCAL YEAR IMTh
Africa Foundation (150) ------------ -------------------------------------------------- 0 30,000 +30,000 0 2.000 +2.000Institute for Human Rights and Freedom (150) ------------------------------------------------- 0 5.000 +5,000 0 5,000 +5, 000Commission on Peace Academy and Center for Conflict Resolution (150) ------------------------ 0 500 +500 0 500 +500
PREIDENTrS BUDGET IKO EXTEND PROGRAMS WHICH DO NOT REQUIREAUTHORIZING LEGISLATION FOR FISCAL YEAR IM5T
Imbtarnm i..a 8rcaky Asalwamce:Advances, Foreign Military Sales (150) ---------..-------------------------------------- 12,300,000 12,300,000 0 9.500,000 9,500.000 0Advances, Foreign Military Sales; Proprietary Receipts (15o) --------------------------- -9,200,0•0 -9,200,000 0 -9,.200, 0O -9,200,000 0Foreign Military Sales Credith: Proprietary Loan Receipts (150) ..----------------------- -17, 000 -297,000 0 -2117.000 -2a7, 000 0Military Assistance. South Vietnamese Force (I5) ------------------------------------- 0 0 0 3,000 3,000 0Lucauidation of Foreign Military Sale Fund (150) --------------------------------------- 0 0 0 -2,000 -Z,000 0
iurnaueeima Develeopment Assidance:Sahel Development Program (150) ------------------------------------------------------ 90000 i00,000 +10,0 00 18,000 19.000 +1,000Housing and Other Credit guarantyy Programs (150) ------------------------------------ 0 0 0 2.333 2,333 0Inter-American Foundation (1OW) ... .. .. .....----------------------------------------- 7,8W2 2%,000 +17,118 9,354 19,624 +10.270Darien asp Highway (150) ----- . ..--------------------------.-.--------------------- 20,000 20,000 0 7,. 6". 7.600 0Payment to Foreign Service Retirement Fund (A I) Payments) (150) ------------------ 24,820 24, 820 0 24, 820 21, 820 0International Development Assistance-Consolidated Working Fund (15) 0 0 0 626 626 0Economic Assistance, Proprietary Loan Receipts (15O)-----------------------------33,.966 -338.966 0 -33%4.966 -338,966 0Economic Assistance. Proprietary Loan Receipts (903) ----------------------- - 27-8, 5u -278, 525 0 -278.52.5 -278.525 0Disaster Relief Assistance (150) -------.------------------------------------------------ 0 0 0 10,192 10,192 0Assistance to Portugal and Portuguese Colonies (150) ----------------------------------- 0 0 0 6,000 6,000 0Prototype Desalting Plan'! (150) --------------------------------------------------------- 0 0 0 5.000 5,000 0Social Progress Trust Fund (150) -------------------------------------------------- 0 0 0 9,030 1l. ,00 0Development Loan Fund (150) ----------.-------------------------.-------------------- 0 0 0 32,0"23 32,023 0International Fund for Agricultural Development (150) --------------------------------- 0 0 0 20.000 20,000 0
Doswrtmoent of w and inatormaloml Cumunmamlioea Aomep;:Payment to the Republic of Panama (150) ---------------------------------------------- 2,328 2, 328 0 2,328 2,328 0Department of State Working Capital Fund (150) ---------- 0)----------------........... 0 0 0 an 53 0Department of State. Miscellaneous Trust Fund (150).. 740 740 0 740 740 0(ifts, Bequests, National Commission on Education, Scientific and Cultural Coope• -
tion (150 ) ------------------------------------------------------------------------------ 25 25 0 20 20 0Intematiorisl Center, l)istrirt of Columbia (150) ---------------------------------------- 2,346 2,346 0 2.346 2,346 0Payment to the Foreign Service Retirement Fund (State Department Payments) (150). 92,300 92,300 0 92,300 92,300 0Foreign Service Retirement and Disability Fund (600)-----------------------------207,817 207,817 0 117,430 117,430 0Eighth Pan American Oamen (150) -------------------------.-------------------------- 0 0 0 6, 8" 6,848 0Stat. Department Proprietary Receipts and Interfund Transfers:
U tah all II • ..------------------------------------------------------------------------ 36, M8,, 4M8 27, 32Z. $21 +5,1141, 17,N•,$4 18,39,4.9 +44k402
95th Congress COXMXITT• PRINT PCosMITr962d Session PRINT 95---
REPORT
OF THE
COMMITTEE ON INTERSTATE ANDFOREIGN COMMERCE
TO THE
HOUSE COMMITTEE ON THE BUDGET
PURSUANT TO SECTION 301(c)CONGRESSIONAL BUDGET
OF THEACT
0)5th Congress, 2d Session
0
SUBMITTED BY MU. STAGGERS, CHAIRMAN
MARcH 15, 1978
U.& GOVERNMENT PRINTING OFFICE
WASHINGTON : 1978
r. -
(m)
M40-
360
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCEHARLEY 0. STAGGERS, West Virginia, CAairmns.
JOHN S. MOSS, CaliforniaJOIhN D. DINGELL, MichiganPAUL 0. ROGERS, FloridaLIONEL VAN I)EERLIN, CalitoviaFRED B. ROONEY, PennsylvaniaJOHN M. MURPHY, New YcikDAVID E. SATTERFIELD Il, VirgtniaROB ECKHARDT, TexasRICHARDSON PREYER, North CarolinaCHARLES J. CARNEY, OhioRALPH H. METCALFE, IllinoisJAMES It. SClHEUER, New YorkRICHARD L. OTTINGER, New YorkHENRY A. WAXMAN, CaliforniaROBERT (BOB) KRUEGER, TezasTIMOTHY E. WIRTH, ColoradoPHILIP R. SHARP, IndianaJAMES 3. FLO RIO, New JerseyANTHONY TOBY MOFFETT, ConnecticutJIM SANTINI, NevadaANDREW MAGUIRE, New JerseyMARTY RUSSO, IllinoisEDWARD J. MARKEY, MussachusetteTHOMAS A. LUKEN, OhioDOUG WALGREN, PennsylvaniaBOB GAMMAGE, TexasALBERT GORE, JR., TennesseeBARBARA A. MIKULSKI, Maryland
SAMUEL L. DEVINE, OhioJAMEG T. BROYHILL, North CarolimTIM LEE CARTER, KentuckyCLARENCE J. BROWN, OhioJOE SKUr[TZ, KansasJAMES M. COLLINS, TexawLOUIS FREY, JR., FloridaNORMAN F. LENT. New YorkRDWARD R. MADIGAN, IllinoisCARLOS 3. MOORIIEAD, CaliforniaMATTHEW 3. RINALDO, New JerseyW. HENSON MOORE, LouisianaDAVE STOCKMAN, MichiganMARC L. MARKS, Peous.yivania
W. E. Wn.L•AMSO., Chief Clerk and StafDbrectew,KENNE'IR J. PAINTER, First Aasistadt Clerk
ELEANOR A. DiNzINs, Assistaid ClerkLEwis E. BEaRY, Mhinorut Counst
Profeesso'i StaffELIZABETH HARRISON, CbouLl
JEFFREY If. SCHWARTZ, CouwdBRIA. R. MOIR, CtUnnd
KAREN NELSON, Profeuional Staff MemberRoss DAViD AIN, Counad
CHRITiOFHER EUGUENE DUNNE, CounSelWnLLIAM MICHAEL KITZUILER, PrOfeaaioal Staff MeMber
MARK 3. RAABE, CounidTuoMAs M. RYAN, Counsed
JAwME 8. COWEN, Profcueiosw Staff Member
361
LETTER OF SUBMITTAM
CONGRESS OF THE UNITED STATES,HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN CQ.NflERCE,-
Hon. ROIBERTN. GIAIMO Waehington, D.C., March 15, 1978.
Chairman, Committee on te Budget,House of Representatives.
DEAR MR. CHAIR.MAN: I am submitting herewith the report of theCommittee on Interstate and Foreign Commerce to the Committeeon the Budget called for by section 301(c) of the CongressionalBudget Act.
Sincerely yours, HARLEY 0. STAGGERS,
Chairman.'Ux)
362
REPORT OF THE COMMITTEE ON INTERSTATE ANDFOREIGN COMMERCE TO THE HOUSE COMMITTEEON THE BUDGET
This is the report of the Committee on Interstate and ForeignCommerce to the House Committee on the Budget- called for by sec-tion 301(c) of the Congressional Budget Act, which in relevant partprovides as follows:
On or before March 15 of each year, each standing com-mittee of the House of Representatives shall submit to theCommittee on the Budget of the House * * *--
(2) * * • the estimate of the total amounts of newbudget authority, and budget outlays resulting there-from, to be provided or authorized in all bills and reso-lutions within the jurisdiction of such committee whichsuch committee intends to be effective during the fiscalyear beginning on October 1 of such year.
The Committee wishes to point out that the amounts set iorth asCommittee recommendations are estimates, since many of the pro-grams set forth in the tables printed hereafter have not as yet beenthe subject of hearings, and others, although under consideration bythe full committee or its subcommittees, have not as yet been placedin final form by the committee, or subcommittee, as the case may be.
(1)
I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATION PRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1973
OIn millions of dollars
President's requ
BudgetauthorityMajor issue or program
est Committee recommendation
Budgetauthority Outlays
Outlays (difference) (difference)
E ducational Broadcasting Facilities an I TelecommunicationsDemonstration Act (sec. 3).
Educational Broadcasting Facilities and TelecommunicationsDemonstration Act (sec. 4(a)).
Federal Trade Commission ---------------------------------
ecurttes and Exchange Commission .......................
I ublic Health Service Act:Comprehensive grants to States and hypertension (sec.
314(d)).Disease prevention and venereal disease (secs. 317 and 318).
Migrant health centers (sec. 319) ------------------------
Community health centers (sec. 330) .....................
National Health Service Corps (sec. 338) .................
01
66
41
65
90.25
34.5
301
63
--------- . . . 30 -------------- See attached letter regardieg PNesidential request budget authority.(+30 )
------------- -- -I H.R. 11100, an administration bill, would provide for the transfer of this pro-gram ,ruom the Department of Health. Education, and Welfare to theCorporation of Public Broadcasting.
64 70 68 Greater funding in hscal year 1979 has been recommended by the committee(+4 ) (+ 4) for the Federal Trade Commission to counter cost of living increases and
projected added expenditures for implementing the proposed enefiylegisiation. Committee recommendations for authorizations for 1980 are$75,000,000 and for 1981, $80,000,000. (Financing method. annualauthozation and annual appropriation).
40 55 54 Committee recommendations for authorizations to, the Consumer Product(+14 ) (+14) Safety Commission include projections which would enasle the Commis-
sion to upgrade its efforts to regulate hazardous chermicats. They alsoinclude funding for establishing and enforcing mandatory standards onhome insulation. Recommendations for auttorizations for 1980 are$60,900,000 and for 1981, $65,000,000. (Financing method. annual au-thoiization and annual appropriation).
65 70 70 Greater funding in fiscal year 1979 has been requested by the committeeA+-5- ) (-4- 5) for the SEC to nict cost-of-li, ig increases and projected additional
expenses from implemen!,ng the 1975 securities amendments, includingthe national market system, and from increased enfore.emiet and surved-lance related tr the burgeoning options trading. The recommended au-thorizations for hiscd years 1979 81 are $70,000,000, $80,000,000. and$91.000,000. respectively. (Financing method: Annual authorization andannual appropriation).
.__ Would provide increase of 15 percent over fiscal year 1978 appropriate) and increase funding ftr hypertension by ,25.000,00............... Includes increased funding for Immunization progr.ams.)
.-------------.See justification No. 1.)
.--.-..-------.Committee recommends modest expmasion of existing program.)
W
0i
0i
0
m
Comment
C43
Family planning (title X) ...............................
Sudden infant death, genetic diseases, and hemophiliaprograms (title XI).
National Cancer Institute (title IV, pt. A) ..............
National Heart. Lung, and Blood Institute (title IV, pt. B)...
National Reseaich Service awards (sec. 472) ..............
Medical libraries assistance (sec. 390) ....................
National health planning and development (title XV) -------
Health resources development (title XVI) .................
Nurse training (title VIII) ..............................
Health services research (sec. 303(iXl)) ..................
Health statistics (sec. 308(iX2)) .........................
Ccmmunity mental health centers (CMHC Act) ................
Drug abuse (Drug Abuse Office arid Treatment Act) ...........
Developmental disa:hilities (Developmenial Disab•lities Servicesand Facilrties Construction Act).
Hcme health services (sec. 602 of Public Law 94 63) ...........
U.S. Travel Service:Dcrnestic travel program ......................--
Reflects commttee's intent to expand research efforts li occupational auienvironmental carcrinoiens.
Reflects committee's intent to expand research efforts in occupational andenvironmental heart and lung diseases. including smrkrin related.Incorporates tireineng currently being suplprted under other lutnorities, costof living increases, and expansion of traininR in shortage fields.Would revitafire important community program which has had no growthfendinR level for several years.Increased funding necessary to support expanded functions required by costcontainment leaislatir,.Reflects 1l06,O000.ig for modernization of public hospital-, $30.000,000 firoutpatient facilities, $120.000.OOO for area development funds.Committee proposes 2-yr extension of exist ng law such that all health pro-fessions traininR authorities can be examined in 1980.Reflects increased traininR authority, expansion of programs in new areas ofservices research such as controlling costs.Reflects consolidation of statistic gathering activities, wider dissemination ofinformation.Would restore feVnding for new starts at S30.000,000. increasee funding forfinancial distress to $25,000,000, continue rape control p!o&rams.See justification No. 1.
See justification No. 3.
Committee feels that home health care proRrams represent a cost-effectiveand preferable alternative to institutional care in man* instances.
Additional funding is nee.... to i. fe.... then umber o -4 i..A ......."...Ito 600 and to provide clerical assistance anJ travel funds fo the additionalinscectors.
USRA has testified that. $27.200,00G is sufficient.
-.-...- The Secretary of Transportation is currently undeitakir• a comprehensiveS.. . reexamination of the Amtrak route system and will submit feommenda-S........ lions on an optimal system to the Congress. In the iforim, sufficient f,,ndsmust be provided for operation and capitalization of the current system
to avoid dsmantling the system pitai to congressioral action on theSeer etarty't,4eoowmendat ons.
C4
. 7 7 -----------
Additionaf funoing provided in order for the counsel to participate in theAmtrak route structure study being performed by 00).
.
365
4Attacled Idter EXEtL'TIVE OFrFIE OF TilE PRESIDENT,
OFFICE OF MANAGEMENT AN) BUDGET,lWasi bq1tun, D.C.
lion. DANIEL .1. Fi.oon,(Chairman, Labor-Ih dt!,, E,'ducalao;, anfd Ild/jare S,,bc,,,,,m;ettfe,
Committee on Appropriat;on., !Iou.c qj RE,'prcact tatliM1,Wastiigton, D.C.
DEAR MIR. CHAnIMAX: This pa4t fall the Pre.sident submitted forconsideration a bill to reauthorize portions of the CoiilmiiiicatiousAct of 19:34, as amended, entitled the "Public Broadcasting FinancingAct of 1978."
One of the features of the bill was the relocation of re.-lon-ibilityfor the administration of asi.tan.e for ed'(latiolial broa(ldcastiflgfacilities from the Department of Health, Education, and Welfare tothe Corporation for Public Broadcasting.
Appropriations for this activity for 1979 did noi appear in eitherthe Dleparlinent's or Corporation's request p)ending- resolution ofcertain technical issues. Please be aS.l1r1el, its indicated in b)oth alenicescongressional submi.-sions, that the admini-tration seeks slu)p)Ort foreducationfl broadcasting facilities and that the "allowance for ('oil-tin:encies" is sufficient to cover this r~equest.
If I can be of further help concerning this matter, please do nothesitate to contact me.
Sincerely, W. BmA CUTTER,
Exectt•'re AlssociateDirector for Budget..
JUSTIFICATIONS FOR FORaMAT I
JAstification NX. 1,The committee recompiends a 15-percent in('reaue in the .•al year
1978 funding IevVI for comulrehensive ,ri-nts to the States for healthservices, wig'a:1t. health centers, sfInden infant death syndrome,genetic disea.-e counseling and screening programs, and d(rg abuseprevention, treatment and rehabilitation Jprogrramis. Thee committeefeels that. this level of funding is appropriate in that it will supl)portmost, of the prorin'ms at existing real dollar levels. taking into accountinflation in thel'fealth care sector and increased program costs.
Justification No. 2The committee has recommended increasing substantially the
President's request for supl)port of family phnning service progranilsand research activities. The committee recommends, that $180 millionbe allocated for family planning service Frograimsi and $100 millionbe- allocated for family planning and population control researchactivities.Jusification No. 3
The commit tee expects appropiations for university affiliated facil-ities and special project grants to reinain at the levels of the fiscalyear 1978 appropriations, $6.5 million and $19.6 million, respectively.The committee recommends an increase in funding for l)rote('tionI.and advocatcy activities from $3 million to $9 nmllig:n, and atn increasein funding for State allotmentbi from $30.1 million to $60 million.
II. PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIRE AUTHORIZING LEGISLATION FOR FISCAL YEAR 1979lin millions of dollars
President's request Committee recommendation
Budget Budgetauthority Outlays authority Outlays CommentMajo issue or program
Ptl III--Electfic utility reform:Department of Energy:
Small hydro projects .... .Northern tier pipeline ... . ..Increased regulatory responsibilities to FLRC-..... ... ... .. ......
"1echitical assistance program... ... .. .. .. . .Grants to State regulatory commissions ----------. .Consumer service program ...... .. .. .. . . . .. ..Rate reform initiatives_......
Committee has not been advised of program details and, while not fore,closing future action, has no recomjneidatboi with respect to this iuave
550 ............... See Justification.(+287)
130 .............. See justification,(+12)
32 ..............
... See letter.
5S0032.51550
101100
32
400bOit,-8
2
850
40151
4010R
.°..o...o ....... ..... .......
... .. . . .
• CA3
367
6
JUSTIFICATIONS FOR FORMAT I1
The administration has requested $263 million in additional fundsfor a child health assessment program, $118 million for medicaid cover-age of low-income pregnant women, and $8 million for coverage ofmigrants. The Subcommittee on Health and the Environment is cur-rently considering these legislative proposals, and committee action isexpected this spring. The committee expects to expand the CHAPproposal to provide higher Federal matching for certain States, tocover additional children, to cover migrants and hard-to-place adoptedchildren, and to broaden benefit coverage. The committee recommendsincluding $450 million in additional funds over the current law forCHAP. Additionally, the committee recommends an increase in fundsto cover additional pregnant women, for a total increase of $130million to cover this population.
Attaclhd letter1lon. ROBEFT N. GIAI.1wo,Chairtnan, (u,,m ;ttee ai the Budget,U.S. HoFxe oif lt-preseitat i1's,11'a.h iti.toti, P.C.
DEARI MR. ('HAIR•MAX: We are plea.sed to provide to you our 1esti-mates of the funds to be provided in legislation for the coming fiscalyear with respect to energy programs. You should know thut theproblem of providing t he(e estimates is considerably complicatedthis year by reason of the fact that the National Energy Act is stillin conference and that the precise dimensi9ns of the programs arenot yet entirely re-,olvedl. Additionally, the DOE atuthorization legi.-lation falls within the jurisdiction of several Committees and we havenot yet been able to determine precisely wherp tlip jurisdictionalresponsibility ies lie.
Accordingly, the figures which we present here will require carefulanalysis and effectivee communications between our staffs as mattersprogress.
D9E AUTHORIZATION
As you know, tho ,total amount requested by the DOE "o!r thecoming fiscal, year is $12,751,030,000. The Committee on Science andTec•hology hasI introduced legislation (I1.R. 10969) to authoizecertain fimid•i, and (Chairnman Udall and I have introdlu((l legislation,Il.R. 11392, to authorize programs under our jurisdiction, as wellas to aulthorize certain programs which flow within the jurisdiction of~.ewr'al C(ommittees. There is overlap between II.R. 11392 and 'HR.10969 and the precise nature of this overlap is difficult to determineat. thi.,, time.
The amounts authorized in H1.R. 11392 for fiscal year 1979 areas follows:
Once again, we must stress that this legislktion is still in tl-e rromcsof formation and that ai number of other (committees have programswhich are included within this legislation. For example, the BankingCommittee authorized certain weatheriza tion prograins and tlhePublic Work-- committee e has authorized certain programs for Federalbuilding, a. well.
Our ,,ttdr will be happy to sit down and discuss these figures indetail with -ours. I believe that communication of this nature isimperat i e I.t•( aise of the overlap between committees and betweenthe bills Inhtol(,cd. We look forward to working with 3 ou.
"HARLEY 0. SIAGGERS,Chairman.
IIL PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING LAWS WHICH MANDATE SPENDING IN FISCAL YEAR 1979 WITHOUT FURTHER ACTION BY CONGRESS
Ila millions of doltnrsi
President's request Committee recommendation
Budvt BudgetMajor issue or program authohe Oula• authority Outlays Comwent
State grants for medicaid:Hospital cost containment .............................. -100 .............. -100 .............."Common audit ........................................ -35 .............. -35 ..............Quality control ........................................ -399 .......................................... No legislation .ecessary. Savings can be accomplished by admnlustrahw
action. No recommendation as to amount of savings.
IV. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
IlIn millions of dollars
Fiscal year-
lsp l1W.. 19F1. 1982 1983
BA 0 BA 0 BA 0 BA 0 BA OCommentInitiative
No fault auto Insturan:e: Jo establish basic sta-ilards for 0.5State no fault benefit plans for the rehabilitation and com-pensation of motor vehicle accident victims.
Fire Prevention Act of 1978: To amenO the Flammable Fabrics .5Act to direct the Secretary of Commerce to study the neces-sity and feasibility of establishing Federal fire safety andcontrol standards and/or a Federal assistance program toaid State and local govenmentss in the enforcement of fireprevengon codes.
National'Highway Traffic'6afety Administration: "National 60Traffic and Motor Vehicle' Information and Cost SavingsAuthorizations of 1979 and 1980."
0. .. 0.35 - ........ .Bill authoiires up to $503,0)2 in appropriations for the Review Board tocarry out its functions under this acL Any sums appropriated will re-main available until expended.
During the 94th Cong., CBO estimated that the Federal Governmentcould realize $6,800,000 in total annual savings by enacting no faultlegislation. The study was based on a survey of 6 of the largest Federalagencies (in terms of motor vehicle usage). The savings were com-Puted from the projected decrease in tort claims and suits against theUnited States for bodily injury arising from auto accidents involvingifovernment-owned or operated cars.
S..................................................Bi authorizes up to $500,000 in appropriations for the Secretary ofCommerce, actmig through the National Fire Prevention and ControlAdministration, to conduct the study required under the act. No addi-tional authorizations for appropriations will be required to fund thestudy.
60 ................................................ Administration draft bill authorizes up to $60,000,000 in appropriationsfor fiscal year 1979 and $60,000,000 in appropriations for fiscal year1980 for the Traffic Safety Administration to carry out the provisionsof the National, Traffic and Motor Vehicle Safety Act. The proposedauthorization is equal to the last fiscal year's approprations. Atpresent, the subcommittee is holding hearings to determine whetherthe recommended amounts are sufficient to cover cost of living in-creases. (Funding method: annual authorization and appropriabon.)
a*
National highway Traffic Safety Administratio•: MotorVehicle Information and Cost Savings Act-
Title I: Requires setting a bumper standard to reduceautomobile damage in low-speed Crashes.
Title I1: To develop and disseminate consumer infor-'nation on relative crashworthiness, damage suscop-tibility, and ease of diagnosis and repair of variousmakes and models of automobiles.
Title IIl: Diagnostic Inspection demonstration projects.Established projects to provide diagnostic services onan experimental basis, and to collect and analyze dataon costs and benefits cf such projects, including suchthings as facility designs and cost savings to consumer sfrom more accurate consumer information regardingnecessary and unnecessary repairs, and fuel savingsfrom adequate tune-ups.
.4 ...... 4 ......................................... Administration draft bill authorizes up to $400,000 in appropriatiosfor fiscal year 1979 and $400,000 in appropriations for hfasl year1980 to enable NHTSA to carry out the provisions of this title. Thisauthorization approximates the appropriations authorized last fscal
year. (Funding method: annual authorization.)1.8 ...... 1.8 ----------------------------------------- Administration draft bill authorizes up t $1,11800.000 in appropriations
for fiscal year 1979 and $1,800,000 in a.nropriatias for fiscal year1980 for NHTSA to perform the requirements of this rdle. The proposedauthorization is about % last fiscal year's appropriations. Littlework has been done so far in developing and disseminating theinformation required in this title. (Funding method annualauthorization.)
.1 ... -.... .... .... Administration draft bill authorizes up to $100,000 in appropriationsfor fiscal year 1979 and $100,000 in oppropriation; for fiscal year1980 for the finapcinj of this tinlls provisions. Tne proposed authori-zation is considerably less than last fiscal year's appropriations sincethe projects are to be terminated soon and most of the analysis hasbeen done. (Funding method: annual authorization.)
Title IV: Odometer tampering prohibitions and civil and .3 . 3 ------------------------------------------ Administration draft bill authorizes up to $300,000 in appropriationscriminal penalty enlfocement: for fiscal year 1979 and $300,000 in appropriations for fiscal year
1980 to carry out the provisions of this title. The proposed authoriza-tion is about • last fiscal year's appropriations. At present, the sub.committee is considering the proper role of the Federal Governmentas opposed to State and private involvement in enforcing the pro-visions of this title. (Funding method: annual authorization.)
Toxic Substances Control Act: To regulate commerce and 60 60 .-..........................------------------- Greater funding in fiscal year 1979 has been recommended by the com-19rotect human health-and the environment by requiring mittee for the Environmental Protsction Agency to enforce t1e pro-testing and necessary use restrictions on certain chemical visions of this act. The additional funding will cover cost of living
.iaubstances. increases and further in-house research to be conducted by EPA.(Included in the annual author izations and appropriations for EPA.)
Federal Railroad Administiation. Rail safety- .... 10 ---------------------------------------------------- Additional funditg is needed to expand FRA act ruiltas in empl.1yerI b. occupational health aqd safety programs tie~ebiy re;3l~i.t an eisi..)g
void in FRA and OSHA activity.Railroad Retirement Fund ----- ------------------------ 363 -------------------------------------------------------- AdditionaLfunding is required to pay out benefits at a level consistent
with *he act as amended in 1974.Railroad Retirement Board: Administrative expenses ....... 6 --------------------------------------- Addito.)al wunist are requnded to reduce ant194pated sigicantly in-
creasbd case backlog resultin- from amJ naits t3 social security.elav-by upgrading work copaoil-ties process.
U.S. Railway Association: Purchase of ConRj securities...600 -------------------------------------------------------- The committee has been infoairqd that ConRail has been unable tomeet the goals of the final sfsteni pliri anJ will need adhitinal
funding in 1979 and in 1980 and W9t1. Funds may be authorizeddirectly under section 216 of the Railroad Revitalization Reform Actot 1976 rather than utiliznin 1ian gu-rantees under section 511 oftfhat act, Ywhich represents off-budlet firancisg, as proposed by
the AdministiathoppClinical Laboratory Improvement-Act ....................... 22.6.6 ...................................................... Committee anticipates a net saving of $35,00,0) under proposed
b egislation as a result of Social Se:uvity Act arnen,-nents.c,,bnant DNA Act ................................... 3 ...... Oommittee anticipates that the allocation to the Na'onl Institutes of
Health will need to be increased to implement the proposed legislation.DIU& Regulatory Reform Act .............................. 11 .......-.............................................. Committee anticipates that the allocation to the Food and Drug Ad-
ministration will need to be incieased to implement the proposedlegislation.Food Labeling and Nutr!;ion Act --------------------------- 2.7 ------------------------------------------------------ D.O.
- 399-------Committe recommend pleading at Ore ulhoriuatiloe el.~~~~2V ............. .9 m~ mm lUlItUlat~ml l
1. M.7275 Does not include Cancer t•lntteu, Heart, L•ngsod Blood Institute a balim.(+656 2425) Iv Repeet 20 Perce" Wncan0n los "step-siter" Iastites.431.1 --------.(+136.419)
(+27.375 ) . prolrrm and Incroaod funding.3 ......... t "m..i. enticipates approximately $0W,000,W In swatp Valde medic.(+8.9 ) ,, O 's We as ro,,.,,.
14 .............. Committee believes fulauthorizatiom Is necessary to imolement program,(+.4 4 ) particularly now antismoking campaign.221.5 . .............. Committee belief ful avoriza s aecanay to implemet pream.
(+8.§ is)aw mleetPeet81................ Do,
215 .............. Do.(+22.047 )
156.. ............. Represents 15.percegt Increae Is funding.46 .... ...
14.651 .............
100 ............ Additional funds are necessary so the proraim can be mplemewtodasquickly as possible t preserve eligible raldlins fortlocafbes in ned drail service.
260 ............ Additional funds may be necessary If applications muting stati" criteria455' ............. are submitted.55.670 .............. The committee intends to examine time 2&D expenditues and Uweir
constbtion to improved technology and solety.
!F
373
12
JUSTMIFCATIONs FoR FORMAT V
With some exceptions, the committee's recommendations with re-spect to health professions education programs reflect a stabilizing ofthe programs at the fiscal year 1978 appropriation level. The com-mittee endorses the President's requests for the National HealthService Corps scholarship program, the exceptional need scholarshipsprogram, family medicine training programs, physician assistant train-ing *ograms, and disadvantaged student assistance. The committeerecommends full funding of primary care training programs and areahealth education centers programs in keeping with the committee'sview that the Federal Government should encourage increases in thesupply of primary care physicians and provide incentives for rational-izing the geographic distribution of health care practitioners. Finally,the committee recommends an increase in the President's request forprogram support for the legislatively mandated manpower supply anddistribution reports. In the committee's view, an adequate level offunding is necessary if the Department of Health, Education andWelfare is to prepare a comprehensive and detailed report which willbe useful to the committee in its consideration of future legislation.
I BEST COPY AVAILABLE i1
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a.m"Now auO B. %d1lu6 ZDZ-8535A -ILAMV. March 20, 1978ON&O" a. CNIVO. Ms."isWo'nlmoble Robert N. Giaimo
Pursuant to Section 301 of the Budget Act, I am pleasedto transmit the attached budget estimates for fiscal year 1979.The Committee's submission is designed to follow as closely aspossible the five format outlines recommended by your letter ofFebruary 9.
As you Know, until this year, the Judiciary Committee hadonly very limited jurisdiction over legislation which eitherrequired or authorized the substantial expenditure of any federalmonies. With the important exception of expenditures under Title Iof the Omnibus Crime Control and Safe Streets Act, the completebudget for the Department of Justice had always enjoyed an organicstanding authorization.
Beginning this year, however, in fiscal 1979, no monies forthe Department may be appropriated without specific prior authori-zation. The Committee, therefore, has undertaken a major newspending responsibility and we expect to exercise that responsi-bility carefully in the weeks ahead. However, because our fullCommittee hearings only began on March 10, and because our firstmark-up experience under the new law will not occur until April,the Committee felt that it would be unwise this first year tosubmit prior estimates broken down by Department program or lineitem. We look forward, of course, to close co-operation with theBudget Committee in the discharge of our new responsibilities intho years ahead.
in the meantime, I hope the attachments to this letter are ofuse to your Committee.
With best wishes,Sigeey,
Peter W. Rodino, Jr.Chairman
N This letter and the budget estimates attached to it ca. be read cnly asft t.The publication deadline for the Qmukittee Print was no Mnday, March 20.
Official Judaicparyprotvtee apl of the budget estintes in steaded frT~Sday mwnmig, torch 21.
(875)
I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE
AUTHORIZING LEGISLATION PRIOR TO ENACTMENT OF APPROPRIATIONS
(In millions of dollars)
President's request Committee dMajor Issue or Program-Budget 1 1udget .....
authority Outlays authority Outlays
(difference) (differenc1.7
inistratiw fof the U.S.
oamWisson on Civil Rights
Departmet of Justice(Includig Gwral Mm stret ,Geuralegal Activities. Antitrust
Dvsion, U.S. Attoneys and 3MrshalsSport of U.S. Prismosrs, Fs andERMSs of Widblessest ComumutyRelations Service, F.B.I., Iuuirat!onand Nationalization Service, IMAM,National Institute of Crrecta,Buld'z and Facilities)."T*Tchnically, an Item V division,rit requiring a oi atin
1
11
2,464,302
11
1.7(+0.7)
U
2,800,000
1.7(+0.7)
U1
House passed bill, ow inConference, has authorizedat the 1.7 figure for FYI79
President's request ree-matent a slight inr~easefrom FY'78, based on noinitiatives bY COuissi n tofocus attention on aged,
Cmzittee mark-u of author-i zatiJon will begin in April.
Present. mittuwdation is only prelimi-:nary and reflects an appzow-Iimate leswmy margin ofabout 20% based on AttorneyGeneral's testimony of3/10/78. No breakdwreomoundations-by pcogram-can be available until after
hoeeramtitsý1i be G.& or decreaami
IIo PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS
WHICH WOULD REQUIRE AUTHORIZING LEGISLATION FOR FISCAL YEAR 1979
(In millions of dollars)
NONE
D
111. PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING
LAWS WHICH MANDATE SPENDING IN FISCAL YEAR 1979 W1'fvHOUT FURTHER
ACTION BY CONGRESS; OTHER LEGISLATIVE SAVINGS PROPOSALS 00
(In millions of dollars)
NONE
IV. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
(In zillions of dollars)
Initiative Buget Authority Outlays CcWMsnti0-a
U Financial Disciomws by Exmectivwad Jdcial kBrnh Phrmml
Ibfoxm Of LM, to segulate U"Wingwad kated Activities
To -ai for Ankzd of AttaumysFame and apenses in Federal
MnityatiWe Agency Proceedings
Gruft to State. for the Paymet ofOmqenation to Penons Injured byVio•ant Crimi
7 r •gularize p ýesgtr a-mitting efgswand to czeate aSelect issi'an on!Igatowand hlfugee Policy
1
1.6
18
30
12
OC~itbtpawe- bill pending &efre08eOmeaittoee, will ewntuually merge with otherbill providing for leisatv branch dis-closure. H.R. 1 as passed by JudiciaryComittee a MUthoize 1 Wm iion dollar foreach of nest 3 FYs.
(kamittee passed bill at~imqzpiaticns of 1.6 million for eachof 3 Ml.
Bil pmading before OM~tta providws 15adIll ion 1Lm -rization for amards of
a Ionys fees and expenss in agencypraceedings wand 3 million authorizationfor CO~t aklrds.
Bill -aee by the House, pending in Senate,re~xe Comttee passed level dcam ftx 40million for FY 179.
Bill as by uinaded byt beeeandnow puading before full Omeittee carriesa CBO cost estimate of 12 million for FV079and 13.8 million for FY 80.
30
W,
(continued)
IV, LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
(In millions of dollars)
Initiative j Budget Authcity I Outlays Cowaent
To pwoide that in civil actimswhm the U.S. is a plaintiff, a-n~ dtfng t my =
sonabl atmawys a feeMother mcnbl costs of liti-gatim.
To ceat rights for public
Agtof 90'741.
-a fom s of cowr~g~SoUnI roxwings and proom~esfor insuring wzyalty paytsathxco Uue Pgistmr of Copy-rights or the Copyright royalty
To auttlxrise jprongram a neTitle nI of the Speedy TrialAct of 1974.
20
1
5
Pwisioa my be processed as spratmleislatn, or as part of larw
20 00
V. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT
REQUIRE AUTHORIZATION LEGISLATION FOR FISCAL YEAR 1979
(In millions of dollars)
Major Issue or Program President's requmst ottse Recc daticn Conment
B.udgt Budgetauh• ty ot.o1w &*ehrity outlay
egal Servicm fint 243 304(+49)
278.7(+35.7)
C*3
coenttee raoaaum ation isin line with oocatitn'sbudge mtst. - weeksto complete the srt termgoal of wminm acces" (2attmy per 100,000 poorpersmon) by the end of F"'79.Alsor 1977 leg1 1ati mndates",w attention to legal problemof the elderly and hwliceppedI-.g others.
255
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Uafn.m, X.C. 20515
March 15, 1978
Honorable Robert N. GiaimoChairmanCommittee on The Budget214 House Office BuildingAnnex #1Washington, D.C. 20515
Dear Mr. Chairman:
In reply to your letter of February 9, 1978, andpursuant to the requirements of the Congressional BudgetAct of 1974, I am forwarding herewith the views andestimates of the Committee on Merchant Marine and Fisheriesconcerning budget authority and budget outlays for fiscalyear 1979.
These views and estimates were considered by theCommittee in formal session on Friday, March 10, 1978,and received a unanimous endorsement of the Committee.
I trust that they will be helpful to you and yourCommittee in carrying out your responsibilities underthe Budget Act.
With kind regards*
S ncerely,
nOs T M. MURPHYV Chairman
Enclosures: Ten Copies
(383)
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COMMITTEE ON MERCHANT MARINE AND FISHERIES
I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRL RE-ENACTMENTOR MODIFICATION OF AUTHORIZING LEGISLATION FOR FY 1979
(In millions of dollars)
Major Issue orProgram
GENERAL SCIENCE, SPACE, ANDTECHNOLOGY
General Science and BasicResearch
National Science Foundation(49-0100-0-1-251)
NATURAL RESOURCES, ENVIRONMENT,AND ENERGY I
Conservation 6 Land Mgt.Int'l Fisheries Commissions;(19-1087-0-1-302)
Pollution ControlAbatement and Control(68-0108-0-304)
Other Natural ResourceOper., Res., 6 Facs.(13-1450-0-1-306)
Oper., Res., i Facs.(13-1450-0-1-306)
Oper., Res., & Facs.(13-1450-0-1-306)
Oper., Res., 6 Face.(13-1450-0-1-306)
(EPA)
(NOAA)
(NOAA)
(NOW)
(NOM)
President's Request
BudgetAuthority Outlays
0.9 0.9
1.4I
33.2 I
5.9 I
0.5
.10.5
1.4
33.2
5.9 I
0.5
0.5
CommitteeRecommendation
Budget IAuthority Outlaysi
(Diff.) -(Diff.)! Comments
Admin. request is fee collections.Add'l funds are recommended for
2.' 2.4 'improved wildlife conservation(+1.5) (+1.5) on military reservations, as pro-
Ivided in H.R. 10882, pending in:Committee.
6.8(+5.4)
(63.0
+29.8) (+
7.0(+1.1). (
2.0(+1.5) (
0.6(+0.1) (
6.8(+5.4) -Ocean dumping program and relatedresearch, as provided in H.R.
'10661, pending in Committee.
63.0 'Add'l funds for Sea Grant program,29.8) -as provided in H.R. 10822, pend-
ing in House.
7.0 !Add'l funds for ocean dumping re-+1.1) search of long-term effects on
marine environment, as providedin H.R. 10661, pending in Cte.
2.0+1.6)
0.S+0.1)
Add'l funds for Marine Sanctuaries:as provided in H.R. 10661, pend-:ing in Committee.'Add'l funds for expenses ofiNational Advisory Committee on,Oceans and Atmosphere, as pro-Ivided in H.R. 10823, pending,in H•,use.
Page 2of S
|
I
a'e
2.0+I.S)
0.l+0.1)
COMMITTEE ON MERCHANT MARINE AND FISHERIES
I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE RE-ENACTMENTOR MODIFICATION OF AUTHORIZING LEGISLATION FOR FY 1979
Research I Development (MARAD)(13-1716-0-1-403) 17.5 -0 17.5Oper. £ rainng (ARAD
Opers. 3 Training (MARAD)13-1750-0-1-403) 57.3 i57.4
CommitteeRecommendation
"Pudget iAuthority I Outlaysl
(Diff.) (Diff.)i
8.0(*l.3)
3.5(+1.3)
4•0.0(*17.9)
0.0
Comments
8.0 Add'l funds for higher level of(+1.3) marine mammal protection, as pro-
-vided in H.R. 10730, pending inCommittee.
3.5 Add'l funds for higher- level of(+1.3) endangered species protection, as
,provided in H.R. 10883, pending in'Committee.
40.0 Add'1 funds to implement 200-mile(+17.9) fishery zone, as provided in H.R.
10732, pending in Committee.
0.1 Authorization in H.R. 10878, pend-'ing in Committee. No Change.
167.0 168.0
262.8 336.5
17.5 1 17.5
58.4 1 58.5M+11) (+1.1)
Authorization in H.R. 10729, pend-in Committee. No change.
Authoriza-ion in H.R. 10729, pend-in Committee. No Change.
'Authorization in H.R. 10729, pend-'in Committee. No Change.
Add'l funds for improved mainten-ance at USMMA, Kings Point; forincreasing annual payments to
Page 3 of S
I
CA300
0,
i
COMMITTEE ON MERCHANT MARINE AND FISHERIES
I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE RE-ENACTMENTOR MODIFICATION OF AUTHORIZING LEGISLATION FOR FY 1979
(In millions of dollars)
Major Issue orProgram
10.
Operating Expenses (CG)(69-0201-0-1-403)
Acquisition, Construction,Improvements (CG)
(69-0240-0-1-403)
Research, Development,& Development (CG)
(69-0243-0-1-403)
Test
Alteration of Bridqes (CG)(69-0244-0-1-403)
President's Request
BudgetAuthority Outlays
944.6 936.8
8II
279.2 223.6
1 II I
1 20.0 18.0. 1I
* i
346 l'
committeecommitteeRecommendation
Budget IAuthority Outlays!
(Diff.) (Diff.)l Comments
(continued)authorized level at State mari-time academies; and for habitabi-
Ility improvements on Stateschool ships.
958.2(+13'.6t
380.0S+10 0 -R)
25.0*(+ 5.0)
34.6
950.4(+13.6)
&dd'l funds for keeping one WHECin commission, for restoring pro-posed reduction in personnel base,and for add'l personnel in SAR,MS, MEP, and ELT programs, as pro-
ývided-in H.R. 11465, pending Cte.
233.2 :Add'l funds for Great Lakes ice-(+ 9.6) breaker, add'l WHEC, pollution re-
covery devices, Houston VTS videoI completion, Mobile, Ala. land ac-I quisition, add'l radiobeacon mod-,ernization, and fire protectionat 7 Air Station hangars, as pro-vided in H.R. 11465, pending Cte.
Note: No legislative proposal has been received since receipt of the Presidential Pudget for FY 19?9.The Committee assumes that this item alludes to H.R. 6213, introduced at SecDOT request In1977. Consideration of that and other bills resulted in H.R. 6803, which was passed by theHouse in September, 1977. To the extent that this Item refers tc the necessity for the Secre-tary to have adequate borrowing authority to meet Fund deficiencies, and to make appropriateexpenditures, the Committee concurs with the Presidential request. It is the estimate of theCommittee that the Fund, in future years, will except on very rare occasions te adequate tvmeet obligations, and the borrowing authority need will be substantially less. In any case,H.R. 6803 provides that funds advanced through the Secretary's borrowing wuthority will ulti-mately be reimbursed by the Fund.
Comments
See Note WO00
COMMITTEE ON MERCHANT MARINE AND FISHERIES
III. PRESIDENT'S KVur RCOUESTS FOR s.VI'rs THR 1 Owris IN EXISTING Lbs vmICH mrmI.T AT,' SPImmir, I:'
FISCAl YFAR 1979 WITlOUT IW1'r.R ACTION BY C(OKR ; OTIIR LID1SISATIVE SAVIUFS PPCPC-ALS Page 1 of 1 cc
89.3 89.3 Add'l funds to implement var-(+32.0) (+32.0) lious provisions of CZMAct of
1976 (P.L. 94-370)
President's Request
Budget
Authority Outlays
57.3 57.3
173.9 168.0
12.0 10.9
2.8 2.4
63.6 63.6
15.0 10.0
169.0 Add'l funds for States to carryC. 1.0) out endangered species programs
10.9 !No change.
2.4 -No change.
64;3 Add'l funds for states to carry(+0.7) out endangered species programs
10.0 1No change.
102.8 iNo change.
174.9(+ 1.0)
12.0
2.8
64.3 I(+0.7)
15.0
116.6!
I
COMMITTEE ON MERCHANT MARINE AND FISHRIES
V. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIREAUTHORIZING LEGISLATION FOR FY 1979
(In millions of dollars)
Major Issue orProgram
COMMERCE AND TRANSPORTATIONwater TransportationFederal Ship Financing Fund(13-4301-0-1-403) (MARAD)
The Panama CanalPanama Canal Company(38-4060-0-3-40S)
Water TransportationSalaries I Expenses (FMC)(65-0100-0-0-403)
COMMUNITY & REGIONAL DEVELOPMENTArea I Regional DevelopmentCoastal Energy Impact Fund(13-4315-O-3-452)
NET CHANGES BY FUNCTION
Function 300:460:
TOTAL CHANGES FORMAT VFORMAT I
FORMAT IV
GRAND TOTAL - MMi&F COMMITTEE
President's Request
BudgetAuthority
0.0
0.0
10.S
ýT
4.0
0S
0
S
S
I
CommitteeRecomendation
BudgetAuthority Outlays
(Diff.) (Diff.)
0.0 (47.3)
Comments
No change.
0.0 (26.0) No change.
10.5 10.'. No change.
Outlays
("7.3)
(26.0)
10.4
4.0 ..oan guarantee impact funds in-.reased to reflect authoriza-ion level necessary to res-
pond to State needs.
a
i I104.0 10.0
!(+100:.) (+100.0) }c
+ 3.7 + 33.71 +100.0 +100.0
+133.7 +133.7 6
+194.1 +102.8+155.1 +140.1
+482.9 +37S.6
Page 2 of 2
I Budget
NINSTrY.,IPTh ONN
MOuw NL 6. 9I0. PA.* 14AmMAN. a. mi. -A . min o - . SmRmV. iL6
m m. ilW Y. oW.V. mý U. a 0AW. saw.fmtam W. WotmN. -A-lP. eM. #. SILLA, lTN.ý4mmI. seam. ema TVawa. "U.
W .I. L i . uGnMSINK .. 46 mtd. &t.,sWAmW (OWLa *.L,. O ft sr Teaf. km.
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9"WIM GNA I NNLY.L"Imwe - % wM. -
RllON Wlm MVFSLP, M-t il
UM& iw4em*^
at.b. 0ouse d lupre*ntatWbeoCOMMITIU ON POST OFFICE AND CIVIL IIIERVISC
we CANNON HOUSE OFFICE ,ILDINO
akwa4sm .&C 3061,
March 14, 1978
Honorable Robert N. GiatmoChairmanCommittee on the BudgetU.S. House of RepresentativesWashington, 0. C. 20515
Dear Mr. Chairman:
Pursuant to section 301 (c) of the Congressional Budget Actof 1974, there are transmitted herewith the views and recom-mendattons of the Committee on Post Office and Civil Service,together with Separate Views, on the Budget of the United Statesfbr fiscal year 1979.
These views and recommendations were ordered reportedby a voice vote of the Committee on March 8, 1978.
Sincerely,
ROBERT N. C. NIXChairman
e.7j"Enclosures
(W?)
PART I
PRESIDENT'S BUDGET REQUESTS FOREXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATION
PRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979(in millions of dollars)
President'sRequest
Authority Outlays
CommitteeRecommendlation
BudgetAuthotity
(Difference)Outlays
(Difference) Comment
NONE OF THE PRESIDENT'S REQUESTS COME UNDER THEJURISDICTION OF THE COMMITTEE ON POST OFFICE ANDCIVIL SERVICE.
Major issueor program
PART U
PRESIDENT'S BUDGET REQUESTS FORNEW AND EXPANDED PFMOGRAMS WHICH WOULD
REQUIRE AUTHORIZING LEGISLATION FOR FISCAL YEAR 1979(In million dollars)
President'sR>equetkll CommitteeRecorrimendation
LegislativePrposal BudgetAuthority
To preserve and promoteethical standards through-out the Executive Branch.(Employee Ethics andUtilization).
Au&horityOutlays (Diffeence)
4.3
(+3.3)
outlays(Differenee)
4.3
(+3.3)
Comment
H. R. a954 vs orderedreported by the Com-mittee on September 22,1977 (H. Rapt 95-642,Part I). Data for floorconsideration has rot beenscheduled.
PART III
PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING LAWSWMICH MANDATE SPENDING IN FISCAL YEAR 1979 WITHOUT FURTHER ACTION
BY CONGRESS; OTHER LEGISLATIVE SAVINGS PROPOSAL(In millions of dollars)
President'sRequest
ConmmitteeRecom medation
LegislativeProposal
To eliminate secondcareer training forair traffc controllerswho are eligible forimmediate retirement.(Civil Service).
2. Terminite dual com-pensation of Federalemployees in activemilitary dty status.(Compensation andEmployee Benefits).
BudgetAuthor
-3
-30
outlays
-3
-30
BudgetAutority
(Difference)
0(+3)
0(+30)
Outlays
0(43)
0(+30)
Comment
Committee does not appearto agree with proposed changeand does not seem likely toconsider such legislation.
Committee rec•ommrds thatfunds be restored to theFY 1979 budget sincethe committee believes thatthe enactrnet of this legis-lation would pose a threat ofsignificant marpor losses,resulting in an accormpayingloss of readiness. The lossof trained personnel, addedto already severe strengthshortfalls, would impose thenecessity of additional expen-ditures for recruiting , reten-tion and training of replace-merts, thereby nullifying anyinitial savings.
Item
1.
PART III
PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING LAWSWHICH MANDATE SPENDING IN FISCAL YEAR 1979 WITHOUT FURTHER ACTION
BY CONGRESS; OTHER LEGISLATIVE SAVINGS PROPOSAL(In millions of dollars)
President'sRequest
CommitteeRecommendation
Legislativeitem Proosal
Budhorget
3. Wage Board pay changes -183to provide for regulationof step-rate and paylinestnacturee and night shiftdifferentials consister.with prevailing practices;to permit the use of State2nd local e payrates in addition to industry
States in Federal vge surveys" wage board employees; and
to change the required schedulefbr full-scale surveys fromonce every second year toonce every third year.(Congeastion and EmployeeBenefts).
BudgetAuthority
Outlays (Difference)
-180 0(+W",)
Outias(Difference)
0(+183)
Commet
Committee recmmendthatfunds be restored to theFY 1979 budget, since thecommittees does not agreewith ali of the changes pro-posed by the President. Thecommittee has completed itsoversight hearings through-oul the country on this matter.The committee is presentlysorting through itsmaterials aind plans to
make its otiara..
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
IdenttUl Initiative Budget Authority
1. H.R. 7700-Postal ServiceAct of 1977 - to increasepublic service authorizationfor the Postal Service andprovide some rate assistancefor small magazines andnewspapers.(Postal Operations and Services).
1,060.0 1,660.0 H.R. 7700 was ordered reported bya vote of 19 to 4 on October 18, 1977.Current provisions in title 39, U.S.C.for public service authorizationsestablish a formula of 10 percent ofthe 1971 appropriaton to the thenPost Office Department. Theauthorization is for $920 million ayear. H.R. 7700 would change thisauthorization to 15 percent of theprior year's operating expenses andauthorize for only two years. Con-gressional Budget Office and com-mittee estimates are for an increasein authorization over current levelsof $1.6 billion in FY 1979 and$1.88 billion in FY 1980. Theremaining $60 million is addedrevenue foregone for the provisionsauthorizing rate discounts for thefirst 250,000 copies of each issueof a second-class or controlledcirculation publication.
Item Outlays Comments
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identif' Initiative
2. H.R. 3793 - to provide Federalemployees who are under inves-tigation for misconduct the rightto be advised in writing of theinvestigation and the right torepresentation. (Civil Service).
3. H.R. 6225 - to guarantee to aFederal employee the right toa hearing prior to a finaldecision of the agency to takean adverse action against suchan employee. (Civil Service).
4. H.R. 6974 - to provide that theDirector of the AdministrativeOffice of the U.S. Courts(AOUSC) may place a total of15 positions in grades 16, 17,and 18 of the General Schedule.(Official request by AOUSC).(Employee Ethics and Utilization).
Budget Authority
.2
51.0
.036
Outlays
.2
51.0
.036
Comments
This legislation has been orderedreported by the committee (4. Rept.No. 95-920). The committeerecommends that appropriatemonies be placed in the Budget forFY 1979.
This bill was ordered reported bythe committee on January 25, 1978.The committee recommends that theappropriate monies be placed in theBudget for FY 1979.
This bill failed to pass the Houseunder suspension of the rules onJuly 18, 1977. Pending on UnionCalendar.
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
5. H.R. 2387 6o increase thesalaries of the Director andDeputy Director of the Cfficeof Management and Budget toExecutive Level I and iirespectively. (EmployeeEthics and Utilization).
6. H.R. 6981 - to increase thesalaries of the Chairmnan andMembers of the Board of Gov-ernors of the Federal ReserveBoard totExecutive Level I and1i respectively. (EmployeeEthics and Utilization).
7. H.R. 3161 - to improve thebasic workweek of Federalfirefighters. (EmployeeEthics and Utilization).
Budget Authority
.014
.041
24.3
Outlays
.014
.041
24.3
Comrments
This bill failed to pass the Houseunder suspension of the rules onJuly 18, 1977. Pending on UnionCalendar.
This bill was approfwy t) e sub-ccrnmictee on May 5, 1977. Actionbefore the full committee was delayeduntil the subcommittee could holdfurther hearings to include ExecutiveLevel officials at the Federal DepositInsurance Corporation and the FederalHome Loan Bank.
This bill was ordered reported bythe committee on January 25, 1978
(H. Rept. No. 95-911).
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
8. H.R. 8332 -to provide for thereferral to the House Com-mittee on Post Office andCivil Service all bills,resolutions, and othermatters under whichauthority is granted toestablish Executive Levelpositions, and to limit thenumber of such positionswhich may be created.(Employee Ethics andUtilization).
9. H.R. 11003 -to clarify theauthority for employmentof personnel in the WhiteHouse Office and the Execu-tive Residence at the WhiteHouse, to clarify the authorityfor employment for personnelby the President to meetunanticipated needs. (EmployeeEthics and Utilization).
Budget Authority
0.0
38.1
Outlays
0.0
38.1
Comments
H.R. 8332 would require allExecutive Level positions in theGovernmental to be ',ustifted. Reviewof these positions may find some tobe excess and cause a reductionin outlays.
This bill was ordered reported bythe committee on March 8, 1978
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identtfi' Initiative Budget Authority
10. H.R. 7814 -to authorizeFederal agencies to expert-ment with flexible and com-pressed employee workschedules. (EmployeeEthics and Utilization).
11. H.R. 10128 - to establisha program to increase part-timecareer employment within thecivil service. (EmployeeEthics and Utilization).
12. H.R. 5544 - to provide for thereferral of certain bills,resolutions, and other mattersto the House Committee onPost Office and Civil Serviceand to provide for a limitationon and control of positionswhich may be placed in grades16, 17, and 18 of the GeneralSchedule. (Employee Ethicsand Utilization).
1.6 1.6
2.4 2.4
0.0 0.0
This bill was ordered reported bythe committee on January 25, 1978(H. Rept. No. 95-912).
This bill wes ordered reported bythe committee on January 25, 1978(H. Rept. No. 95-932).
H.R. 5544 would place all super-grade positions in the Civil Servicepool. Review of these positionsmay find some to be excess andcause a reduction in outlays.
Item Outlays Comments
.1
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identify Initiative Budget Authority
13. S. 1730 - to provide for anadditional Assistant Secretaryin the Department of theTreasury at Executive Level IV.(S. 1730 passed the SerateJanuary 20, 1978, and wasjointly referred to the Com-mittee on Ways and Means).(Employee Ethics and Utilization).
14. S . 1704 - to provide two additionalAssistant Secretaries in the Depart-inert of Agriculture; to elevate theposition of Administrator, Food andNutrition Service from GS-18 toExecutive Level V; and to establisha new position of Administrator, FoodSafety and Quality Service at ExecutiveLevel V. (S. 1704 passed the SenateJanuary 20, 1978, and was jointlyreferred to the Committee onAgriculture). (Employee Ethicsand Utilization).
.087 .087
.276 .276
GENERAL COMMENT: Thecommittee has received severalrequests from various departmentsand agencies for creating newpositions or elevating grades of topofficials. Hearing on all requestsand legislation will be held by thecommittee.
The new Assistant Secretary wouldbe responsible for the law enforce-ment responsibilities in theDepartment.
See general comment. TheAssistant Secretaries will head upthe Office of Economics, PolicyAnalysis and Budget and the Officeof Congressional and Public Affairsrespectively. The Directors ofthese offices are both occupyingExecutive Level IV positions.
Item Outlays Comments
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identify, Initiative Budget Authority
15. To provide six additionalExecutive Level positionsin the Department of HEW.(Official request from HEWnot yet introduced).(Employee Ethics andUtilization).
16. To place the Director andDeputy Director of theU.S. Secret Service atExecutive Level IV and Vrespectively; and to placethe Director of the Officeof Revenue Sharing atExecutive Level V. (Officialrequest from the DeputySecretary of the Treasurynot yet introduced). (EmployeeEthics and Utilization).
.366
.181
.366
.181
See general comment. Currently,six Executive Level positions areon loan to $EW under PresidentialOrder. The subcommittee heldhearings on May 5, 1977. Thesepositions include three ExecutiveLevel IV and three Executive LevelV. Support staff, if ary, has notbeen computed in this estimate.
See general comment. TheTreasury Department currentlyhas three Executive Level positionsallotted from the President's pool.
Item Outlays Comments
0
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identtfýy Initiative
17. To provide an additionalAssistant Secretary forEconomic and StatisticalAffairs, Department ofCommerce, at ExecutiveLevel IV. (Officialrequest jointly referredto the Committee onInterstate and ForeignCommerce, not yetintroduced). (EmployeeEthics and Utilization).
18. To establish the positionof General Counsel in theEnvironmental ProtectionAgency at Executive LevelV. (Official request not yetintroduced). (EmployeeEthics and Utilization).
Budget Authority
.063
.059
Outlays
.063
.059
Comments
See general comment. Supportstaff, if arry, has not been comn-puted in this estimate.
See general comment. Support staff,if any, has not been computed in thisestimate.
The General Counsel at EPA iscurrently at grade 18 of the GeneralSchedule; therefore, the salary forthis position will be the same (GS-18and Executive Level V positions areidentical in salary).
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identify Initiative Budget Authority
19. To place the position ofCommissioner, AutomatedData and TelecommunicationsService, General ServicesAdministration, at ExecutiveLevel V. (Official requestnot yet introduced). (EmployeeEthics and Utilization).
20. H.R. 390 -to authorize theBureau of the Census tocollect, analyze and publishcurrent world populationstatistics. (Census andPopulation).
.063
1.6
.063
1.6
See general comment. This positioncurrently Is In Executive Level Vwhiich has been allotted from thePresidentýs pool. Support staff,if any, has not been computed inthis estimate.
This bill has been approved by thesubcommittee and is pending fullcommittee consideration. Thelegislation will result in no newbudget outlays. It is a transfer offunds and authority from the U.S.A. 1. D. office to the Bureau of theCensus.
Item Outlays Comments
0•
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identtfý' Initiative Budget Authority
21. H.R. 3789 -to entitle sub- Less than $1 milliondivisions of a municipalityto receive population censusstatistics that conform to theboundaries of such a division.(Census and Population).
22. H.R. 10386 - to limit the con- Committee requested atent of census questionnaires; cost estimate from theestablish formal procedures to CBO in December, 1977.challenge census estimates; CBO's estimate has notcreate a committee within the yet been received.Department of Commerce con-sisting of statistical experts toreview and ase*s the qualityand accuracy of statisticalresults published by the Bureauof the Census. (Census andPopulation).
The provisions of this bill have beenincorporated into H. R. 10386. Thesubcommittee intends to considerthis legislation separately in theevent H.R. 10386 is not reportedby the full committee.
This bill has been approved by thesubcommittee and Is pending fullcommittee consideration.
0:oaU
$.
Item Outlays Comments
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
23. To require Congress toissue data impact state-ments on all new legis-lation which would requirethe collection of informationand impose a "sunset" onFederal statistical activities.(Census and Population).
24. The President's CivilService Reform legis-lation (see, H. Doc.95-299). (Full committee).
25. S. 666 - to provide liberalizedretirement benefits for certainnon-Indian employees of theBureau of Indian Affairs andthe Indian Health Service.(Compensation and EmployeeBenefits).
Budget Authority
rnknown
1.8
8.4
Outlays
Unknown
1.8
9.0
Comments
The subcommittee plans to holdseveral days of hearings on thebill.
The committee has scheduledhearings on the proposals andanticipates that it will favorablyreport all or part of such pro-posals for House consideration.
S. 666 is similar to H.R. 9603which has been approved by thesubcommittee. S. 666 was passedby the Senate on January 30, 1978,and is scheduled for full committeeconsideration.
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identtfýy Initiative Budget Authority
26. H.R. 9279 - to authorizegrade and pay retention forcertain employees who havesuffered reductions in gradeas a result of grade reclassi-fication actions or reductionsin force due to reorganizationsor other factors. (Compen-sation and Employee Benefits).
27. • H.R. 10633 -to extend earlyretirement benefits, nowprovided to air traffic con-trollers, to employees offlight service stations andflight standards units.(Compensation and EmployeeBenefits).
5.5
8.4
5.5
Unknown
H.R. 9279 was ordered reported bythe committee on October 12, 1977.The cost estimate does not take intoaccount the savings that will resultfron the elimination of certainadverse action appeals.
Would allow tligibile employees toretire after 25 years of service or,if age 50, after 20 years of service.Employees would be guaranteed aminimum annuity equal to 50 percentof average pay. Budget authorityis amount required to amortize (over30 years) unfunded liability createdby legislation.
1-
Item Outlays Comments
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
28. H.R. 460 - to providespecial allowances to cer-tain physicians employed bythe United States in orderto erhance the recruitmentand retention of such physicians.(Compensation and EmployeeBenefits).
29. H.R. 8503 - to provide thatcivilian air traffic controllersof the Department of Defenseshall be authorized the sameearly retirement benefits nowauthorized for air traffic con-trollers of the Department ofTransportation, and for otherpurposes. (Compensation andEmployee Benefits).
30. H.R. 4601 - to increase theuniform allowances availableto Federal employees.(Compensation and EmployeeBenefits).
Budget Authority
14.0
.5
9.5
Outlays
14.0
Comments
Legislation would authorize forGS physicians the same additlonalcompensation presently authorizedfor physicians employed by theVeterans Administration or theDepartment of Defense.
*~bh
.5 Legislation would authorize sameearly retirement benefits forDepartment of Defense air trafficcontrollers as is authorized forDepartment of Transportatkicontrollers.
9.5 Presently, Federal employeesreceive $125.00 annually to buyand maintain a uniform. Billwould grant $300 initially to buya uniform and $200 annually formairkenance.
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
31. H.R. 10232 -to authorizecivil service retirementcredit for certain serviceperformed as an employeeof a state or local govern-rment under a Federallyfunded program. (Compen-sation and Employee Benefits).
32. H.R. - to change thecomputation formula for theFederal Employees' GroupLife Insurance (FEGLI)program. Increase theGovervwne*'s contributionto 50 percent of subscriptioncost and add optional familyplan, the total cost of whichwill be borne by the employee.(Compensation and EmployeeBenefits).
Budget Authority
Unknown
75.0
Outlays Comments
Unknown During the 94th Congress, the CivilService Commission estimatedthat this legislation would increasethe urljndgd liability of the CivilService Retirement fund by approxi-mately $28,000 for each eligibleemployee. It is estimated that6,000 employees would be eligibleunder the provisions of H.R. 10232.
75.0 Ratio cost of FEGLI program(Government pays one-third,employee pays two-thirds) hasnot changed since 1954, while70 percent of private industryprovides 100 percent of thesubscription cost of employees'life Insurance. The cost estimatewas prepared last year.
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
33. H.R. 9590 - to increase theGovernment's contributionfor Federal employeeshealth benefits to 75 per-cent. (Compensation andEmployee Benefits).
34. H.R. 4320 - to discontinuecivil service annuity pay-ments to former civilservice employees whileperforming service as ajustice or judge of theUnited States. (Compen-sation and Employee Benefits).
Budget Authority
375.0
.096
Outlays375.0
Comments
Presently, the Government con-tributes 60 percent of the averageof the subscription charges for thehighest level of benefits offered bythe six plans having the largestnumber of enrollments. H.R. 9590would increase the Governmentcontribution to 75 percent, ustngthe same formula. The costestimate was prepared last year.
.083 H. R. 4320 was ordered reportedby the committee on February 22,1978 (H. Rept. No. 95-913). AfterFiscal Year 1979, the enactmentof this legislation will result in areduction in outlays.
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Item Identify Initiative
35. H.R. 8317 - to provide thata former spouse of a Federalemployee who is married tosuch employee for five yearsor more shall be entitled to aportion of such employee'sannuity and to a portion ofthe annuity of any survivingspouse of such employee, andfor other purposes. (Compen-sation and Employee Benefits).
36. H.R. - to provideliberalized retirementbenefits to certain Federalemployees working !n thePanama Canal Zone.(Compensation and EmployeeBenefits).
Budget Authority
Unknown
9.2
Outlays
Unknown
4.0
Comments
Legislation to be proposed by theAdministration. Budget authorityis amount required to amortize(over 30 years) unfunded liabilitycreated by legislation.
PART IV
LEGISLATIVE INITIATIVES OF CONGRESS FOR FY 1979(In millions of dollars)
Identify Initiative Budget Authority
37. H. R. 3800 - to providethat any Federal employeewho, at the time of retire-merit, does not elect a reducedannuity in order to provide asurvivor annuity to a spouseor other person may make suchan election within one yearafter retiring. (Compensationand Employee Benefits).
38. H.R. 10650 - to provide survivorannuities to post-retirementspouses of annuitants who diedbefore the effective date ofPublic Law 91-658. (Compen-sation and Employee Benefits).
I .
9.3
12.0
5.1
12.0
This legislation is retroactive.The Civil Service Commissionestimates that the bill would givealmost 60,000 retirees a secondchance to provide a survivorannuity. The Commissionbelieves that approximately tenpercent (6,000) would takeadvantage of this opportunity.
Public Law 91-658 amended thecivil service retirement law soas to provide for the automaticsubstitution of a spouse acquiredafter retirement as an eligiblesurvivor arnuitart. However,that law was not applicable to thesurvivor of an annuitant who diedbefore the effective date of the Act-January 8, 1971. This bill willextend application of the law to suchsurvivors.
Item Outlays Comments
.1
419
SEPARATE VIEWS
TO ACCOMPANY
COMMITTEE BUDGET RECOMMENDATIONS
The budget recommendations for fiscal year 1979 presented by the
majority members of the comittee are at best wishful thinking and reflect
once again the unrealistic and Easter-5asket approach that governs their
action.
Should this package of committee legislative proposals be enacted,
it would exceed the President's budget recommendations by approximately
$2.6 billion. It is not reasonable this would be acceptable to tle
House, and therefore we urge, as we have in previous years, that the
committee majority use this reporting requirement as a weeding out
process rather than the catchall technique to which they are inclined.
Many, if not most, of the legislative initiatives reported have
dubious prospects of passage. And some of the more costly of them are
opposed by the Carter Administration, which lessens their chances even
further.
a - For example, the Administration is on record as opposing H.R. 6215,
employees' right to a hearing prior to the fiial decision on .an adverse
action ($51 million); H.R. 3161, reducing the workweek of Federal firelighters
($24.3 million); and H.R. 4620, allowances for Federal physicians ($14 million).
Prime among the budget-busting items is, of course, H.R. 7700 which, as it
came from comittee, proposed a $1.6 billion increase in Postal Service public-
service subsidy, over and above the President's budget. This increase would raise
the public-service subsidy level to $2.5 billion for Fiscal Year 1979.
420
-2-
Despite recent reports surfacing that agreement was reached with theWhite House on an $800 million public-service increase, the facts areto the contrary.
on H.R. 7700The official position of the Carter Administration/is much more
modest and as expressed in a letter dated March 14, 1978, is as follows:
"...the Administration would prefer that the public-service subsidy
be increased (from $920 million) to $1 billion for fiscal year 1979;
to $1.1 billion for fiscal year 1980; to $1.2 billion for fiscal year
1981; and to $1.3 billion for fiscal year 1982 and beyond."
Therefore we recommend to the Budget Committee that legislative
fact be sorted from legislative fancy in preparing the Fiscal Year 1979
budget resolution. A 0 A. A
- -~
42t
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March 15, 1978
Honorable Robert N. GialmoChairmanHouse Committee on the BudgetHouse of RepresentativesWashington, D. C.
Dear Mr. Chairman:
Pursuant to section 301(c) of the CongressionalBudget and Impoundment Control Act of 1974 we areenclosing ten copies of the Views and EstimatesReport on the Budget for the fiscal year 1979 ofthe House Committee on Public Works and Transportation.
WILLIAM H. HARSHARanking Minority Member
Si " ncere
HAROLD T. HNSONChairman
(421)
L
REPORT
to the
COMMITTEE ON THEE BUDGETCONTAINING THE VIEWS AND ESTIMATES
of the
COm-MITTEE 0;PUBLIC WOMKS AND TRANSPORTATION
on the
BUDGET FOR THE FISCAL YEAR 1979
95th2nd
CongressSession
March 15, 1978
(423)
424
CONTENTS
PageI. Introduction
A. Overview of President's Budget ............. 1B. Impact on Committee Programs ............ 2
II. Summary of Committee Recommendations by Function andSubtunction .................... 5
III. Summary of Presidential and Committee Proposals ..... 7IV. Detail of Committee Recommendations by Subcommittee,
Agency and Program ... ............ 9A. W ater Reore... . .......... 9B. Surface Transportation ................. *00" 19C. Public Buildings and Grounds ...... 32D. Aviation... ................. 35E. Economic Development ................ 37
425
I. NITRODUCTION
A. OVEfiVIEIo OF PRESIDENTtS BUDGET
President Carterts budget for 1979 proposes a restrainedspending program with little in the way of new initiatives. Taxreductions and reforms totaling $24.5 billion are the mostsignificant policy initiatives in the budget.
For 1979 outlays of t500 billion and total receipts of $440billion are recommended. This results in a deficit of $61billion wnich as shown in the table below is about the same astne revised budget for 1978. The 1978 revised budget is $4.5billion higher tnan the revised Ford'budvet submitted by thePresident last year.
The reduction in taxes which is to begin on October 1 is toassure a continued economic recovery and a reduction inunemployment. The economy and the budget are interrelated.Economic conditions significantly affect the budget and thebudget in turn influences economic conditions. Real economicgrowth in calendar years 1978 and 1979 is projected to averageabout 4-3/4%, which compares with 4.9% in 1977 and 6% in 1976.Unemployment is expected to decline to about 6.2% by the fourthquarter of calendar year 1978 and to 5.8% by the fourth quarterof calendar year 1979. Inflation is projected to remain ataround 6% annually during this period with short term treasurybills leveling off at 6.1,.
1
426
In summary, the President's 1979 budget recommendations providefor financing an effective national energy program, assign a highpriority to programs improving our welfare program, strengthenprograms which benefit urban areas, restrict defense expendituresto a real growth of 3% above the current year's budget, placeincreased emphasis for improving and protecting our nationalresources, and proposes a real rate of growth of almost 5% forbasic research.
In formulating his budget, the President directs attention tothe finite nature of our resources. While public needs areimportant, private needs are equally vital. This leads thePresident to the premise on which his first budget is based: thatwe must firmly limit what the Government taxes and expends. Hisbudget would trim the Federal share of the gross national productto 22% which compares with 22.6% for the previous year.
The deficit of $60 billion excludes the transactions of the so-called off-budget agencies, which althouGh Federally owned andcontrolled are by law excluded from the budget totals. However,the financing of the outlays for these off-budget agencies whichIn 1979 is estimated to be $12.5 billion are added to the budgetdeficit to comprise the total Government deficit of $73.1 billionwhich has been financed by borrowing from the public or othermeans. The total deficit is slightly below 1978. Theadministration does not anticipate difficulty in its financing.
B. IMPACT ON COMMITTEE PROGRAMS
WATER kE1L.LS The President's budget request for the waterresources development program of the Corps of Engineers woulddelete 58 ongoing studies and delay the completion of 59projects. Likewise, the budget request for the watershed programof the Soil Conservation Service would permit no new planning orconstruction starts. These policies, if adopted and continued,would lead to an early termination of these agencies' veryimportant water resources programs. The Committee is accordinglyrecommending restoration of funding for these programs which willbring them essentially to their fiscal year 1978 level.
The Administration's budget request for the water pollutioncontrol segment of the Environmental Protection Agency'sAbatement and Control program reflects a net decrease inpositions, in addition the resources are not sufficient tomaintain a strong pollution control program in general and areespecially inadequate when viewed in light of the addedresponsibilities given the agency under the recently enactedClean Water Act of 1977 (PL 95-217).
2
427
It is vital that continued funding be provided theEnvironmental Protection Agency for the construction of municipalwaste treatment works, including full implementation of the newauthority for innovative and alternative technology and the fullreimburse ent -to municipalities that were not eligible for thecurrent 7?% Federal grant share but acted in good faith to complyin a timely manner with Federal requirements. The areawide wastetreatment management planning processes (section 208) are thebackbone of an effective pollution control process, yet thisprogram and grants to State and interstate water pollutioncontrol agencies have been significantly underfunded. Also, theEnvironmental Protection Agency has an expanded and reinforcedresponsibility in the area of effluent controls for toxic andconventional substances.
Because of the underfunding of a number of the EnvironmentalProtection Agency's programs, the Committee recommends severalincreases.
SURFC TRAtGSPORTATION- The Administration's budget. providesfunding to accommodate major revisions and restructuring of thefederal highway and mass transportation programs under a proposedlegislative program. Despite their restructured nature the newproposals do not address issues such as the relationship betweenneed and funding for highways and transit raised by SecretaryAdams in testimony before the Committee. At the same time thereis some indication of an increased federal role with respect tohighway rehabilitation and bridge replacement. However, a majorproblem with the President's proposal making it difficult toanalyze is that it is impossible to trace existing programstnrough the new structure and thereby determine intended fundinglevels in 1979 for these programs.
PUBWJ.Q BLDINGS AnD GfQOUNQS- The Administration's budgetprovides only $17.6 million fcr the new construction andacquisition activities of the Public Building Fund, less thanPresident Ford proposed in his FY 1978 budget. Of that amount,$14.8 million is for the acquisition and improvement of U.S.Postal Services properties by the General ServicesAdministration, and only $2.8 million is actually for newconstruction. There is a demonstrated need for additionalfederal construction to more economicallly meet the existingspace needs of' the Federal Government. The Public Buildings Fundis expected to have a fund balance of over $76 million by the endof FY 1979. The Committee therefore recommends an additional $76million for new construction.
3
24-066 0 - 78 - 28
428
Since proposing its FY 1979 budget, the Administration hasproposed a $52.3 million project to complete a redesigned UnionStation and National Visitors Center. The Committee is currentlyholding extensive hearings on the national l Visitors Center, andhas not yet determined what agency or department should bedelegated the authority to complete the unfinished NationalVisitor Center project, Therefore, the Committee recommends anadditional $53 million for work at the National Visitor Center.
Al•IATIO- The Administration's budget contains sufficient fundsto cover existing authorized levels of airport developmentfunding However, H.R. 8729 reported by this Committeee December13, 1977, contains an additional $260 million for airportdevelopment for fiscal year 1979. The bill also provides 2165million in a new grant program for noise abatement planning andimplementation. The $165 million is not in the Administration'sbudget. Finally, once again the Administration has not providedadequate funding for safety out of the facilities and equipmentfund -- the Committee has added t53.6 million in crder to bringthe program in line with previously expressed Congressionalintent.
ECONOMIC LEVELOPMENTo Although the President's request foreconomic development prograMs is above the current level, themajor part of the increase is for trade adjustment activitieswhich are not authorized by the Fublic korks and TransportationCommittee. Consequently, we are not in a position to analyzethis portion of the request. We have carefully analyzed thoseprograms under our jurisdiction and have recommended increasedfunding levels in a few hi-h-priority areas to reflect currentCommittee policy and new initiatives that we will consider thisyear.
In addition, we believe that a new labor-intensive public worksprogram initiative will be suggested in the President's UrbanPolicy Message which is scheduled to be delivered in mid-March.Suggested funding for this new Administration program is notincluded specifically in the budget. ke also understand that theAdministration will send up suggested legislation for a newenergy impact aid program that will add probably $20C million tothe Title IX budget request. We will not be able to submit ourviews on appropriate funaing levels on these new Administrationinitiatives until the legislation is considered by the Committeelater this spring.
4
II Summary of Committee Recoimendations by Function and Subrunctionfor the Fiscal Years 1978 and 1979
(in millions)
FUNCTIONSubfunction
_ Pudaet Authority Out laysPresident's Committee President9s
GCUFiAL GOV~hNMEhT (800)Legislative Functions (801)Executive Direction & :anaeLement (802)Central Fiscal operations (c03)Gtaeral Froperty & Records Management (804)Other General Government (606)
C. President's budget requests for savingsthrough changes in existing laws whichmandate spending in fiscal year 1979without further action by Congress;otner legislative savings proposals:
NONE
7
432
TAELE III.-Continued(in millions)
Amount Page
D. Legislative initiatives of Congressfor fiscal year 1979:
SUfiACE TRAiISPKATATION:Department of Transportation
AV. V LtTjIL LF CC: . h CO1i.E.LATIC!:S *YSUi3CO-i.ITTEE, AGENCY A14D PHOCAM
This section of the report provides the detailed support forall changes that tnis Committee recommends repardin= thelegislative ana funding proposals set forth in the President'sbudget as well as backup for the Committee's program initiativesrequiring legislation in tnis coming session of Congress.
WATER RESOURCES
The Committee's program responsibilities in this areainclude the construction, operation, and maintenance activitiesof the Corps of Engineers as they pertain.to flood control, watersupply, erosion and navigation works along the coasts and in ourrivers and harbors; the waste treatment construction grants andremaining water pollution related programs of the EnvironmentalProtection Agency; the water resource and flood controlactivities of the Soil Conservation Service; Disaster Relief; aswell as the water resource and pollution conttbl activities ofsuch independent agencies as the Tennessee Valley Authority, St.Lawrence Seaway Development Ccrporation and Federal t:aritimeCommission.
The President's budget requests t8361.9 million in budgetauthority and S9570.0 million in outlays for these programs. TheCommittee recommendatic-3 include increases of $1364.1 million inbudget authority and $381.7 million in outlays, the details ofwhich are outline as follows:
Sgi Conservation Service- The Ccr..mittee considers thefiscal year 1978 funding level for this program to be adequateand therefore recommends an increase in buacet authority tomaintain the program at that level, with an allowance for a levelof inflation of 6 percent.
Corps oL EnzineCs- The Committee recommends an increase inbudget authority of $380 million. This Will permit continuedfunding of the 58 ongoing studies which are not included In theFresident's budget request and a restoration or adequate fundinglevels for the 59 projects which would be delayed because ofreduced funding.
11
436
It would also permit earlier completion of some projects andinitiation of new planning and construction starts, which areneeued if the program is to remain viable and responsive to theNation's needs. Finally, it woulu insure an adequate fundinglevel for operation and maintenance activities, particularlythose associated with our navigable waterways.
Otner Independent ASencies
Tennessee Valley Authority
(In millions of dollars)
1978 1979Bureau Budget Committee Budget Committee
Program hst. Recom.* Est. Recom.
Tennessee Valley Authority FundResource Development:
Tennessee Valley Authority- The increase of t10 million willpermit adequate funding of the Columbia Lock and Dam.
Independent Agencies
Environmental Protection Agency
The Committee recommends increases totaling $939.8 millionin buaget autnority and $246.2 million in outlays for fiscal year1979. Programs receiving increases are discussed on thefollowing pages.
12
437
In setting for fiscal years 1979 ana beyond authorizationslevels in P.L. 95-217, the Committee took into account the infacts that previous years water pollution control programs werefunded at grossly insufficient levels in previous years, and thatit takes time to Lear such programs up to the level of effortcalled for. Thus in many instances, many of the amountsauthorized for fiscal year 1979 are lower than levels authorizedin previous years. These authorizations are the Committee'sassessment of the actual level of funding that can and should beprovided each of the procgraMs under the Federal Water PollutionControl Act.
(In millions of dollars)
IG78 1979Bureau Eudeet Committee Eudget Committee
Program Est. Reconi. s st. Recom.
Construction Grants:reimbursement to States,
1966-73:
Eudget Authority ..... 0.0
Outlays.............. 250.0
(+F50.C)
250.0
0.0
150.0
70.0(+70.0)
70.0(-A0.o)
$ection 207:
budget Authority....h500.0
Outlays .............. Th85.0
4500.0
3885.0
4500.0 5000.0(+500.0)
4510.0 4500.0(-10.0)
Section 205(e)
Budget Authority .....
Outlays.................
0.0
0.0
Facility Site.
Budget Authority .....
Outlays ..............
0.0
0.0
75.0(+75.0)
35.0(+35.0)
15.0
(+15.0)
5.0
13
438
An authorization of $4.5 billion has been provided forfiscal year 1978 and $5.0 billion for fiscal year 1979 forFederal grants for the construction of municipal waste treatmentworks. In addition, a separate authorization is provided insection 205(e) to assure that no State receives less than 1/2 of1% of the total amounts authorized. The Committee recommendsthat these entire sums be fully available for obligation.
P.L. 95-217, which was enacted December 27, 1977, providesan authorization for appropriations for five fiscal years. Theauthorizations for fiscal years 197C through 19?1 were allottedto the states immediately after enactment. A major change in theAct is the provision making the amounts of each authorizationsubject to appropriations Acts. This provision was adopted incompliance with the Congressional Budget and Impoundment ControlAct ot 1974. However, it is recognized that making theauthorizations subject to annual appropriations Acts reintroducesthe very uncertainty in the level of funding that Congress hadattempted to eliminate in the Federal Water Follution Control ActAmendments of 1972 when it provided for contract authority.Therefore an allotment is no longer a commitment to fund because,altfou~h contract authority is still theoretically available, itno longer has any significant impact on the availability offunds.
The Euoget Impoundment and Control Act of 1974 anticipatedthat, in the absence of effective contract authority, ttleAppropriations Committees would make available advancedappropriations for those programs which require long-termplanning commitments for efficient expenditures of funds. TheCommittee anticipates that the Appropriations Committees will,with the support of the Budget Committees, provide advancedappropriations for fiscal years 1979, 1980, and 1981. Only inthis way can States and communities know in advance that adequatefunos will oe available and proceed to plan for construction ofneeded wastewater treatment works.
The President's budget contains no budget authority for thereimoursement programs authorized by section 206(a) of theFederal hater Pollution Control Act. The section 206(a) programwas amended oy P.L. 95-217 to extend the deadline for projecteligibility from July 1, 1972, to July 1, 1973. This was done toclarify the eligibility of a few additional projects whose statushad been clouded because of inequities resulting from EPA's delayin implementing this program. The Committee's recommended levelof' budget authority provides its oest estimate of funds needed toreimburse fully all currently all eligible projects as well asprojects made newly eligible oy P.L. 95-217.
439
(In :nillion§ of dollars)
197A 1979Bureau Budget Committee Budget Committee
Program Est. Recom. Est. Recom.
Enforcement:Effluent permits:
Budget Authority ..... 22.2 22.2 25.4 35.0(+9.6)
Outlays.............. 22.0 22.0 25.0 35.0(+10.0)
The Committee's recommendation represents the amount ofFunds to be earmarked for enforcement from the authorization forEPA's administrative activities contained in section 517 of theact. Thousands of effluent permits hase been issued to municipaland industrial dischargers containing compliance schedules thatare geared to the achievement of the 1977 and 1983 effluentrequirements of the Act. If the permits are to result inimproved water quality, it is vital that they be carefullymonitored and enforced. EPA's resources in this area for fiscalyear 1979 are inadequate for this task.
15
"440
(In Millions of dcllars)
1078Bureau Eudget
Program Est.
Abatement and Control:Pilot Training Programs(sec. 104(c)(1):
Budget Authority ..... 0.1
Outlays .............. 0.1
manpower forecasting(sec. 104(g)(2):
Euaget Authority..... 0.2
Cutlays .............. 0.2
Grants to State agencies(sec. 106):
Budget Authority..... 54.0
Outlays ............... 54.0
Training grants (sec. 112):
Budget Authority ..... 0.0
Outlays .............. 0.2
Areawide managementplanning processes (sec. 208):
budget Authority ..... 69.5
Outlays............ 55.0
CommitteeRecom.
3.0(+2.9)
1.5(+1.::)
1.5
(+1.?)
1.3(+1.1)
514.0
51 .0
0.0
0.2
150.0
(+80.5)
55. 0
1972Budget CommitteeEst. Recom.
0.1
0.1
.L 0.2
0.2
52.4
52.0
0.0
0'.0
50.0
64.0
3.0(+2.9)
3•.0(+2.9)
1.5(.1.3'
3.0(+2.8)
100.0(+47.6)
52.0
7.0(+7.0)
7.0(+7.0)
150.0(+100.0)
105.0(+41.0)
16
"441
(In millions of dollars)
1978 179,bureau m Budget Committee Budget Committee
Program Est. Recom. Est. Recom.
Alaska VillageDemonstration Projects (sec.
Budget Authority.....
Outlays..............
113)
0.0
0.0
Clean lakes program(see. 314):
Budget Authority.....
Outlays ..............
Emergency Fund:
budget Authority.....
Outlays ..............
General Administration(see. 517):
Budget Authority.....
Outlays..............
0.0
0.0
0.0
,).0
90.6
81.0
0.2(+0.2)
0.2(+0.2)
60.0(+60.0)
10.0(+1C.O)
0.0
0.0
90.6
81.0
0.0
0.0
14.7
4.5
0.0
0.0
116.1
108.3
0.2(+0.2)
0.2(+0.2)
60.0(+45.3)
20.0(+15.5)
10.0(+10.0)
10.0(+10.0)
121.5(+5.4)
118.5(+10.2)
The programs authorized by the Federal Water PollutionControl Act have consistently been underfunded. In someinstances, funding of vital programs has been eliminated. Theprogram levels recommended by the Committee will begin to rectifythis situation. PrograWs of particular importance are asfollows:
17
442
Tiring itants and scholarships sectiona IJ..21..-- Only$05 million in budget authority was requested for this program,although it is an important factor in safeguarding the investmentof Federal funds in the abatement and control of pollution. TheCongress has shown its continued interest in the program in pastyears by authorizing and appropriating funds.
Grants Ig State U1 I J& Water fr.LLj.2 ControlAgenci3 (section, 1.Q).-- This program has Consistently beenunderfunded, despite evidence from both the States and EPA thatit is a vital component of the water pollution control program.In the past however, Congress has recognized the significance ofthis program by appropriating more. funds than were requested bythe administration.
The President has requested $524 million for this program infiscal year 1978. Representatives of the various States havetestified that a minimum of $100 million is required.
The importance of assisting the State agencies wasreempnasized in P.L. 95-217 by the development of a specialprogram ot management assistance to those States which take onaaditional delegated responsibilities under the constructiongrant program. Up to 2% of a State's construction 3rantallotment may be used for such assistance. The Committeeemphasizes however, that this special management assistanceprogram is a supplement to the section 106 program and in noinstance is to oe considered a substitute.
Ara waste proceDsssAction &..08f ) --The President's budget provides only $50 million for this programin fiscal year 1978. This budget is insufficient to providerunds for subsequent grants of up to 750 for areas which havecompleted the initial plans of their continuing planningprocesses as called for in the statute. Also, it is insufficientto assist States in completing their balance-of-State nonpointsource control programs.
The Committee supports full funding of 4200 million of thesection 208(c) program for agricultural cost-sharing to controlnonpoint sources of pollution. This program is reflected infunction 350 (Agriculture) of the Budget.
is
443
SURFACE ThANSFChTATION
The responsibilities of the Surface TransportationSubcommittee include oversight of the Department ofTransportation's Federal Highway Ao=inistration, National EighwayTraffic Safety Administration, Urban Mass Transit Administration,and Hazardous Materials Eureau as well as the Public LandsHighway Programs of the Departments of A~riculture and Interior.The group also manages legislation related to the regulation ofnon-rail surface transportation. For the Committee's surfacetransportation function, the President's budget includes$11,614.7 million in budget authority and $10,390.3 million inoutlays. Increases recommended by the Committee total t4,149.9million and $13.9 million in budget authority and outlaysrespectively.
Department of Agriculture
Forest Service
(In millions of dollars)
1978 1Q79Bureau Eudget Committee Budget Committee
Program Est. Recom. Est. liecom.
Forest Hoads and Trails
budget Authority ......--- 11?.0 140.0(+22.0)
Outlays .............. --- 100.0 110.0(+10.0)
19
24-066 0 - 79 - 29
0
444
Department ot Interior
(In ,ijillions of dollars)
1978 1072bureau Sudvet Committee Budget Committee
Program Est. hecom. Est. Fecom.
National Park ServiceRoad Construction:
Eudget Authority ..... 16.0 30.0(+14.0)
Cutlays.............. 8.0 15.0(+7.0)
Parkways
Eudgt Authority..... - .. 24.0 45.0(+21.0)
Outlays .............. --- 12.0 20.0(+P.O)
bureau of Indian AffairsRoad Construction:
Budget Authority..... --- 71.4 e?.O(+11.6)
Outlays .............. 71.6 E0.0(+6.4)
As in the budget for FY 1978, the Aoministration's budgetfor 1979 relates road construction in theses agencies to generalauthority ratner than tne most recent Congressional action - theFederal Aid Highway Act of 1976. The CoMmittee estimatesattempts to relate the budget to estimates of Congressionalaction for tnese programs this year.
20
445
Department of Transportation
Federal highway Administi'ation
The President's budget supports the expeditious completionof the Interstate highway System as a priority goal and requests'an increase in construction of t250 million above the FY 197Alevel. It should be noted, however, that the 1976 Federal-Aidhighway Act authorized an increase in annual authorizations to.3.625 billion beginninZ in FY 1960, thus the $3.5 billion levelrecommended by the Aoministration represents a net decrease of1125 million beginninG in 1980. The Committee believes that therecommended amount will not be sufficient to support an expeditedconstruction schedule and recommends a further increase of 45C0million. In addition, the Administration proposes that theminimum 1/2r to which each state is entitled be allocated fromthe regular interstate apportionment rather than a separateauthorization as in the past; the Committee disagrees, notingthat since part of this is allocated to states which havecompleted tneir interstate construction, this will detract fromthe goal of expeditious completion of the entire system, andrecommends a separate authorization of $125 million. rheCommittee's recommendations for the interstate system exceed theAdministration's budget request by $625 million.
The Administration's legislative proposal contemplates amajor restructuring of the non-interstate categorical aid programinto a few very broad categories, including Federal-Aid Primary,Small Urban and Rural Transportation Assistance, UrbanTransportation Assistance, ana Safety Inorcvements and at thesame time eliminates a number of categories. TheAdministration's proposal implies that the authorization levelsfor the new categories will at least equal or exceed the combined1978 authorization levels for the individual categories which goto make up the new categories; however the total proposedauthorizations for FY 1979 are less than the 1978 authorization.
The Administration contends that the net effect will be tohold the state harmless, so that few if any states will declinein overall level of funding as a result. The Committee believesthat it will be impossible to hold the states harmless because ofthe new distribution of funds implicit in the combinedcategories. Generally, this would oenefit those states notcurrently receiving t'unas through the special categoricalprograms anu hurt those states uhich do benefit. For example,the funding for Bridges on Feaeral Dams would be split andattributed to Federal-Aid Frimary and Small Urban and RuralTransportation Assistance. Therefore, authorized moneys whichwould have been targeted at specific projects in specil'ic stateswould instead be apportioned among all the states according tothe foraula of the larger category.
This item includes $25 million for tne Great IViver Road and160 million L'or hail/Highway crossing demonstrations in 1979.
23
448
(In millions of dollars)
1978 IS79Eureau Budget Committee Euaget Committee
Program Est. Recom. Lst. Recom.
highway relatedIar'ety Grants (Trust)
Budget Authority ..... 24.e 24.8 O.C 93.3(+93-3)
Outlays .............. 20.0 20.0 18.8 73.0(+55.0)
The Committee's recommendation provides $25 million Stateand community grants; $50 million for the 55 mph speed limitprogram; $15 million for incentives; and $7.5 million for schoolbus driver training.
The Committee recommenas an acditional tr,-3 rillicn fcrfiscal year 1979 for completion of the ::ational Visitors Center.The project tcoay encompasses an incomplete and unusacle parkingfacility, a visitor center with less tnan the originallyenvisioned services, and an uncompleted replacement railroadstation. On February 22, 1978, the Administration prcpcsed aý52.3 million project to complete a redesignec Unicn Station andNational Visitor Center. Unoer tne Acministration proposal,$22.8 million of the total would come from the Lepartment ofTransportation's existing authority unaer the Northeast CorriaorImprovement Project, and the remaining !29.5 million wouldrequire a new authorization. Tne Committee has not yetdetermined which cepartzent or agency should be authorized tocomplete construction at the national Visitcr Center. However,the Cozmittee ,Oes intend to report legislation by May 15, 1978,which will provide for a final cesien which can accommodate boththe growth in rail passenger traffic and the legitimate needs ofvisitors to the Gation's capital.
452
(In millicrs of dollars)
107ý 1979
Bureau udset Committee Euaget ComnitteeProgram Est. hecom. Est. recom.
Rail-Hwy. Crossing Lemos:
Budget Authority..... 1.P 1.p 0.0 30.0
Cutlays .............. 5.6 j.6 7.2 14.L.(+7.2)
Matter an exhaustive review, however, the Committee hasconcluded that increases acove tie 1'7e level of autnorizationsare necessary in several existing categories. The Coxmittee isrecommending an increase of !750 million for the feueral-AidPrimary system and -25C million for tre feaeral-AiJ Secondarysystem in an effort to check tne rapid deterioration .of thoseexisting systems. The Conxittee further recommends the additionof the Commonwealth of the :.crthern :*arianas to the Territorialhighway program vith an annual authorization of $1 zillicn, anincrease in the Sater Otf-System Roaus program of $100 million,the establishrzent of a permanent program for tne construction oftikeways for commuting and recreational purposes at an annualauthorization of 425 million (402.5 million from the Trust Fund,and '12.5 million iron the Ceneral Fund), and an increase forErid-es on Federal Eams of !1r million in FY 1979.
The Adzinistration's proposals it. the t.ighway safety areacontemplate a similar restructuring, although once again thelevel of* authorizations for FY 1979 is ctaracterized asequivalent to 1978 with one major exception. The request for the.,4ecial brioge replacement program is an increase of $270 millionover 1978; the Committee feels This is clearly inadequate to dealwith the gravity and extent of the problem of unsafe bridges andrecommends an increase of 1^e20 million.
Section 203 of the Highway Safety Act of 1976 authorized'125 million annually for the elimination of hazardous rail-ninbay crossznrs on tnc leceral-aia system and 175 millionannually for off-system crossings. The Committee feels thattl:ese amounts are ir.adequate and recommends increasing on-systemauthorizations to V!50 millionn annually and cIf-system to •1C0millionn per year.
The Committee feels that these authorization levels areinacequate to meet the goal of maintaining, improving andexpanding the nation's public transportation facilities andrecommends $2.2 billion per year for section 3 discretionarygrants, $1 billion annually for section 5 formula grants, $600million annually for transit substitutes for interstate transfers($75 million less than the Aoministration has requested), $60million for commuter rail in 1979, $60 million annually forplanning ($12.5 million more than the budget request), and $150million annually for rural transportation' assistance. Althoughthe Administration has requested no funds for this latterpurpose, it intends that a similar program be funded through theSmall Urban and Rural Transportation Assistance category in theFederal-Aid Highway program. The Committee's recormendationsrepresent an increase over the budget request of slightly morethan $1 billion in FY 1979 ceclining to a difference ofapproximately $700 million in FY 1982 because of the plannedincreases in section 3 ana 5 of the Administration's request.
In comparing the requested authorizations it must be notedcarefully that the sharply differing aTounts requested forsections 3 and 5 represent a Pery different approach toutilization of those two sections. Many projects currentlyfunded under section 3 houla shift to a newly expanded section 5uncer the Administration's proposal, a shift with which theCommittee disagrees.
Extensive hearings ana investigation have demonstrated theneed for revision in mass transportation programs, and ooth theAaministration's proposals and legislation pending in theCommittee address tnis need. The Administration has asked thatthe section 3 ciscrttionary capital grant program be limited toconstruction of new fixed guideway systems*' extensions ofexisting fixed guideway systems, major bus fleet expansion,emergency projects which cannot be funded through section 5, newtechnology put into service, and joint development costs, and isseeking authorizations of •640 million for FY 1979, $69C millionin Fy 19q80, P740 million in 1981. .790 million in 1982, and tF40million in 1983. It further proposes that beginning in FY 1979 anew section 5 formula oe utilize, one that would contemplatefunding for routine bus ano rail replacement and mooernization offacilities and equipment and ask authorizations of' $1,735 ffillionin FY 1979 increasing by t5O -illion per year to t1,885 trillionin FY 1902. This would include funding for commuter rail linesnow separately authorized under sections 17 and 18.
N0
456
For the most part, the levels requested for the 1jFTSA areclose to the Committee's recommendations. In related nighwaysafety programs administered by FHWA, however, the Committeewould add .'1.2 oillicn annually for the special bridgereplacement program, anu a total of .50 million annually foreli.•ination of' cazaruous rail-highway crossings.
Summary
The Committee recommends an obligation level for Feaeral-aidhighways ot $10.3 billion per year for the fiscal years 1979,1980, 1981 and 19E2. The Administration has proposed differentobligation ceilings for 1979 based on the alternatives presentedin the budget. If new legislation enacted by the Congressretains the same programs, the proposed obligation ceiling is setat 't7.445 billion, the same limit imposed by the DOTAppropriations Act of 1978 (PL 95-65). Assuming the legislativeproposals emooaied in the budget request are enacted, theAdministration envisages an obligation ceiling of $7.8 billion.It should be noted, however, that this ceiling would includeseveral categories not now under the ceiling, including highwaybeautification, territorial highways, and hightay-related safetygrants.
The Committee recommends that $1,100 million in additionalbudget authority for FY 1979 be provided for certain directappropriation programs administered by the FHWA for which budgetrequests for the most part are inadequate or entirely lacking.This includes $44 million for construction of the Seven MileEritae on tne Cverseas highway. Requests for 1980, 1981 and 15should also be approximately t1,1CO million.
PUBLIC BUILDINGS AND CRObhDS
The acquisition, renovation and repair of federal officespace as well as certain special purpose facilities for allbranches of' Government fall within the purview of the PublicBuildings and Grounos Subcommittee. In addition, legislationrelated to certain administrative expenses of* the Executivemansion, the protective services of the Secret Service andGeneral Services Administration are reviewed •y the Subcommittee.Tne President's budget provides *2C1,.9 -iillion in budgetauthority and $220.3 million in cutlays for these programs. TheCommittee's recommendations would increase these amounts by $53.6million in budget authority and outlays by !31.2 million.
32
457
Inuependcnt Agencies
General Services Administration
The FY 1979 budget requests '2. million for newconstruction plus 114.6 million for acquisition. The Cofmmitteeaccepts these projects and recoamuends an increase of $76 millionfor new construction. The Committee recommendation for newconstruction ana acquisition totals .93.6 million in newobligational authority and t54.5 million in outlays for FY 1979.
(In millions ot dollars)
197P 1970bureau Ludget Committee Eudget Committee
Program Est. fieco.m. Est. Recom.
Federal Buildings Fund:
Obligating authority.. 20.5 20.5 17.6 93.6(+76.0)
Outlays.............. 54.6 54.6 44.5 54.5(+10.0)
The Ceneral Services Administration provides building spacefor Federal departments and agencies by Federal construction orby leasing. GSA is authorized to lease for periods up to 20years existing ouiloings or buildings to be erected by privatedevelopers for Government use. Government-leaseo space underGSA's control has increased during recent years. Eudretaryrestrictions on construction have been a major reason forincreased leasing. Construction expenditures are historicallyfirst items to be eliu.inated when oemanas on the national budgetare unusually jreat. The Committee strongly feels that Federalconstruction and ownership would in many instances provide moreeconomically for the space neeos of the Federal government.Therefore, the Committee recommends that the public buildingsfund balance of approximately $76 million by the end of FY 1979oe auaed to tne construction request.
33
458
(In millionsns of dollars)
,, 197Pf ,1979
Bureau Budget Committee Budget CommitteeProgram Est. Recom. Est. Recor.
Public Lands Highways
Budget Authority ..... -
Outlays .............. -
Forest Highways:
Budget Authority ......-
Cutlays .............. -
Eikeways
Budget Authority ......-
Outlays .............. -
Interstate fiesurfacinc:
budget Authotity....
Outlays .............. .
Small Urban and Rural Program:
Budget Authority .....
Outlays.............. .
Admin., Research & Other:
budget Authority..... -
Cutlays ................-
c.0 16.0(+16.0)
0.0 1C. 0(+15..0)
0.0
.L. 0.0
0.0
0.0
33.0(+33.0)
33.0(+33.0)
*12.5(+12.5)
7.5(+7.5)
0.0 175.0(+175.0)
0.0 60.0(+60.0)
725.0
65C.0
340.C
340.0
0.0
0.0
C.0
0.0
27
459
AVIATION
All aspects of the Department of Transportation's FederalAviation Administration including the operation and maintenanceot the nation's airport and airways system, related research anddevelopment as well as the procurement of essential equipment andfacilities are the major responsibilities of this subcomaittee..Its jurisdiction also includes legislation related to the safetyand -economic regulation of the aviation industry as well as theoverall responsibilities of the National Transportation SafetyEodra. Appropriation requests for these programs amount to$3,201.9 million ana $2,997.1 million in budget authority andoutlays respectively. Committee recommendations, detailed below,amount to $3,680.5 million in budget authority and $3,096.5million in outlays.
Department of Transportation
Federal Aviation Administration
(In millions of collars)
1078 1079Bureau Budget Coxmittce Fudget Committee
Program Est. Recom. E rst. fiecom.
Airport Noise Planning &Program Implementation
Euoaet Authority ..... 0.0 0.0 0.0 165.0(+165.0)
Outlays .............. 0.0 0.0 C.O 25.0(+25.0)
Title I of' H.R. 8729, as reported by the Committee,estaolisnes a new, voluntary airport noise compatibility planningana program development prograin under the Airport and Airwaydevelopment Act of 1970 to assist airports and surroundingcommunities to develop and carry out programs to reduce existingnoncompatible land uses around airports. Airport operators whoseprograms have been approved by the Secretary of Transportationand units of local government identified in the noise impact mapas being impacted by noise as a result of airport operations areelibible for 80 percent federal share grants. Title I authorizes$15 million tor planning and ±150 million for programimplementation for fiscal year 1979.
The President's budget of $590 millIon for airportdevelopment and planning is consistent with the amount authorizedby P.L. 94-353. However, h.h. 8729, reported by the Committee inDecember 1977, increases the presently authorized level forfiscal year 1979 from $590 million to ýE50 million. Thisincrease is based on significant indicators of near term nationalairport system needs which require an immediate increase inauthorized levels in advance of the anticipated congressionalconsideration in 1980 of the future of the Airport and AirwayTrust Fund.
The Airport and Airway Levelopment Act of 197C, as amended,authorizes the Secretary to obligate = less than $290 M fromthe Trust Fund for the acquisition, establishment and improvementof air navigation facilities. The Committee's recommendedincrease is consistent witn the basic statute and will accelerateneeded acquisition of air navigation facilities. The Presidentrecommended $370.9 million from the airport and airway trust fundfor acquisition of airway facilities. However, $174.5 of the$370.9 in the budget represents full funding of a flight servicestation modernization program covering a seven year period.Vihile the Committee is pleased with the Administration's movetoward modernization, concern persists that insufficient fundsare being spent on tne acquisition of safety items such asInstrument Landing Systems ana Visual Approach Slope Indicators(VASI). Subtracting the 1174.5 from the *370.9 leaves $196.4 forthe F&E program for fiscal year 1979. The Federal AviationAdministration needs to accelerate its program to acquire theseessential safety items. For example, only approximately 25percent of the runways of our Nation's airports served byscheduled air carriers have VASI (whi:h provide vertical guidanceto pilots) installed thereon. The President's recommendation of$370.9 is not entirely consistent with the will of Congressexpressed in 1970 and again in 1976 that more trust fund money bespent on this program.
ECONCMIC DEVELOPMENT
Activities of* the Committee covered by this Subcommitteeincludes tnose of the Economic Development Administration of theDepartment of Commerce, Appalachian Regional DevelopmentPrograms, Public Works Jobs programs and the RegionalCommissions. For these programs, the President's budget includes$1,183.2 million in oudget authority $2,937.9 million in outlaysin FY 1979, and the Committee is recommending increases of t351.7million in budget authority, and *153.7 million in outlays.
This $10 million increase is needed to open and operate fourregional offices and provide more effective administration ofbusiness development activities.
(In millions of dollars)
1978 1979Bureau Budget Committee budget Committee
Program Est. Recom. Est. Recom.
Economic DevelopmentAssistance Programs
1. Public Works GrantsTitle I
Budget Authority ..... 151.0
Outlays............... 137.8
151.0
137.8
219.0
161.4
425.0(+206.0)
333.6(+172.2)
38
463
EDA - Continued
(In millions of dollars)
1978 1979Bureau Budget Committee Eudget Comuittee
Program Est. Necom. Est. Recom.
2. Business DevelopmentTitle II
Budget Authority.....
Outlays..............
3. Planning Sec. 302
iu~Get Authority .....
Outlays ..............
36.9
27.9
11.5
8.4
36.9
27.9
11.5 .•
8.4
55.5
?3.5
17.0
10.8
80.5(+25.0)
51.3(+17.8)
34.3(+17.3)
21.0(+10.2)
4. Disaster BeliefTitle VIII
budget Authority .....
Outlays ..............
5. Economic AdjustmentTitle IX
0.0
C.0
Budget Authority ..... 114.3
Cutlays............... 48.5
0.0
0.C
114.3
48.5
0.0
0.0
180.6
R7.9
50 .c(+5C.0)
15.C(+15.0)
200.0(+19.4)
63.0(+5.1)
39
1. Public Works Grants- A $206 million increase to theauthorized level is recozmaended to help maintain the rural-urbanbalance of the program and permit more emphasis on joo-producingpublic works projects in areas impacted by high unemployment.
464
2. business Development- An increase of 125 million Issuggested in business development loans in order to reducebacklog of approved applications and to permit increased programactivity in urban areas.
3. laii Sec. 2_.- This increase of 617.3 for districtplanning would bring the Title III appropriation to theauthorized level, permit tne creation of new economic developmentdistricts and maintain the rural-urban balance of the programwhen new metropolitan districts are authorized next year.
4. DIsaster Pllief Title VILU. Title VIII authorizes aneconomic recovery and planning program that has never beenfunded. Legislation has been introduced to amend this title inorder that the Federal and State response to disaster recoverycan be -core effective.
5. Adjtustment 2 ILUL2 I.- This is a $19.4 millionincrease over the Administration budget request that theCommitteee feels is justified to support the urban economicdevelopment revolving fund program authorized last year asSection 204, and to support the new aid program for the steelindustry. The Committee intends to pass new Title IX authorizinglegislation to cover the budget request.. As noted above, theAdministration is considering new energy impact legislation underTitle IX that is not reflected in the budget request.
esci Acion, Pljnning Commission-Title ,t The Committeerecommends an increase of $24 million in this item to initiatenew Regional Commission program activities authorized in 1976,such as energy-related Jmpact evaluation and demonstrationprojects. Additional funding is also required for any newcommissions that may be established in 1979.
40
465
The recommendation3 of the Subcommittee would increase tneFY 1979 appropriations level for the Economic DevelopmentAdministration to $955.2 million. Of this total, W13.7 millionis authorized unoer the Trade Adjustment Act. For the programsunder our jurisdiction we are recommending $841.5 millioncompared with the authorized level of $1.42 million.
41
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- 6-- L I-- K& March 15, 1978musme j .*
Honorable Robert N. GiaimoC ha irTanCommittee on the BudgetU. S. House of Representatives"Washington, D. C. 20515
Dear Mr. Chairman:
Pursuant to Section 301(c) Public Law 93-344 there is
submitted herewith the views and estimates of the Committee
on Science and Technology for authorizing legislation which
will result in new budget authority and budget outlays
for fiscal year 1979 for those programs falling within
assigned areas of jurisdiction.
The cost data contained in the attached report are
the best estimates available at this time, and in large
measure, are based upon legislation which has been reported
by the Committee. One exception to this is the Department
of Energy Authorization bill. The estimates for that
legislation included herein are based on subcommittee
markup actions and are subject to change when the Full
Committee acts upon the measure.
(467)
468
Honorable Robert N. GiaimoPage two
The estimates for the National Aeronautics and Space
Administration, the National Science Foundation, the-
Environmental Protection Agency R&D Program, the Federal
Aviation Administration R&D Program, the Standard Reference
Data Act, the Federal Fire Prevention and Control Act are
all based upon final Committee reported legislation.
This Committee proposes to continue to subject the
research and development portion of the appropriation request
for the Environmental Protection Agency to annual authorization.
The cost data relating thereto have been included in the
attached estimates.* Also, commencing with the FY 1978 budget,
we proposed to subject the research and development portion
of the appropriation request for the Federal Aviation Admzn-
istration to annual authorization. This measure passed the
House, but was not acted on by the Senate in fiscal year 1978.
The Committee plens to continue to press for annual authori-
zation for the FAA R&D Program and cost data relating thereto
have been included in the attached estimates for fiscal year
1979.
It should be noted that, although not now subject to the
annual authorization process by this Committee, specific
recommendations concerning research and development activities
under the National Oceanic and Atmospheric Administration
469
Honorable Robert N. GiaimoPage three
have been included in the attached estimates (Format V).
Legislation is now pending to amend the organic Act for NOAA.
These proposals will be coordinated with other committees
of cognizant jurisdiction as appropriate.
Special attention is invited ro the Health budget
category (550) wherein certain budgetary recommendations are
made as to funding levels in Format V. Although the
National Institutes of Health are not within the specifically
assigned jurisdiction of this Committee, additional funding
is strongly recommended for research and development for
environmental cancer research and study and for extramural
programs in prediction, detection and assessment of
environmentally caused diseases. Although the National
Institutes of Health are primarily under the jurisdiction
of the Interstate and Foreign Coimerce Committee, the
recommendations of this Committee are focussed only on
environmental research programs where the jurisdiction
of the two committees overlap. The budget data contained
in the attached estimate are based upon hearings and sub-
committee analyses in which the NIH budget and programs of
environmental research were reviewed. These proposals will
be coordinated with other committees of cognizant jurisdiction
as appropriate.
470
Honorable Robert N. GiaimoPage four
This Committee is-quite concerned about the clarity of
the President's budget with regard to the Department of Energy
fiscal requirements for 1979. The data included in the
proposed legislation and the budget is presented in such a
fashion as to make it difficult to determine budgetary
allocations to the several standing committees having divided
jurisdiction over the department. Since the matter of
jurisdictional responsibilities between the several committees
concerned is controversial, the President's method of budget
presentation tends to further aggravate an already sensitive
situation. His budget data are susceptible to varying interpre-
tations which no doubt will lead to further jurisdictional
dispute. This Committee has drafted, introduced and has under
consideration its own bill which reflects the results of
our jurisdictional analysis of the budget data received.
Undoubtedly, other cognizant committees are doing likewise.
The estimates attached are based upon those elements of the
budget which our analyses indicate clearly fall within the
jurisdiction of this Committee.
It should also be noted that the President has proposed
in his budget certain savings through changes in existing
laws which mandate spending in fiscal year 1979, without
further action by Congress, in connection with revisions in
471
Honorable Robert N. GiaimoPage five
changes for uranium enrichment services (Format III). This
Committee is not favorably disposed toward the President's
legislative proposal to change the price of uranium
enrichment services and therefore the $163 million in
savings will of necessity have to be offset by increases in
budget authority and outlays elsewhere in the budget.
This Committee is not prepared to comment on tax
expenditures serving purposes similar to direct expenditure
programs. While there may be some direct relationship
between tax expenditures and budgetary functions and sub-
funct:'ons falling within the purview of this Committee,
matters of this nature are normally not considered during
the authorization process unless specifically highlighted
in the annual authorization requests from the various
agencies. This Committee assumes that tax expenditure
legislation, including that related to programs subject to
annual ao-thorization, is a function of the Ways and Means
Committee.
As indicated previously all major legislation, with
the exception of the Department of Energy bill, has been
reported by the Committee. Revised estimates to the Energy
bill will be provided as soon as final markup data are available.
Sincerely,
OLIN E. TEAGUEChairman
Enclosures
1. President's Budget Roquests for Existing Programs Which Require Authorizing Legislation Prior to theEnactment of Appropriations for Fiscal Year 1979
major Issue or Progain
General Sciene Space and Tech-nolo (250)
National Science Foundationa. Research and Related
Activities (251)
b. Special Foreign Currency(251)
c. Science Education Activities(251)
Department of Energy
Operating Expenses (251)
Plant and Capital (251)
Life Sciences Research and Bio-Medical Applications (251)
Operating Costs (251)
Capital Equip. & Construction(251)
COMMITTEE ON SCIEINC AND TECHNOLOGY(in millions of dollars)
Provides authorizationfor DOE for FY79 forbasic energy sciences,high energy physics &nuclear physics. Subject toadjustkvent in final markup.
Subcommittee recommendedno increase in this item;subject to adjustment infinal markup.
IIi I I!
I. President's Budget Requests for Existing Programs Which Rtequire Authorizing Legislation Prior to theEnactment of Appropriations for Fiscal Year 1979
2.(in millions of dollars)(in millions of dollars)
major issue or Program
General Science, Space and Tech-nology (250)
Nuclear PhysicsOperating Expenses
Plant and Capital
National Aeronautics and Spaceadministration
Research and Program Management(253)
Fesearch and Program Management(254)
Research and Program Management(255)
Construction of Facilities (253)
Construction of Facilities (254)
Construction of Facilities (255)
Research and Development (253)
Research and Development (254)
Research and Development (255)
President's request
Iudgat OutlaysAuthority1
72.900
1. 500
388
302
43
31
45
1,828.0
907
305
committee iAcmmendatLon
BudgetAuthority
(difference)
Outlays(difference)
Momesnts
-4 0~ 4 --
71.600
.400
388
301
43
56
8
48
1,820.
"841299
74.900(+2)1.500
(0)
388
302
43
31
40(-5)
1,824(-4)933(+26)304(-1)
73.600(02)
.400(0)
388
301
43
56
8
47(-1)
1,820(0)854
(+23)300
(+1)
Subject to adjustment in finalmarkup.Subject to adjustment in finalmarkup.
Ci3
General reduction in rehabilitationand modification of various locations
Increase for advanced programs
Increase for space applicationsprogramsIncrease for data acquisitioncapabilities
or t, Tt,i
tq4
.z. President's Budget Requests for Existing Programs Which Require Authotizing LegislatIon Prior to theenactment of Appropriations for Fiscal Year 1979
major lsse or Progrm
DIERGY (270)
Department of Energy (270)
Environment (270)
Operating Costs
Capital Equip. & Construction(Capital investment)
Research & Technology Development
(270)
Operating Costs
Capital Equip. & Construction.
Presient-'s request
BudgetAuthority
183.988
24.6
6.5
3.5
Outlays
181.038
20.0
16.0
3.0
(in millions of dollars)Cusitt" eeMcoimendation Comments
BudgetAuthority(difference)
201.388(+17.4)
24.6
6.5
3.5
Outlays(difference)
197.723(+16.685)
20.0
16.0
3.0
Department of Energy data subject toadjustment in final markup.
Increases in funding for coordinatingctivities, environment/enerqy infor-tion systems, integrated assess-
ments, and environmental engineeringareas. Data subject to adjustment infinal markup.
figures represent action only onLight Water Reactor Facilities ProgramLSubject to adjustment in final markup.
592.2 Provides authorization for DOE for(+78.4) FY79 for the R,D&D of solar energy,30.6 fuels from biomass, geothermal energy,
hydroelectric power, space nuclearapplications, and ATAP.
6.0 Geothermal Resources Development Fund
779.412 action reflects normal authorizationamount for FY79 rather than the
65.070 -equested amount for full authori-tation
2238.993
219.600
308.2(+48.8)
4.1
I
"C.i
Provides authorization for DOE forFY79 for energy conservation researchdevelopment and demonstration
I
00
S
Id
major Issue or Program
•mqw •eqm•l, qm qJ•
I I I
I. President's Budget Requests for Existing Programs Which Pequire Authoxizing Legaslation Prior to theEnactment of Appropriations for Fiscal Year 1979
5.
major Zisue or Program
ENERGY (270)
Policy and Nanagement (276)
Operating Expenses
Plant and Capital
Other Federal Funds
Environmental Protection Agency
Energy R&D (271)
NATURAL RESOUCES & ENVIRONME (3001
President" a request
Budget OutlaysAuthority
442.4
60.5
2.0
114.765
209.363
(in millions of dollars)Comitt"e Recommendation Comments
BudgetAuthority
(difference)
Outlays(difference)
t 4 1 4
4423.4
33.7
2.5
125.500
183.0
442.4
60.5
2.0
138. 370(+23.605)
247.968(+38.605)
423.4
33.7
2.5
151.921(026.421)
217.148(+34.148)
Department of Energy data subject toadjustment in final markup.
Provides authorization for DOE forFY79 for policy and program mgt.Includes 25.OM Budget Authority/23.5H Outlays '41 Decomeissioning &Decontamination Program. The Comitteefeels the Decommissioning & Decontam.belongs in format I as it was alsoauthorized in the FY78 ERDA Authoriza-tion, thus not qualifying as a new &expanded program.To provide for continued EPA research'on environmental and health impactsof energy development. Also increasedfunding for pollution control tech-nology.
Extension of authorization for Officeof R&D and increases primarily in thehealth and ecological effects program,and .industrial processes program.Committee heard extensive testimonyon need for increased health effectsresearch.
Environmental Protection Agency
Research a Development (304)
I.
I. President's Budget Requests for Existing Programs Which Require Authorizing Legislation Prior to theEnactment of Appropriations for Fiscal Year 1979
Major Issue or Program
NATURAL RESOURCES & ENVIRONMENT(300)
National Oceanic & AtmosphericAdministration
Marine Ecosystems Analysis andOcean Dumping (306)
COMMERCE & HOUSING CREDIT (370)
Department of Commerce
National Bureau of Standards
Fire Research Center
Standard Reference Data Program(376)
Scientific & Technical Research(376)
President's request
Budget OutlaysAuthorityJ
15. 202
4.9
3
91.764
15.00
4.9
3
84.005
in millions of dollars)CoaitteeRaconendation Comments
BudgetAuthority(difference)
15.202
5.1(+.2)
3
96.769(+5.000)
Out lays(difference)
15.0
5.1(+.2)
3
89.005(+5.000)
6.
Extension of authorization to providecrucial marine environmental infor-mation to balance economic develop-ment and environmental conservationin critical regions through extensiveanalysis.
This item is combined with theNational Fire Prevention and ControlAdministration (451) in the President:request and in H.R. 11291, the billreported by the committee. The in-crease provides for renovation of thesite acquired for the NationalAcademy for Fire Prevention andControl.
Provision in II.R. 11302 for conductof environmental related R&D inmeasurement science at NBS.
1. President's budget Requests for Existing Programs WIaci J;equ1re Autnoriz-ing Leg-aiat•cx -rro5 LI) WOEnactment of Appropriations for Fiscal Year 1979
Major Issue or Program
TRANSPORTATION (400)
National Aeronautics & SpaceAdministration
Research & Program Management(402)
Construction of Facilities (402)
Research and Development (402)
COMMUNITY AND REGIONAL DEVELOPMENT(450)
National Fire Prevention & ControlAdministration (451)
b
President's request
BudgetAuthority
181
77
264
12.926
Outlays
181
42
244
12.1
(in millions of dollars)Committee Recommendation
Budget OutlaysAuthority (difference)(difference)
181
77
292(+28)
20.467(+7.541)
181
42
256(+12)
20.467(+8.367)
7.
Comments
Increase for aviation research &technology.
Increase provides for renovation ofthe site acquired for the NationalAcademy for rire Prevention &Control.
!
II. President's Budget Requests for New and Expanded Programs which would Requirefor fiscal year 1979
Authorizing Legislation
Legi
Loan Guarantees for alter-nate fuels, P.L. 95-238requiring special authori-zation Committee Recomm.
Budget AuthorityOutlays
l'roieccon;S
This legislative proposaladopted in P.L. 95-238 wouldprovide loan guarantees forresearch in alternative fuelssuch as biomass, coal gasifi-cation, oil shale and others notreadily identifiable at this time.These data subject to adjustmentin final markup.
*Budget estimates rot at thistime available.
a.
I
111. President's Budget Requests for Savings through changes in Existing Laws which Mandate Spending in FiscalYear 1979 Without Further Action By Congress; Other Legislative Savings Proposals
Na~or Issue or Program
Department of Energy
Changes in charges for uraniumenrichment services
Legislative Reduction:
National Aeronautics andSpace AdmLnistration
(rescission of prior year'sauthorization)
dget] OutlaysAuthorit y1
-163
60.194
(in millions of dollars)Camittefs lccomendationf
BudgetAuthority
(difference)
Outlays(difference)
t I 4
-163 0
60.194
0
9.
Co.-.ents
The Administration budget requestincludes a legislative proposalto chare the price of uraniumenrichment services. The Comitteeis not favorably disposed toproceed with this request. Therefore,additional amounts of $163 millionwill be required in budget authorityin outlays for fy 1979.
P.L. 88-133, Sec. 6 modified Section308 of the National Aeronautics andSpace Act of 1958 to automaticallyrescind unfunded authorization offunds three years following suchauthorization. The amount shown isthe unfunded authorization upcomingfor fiscal year 1975.This rescissiondoes not impactbudget authority and outlays forfiscal year 1979.
!ft
IV. Lagiulative Initiatives of Congress for Fiscal Year 1979
10.
Identify initiative
H.R. 10601, Solar Power SatelliteResearch, Development andDemonstration Act of 1978
H.R. 10811, Federal AviationAdministration R&D AuthorizationAct, 1979
H.R. 10830, Solar PhotovoltaicEnergy Research, Development &Demonstration Act of 1978
H.R. 6669, National ClimateProgram
S. 1617, National Ocean PollutionResearch, Development and Moni-toring Program
H.R. 5720, To establis% a researchand development effort resultingin the commercialization of nativelatex rubber.(authority and outlays)
H.R. 10859, National MaterialsPolicy
1979
25
IS. 473
0
50
5.0
150
0.2
1980 1 1981
50
78
150
60
5.0
15
0.2
11982
75 71
80 80
170 1205
70
5.0
15
70
5.0
15
0.2 0.2
1983 Comments
To authorize to be appropriated funds forsolar satellite power research, development &demonstration program.
Legislation to authorize trust fund moniesfor Federal Aviation Administration Researchand Development
FY1979 Authorization is contained in H.R.10969, Department of Energy Authorization Act.
5
00
ili;
{h
Fiftral ypav
I A
• lV
45
8o
225
70
5.0
15
0.2
H.R. 6669, which establishes a National ClimateProgram, has passed the House and awaitsSenate action. That bill authorizes $50million for FY 1978. (House Report 95-266).
Activity is proposed for authorization inS. 1617, which has passed both House andSenate.
H.R. 5720 has been introduced to accomplishthis initiative
H.R. 10859 has been introduced to accomplishthis initiative.
4
i
I
!
t
V. President's Budget Requests for Existing Programs which do not require authorizing legislation forfiscal year 1979 (Please comment on programs which this committee presentlyhave direct spending responsibility"
______________________I ~ irguuauen~ u ruqueu~
Na3or issue or Program
National Science Foundation (251)
Consolidated Working Fund
Donations
General Function 250 Receipts
BudgetAuthority
Outlays
(in millions of dollars)Comittee Recommendation
Budget OutlaysAuthority I (difference)(difference)
0
5.3
-0.278
0.5
4.5
-0.278
0
5.3
-0.278
0.5
4.5
-0.278
Comments
It is noted that the Science andTechnology Committee has legislativejurisdiction over some portions ofthe Executive branch which havecontinuing authorization and willspend money in FY1979. These are:1) Office of Science & Technology
Policy2) Remainder of National Bureau of
Standards not covered here.
11.
FresiQn- X"I uegB•!
II II
V. President's Budget Requests for Existing Programs which do not require authorizing legislation for
fiscal year 1979 (Please comment on programs which this committee presentlyhave direct spending responsibility)
Najor Issue or Program
Natural Resources & Environment(300)
Department of Commerce
National Uceanic & AtmosphericAdministration (306)
Sea Grant-Marine environmentalresearch (NOAA 88)
I
Basic Fisvironmental Services(NOAA 93)
Environmental Satellite Services(NOAA 113)
Public Forecast & Warning Service(NOMA 135)
Specialized Environmental Services(NOAA 167)
President's requests
Budget OutlaysAuthority
4.825
118.610
97.846
117.900
7.029
4.825
114.0
97.00
117.010
7.029
(in millions of dollars)c•o.ittee Recommendation
BudgetAuthority(difference)
4.825
118.610
97.846
119.613(+1.713)
7.029
Out lays(difference)
4.825
114.0
97.0
118.723
7.029
12.
•cnens
Although NOAA is not specifically with-in assigned jurisdiction of the comimt-tee, the committee makes a ecomen-dation to the NOM budget in the listedareas. Annual authorization for NOAAis presently pending legislation beforeS&T and MK&F Committees.
Marine environmental research onunderstanding the effects of varioususes and misuses of marine and esturineecosystems.
•asic environmental services which,include basic observations, commni-:ations and maintenance and repair.
Includes necessary funding for theOperations, support, environmentaldarning service and development and%pplication of satellite technology.
Includes all public forecast and
rning services conducted by thetional Weather Service. Increase
reflects expectation that proposedlosure of 19 Weather Service officesccroas country may be reversed.
Program provides forecasts andwarnings of sudden solar disturbancesand the effects on the atmosphere.
C40
V. President's Budget Requests for Existing Programs which do not require authorizing legislation forfiscal year 1979 (Please comment on programs which this committee presentlyhave direct spending responsibility)
Major Issue or Program
Environmental Data And Informa-tion Services (OAO 170)
Global Monitoring of ClimacticChange (NOAA 176)
Weather Modification (NOAA 177)
International Programs/GARP(NOAA 182)
International program-Great LakesResearch (NOAA le5)
Miscellaneous Trust Funds
DEPARTMENT OF ENERGY
Advances for cooperative work
PresLdent - requuu'
6.odgetAuthority
19.979
1.972
6.442
5.440
3.067
11.297
2.480
Outlays
20.000
1.972
6.100
5.500
3.100
1.911
millions of dollars) C___ nt_nittee RecommenendationJ Comments
Outlays(difference)
20.000
1.972
6.100
5.500
3.100
11.297
2.480
BudgetAuthority
(difference)
19.979
1.972
6.442
5.440
3.067
9.386
2.480
13.
Program provides worldwide environ-mental data and information
Effort to establish baseline datato determine long term effects ofchanges in the atmosphere on globalweather ani climate.
Program to reduce the loss of lifeand damage to property resulting fromhurricanes and other severe storms.
Global atmospheric research programexpected to Improve the time rangeand accuracy of weather forecasts andto gain a better understanding of thephysical basis for climate.
Effort to develop a sour scientificbasis for improving environmentalprediction in the Great Laxes region.
I I I II
V. President's Budget requests
major Issue or Program
Health (550)
Department of Health, Educationand Welfare
National Institutes of Health
National Cancer Institute75-0649-0-1-550
Natio.al Institute of Environ-mental Health Sciences75-0662-0-1-550
for Existing Programs which do not require authorizing legislation for fiscal year 1979
14.
(in millions of dollars~President's request
budget Outlaysasithorityl
t
862.406
65.819
878.802
69.247
Committee Recommendation
Budget OutlaysAuthority (difference)
(difference)}
888.802(+10.000)
79.247(+10.000)
(+ý5 slots)
872.406(+10.000)
75.819(+10.000)
commont.s -
Although NIH1 is not specifically withi:assigned jurisdiction of the committee,the committee makes a recommendationto the listed budget areas.
Additional funds recommended forenvironmental cancer studies,carcinogenesis research, and researchon co-car. inogens. Subcommitteefound research in these areas tobe sparse. Also effects partialshift of emphasis at NCI fromcancer cures toward cancer prevention
Increases recommended for extramuralprograms in prediction, detectionand assessment of environmentallycaused diseases; mechanisms ofenvironmental diseases & disorders;environmental health manpowerdevelopment; and intramural research.Slot additions for conduct ofintra.mural program and for managementof extramural program.
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The Honorable Robert N. OiaimoChairmanCommittee on the BudgetU. S. House of RepresentativesWashington* DC ' 20515
Dear Mr. Chairman:
Pursuant to Rule X, Clause 4(g) or the Rules of theHouse of Representatives, I am pleased to submit the followingreport which represents the views and estimates of thisCommittee to be set forth in the current resolution onthe budget for Fiscal Year 1979 for the Small BusinessAdministration:
1. That for Fiscal Year 1979 additional budgetauthority of $572.9 million (over that recommendedby the President) should be provided for theSmall Business Administration under Commerceand Transport~tiOn (403) for the Business Loanand Investment Fund. The Committee estimatesthat this will result in additional outlays of$461.55 million.
The Committee believes that the increasesrecommended are essential to provide additionalassistance to small business:
(a) in direct regular business loans.Providing additional direct loan moneyIs absolutely essential to provide smallamounts of financing to those concernswhose loan needs are so small that banksand other financial institutions refuse
31uWw1o03 j3q0Onto even consider thenloan applicationdue to the amount Involved.
OS Uk CV I ON 810
U.BL'A 13d(48a)
"- . 0 1
488
The Honorable Robert N. OiaimoMarch 10, 1978Page Two
(b) In a restructured program providingmanagement, technical and technologicalassistance to small concerns. Legisla-tion to modify this program has alreadypassed the Senate by a unanimous voteand will be considered by this Committeeat a meeting on March 21st.
(c) In additional personnel primarily asbusiness loan officers and contractingspecialists.
2. That for Fiscal Year 1979 additional budgetauthority of $1.145 billion (over that recommendedby the President) should be provided for theSmall Business Administration under Communityand Regional Development (453) for the DisasterLoan Revolving Fund. We estimate that this willresult in additional outlays of $477 million.
The Committee believes that the Increasesrecommended are essential to provide additionalassistance to:
(a) Victims of natural disasters such asfloods, drought and extreme cold andsnowfall. The W1.5 billion recommendedin program level would approximate theappropriations made to date this FiscalYear. Also, it would be a more realisticlevel and eliminate the necessity forprojected supplementals, thereby complyingwith the intent of the Budget Act..m
In addition, the Committee recommendsadding $3 million for disaster loanpersonnel to this year's level. ThePresident's budget actually requests $16million less than this year's level anddoes not recognize that SBA recentlytransferred $8 million to this year'spersonnel budget for disaster loan makingpersonnel.
489
The Honorable Robert N. GiaimoMarch 10, 1978Page Three
(b) Small business victims of non-physicaldisasters such as the energy shortage.It is anticipated that there will be-substantial demand for energy-shortageloans by those concerns which havesuffered substantial economic injurydue to tneir inability to obtainelectricity in normal amounts due to thestrike by coal miners.
These recommendations are submitted with the approvalof Ranking Minority Member Conte and the other Membersor the Committee.
With best wishes, I am
Sincerely,
Neal SmithChairman
rp
491
COMMITTEEE PRINT]
REPORT TO THE COMMITTEEEON THE BUDGET
FROM
THE COMMITTEE ON VETERANS' AFFAIRS
SUBMITTED PURSUANT TO SECTION 301 OF THECONGRESSrONAL BUDGET ACT OF 1974
ON TII1,
BUDGET PROPOSED FOR FISCAL YEAR 1979
MARCH! 13, 1978
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 1 1971
(411)
24-0" 0 a 78 -*3
I
492
COMMITTEE ON VETERANS' AFFAIRS
RAY ROBERTS. Team, Chulrmes
OLIN E. TEAG UE. TexasDAVID S. SATTERFIELD 11. VirginiaDON EDWARDS. CaldforniaG. V. (BONNY) MONTGOMERY. MississippiCIIARLEB S. CARNEY, OhioGORGO E. DANIELSON, CalltorniaLESTER L WOLFF. New YorkJACK BRINKLEY. GeorgiaRONALD M. MOTTL, OhioROBERT $. CORNELL, WisconsinW. 0. (BILL) IHEFNER. North CarolinaMARK W. UANNAFORD CaliforniaEDWARD P. BEARD, Rhode IslandROBERT W. EDGAR, PennsylvaniaCLIFFORD ALLEN, TennesseeSAM S. HALL, Jf.. TexasDOUGLAS APPLEGATE. OhioDOUG BARNARD, Georglia
JOHN PAUL ITA.MMERACHIMIDT, Arksa,,msMARGARET M. HiECKIER. MumachusettsCHALMERS P. WYLIE, OhioELWOOD HIILLIS, IhdianaJAMES ABDNOR. South DakotaWILLIAM F. WALSII. New YorkTENNYSON GUYER, OhioGEORGE HANSEN, IdahoHA ROLl) S. SAWYER, Michigan
A. M. WiLut , JI., 8.1,. Director
(-I)
493
CONTENTS
Observations of the Veterans Adlministration budget request ------------ I
Veterans Administration programs by functional distribution- ..-.-.--... 5
President's proposed legislative program ----------------------------- 7
President's budgt requests for existing programs which require reenact-ment or modification of authorizing legislation, fiscal year 1979-.....-.- 0
President's budget requestst for new and expanded lFrograni which requireauthorizing legislation, fiscal year 1979 ----------------------------- I I
President's budget reqmustm for reductions in existing programs whichrequire amendment of.authorizing legidation, fiscal year 1979------. I1
Legislative initiatives of Congress, fiscal year 1979 --------------------- 14
President's budget requests for existing programs which do not require
authorizing legislation, fiscal year 1979 ---------------------------- 19
(A) Medical care ....................................... 19
(B) Medical and prosthetic research-...................-22
(C) Construction of medical facilities-...................-23
(D) Grants for construction of State extended care facilities-.-- 4
(III)
0
494
REitORr or THE COMMITTEE ON VETERANS' AFFAIRS ONBUDGET MATTERS UNDER ITS JURISDICTION
The Committee on Veterans' Affairs is submitting this report onestimates of budget matters under its jurisdiction pursuant to section:301(c) of the Congressional Budget and Impoundment Control Actof 1974. This report is based on the best information that is now avail-able to the Committee. It is hoped that the report will be helpful tothe Committee on the Budget in preparing its budget targets for thefirst concurrent resolution.
The President's 1979 budget for the Veterans Administration pro.vides for benefits and services to the country's 29.8 million veterans,the 62.1 million members of their families, and the 3.8 million survivorsof deceas..ed veterans.
Budget authority of $19.0 billion and outlays of $19.2 billion areestimated for 1979. These estimates represent increases of $15.2million in budget authority and $340.6 million in budget outlaysover estimated requirements for 1978. Budget authority for 1979consists of an appropriation request of $18,335,647,000 for existinglegislation, $535,005,000 of permanent authority, and $177,278,000 in-proposed legislation.
Average employment for 1979 is expected to increase 878 to a totalof 216,320. Average em ployinent of 191,517 for the Department ofMedicine and Surgery will be the ninth consecutive year of record high,employýment•Yin ten years-1970 to 1979--Veteranq Administration appropris-
tions for veterans' benefits and services have inireased over $9.9 billion,or 116 percent. Average employment has in'reabed 58,363, of which5:3,583 has been for the Depart'ment of Medicine and Surgery. low-.ever, looking at the Veterans Administration Budget as part of thetotal Federal budget, the percentage of budget outlays attributableto the VA has been decreasing over the past four years, from a high of5.1 percent in fiscal year 1975 to a low of 3.8 percent for fiscal year1979.
The Committee is deeply concerned about the deficiencies in theAdministration's budget request for veterans' benefits and services,especially the lack of proper funding for the medical program.
OBSERVATIONS OF THE VETERANS ADMINISTRATION BUDGET RzQUzsT
I. GZENZAL OVERVIEW1. Budget authority would decrease from fiscal year 1978 to 1979
if the President's legislation is not enacted; if his legislative proposalsare enacted, there would be an increase in total budget authority of
(1)
495
2
only 0.1 percent. Outlays, under the President's legislative proposalswould increase by 1.8 percent. If his proposals are not enacted, outlayswould increase by 1.0 percent. This compares to an estimated increasein the Consumer Price Index of 5.6 percent. Thus, the VeteransAdministration budget request does not even keep pace with estimatedinflation.
2. Looking at program accounts, benefit programs are decreasingby 3.1 percent in outlays kind 4.1 percent in budget authority. The re-duction in readjustment benefits is the largest, with a 20 percentreduction ($529 million) in budget authority and 12.7 percent ($3,934million) in outlays.
3. Medical program, are increasing by approximately 7 percent.This is due to inflation, the opening of new hospitals, and suecializedmedical programs. Existing hospitals are, in fact, being cut back by:1,1:;2 operating beds. Contract hospitalization, outpatient visits, andnew medical facilities are also being cut. There is a proposed elimina-tion of the grants to the Republic of the Philippines program.
4. Medical research is being cut back .n 53 hospitals due to a stand-Atill ,budget in this program for seven fiscal year.
5. In the construction accounts, theie is a decrease ia budget au-thority for construction of major projects, as the proposal is beingtiade within the budget to increase the limitation from $1 millionto $2 million, and the level of Other Improvements projects is sig-nificantly reduced.
0. Of the total $22.746 billion Federal outlay for education, veteransreadjustment education programs are projected at 10.3 percent forfscal year 1979. In fiscal year 1978, the VA portion was 15.9 percent,a decrease of 5.6 percent.
7. In the area of Federal training and employment programs, thetotal obligations for fiscal year 1979 are estimated to be $14.715billion, with the VA supporting $123 million for on-the-job-training,$121 millicn for vocational rehabilitation, and $10 million for veteransassistance centers, a VA sub-total of $254 million, or 1.7 percent.This is a decrease in percentage from fiscal year 1978, which was 3.3percent.
8. In the health area, Federal spending is expected to total $63.4billion, with 8.9 percent attributable to the VA. This is a decreasefrom the 9.1 percent in the fiscal year 1978 budget.
9. Federal income security programs are estimated at $215 billionin 1979. Of this amount, cast benefits account for $161.2 billion,unler this sub-total, VA benefits account for $10.275 billion, or 6.4percent of the cash benefit outlays anti 4.8 percent of the total incomesecurity benefits (down from 5 percent in 1978).
It. DEPARTMENT OF VETERANS BENEFITS
A. Income Security For Veteran--Compensation, Pension, andInsurance
1. In 1979, 2.3 million veterans with service-connected disabilitieswill receive monthly compensation payments totaling $5.3 billion.Also, benefits in excess of $1.1 billion are expected be paid to 364,000survivors of veterans whose deaths are related to service-connecteddisabilities.
496
3
2. Approximately 1.0 million wartime veterans and 1.3 millionsurvivors who qualify for monthly pensions, based on financial need,will be paid $3.2 billion.
3. The families of 7.9 million servicemen and veterans are protectedby various life insurance programs with a total coverage of $96.9billion.
4. A decrease of 795 survivors is anticipated in the compensationcaseload.
5. An increase of $3 per veteran and $16 per survivor is expectedfor compensation recipients. This is less than I percent increase,compared to an anticipated 5.6 percent increase in the ConsumerPrice Index.
6. The pension caseload for veterans is expected to decrease by 8,820with the cost for the pension program decreasing by $53.2 million.However, the 1978 pension caseload was underestimated by 15,488.Therefore, the decrease may not be realistic.
7. A supplemental $489.6 million is requested for 1978 which mightmake the 1979 figures low.B. Readjustment Bertrafi
1. Monthly payments for educational benefits of the "0I Bill" areestimated to total $2.7 billion, covering assistance to 1.4 millionveterans and their survivors.
2. The number of Post-Korean veteran trainees is exacted to de-crease by 188,320 and the cost is expected to decrease by r382,968,000.
3. The number of servicepersons trainiag is expected to decrease by23,600, with a decrease in cost of $12.3 million.
4. The number of sons and daughters training is expected to de-crease by 5,5W0 with a decrease in cost of $11.4 million.
5. The number of education loan defaults is anticipated to increaseby 5,009, or 175 percent. The total amount of defaults is expected tobe $8.528 million, an increase of $6.290 million over 1978 or over281 percent. In addition, the committee feels these estimates havepreviously been considered low.
IU. DEPARTMENT OF 3EZDICINE AND SUJEZnYA. Medical Care
1. Funding for veterans' medical care programs will be $5.3 billionin 1979. This will provide inpatient hospital, nursing home or domi-ciliary treatment and services for 1.4 million veterans anti outpatient/ambulatory care totaling 17.9 million visits. In 1979, an average of184,545 beneficiaries will Ibe provided medical services and treatmenteach day-3,766 above the actual level for 1977.
2. Operating beds will be reditced by 3,132 beds, the equivalent ofclosing more than six 500-bed general hospitals. This represents a de-crease of more than 15,000 beds during the past ten years, the equiv-alent of closing thirty 500-bed hospitals.
Other noted deficiencies include thirty-five major constructionprojects; a 67-percent cut in grants for construction of State extendedcare facilities (in spite of overwhelming need); and another severe cutin the medical research program, already badly crippled. Details ofthese proposed cuts and the Committee's recoinniendations for res-toration of funds are set out later in this report beginning on page 19.
497
4
3. Average daily patient census (ADPC) is decreasing by 2,415(3.2 percent):
(a) Medical bed section: decreasing by 1,385 (3.7 percent).(0) Surgical bed section: decreasing by 506 (3.4 percent).(c) Psychiatric bed section: decreasing by 524 (2.3 percent).
4. VA domiciliaries will have a decrease in:(a) Average operating beds:-288 (2.9 percent).(b) ADPC: 256 (2.9 percent).(c) Patients treated: 294 (1.7 percent).
5. Total VA facilities will decrease as follows:(a) Average operating beds: 1,661 (1.5 percent).(b) ADPCL: 2,173 (2.4percent).
6. The staff to patient ratio in VA hospitals will a.-,erage 1.96.However, the committee has no indication how that compares tocommunity ho.spitals, nor what the optinum should be. It is the Coin-mittee's impression that this is far below the staffing provided in comn-munity hospitals.B. Medical and P~rosthetic Research
1. Support of ongoing institutional programs is decreasing by $3.124million (4 percent).
2. New institutional programs decreasing by $850,000 (15.9 percent).3. Career development programs decreasing by $768,000 (7.7
percent).4. Total medical research decreasing by $407,000 (0.4 percent).5. Elimination of the Medical Research Program in 53 hospitals.
C. Medical Administration and Miscellaneous Operating Expense#1. Exchange of medical information (EM I) is decreasing by $930,009
(27.1 percentt; $:155,000 of the decrease is in the educational grantsprogram and $575,000 is for training equipment, service, and supplies.
2. A new program of "Multi-Level Care" is to be tested and de-veloped under Medical Administration. The Medical Administrationprogram is requesting an increase of $5.8 million of which the multi-level care program will cost a substantial amount.D. Grant. for Construction of State Extended Care Facilities
Budget Authority is decreased by $10 million, despite the fact thatStates are still applying for grants.E. Grants to the Republic of the Philippines
The Veterans Administration has recommended that the grants beeliminated, which would decrease budget authority by $1.? millionand outlays by $1.4 million.F. Assistance for Health Manpouw Training Institutions
1. Grants for new State medical schools are increased by $7.8million.
2. Other health manpower training institutions are increased at theauthorized level of $50.0 million.0. Con itruction
1. The construction request of $417 million would permit an obliga-tion level of $495 million-a record high. The request includes $4million for advance planning to permit the preliminary developmentof projects prior to inclusion of funding in a budget request.
0
498
5
2. The $417 million request is down 15 percent from fiscal year 1978.3. The ma or change in the construction program is the Camden,
N.J., hospital where funds were requested for the construction of anoutpatient clinic rather than a now hospital as had been previouslyapproved. In addition, no funds are requested for projects previouslyapproved by the Congress that total $201,984 million.
4. Two replacement hospitals are proposed: Portland Oreg andSeattle, Wash., for a total of $220.1 million. There is aisoluteiy noplanning beyond FY 1980 on the part of the VA.
Iv. VZTZRANS HOUSINGAssistance is expected to be provided to 372 thousand veterans to
purchase homes through guarantees of privately financed mortgages.Also, VA is expected to make 2 540 direct loans where private mortgagecredit is not generally available.
V. THiN NATIONAL CEMETERY SYSTEM
The opening of fvle additional cemeteries are scheduled-one in1978, two in 1979, and two in 1980. Initial design funds for two addi-tional cemeteries in Federal Regions IV and V are included in the1979 request.
VTFERANs ADMINISTRATION PROGRAMS By FUNCTIONALDISTRIBUTION
The programs under the Committee's jurisdiction are administeredby the Veterans Administration and are broken down into severalsubfunctional classifications. There follows a list of the functions andprograms included in the Veterans Administration budget for fiscal
1979 including a comparison of total budget authority tad out.jays recommended by President Carter and tMe Committee on Vet-erans' Affairs:
FUNCTIONAL D•Itl•UTION OF VA UTIMATEUS-SUO(T AUTHORITY
703-Hospital an medical care for veterans:Modocalcore .............................. 4,373,307 4,924,9137 5.27t.6t1
Plosed legislation ................................... I -14 .12Medoial and prosthtic reseah c.......... .. 104,U33 111. 8 11III, 667MediAl dmoniustirite an misllnieous op.
or 4 o1po10s110 ......................... 31,141 43 31 47.1155Construds Majo r n Irtloct4 .................. 05,60 31 368 25, 85
n uct , mino projects .......... 711 5,234 121,147
flailiti ...... ............... 1.......... o 10000 5.000clanIs to the Repulmic o# the Philippines ....... .3 100 7 ............Asislane for health moapewer training neoll.
1 4 ................................... 45.045 67,200 75.000Lubonal. hamalal and m"W"iA we Em
5,416.624+ 1 4,21: 1 2 1 0 6 2 2f+814 13%;97
+41.539 47.855-7. IN 47, 839+25,11 155, 65B
J5.00O 13.000-11700
+7. W0 75,000
v e-...-..._..... ............. .419 5,7. +1.7,07 6, 426,271704--Votarasm loo ing ...................................................a................... .............70--Othe vleraue benefits an service:
eneral ope~in!penaeg..................125,3l 5184,500 522,074 +37,574 6t. 074Goel a -e u ........................... . ........ 5-,43 5p,9t0s,, y o . -.................................. .... .:• . 4Sooop pod It. d ................................. 000.......
FUNCTIONAL DISTRIBUTION OF VA ESTIMATES--OUTLAYS-Continued
In thousands of dollars
Differencebetween
1977 1978 1979 1918 and HVACFunction and program actual estimate estimate 1979 budget
703-Hospital and medical Care for veterans:Medical care ................................ 4.290.617 4,904.275
Proposed legislabon ....... .....................Medical and prosthetic research ........... """-104.460 111,573Medical administration and miscellaneous
opratn expenses .................... 3,668 43, 239Construction, major projects..........168,402 198,.76Construction. minor projects ............ 65.,438 114, 988Giants for construction of State extended care
facilities ................................ 7.828 11.407Grants to the Republic of the Philippines ...... 2046 1.718Assistance for health manpower training institu-
tions .................................... 31. 109 48,155Special therapeutic and rehabilitation activities
fund ..................................... -76 -150
No: Excludes veterans support programs of other anes.
PROPOSED LEGISLATIONThe Administration is requesting legislation that, if enacted, would
increase outlays in 1979 by $177 million. The proposals to be submittedto Congress include professional, medical and psychological readjust-ment services to Vietnam veterans, and a 6.8 percent rate increase incompensation payments for service-connecteddisabled veterans andwidows under the dependency and indemnity compensation program.
In addition, the Administration has included $111 million in thebudget for "pension improvements". This amount would hardlybe adequate for a cost-of-living rate increase for those currently on thepension rolls. The Administration has assured the Subcommittee onCompensation, Pension and Insurance of its support for pensionreform, but has not suggested what the Federal outlay should be. TheCommittee expects the Administration to submit a budget amend-ment that would include a reasonable amount to bring about a mean-inful pension reform measure.
rhe number of trainees under the VA education and, training pro-grams is expected to decrease by 213,000 (luring the next fiscal yearthereby effecting a saving of $401.0 million in fiscal year 1979. TheAdministration has also prol)osed the elimination of two training pro-grams for veterans, namely, flight and correspondence school training.If approved by Congress, the ending of flight and correspondence
" L V
501
8
school training would result in a saving of $100 million during thenext fiscal year.
In addition, the Administration is not proposing any new or ex-panded training programs for veterans. it is not proposing a rateincrease for those going to school under the current programs.
On the other hand, the Administration is recommending an increaseof $1.46 billion in student aid programs administered by the Depart-ment of Health, Education and Welfare, including $990 million inBasic Educational Opportunity Grants (BEOG) to guarantee a$250 grant to students from families with incomes up to $25,000;increasing the average grant by $200 for students in families withincomes between $8,000 and $16,000; and increasing the maximumgrant for students from low-income families from $1,600 to $1,800.
The Administration is also recommending an increase of $165million for college Work-Study to provide salary subsidies for 280,000additional jobs, bringing the total to more than one million. Theincrease is mostly for students from families with incomes above$16,000. In addition, it is recommending an increase of $297 millionfor the Guaranteed Student Loan Program. The Administrationis* opposing that subsidies be provided for students from families'With incomes up to $45,000.
The Committee takes note of the increased expenditures recom-mended for education programs administered by the Department ofHealth, Education, and Welfare, while recommending no increases in:education programs for veterans and the termination of two on-going"programs. This appears to be inconsistent with the Administration'sassurance that it is committed to helping Vietnam veterans. Therefore,this report includes a reasonable amount for education, training andemployment purposes for Vietnam and disabled veterans.
There follows a list of the Administration's legislative programfor the next fiscal year:
Res~etbenefits:ban*ft foe fliSiht training programs (effcbive Oct 1. 1973).......... -8 733 -5t 833
EIlimnafo benfts for cornespondenee training progrnms (elective Oct.!. 1978). -4..1 6 -46.167
Total. readjutmnt Im ............b.................................... -100.006 -1 000
Medical care:To effect reimbursement to the Vqteram' Administrato by private insurers and
workers compensation Ow We cost of modili care and treatment to veatemnswith noon.servie-connctad disabilities (elective Apr. 1.11).........
To moned current legisaon to limit t payment for reimbursement of travelexpenses #or beneficiaries provided medical care for non-svice-ronnecteddisabilities electivee Oct. . 1978) ...........................................
To authorize the Administrator 1 n tate fee-for-service contracts with coamuaityagencies for the treatment o drug end ach dependent patients .........
To salhorize t Administrator to provide proflssw mental and psychological_readjustment services to Vietm nw Veterans ...............................
To extoen the prOvisis @ Psiblie Law 95-201 (VA Physician and entists PayCompa•rbility Act of 1975), to Sept. 30 1979 .................................
General operating expenses:Administrative expense reduction related to the legislative proposal eliminating
new enrollments in flight training programs a$n correspondence training byveterans, spouses and surviving spouses ..................................... -1, 374 -1. 374
Remove the requirements to inspect the manufacturing of mobile homes ........... -121 -121
Total, general operating expenses ........................................... -1.495 -1.496
Total. VA proposed legislation .............................................. 177, 278 151. 4316
I. PRESIDENTS BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE RCENACTMENT OR MODIFICATION
OF AUTHORIZING LEGISLATION FOR FISCAL YEAR 197,
[In millions of dollml
President's requet Committee recommendatiOn
BudgetBudget authority Outlays
Major issue or program authority Outlays (difference) (difference)
701-Compensaticn and pensions:To provide annual compensation rate increase for
veterans and spouses under DIC program ........ 309.9 284.1 350.0 350.0(40.1) (65.9)
CommentDisability compensation is a monthly payment provided to service-
connected disabledd veterans who have suffered disablement as aresult of their active military service. These payments are predicatedupon ratings assessinf by ten percentile levels the average impairmentin earning capacity flowing from service-connected disability. Similarmonthly benefits are provided to the surviving spouses and childrenof veterans who have died as a result of causes attributed to theiractive military service. These benefits are called dependency andindemnity compensation (DIC). These benefits represent an obliga-tion owed by the people of the nation to those who have suffereddirectly as a result of their service in our nation's defense.
'the Congre.ss has maintained a continuing review of these programslooking toward an assurance that the level of benefits provided keepspace with increases in living costs due to inflation.
The program was reviewed in the first session of the 95th Congressand Public Law 95-117 was enacted providing for an increase ofapproximately 6.6 percent in disability compensation and dependencyand in(lenmnity compensation rates. These increases were effectiveOctober 1, 1977.
The Subcommittee has scheduled hearings on March 21 and 22 toexamine anew the operation of the compensation program for bothveterans and survivors. It is expected that as soon as cost-of-livingprojections are available on a reasonable basis, steps will be takento conitider an increase effective October 1, 1978, that would assuretLat those suffering disability or death from service-connected causeswill not be left behind in the wake of spiraling inflation.
The Administration is proposing a 5.8 percent increase, effectiveOctober 1, 1978. The agency's esLiuiated cost in fiscal year 1979 is$309.9 million.
503
10
II.R. 10337 would provide a 6.5 percent rate increase, effectiveOctober 1, 1978. The Congressional Budget Office has estimated thatoutlays in fiscal year 1979 would be about $350.0 million.
lin millions of dollars
President's request Committee recommendation
BudgetBudget authontv Outlsws
Major issue or program authority Outlays (difference) (diff;i
701-Compensation and pensions:To provide for pension improvements .............. 111.0 111.0
(,t ,))ri)
C ;.mwnt L. !=The Administration isI proposing $111 million during the next fiscal
year for "pension improvement.s.."The Subcommittee on Compensation, Pension and Insurance held
hearings on February 7, 8 and 9 on several bills spending before theSulbcommittee that would amend the ,.irrent pension l)ro1oram II. R.10173, introduced by the flistinguiied ('Chairman of t Ile S"ubcommitteeon Com pen.ation, Pension and In.,iurance, the Hlonorable G. V.(Sonny) *!ontgomery, would provide for major l)en-ion reforit. Thebill is cospon.-,ored by a majority of the members of thie full committeeand the total number exceeds 150 Members of the House. A similarmeasure is being considered in the other body.
"The Subcommittee recommended the bill to the full Committee,and on March N1, the full Committee ordered the bill reported, asamended.
H.R. 10173 addresses the major deficiencies and inequities of thecurrent pension program. It would establish a pension which wouldinsure each veteran apd surviving spouse, an income exceeding anational minimum standard of need ($4,000 annually for a permanentlyand totally disabled veteran or $3,000 for a surviving spouse, withcorrespondingly higher rates where there are additional dependents).
In addition, it would provide for adjustment in pension ratessimultaneously with increases in Social Security payments. The bill is sodrawn that a Kill cost-of-living increase will ap)ply to both the person'ss-ocial security payment and to the pensioner's monthly pension bene-fit, thus eliminating the current problem cf reduction in pension associal security payments are raised.
H.R. 10173 would also eliminate most of the exclusions of incomeunder current law which are inequitable and discriminatory.
Subcommittee hearings also included H.R. 9000, a bill that wouldgrant a $150 per month bonus to eligible WW I eligible veterans andeligible survivors.
fIn millions of ddoaiasl
Presidents request Committee recommendationBudlde
Budget authority OutlaysMajor issue or program authorty Outlays (d Bufeence) (diffeence)
703--Host•ital and medical care for veterans:To extend the provisions of Public Law 9S-201 (VA
Physician and Dentists Pay Comparability Act of1975) to Sept 30, 1979 ......................... . 3.. 3.9 3.9 3.9(0) (0)
S?.:
504
11
CormmentThe Office of Management and Budget advised the Committee last
year that it would submit to the Congress in early 1978 its legislativei'ecommedlations to provide a i)ermattent solution to the recruitmentamid retention of p)hysicians and dentists within the Federal health(are s-vtem.
The'Committee has not received any official communication fromeither the Office of Monagement and budget or the Veteran's Admin-istriation in further reference to the matter. Until such time, theCommittee ii expected to continue to extend the authority for theAdministrator to enter into agreements with physicians and dentistsprior to 'ej)tember 30, 1978, when current authority is due to expire.II. PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIRE AUTHORIZING
703-Hospitals and medical care for veterans:To authorize the Administrator to negotiate fee-for-
service contracts with community agencies forthe treatment of drug and alcohol dependent pa-tients ........................................ 2.4 2.4 2.4 2.4
(0) (0)
CommentThe Administration has not yet submitted its proposed legislation
Eliminate benee'ts to correspondence training pro-grams (effect.ie Oct. I, 1978) ................... -46.2 -46.2 0 0(46.2) (46.2)
505
12
CommentThe Administration has submitted its proposed legislation to the
Congress desig-,ed to terminate the authority for pursuit of corre-spondence training programs for veterans, spouses, and survivingspouses.
The Administration feels that neither of these two programs hasfulfilled its intended purpose-helping the beneficiary adjust to hisor her changed circumstances by providing the training needed forbasic employment.
It is estimated that enactment of such a proposal would result insavings of $100 million in fiscal year 1979 and in savings of $356 mil-lion over the first five fiscal years. The proposed legislation wouldbecome effective October 1, 1978.
The Veterans Administration submitted the same proposal lastyear. In its transmittal letter dated January 19, 1977, the Adminis-trator suggested that Federal assistance undler the GI Bill programshould be directed toward institutional trahiing and job training.
Although the Committee has previously expressed doubts as tothe equity in terminating these programs, tie Subcommittee onEducation and Training will re-evaluate the pro grams in light of thelatest Administration recommendation and will determine whetherthese programs are not fulfilling their intended purposes.
703-Hospitals and med.cal care for veterans:To effect reinbuisement to the Veterans' Admini.
stration by private insurers and *orkers' com-pensation for the cost of medical care and treat-ment to veterans with non-service-connecteddisabilities (effective Apr. 1, 1978) .............. -120.0 -120.0 0 0
(120.0) (120.0)
CommentUnder existing law, a veteran of any war or of service after January
31, 1955, who is under age 65, is eligible for necessary hospital carefor a non-service-connected disability if lie is unable to defray theexpenses of private hospital care. Veterans who are age 65 or'olderare entitled to such care without regard to their ability to bear thecost of private care.
The proposed legislation would require that certain veterans re-ceiving hospital care from the Veterans Administration for non-service-connected disabilities be charged for such care to the extentthat they have health insurance or similar contracts with respect tosuCh care, or are entitled to such care under worker's compensation.
Similar proposals were submitted to the 91st Congress on February26, 1970, as part of the Federal Economy Act of 1970; to the 92d Con-gress by letters of January 26, 1971, introduced as S. 2807; to the 93dCongres,•. by letter of March 14, 1973, introduced as .R. 5936; andin the 94th Conr(ess, it was introduced as II.R. 4009. The legislationwas again submitted last year.
506
13
In its justification of the proposed legislation, the Veterans Ad-ministration feels that "the United States should not bear the cost ofhospitalization or outpatient medical care of veterans for non-service-connected disabilities where to do so would provide a windfall in thenature of a Federal subsidy for third parties, such as insurancecompanies.
it should be noted that the Subcommittee on Medical Facilities andBenefits held hearings on the identical proposal submitted by theAdministration in 1976. In the testimony presented no evidence wassubmitted to show that hospitalization and medical care of veteranswith non-service-connected disabilities carrying private insuranceprovided a windfall to insurance companies.
The Veterans Administration has made only minimal efforts to con-sult with private insurers, and then only at the insistence of thecongressional authorizing committees, about the implications of theAdministration proposal. At a meeting in the spring of 1976, attendedby private insurers, officials of the Veterans Administration indicatedthey had probably grossly overstated the first-year savings of theproposed legislation.
Although additional hearings may be held this session, the Com-mittee is not expected to favorably consider the proposed legislationuntil such time as the Veterans Administration can provide sufficientevidence that insurance companies, andior other third parties, arereceiving a windfall under current procedures.
The Administration has not submitted a proposed bill. The Com-mittee would also point out that if enacted, the first-year cost savingswould be no more than $20 to $25 million. In the opinion of the Com-mittee, the projected cost-savings of $120 million is grossly overstated.
CommentThe current authority to provide hospital and medical care specifies
that the beneficiary will be reimbursed for the necessary expenses oftravel in connection with receiving mnedhical care. Under present law,eligibility for reimbursement for non-service-connectet condo litionsis based'on a statement on the ail)lication form that the beneficiaryis unable to defrav the expense* of travel.
Section 101 of 'Public Law 94-5sl, the Veterans Omnibus HealthCare Act of 1976, amended section Ill of title 3S, to revise the VA re-imbursement policy for beneficiary travel. Under the policy now ineffect, veteran- with non-service-connected disabilities are reimbursedonly if they certify, subject to criminal sanction for false statements,that they are unable to defray the expenses of travel; and reimburse-
5O0
14
ment for all veterans, service-connected as well as non-service-con-nected, is limited to the cost of travel by public transportation (exceptwhere public transportation is not reasonably accessible to the vet-eran 's home or would be medically inadvisable, in which case the vet-eran may be reimbursed for the cost of travel by privately ownedvehicle).
The Administration proposal would further restrict travel reim-bursement for veterans, with non-service-connected disabilities so thatreimbursement would be authorized only when special vehicular modesof transportation are required for medical reasons and conditionedupon prior authorization by the Veterans Administration. Thesemodes of transportation would include ambulance service, air ambu-lance service, hired car, and transportation where it is necessary forthe beneficiary to be accompanied by an attendant.
Although the Administration has not yet submitted its proposedlegislation to the Congress, it is expected to be similar to that proposedduring the first session of the 95th Congress, which was not favorablyconsidered by the Committee.
705-0ther veteran bWords and services:Veterans housing:
Inmve the reqwrements te inspect the m•netacturing d mobtl. hom .................. -0.1 -0.1 -0.1 -0.1(0) (0)
CommentThis legislative proposal was submitted to the Congress during
the first session of the 95th Congress. The bill, H.R. 4341, wasreported by the Committee and passed the House on September 12,1977. It is now pending in the Senate.
706-Othar veterans beneIt and services:General o•pveanl expenses:
Administrative expense reduction related hsth legislative pr eliminatinl mwenrollments in #II traPi programs acorrespo"c training by veterans, spouses.and surviving speuses...................... 1. -1.5 0 0(1.5S) (!.S)
IV. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979
Ila millions of dollars
Budget
Identify iniiative Authority Outlays
701--Income sowuity for veterans: 392. 392.
34-0* 0 - 79. 33
508
15
1. H.R. 6501-To provide increased compensation for veteranswho have suffered the loss, or loss of use of, paired extremities.Comment
On May 23, 1977, the House passed and sent to the Senate, II.R.0501. The measure is pending before the Senate Committee onVeterans' Affairs.
2. To provide a 6 percent cost-of-living increase for DIC parents,effective October 1, 1978.
3. To dlecrease the minimum disability rating a service-connectedveteran must have in order to receive ah(litional compensation fordependents (the current minimum rate is 50 percent).
4. To provide for a two-Step aid andi attendance compensationpayment system for certain severely disabled service-connectedveterans.
5. To clarify the intent of Congress in providing for exemptionfrom taxation of that amount of military disability retired pay to aveteran equal to the amount of tax-free veterans compensation orpension benefit to which the veteran is determined to be retroactivelyentitled but for the receipt of such military retirement pay.
6. To increase the rate of compensation payable to veterans whohave lost three extremities as the result of aW.-ervice-connected dis-ability.
7. Reinstate 6-month hospitalization, institutional or 4lomicil;arycare period prior to reducing stipend of a pen.sioner with no dependents.
8. To provide that the survivors of a teran who was i ated totallyanl permanently service-connected di.a-i)ed for a period of at leastten years wouldbe entitled to dependleniy anti indemnity compen-,ation as though the veteran had died from a service-connecteddisability.
9. To provide that the disability rating of a veteran with a service-connected disability rated 30 percent or more but less than totalshall be increased by 10 percent when the veteran attains age 65.
10. To provide mortgage protection life insurance to certainveterans unable to acquire commercial life insurance because ofpermanent and total service-connected disabilities&'
11. To provide increase from $500 to $1,000 the amount by whichthe annual income of certain disabled veterans may exceed themaximum annual income limitation for pensions without such veteranslosing the right to continue to receive drugs and medication from theVA.
On millions el dollars
BudgetLegislative proposlW avthoraty 0laUsys
702-Veterans eductmmn rubabdl~taim and training: US. I S I
1. To extend the period of eligibility for veterans readjustmentappointments in the Federal Government for Vietnam era veterans.
509
16
CommentThis is an Administration proposal.2. To provide educational benefits on a prorated basis, to children
and spouses of veterans having permanent service-connected disa-bilities rated at not less than 80 percent.
3. To improve the Chapter 31 Vocational Rehabilitation programto make more effective the placement of veterans in jobs followingeducation and rehabilitation.
4. To expand and hinprove the VA On-The-Job training programdesigned to place more Vietnam veterans on jobs.
5. To transfer the functions of the Secretary of Labor underchapters 41 42 and 43 (relating to job counseling, training, placement,and reemployment of veterans) to the. Administrator of VeteransAffairs; to establish the Office of Associate Deputy Administratorfor Veterans' Employment, and for other purposes.
6. To allow veterans with upgraded discharges to receive full VAeducational benefits, notwithstanding the date of such veteran'sinitial discharge from service.
7. To allow certain individuals wrongfully precluded from takingadvantage of chapter 31 vocational rehabilitation benefits to obtainsuch benefits.
8. To amend the so-called "affirmative action" provisions of Title38 in order to give veterans asserting discrimination in employmentthe same procedural rights as persons covered by title VII of theCivil Rights Act of 1964, as amended in 1972.
9. To provide rate adjustments for those going to school under theGI education program.
10. To provide limitations on the payment of education assistanceallowances to certain incarcerated veterans and to prohibit concurrentreceipt of GI benefits and Law Enforcement Assistance AdministrationgrantsL
11. To provide authority for the Administrator of Veterans' Affairsto forgive up to two-thirds of a veteran's loan issued pursuant toSection 201 of Public Law 95-202, thereby eliminating the necessityof the State to pay up to one-third of such loan.
[Ii *iligg .1 douiar
aqustv .MM GOWty OMWap
703--Uopit*l, ad Amdical care fu vnerasa:
1. H.R. 5027-To clarify the requirements that fee basis medicalservices be provided by the Veterans Administration in certain cases.Comment
The bill passed the House on April 4, 1977. It was amended andpassed by the Senate on September 9, 1977 and is now on the Speaker'stable.
510
17
2. H.R. 1678-To name the Veterans' Administration Hospital atTampa, Florida, for James A Haley.Comment
The bill passed the House on June 20, 1977. H.R. 5027 as amendedby the Senate contains this provision and the measure is now on theSpeaker's table.
3. H.R. 7643-To name the Veterans' Administration Hospital atBedford, Massachusetts, for Edith Nourse Rogers.Comment
The bill passed the House on June 20, 1977. H.R. 5027 as amendedby the Senate contains this provision and the measure is now on theSpeaker's table.
4. H.R. 5025--To revise the provisions of Title 38, United StatesCode, relating to the construction, alteration, and acquisition ofVeterans' Administration medical facilities.Comment
The bill passed the House on May 2, 1977 and is now pending inthe Senate.
5. H.R. 5029--To authorize contracts with the Republic of thePhilippines for the provision of hospital care and medical services;to authorize the continued maintenance of a Veterans' Administrao.tion office in the Republic of the Philippines, and for other purposes.Comment
The bill was passed by the House on April 4, 1977, providing for aone-year extension of authority through fiscal year 1979. The measureis pending in the Senate. ",
6. To provide authority to furnish non-service-connected hospitalcare to eligible veterans living in Alaska and Hawaii.Comment
tCurrent authority for the Administrator to furnish hospital carto certain veterans living in a State, territory, commonwealth, orpossession of the United States not contiguous to the forty-eightcontiguous States will expire December 31, 1978.
7. To provide additional benefits to employees of the Veterans'Administration serving at offices in the Republic of the Philippines.Conme,
The proposed legislation is designed to correct the discriminatoryaspects of current law regarding A employees in the Philippines.Public Law 89-16 provides for the reimbursement of certain movingand storage expenses of Federal employees when transferred from oneduty station to another in the interest of the United States. Severalof the allowance and moving expense benefits available to employeestransferring to stations within the United States are not currentlyavailable to VA employees transferring to a new official station in the50 States, the District of Columbia, and Puerto Rico.
8. To designate the proposed new Veterans' Administration hospitalin Uttle Rock, Arkansas, as the "John I. McClellan MemorialVeterans' Hospital."
511
18
CommentA similar measure has passed the Senate and is now before the
Committee.9. To increase the number of nursing home and/or intermediate care
beds for which the VA contracts.comment
The proposed legislation would require that the Administrator ofVeterans' Affairs provide for the admission of not less than 12,000veterans eligible for nursing home or intermediate care, in communitynursing homes.
The proposed legislation would provide the VA with needed flexi-"bility to outplace veterans, particularly elderly veterans, who no longerrequire care in a hospital bed in a community nursing home near hisfamily. At the present time the VA is able to provide certain types ofcare more economically in community nursing home facilities thanin VA nursing care beds.
10. To provide medical care to a deceased veteran's parent(s) whoreceive dependency and indemnity compensation.Comment
The proposed legislation would amend section 613(a) of title 38,United States Code, by adding a new clause (3) to provide medicalcare under CHAMPVA for an eligible parent(s).
11. To expand the authority of the Administrator to extend medicalservices to veterans of World War I on the same basis as that providedfor Spanish Ami War veterans.
12. To provide outpatient dental services and treatment to anyveteran with a service-connected disability rated at 100 percent." 13. To provide outpatient dental services for certain prisoners of war.
NI- ias buuia: .. 0 8.0
1. To increase the maximum home loan guarantee from $17,500to $25,000.
2. To increase the specially adapted housing assistance grant forcertain disabled service-connected veterans from $25,000 to $30,000.
3. To liberalize the eligibility requirements for home, condominium,and mobile home loans for veterans of the Vietnam wartime period-the same 90-day period of service as required for World War II andKorean Conflict veterans. '
4. To improve the mobile home loan program of the VeteransAdministration.
512
19[in milleUs of de"
701--Oileeraw s beneftd servee:Ce •mlmdeelS oan d buId ............................................... 50.be 541.0
1. To require the Administrator to pay a $150 allowance to any§tate, or political subdivision, as reimbursement for expenses incurredin the burial of a veteran in State cemeteries.
2. To provide for the burial at Arlington National Cemetery, theremains of an unknown American soldier who lost his life in theAmerican Revolutionary War.
3. To increase the maximum allowance provided for the burialand funeral expenses of certain veterans. The maximum allowance is$250.
4. To revise the provisions of Title 38, relating to the construction,alteration, and acquisition of land for cemeteries.
5. H.R. 7678-Relating to the assignment of retired militarypersonnel to the American Battle Monuments Commission.CornmeM
The measure has passed the House and is now pending in the Senate.6. To revise the eligibility requirements for the receipt of a head-
stone or marker for veterans whose remains are unrecoverable.7. To allow a deceased veteran's estate to receive in cash the
amount it costs the United States Government to provide a head-stone or marker.V. PESIDNTS MW3 0R FO• EXISTING PROGMS WHICH 00 NOT REQUIRE AUTHORIZING LEGISLA-
At the beginning of each fiscal year, and prior to the Administra-tion's budget submission to the Congress, the Committee surveys theDepartment of Medicine and Surgery to determine its needs for thenext fiscal year. This is accomplised through written surveys, andpersonal conversations and discussions with the Chief' MedicalDirector and members of his staff, various hospital directors andchiefs of staff, the major veterans organizations, and others interestedin providing outstanding care for our veterans.
513
20
Based on this review and analysis, the Committee believes theAdministration's proposed budget for medical care is deficient in manyareas and recommends that the funding level be increased as follows:
MEDICAL CARE
Pupee(Utegmis) frEE
A. Wes~lhdooA A "dow•.m:m ..Ii.................................EAjabag iie .................................................... L
...........eo..................................... . ..F00e ptal.. ............ .................................... ..CNAMPVA-lOvtW. . ..... ......... ...................................No.. dc d 1@0. i ........... o... 0............................... : ... " .now medaed w ..ute ................................... .. . .ll d ,ie .......................................... . . ............T ed....................................................... . .IL... 2.712
L • SI-I weme .c .....e........................................... o......... 7.,0O o w M prgr m r l . ........................................... so 10
T old ..... .......................................... 1 5 k4W "W . ................................. . "1 203
Td .......eo....................................................... e, ifl 7447eta meica uu................ 0....................................... 16 l S 1I
The inadequacies of the Administration's budget in the Above areasare staggering and unless necesau y funds are restored by the Appropri-ation and Budget Committees, medical benefits and services forveterans will bI drastically curtailed both in quality and quantityin almost every VA medical facility in the country.
The Administration is seeking to reduce the operating beds by a,total of 3,132 resulting in th6 reduction of the equivslet of 1,500employees, Of his totml proposd bed reduction, 2,500 Were orderedcut by the Office of M.anae.ment and Budget. Closure of these bedsis the equivalent of closing six average size, 500-bed hospitals.
The number of beds scheduled to be closed during the next fiscalyear at various hospitals include:
Bed so":Tu ke-ee_.- .......... 36
Arkansas: Little Rock ------ ------------------- 54Cawifornis:
Allen Park -------------------------------------------- 37Ann Arbor-------- ------------------ 38Battle Creek ------------------------------------------ 70Saginaw----------------------------------------- 30.
Big SpringHouston ........................................San Antonio--Temple ..........................................
U tah: Salt Lake City .........................................Washngton: Wails Wal --------------------------------West Virginia: Martinsburg..............................'Wisconsin:
Madison ........................................Wood ................................... .......
309
31253190
18603035323172
4750
Total bed loos ........- 3, 132
During the past 10 years operating beds have decreased more than15,000 or the equivalent of more than thirty average size, 500-bedhospitals.
A. Medical and prostei resemac:(IReinsat research rogrm in53hopitae ........ ................... 5oo 100
ainontale Career devolopmeit prt, tim dlsta ye 1o t8lvO....... ,5004Rcuitment od new auoW invent ................................ . 000 10
funding l roa ved Mead Review lewdprograms ........... ....... . S 50Eq t ra. requirmennts at now laslut ................................ 1, . .(I Fu appeved caree oelopm*en pt candid .ates................ 1.000 n
I. Rehabulitative reearch:Av()Atomobve adaptive equipment ........................................ 325 6Spinal cord injury program research .................................... 675i(Laoomotor system research ............................................ asSensory aumutatio research ......................................... 315 5
Total .............................................................. 2,240 2SC. Implementat"on of HS.RL & . MiO's .......................................... W1 10
Total, medical and prostleti resarch.................................... 13.310 245
The Committee recommends an additional $18.3 million for medicaland prosthetic research for the projects shown above.
It is weil established that quality medical care goes hand-in-handwith excellent research and training. An excellent research and tra*iniprogram has great impact in attract'ui and retaining top professionalpersonnel. The Veterans Administration, and this Committee, takegreat pride in the fact that at least one-half of all physicians graduat-
516
23
ing from medical schools in this country receive some of their traininginVA_ hospitals. Research in VA hospitals is world-renowned produc-ing Nobel prize winners; producing leaders in every field oi medicalinvestigation; and providing medical breakthroughs benefiting notonly all Americans, but people throughout the world. The Administra-tion proposes to cut out the research programs in 53 VA hospitals. Theoverall budget deficiency for me(Ial an(d prosthetic research is $18,-310,000. This deficiency will have grave impact on the dedicated in-vestigators, physicians, nurses and allied health personnel who servethe veterans and who continue to contribute so much to providing fortheir health needs.
JIm moisim of "&uIsr
Prossamrs roqest COMMONt r"ommWmasadas
Suds sutenl Outlaymalor iUse a proven asly oulays (d&= rouwo) (dworosc)
Conatuctmwl @1 medical I asl ............. . 417.01 36".? 5 3.5 4 ".9(230.5) 1(4.3)
The committee recommendA an additional $236,500,000 for theconstruction program as follows:
13) East Orange. N.J.-Additional elevators. --------------- 98914 Iowa City, lowsa-Parking facilities- ........ 2,553
I 15) Kansas City, Mo.-Air, oxygen and vacuum system ...... I, 42716Long Beach, Calif.-Resarch and education addition.... 8,383SMiami, Fla.Research and education addition----------' 7,262
18 Murfreesboro, Tenn.-Remodel wards 5A and 5B-.------ 2, 82819 Mountain Home, Tenn.-Clinical support building. ------- 8,928
(20) Oklahoma City, Okla.-Clinioal expanmon and ambulatorycare facility ----------------------------------- 28, 374
(21) Salem, Va.--Modernlse building 76-.......2, 169(22) San Francisco, Calif.-Remodel old hospital..-18, 588(23) Shreveport La.-Research and education building-.----- 708(24) Syracuse, N.Y.-Parki facility.- 2,9765
Total -------------------------------------- 146,307
Total, major construction ----------------------------- 201, 984B. Total, ior construction ------ 34, 511
Total, major and minor cunstruction----. --------- 236, 495
Jim miliom d6 doliJ
Pmoidurg toquest Comminoo rownmmeond
hula W"o W propm &utV 0uwy (digroo (diffotomo)
kma 1W b ulel of Stsu osoaroas"lb C .. LO IU O I5.0 15.0(10.0o) (3.0)
The Committee recommends an additional $10 million for grants toStates for construction of veterans' medical facilities. •
-i~S a. ms. ues0. ~m. mam I a.m8 , m-v.ANOu m .ami N m &N mG m, =.m1., aM. n. Im- - Aim. MIN.
-- "--= 8A----"=" COMMITTEE ON WAYS AND MEANS800,•. "am N 1. .64006 S&i,=& . u I.AL. IWL • 6 .001000. No".ama Pe ,,.. mMA". , U.Sf. WOUK OF IWN ATIVesa. .&,,mn&. •. 4.. A. (logo W "^e Pa•.
m mm. mm. manm. P&. WA54INGTON. D.C. =015.CON,~ =OW . *410NI"40"
The Honorable Robert 1:N. GiChairman, Comnsittee on the 1:xgetU.S. House of Representatives
Deow Mk. Chaim :
Pursuant to Section 301(c) of the Congressional Budget Act of 1974,I am trsmjttig the report of the Cwnittee on Ways and Means on thefiscal year 1979 budget. The Committee has attempted to provide realisticview and estimates on thoee aspects of the fiscal yeaw 1979 budget thatfall within t1e Cauzdttee's Jurisdiction. As you know, the statutoryrequirements of the Budget Act require the Committee to reomend anapporate level of aggregate venues, budget authority, outlays, deficitand public debt for the fiscal year. These rmccoumndations ar sumarizedin Section I of the report, and reflect our best judpint at the presenttim of the aggregate effect on the fiscal yew 1979 budget of anticipatedaction by the Committee.
Section II of the report reflects the Comnittee's reoummendations onfiscal year 1979 budget authority and outlaya, presented on the five formatsspecifically requested by the House Budget Ccnittee. The Caumdttee'srcwandations on the fiscal yeaw 1979 deficit and public debt limit arepresentd in Sections IV and V respectively. An estimate of Federal tax
pnt'wes is presented in Section VI.
In Section III of the report, the Caunittee recommds that theapproprdAte level of revenues tor fiscal year 1979 be $437.0 billion, andthat the aggregate level of Federal revenues should be reduced by $35.2billion frun the $472.2 billion estimated under present 1w. The Congressionaludget Act does not require the committee to specify the precise ocuzosition
of the anticipated $35.2 billion reduction in fiscal year 1979 revenues.
(519)
520
The Hwnorable Robert N. GiaiuuMarc 15, 1978Pap 2
As you know, the President has submitted a major proposal for taxreduction and refom, the eer tax confereno is aurently recessed,and various tax credits azm expiring at the ean of calefda yew 1978.In addition, various Mtu rs of the Comttee have e3qpssed interest inhaving the Conmittee consider other major proposals such as partial integrticn,tuition tax elief, tax relief for the elderly, daritable deductions forindivia who do not itemize, and social security tax reductions. Inview of the brovW range of issues and proposals pending before the Comittee,it %uld be impractical and highy speculative to attuipt to identify specificproposals that may ultimately be approved affecting fiscal yew 1979 rev•ums.Thus, the Committee has reomwxded in Section III the levels of aggegiate"revenues and agregate reductions ,ichai m' anticipated for fiscal yew 1979.
AU:rlc
95th Con~.S CMZTUPj~MN {WMP9-0
COMMITTEE ON WAYS AND MEANSU.S. HOUSE OF REPRESENTATIVES
MARCH 15th REPORT OF THE COMMITTEE
ON WAYS AND MEANS TO THE HOUSEBUDGET COMMITTEE ON THE
FISCAL YEAR 1979 BUDGET
MARCHf 15, 197
24019
Printed for the un at th Commitue on Ways m Mess
U.S. GOVURNMINT PRXITING OIYICs
WASHINGTON : i178
(521)
522
COMMITTEE ON WAYS AND MEANS
AL ULLMAN, Oregon, ChairmenJAMES A. BURKE'. MassachusettsDAN ROSTENKOWSKI, IllinoisCHARLES A. VANIK, OhioOMAR BURLESON, TexasJAMES C. CORMAN. CaliforniaSAM M. GIBBONS. FloridaJOE D. WAGGONNER, JL, LouisianaOTIS G. PIKE. New YorkJ. J. PICKLE. TexasCHARLES B. RANGEL, New YorkWILLIAM R. COTTER, ConnecticutFOtTNEY H. (PETE) STARK, CaliforniaJAMES R. JONES, OklahomaANDY JACOBS, Ja., IndianaABNER J. MIKVA, IllinoisMARTHA KEYS, KansasJOSEPH Ia. FISHER, VirginiaHAROLD FORD, TennesseeKEN HOLLAND, South CarolinaWILLIAM M. BRODHEAD, MichiganED JENKINS. GeorgiaRICHARD A. GEPHARDT, MissouriJIM GUY TUCKER, ArkansasRAYMOND F. LEDERER, Pennsylvania
BARBER B. CONABLE. Ja.. New YorkJOHN J. DUNCAN, TennesseeBILL ARCHER, TexasGUY VANDER JAGT, MichiganWILLIAM A. STEIGER. WisconsinPHILIP M. CRANE. IllinoisBILL FRENZEL, MinnesotaJAMES G. MARTIN, North CarolinaL. A. (SKIP) BAFALIS. FloridaWILLIAM M. KETCHUM, CaliforniaRICHARD T. SCHULZE, PennsylvaniaBILL GRADISON, Ohio
Jons fM. MARTIN, Jr., Chiel CounselJ. P. BAKnR, Assistant Chief CounselJouHx K. IsAGHnzA, Mmnority Counsel
523
LETTER OF TRANSMITTAL
CoMITMrrE ON WAY.s AND MEANS,U.S. Housz oF RnEPRsENTATxvEs,
Hon. RoET N. GuiAo, lWaakington, D.C., March 15,1978.
Chairman, Committee on the Budget, 44U.S. Houwe of Repreaentativea.
DEAR M1. CiH.ARMAN : Pursuant to section 301 (c) of the Congres-sional Budget Act of 1974, I am transmitting the report of the Conm-mittee on Ways and Means on the fiscal year 1979 budget. The Com-mittee has attempted to provide realistic views and estimates on thoseaspects of the fiscal year 1979 budget that fall within the Committee'sjurisdiction. As you know, the statutory requirements of the BudgetAct require the Committee to recommend an appropriate level of aggre-gate revenues, budget authority, outlays, deficit and public debt forthe fiscal year. These recommendations are summarized in section Iof the report, and reflect our best judgment at the present time of theaggregate effect on the fiscal year 1979 budget of anticipated action bythe Committee.
Section II of the report reflects the Committee's recommendationson fiscal year 1979 budget authority and outlays, presented on the fiveformats specifically requested by ihe House Budget. Committee. TheConunittee s recommendations on the fiscal year 1979 deficit and publicdebt limit are presented in sections IV and V, respectively. An estimateof Federal tax expenditures is presented in Fection VI.
In section III of the report the Committee recommends that theappropriate level of revenues ior fiscal year 1979 be $437 billion, andthat the aggregate level of Federal revenues should be reduced by$35.2 billion from the $472.2 billion estimated under present law. TheCongressional Budget Act does not require the Committee to specifythe precise composition of the anticipated $35.2 billion reduction infiscalyear 1979 revenues.
As you know, the President has submitted a major proposal for taxreduction and reform, the energy tax conference is currently recessed,and various tax credits are expiring at the end of calendar'year 1978.In addition, various Members of the Committee have expressed interestin having the Committee consider other major proposals such as partialintegration, tuition tax relief, tax relief for the elderly, charitabledeductions for individuals who do not itemize, and social seciirity taxreductions. In view of the broad range of issues and proposals pend-ing before the Committee. it would be impractical and highly specula-tive to attempt to identify specific proposals that may ultimately beapproved affecting fiscal year 1979 revenues. Thus, the'Committee" hasrecommended in section III the levels of aggregate revenues andaggregate reductions which are anticipated for fiscal year 1979.
Sincerely,AL ULLMAN, Chairman.
24-04 0 - 78 - 34
524
CONTENTS
?smLetter of transmittal ..... In
I. Summary of recommendations on fiscal year 1979 budget----..------ 1II. Budget authority and outlays --------------------------------- 5
A. Formats requested by House Budget Committee ----------- 7B. Narrative appendix ..... 25
1. Trade ---------------------------------- 272. Public assistance and unemployment compensation.. 293. Health ------------------------------------ 374. Social security------------------------------- 395. Other ------------------------------------- 42
III. Revenues and customs receipts ------------------------------ 43IV. Deficit ----------------------------------------------- 49
V. Public debt limit ---------------------------------------- 53VI. Tax expenditures ---------------------------------------- 67
525
I. SUMMARY OF RECOMMENDATIONS ONFISCAL YEAR 1979 BUDGET
526
SUMMARY OF RECOMMENDATIONS ONFISCAL YEAR 1979 BUDGET
Section 301 of the Congressional Budget Act of 1974 (Public Law93-344) requires the Committee on Ways and Means to report itsrecommendations and estimates with respect to those aspects of thefiscal year 1979 budget which relate to the Committee's jurisdiction.Specifically, Section 301(c) requires a report to be filed with the HoussBudget Committee by March 15 on the recommended level of budgetauthority, outlays, revenues, deficit and public debt for fiscal year1979. The Committee carefully considered each of these items andrecommends that:
(1) the appropriate level of revenues for fiscal year 1979 is $437.0billion, and the amount by which the aggregate level of Federalrevenues should be decreased from what would be collectedunder present law is $35.2 billion;
(2) aggregate budget authority in the President's fiscal year 1979budget request should be increased by $582.05 million;
(8) aggregate outlays in the President's fiscal year 1979 budget re-quest should be increased by $643.05 million; and
(4) the deficit reflected in the President's fiscal year 1979 budgetshould be increased by $3.243 billion.
527
II. BUDGET AUTHORITY AND OUTLAYS
528
KEY TO BUDGET FUNCTIONAL CATEGORIES
150 International Affairs370 Commerce and Housing Credit450 Community and Regional Development500 Education, Training, Employment, and Social Services550 Health600 Income Security750 Administration of Justice800 General Government850 General Purpose Fiscal Assistance
I. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH REQUIRE AUTHORIZING LEGISLATIONPRIOR TO THE ENACTMENT OF APPROPRIATIONS FOR FISCAL YEAR 1979
(In millions of dollars)
President's request Commiltee recommendationsFunc _____________"tomil Budgetcate- Budget authority Outlaysgory Major issue or pwram, authority Outlays (dZlereuce) (difference) Comments
TRADE
CONDUCT OF FOREIGN AFFAIRS
150 U.S. International Trade Co n-mission; Independent budget andauthorization of appropriationrequired by see. 175 of Trade Actof 1974 (Public Law 93-618).'
PUBLIC ASSISTANCE ANDUNEMPLOYMENT COMPEN-SATION
500 Title XX social services: Extensionfor another year, to maintain the$2,700,000,000 ceiling, of the$200,000,000 increase for child(lay care services under title XXsocial services program.
600 Child support: Extend with modi-fications through fiscal year 1979Federal matching funds undertitle IV-D for child supportservices for non.AAFDC in-dividuals.
13. 113 13. 113
200
12
200
12
12. 813 12. 813 In reviewing the Commission's(-0.300) (-0.300) budget, the Committee noted a
number of areas (such as self-initiated 332 studies and travel)where savings are possible with-out impairing the Commission'sessential functions.
400 400 The Committee recommends that the(+200) (+-200) statutory ceiling on Federal title
XX funds be increased to $2,900,-000,000 beginning in fiscal year1979. A separate title XX socialservices entitlement program of$16,000,000 would be establishedwithin the $2,900,000,000 ceilingfor Puerto Rico, Guam, and theVirgin Islands, plus funds for theNorthern Mariana Islands.
12 12 Similar provisions are in H.IR. 7200whieh passed the House on June 14,1977.
I Roqu•u by U.S. Internatiomal Trade C;oenmhauon in " Budget Estimates, Fiscal Year, 1979 (Congresional Submlislon, January 1978)."
-4
II. PRESIDENTS BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIREAUTHORIZING LEGISLATION FOR FISCAL YEAR 1979
[in mai~ona of doillu"
Fu letdI t's requmst Committe
tiowagads- atoty onusasgory Les0AiUV* Proposl 1 te Outifs ti "m.. Conmemas
PUBLIC ASSISTANCE ANDUNEMPLOYMENTCOMPENSATION
500 Child welfare services: Modifythe current child welfare andfoster care programs to:
(a) Establish the title IV-Bchild welfare servicesprogram as an entitle-ment program with aceiling of $266,000,000.
(b) Extend Federal matchingto voluntary placed fos-ter care children, fostercare children in small
urUblic institutions, andor adoption subsidies.
830
2 141
'30
1 266
30
'141 In 1977, the House passed H.R.7200 with changes in the childwelfare and foster program simi-lar to the President's proposal.While accepting the spending out-lays projected by HEW for titleIV-B, the Committee does sowith the understanding that greaterutilization of the funds available tothe States may result in outlays upto the full entitlement.
30 H.R. 7200, passed by the House in1977, contains provisions similar tothose in the President's proposal.The President's budget failed totake these provisions into accountwhen estimating the costs of theAdministration's proposed legisla-tion. The Committee, therefore,suggests that these costs be add-ed to the President's budget.
5O0
500 Settlement of outstanding pre-title XX social services claims.(President's budget recommendsfunding through a fiscal year 1978supplemental appropriation.)
600 Emergency assistance: Modify andexpand the AFDC emergencyassistance program by allowinglimits on eligibility and authoriz-ing special disaster assistance.
600 Puerto Rico Guam, Virgin Is-lands, Northern Mariana Islands:Double the current limitation onFederal funds for aid to the aged,blind and disabled and AFDC inPuerto Rico, Guam, and the Vir-gin Islands and increase the Fed-eral matching rate from 50 to 75percent.
600 Reduction In Federal unemploy-ment insurance tax rate from 0.7to 0.5 percent.
8 543
125
26
8 543
125
26
4--600
543 543 The Committee accepts the Presi-dent's recommendation, but recoin-mends that the funds be includedin the fiscal year 1979 budget of theTreasury Department.
0 0 The Committee recommends against(-125) (-125) the proposed changes in the emer-
gency assistance program. TheCommittee is concerned aboutgranting States further statutoryauthority to limit the scope of afederaUy funded emergency assist-ance program, and expanding thefunctions of the welfare system toinclude administration of disasterassistance.
188 188 The Committee recommends extend-(+162) (+162) ing the 881 program to these
jurisdictions and removing theceiling on Federal funds for AFDC,but without a change in the match-ing rate as provided in House-passed H.R. 200.
0(+600)
See footnotes at end of table.
C,'iCAt
The Committee recommends that thefiscal year 1979 budget not antic-ipate enactment of this proposalbecause, according to Administra-tion estimates, it would make re-payment of the present $8.6 billiondebt impossible.
IL PRESIDENT'S BUDGET REQUESTS FOR NEW AND EXPANDED PROGRAMS WHICH WOULD REQUIREAUTHORIZIlG LEGISLATION FOR FISCAL YEAR 1979-Continued
600 Cruie oil equalization tax rehnte4to non-taxpayers: The Presi-dent's budget anticipates enact-ment of the- .rude oil equalizationtax (COET), with a rebate ofCOET revenues through incometax refunds to taxpayers anddirect payments to individualswho do not pay Federal incometax.
7
1, 333 1,333
5 - 12 11.R. 8423 passed the House Septem-(- 19) ber 12, 1977 and was approved by
the Senate Finance Committee onFebruary 28, 1978. This proposal(which was a 1977 Ways and MeansCommittee initiative) has been in-cluded in the Administration's fiscalyear 1979 budget as a programexpansion. As such, it is no longerlisted on Format IV with otherCommittee initiatives.
433 433 The Committee anticipates that a(-900) (-900) crude oil equalization tax, if en-
acted, would not be effective priorto July 1, 1978.
I-'0
850 Taxable bond option: The Presi-dent's tax program includes aproposal to permit State andmunicipal governments to electto issue taxable bond with iFederal interest subsidy of 35percent for obligations issuedduring 1979 and 1980, and a 40-percent interest subsidy for obli-gations issued thereafter.
7, 094 99 7,094 99 The Committee recommends inclusionof budget authority and outlaysfor a taxable bond option which willbe carefully considered by the Com-mittee during its deliberations on thePresident's tax program. In 1976, theCommittee reported a bill with ataxable bond option substantiallysimilar to the President's proposal.
t The President's request fOr budget authority is $141.000,000; however, congressionalactions to establish or expand a rew entitlement budget authority hrs, to date, beenincluded in budget resolutions st the full amount of the ceiling, not at projected utiliza-tion levels.
I This is an increase of 84 C000,000 over current law expenditures. The President'sbudget request is included 2paces in the budget-457,000,000 is part of the regular fiscalye1979 appropriation uno texistlng authorization and v 4,uOO0 under prooe?T1 President's request for budget authority and outlays should he increased by
these amounts for the reasos described In the narrative.
4 The President's budget (peges 621 aid 65S of the Appendix) indicates that, if the taxrate was not reduced, 5400000,000 of U.I. trust fund rev-aues would he used In fiscalyear 1979 to repay advances from the general fund. Under his asmmption, the effects ofth proposed tax reduction, an resulting ioessof $6000,O0,0O •n trust fund revenues, wouldbe (1) to reduce U.I. trust fund revenues by 8200,000,000, .rid (2) to nu• Imosble theanticipated 400.00000 payment on out ng genera "•nd loas.* IRefects revised estimate of the legislation' scost impsc.or
I-d
MII. PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING LAWS WHICH MANDATESPENDING IN FISCAL YEAR 1979 WITHOUT FURTHER ACTION BY CONGRESS; OTHER LEGISLATIVE SAVINGSPROPOSALS
600 AFDC work expense disregard:Limit work expense deductionsfor AFDC recipients.
600 Child support: Eliminate incentivepayments to States and local-ities for interstate cooperation inenforcement actions under thechild support programs.
-119
-21
-119
-21
0 0 The Committee believes that this(+119) (+119) i.Ase is more appropriately dealt
with a.; a part of comprehensivewelfare reform. Therefore, theCommittee recommends against thePresident's proposal.
0) 0 The Committee heard testimony in(+21) (+21) 1977 that various elements of the
federally assisted child supportprogram were just beginning toproduce results in relationship totheir administrative costs. There-fore, the Committee recommendsagainst the President's proposal.
INA
HEALTH
650 II.R. 657--Hospital Cost Con-tainment Act.
550 Mandate of common audits ofprovidles by medicare and med-scaid programs.
-630
--6
-- 680 The Committec's estimate assumes(-50) that the voluntary goals outlined
in section 102 of 11.It. 6575, asreported Iby the Subcommittee onlilealth, l'ebr, vry 28, 1978, will bemet, at lenst through the end offiseal year 1979. It should be notedthat such a reduction in outlay-would not he the direct result ofFederal regilntory legislation, butrat her through private-sector activ-ity to restraill the rate of hospitalCOstC inflation so ns to preclude thetripgerig of the fed,,rai controlsolatiltel ill Parts B, C, and D ofthe hospital cost contninment billas reptirtc•d from the Ilealth Sub-Collinlit tee.--0
O-A
I.L PRESIDENT'S BUDGET REQUESTS FOR SAVINGS THROUGH CHANGES IN EXISTING LAWS WHICH MANDATERENDING IN FISCAL YEAR 1979 WITHOUT FURTHER ACTION BY CONGRESS; OTHER LEGISLATIVE SAVINGSPROPOSALS-0Cotiued
(in mndons a doUarsi
Fun Prdent's request Cmmttee recommendation
omld Budeeteate- Budget authority Outlsystory idgI5IaUve Prpopm i an ty Outays difference ) (dierene) Comments
SOCIAL SECURITY
600 Eliminate minimum benefit for noweligibles and freeze for those onrolls (effective July 1, 1978).'
600 Start entitlement to retirement anddependent benefits with 1stmonth during all of which re-quirements for entitlement aremet (effective Oct. It 1978).
-254
-- 138
0 The Committee believes that it(+254) would be unrealistic to expect
enactment of these savinP pro-posals that would reduce socialsecurity trust fund expenditures.Therefore, the Committee recom-mends against the President's pro-posals.
0 Do.(+138)
600 Limit retroactive payments to 3months Instead of 12 (effectiveOct. 1, 1978).
600 Limit student benefit amount to$1,600 (the BEOG amount) infiscal year 1979, increasing there-after with wage increases (effec-tive July 1, 1978).
600 Provide for reimbursement to thetrust funds for cost of complyingwith Employee Retirement In-come Security Act of 1974(ERISA) (effective Oct. 1, 1978).
Social security total --------
-121
-117
-14
-644
0(+121)
Do.
0 Do.(+117)
-14 The Committee sgeed with thePresident's recommendation thatthe Social Security Administrationbe reimbursed for duties performedpursuant to ERISA.
-14(+630)
I W4 0106000 reducllo in out~sy&-Owcs yea UMlS
IV. LEGISLATIVE INITIATIVES 0.1 CONGRESS VOR FISCAL YEAR 1979[In millions of doilarsi
improve the operation and effec-tiveness of the trade adjustmentassistance programs for workersand firms under the Trade Act of1974 (Public Law 93-618):
Trade adjustment assistancefor workers: Provisions toexpand worker eligibilitycoverage, to increase jobsearch and relocation allow-ance benefits and trainingavailability, and to improveprogram coordination; newprovision for labor technicalassistance.
Trade adjustment assistancefor firm: Provisions to ex-pand firm eligibility cover-age, to increase financial andtechnical assistance benefitsand availability, and to im-prove program coordination;new provisions for industry-wide studies and technical2.sistane.
PUBLIC ASSISTANCEUNEMPLOYMENTCOMPENSATION
91.600
0
4ND
The Subcommittee on Trade completed markup of H.R. 8442and related Administration amendments on February21, 1978.
91. 600 The President's fiscal year 1979 budget request for tradeadjustment assistance for workers did not include fundsfor any legislative changes in the program. The $91.6million recommended by the Committee for this purposeis based upon estimates provided by the Department ofLabor. This amount does not include additional fundsrecommended by the Committee to implement adminis-trative provisions, for which a supplemental budgetrequest will be made. (See Format V.)
0 The President's fiscal year 1979 budget request for tradeadjustment assistance for firms already includes $22.0million in anticipation of legislative changes in the programapproved by the President in December 1977: $15 millionfor financial assistance, $3 million for technical assistanceto firms, and $4 million for industry studies and technicalassistance to industries. (See Format V.) The legislativeinitiatives requiring $22 million were proved by theSubcommittee on Trade on February 2 1,1978, in itsmarkup of H.R. 8442; no additional funds will be requiredto implement other legislative changes in the firm programapproved by the Subcommittee at that time.
600
0
.5
400600 Fiscal relief for States and local-ities: Providing $400,000,000 infiscal relief, consistent with theAdministration's proposal for"interim fiscal relief' betweennow and implementation ofwelfare reform legislation.
600 Enactment of legislation providing"cost equalization payments" toStates for years beginning withfiscal year 1979: Establishing asystem whereby Federal generalrevenues ("cost equalization pay-ments") would be available to aState for payment of unemploy-ment compensaton benefits duringperiods in which it has an un-usually high rate of unemployment.
HEALTH
550 Improvements in medicare to closecertain existing gaps in coverageand to eliminate certain defectsin benefit structure that may re-sult in hardship for beneficiarieswhen they become sick or dis-abled, e.g., eliminate 24-monthmedicare waiting period for re-entitled disabled; coverage ofservices needed outside theUnited States; improved cover-age of ambulance, durable medi-cal equipment, and home healthservices.
(See narrative appendix.)
(See narrative appendix.)
100
General Federad revenues trunsferrd
to state UI recounts
270
V. PRESIDENT BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO JOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979
gary me ir PrM autoity Outlays (dlAErene (dmn) Commwats
TRADE150 CONDUCT O FOREIGN AwAIS
International Trade Negotiations:Department of State.
General Agreement on Tariffs andTrade.
370 OTHER ADVANCEMENT AND RzGU-LATION OF COMMERCE
Technical and Financial Asistance.International Trade Policy, Analy-
sis and Support: Department ofCommerce
450 AREA AND REGIONAL DzvzLoMEzNT
Technical Assistance to Firms .....
Financial Assistance to Firms------
Community Adjustment Assistance.Foreign Trade Statistics........
4. 717
2.825
02.856
19. 400
75. 300
1.3009.269
4. 247
2.825
1.0002.856
4. 000
40.000
1.3009. 245
4. 717
2.825
02.856
19. 400
75- 300
1.80010. 719
(+1.450)
4. 247
2.825
1.0002.856
4. 000 Budget authority includes $7,000000for legislative initiatives; see Yor-mat IV for comment.
40.000 Budgetauthoritylncludes$15,000 000for le!alative initiatives; see Fmat IV for comment.
1.30010. 695
(+L 450)
0--00
Under see. 608 of the Trade Act of1974, Con,3s directed that com-parabiloty of among theenumeration Of artiles importedinto and exported from the UnitedStates and the enumeration ofarticles produced in the United
I
State. Effortstowarddevelopmentof•an improved inerato al ssifica-tion of articles for trade and cus-toms purposes were also mandated.The Trade Act also imposed report-ing requirements on articles affectedby the Generalised System ofPreference for developing coun-tries In addition, the Trade Act(sec. 282) requires the monitoringof the relationship between changein the volume of imports andchanges in U.S. employment andpouction by geogrhic regions.
overall figures for foreign tradestatistics include funding for these 3special programs of 750,000 infiscal year 1979; $545,000 for datacomparability under sec. 608, $91,-000 for GSP data, and $114,000 forthe Bureau of the Census share ofthe trade monitoring sm. The
mtteeinlusof (1) an additional $960,000 re-quired for validation of export dataand for efforts to develop a har-monised intnationa claul/icationof articles in conjunction with see.608; and (2) an additional $500,000required to expand industry pro-duction data emsential to the trademonitoring stemthe joint imple-metation o Mwhih by the CensusBureau and the Bureau of LaborStatistics is included in the pro-pasals approved by the Presidentin Decembr 1977 for administertive improvements in the tradeadjustment assistance programsunder the Trade Act. (Also, secomment for Bureau of ILbr Sts-tistt .) .
V. PRE WENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZE GLEGISLATION FOR FISCAL YEAR 1978--Continued
eeate. Budt authority Oet Cmnsgory Mopw Imua or program authority Ooys (diferece),dil,"t) Co.mmet
TRADE--, n.
504 TRAINING AND EMPLOYMENT
(Department of Labor)
Federal Administration of Employ-ment and Unemployment Insur-ance Services for Workers Ad-versely Affected by Trade Agree-ments.
State Administration of Employ-ment Services for Workers Ad-versely Affected by Trade Agree-ments.
Trade Act Activities (Job search,training, and relocation allow-ances).
505 OTHER LABOR Szavlcas
(Department of Labor)Trade--------------
1. 513
a.5o0
(,)
& 923
1. 513
&50W
1. 513
& 50
1. 513 Budget authority does not includeany funding for legislative initi&tives; see Format IV for comment.
& 500
(1)
6606 15. 923 15. 606 The Committee recommends Inclu-(+10.000) (+10 000) sion of an additional $10,000,000
required to implement on a nation-wide basis a system already testedby the Department of Labor forearly identification by industry
8 E
Bureau of Labor Statistics salariesand expenses (trade monitoringsystem).
600 UNEMPLOYMENT INSURANCE
(Department of Labor)
Trade adjustment assistance allow-ance.
State Administration of Unemploy-ment Insurance Services forWorkers Adversely Affected byTrade Agreements.
See footnotes at end of table.
0
establishment of unemployment dueto increased import competition.Implementation of this system wasincluded in the proposals approvedby the President in December 1977for administrative improvements inthe trade adjustment assistanceprograms under the Trade Act of1974 and for which the Administra-tion is currently preparing a supple-mental budget request.
0 0.300 0. 300 The Committee recommends inclusion(+. 300) (+. 300) of $300,000 required by the Bureau
of Labor Statistics to implement itsshare of the trade monitoring sys-tem under sec. 282 of the Trade Actof 1974. The joint implementationof this program by the Bureau ofLabor Statistics and the Bureau ofthe Census is included in the pro-posals approved by the President inDecember 1977 for administrativeimprovements in the trade adjust-ment assistance program under theTrade Act.
tI-P", 9e
190. 000 190. 000 190. 000 190. 000 Budget authority does not include anyfunding for legislative initiatives;see Format IV for comment.7.100 7.100 7.100 7.100 Do.
V. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 19879--Continued
(In milions .1 doll"
President's request Committee oumendslFuno-U8ooal
cate- Budget tOtlygory MaOW is"u or program atoiy Oulys (dlrn-iT d~rne Comments
TRADE-Con.750 FEDERAL LAW ENFORCEMENT
AND PROsECUTION
Salaries and expenses: U.S. Cus-toms Service.
800 ExEcuTivz DIRZICTION ANDMANAGEMENT
Office of the Special Representativefor Trade Ne otiations, Execu-tive Office 5 the President:Salaries and expenses&
431. 350 431. 722 433 350 433. 722 The Committee recommends inclusio-A(+2.000) (+2.000) of an additional $2,000,000 to
deal with the increasing work-load of appraisement and entryprocessing of merchandise and toadminister the steel reference pricemechanism without curtailing othernecessary operations. The CustomsService estimates that increasedspending in these categories willresult in increased customs reve-ues that will more than offset theincreased appropriation.
2.665 2. 700 2.665 2.700
Is
800 CENTRAL FISCAL OPERATIONS
Refunds. transfers, and expenses,unclaimed, abandoned, andseized goods: U.S. CustomsService.
850 OTuER GENERAL PURPOSEFISCAL ASSISTANCE
U.S. Customs Service collection ofduties and taxes for Virgin Is-lan(18 and Puerto Rico: Miscel-laneous permanent accounts.
PUBLIC ASSISTANCE ANDUNEMPLOYMENTCOMPENSATION
500 Employment and Training Admin-istration Unemployment TrustFund: Trust fund portion of thecosts of the Employment Service.
600 Unemployment Insurance TrustFund: State and Federal unem-ployment insurance revenues andexpenditures.
HEALTH
550 Medicare'
bee footnotes at end of table.
4.000 4.000 4.000 4.000
282.000 282. 000 282.000 282.000
723
16, 470
31, 703
0
10,093
30,039
723
16, 470
31,703
0 The Committee recommends that thefiscal year 1979 budget anticipatecosts associated with this program.
10, 093 The Committee recommends that thefiscal year 1979 budget anticipaterevenues and expenditures asso-ciated with the State and Federalunemployment compensation pro-grams.
30,039
Y. PRESIDENT'S BUDGET REQUESTS FOR EXISTING PROGRAMS WHICH DO NOT REQUIRE AUTHORIZINGLEGISLATION FOR FISCAL YEAR 1979--Continued
(In millions of dollars)
Committee recommendationFune. President's requestUOnali BudgetWe- Budget asIt hodlty Ontlaysgory MA*jo WiS Or program authority Outlays (difference) (difference) Comments
SOCIAL SECURITY
GENERAL RETIREMENT AND Dis-ABILIATY INURANCE
600 Federal old-age and survivors in-surance.
Federal disability insurance -------Railroad interchange
Social Security total ---------
OTHER600 U.S. Tax Court Judges Survivors
Annuity Fund.
86, 407 8 87, 866
15, 108-1,377
14, 943-1,377
100,138 '101,432
110 44
86, 407 '87, 866 The following budget estimates con-cerning social security payments
15, 108 14,943 that are financed from general- 1, 377 -1,377 revenues are reviewed by the Ap-
propriations Committee: Militarywage credits of $526,000,000; pay-ments to certain uninsured ind•i-viduals of $230,000,000; and pay-ments of $4,000,000 for partial costof complying with the EmployeeRetirement Income Security Actof 1974.
See "Additional Comment, for the100,138 $ 101,432 Appropriations and Budget Com-
mittees" in narrative.
110 44
I Figure not yet available. Funds for this purpose are provided fro,,, the Secrotary ofLabor's dicretionary futnd under the Com|reltengive ELpluyment and Trainung Actof 1978 and totaled $9,700,000 in fiscal year 1911.
I Fst Imato. l,a-q d on prolection.r of the Department of IHealth. Edeation. and Welfare.3 rxclutalei $2,".0,000,0OO for limitation on admlnasttaive espouses appropriated by theHouse Appropriations Committee.
547
NARRATIVE APPENDIX
548
1. TRADE
TRADz ADJUSTMENT ASSISTANCE FOR WORKERS AND FIRMs
On February 21, 1978, the Subcommittee on Trade completedmarkup of H.R. 8442 and related amendments proposed by the Ad-ministration to improve the operation and effectiveness of the tradeadjustment assistance programs under the Trade Act of 1974 (PublicLaw 93-618) for workers and firms adversely affected by increasedimport competition. H.R. 8442 was based upon comments and sug-gestions for improvements in these programs and in community ad-justment assistance received from public testimony before the Sub-committee in hearing held on March 31-April 1, 1977, and from othercommunications to Members and staff. The bill was introduced as aresult of considerable public interest and after legislative initiativesexpected from the Administration as a result of the President's direc-tive in April for interagency review of the programs did not materialize.
The Subcommittee began markup on October 31, 1977, incorporat-ing H.R. 4460, as amended, into H.R. 8442 to provide retroactiveapplication of benefits to workers who were deniedassistance becausethey were unaware of the I-year filing deadline under the new program.
Nearly all of the provisions of H.R. 8442 approved by the Sub-tommittee on February 21, 1978, were supported by the Administra-tion to expand the eligibility for assistance to additional trade-impacted workers and firms, to increase job search and relocationallowances and training availability, to liberalize the financial assist-ance benefits available to firms, and to speed up the certificationprocess and improve program coordination. The Subcommittee alsoapproved Administration proposals to expand technical assistance tofirms, to conduct industry studies and to provide technical assistanceon an industry-wide basis.
The legislative initiatives represent minimal changes to removeinequities in the present statute, to promote greater efficiency inidentification of recipients and delivery of benefits, and to expandassistance measures of greatest interest and benefit to trade-impactedworkers and firms.
The legislative initiatives approved by the Conmnittee for workertrade adjustment assistance will cost an estimated $91.6 million infiscal year 1979; an additional $22 million for legislative improvementsin assistance to firms was already anticipated in the President'sfiscal year 1979 budget request. The Committee recommends in-clusion of an additional $10 million in the Department of Laborfiscal year 1979 budget request, $300,000 in the Bureau of LaborStatistics request, and $1.450 million in the Bureau of the Censusrequest to implement the early unemployment identification and statis-tical and trade monitoring systems for administrative improvements inthe trade adjustment assstance programs, on which the Administra-tion is currently preparing supplemental budget requests.
cate¢ ry Major program or initiative auoity Outlays authority Oulays authity Outlays
150 U.S. International Trade Commisson. 13.113 13.113 12.813 12.813 -0.300 -0.300150 International trade neotiations ..... 4.717 4.247 4.717 4.247150 General agree tsM on tariffs and
(c) Collections for VirginIslands and Puerto Rico.. 282.000 282.000 282.000 282. 000
800 Office of Special Triade Representa-tive........................... 2.665 2.700 2.665 2.700
Total .................... 1.056.831 1,00,L727 1.161.881 1,111.777 +105.06 +10LOS.
550
2. PUBLIC ASSISTANCE AND UNEMPLOYMENTCOMPENSATION
TrrLz XX SOCIAL SERVbCuS
The President's budget recommends the extension for another year,through fiscal year 1979, of the temporary $200 million increase forchild day care services under the title XX social services program. Thetemporary $200 million increase in the title XX ceiling to $2.7 billionwas originally enacted as Public Law 94-401 for fiscalyear 1977 andextended through fiscal year 1978 by enactment of Public Law 95-171.
The Committee recommends that the statutory ceiling on Fed-eral title XX funds be increased to $2.9 billion beginning in fiscal year1979. The Committee believes that this increase is essential to main-tain the current level of services under title XN. Even with the tempo-rary $200 million increase which has been in effect since October 1,1976,the effect of inflation has meant that title XX funds can only pur-chase three-fourths of what they bought in 1972 when the ceilmg onFederal funds was established. Sme States which have been at theirceiling for a number of years have been compelled to cut back impor-tant services.
The $2.9 billion would include a $16 million entitlement for title XXsocial services in Puerto Rico, Guam, and the Virgin Islands. Undercurrent law, these jurisdictions receive an allotment for social servicesunder title XX only from the amounts that the States and the Districtof Columbia certify they will not need from the formula allotmentsfor that year. Such a reallotment cannot exceed $15 million for PuertoRico and $500,000 each for Guam and the Virgin Islands. Since 48States are expected to be essentially at their ceiling in fiscal year 1979,a separate $16 million entitlement program for these jurisdictionswithin the proposed new $2.9 billion ceiling is necessary to assure theprovision of social services for residents of Puerto Rico, Guam, andthe Virgin Islands. The Committee also intends that the $2.9 billionceiling provide for an appropriate amount of funds for social servicesprograms in the Northern Mariana Islands, which was recently estab-1ished as a new U.S. territory with Commonwealth status.
The Committee therefore recommends that the fiscal year 1979budget anticipate legislation that will increase to $2.9 billion thepermanent ceiling in title XX social services funds.
Cmwi Surroirr
The President's budget recommends a continuation through fiscalyear 1979 of Federal matching funds for the costs to States of ad-ministering child support collection and paternity establishment serv-ices for non-AA-DC individuals under title IV-D of the Social SecurityAct. The President's recommendation would also modify current
551
30
law in a manner consistent with H.R. 7200 as it passed the House onJune 14, 1977. The proposed changes contained in H.R. 7200 wouldlimit Federal matching to the costs of services provided to thosewhose income does not exceed twice the State AFDC standard ofneed; require States to charge an application fee; and require Statesto deduct from the amount of child support collected, any costs inexcess of the application fee.
It is estimated that this proposal would cost $12 million in fiscalyear 1979. The Committee recommends that the fiscal year 1979budget anticipate enactment of the proposal.
CHIL) IELFAIU SFaVwCMs
The President's budget proposes legislation to modify the currentchild welfare and foster care programs authorized under title IV of theSocial Securitv Act. This legislation was originally sent to the Congressby the Administration in July of 1977. Based on that legislativeproposal, the Administration has projected fiscal year 1979 outlaysor title IV-B of $141 million. This is a $84 million increase over the
current appropriation of $57 million for fiscal year 1978.Un June 14, 1977 the House passed H.R. 7200, which also contains
sig-ificant changes in the child welfare and foster care programs undertitle IV.
Both the President's proposal and the child welfare provisions inH.R. 7200, as it passed the House, establish a child welfare servicesprogram as an entitlement with a ceiling of $266 million. A primarydifference between the President's proposal and that passed by theHouse in II.R. 7200 concerns the conditions a State must meet toreceive its full allocation under the $266 million ceiling. Under thePresident's proposal, while all States would be entitled to an allocationunder, a $119 million limitation, a State would have to make certainimprovements in its child welfare and foster care programs before itwould be entitled to receive the full allocation under the $266 millionceiling. HEW has estimated that seven States would meet the addi-tional requirements and would be entitled to their full allotment underthe $266 million ceiling in fiscal year 1979, which would result inadditional outlays of $22 million, and total outlays in fiscal year 1979of $141 million.
In comparison, under the House-passed version of H.R. 7200, begin-ning in fiscal year 1978 States would be entitled to the full amount oftheir allocation under the $266 million ceiling to enable them to have inplace by October 1, 1979, certain improvements in their child welfareand foster care programs. In addition, under the House-passed bill,States would have to develop approvable plans and implement serviceprograms. These requirements and the leadtime necessary could havethe effect of limiting a State's use of its full allocation under the $266million ceiling in fiscal Year 1979.
The Committee, while accepting the spending outlays projectedby HEW for title IV-B in fiscal year 1979, does so with the understand-ing that greater utilization of the funds available to the States underthe House-passed bill may result in outlays up to the full entitlement.
The President's legislative proposal in this area also includesmodifications in the foster care program and authorizes Federalassistance for adoption subsidies. Similar provisions in House-passed
552
31
H.R. 7200 were estimated to result in outlays in the first year ofimplementation of $16.0 million for voluntary placement in fostercare; $10.0 million for foster care in small public institutions and$4.0 million for adoption subsidies.
The President's budget, however, failed to take these provisionsinto account when estimating the cost of the proposed legislation.Thus, the Committee wi.shes to ,h'wv to the attention of the HouseBudget Committee this underestimation of the cost of the President'sproposal and recommends that these additional costs be included in arevised estimate of the President's budget.
The Committee recommends that. tle fiscal year 1979 budget an-ticipate enactment of legislation that would establish a child welfareservices entitlement program with a ceiling of $266 million. Fiscal1979 outlays resulting from this program are estimated to be $141million, or $84 million over the current appropriations for IV-BChild Welfare Services of $57 million. However, total outlays mayreach the full $266 million entitlement.
In addition, the Committee recommends that the fiscal year 1979budget anticipate enactment of the modifications in the foster careprogram discussed above, with estimated outlays totaling $30 million.
E'3M(L.-,CNY .%5i,S;STAXCE
The President's budget proposes legislation to modify and expand.the emergency assistance program now authorized under title IV-Aof the Social "Security Act. The Administration estimates that thesechanges would increase Federal costs over those for the current emer-gency assistance program under title IV-A by $125 million in fiscalyear 1979.
Under current law, States may at their option claim Federalmatching at a 50-percent rate for their expenditures for emergencyassistance to needy families with children. At the present time abouthalf of the States hnave an emergency assistance program that qualifiesfor these Federal matching funds. The President's proposal wouldgive specific statutory authority to the States to establish limitationson the kinds of emergency situtatioins for which aid would be providedand the categories of individuals ;:iid family,., whio woulh be eligible foremergency assistance. The intent of this proposal is to encourage moreStates to establish an emergency assistance program. HiEW hasprojected that the current Federal cost of $34 million would increaseby, $40 million in fiscal year 1979 if these changes were enacted.
"The President also proposes te provide 75 percent Federal matchingfunds for costs to States of providing eni-rure'm.cv assistance to needyfamilies and other needy individuals ii cases of ia Presidential findingof natural disasters causing extraordinary iulceI,-ses in emergencyassistance expenditures b%- a State. HEW has estimated that $85million would be claimed by States under this program in fiscal year1979. This proposed modification in the current emergency assistanceprogram is intended to create an on-gonig program to replace a tem-porary emergency energy program whii,:h has been admiistered bi theCommunity Services Administration. This program was funded at thelevel of $200 million in fiscal year 1.977. The Administration is re-questing a $200 million appropriation to continue the program throughfiscal year 1978.
r.
553
32
The Committee has serious concerns about the effects of thechanges in the present emergency assistance program proposed in thePresident's budget, including the proposal to grant States greaterstatutory authority to limit the scope of this federally funded program.The Committee is also concerned about expanding the functions of theState welfare agencies to include administration of a disaster assistanceprogram that is intended to serve a broader population than welfarerecipients.
Because of these reservations, the Committee recommends that thefiscal year 1979 budget not anticipate enactment of the changes inthe emergency assistance prograui proposed in the President's budget.
SM-ErL•FMNT OF OrST.NxGxo PRE-TimF. XX SocIAL SErVICES CLAIMS
The President's budget proposes $543 million, through a 1978supplemental appropriation, for carrying out legislation submitted tothe Congress last fall that will settle outstanding claims by Statesfor costs of social services provided prior to the implementation oftitle XX in October 1975. The primary purpose of the legislationrecommended by the President is to settle long-standing disputesbetween a number of States and HEW regarding claims by States forreimbursement for social services provided prior to 1975.
The proposed legislation is based on an agreement between theStates and HEW. Under the agreement, subject to obtaining thenecessary legislation, HEW will not attempt to recover any of theFederal funds which it contends were inappropriately provided toStates for matching of social services expenditures prior to imple-mentation of title XX, and will pay a portion of the unpaid pendingState claims against HEW according to a formula worked out in thenegotiations. The portion ranges from 21 to 38 percent, depending onthe size of the claim.
Under the bill, $543 million of budget authority would be providedto settle the $1.6 billion in unpaid claims still in dispute. In addition,$1.0 billion previously unpaid claims would be forgiven. The formulaapplied to the outstanding claims will result in a payment of $531million. The remaining $12 million would be available to pay (at a15-percent rate) any additional claims brought by the States duringthe period from Ap:il 15, 1977, through 90 days after the enactment ofthe bill. Any of thte $12 million which is not used would be availableto increase the settlement of the existing claims of States claimingmore than $150 million.
On Febrimrv "21. the Subcommittee on Public As.-istance and Unem-ployment Compensation approved the legislation submitted by theAdministration, but with the modification to delay implementation,or any payments, until fiscal year 1979. The Committee recommendsthat the fiscal year 1979 budget anticipate enactment of this legislationapproved by the Subcommittee. And, as in the President's budget,$543 million should be included in the budget of the Treasury De-partment for this purpose.
PUBIc ASSISrTANcF: PRtcwR.Luq It Pup.")o Rico. Gt-.A, THE VInGINISLANDs. AND Inip. NOwFim.RN MARIANA ISJAND)S
The President's budget recommends legislation to increase by $26million Federal matching funds available to Puerto Rico, Guam, and
554
33
the Virgin Islands for their AFDC and aid to the aged, blind anddisabled programs. This would double current Federal funds availableto these offshore areas for their public assistance programs. In addi-tion, the proposed legislation would increase the Federal matchingrate from 50 to 75 percent.
The current ceiling for Puerto Rico is $24 million per year; it is$1.1 million for Guam, and $0.8 million for the Virgin Islands. Theseamounts are intended to cover all assistance payments, includingAFDC, assistance to the aged,blind, and disabled and administrativecosts. The 50 States, by contrast, have no ceiling on Federalfinancial participation under AFDC.
H.R. 7200, as it passed the House on June 14, 1977, would extendthe SSI program to Puerto Rico, Guam, and the Virgin Islandseffective Apil 1 1978, at an estimated cost in fiscal year 1978 of$81.8 million and in fiscal year 1979 of $185.2 million. Benefit levelswould be adjusted so as to bear the same ratio to the SSI benefitrates in the States as the per capita income in each offshore areabears to the per capita income of the State with the lowest per capitaincome. Also, H.R. 7200 would remove as of April 1, 1978, the dollarceiling on Federal matching funds for AFDC in Puerto Rico, Guam,and the Virgin Islands. It would maintain the 50 percent Federalmatching rate. Because of the continuation of the current Federalmatching rate, these jurisdictions have indicated that the increaseduse of Federal funds would be only $1.5 million in fiscal year 1978and $2.9 million in fiscal year 1979.
The Committee recommends that the fiscal year 1979 budgetanticipate enactment of the provisions in H.R. 7200, as approved bythe House, that would extendSSI to Puerto Rico, Guam, and the Vir-gin Islands and eliminate the ceiling on Federal matching funds forAFDC. It is estimated that these changes will cost $188 million infiscal year 1979. In addition, the Committee recommends that suf-ficient budget authority be provided to assure adequate funding for theAFDC program in the Northern Mariana Islands which is nowentitled to claim Federal matching funds for an AFDC programunder the provisions of the covenant which established the jurisdictionas a United States territory with Commonwealth status.
REDUCTION IN THE FEDERAL UNEMPLOYMENT I.xSNt-iNCz TAX RATz
The President's 1979 budget includes the provision in the President's1978 tax reduction and reform proposals that would reduce the Fed-eral unemployment insurance tax rate from 0.7 percent to 0.5 percentas of January 1, 1979. It is estimated that this proposal would reduceunemployment insurance trust fund revenues by $600 million in fiscalyear 1979 and by $900 million in fiscal year 1980.
Federal unemployment insurance taxes are paid by employers onthe first $6,000 of employee wages. Under the provisions of Public-Law 94-566, the Federal unemployment insurance tax rate was tempo-rarily increased as of January 1, 1977, from 0.5 percent to 0.7 per-cent. The tax rate will be automatically reduced back to 0.5 percentwhen all Federal general revenue loans to the Extended Unemploymmeant Compensation Account in the Federal Unemployment Insur-ance Trust Fund have been repaid. At present, outstanding Federalgeneral revenue loans to the Extended Unemployment Compensation
555
34
Account total $8.6 billion. It is estimated that, under provisionsof present law, these loans will be repaid by 1986.
The Committee recommends that the fiscal year 1979 budget not an-ticipate enactment of the proposed reduction in the Federal unem-ploywent insurance tax rate because, according to Administrationestimates, it would make repayment of the $8.6 bil ion debt impossible.Under present law. the Administration estimates the general revenueloans will be repaid by 1986. If the tax rate is reduced, as recommendedby the President, thie loan balance will still be in excess of $7 billion in1986.
AFDC WORK ExPExNSE DUISMGARD
The President's budget includes a $119 million reduction in FederalAFDC expenditures in fiscal year 1979. This reduction anticipatesenactment of an Administration proposal that would change provi-sions in present law pertaining to the treatment of work-relat ex-penses for working AFDC recipients. Under current law, recipientsare permitted to itemize and sub tract from gross earnings job-relatedexpenses such as transportation and special clothing, in addition tothe $30 plus one-third disregard and child care expenses. Allowablework-related expenses vary from State to State. The Administration'sproposal would establish limits on the amount of deductible work-related expenses.
The committee e believes that this i:ue is more appropriatelydealt with -is a part of comprehensive welfare reform. Therefore, theCommittee recommends that the fiscal year 1979 budget not anticipateenactment of the President's proposal.
CHILD SUPIPOR
The President's budget recommends enactment of legislation toeliminate the incentive payments to States and localities for inter-state cooperation in enforcement and collection actions under titleIV-D, the child support enforcement program.
Current law provides for inccntive payments to State and localgovernments to encourage inter- and intra-state cooperation in theenforcement and collection of support rights assigned under the childsupport provisions of AFDC law. The incentive payment made to apolitical subdivision or to a State is from the funds that otherwisewould be returned to the Treasury when support payments for welfarerecipients decrease public welfare costs for such recipients. The pay-ment is to amount to 15 percent of any amount collected which isattributable to the support obligation owed.
The Administration contends that the administrative costs forinterstate incentive payments in relationship to their return are toogreat to merit continuation of the incentive payments arrangementfor interstate collection activities. Under the proposal, such incentivepayments would continue in the case of intrastate cooperation.
The Committee, however, has been in formed by a number of Statesthat the incentive payment provision is beg ining to produce positiveresults. The Committee believes that the elfect of the provision shouldbe the subject of more complete evalm2tion by the Department, andthat in the meantime the provision sould not be repealed. The Corn-
24-Q0 0 - 76 - 36
556
35
mittee therefore recommends that the fiscal year 1979 budget not an-ticipate enactment of this proposal.
FISCAL RELIFy FoR STATES AND LOCALITIES
The Committee recommends that the fiscal 1979 budget anticipatelegislation providing $400 million in fiscal relief to States and locali-ties. This recommendation is consistent with the Administration's pro-posal for "interim fiscal relief" between now and implementation ofwelfare reform legislation.
The Social Security Amendments of 1977 provided for $187 millionof "interim fiscal relief payments" to be divided among the Stateshalf on the basis of AFDC expenditures and half according to therevenue sharing allocation formula. It is anticipated that the sameamount of fiscal relief payments for fiscal year 1978 will be included inH.R. 7200. These fiscal relief payments are supported by the Admin-istration. In addition, the Administration has stated that, as anamendment to general welfare reform legislation, it would supportfiscal relief payments of $450 million in fiscal year 1979 and $525million in fiscal year 1980, to be distributed among the States accord-ing to an allocation formula similar to that used for the fiscal year1977 payments.
ENACTMENT OF LEGISLATION PROVIDING "COST EQUALIZATIONPAYMENTS" TO STATES FOR YEARS BEGINNING WITH FISCAL YEAR1979
The Committee recommends that the fiscal year 1979 budgetanticipate enactment of legislation providing "cost equalization pay-ments" to States for years Yeginning with fiscal year 1979 as providedunder the provisions of H.R. 8291. This legislation would establish asystem whereby Federal general revenue funds, "cost equalizationpayments", would be available to a State for the payment of unem-ployment compensation benefits during periods in which it has anunusually high rate of unemployment.
The Committee makes no recommendation with regard to the pro-visions of H.R. 8291 that would make "cost equalization payments"for years prior to fiscal Year 1979. The matter of retroactive paymentswill be considered during Subcommittee and full Committee delibera-tions on H.R. 8291.
In general, H.R. 8291 would require that, for each year beginningwith calendar 1974, the Secretary of the Treasury would compensateStates for a portion of their unemployment compensation costs,if (1) a State's insured unemployment rate for that year wasat least 6.0 percent, and (2) its total unemployment compensationcosts exceeded the costs of a designated base year. The "base year"would be the most recent year in the past 5 years for which State'sinsured unemployment rate was less than 6 percent; or, if the insuredunemployment rate was not under 6 percent in any of the previous5 years, the base year would be the year in the past 5 in which theState's total unemployment compensation costs were the least.
These cost equalization payments would be made in the form oftransfers from the general fund of the Treasury to the account of eacheligible State in the Federal Unemployment Insurance Trust Fund.The Committee has been informed by the staff of the House BudgetCommittee that such transfers would not represent Federal outlaysunder the unified..budg .- . -
557
36
In the case of a State which has an outstanding Federal unemploy-ment insurance loan, any cost equalization payment to which it isentitled would be credited against the balance of its Federa! loans.At the present time, 21 States have outstanding Federal unem~p!oy-ment insurance loans totaling $4.7 billion. The retroactive provisionsof H.R. 8291 would offset approximately $3 billion of these loans.
Under theprovisions of HR. 8291, an estimated $270 million wouldbe transferred from Federal general revenues to eligible State accountsin the Federal ITnemployment Insurance Trust Fund for fiscal year1979, and $42 million for fiscal year 1980.
SUMMARY OF PUBLIC ASSISTANCE AND UNEMPLOYMENT COMPENSATION RECOMMENDATIONS
(in millions of dollars
CommitteeFunc- President's request recommendation Oiffeiencetionalcate- Budget Budget Budgetgory Major program or initiative authority Outlays authority Outlays authority Outlays
500 Title XX social services ................. 200 200 40O 400 +200 +200Child welfare services:
500 (a) Establish title IV-B entitlement.. 266 141 266 141500 (b) Extend Federal matching for
600 AFDC work expense disregard ........... -119 -119 0 0 -+119 +119600 Fiscal relief for States and localities ------ 0 0 400 400 +400 +400600 Reduction in Federal unemploymant in-
Total ........................... 17,655 11,030 19,032 11,807 +1,377 +777
1 The Committee recommends that budget authority and outlays in the President's budget be increased by these amountsfor the reasons provided in the narrative.
I This additional budget authority merely reflects a continuation of present law.
558
3. HEALTH
MELDICAr1 E
Present law outlays under medicare are estimated for fiscal year 1979at $30.0 billion. This rel)resents an increase of more than 1ý percentover fiscal year 1978 outlays. T'le primary factor accounting for theincrease is inflation in medical care costs.
Hospital insurance expenditures generally account for about 70 per-cent of the medicare payments. In' fiscal year 1978, $21.0 billion inoutlays is estimated under part A hospitall insurancee. Part B, thesuippleIientary medical insurance program, will account for $9.1billion.
Income to the trust funds in fiscal year 1979 is estimated at $31.7"billion.
As indicated in Format I I, the President's budget recommendsadoption of r(nal di:,ta-e legi,4lation-in effect endorsing the legisla-tion (I.R. 8423) initiated by the Committee on Ways and Meansand passed by the HIous of Representatives on September 12, 1977.H.R. 8423 was al)proved by tle Senate Finance Committee on Feb-ruarv 28. 1978. The Administration estimates a fiscal year 1979 costof $7 million for this legislation even though it would reduce medicareoutlays in future years. However, revised Committee estimates, withwhich the Office of the Actuary in the Social Security Administrationnow concurs, indicate a savings in fiscal year 1979 of $12 million forH.R. 8423 as passed by the IHouse. These revised estimates are reflectedin the Committee's recommendations in Format II.
Hospital cost containment le islation-a major initiative of theAdministration-is designed to stow the rate of hospital cost inflation,reducing costs for all payers including the medicare program, whichwould experience a $630 million reduction in outlays in fiscal year1979. On February 28. 1978, the Subcommittee on Health approved analternative cost containnment proposal that would impose governmentalcontrols only when and if voluntary cost reduction efforts in the privatesector fail to meet cost reduction goals specified in the legislation. If,as the Committee assumes, these pmrvate sector cost containment effortsare successful enough to avoid triggering a program of federal con-trols into effect, the cost effect on medicare would be to reduce pro-gram outlays in fiscal year 1979 by $680 million-a reduction $50million greater than estimated for the original Administration pro-posal. If voluntary goals are not met, and a federal program is trig-gered into effect, a smaller z education in outlays would be experienced.
With respect to legislative initiatives of the Congress for fiscal year1979, the Committee believes improvements need to be made in medi-care to close certain existing gaps in coverage and to eliminate certaindefects in the benefit structure that may result in hardships for bene-
559
38
ficiaries when they become sick or disabled; e.g., elimination of the24-nionth medicare waiting period for reentitled disabled; coverage of-erv'ices needed outside the United States, improved coverage of ambu-lance, durable medical equipment, and home health services. Thus, theCommittee recommends that the fiscal year 1979 budget anticipateenactment of legislation that would increase outlays by $100 million forimprovements in the medicare program.
SUMMARY OF HEALTH RECOMMEiIDATIONS
Iln millions of do"a"
CommitteeFunc- President's request recommemistion Diftefencetionatca o r- Budget Budget Budget
cy Majo¢ program at initiative authOrity Outlays authority Outlays authority Outlays
V50 Hospital cost containment (H.R.6s)... - W -630 -54550 Mandate of common audits ------------- -6 -6550 Improiements to WMediare program ...... 0 100 +106500 Medicare program ..................... 31.703 30,039 31, 703 30,039
Total ............................ 31,703 29,410 31,703 23,441 0 +31
560
4. SOCIAL SECURITY
AMINISTRATION's SAVINGS PROPOSALS
According to the President's budget, under present law fiscal year1979 revenues into the social security (OASDI) trust funds are esti-mated to be $100.1 billion, and outlays are estimated to be $103.7 bil-lion, leaving a deficit of $3.6 billion.
As outlined in Format III, the President's budget recommends fourlegislative changes in the social security program that would reducetrust fund expenditures by $630 million in fiscal year 1979, and a rec-o.iiiuendationi to increase reimburbenient to the Social Securitv Admin-ist ration for services it performs under the provisions of the EmployeeRetirement Income Security Act of 1974 so as to pay the full cost. ofthe services performed ($14 million).
The major impact of the Administration's cost savings proposalswould be: (1) to eliminate the social security minimum benefit for newbeneficiaries; (2) to reduce entitlement to retirement and dependents'benefits by starting them one month later than under present law;(3) to reduce the period that benefits can be paid retroactively beforeapplication is made from 12 months to 3 months; and (4) to limitpayments to child beneficiaries age 18 or over who are full-time stu-dents to the maximum payment made tinder the Basic EducationalOpportunities Grants program. Each of these proposals is controver-sial. Ore of them (the limit on 41udents' benefits) was rejected in theconsid, ration of the Social Security Amendments of 1977. Other pro-posals (including eliminating the minimum benefit and reducing retro-active payments to 3 months) would change the policy on issues thatwere considered and modified in the recently enacted Social SecurityAmendments of 1977.
The Committee considered and discussed each of the proposals rec-ommended by the President for reduced trust fund expenditures.Without passing final judgment. on any of these proposals, the Com-mittee concluded that it would be unrealistic to expect enactment ofany of these four savings proposals. Thus, the Committee recommendsthat the fiscal year 1979 budget not anticipate enactment of these foursavings proposals relating to the social security trust funds.
The Committee does recommend, however, that the fiscal year 1979budget anticipate the $14 million savings relating to reimbursingthe Social Security Administration for its full costs associated with itsduties performed pursuant to the Employee Retirement Income Se-curity Act of 1974.
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40
ADDITIONAL COMMENTS FOR THE APPROPRIATIONS AND BUDGETCOMMITTEES
It has come to the attention of the Coimittee through oversightactivities of the staff of the Social Securityv Subconimlittee that solineaspects of essential quality assurance in the social security disabilityprogram have been neglected becau.-e of i.s-ilflicient rese,1urces. Thismay be having a significant effect on the awarding of disability benefitsand the cost of the program. It is e.-se-ntial t hat when su: •,t atialdeficiencies in a State agency operation are uncovered that such aState be wore closely monitored l'v the Federal agency through thereview of a higher percentage of cas-es. pierh',ps. even on plreafl(.IIIic:li-tive basis. Also, the Committee wishes to inake sure that there is noreduction from the 5 Ipercent sample of title 1I cases by the SocialSecuritv Administration. There is evidlence that a full s:anple has ]lot1,,en ni;4 eot istently in the past, and there are even strong indicationsthat the sample size should be increased. Sonic States have complainedthat insuf lieient. returns have lessened tho valie of the Fd,.-ral review.and certainly less than a full saIliille adve'r-ely affects the siahIttittalvalidity of 'quality assurance findings. Simiuilarly, the Conmitteewishes'to be assure-d that the State agency quality assurance units arefully staffed and with adequate niicdic:n support. and that more effec-tive'supervisory review and other elements of quality assurance be inplace in accordance with the Federal directives (FATr-l07). Thus,the Committee urges that both the Appropriations and Budgret Comn-mittees in examining the amount of administrative expenses for theSocial Security prot-ram be sure that an adequate allowane is mradefor title 1I disability insurance quality assurance activities at boththe Social Security and the State agency level.
The Administra'n;n has rquested new appropriation act languageto enable the Social Security Administration to have a single con-solidated appro;,riation account to carty out the administrativeaspects of a number of welfare profrarns which have been transferredto it under the reorganization of the Department of Health, Educa-tion, and Welfare (March 1977) anld if, administrative responsibilitiesunder the Black Luna legislation. The social security trust fundswould be fully reimbursed for any advances t, these programs withinterest. This appropriation lan!rinae follows the precedent set in theSocial Security Amendments of 1972 for advances for SS1 adlminis-trative expenses but, as submitted in the budget. does not contain aprovision in the 1972 Amendments to the effect that such authoritywould expire after any fiscal year for which advances from the trustfunds, plus lost interest-, had not been repaid. The Acting Commis-sioner of Social Security has af'reed to submit legislation for theseprograms identical to that for the SSI program to the Subcommitteeon Social Security for enactment into law, and the Committee re-onests that the provision not be included in the ITEW appropriationsact until the Subcommittee has had an opportunity to examine andconsider such propo.sed legislation and consult with the Anpropria-tionq Committee as to the appropriate manner of enacting sw hlegislation.
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41
SUMMARY OF SOCIAL SECURITY RECOMMENDATIONS
(In millions of dollars
CommitteeFunc. President's request recommendation Differencebonalcate- Budget Budget Budgetlory Major program or initiative authority Outlays authority Outlays authority Outla)s
600 Elimination or freeze of minimum benefit. -254 0 +254600 Reduction in entitlement to retirement
and dependents' benefits ------------- -138 0 +138600 bmitation on retroactive payments ....... -121 0 +121600 Limitation on student benefits ........... -117 0 +117600 Reimbursement to Social Security Admin-
istration for costs relating to ERISA-.... -14 -14600 Federal old-age and survivors tiust fund.. 86,407 187. 866 86, 407 187. 866600 Federal disability insurance trust fund-... 15,108 14, 943 15,108 14, 943600 Railroad interchange .................... -1,377 -1,377 -1,377 -1,377
Total ........................... 100,138 1 O0, 788 100,138 '101,418 0 +630
I Excludes $2.280.000.000 for limitation on administrative expenses appropriated by the House AppropriationsCommittee.
563
5. OTHER
CRUDE OIL EQUALIZATION TAx REBATRIS TO NoN-TAXPAYERS
The President's fiscal year 1979 budget anticipates enactment ofthe crude oil equalization tax (COET), with a rebate of COETrevenues through income tax refunds to taxpayers and direct pay-ments to individuals who do not pay Federal income tax. The Presi-dent's budget includes budget authority and outlays of $1.333 billionfor direct payments of COET revenues to individuals who do not payincome tax. The Committee anticipates that a crude oil equalizationtax, if enacted, would not be effective prior to July 1, 1978. Thus, theCommittee recommends that the budget authority and outlays in thePresident's budget be reduced by $900 million.
TAXABLE BOND OPTION
The President's tax program includes a proposal to permit State andmunicipal governments to elect to issue taxable bonds with a Federalinterest subsidy of 35 percent for obligations issued during 1P79 and1980, and a 40-percent interest subsidy for obligations issued there-after. The President's fiscal year 1979 budget includes budget author-ity of $7.094 billion and outlays of $99 million for a taxable bondoption. The Committee recommends inclusion of this budget authorityand outlays in the fiscal year 1979 budget for a taxable bond optionwhich will be carefully considered by the Committee during itsdeliberations on the President's tax program. In 1976, the Commit-tee reported a bill with a taxable bond option that is substantiallysimilar to the President's proposal.
SUMMARY OF OTHER RECOMMENDATIONS
[In millions of dollarsl
CommitteeFunc- President's request recommendation Differencetonalcate- Budget Budget BudgetPory Major program or initiative authority Outlays authority Outlays authority Outlays
600 U.S. Tax Court Judges' Survivors AnnuityFund ------------------------------- 110 44 ItO 44
Under present law, fiscal year 1979 revenues are estimated to be$472.2 billion. This revenue estimate assumes the absence of tax legis-lation either (1) extending various provisions that would otherwiseexpire at the end of calendar year 1978 or (2) increasing or reducingfiscal year 1979 revenues.
The President's fiscal year 1979 budget recommends that revenuesbe reduced by $32.6 billion to a level of $439.6 billion. The President'srecommendation assumes (1) extensicu of several provisions expiringat the end of 1978 and (2) enactruent of proposals relating to tax re-duction and reform, energy and several miscellaneous items.
Section 301 of the Congressional Budget Act requires the Committeeon Ways and Means to recommend an appropriate level of Federalrevenues for fiscal year 1979 and the amount, if any, by which theaggregate level of Federal revenues should be increased or decreased.Section 301 does not require the Comlmittee to identify or speculateon specific tax proposals that may ultimately be approved affectingfiscal year 1979 revenues. Such an exercise would be impractical andpremature.
The Committee deliberated at lentrth the issue of the appropriatelevel of revenues for fiscal year 1979, and the appropriate aggregatereduction in revenues for the fiscal year. The Committee recommendsthat the fiscal year 1979 budszet anticipate enactment of legislationth at would reduce fiscal year 1979 revenues by $35.2 billion, thus pro-viding a revenue floor of $437 billion for the fiscal year.
For fiscal year 1979, customs receipts are estimated at $6.4billion, up from $5.8 billion in fiscal year 1978. Import fees on crudeoil and petroleum products also are in the nature of customs duties,and receipts from import fees on crude oil and petroleum products areestimated at $160 million for fiscal year 1979.
The Subcommittee on Trade annually considers small tariff billsof limited product scope designed to correct anomalies and distortionsin the operation of the tariff laws or to remove a tariff on raw materialsno longer available or on products no longer made in the UnitedStates. The removal or temporary suspension of such tariffs is designed
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568
46
to make American producers and workers more competitive byimproving their access to lower cost materials and to eliminate un-necessary charges to the consumer in cases where the duty providesno protection nor serves any other purpose. These small tariff billsgenerally have minimal impacL on customs receipts.' As a result oftariff laws of limited product scope enacted during the 93d and 94thCongresses, the average annual customs revenue loss was $2.9 million.The small tariff bills enacted in 1977, which incorporated the pro-visions of 21 different bills, had a combined annual revenue loss ofapproximately $10,720,000. Four tariff bills which passed the Houseand are still pending before the Senate have an estimated potentialrevenue loss of $203,000 generally beginning in fiscal year 1978. Suchlosses are less than % of one percent of total customs receipts, whichare less than %o of one percent of total Federal budget receipts.
Effect of Individual Tariff Bill. on Customs Receipts
In 1978, the Subcommittee on Trade plans to hold hearings andwill probably report, and the Committee on Ways and Means willprobably consider and report favorably, bills providing new dutysuspension or duty-free entry of limited product scope. Nine suchbills have been introduced and referred to the Subcommittee. If eachis enacted, it is estimated they could result in a loss of customs revenueof no more than $4.46 million for fiscal year 1979.2 Another six billsinvolve continuation of duty suspensions scheduled to expire June 30,1978, and failure to enact such bills could result in a gain in customsrevenue. The estimated annual cost of continuing these suspensionsis $2.74 million. In addition, other, meritorious bills may be introducedin the near future or the Subcommittee may want to report favorablybills which it passed over without prejudice last year. Thus, someadditional allowance for customs loss should be provided.
Contingency estimate.-Based on the above, it is estimated thattariff legislation could result in revenue losses in fiscal year 1979 of$10 million, and for fiscal years 1980-83, the revenue changes resultingfrom tariff bills would average an estimated $10 million per year.
Import Fees on CHud Oil and Petroleum Products
In fiscal year 1976, $1.9 billion in import fees on crude petroleum andpetroleum products was collected, as compared with an estimated-$13 million in fiscal year 1977 and +$39 million in 1978.3 Shouldmajor energy legislation result in substantial import levies on crudeoil and petroleum, the revenue impact would be slightly less than $30million for each cent per barrel oF petroleum imports. Should energylegislation involve import quotas, there could be revenue losses, themagnitude of which cannot be estimated at this time.
'Regarding the reporting requirement. of the Congressonal Budget Act of 1974 regard-Ing "tax expenditures." it has been determined that legislated exceptions or exemptonsfrom customs duties &re not to be considered as "tax expenditures" since the revenue ices.do not involve a special ezelusion, exemption, or deduction from gross Income or do notinvolve a special credit, a preferential rate of tax, or a deferral of tax liability.
4 Based on the assumption that concurring Senate action will take place prior to Oct. 1,19T&
9 Due to the reduction and/or removal of some import fees Imposed by' the President earlYIn 1974.
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47
CUSTOMS RzvnwNus RESULTING FROM CONGRESSIONAL PROCMDUUE5WITn RESPECT TO PRZSIDENTIAL ACTION
Under chapter 5 of title I of Public Law 93-618, the Trade Act of19' 4, Congress established certain procedures with rýspect to certainPresidential actions in the trade area. These provisions anticipateautomatic consideration by both Houses of Congress of bills and reso-lutions implementing, approving, or disapproving certain actions bythe President, and in one instance the Secretary of the Treasury,which could have a customs revenue effect.
It is not possible to indicate at this time whether the Congress willbe called upon to approve an implementing bill or approval resolutionwith respect to one or more trade agreements submitted to theCongress under section 102 of the Act involving customs revenuesduring fiscal year 1979. The various Multilateral Trade Negotiationproposals relating to tariff reductions generally propose a post-1979date for the ber, nnig of reductions.
The Trade 1974 provided for the waiver of countervailinduties through January 4, 1979 in an effort to encourage multilateraltrade negotiations on the question of the control of trade-distortingsubsidies. During the past 4 years, the President has waived the collec-tion of countervailing duties on a number of items, primarily foodproducts from Europe. It is unclear at this time whether the Multi-lateral Trade Negotiations will result in a code on subsidies which willmake the collection of these duties unnecessary or whether the Ad-ministration, for further negotiating purposes, will request an exten-sion of the waiver authority. If the waiver authority expires, dutyreceipts on a number of items would be increased, unless action istaken to eliminate the foreign subsidies, nullifying the need for theapplication of countervailing duties.
It is also not possible to indicate at this time whether the Congresswill be asked to consider a resolution approving the extension of non-discriminatory treatment to a non-market-economy (Communist)country. It is unlikely, however, that should such an approval resolu-tion be considered favorably that the customs revenue consideration(resulting from the application of lower rates of duty to imports fromthe country involved) would be significant in terms of the overallbudget impact.
It is also not possible to indicate whether the President will askthe Congress to extend beyond July 3, 1978, the Trade Act title IVfreedom of emigration waiver, which allows extension of nondiscri-natory (most-favored-nation) treatment to imports of products fromRomania. In view of continuing uncertainty of developments inRomania, the Subcommittee on Trade will be examining any extensionof the waiver very closely. Should the Congress not extend the waiver(resulting in withdrawal of MFN treatment on imports from Romania),TSUS column 2 tariff rates would be restored. In the first full year oftheir application, it is estimated that revenues would be increased byapproximatel $10 million.
te resolutions approving certain actions by the Presidentunder the Trade Act of 1974, it is not possible to anticipate the amountof customs revenue, if any, which may be involved in such'action bythe Congress.
568
48
As indicated above, the automatic consideration of resolutions dis-approving certain actions autborized under the Trade Act of 1974 andother trade statutes is required under section 152. The Act providesfor such disapproval resolutions which could have a customs revenueimpact in terms of:
Actions by the President to provide import relief under section203 of the Trade Act (currently, for example, actions relating toferrochromium and ferrous fasteners are pending before theSubcommittee);
Actions taken by the President under section 301 of the TradeAct relating to certain trade practices of foreign governments;
Actions by the Secretary of the Treasury under section 303 ofthe Tariff Act of 1930 (the countervailing duty provision).
Further decisions on cases currently pending in the courts challengeing the Secretary of the Treasury's interpretation of the countervailingduty law and any legislative action that might be required could have arevenue impact. In general, it is anticipated that the customs revenueimpact of the implementing bills, approval resolutions, and disapprovalresolutions provided for in sections 151-153 will not be significant interms of the overall budget in fiscal year 1979.
The above circumstances suggest, however, that consideration begiven to an amendment in the requirements of the CongressionalBudget Act which would in effect provide for special treatment ofactions by the House, which cannot be anticipated in advance, undersections 151-153 of the Trade Act of 1974.
569
IV. DEFICIT
570
Table A. SUMLMARYCOMPOSITE EFFECT OF RECOMMENDATIONS Oil
FISCAL YEAR 1979 BUDGET DEFICIT
Billions of dollars
A. Decreased fiscal ycar 1979 revenues attributable to recommen-dations -------------------------------------------- 2. 600
B. Increased fiscal year 1979 outlays attributable to recommenda-tions ---------------------------------------------------- . 643
Total effect on fiscal year 1979 budget deficit--_- +3. 243
Table R. REVENUESCOMPOSITE EFFECT OF RECOMMENDATIONS ON
Nons.-Details may not add to totals due to rounding.
1.2.
3.4.5.
+ 582. 050 +643. 050
572
V. PUBLIC DEBT LIMIT
573
PUBLIC DEBT LIMIT
Under present law, the public debt limit consists of a permanentlimitation of $400 billion and a temporary lin1itation of $352 billion,effective through March 31, 1978. rhe President originally recom-mended I& increase of $29 billion, i.e., from $752 to $781 billion, in thepublic debt limitation for the second half of fiscal year 1978. The Presi-(lent al.so recommended that the public debt limitation for fiscal year1979 be increased by an additional $90 billion over the debt level of$781 billion i)rojecte(l for the end of fiscal year 1978.
On March 13, 1978, the Administratioit presented revised budgetestimates to the Committee on Ways and NMeans for fiscal years 1978and 1979. The Administration's revisions include a reassessment offiscal year 1978 outlays based on reports of actual spending in recentmonths. Specifically, the revisions indicate that fiscal year 1978outlays are estimated to be approximately $9 billion less than pre-viously projected. In view of these revised budget estii. iates, theAdministration now recommends that the public debt limitation beincreased by $22 billion, from the present level of $752 billion to $774billion through the end of fiscal year 1978, September 30, 1978. Inaddition, the Administration recommends that the public debtlimitation be increased by an additional $89 billion from $774 billionto $863 billion for fiscal year 1979.
The Administration's revised budget estimates were supplied to theCommittee subsequent to the consideration of its recommendations tothe House Budget Committee on the fiscal year 1979 budget. Thus,the Committee is not in a position to recommend a specific level ofpublic debt for fiscal year 1979. However, the Committee has ap-)roved legislation (11.1t. 11518) to extend the present public debt
limitation of $752 billion beyond its March 31, 1978, expiration dateto July 31, 1978. This action by the Committee is consistent with theAdministration's revised budget estimates which indicate that thepresent $752 billion limitation would be sufficient for this period.
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574
VI. TAX EXPENDITURES
575
ESTIMATES OF TAX EXPENDITURES
IntroductionThis report on tax expenditures is published as part of the report
by the Joint Committee on Taxation to the Committees on theBudget. As in the case of earlier reports,' the estimates in this reportalso were prepared with the extensive assistance of the staff of theOffice of Tax Analysis in the Treasury Department. The first tworeports were prepared in compliance with the request by the confereeson the Revenue Act of 1971 that tax expenditure data be submittedregularly to Congress by the Joint Committee staff. The last reportwas published one year ago for submission to the Committees onthe Budget.
In January, the Administration published its estimates of taxexpenditures for fiscal years 1977-1979 in Special Analysis G of theBudget for fiscal year 1979.2
This report covers fiscal years 1978-1983. The tax expenditureitems included in this pamphlet and in Special Analysis G are iden-tical. Differences between the special analysis and this report overthe inclusiveness of the list have been resolved. The tax expenditurereport by the Congressional Budget Office (CBO) (which will be
published shortly) aTso will contain the same listings. The staff of theJoint Committee generally has made its estimates in terms of theprovisions in present law (as of December 31, 1977) and assumedthat the expiration dates will not be extended or otherwise modifiedand no other changes will be made in the present law.
The concept of tax expendituresTax expenditure data are intended to show the cost to the Federal
Government, in terms of revenues it has foregone, from tax provisionsthat either have been enacted as incentives for the private sector of theeconomy or have that effect even though initially having a differentobjective. The tax incentives usually are designed to encourage certainkinds of economic behavior as an alternative to employing directexpenditures or loan programs to achieve the same or similar objec-tives. These provisions take the form of exclusions, deductions,credits, preferential tax rates, or deferrals of tax liability. Tax ex-penditures also are analogous to uncontrolled expenditures madethrough individual entitlement programs because the taxpayer whocan meet the criteria specified in the Internal Revenue Code mayuse the provision indefinitely without any further action by the FederalGovernment. This is possible because provisions in the Internal Reve-nue Code rarely have expiration dates that would require specific
I Committees on TWays and Means and Flince, Estimates of Pederal Tax Expenditures,October 4. 1972. June 1, 1973, July 8, 1975, March 15. 1976, and March 15, 1977.2 "Tax Expenditures," Special Analysis G. Special Analyset of the Budget of the UnitedStates Government for Piscal Year 1979, pp. 148-174.
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congressional action to continue the availability of the tax provision.For many provisions, the revenue loss is determined by the taxpayer'slevel of income and his tax rate bracket. From the viewpoint ol thebudget process, fiscal policy and the allocation of resources, uncon-trollable outlays or receipts restrict the range of adjustments thatcan be made in public policy. One of the initial purposes of the enum-eration of tax expenditures was to provide Congress with the informa-tion it would need to select between a tax or an outlay approach toaccomplish a goal of public policy.
The staff followed the definition of tax expenditures developed inthe legislative process that produced the Budget Control Act. Includedin this report as tax expenditures are virtually all tax provisions whichhave been characterized as tax expenditures under almost any of theprior listings by other sources. As a result, listing an item as a taxexpenditure in this report is a part of a process of providing informa-tion, and the listing becomes a catalog, of past public policy decisionsaccompanied by estimates of their effects upon budget receipts. Nojudgment is made, nor any inference intended, about the desirabilityof any specific provision as public policy or about the effectiveness ofthe tax approach relative to other methods of achieving the particularpublic policy goals desired.
In this report, a tax expenditure is described as a tax incentivethat departs from simply allowing the taxpayer to deduct from grossincome the costs incurred in earning net income. Under this concept,deductions are allowed for current expenditures which are directlyrelated to the process of earning income, and therefore these expendi-tures are not treated as tax expenditures. These deductions also maybe treated as business costs, and they are deducted on returns filed bycorporations, partnerships and individual proprietorships. On the otherhand, capital costs by their nature are not incurred entirely in oneyear. The basic tax provision allows depreciation ratably (i.e., straight-line depreciation) over the useful life of the capital asset, but taxlawalso permits accelerated depreciation to provide investors with fastercapital recovery through shorter lives and/or faster rates of deprecia-tion. Such faster tax treatment of capital costs is classified as a taxexpenditure; in this report, those items appear as various types ofaccelerated depreciation: asset depreciation range (ADR), depreciationin excess of straight-line, percentage depletion allowances (in excess ofcost depletion), and current expensing of costs that otherwise wouldbe capitalized.
Individuals who are employees-and do not carry on their ownbusinesses-have analogous business-type deductions which also arenot clarsified in this report as tax expenditures. The expenses also arecosts which are incurred in earning net income, e.g., the cost ofhis tools that a mechanic uses. Most other deductions which individualstake on their tax returns represent personal consumption expenditures.These deductions reflect public policy decisions to facilitate specifictypes of consumption spending and are therefore generally classifiedhere as tax expenditures. An exception to this rule is made for generalpersonal exemptions and the standard deduction 3 which have not
'The minimum standard allowance and the percentage standard deduction were repeledby the Tax Reduction and Simplification Act of 19T , and the standard deduction of r2.200for single taxpayers and $3.200 for Joint returns by married couples was enacted to replacethem and was built into the tax structure as the zero bracket amount.
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been treated as tax expenditures in any analysis of the subject orin the Budget Control Act. Individual tax expenditures also includevarious kinds of income, e.g., sGcial security payments to the aged,dependents and survivors, which are tax-exempt income but wouldbecome components of adjusted gross income from which taxableincome is derived in the absence of the tax exemption. It should benoted in this context that the Administration has proposed to includeunemployment compensation in the income of taxpayers with ad-justed gross income from all sources (including unemployment com-pensation) greater than $20,000 for single taxpayers and $25,000 formarried taxpayers.
A number of tax provisions are not treated as tax expenditures.The general tax rate structure is not part of tax expenditure analysis:the structure of graduated tax rates and taxable income bracketsin the individual income tax and separate tax structures for singlepersons, married persons filing' separately, heads-of-househol'dsand income splitting for married persons. Other such items are thepersonal exmption-one per taxpayer and each del)endent-and thestandard deduction. On the other hand, included as tax expendi-tures are the additional personal exemptions for the aged and blindand itemized personal deductions.
In the business tax area, the combined corporate normal andsurtax tax rate is considered to be the general tax rate structure andis not classified as a tax expenditure. The surtax exemption is treatedas a departure designed to benefit small corporations, and thereforeit is treated as a tax expenditure.
There is no provision for negative tax expenditures, and no pro-visions are classified as disincentives. Thus, the corporate surtaxrate is treated as the basic provision andi not a de )arture from thenormal tax. the limitation on the deduction of a net long-term capitalloss is a limit to the incentive made available through the specialtreatment for capital gains.
Imputations of income in kind received from the services of durableassets are not treated as income in the tax code and are not here classi-fied as tax expenditures. They might be considered as income underother concepts of income for tax purposes. Measurement of the im-puted income-in-kind would be a formidable task. The imputed incomefrom an owner-occupied home is the most prominent of these items,and among the others are the income that could be imputed to house-hold furniture and appliances, books and art collections and automo-biles. Food stamps are a form of income in kind that also is omittedfrom this listing.
Foreign tax credits are not classified here as tax expenditures sincethey are generahy considered as the way of taking into account theinterrelationship of domestic and foreign tax systems. In addition, thisanalysis does not attempt to go behind the current legal interpretationand attribution of payments by U.S. corporations to foreign govern-ments as taxes (e.g., it does not attempt to treat any such paymentsas royalties as in the case of oil income), when the payments aredesignated in that way by those governments.
Measurement of tax expendituresEstimates of tax expenditures are difficult to determine and are sub-
ject to important limitations.
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Fch tax expenditure is measured in isolation. The amount of thededuction is added back in the calculation of taxable income whichraises its level. The difference in tax liabilities as estimated underpresent law including the tax expenditure and this new higher levelof tax liabilities is taken as the amount of the tax expenditure. Forthis computation and in keeping with the general practice of revenueestimating, it is assumed that nothing else changes.
SSome further observations on these estimating problems follow.First, if two or more items were to be eliminated, the result of the
combination of changes being made at the same time might produce alesser or greater revenue effect than the sum of the amounts shownfor each item separately. This is why totals are not shown for table 1,except in a footnote.
Second, in some cases if a tax expenditure item were to be eliminated,it is possible that Congress would, at least to some extent, desire todeal with the underlying problem by a direct expenditure or loanprogram. The effect of any such program is not taken into accountin the estimates shown. A direct expenditure could become a taxexpenditure if it takes the form of a payment to an individual orbusiness that is not included in income subject to taxation. In addition,if some of these provisions were removed from the tax laws, thisremoval might be accompanied by revisions in tax rates, personalexemptions or the standard deduction, as has happened in tihe past.Other fiscal and monetary policies might be adopted to offset a taxchange. None of these possibilities haslbeen taken into account in theestimates.
Third, when tax expenditure items have been added to the tax lawin the past, they did not become fully effective until the lapse of severalyears. As a result, the eventual annual cost of some items is notfully reflected until some time in the future. Conversely, if variousitems now in the law were to be eliminated, it is unlikely, in manycases, that the full revenue effects shown would be realized until anextended period of years had passed.
Fourth, differences in personal income levels and corporate profitscan also account for differences in the cost of tax expenditure itemsfrom year to year. Thus, some tax expenditure items themselves maybe larger or smaller from year to year, wholly independent of taxconsiderations.
Fifth, in the case of many of the items, especially those for whichinformation is not available on tax returns, it is necessary to obtaininformation from whatever sources are available and to base the esti-mates on these sources.
Tax expenditures by functional categoryTo aid analysis of the economic benefits provided through the tax
laws to various sectors of the economy, the costs (tax expenditures)and beneficiaries (in terms of area of activity) are grouped in table1 in the same functional categories as outlays in the Federal budget.Where possible and relevant, estimates are shown separately forindividuals and corporations. Some tax expenditures do not fit clearlyinto any of the budget functional categories, and they have beenplaced in the functional category which is the most appropriate. TheOffice of Management and Budget, the Congressional Budgpt Officeand the Joint Committee staff concur on these placements.
TABLE L-TAX EXPENDITURE ESTIMATES BY FUNCTION AND SUBFUNCTION t
Fisca years, In millions of dollars
Corporations Individuals
Function and subiunction 1971 1979 1980 1981 1982 1963 1978 1979 1980 1981 1982 1983
National defense:Exclusion of benefits and allowances to Armed Forces personnel ........................................................... 1,260 1,370 1,470 1,585 1,715 1,850Exclusion of military disability pensions ................................................................................ 115 120 130 135 145 150
International affairq:Exclusion of imiome earned abroad by U.S. citizens ........................................................................ 360 385 415 475 510 550Deferral of income of domestic international sales corporations
(DISC) ................................................. 1,135 1,335 1,525 1,630 1,700 1,830 ............................................................Deferral of income of controlled foreign corporations ........... 615 665 720 775 835 905.......................................Special rate for Western Hemisphere trade corpomtiaos ........ 25 15 5 ..........................................................................................
General science, space, and technology:Expensing of fesech and development expenditures .......... 1,450 1,520 1,610 1,695 1,715 1, 635 30 30 35 35 35 35
x'FYpensing of exploration and development costs .............. 885 965 1,080 1, 185 1,265 1,360 300 300 360 420 480 545Excess of percentage over cost depletion ..................... 1,120 1,210 1,310 1,400 1,485 1,570 340 370 405 430 435 440Capital gains treatment of royalties on coal ................... is 15 20 20 20 20 50 60 70 75 95 95 CA
Natural resources and environment: . 4Exclusion of interest on State and local government pollution co
control bonds ------------------------------------------ 220 265 300 330 355 390 110 130 145 160 175 1M5Exclusion of payments in aid of construction of water and sewage
utilities ------------------------------------------------ 10 10 10 10 10 10 ......................................................5-yr amortization on pollution control facilities ................ -- 130 -45 40 130 180 140 ............................................................Tax incentives for preservation of historic structures --------------------- 5 5 5 5 5) 5 5 10 10Capital gains treatment of certain timbe• income -------------- 205 230 250 275 300 335 60 65 70 80 I5 95Capital gains treatment of iron woe -------------------------- 5 10 10 10 10 10 5 10 10 10 10 10
Agriculture:Expensing of certain capital outlays .......................... 70 75 80 so 85 85 445 460 480 495 515 530Capital tains treatment of certain ordinary income ............. 10 10 10 15 15 is 350 365 385 405 425 450Deductibility of noncash patronage dividends and certain other
Items of cooperatives ----------------.------------------ 490 525 560 595 635 675 -175 -185 -190 -200 -210 -220Commerce and housing credit:
Dividend exclusion ---------------------------------------------------------------------------------------------------- 475 505 530 560 590 620Exclusion of interest on State and local Industrial development
bonds ---------------------------------------- 235 270 315 355 400 445 115 135 155 175 195 220Exemption of credit union income --------------------------- 0 90 100 115 125 140 -------------------------------------------------------....Excess bad debt reserves of financial institutions .............. 705 790 930 1,025 1,040 1,085 ............................................................Deductibility of mortgage interest on owner-occupied homes .............................................................. 4, 985 5,530 b, 140 6,815 7, 565 8,395Deductibility of property tax on owner-occupied homes .................................................................. 4 665 5,180 5,750 6, 385 7,085 7,865Deductibility of interest on consumer credit ............................................................................... 2,120 2, 350 2,610 2895 3,215 3, 565Expensing of construction period interest and taxes ............ 500 525 555 585 615 645 140 90 145 165 205 230See foOtree at and of tbl
TABLE i.-YAX EXPENDITURE ESTIMATES BY FUNCTION AND SUBFUNCTION L-Continued
_Corporations Individuals
Function and subtunction 1978 1979 1960 1981 1982 1983 1978 1979 1980 1981 1962 1963
Commerce md housing credit:Excess first-)ear depreciation ............................... 45 SC 50 55 55 60 145 155 165 170 180 190Deprecation on rental houmng in excess of straight ......... 70 70 70 75 90 85 300 290 290 300 315 335Depreciaion on tuildings (othe than enata housing) in excess
of straight line ........................................ 140 130 115 10 105 105 125 115 105 95 90 95Asset depreciation range ............................. 2.245 2,640 3,120 3,625 4,155 4,725 115 135 165 190 215 245Capital Rains (other than farmng, timber, iron ore, and coal)... 540 575 635 705 780 865 7.430 7,990 8,585 9, 23k) 9,925 10,665Deferral of capital pins on home sales ................................................................................... 935 980 1,030 1,060 1.135 1.195Capital gains at death .................................................................................................. 8,120 8,975 9.910 10.945 12.090 13.53Corporate surtax exemption ................................. 3, 885 3, 540 2.905 3.005 3,225 3,480 .......................................................Investment credit ......................................... 10,735 12,320 13,650 13,0 5 11,400 11.410 2,390 2,725 3,020 2,980 2.640 0,745
Transportation:Deductibility of nonbusiness State gasoline taxes .......................................................................... 760 W 935 1,035 1,150 1,2•55-yr amortization on railroad rollin stock ......... • .. .... -40 -40 -40 -40 -40 -35.......................................Deferra of tax on shipping companies ....................... 105 85 70 60 55 45 ............................................................
Community and regional development:5-yr amortization for housing rehabilitation ................... 5 S S (:) (') -5 10 S S (5) (2) -5
Education, training, employment and social services:Exclusion of scholarship and fellowship income ........................................................................... 295 330 355 385 415 450Parental personal exemption for students age 19 or over ................................................................... 770 790 815 840 65 890Exclusion of employee meals and lodging (other than military) .............................................................. 300 325 350 380 410 445Exclusion of contributions to prepaid legal services plans ................................................................... 10 15 20 35 so 60Investment credit for employee stock ownership plans (ESOP's). 255 305 330 190 .............................................................................Deductibility of charitable contributions (education) ........... 255 285 315 350 380 410 585 645 720 795 885 980Deductibility of charitable contributions to other than education
and health .............................................. 315 350 390 430 470 510 4,370 4,855 5,385 5.9•0 6.635 7,365Maximum tax on personal Seri inome ................................................................................ 665 o600 955 1,150 1,375 1,655Credit for child and dependent care expenses ..... 5.7.....5............................................................. -525 575 635 605 765 840Credit or employment of AFDC recipients and public assistance
Hefth:Exclusion of employer contributions for medical insurance pre-
miums and medical care ............................................................................................. 6,340 7,225 8,240 9,390 10,705 12,205Deductibility of medical expenses ...................... ................................................................ 2,43S 2, 655 2,895 3,155 3,435 3,745Expensing of removal of architectural ad tIrmportation barriers
to the handicapped ................. _.................... 10 10 (6)() (') (9)Deductibility of charitabe contributions (health)-----160 175 1 15 235 255 875 910 1,075 1, 195 1,330 1,475
lnceme secwity:Exusin of social security benuts:
Disability Insurance benefits ........................................................................................OASI benefits for Wired t workers ....................................................................................Benft for dependents and survives ...............................................................................
Exclusion at railroad retirement system benefits ...........................................................................Exclusion of wokmen's compensation beeei ............................................................................Exclusion of special benefits for disabled coal miners ......................................................................Exclusion of unemployment insurance beenetts ...........................................................................Exclusion of public assistance beennts ..................................................................................Inclusion of sick pay ...................................................................................................Net exclusion of pension contriutas and earnings:
Empoerpns ........pPlans for self-employed and eh...
Exclusion of other employee benefits:Premiums on group term life insurance ..............................................................................Premiums on accident and disability Insurance ........................................................................Income of trusts to finance supplemetary unemployment
Exclusion of interest on life insurance savings.Exclusion of capital ge-as on home sales for sprso s --ag ...65 ........................................................
and over .----------------------------------------------------------------------------------------------------------Additional exemption for elderly ---------------------------------------------------------------------------------------A d d itio n a l e xe m p tio n fo r th e b i nd ..... .. .. . . . . .. .. .. . . .. ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .D ed ucb b ility of ca su alty lo sses .. .. .. .. .. .. .. .. .. .. .. .. .. .. .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .T a x c re d it fo r th e e ld e rly . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Eafrned icm crpdit:
Veterans benefits and services:Exclusion of veterans disability com pensation ............................. . . . . . . . . . . . . . .. . . . . . . . . . .. . . . . . . .. . . . . . . . . . . . . . .Exclusion of veterans pensions ------------------------------------------------------------------------------------------E x c lu sio n l G I b ill b e n e fits ... .. . . . . . . . . .. .. . . . . .. .. . . . . ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General government:Credits and deductions for political contributions ..........................................................................
General purpose fiscal assistance:Exclusion of interest on general purpose State and local debt,.. 3,470 3,865 4,305 4,780 5,310 5,845Deductibility of nonbusiness State and local taxes (other than
on ownef-oýcupied homes and gasoline).......................Tax cedit for corporations doing business in U.S. possessions. 485 520 565 ...... 610 ...... 660 - 710
interest:Deferral of inteest on savings bonds ..................................................................................
Note: These totals repress the mathematic sum of the estimated fIscal year effect of each o. thO tax expenditureItems included in the tabml i The iitatics on the use of total are explained in the text
Souwn: Staft of othe Trmasury Department a the Joint Committee ms Taxatom.
583
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Washn t oanDbinston. C.c 225150T*^ ft -efte "emMarch 14, 1978
The Honorable Robert N. GiaimoChairmanHouse Committee on the Budget214 House Annex #1Washington, D.C. 20515
Dear Mr. Chairman:
Pursuant to section 301 of the Congressional Budget Act of1974, and in response to your letter of February 9, 1978, Iam submitting herewith a report on the FY 1979 budgetaryimpact of the legislation before the Ad Hoc Select Committeeon Outer Continental Shelf (OCS). Since the proposed legis-lation may pass by mid-FY 1978, and would be implemented assoon as possible, I am including the possible effects on theFY 1978 budget, i.e., through supplemental appropriation andpotential revenue losses. In addition, long term projec-tions are provided through FY 1982. Much of this budgetanalysis is based on a March, 1978, cost estimate preparedby the Congressional Budget Office.
The Select OCS Committee is a special body composed ofMembers from the Merchant Marine and Fisheries, Interior andInsular Affairs, and Judiciary Committees. Pursuant to H.Res. 97, which established the Committee for the 95th Congress,the Committee is:
"to consider and report to the House on the billH.R. 1614, . . . and on any related bill or matteror subject which the Speaker determines fallswithin the jurisdiction of the SelectCommittee . . .
To date, only H.R. 1614, has been referred to the SelectCommittee; consequently, the following fiscal impact analy-sis is limited to this one bill. H.R. 1614 passed the Houseon February 2, 1978, by a vote of 291-91, aftr the incorpora-tion of numerous amendments. Subsequently, the title of H.R.1614 was amended to S. 9, the Senate companion bill, andsent to the Senate.
584
Page Two
S. 9 is a bill designed to establish a policy for themanagement of oil and natural gas in the outer ContinentalShelf, to protect the marine and coastal environment, toamend the Outer Continental Shelf Lands Act of 1953, and forother purposes.
The legislation is a comprehensive revision of the 25 yearold Outer Continental Shelf Lands Act. It adds new respon-sibilities to the Department of Interior, the Department ofTransportation, the Department of Justice, and other agencies.The bill would establish an offshore oil spill pollutionfund to protect the marine and coastal environment. Itwould establish fishermen's gear compensation funds toprovide funds for claims of damages to commercial fishingvessels, gear, or economic losses. Also, the bill wouldrevise bidding and leasing procedures and disposition ofrevenues. Finally, the bill would provide grants to coastalstates affected by OCS energy activities by amending theCoastal Zone Management Act of 1972.
Within the context of the instruction to Committee Chairmen,S. 9 falls into Format IV, entitled "Legislative Initia-tives of Congress for FY 1979." In other words, it wouldestablish a modern regime for the management of OCS oil andgas resources, which is in addition to items in the Pre-sident's legislative proposals. It should be mentioned thatthe Administration does strongly support this legislation.
The following budgetary analysis shall be presented on a
Title-by-Title basis.
Title I
This title provides findings and purposes with respect tomanaging the resorces of the outer Continental Shelf andinvolves no specific costs.
Title II.
This part of the bill would have basically three cost effects.First, implementation costs for new responsibilities ofvarious agencies. Second, initial revenue loss due toexperimental bidding procedures and a revenue transfer fordisposition of revenues. Third, the establishment of fisher-men's gear compensation funds. In addition, a contingentliability will be discussed, if a lease were denied undercertain circumstances.
585
Page Three
frmplementation Costs
Title II of the bill amends the Outer Continental ShelfLands Act. These amendments vest a number of new respon-sibilities in the Department of Interior, the Department ofTransportation, particularly the Ccast Guard, the Departmentof Justice and the Federal Trade Commission.
The Secretary of Interior would be required to vstablish anational program fur the leasing of the OCS, including thedevelopment of a five-year nr.ional leasing program and theimplementation of new alternative bidcainq systeris; torequire exploration plans designed to determine the loca-tion, extent and characteri: tics of our offshore oil and qasresources; to review development and production plans sub-mitted by lessees and recommendations submitted by coastalStates; to maintain an OCS information program; to coordi-nate activities with affected States and other agencies; toprepare environmental impacts statements; and to conductenvironmental studies (the Secretary of Interior is toemploy the services of the Commezce Department to the maximumextent practicable). Additionally, there are a number ofother administrative requirements contained in this Title,such as reporting requirements.
The enforcement of safety and environmental regulations isto be shared by the Secretary of Interior and the CoastGuard. The requirements on the Co.ast (luard, in the carlyyears may be high, primarily for t-ie purchase of ne' vessels,aircraft and other enforcement equipment.
Miscellaneous additional implementation costs are expectedfor the Departments of Justice and the Federal Trade Com-mission. The former with respect to advising the Secretaryof Interior on anti-trust actions and possible involvementsin litigation, and the latter beca.'se of its responsibilityto consider and report on anti-competitive conditions.
TITLE II. - IMPLEMENTATION COSTS
(in millions of dollars)
FY 1978 FY 1979 FY 1980 FY 1981 FY 1982
Interior Dept:Budget Auth. - - - - -
outlays 32 85 53 15 15
CA,
: i.,.: . - - - -
f I LL ' .f -(
fý. ',( 'L : .r : 7,r "+", L, 4 '': 06 -' C',,. .f , f% 1X S+ , .h C .3 Y, FY
c s, r-.. r ,.: d ,.t t -t e, ar. t . )nu c, ' Ft: . :! .. ' e Lc-,: r., "c.. r: r, . ,. t h- a ' t pc s' F i• L:,,1 1t y t
:',+ ~ to tz"o.,,..c 7+e m '+. t. .:,,;= +",.'L t"t e E:'.. •t !: c s f r i. +, ,vm.ertatior-:':i~~~~~t7 F:, -++: .• S.if r.: c • .1: -.d 4;t 1, 4: 0-', ArC S'.Ib-
•'•rt+&. V( z.w• -t t. c ", t.,ie z..- r z. tf cfIf ice wý -th, nct:,.•:e"~~~~~~~~ rc,•' t:., -.,:• • .,l.," : ,:'.ce a .hor i-
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.(Lfe + r,. .+t ,.: :-. t + :r~r:: s -e Secrcta."y t=n lease+:.=.,c •r=e ++: :+.: • +,era e ;,•~z+¢:L• , r :.cw alternative
:.3:,:+;i nrc=:s *:er : tar ":e "•:@d;ticPa: cash bon.;sF, a Cn. "T'e :-,s!,.' s est'•.stvm c a ýreri.r --n front-end
:,+~t = :+ w ;:r .,ts ar Ir .eer v-'ar.;aae to the .-.aior oil1E ;7 n...[ &t¢ ne-V s;e r+t '+, . 5 . S sters, I, s'-ch as th)'e
w¢.-rK cmm~onit.. at.7. -:,• ".et r•f• sa '-:s s es are intended".: r~t•.T:e -;,•,e .'• r n :C-E dct.','t.ts an d _rc+vide a fai-r
zt*.:r. t:, *..rýe ,,-t !.nmt n t Tolti't n~ew IS tl;;e s 7^.:l have thet ! !.e'c"t "_ ! et : t a.- T ez.er&: .-e %tr,.-es at t.he ;,n iti at or. of-:!+e teeL . !,a9 •tk-,ý t , %%;. :'1 .r-.Cre ase r evenr6es down the road
:..=:• t~e•ro ,r .- r !.bst. S;.rzt t:e Qtelay'ed re-.e.-,e.:,u~e r.ov . tri, ;" e u ryit•'•er.s w,--: " v cc.r after FY IME,: : i, , : '., '+,'. ; h e a: - pe :,f t !... s c •i a a na:r. y s is . T: e
J.Z.P.z.' &t hitL:. an.• .ncess n.e -usrarfes a. ,s :esw..rd it,, tilze, the efr,.-w alternate
Secretary may use the royalty bidding system in any leasesale. However, to date, use of this system has been minimal.Under the mandated alternatives, the Secretary can requirefixed bonus, and royalty, net profit, or work commitment asthe bidding option. If we assume that the new systems willbe employed at the ceiling of 50%, and that the Secretarywould not have used a royalty bidding system without thismandate, it may result in a decrease of one-half for thebonus revenues of this portion of the leases.
Section 206 of the bill provides for the disposition ofrevenues. It requires that beginning in FY 1979, 20%, up toa maximum of $200,000,000, of all OCS rentals, royalties,revenues, or other sums deposited in the Treasury shall becredited to the Coastal Energy Imract Fund established bysection 308(h) of the Coastal Zone M1anagement Act of 1972.This provision would have no net budget impact, but wouldresult in a transfer of funds from the general Treasury to aspecific fund for a different budget function. As estimatedby the Congressional Budget Office, the budget impact ofsections 205 and 206 during fiscal years 1978-1982 follows:
(in millions of dollars)
FY 1978 FY 1979 FY 1980 FY 1981 FY 1982
Revision ofBidding andLeaseRevenue Loss 200 300 300 300 400
Disposition ofRevenuesRevenue Loss - 200 200 200 200
Revenue TransferCoastal EnergyImpact Fund - -200 -200 -200 -200
NET REVENUE -Lu 3 300 30 -0LOSS .....
Fishermen's Gear Compensation Fund
Section 210 of the bill adds a new section 30 to the OuterContinental Shelf Lands Act to provide for the establishmentin the Treasury of a Fishermen's Gear Compensation Fund tocompensate fishermen for damages to fishing gear, vessels,and economic losses caused by OCS activities. The totalamount of the fund is not to exceed $600,000.
24-066 0 - 78 w .18
588
Page Six
The Secretary of Interior is authorized to establish andmaintain area accounts for any area of the outer ContinentalShelf, not to exceed $100,000. The funds are to be suppor-ted by collection of fees from lessees or permittees not toexceed $5,000 per lease per year. Establishment of thefunds is discretionary with the Secretary. Thus, there maybe no budget impact.
Contingent Liability
Section 210 adds a new section 25 to the Outer Continental'Shelf Lands Act, dealing with OCS oil and gas developmentand production. This provision would impose a contingentliability upon the Federal Government if a lease were deniedunder certain circumstances. If a development plan weredisapproved by the Secretary of Interior because of "ex-ceptional geologic conditions in the lease area, exceptionalresource values in the marine or coastal environment, orother exceptional circumstances "and the proposed plan couldnot be modified satisfactorily, the lessee may reapply forapproval of the plan within a five-year period. Upon ex-piration of the five-year period, or sooner if requested bythe lessee, the Secretary may cancel the lease if he con-tinues to disapprove such plait. In this event, the lesseewould be entitled to claim for compensation under the Con-stitution and other laws. Because of the five-year reviewperiod provided in the section, the technical realities ofoffshore drilling, and substantial investments made afterobtaining a lease, it is highly improbable that any liabilityfor the Federal Government will result from this section inFY 1978 or FY 1979.
Title III
Title III establishes an Offshore Oil Pollution CompensationFund in the U.S. Treasury, at a minimum level of $100,000,000not to exceed $200,000,000, except to permit any moneysrecovered or collected on behalf of the fund to be paid intosuch fund. The fund is to be administered by the Secretaryof Transportation and the Secretary of the Treasury. Thefund is to be supported by a levy which may be modified, ofup to 3 cents per barrel on oil produced from the outerContinental Shelf. Section 313 authorizes for administra-tive costs $10,000,000 for FY 1979, and $5,000,000, eachfor the two succeeding fiscal years. The estimated costsand revenues associated with Title III, as provided by theCongressional Budget Office are summarized below:
(b) Est. receipts of fund less disbursements from fund
Title IV Amendments to the Coastal Zone Management Act
This title would amend the Coastal Zone Management Act of1972, by providing grants to coastal States for the purposeof ameliorating adverse impacts resulting from exploration,development or production of energy resources.
Section 402 of the bill would amend the Coastal Zone Manage-ment Act of 1972 to provide grants to affected coastalStates for the purpose of carrying out its responsibilitiesunder the Outer Continental Shelf Lands Act. The amount ofany such grant shall not exceed 801 of the cost of carryingout such responsibilities. For this purpose, $5 million isauthorized for each fiscal year 1979-1983 for Section 308(c)(2)grants. Outlays were estimated by the Congressional BudgetOffice on the basis of the similar ongoing program as follows:
(by fiscal years, in millions of dollars)
FY 1978 FY 1979 FY 1980 FY 1981 FY 1982
Auth. Level - 5 5 5 5Outlays - 2 5 5 5
Title V
Title V contains miscellaneous provisions which may notresult in any additional implementation costs.
Finally, it is the position of many Members of the Committeethat S. 9 will result in better coordination of OCS acti-vities and the avoidance of bureaucratic duplication.
590
Page Eight
This is particularly true in the area of environmental.andsafety regulations. However, improved coordination is mostdifficult to document and only through experience can suchdeterminations be made. It should also be noted that theimplementation estimates for early years will be higher thanlater years because of the initial start-up costs involved.
As Chairman of the Select OCS Comnittee, I request that theHouse Committee on the Budget include the amendments to theOuter Continental Shelf Lands Act in its consideration ofthe PY 1979 budget.
With kind regards, I remain,
Sincerely,
J JOHN M4. MURPHYV hairman
JMM: tg
ýAw 68 SECRET -, ..-=w"T "100l MI 0 " N al We a,0"N"1
1,411
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M m•Ub.Ma- U.S. HOUSE OF REPRESENTATIVESMA .Tw.NOW& 40 RMMANIENT SELECT COMMITTEE
WonPAin. e ON INTELLIGENCE
J" O m emWASHINGTON, D.C. mUS0
"ýN-e LAMnow Gomm March 14, 1978
The Honorable Robert N. GlaimoChairman, Committee on the BudgetU.S. House of RepresentativesWashington, D. C. 20515
Dear Mr. Chairman:
The attached classified report is submitted pursuant to Srtifon301 of the Congressional Budget Act of 1974 and H.Res. 658. Thisreport represents the House Permanent Select Committee on Intelligencerecomendations on the budget requirements for the U.S. NationalForeign Intelligence Program and Intelligence-Related Activities forFiscal Year 1979. The resources for these activities, although notidentified as such, will also be included in the reports you willreceive from certain of the standing committees.
The Program and Budget Authorization Subcommittee under theChairmanship of Congressman Bill D. Burlison has held more than 50hours of hearings on the FY 79 intelligence and intelligence-relatedbudget. They are not yet complete, but that number of hours shouldgive you an idea of the depth to which we are examining the budgetaryneeds of our intelligence and intelligence-related activities.
As you are aware, the last time the House addressed the questionof whether or not certain budget figures for the intelligence activi-ties of the U.S. Government should be made public, the House voted tokeep them classified. Pursuant to that decision, and in accordancewith H.Res. 658, the Comittee has classified the attached reportSECRET. Our Committee is instructed by H.Res. 658 to submit a recom-mendation whether to publish a total intelligence budget figure by theend of the 95th Congress and we have held hearings toward that end.In the meantime, I strongly urge that the Budget Committee treat theinformation as classified.
With every good wish, I am
IJpmi hlm al 0 -Plosurid*e docun.er,,' .'e, 4INCLASSIF1I' Chairman
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Honorable Parren MitchellChairmanHuman Resources Task ForceHouse Budget ComitteeWashington, DC 20515
Dear Parren:
In response to a request from your Full Committee Chairman,Bob Giamo, I would be pleased to participate on behalf of theHouse Aging Committee in the Congressional budget process.
Your Task Force's allowing me to testify on two issues ofprime concern to our committee, the need for specific budgetauthority for Medicare amendments to expand home health care,and the impact of the Administration's FY 1979 budget on theelderly would be greatly appreciated. I would only need tenminutes to address these issues. Perhaps such a brief timecould be set aside at your upcoming hearing on March 22, asI understand this will be the last hearing you plan to holdon any subject prior to Committee action on this year's budget.
First, the expansion of home health alternatives tonursing homes is one of the highest priorities of the AgingCommittee, which I have the privilege of serving as Chairman.
A recent report by the General Accc-inting Office, "HomeHealth -- The Need for a National Policy to Better Provide forthe Elderly," has provided specific estimates of the cost ofremoving a number of restrictions on home care utilizationunder Medicare. GAO has determined that elimination of thevisit limit, prior hospitalization, and homebound requirementsas well as the addition of homemaker-chore services could beaccomplished for a maximum of $192.5 million. Their reportconcludes that "the costs assocTiate with those changes wouldnot be prohibitive and could provide significdnt disincentivesto institutionalization." furthermore, in testimony beforeour Committee, GAO indicated that this amount does not includeoff-setting savings such as reduced expenditures for nursinghome care under the Medicdid program that would result fromexpanding home care.
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Honorable Parren MitchellPage 2March 14. 1978
Your Task Force's providing specific budget authority forlegislation to make these Medicare amendments (such as H.R.10738) would be a major element in a long overdue shift tomake non-institutional care more available and would be animportant step forward in reversing the current institutionalbias of federal health care programs. For example, in 1977.only four-tenths of 1 percent of the over $5 billion Medicaidspent for persons over 65 was for home health care, contrastedto 78 percent for care in nursing homes.
This custodial mentality ignores two basic facts: Firstof all, most elderly persons do not need to be in an institu-tions and very few want to leave their own homes, friends, andcommunities to go into an impersonal, regimented nursing home.Second, as the GAO report noted, "Until older people becomegreatly or extremely impaired, the cost of nursing home careexceeds the cost of home care."
Second, and at the same hearing, I would like the oppor-tunity to address the impact of the elderly on the budget. Asyou know, in testimony before the House Budget Committee, HEWSecretary Joseph Califano recently quoted estimates by the"National Journal" claiming that spending for the elderly nowcomprises one-third of the federal budget.
These figures were not only inflated, they were extremelymisleading. For example, Secretary Califano included in hisestimate $90.2 billion worth of social security payments. Yetthis ignores the fact that at least $20 billion out of thisamount goes to persons receiving survior, dependent, or retire-ment payments who are under 65.
Similarly his estimates include all federal payments forMedicare, Civil Service retirement, and military retirement.Yet, Medicare provides health care to the disabled of all agesand people can retire from the Civil Service at 55 or from themilitary at an average age of 45 after 20 years of service.Thus, an additional $20 billion-for these three programs wasinaccurately labeled by the Secretary as spending for theelderly.
Your Task Force's hearing our committee's views on thiscritical issue would allow an opportunity to set the recordstraight and examine the real impact of the elderly on thefederal budget.
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Honorable Parren MitchellPage 2March 14. 1978
My staff would be pleased to work closely with yours in
developing any additional needed information for such a hearing.
With warmest personal regards, and
Believe me,
Always sincerelys
SClaude Pepper
Chairman
CP:yrw
Enclosure
596
REPORT TO THE CONGRESS(EXCERPTS)
~ BY THE COMPTROLLER GENERALOF THE UNITED STATES
Home Health -- The Need For ANational Policy To BetterProvide For The ElderlyUntil older people become greatly or ex-tremely impaired, the cost of nursing homecare exceeds the cost of home care includingthe value of the general support services pro-vided by family and friends. However, for thegreatly or extremely impaired, the value ofservices provided by family and friends be.comes a dominant factor in their care andwell-being. Thus, those greatly or extremelyimpaired elderly who live alone are the mostlikely to become institutionalized. The Con.greos should consider focusing the jobs to becreated to assist the sick and elderly under thePresident's welfare reform proposal to thoseelderly who live alone and are without familysupport.
Because the States and HEW are experiencingconsiderable difficulty in coordinating themany Federal programs which offer homehealth benefits, HEW should develop for theCongress consideration a comprehensive na-tional policy for the delivery of home healthservices.
DECEMBER 30, 1977HRD.7819.1
L597
COMPTROLLER GENERAL'S HOME HEALTH--THE NEED FOR AREPORT TO THE CONGRESS NATIONAL POLICY TO BETTER
PROVIDE FOR THE ELDERLY
DIG 1 ST
The Department of Health# Education# and Wel-fare (HEW) administers the principal Federal pro-grams which provide home health care. Themain home health care programs that are medi-cally oriented are Medicare and Medicaid.HEW is also responsible for administeringvarious home care or in-home service pro-grams which are authorized under the SocialSecurity Act and the Older Americans Act.
HOME SERVICES COMPARED TOINSTITUTIONAL! ZATIONUntil older people become greatly or extremelyimpaired, the cost for home services, includ-ing the large portion provided by families andfriends, is less than the cost of puttingthese people in institutions. To put thesesame people in public institutions would costthe public more because public agencies arespending fewer dollars per person than arespent for institutional care. About 17 per-cent of those 65 years or over fall withinthe greatly or extremely impaired categoryand about one-third of them are in institutions.(See p. 20.) For them the value of supportiveservices provided by families and friends be-comes so high that home care costs more thanthat provided by institutions.
As one becomes more impaired, the costs or valuesof home services increase and the proportion ofcare provided by families and friends alsoincreases. At the "greatly impaired" levelwhere the breakeven point in cost is reached,families and friends are providing over 70percent of the value of services received byolder people. Families and friends are pro-viding about $287 per month in services forevery $120 being spent by agencies. (See p.18.)
At all levels of impairment the value ofservices provided by families and friends is
Tear She&. Upon removal, the reportCover date should be noted hereon. i HRD-78-19
598
significantly higher than public agency costs.(See p. 16.) Older people who are greatly orextremely impaired and live alone have a highprobability of institutionalization. Whereasthose living with spouses or children do not.Thirty-one percent of those older people whoare the greatly impaired or worse live alone.Of these people, 76 percent enter institutions.(See p. 20.)
The President's August 1977 welfare reformpackage includes a proposal for creating200,000 public service jobs for providinghome services for the elderly. These jobscould reduce welfare costs. If these jobswere focused toward meeting the needs ofthose elderly and sick who do not have sup-portive services of families and friends,the proposal could be a strong potential forproviding an alternative to being placed inan institution.
COST IMPACT OF MAKING CHANGESTO HOME HEALTH PROGRAMS
Social Security Administration actuariesestimated the cost impact of proposed changesliberalizing the home health benefits underMedicare, such as eliminating the requirementthat beneficiaries be confined to their homesand be in need of skilled care, limitationson the number of home visits, and the additionof homemaker services in fiscal year 1978.
In GAO's view, except for the removal of theskilled care requirement, the costs associatedwith these changes would not be prohibitiveand could provide disincentives to institu-tionalization. In fact, a bill approved by theHouse of Representatives in September 1977 toencourage the use of less costly home dialysisfor Medicare beneficiaries with kidney failurewould eliminate the homebound requirement forone class of Medicare beneficiaries. (See p.28.)
ACTIONS TAKEN ON GAORECOMMENDATIONS
Most of the problems noted in GAO's 1974report, *Home Health Care Benefits Under Medi-care and Medicaid" have been alleviated by the
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implementation of various provisions of the1972 Amendments to the Social Security Act,and by better provider understanding, gainedthrough experience, of Medicare's home healthcare requirements. (See p. 32.) However, offi-cials of Federal, State, and private agenciesstated that many physicians were unaware ofthe types of services being provided by homehealth agencies. (See p. 36.) States stillhave different requirements concerning thenumber of visits allowed under Medicaid.Florida has given unequal treatment to certainMedicaid recipients also eligible for Medicarecoverage, which is contrary to HEW regulationsand the State's approved Medicaid elan. (See p.39.)
DIFFICULTIES IN COORDINATION
Under current legislation the various Federalhome health programs defy coordination accordingto HEW. (See p. 50.) An overall Federal policyfor home health care would have to be developedand legislative changes enacted before theprograms could be consolidated.
The Administration on Aging is the designatedfocal point within the Federal Government inmatters pertaining to problems of aged andaging. Additionally, the Public Health Serv-ice has responsibility for coordinatingHEW's short-term initiatives to improve homehealth care. However, a working agreementbetween the two agencies has not resulted ineffective coordination. (See p. 49.)
State and local officials acknowledge thathome health care and other related home de-livered services for the elderly are not beingeffectively coordinated. They generally agreedthat there is such a vast number of servicesavailable through so many different programsthat effective coordination and deliveryof all home health care is difficult. (Seep. 51.)
Although interagency or intra-aqency agreementsbetween State and local agencies exist, theyhave not provided coordinated services to thebeneficiaries. (See p. 50.)
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One study prepared by the Health SystemsAgency of South Florida concluded that bettercoordination is needed. The study in partindicated that
-- there is no unified system providing anintegrated comprehensive and coordinatedpackage of health related and supportiveservices in the home,
-- existing programs providing services in thehome result in fragmented provision ofservices at the local level, and
-- the lack of a local coordinated mechanismamong providers of health related and sup-portive social services in the home and be-tween providers of health services createscommunity problems. (See o. 50.)
RECOMMENDATIONS
HEW should:
-- Have intermediaries and carriers publicizethe use of home health care and provideinformation concerning the availability ofhome health services to physicians andinstitutional providers. (See p. 44.)
-- Identify State Medicaid programs which donot provide equal treatment to eligibleindividuals and take steps to correct suchinequities. (See p. 44.)
-- Develop a comprehensive national home healthpolicy for consideration by the Congress.(See p. 54.)
The Congress, in deliberations on the Adminis-tration's welfare reform proposal should con-sider focusing the jobs created to assist thesick and elderly to those elderly who livealone and are without family support. (Seep. 22.)
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CHAPTER 3
COST IMPACT OF MAKING CHANGES TO HOME
HEALTH CARE PROGRAMS UNDER MEDICARE AND MEDICAID
The Subcommittee asked for information and our evaluationon the cost impact of possible changes to the Medicare andMedicaid programs which would increase the availability ofservices and provide services not currently covered by theprograms.
We asked HEW to provide the estimated costs for the pro-posed changes. For one proposed change that would affectMedicaid--the addition of homemaker services--HEW advised usthat it was conducting a number of experiments to determineif homemaker services could be a cost-effective substitutefor skilled care. HEW personnel stated that until the studieswere completed, they could not estimate the cost of addinghomemaker services to Medicaid.
Mandatory home health care benefits for all Medicaideligibles is the other proposed change. Home health care tothe medically needy is technically not a requirement underthe law, but it is provided in 32 States and jurisdictionsthat have a medically needy program; therefore, the cost ofthis proposed change would be minimal.
SSA actuaries estimated that for fiscal year 1978, theadditional costs for each of the proposed changes to Medicare,computed separately, would be as follows:
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Estimated costProposedchante of changes. ....... ('•in-1 i6nijF--
Elimination of:
Limits on number of visits underparts A and B $ 12.5
Skilled care requirement underparts A and B 1,250.0
Prior hospitalization requirementunder part A 12.5
Homebound requirement under partsA and B 92.5
Adding homemaker/chore services 75.0
The above amounts should not be totaled because if morethan one limitation were removed, there would be interactions.For example, the estimated $1,250 million for eliminatinq theskilled care requirement does not include the 1 million per-sons who consider themselves homebound and in need of homeservices, but not necessarily skilled care. Most of theseare eligible for Medicare and are suitable recipients forhomemaker services. The cost of providing this service couldresult in expenditures of $2 to $3 billion if the skilledcare requirement was eliminated and homemaker service wasadded.
A discussion of each of the proposed changes is presentedbelow.
LIMIT ON NUMBER OF VISITS
For Medicare, a beneficiary is eligible for 100 visitsper spell of illness a year following a qualifying inpatientstay under part A and 100 visits per calendar year under partB.
SSA actuaries estimated additional costs of about $12.5million for an additional 300,000 visits for fiscal year 1978if these visit limitations were removed--a 2-percent incLeasein home health benefits costs. This assumes that about 3,000people would exhaust part B benefits and use an additional100 visits a year.
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According to SSA data, few beneficiaries exhaust thepresently allowed number of Medicare home health care visits.This data showed that, as of January 21, 1977, of the 553,941people who received home health care under part A, 11,849 orabout 2 percent exhausted their benefits. For persons receiv-ing part B home health care during the last 3 years, benefitswere used as follows:
Number of Number ofpeople who people who
Year received benefits exhausted benefits
1974 108,460 2,117
1975 165,354 3,118
a/1976 176,392 1,916
a/SSA considered the data for 1976 incomplete.
SSA could not provide information on the number of people whohad exhausted both patts A and B benefits.
Because about 97 percent of part A Medicare beneficiarieshave part B coverage, we assume that most people who exhaustedpart A benefits continued to receive services under part B.Thus, very few people (about 3,000) exhaust all availablehome health benefits under Medicare.
We contacted 36 individuals who exhausted their part Bbenefits during 1976, or the agencies providing services tothem, to find out if they had incurred additional expensesafter their Medicare benefits had been exhausted. Thirty-five continued to receive home health services and one wasinstitutionalized to receive physical therapy treatment underMedicare. The additional home health expenses, which rangedfrom $5.00 per visit in Cleveland to an average of about$33.00 per visit in Jacksonville, Florida, were paid fromcommunity funds, absorbed by the local agency, paid partlyby the individual, or paid by Medicaid. Only three individ-uals were able to pay a portion of their costs for the addi-tional benefits received.
Data on the number of additional visits received by all35 individuals was not available. However, 13 individualsreceived, on the average, an additional 61 visits during 1976which indicates to us that the assumption that individualsexhausting benefits would use an additional 100 per year maybe a little high.
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24.066 0 * 78 - 39
604
REMOVING THE REQUIREMENT THATBENEFICTUIARIE NEED SKILLED CARE
A beneficiary who needs intermittent skilled nursingcare, or physical or speech therapy, and who meets certainother conditions, can also receive a variety of additional.services, including home health aides, occupational therapists,and medical social workers, as well as coverage of medicalappliances and supplies.
SSA actuaries estimate an increased cost of $1,250 mil-lion ($938 million for part A and $312 million in part B) infiscal year 1978 if only the skilled care requirement wereremoved.
The estimate of $1,250 million as a first year costassumes that only care by currently approved home healthagencies is reimbursed. It was also assumed, Medicare pays40 percent of the cost of approved home health agencies.Almost all services are provided to Medicare eligibles. Ifno expansion of providers occurred, the increased servicesalone would cost $842 million. The remaining $P08 millionwould allow for a 50-percent increase in the current level ofstaffing.
ELIMINATION OF PRIORHOSPITALIZATI•- REQUIREMENT
To receive home health benefits under part A, a benefi-ciary has to be an inpatient in a hospital for at least 3 con-secutive days (not counting the day of discharge). An SSAactuary estimated the elimination of this requirement alonewould cost about $12.5 million in fiscal year 1978. The esti-mate also considered that this elimination would remove therequirement that treatment received by beneficiaries berelated to a post hospital or skilled nursing facility stay.
About $6.2 million of the estimated increased cost wouldbe expected to result because 1.1 million part A beneficiarieswho have not purchased part B coverage would have access tohome health coverage under part A without being hospitalized.
However, because home health care is limited to individualsunder the care of a physician whose services are covered underpart B--access to home health services under part A (withor without the prior hospitalization requirement) without partB coverage seems to us to be of limited- value.
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The remaining increased costs would result because non-hospitalized beneficiaries entitled to both parts A and Bwould have 200 visits per year instead of 100. The dataavailable does not allow for a very precise determinationof the cost of this effect but it is estimated to be $6.3million.
Because the entire part A benefit structure is builtaround a benefit period which can only start when a personis hospitalized, this estimate also assumes that the part Alimits without prior hospitalization would be 100 visits ayear instead of 100 visits a year after the beginning of onebenefit period and before the beginning of the next.
We believe that individuals are not encouraged, underpresent law, to be hospitalized in order to qualify for homehealth benefits. While HEW has not specifically studied this,SSA did make studies in 1968, 1970, and 1973 to find out ifthe 3-day hospitalization requirement had caused additionaluse of hospital admissions merely to provide coverage forskilled nursing facility stays. These studies showed noevidence of any general practice of the use of inpatienthospital stays to qualify patients for skilled nursing bene-fits.
Also, about 97 percent of Medicare beneficiaries arecovered by part B which provides home health benefits with noprior hospitalization requirement. Unless part B benefitsare exhausted (which is rare), an individual is not encour-aged to seek a hospital admission to qualify for home healthcare under part A because the part A inpatient hospitaldeductible is twice as high as the part B deductible.
ELIMINATION OF THE HOMEBUJNLD REQUIREMENT
To be eligible for '%come health care, a physician mustcertify that the p,:tient is confined to his or her home.A homebound person is permitted infrequent or brief absences.
SSA's actuaries estimated that the removal of the home-bound requirement would expand benefits to a new category ofpatients and cost about $92.5 million in fiscal year 1978 ifall other requirements remained unchanged. This would repre-sent a 17 percent increase in the cost of home health benefits.
HEW officials said they believed the primary reason peo-ple want the homebound requirement eliminated is to coverhome dialysis for beneficiaries with kidney failures. Ofthe $92.5 million, about $36 million would apply to people
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receiving home dialysis but who are not homebound. Accordingto the SSA actuary, approximately 9,500 people, each of whomdialysizes about 150 times a year, could use a home healthaide to assist in the time-consuming process. 1/ The estimateassumes that an average visit (about $37) woul( be reimbursedand that each patient would use the 100 visits maximum.
The remaining $56.5 million would allow for home healthservices to those individuals who are in need of skilled carebut are currently not homebound. SSA's actuary estimated thatabout 10 percent of Medicare beneficiaries would benefit fromthis change. The estimate, however, did not consider whetherindividuals in need of skilled care were receiving it fromanother source. For example, receiving skilled care on anambulatory basis, in a doctor's office, or in a health clinic.
On September 12, 1977, the House of Representativespassed a bill (H.R. 8423) to make improvements in theend stage renal disease program. One objective of the billis to provide incentives for the use of lower cost, medicallyappropriate self-dialysis (particularly home dialysis) as analternative to high cost institutional dialysis. The Waysand Means Committee report (Report No. 95-549 dated July 29,1977), noted that the annual cost of facility dialysis (rang-ing from $15,000 to $30,000) was generally twice the annualcost of home dialysis (ranging from $8,000 to $12,000). Butthe percent of patients on home dialysis had declined steadilysince Medicare had started providing universal coverage forsuch services. To provide incentives for home dialysis,the bill would provide coverage for periodic home dialysissupport services including visits by a qualified provider.The bill would also provide for the implementation of anincentive reimbursement system with respect to the paymentfor the dialysis of patients dialyzing at home under thesupervision of a dialysis facility. Under the bill, HEWwould be authorized to, on the basis of a target reimburse-ment rate, for home dialysis and all necessary home dialysismedical supplies, equipment, and supportive services--includ-ing the services of qualified home dialysis aides. We couldfind nothing in the bill which would require renal diseasebeneficiaries to be "homebound" to receive such benefits.Thus, for about 40 percent of the $92.5 million in addi-tional cost of eliminating the homebound requirement, thereis House approved legislation which would eliminate or
1/Other HEWdata showed that as of June 1977 about 5,000people were on home dialysis.
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significantly dilute the homebound requirement and wouldreduce costs for a specific class of Medicare beneficiaries.!/In this connection, the House Ways and Means Committee reporton the bill (H.R. 8423) also stated that HEW had informed theCommittee that it "anticipates that the accrued savings thatwill be realized as a result of increased dialysis in thehome setting will offset the cost of incentives included inthe bill."
We believe that a similar argument to provide disincen-tives for institutionalization could be made for the Medicarebeneficiaries requiring skilled care, but who are not "home-bound" and, thus, are ineligible for home health services underMedicare. This assumes that the difficulties in obtainingtreatment on an ambulatory basis makes the alternative ofinstitutionalization more appealing.
ADDITION OF HOMEMAKER SERVICES
HEW is currently conducting experiments to determine thecost effectiveness of providing homemaker services (see app.III), and until these experiments are completed we weretold that it would be difficult to accurately determine thecost of adding homemaker services, particularly with respectto Medicaid.
For Medicare, SSA's actuaries said that assuming anindividual is homebound, in need of skilled care, and thathomemaker services are provided only while skilled care wasrequired, additional homemaker services would cost Medicare$75 million in fiscal year 1978. According to SSA's actuary,the homemaker benefits currently perceived are very restric-tive and a broader definition would result in higher costs.SSA's actuary estimated that about 50 percent of those receiv-ing skilled care would be eligible for homemaker services.
We obtained the following data on the cost of homemaker/chore services from State officials in California and Georgia.
California provides homemaker/chore services through itstitle XX program. In its plan the State estimated that about
1/The bill would not amend the part B home health benefit assuch. Thus the 20 percent coinsurance charge would beapplicable to these proposed new benefits whereas nocoinsurance charge would continue to apply to the regularpart B home health benefit.
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113,000 aged, blind, and disabled individuals would benefitfrom the program during the period July 1, 1976, throughJune 30, 1977. The State estimated the Federal and Statecosts for homemaker/chore services in California would be $80million. The State did not estimate any savings on insti-tutionalization resulting from benefits provided under theprogram.
Georgia's title XX administration is currently evaluat-ing the use and measuring the effectiveness of homemaker/chore services as an alternative to institutional care forthe aged, blind or disabled, and mentally retarded adults whoare eligible for title XX benefits. An interim report fromGeorgia's homemaker demonstration project indicates it waspreventing institutionalization and reducing.overall healthcare costs. The report showed that during the first 3 monthsof the project, homemaker services prevented over 2,300 monthsof institutional care and saved $278,231. The project's 60homemakers--at a cost of $456,471--enabled more than 900 peo-ple to stay home avoiding 851 months of foster care, 1,246months of intermediate nursing care, 170 months of skillednursing care, and 114 months of other placements, such asmental institutions all of which would have cost about$735,000.
We did not validate the data supporting this report, butit tends to support the findings in our Cleveland study (dis-cussed in the previous chapter) to the effect that greatly orextremely impaired people require more than nursing servicesto be maintained in their homes.
ADDITION OF HOME HEALTH CARE BENEFITSUNDER MEDICAID AS A REQUIRED SERVICE-
Federal law and HEW regulations require that home healthcare benefits be provided to all aged, blind, and disabledcategorically needy individuals 21 years of age and older.Home health care benefits to the medically needy is techni-cally not a required service under the law. However, 32States and jurisdictions covering the medically needy arealready offering this service--thus, we assume that the costof this change would be minimal.
CONCLUSIONS
In summary, we believe that the elimination of the limi-tation on the number of visits under Medicare would not becostly because few people presently exhaust such benefits.The elimination of the prior hospitalization requirement alsowould not be costly, but the use of institutional services
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would be slightly affected because individuals are not encour-aged to be hospitalized for such benefits, and most Medicarebeneficiaries are already eligible (under part B) to receivesuch benefits without hospitalization.
The Congress is currently considering the eliminationof the homebound requirement in pending legislation for onegroup of Medicare beneficiaries (those with end stage renaldisease) as an incentive for less costly home dialysis inlieu of center or inpatient dialysis. We believe that theelimination of this requirement for all beneficiaries requir-ing skilled care could well provide similar disincentivesto institutionalization.
Although experiments in the program are still continuing,some evidence shows that the addition of homemaker/chore serv-ices could provide disincentives to institutionalization forindividuals who are greatly or extremely impaired which mighthelp to offset the additional cost of this service.
The elimination of the Medicare's skilled care require-ment would substantially affect the cost and the acute careorientation of the program.
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HOME HEALTH RESOLUTION
OFFERED BY CONGRESSMAN PEPPER
(APPROVED BY FULL SELECT COMMITTEE ON AGING BY UNANIMOUS VOICE VOTE ON FEBRUARY 2, 1973)
BACKGROUND
In August 1976, the Select Committee on Aging requested theU.S. General Accounting Office to examine and report on federallyfunded home health programs, especially as to the costs of in-homecare compared to institutional care.
On December 30, 1977, the General Accounting Office transmittedto Chairman Pepper its report, titled "Home Health--The Need For ANational Policy to Better Provide For The Elderly." The reportdocumented the fact that for the vast majority of older people, thecost for home services is less than the cost of placing these personsin institutions. GAO also concluded that several changes in theMedicare law governing home health services could improve the avail-ability of those services as a disincentive to institutionalizationin nursing homes and hospitals, without prohibitive increases incosts.
In addition, the report noted that at least eight federalprograms exist under which home health services are available, andthat there is no national policy to address this uncoordinated mazeof programs.
In approving its 1975i report, "New Perspectives in Health CareFor Older Americans," the Select Committee on Aging recommended thatspecific steps be taken to widen the availability of federally fundedhome health services, and of information about those services.
RESOLUTION0
BE IT RESOLVED,
That the Select Committee on Aging, in view of the con-clusions and recommendations of the Decenber 30, 1977 GAO reporttitled "Home Health--The Need For. A National Policy To BetterProvide For The Elderly" --
-- reiterates its support for expansion of home health benefitsunder Medicare as an alternative to institutionalization and forimproved information about home health programs through a nationalclearinghouse for such information; and
-- calls on the Courittees on ..dys and Neans arid Interstate andForeign Conunerce to consider legislation addressing these goals asquickly as possible during the 95th Congcess.
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FY 1979 APPROPRIATIONS RESOLUTION
APPROVED BY UNANIMOUS VOTE OF THE SELECT COMMITTEE ON AGINGThursday, February 2, 1978
BACKGROUND
Through hearings, workshops and other methods of inquiry, theSelect Committee on Aging has documented a massive need for improvementsin the level of resources committed to bettering the lives of America's23 million senior citizens. Members of the Committee were very active,during the 1978 budget process, securing increases in federal programsserving the elderly amounting to some $93 million over the Administration'srequest.
The FY 1979 budget request submitted January 23 by President Cartercalls for no expansion in any of the major programs serving the elderly.In fact, budget requests for the Older Americans Act, Senior Opportunitiesand Services, home health demonstrations and others are at the same levelas Congress actually appropriated for FY 1978. Because these requests donot reflect an inflation factor, the amount of funds which would be availableunder President Carter's budget would actually be less than appropriatedlast year.
In one instance, ACTION'S Retired Senior Volunteer Program (RSVP),the Administration actually proposed a 24% reduction from $20.1 millionto $15.4 million. RSVP is an important tool both for communities Inmeeting basic human needs and for older citizens to become involved in theircommunity activities. Federal funds in this program are used primarilyfor administrative costs since volunteers do not receive stipends. Accordingto ACTION'S budget statement, RSVP has been their least costly volunteerprogram. ACTION acknowledges that the proposed budget cut will reduce thenumber of RSVP volunteers from 250,000 to 220,000.
RESOLUTION
BE IT RESOLVED,
That the Select Committee on Aging
-- believes that the current level of appropriations for programsaiding senior citizens is not adequate to meet the existing need for services;
-- opposes cuts in major federal programs providing services forolder Americans, and stresses that the 1979 appropriation for these programsshould, at an absolute minimum, be increased to compensate for inflation;
-- concludes that, for several specific programs, substantialincreases in the FT 1979 appropriations will be required to help bring theseprograms closer to the need for assistance they provide;
-- calls on the Appropriations and Budget Committees to act onFY 1979 budget resolutions and appropriations bills to provide increasedsupport for programs for senior citizens.
-- calls on the Education and Labor Committee to approve authorizationlevels which would more adequately meet the needs of our elderly population.
'I
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March 15, 1978
The iHonorable Robert N. GiaimoChairmanCommittee on the BudgetU.S. House of RepresentativesWashington, D.C. 20515
Dear Que--LCbimaui:
In response to your letter of February 9, I am pleasedto submit, on behalf of the Select Committee on Population,recommendations regarding Fiscal Year 1979 funding levels forpopulation-related Federal programs. The Select Committee hasmet and approved the enclosed recommendations.
As you know, the Select Committee on Population wasestablished by the House in September of 1977. On October 14,the Speaker appointed sixteen Members to serve on the SelectCommittee. All of the Select Committee "Iembers were drawnfrom standing committees and subcommittees having population-relevant legislative jurisdiction. In addition, the Speakerappointed me Chairman of the Select Committee.
The Select Committee on Population has no legislativemandate; nor do we seek one. Rather, our goal is to conductstudies and investigations which will assist the standingcommittees and subcommittees and be supportive of their legis-lative jurisdiction.
In this connection, the Select Committee Members andstaff have organized themselves into four Task Forces. TheseTask Forces and their subject matter areas are:
Task Force I - Domestic Fertility andContraception
Task Force II - Immigration
(618)
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The tionorable Robert N. Giaimo-2-March 15, 1978
Task Force III - Population and Develop-ment Assistance
Task Force IV - Economic, Political, andSocial Consequences ofChanging U.S. Popula-tion Size and Structure
As of this date. we have completed one week of generalOverview hearings, and three weeks (nine days) of Task ForceI hearings. Our Task Forces II through IV have scheduled atotal of seven weeks of hearings, which will be conductedbetween the beginning of April and mid-June of this year.
The Select Committee has not yet conducted in-depthexaminations of immigration, population and developmentassistance, and the economic, political, and social conse-qucnces of changes in U.S. population. Ifence, the enclosedreconmendations focus, for the most part, on Federal programsrelated to domestic family planning services, research, andtraining; contraceptive research and development; population,family life, family planning, and contraceptive informationand education: and allocations of immigration research funds.
Next year, following completion of our investigationsinto immigration, population and development assistance, andthe consequences of changes in U.S. population, the SelectCommittee expects to be able to provide more comprehensiverecommendations regarding funding levels for Federal programsin these areas.
Because the Select Committee on Population has nolegislative authority, the enclosed recommendations will beformally submitted to the appropriate standing committeesand subcoi;oittees of the House. We are forwarding them toyou at this time because we understand that the Committee onthe Budget must have notice, by March 15, of any fundingrecommendations we plan to make.
616
The i•onorable flobert 1'. Giaimo-3-March 15, 1978
Let me take this opportunity t.) express my appre-ciation, and that of the entire Select Conunittee. for theopportunity to submit our suggestions and proposals aspart of the House budget process.
With every warm best wish,
Yours,
James 1i. ScheuerChairman
JIHS:mpEnclosures
I. President's Budget Requests for Existing Programs which Require Authorizing Legisiation Prior tothe Enactment of Appropriations for FY 1979
(iln millions of dollars)
Major Issue or Program
Public Health Service Act(Title X)
-Family Planning Servicesand Research
-Training
-Information and Education
President's Request
141.4
3.0
0.6
Select Committee Recommendation
214.3(+72.9)
4.0(+1.0)
0.7(+0.1)
Comment
See Justification No. 1
The Comnittee recommends in-crease in funding for trainingof family planning personnel.This money is especially criti-cal for the training of para-medical personnel. The train-ing of nonphysician healthworkers would greatly expandthe capacity, and lower thecost, of delivering familyplanning services.
The Administration is proposingthat $.6 million be spent forinformation and education inFY 1979; however, this amountis identical with the fundsappropriated in FY 1978. TheSelect Committee recommends thatfunds for information an4 educa-tion be increased to $.7 millionto compensate for the 6 percentinflation rate plus extra fundsto expand contraceptive informa-tion campaigns aimed at adoles-cents.
0
0
-2-
(in millions of dollars)Major Issue or Program President's Request Select Committee Recommendation Comment
- Community Health Education 3.0 10.0 Increase funds to develop pilot(+7.0) programs in family life educa-
tion at community level.
- Population Research
- Total 82.3 110.3 - See explanation below:(+28.0)
(+10.0) - Increase grant funds forfundamental research in humanreproduction and population socialservices.
(+5.0) - Establish new grant supportedclinical research centers (7)to uork in close association withthe goal directed programs of theCenter for Population Research andthe Center for Research for Mothersand Children.
(+3.0) - Expand programs for support ofbiomedical and social science re-search on the health of women.
(+4.0) - Expand program in contraceptivedevelopment, Including clinicaltrials on new drugs, devices andmethods.
(+4.0) - Expand program in contraceptivesafety, including clinical trialson newly developed contraceptives,as well as those currently in use,and including research on safetyof use of oral contraceptives byadolescents.
-3-
(in millions of dollars)
Major Issue or Program President's Request Select Committee Recommendation
- Establish 70 new employment ceil-ing positions for NICHD (50 intra-mural, 20 extramural and programdirection) and provide new equip-ment for expanded intramural re-search facilities.
Foreign Assistance (AID)Authorization
- Population Planning
- World Health Organiza-tion bio-medical re-search program
- AID bio-medical re-search program
- Information, Education,Communications; andTraining and InstitutionalDevelopment
205.4 220(+14.6)
5(+5.0)
19.8(+5.0)
24.3(+4.6)
14.8
19.7
00See JustificationNo. 2
See JustificationNo. 3
See JustificationNo. 4
See JustificationNo. 5
(+2.0)
Comment
619
JUSTIFICATION NO. 1
TITLE X FUNDS FOR FAMILY PLANNING SERVICES
The current authority for single project grant
and contracts to public and private nonprofit agencies
providing family planning services for FY 1978 is $131.4
million. The appropriations needed for FY 1979 to com-
pensate for 6 percent inflation would be $139.28 million.
The Administration is proposing that $141.4 million be
appropriated for services in FY 1979. However, this mini-
mal increase does not begin to alleviate the problem of
need for more than 2 million low and marginal income women
and sexually active adolescents.
The Select Committ(e on Population recommends that
$214..; million be appropriated for Title X funding for
Family Planning Services and Research. This amount allows
for a 6 percent inflation growth plus an additional $35
million, which would enable 500,000 new patients to be
served. The legislation also authorizes two additional
project grant and contract programs: $35 million to
enable voluntary family plannizig projects to provide to
an additional 500,000 young people "comprehensive services
appropriate to the needs of teenagers who are at risk of
unwanted pregnancy" (of whom there are approximately 4
million teenage girls); and $5 million for demonstration
projects aimed toward the alleviation of problems in in-
fertility.
JUSTIFICATION NO. 2
FOREIGN ASSISTANCE (AID) AUTHORIZATION
AID originally requested $236 million for population
assistance FY 1979. This figure was cut by AID administra-
tive staff to $216 million and further cut by OIB to $205
million. The Select Committee recommends that the AID bud-
get for population planning be restored to $220 million.
24-066 0 - 78 - 40
620
JUSTIFICATION NO. 3
WORLD HEALTH ORGANIZATION
The recent hearings on domestic contraceptive
research held by the Select Committee on Population
concluded that the U.S. government should support
WHO's bio-medical research program (i.e. on contra-
ceptive research). Witnesses felt that the best
avenue for support was through AID. However, it
should be noted that direct support for WHO will
start a precedent, as the current policy (or prac-
tice) is to use UNFPA as the conduit for supportfor WHO and any other UN population related activi-
ties.
JUSTIFICATION NO. 4
AID Bio-medical Research Program
The recent hearings on domestic contraceptive
research held by the Select Committee on Population
concluded that more work must be done on contracep-
tive development and contraceptive safety studies.Witnesses felt that the best avenue for support was
through AID.
JUSTIFICATION NO. 5
INFORMATION, EDUCATION, COMMUNICATIONS; AND TRAINING,
AND INSTITUTIONAL DEVELOPMENT
The Select Committee recommends that an Ldditional
$9.2 million dollars be provided for Information, Educa-
tion, and Communication Programs; and Training and Insti-tutional Development. Special emphasis should be placed
on use and training of paramedical personnel.
IV. LEGISLATIVE INITIATIVES OF CONGRESS FOR FISCAL YEAR 1979(in millions of dollars)
Fiscal Year1979 1980 1981 1982 1983
Population Education Act
Evaluation of Family LifeEducation Programs
6.0 15.0 25.0 35.0 40.0
.5 1.0 1.5
The Select Committee plans torecommend that the Elementary andSecondary Education Act be amendedto provide funds to support popula-tion education activities in ele-mentary and secondary schools. Thisprogram would be carried out by theOffice of Education
The Select Committee plans torecommend that the Elementary andSecondary Education Act be amendedto provide for a three-year programfor evaluation of ongoing family lifeeducation programs. This evaluationwould be carried out by the Officeof Education.
Initiative Comment
V. President's Budget Requests for Existing Programs Which Do Not Require Aut'iorizing Legislation Prior to
the Enactment of Appropriations for FY 1979
(in millions of dollars)
Major Issue or Prograr
Public Health Service Act
- National Institute ofChild Health and HumanDevelopment(Title IV, Section 441)
President's Request
198.931
Select Committee Recommendation
248.931(+50.0)
(+50.0)
(+3.0)
(+2.0)
Comment
See explanations of proposedincreases below:
Establish new grant supportedclinical research centers (7)to work in close associationwith the goal directed pro-grams of the Center for Popu-lation Research and the Centerfor Research for Mothers andChildren
Expand programs for supportof biomedical and socialscience-research on the healthof women.
Establish 70 new employmentceiling positions for the NICHD(50 Intramural and 20 extra-mural and program direction)and provide new equipment forexpanded intramural researchactivities.
Page Two
Major Issue or Program President's Request Select Committee Recommendation Comment
(+3.0)
(+37.0)National Institutes ofHealth, General Build-ings and FacilitiesAppropriation (Title III, Section 301)
Immigration Research (not available) up to 10.0
Expand pre - and post - doctoraltraining in reproductive biologyand developmental biology.
Provide funds for contruction ofa new intramural research facilityfor NICHD.
The Select Comnittee recommends thatup to 10 million be earmarked forinitiation of research into imi-gration flows into the U.S., and thedevelopment of accurate data on legaland illegal immigrants. These fundswould be allocated among the JusticeDepartment, Immigration and Natura-lization Service; the Labor Depart-ment; the Agency for InternationalDevelopment, Office for PopulationResearch; the National Institute forChild Health and Human Development;and the Bureau of the Census.
C.3
REPORT
of the
JOINT ECONOMIC COMMITTEECONGRESS OF THE UNITED STATES
to the
COMMITTEES ON THE BUDGET
together with
MINORITY AND ADDITIONAL VIEWS
(w5p
626
I. INTRODUCTION
The U.S. economy made substantial progressin 1977. Unemployment for the year fell to 7percent and dropped at year end to 6.4percent. The number of employed peopleincreased by more than 4 million. Real grossnational product (GNP) grew about 5 percent,while gross private domestic investment roseabout 13 percent in real terms. Profitsimproved substantially.
Although these developments are gratifying,we cannot forget that the Nation has still notfully recovered from the worst recession sincethe Great Depression. The national economyhas come only about 60 percent of the way backto full employment. The capacity utilizationrate is 83 percent, several percent below thedesirable level, and unemployment is stillabove 6 percent. Inflation continues to be astubborn problem; the increase in consumerprices of 6.8 percent is much too high, andthe productivity increase of 2.4 percent forthe year is not reassuring.
Our overall progress should not conceal theserious situation of certain groups andcertain sectors of our economy. Theunemployment rate for blacks and for blackteenagers is far above the average. In theabsence of specific structural programsunemployment for minorities can be expected toremain chronic and severe. In many casesstructural unemployment has been exacerbatedby serious urban problems. Many centralcities have not recovered from the recentrecession. Public services have been .educed,local - taxes are high, and urbaninfrastructures are deteriorating. Ournational transportation system is deficient.An energy program is urgently needed. Certain
Employment - UnemploymentMILLIONS OF PERSONS (16 and Older)intn
I I I I III I I I I
1975
Civilwan Labor Force
Employment
I i *1 I I I i i I I I
1976
00ii-IN 0 .
I I I i I I I I I I
1977
SOURCE: Department of Labor
90 F
80 -
10-
5
0
bb
IIIW
I i l i i l . . .Ii I ~ I I I. . . . . . . . .
€
0
628
industries have required governmentassistance, and there are sections of thecountry that are plagued by stagnation.
The international economy gives rise todifficulties for U.S. policy. Our balance-of-payments deficit caused by slow recovery inEurope and heavy oil imports will continue.Serious credit problems among the developingnations persist. Energy dependency makes oureconomy vulnerable to external shocks.
The Administration has addressed itself tomost of these problems in a responsiblemanner. Its program has much to commend it.With the stimulus of the proposed taxreduction, the Administration projects a realgrowth rate of 4.7 percent for 1978, withunemployment dropping to the 6 - 6-1/4 percentrange. For 1979, a similar rate of growth isprojected, with unemployment falling below 6percent.
The basic question is whether or not oureconomy can do better. We believe that itcan. With the proper policy mix, real growthrates of 5 to 5.5 percent in 1978 and 1979 areattainable, and should be our national goal.Our analysis of the outlook and the policy mixleads us to the conclusion that such goals canonly be reached if the President's taxIoposals are accompanied by a monetary policythat will move short-term interest rates inthe direction of 1977 levels.
Additional stimulus is definitely neededfor 1979. That stimulus, however, should comein the form of an expansionary monetary policythat will reverse the recent rise in short-term interest rates. If monetary policyshould become even gradually more restrictive,greater reliance will have to be placed onincreased Federal spending or larger tax cuts.
629
And even then, a restrictive monetary policycould prevent the achievement of 1979 goalsfor production and employment, enlarge theFederal deficit, and retard needed capitalformation.
An examination of the President'sdiscretionary budget choices reveals littleevidence that a major change in priorities istaking place. There are some signs that afoundation is being laid for future changes.But so far, this year's priorities are similarto those of prior budgets. Further, there islikely to be less economic stimulus in thebudget requests than is apparent from thefigures because of the composition of theincreases.
Inflation will continue to concern U.S.policymakers as it does the rest of the world.Obviously, it cannot be cured over night. Itrequires a composite of measures, both publicand private, and substantial public consensus.We believe that the Administration'sinitiatives, while in the right direction, canbe improved. We urge strengthening of theCouncil on Wage and Price Stability andgreater efforts to reduce the inflationaryimpact of Federal programs.
We recognize that full employment and pricestability cannot be achieved by fiscal andmonetary means alone. Only with a coordinatedprogram of structural measures dealing withsuch problems as manpower, investment, supplybottlenecks, international factors, and thelike can we accomplish high employmentobjectives in a balanced and stable setting.In carrying out our role under the EmploymentAct we have stressed the importance of alonger term perspective and of improvedcoordination of public programs.
630
In this Report, as in previous ones, wehave attempted to provide longer rangeinsights, and we commend the Budget Committeesfor placing emphasis on five-year projectionsin their forthcoming review of the Budget. Atthe same 'time, we see obvious need forimproving substantially our national capacityfor the planning and coordination of policy tomeet the objectives of the Employment Act of1946. For that reason, we accord highpriority to enactment of the Full Employmentand Balanced Growth Act (generally referred toas the Humphrey-Hawkins bill).
The major recommendations of the JointEconomic Committee are set forth below. Theseand additional recommendations are discussedin the following chapters.
o We strongly endorse the Humphrey-Hawkins bill and urge its swiftenactment by the Congress. TheCongress should enact specific,quantitative long-term economic goalsthat will serve as the basis forcongressional fiscal, monetary,- andother economic policies. *.
SSenator Proxmire states: "In addition toan unemployment goal, the Humphrey-Hawkinsbill should include a complementary spcificgoal for the rate of inflation, the equaloverwhelming problem our economy faces."
631
o Economic stimulus, in addition tothat proposed in the Bu vet, isneeded in 1978 and 1979. This shouldbe implemented through anexpansionary monetary policy. Toachieve this stimulus, the growth ofthe money supply should be such thatthe rise in short-term interest ratesis reversed. Policy in 1978 shouldtend to move short-term rates towardtheir 1977 levels. Interest ratesshould be maintained at these lowerlevel-rsin 1979. */ .
7/ Representative Moorhead states: "Here andsubsequently the Report recommends a stronglyexpansionary monetary policy for 1978 and1979. I do not believe that the FederalReserve should be a slave to its presenttargets for growth of the monetary aggregatesand concur that these targets might properlybe raised somewhat in the period ahead toassure continued expansion of the economy. Iwould hope that the outcome would be lowerinterest ratee. But I would regard as toorisky a monetary policy explicitly aimed atdriving down the present level of short-termrates regardless of the consequences in thegrowth of the aggregates. Given the presentand prospective rate of inflation, the Reportimplies a negative real rate of interest for asustained period, and this may not be arealistic target."
**/ Senator Bentsen states: "I support anexpansionary monetary policy as long as thatpolicy is consistent with the goal of areduction in the rate of inflation."
632
o Domestic recovery is too important anobjective to permit monetary policyto be diverted to other goals. Wetherefore oppose the recent increasein the Federal funds and rediscountrates because they representdeliberate attempts to use domesticmonetary instruments to achieve aninternational purpose. Interventionin foreign exchange markets should besTtrictly limited to measures designedto correct "disorderly markets."
o In fiscal year 1979, total Federalexpenditures should fall within a$500-$506 billion range and total taxreceipts should be approximately $440billion. This fiscal policy, combinedwith the monetary policy discussedabove, will achieve the economicgoals set forth in this Report. */
*/ Senator Proxmire states: "This level ofspending is excessive. There is hardly aprogram in the government which could not beimproved through a cut in expenditures,attention to detail, and a reduction ininefficiency and waste. A $25 billion, or 5percent cut, should be achievable."
633
"o Congress should immediately begin areview of the social securityfinancing legislation recentlyenacted. Special attention must begiven to the long-term macroeconomicconsequences of any financingproposal.
" The Federal Reserve should issue awritten report to the Congressshortly after the receipt of theEconomic Report of the President.After consultation with the House andSenate Banking Committees, the JointEconomic Committee would review thisreport and make its recommendations.The Federal Reserve's report would beexpected to meet three basicrequirements:
(1) Analyze the desirability,consistency, and feasibility of thequantitative goals for employment,growth, and inflation for theforthcoming fiscal year as set forthby the President.
(2) Provide the Federal Reserve'sown quantitative forecast of economicactivity for the forthcoming year ona quarterly basis.
634
(3) Discuss in exact quantitativeterms how the proposed monetarypolicies are designed to reconcilethe President's 'targets and theFederal Reserves own forecast. .1/
o As part of its annual report to theCongress, the Council on Wage andPrice Stability should determinewhether Federal actions have resultedin a net reduction or increase ininflation. Any specific actions whichhave had a significant impact shouldbe thoroughly discussed and theseimpacts should be quantified.
Senator Bentsen states: "While Iunderstand the need for coordination ofmonetary and fiscal policy, these proposalscould undermine the traditional independenceof the Federal Reserve System and hence Ireserve judgment on them."
635
II. THE ECONOMIC SITUATIONAND OUTLOOK
1977
The turnaround in the economy that began inmid-1975 continued through 1977, making it ayear of good and reasonably balanced economicgrowth. Real GNP grew at an annual rate of4.9 percent in 1977, compared with a 6.0percent increase in 1976. The continuedrecovery was led by strength in the householdsector -- especially in the demand forconsumer durable goods and housing. However,the business sector has not respondedvigorously. Non-residential construction hasnot yet reached its 1974 peak and producers'durable equipment only matched its 1974 level.Business fixed investment in the currentrecovery has continued to lag behind theperformance that other business cycles havetaught us to expect.
The current economic recovery has dependedheavily upon consumer spending, which wasspurred initially by the personal income taxreduction in the spring of 1975. In 1976nominal personal consumption expenditures grewby 11.6 percent while personal income grewonly 10.3 percent. This caused the personalsaving rate to drop sharply, reaching theextremely low level of 4.1 percent in thefirst quarter of 1977. During subsequentquarters, consumers slowly returned to morenormal patterns of saving. The preliminaryfigures for the fourth quarter of 1977estimate a saving rate of 5.7 percent. Forthe two-year period 1975-1977, consumptiongrew more rapidly than income, leavingconsumers with a large burden of debt.
24-0•6 0 - 78 - 41
636
In real terms, business fixed investmentrose by roughly 8-1/2 percent in 1977 -- aboutthe same as 1976. Compared with previousrecoveries, this reflects a very sluggishpace. Although 8 percent does not sound likea poor growth rate, it must be remembered thatin the fourth quarter of last year, investmentwas still below its previous peak. At thisstage in previous recoveries fixed investmenthad exceeded its earlier peak by an average of14 percent. Investment in nonresidentialstructures has been particularly poor; theincrease was only 3.5 percent in real terms in1977.
After almost no change in 1976, nonfarminventory accumulation increased substantiallyin 1977. The ratio of inventories to finalsales, however, has shown a gradual declinesince the third quarter of 1976, indicatingthat the inventory, buildup has not beenexcessive. In fact, the sharp drop in thefourth quarter figures -- partly attributableto the coal strike and some auto plantclosings -- set the stage for some inventorybuilding in the first half of 1978.
1977 proved to be a good year for the homeconstruction industry. Although the record-setting levels of 1972 were not matched,privately owned housing starts were estimatedat 1.986 million units, 29 percent above thelevel for 1976. By far, the largest increasewas in the South where 274,000 new units werestarted from December to December.
Spending by Federal and State and localgovernments was another important source ofexpansion in 1977, increasing 2.5 percent inreal terms as compared with 0.5 percent in1976. The growth occurred largely in theFederal sector which had experienced a declinein 1976. Purchases at the State and local
Residential and NonresidentialFixed InvestmentBILLIONS OF DOLLARS100
70
60
50
40
1975SOURCE: Department of Commerce
1976 1977
638
level grew very slowly although they did speedup as the year progressed. As a result ofthis slow spending growth, the surplus inState and local government operating budgetsincreased almost $10 billion. National Incomeand Product Accounts (NIPA) estimates are notavailable on a State-by-State basis, andcertainly not all States are in surplus, but
A other information indicates that the generalsurplus condition is widespread. Thiscondition will probably lead to some moderatetax reductions or foregone tax increases in1978. Further expenditure growth will dependheavily on grants supplied by the FederalGovernment.
Because of the strong economic growth,total employment increased during 1977 byabout 4 million, bringing civilian employmentto 92.6 million persons by the end of theyear. Substantial gains were made in reducingunemployment as well, with the unemploymentrate declining from 7.7 percent in 197.6 to anaverage of 7.0 percent in 1977. Using thenewly revised seasonal adjustment factorsreleased in December by the Bureau of LaborStatistics, the unemployment rate showed asteady decline beginning in July. TheDecember rate of 6.4 percent was good news,marking the lowest rate since late 1974. Thedecline was sustained in January 1978 as therate dropped slightly to 6.3 percent. Overthe year, the number of unemployed personsdropped by more than 1.1 million.
Most groups in the labor force enjoyedlower unemployment rates. From January 1977to January 1978, the rate for all male workersdeclined from 5.8 percent to 4.7 percent,while female unemployment dropped from 6.9percent to 6.1 percent. However, theunemployment rate for black Americans was
639
virtually unchanged and the rate for blackteenagers increased from 36.2 percent to 38.7percent.
The labor force participation ratecontinued to rise throughout the year,reaching an all-time high of 62.8 percent inNovember and December. This is primarily areflection of the increasing number of womenentering the labor force. By year's end therewere 98.9 million persons in the civilianlabor force.
Although 1977 was a very good year foremployment gains, unemployment remains aserious problem. It is not only a racial anddemographic problem, it is also a geographicproblem as described in detail in Chapter VI.Unemployment in the older U.S. cities during1977 bears this out, with unemployment ratesthat are typically higher than the nationalaverage.
The Consumer Price Index rose 6.8 percentfrom December 1976 to December 1977. Thisdoes not compare favorably with the increaseof 4.8 percent in 1976. The acceleration in1977 was due primarily to food prices whichrose 8.0 percent in 1977, following a rise of0.6 percent in 1976. Prices rose in 1977 formany grocery store foods, such as meats,poultry, processed fruits and vegetables,sugar, fats and oil products, and cereal andbakery products. Prices for new cars, fueloil, and gasoline increased more in 1977 thanin 1976, but used car prices declined in 1977after a substantial rise in 1976.
The Finished Goods Index, which is a betterindication of prices paid by producers thanthe All Commodities Wholesale Price Index,rose 6.6 percent from December to December.The Bureau of Labor Statistics began
Consumer PricesINDEX. 1967 w 100
180
170
160
1.flMILLIONS OF PERSONS (16 and Over)
101
5
01975
SOURCE: Department of Labor
1976 1977
in n
S. . ., , ,
age.. ..
641
emphasizing the Finished Goods Index in Augustbecause it includes only changes in pricesreceived by producers for those commoditiesthat are in the form in which they willeventually be sold to users. In thiscalculation, price changes are not countedrepeatedly as goods move through variousstages of processing. Producer finished goodswere 7.2 percent higher in 1977, consumer foodprices rose 6.6 percent, and the index forconsumer finished goods excluding food rose6.1 percent.
While consumer prices rose 6.8 percentduring 1977, adjusted hourly earnings forprivate nonagricultural workers rose by 7.5percent, resulting in a real gain for theconsumer of .6 percent. This was much smallerthan the gain last year when real hourlyearnings rose 2.3 percent.
Productivity growth in the private businesssector in 1977 did not match the pace of 1976.The 2.4 percent increase in 1977 reflected a6.0 percent increase in output and a 3.6percent increase in hours worked. During1976, productivity rose 4.2 percent. Thegrowth of hours worked by all personsaccelerated in 1977 -- the largest increasesince 1973. The durable goods sector, whichis typically the most sensitive to cyclicalfluctuations, showed an increase inproductivity of 1.5 percent in 1977 comparedwith 7.2 percent in 1976.
In contrast to 1976, the external sectoracted as a brake on economic expansion in1977. Net exports of goods and services fellfrom a 1976 surplus of $7.8 billion to adeficit of $9.1 billion in 1977. A $4.1billion improvement in the surplus on servicesfrom $17.1 billion in 1976 to $21.2 billion in1977 was more than offset by a $21.2 billion
642
increase in the merchandise trade deficit.With U.S. exports concentrated in theagricultural and capital goods manufacturingsectors, slow growth abroad meant weak exportmarkets for the United States. Sharplyincreased imports of oil also contributed tothe widening deficit. The $10 billion inadded oil imports amounted to roughly half thelarger merchandise trade deficit and well overhalf of the $16.9 billion swing that markedthe shift from surplus to deficit on thebalance of goods and services.
Deficits in the balances for merchandisetrade, goods and services, and the currentaccount are likely to continue through 1978and beyond. However, there may be somereduction in all three deficits during 1978.
Because there is a considerable lag betweenrising import prices and the substitution ofdomestic for imported goods, a depreciatingdollar could upset this calculation. Thedollar value of 1977 imports was given a boostby the 5.4 percent fall in the multilateraltrade weighted value of the dollar. Largetrade and current account deficits in 1978coupled with persistent inflation at the 6percent level could lead to furtherdepreciation ot the dollar in 1978.
Somewhat more rapid growth abroad shouldresult in a higher level of U.S. exports.Nonfuel imports can be expected to fallslightly as growth in this country slows in1978 and 1979. Imports of oil jumped 20percent in 1977 in response to cold weather,stockpiling, and a decision to build upstrategic reserves. North Slope productionand the existence of adequate stocks willtend to stabilize the level of U.S. oilimports. The major imponderable remains the
643
price decision that will emerge from themidyear meeting of the Organization ofPetroleum Exporting Countries (OPEC).
The money supply grew at the relativelyrapid rate of 7.4 percent from the end of 1976to the end of 1977. This growth rate,however, did not prevent short-term interestrates from moving up sharply. The three-monthTreasury bill rate rose from 4.4 percent inDecember 1976 to 6.1 percent in December 1977.Long-term rates, however, fell during theyear. Monetary policy and its relationship tooverall economic performance is discussed in-detail in Chapter IV.
1978
Looking ahead into the remainder of 1978,we foresee a continuation of recovery. TheAdministration's forecast of 4.7 percent realgrowth is within a reasonable range ofprobable outcomes. The unemployment rateshould therefore decline gradually, falling tothe neighborhood of 6 percent by the end ofthe year. While we wish the President successwith his incomes policy, we do not consider itstrong enough to produce a dramatic change.Barring uncontrollable events, prices shouldincrease approximately 6 percent in 1978.
Although we do not have any seriousdifferences with the Administration over itsview of the economic outlook, we sense atendency to accept this economic performanceas the best that can be expected. We believethat economic performance can be improved. Inthe following chapter we recommend moreambitious goals for both the near-term and themore distant future.
644
1979
As usual it is difficult and risky toproject events more than a year into thefuture. On the other hand, our ability toinfluence the path of economic growthincreases as we look further into the futureand take steps to prepare for it.
The Administration has forecast real growthof 4.8 percent in 1979 coupled with aninflation rate of 6 percent and anunemployment rate of 5.8 percent. We believethat this forecast is achievable -- in fact wehave recommended more ambitious goals.Nevertheless, there are many potentialproblems which could cause 1979 to be farweaker than expected.
As indicated earlier, economic growth in1979 is heavily dependent upon the path ofmonetary policy in 1978. If interest ratesare stable or decline moderately in 1978 andremain stable in 1979, we could reach a growthtarget of 5 percent in 1979; if interest ratesrise throughout 1978 it will be impossible toachieve this target without an unacceptablylarge deficit in the Federal budget. In ourjudgment, if interest rates are allowed torise further, we run a serious risk of growthbelow 3-1/2 percent in 1979.
The Longer Term
The years 1978 and 1979 are critical inaccomplishing our long-term objectives ofmoving the economy back to full employment.If we achieve the targets suggested by thisCommittee, we will be within 2 percent ofpotential GNP by the end of 1979. As weapproach this goal, we must be careful thatFederal policies do not overstimulate demand
a
645
Fiscal policy for 1978 has been largelydetermined. If the proposed tax reductiongoes into effect October 1, most of theeconomic impact will occur in 1979.Expenditures have been set by the SecondConcurrent Resolution and even if they areraised moderately as the President's budgetindicates, this will only validate existingpolicy. As indicated in Chapter IV we have noserious problems with the fiscal policyimplied by the President's Budget for fiscalyear 1979.
Monetary policy is far more flexible thanfiscal policy and offers a much greateropportunity to influence economic activity inthe second half of the year. If short-terminterest rates continue to rise through 1978as they did in 1977 and as the Council ofEconomic Advisers and others expect in 1978,there would be a serious impact on economicgrowth in 1979. An analysis prepared by thecommittee staff, discussed more fully inChapter IV, concludes that unless short-terminterest rates stabilize and begin to declineit will be difficult to reach the Council'sgrowth projections.
In accepting the Administration's view ofthe economic outlook for 1978, we are quitecognizant of the pressures now developing infinancial markets. We are aware that loandemand has been increasing and that foreignfunds which in the past have helped financepart of the Federal deficit may not bedepended upon this year. Nevertheless, wehave concluded that the dangers of financial"crowding out" are minimal this year. We areconfident that with cooperation from themonetary authority, both the Federal deficitand private demands for funds can beaccommodated without sharp increases ininterest rates.
646
The pattern of the recovery in 1978promises to be erratic. The coal strike willhave an adverse impact on output in the firstquarter. The severity of this impact will ofcourse depend upon how long it takes to getproduction moving again, but we can easilyforesee a significant national effect. Thisfactor alone would tend to reduce growth inthe first quarter and raise the growth rate inthe second and third quarters as inventoryrebuilding occurs.
The social security tax increases whichbecame effective January 1, 1978, will alsohave a dampening effect. Growth in the finalquarter of 1978 will remain strong if, asexpected, consumption is stimulated by acombination of tax reductions, social securitybenefit increases, and Federal pay increases.
Despite the likelihood of stronger growthrates in the second half of the year than thefirst, fundamental forces in the economy couldweaken as the year progrezs.es. If interestrates are allowed to rise, this would have anadverse impact on business investment in 1979.If they rise enough to cause the flow of fundsinto savings institutions to be curtailed,housing, which has a significant impact onother sectors of the economy and which isalready expected to be weaker in 1978, willdrop substantially. If consumers decide torepay debt or increase saving, or if energyprices are increased significantly, thesefactors will also dampen economic growth inlate 1978 and set the stage for a weakperformance in 1979.
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while creating capacity shortages. It is forthis reason that we stress the need to relymore heavily on monetary policy for stimulusin 1978 and 1979. Lower interest rates willstimulate investment and expand capacity thusreducing the problems that might beencountered as we approach potential output.If we do not expand industrial capacity and ifwe rely solely on fiscal policy to stimulatedemand, we risk creating a situation where asmall amount of excess demand two or threeyears from now will set off a new inflationaryspiral that will trouble us for years to come.It is essential to change the mix of policy toprovide a balanced expansion.
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III. GOALS FOR ECONOMIC POLICY
Despite steady improvement in the economyduring 1977, the economy is still a long wayfrom full recovery. To make satisfactoryprogress in sustaining further growth andreducing unemployment, the Congress shouldadopt specific targets for 1978 and 1979.
In proposing economic goals to theCongress, we must be careful not to putexcessive emphasis on a particular policyinstrument, and we must be very careful not toconfuse means with ends. Just such confusionmay have been created by the present system ofcongressional oversight of Federal Reservemonetary policy. Current law instructs theFed to maintain growth of the monetaryaggregates "commensurate with the growth ofpotential output." As a result, the monetaryaggregates have been treated as the targetsrather than as instruments of monetary policy.By relating monetary policy only to long-runobjectives, no real burden has been placed onthe Fed to relate its monetary policies tosuch economic goals as the growth inproduction, the level of unemployment, or therate of inflation. In Chapter IV we presentspecific recommendations to remedy thissituation.
The Administration came perilously close toconfusing means and ends by making a balancedbudget a key target of national economicpolicy. Balance in the budget should be asecondary aim of economic policy. The budgetdeficit or surplus should be determined by thefiscal needs implied by current economicconditions.
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During the past year, the Administrationhas put its goal of a balanced budget in aclearer perspective. Although budgetarybalance remains a matter of importance to theAdministration, this view is now put forwardwith considerably less rigidity than earlierand the size of the deficit is to bedetermined with an eye first to the overallperformance of the economy. We note that theReport of the Council of Economic Advisersconceded, as our staff argued in an evaluationof the 1981 targets, that structuralweaknesses may be such that it might be unwiseto balance the budget even at full employment.
The President's Economic Report and Budgetplace considerable emphasis on reducing theFederal Government's relative role in theeconomy. While a variety of factors couldcombine to alter the components of Federalexpenditures, the total should be determinedby the needs of the nation and the economy.In setting national economic goals, we shouldkeep in mind that it is rising production andemployment that are the principal measures ofeconomic well-being and not the size of thebudget deficit or the level of Federalexpenditures.
Growth and Employment Goals for 1978 and 1979
In its 1977 Annual Report, the JointEconomic Committee recommended specific goalsfor real growth in GNP and the rate ofunemployment. For 1977, we recommended a realrate of growth of 6 percent and a reduction inthe unemployment rate to 6.5 percent by yearend.
As a result of moderate fiscal stimulus andthe strong performance of the private sector,the economy has come quite close to meeting
650
those goals. Real GNP grew by almost 5percent. Although somewhat below ourrecommendation, the U.S. performance stillexceeded that of all her major tradingpartners except for Japan. The record ofunemployment reduction was even better.Overall, the rate of unemployment fell 1.4percentage points in 1977 and exceeded ourgoal by one-tenth of one percent.
The relatively strong performance of theeconomy in 1977 partly reflected theestablishment by the Administration and theCongress of specific quantitative goals. Byfocusing on ambitious but attainable goals,the Congress and the Administration have aclearer basis on which to build economicpolicy. The Administration's endorsement ofthe Full Employment and Balanced Growth Act(generally referred to as the Humphrey-Hawkinsbill) indicates a clear commitment to continueand improve this process.
We strongly recommend that the Congressformally establish s ecific targets foremployment, growth of real output, andproductivity. ,
*/ Senator Proxmire states: "Congress would5e remiss if it did not also establish goalsfor a decline in the rate of inflation."
861
Employment and unemployment goals shouldbe broken down into goals for specificdemographic groups, so that programs foraiding specific groups and for reducingdifferential unemployment rates can bedeveloped.
As the United States becomes more involvedwith foreign economies, the success or failureof many domestic policies will depend ondecisions made in foreign capitals.Similarly, U.S. economic policies will have asignificant impact on the economies of othercountries. While each country must considerits own domestic interests, growinginterdependence makes greater internationalcoordination of domestic economic policiesvital. At the London summit in May 1977, thePresident and the leaders of the major westernindustrial powers took a step in thisdirection by establishing goals for realgrowth of GNP in their respective countries.The attempt was far from successful. Only theUnited States achieved its goal for growth,and then only after revising it downward. Theexistence of goals can invite public pressureby one country on another, but their absencewould do nothing to promote internationalcoordination. Despite the disappointingperformance in 1977, it is highly desirablethat the process be continued.
At special economic meetings and throu nthe Organization for EconomicCooper at ion and Development (OECD), theUnited States should encourage the majoindustrial powers to set specificquantitative goals for growth in realGNP.
As we have already noted in Chapter II,there is a broad consensus that withoutstimulus, the economy will begin to weaken in
24-066 0 - 78 - 42
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the latter part of 1978. If its proposals fornet tax reductions are adopted, theAdministration anticipates real GNP growth for1978 in the range of 4-1/2 to 5 percent withthe unemployment rate declining to between 6and 6-1/4 percent.
Barring any unexpected shocks, theAdministration foresees a similar performancein 1979 with real GNP growth in the 4-1/2 to 5percent range. The rate of unemployment wouldcontinue to decline to a rate somewherebetween 5-1/2 to 6 percent at year end. Weagree that growth should slow somewhat as theeconomy approaches potential GNP.Nevertheless, we favor somewhat more ambitiousgoals than the Administration.
Real GNP growth between 5 and 5-1/2percent in calendar year 1978 is adesirable and attainable goal. Thisgrowth target is consistent with anunemployment rate averaging no more than6.4 percent during the year and fallingto 6 percent or less by year end.
If 1978 is marked by a strong economic"..performance, we would endorse a_ growthtarget in the neighborhood of 5 percentfor 1979. This would reduce theunemployment rate to approximately 5-1/2percent by the end of the year and placeeconomic output within 2 percent ofpotential by year end. Fiscal andmonetary policy should be structured toachieve these goals.
In setting economic policy, the Congressmust also consider other problem areas thatmay not lend themselves to specificquantitative goals. The Congress is concernedabout the composition as well as the level of
Potential and Recommended GNP Growth$8ILLIONS (1972 DoUlm)1.800
SOURCE: J.E.C.. Depvnment of Commece, Council of Economic DivM0n
01WA
1983
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Federal spending. Likewise, adequate andbalanced levels of consumption and investmentin the private sector are a matter ofcongressional interest. The persistentproblems of inflation and structuralunemployment and local economic developmentalso warrant congressional attention. Thegrowing importance of world markets for theU.S. economy has raised new questions aboutthe U.S. position on international trade andpayments.
The President's program is based on aparticular mix of tax, spending, and monetarypolicies. Chapter IV discusses a staff studywhich explored three specific alternatives tothe Presidential mix. The economic effects ofa more expansionary monetary policy, a largertax cut, and somewhat greater spending wereanalyzed in turn.
After considering these alternatives, weare convinced that greater reliance should beplaced on monetary policy. By pursuing amonetary policy which will reverse the rise inshort-term interest rates and move them in thedirection of the average level of 1977, theeconomy could grow and invest more whileactually decreasing the level of the budgetdeficit.
Throughout the 1970s, rising prices havecreated a whole series of economic problems.In 1977, consumer prices grew by'6.8 percent,a sharp increase over the 4.8 percent raterecorded for 1976. The prospects forsignificantly reducing inflation in 1978 arenot bright. The underlying rate of inflationand the rate of increase in unit labor costsare both over 6 percent. A depreciatingdollar, increases in the minimum wage, risingpayroll taxes, and a number of other policieswill all push prices upward. The
655
Administration hopes to achieve a modestreduction in the rate of consumer priceincrease to about 6 percent a year. We agreethat this is a reasonable target. To reachthat and future targets for reducinginflation, the Congress should begin toexplore several methods of directly attackingthe problem of rising prices. Chapter Vexamines a variety of potential policies andsolutions.
Despite a record increase of 4.1 millionjobs and a steady drop in the unemploymentrate during 1977, serious employment problemscontinue to exist for several groups. Membersof minority groups, teenagers, and women allsuffer significantly higher rates ofunemployment than do adult males. Althoughsteady growth in GNP is a precondition toopening employment opportunities for thesegroups, in many cases structural measures mustbe adopted. The need for structural programswill become particularly acute as the economyapproaches the stage where rising demandbegins to create serious inflationarypressures. In Chapter VI, we assess a numberof present and potential structural programs.
The very large trade and current accountdeficits pose serious problems for U.S.policymakers. As the trade deficit approached$30 billion for 1977, the dollar began to fallin value against the Japanese yen and severalEuropean currencies. The Treasury and FederalReserve Board both moved to intervene inforeign exchange markets to stabilize theinternational value of the dollar. Inaddition, the Federal Reserve raised theFederal funds and discount rates in an attemptto increase the demand for the dollar.Because the current account deficit drainsaggregate demand away from the domesticeconomy, compensating fiscal action is needed.
Faced with inadequate demand elsewhere in theeconomy, the current account deficit adds tothe required size of a compensating fiscalstimulus package and budget deficit. InChapter IV, the domestic impact of adepreciating dollar is discussed in moredetail.
Developments in the international economynow have such a pervasive impact on the U.S.economy that international issues arediscussed throughout this Report. We wish toplace particular emphasis on Lwo points.First, the principal causes of the tradedeficit are slow growth abroad and anincreased reliance on imported oil. Thedeficit reflects a faster pace of growth andgreater economic strength of the United Statesrelative to the rest of the world. Inaddition, the current dollar deficit alsoreflects the large oil price increase. Thelarge current dollar deficit does not warrantor justfiy a turn toward protectionism. Thisis not to say that individual industries arenot experiencing considerable pressure fromimport competition. However, specificindustry problems should be handled on a case-by-case basis in the context of a carefullydesigned policy of adjustment assistance.
Second, we strongly advise against usingdomestic monetary policy for internationalpurposes.*/ An increase in domestic interestrates to stabilize the dollar would vitiatethe President's tax incentives for investment,slow the pace of the economic recovery, andraise the budget deficit.
7eo ator ' Ricoff states: "This statement
is too strong. I would agree that monetarypolicy should not be used primarily forinternational purposes."
b
658
Longer Term Economic Goals
The achievement of longer term growth andemployment goals is heavily influenced bycurrent fiscal and monetary policy. Byestablishing specific quantitative longer termgoals for economic performance, fiscal andmonetary policy can be better tailored toassure steady, noninflationary growth.
As the economy approaches a high employmentlevel, the existence of structural imbalancesincreases the dangers of inflation. A five-year perspective can help focus attention onthe sectoral and industrial imbalances thatwould disrupt growth.
Present day labor policy can also beimproved by viewing the problem from a longerrange perspective. A shortage of skilledworkers can create inflationary bottlenecks,and regional imbalances in the supply anddemand for labor imply labor shortages andwage inflation in some areas and unemploymentand lost production in others. A long-termgoal for employment and GNP growth would helpto determine the appropriate timing andcomposition of structural programs needed toimprove labor market conditions.
During the past three years, capitalformation has been very disappointing relativeto previous recoveries. Part of theexplanation lies in the severity of therecession which forced the recovery to startfrom a base of very low capacity utilizationlevels. Various sources of increased businessuncertainty have also deterred capitalinvestment. Through the use of specific long-term goals, the Government could reducesharply uncertainties that arise fromconfusion about-nature and intention of theFederal Government's economic policy.
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The Full Employment and Balanced Growth Act
The Employment Act of 1946 established theCouncil of Economic Advisers and the JointEconomic Committee of the Congress, and itrequired the President to submit an annualeconomic report to the Congress. It waslandmark legislation that for the first timeacknowledged the responsibility of the FederalGovernment for promoting "maximum production,employment, and purchasing power." Althoughthe Act has served the country well, it isclear that the increasing complexity ofeconomic policymaking demands that theEmployment Act be augmented by supplementallegislation. This is the purpose of theHumphrey-Hawkins bill.
The bill has undergone many revisions. Inan earlier form, the present CEA Chairmantestified that it carried with it potentiallydisastrous inflation effects. Yet todayChairman Schultze endorses thelbill. Earlierprovisions -- such as the right of anindividual to use courts of law to sue theFederal Government for satisfactory employment-- have been discarded. In its present formit is a blueprint for economic progress thatsets larger objectives, provides for theirimplementation through a coordinated approach,and places the responsibility on policymakersfor failures to achieve its targets.
Specifically, the Act requires thePresident to state explicit short-term goalsand to recommend the fiscal and monetarypolicies needed to achieve these goals. Italso requires the President to set forth hisfive-year goals each year. All this, finally,must be consistent with the Act's objective ofreducing the overall unemployment rate to 4percent within five years following enactment.
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The bill itself does not contain specific,job-creating programs. Rather, thelegislation establishes the structure and theprocedures with which the Administration andCongress, with the cooperation of the FederalReserve, will determine the state of theeconomy, identify problems, and implement thecomprehensive and coordinated policy andprogram mix necessary to help guide theeconomy toward our national goals. It iswithin this framework that specific, job-creating tax and spending proposals would beconsidered and enacted.
Unlike the Employment Act, which is silenton the subject of inflation, the Humphrey-Hawkins bill establishes the goal of pricestability as a high priority objective. */ Thebill proposes to deal specifically withinflation by instituting early warning systemsto detect impending capacity shortages, bystockpiling of agricultural and other criticalraw materials, and by vigorously enforcinganti-trust laws.
*/ Senator Proxmire states: "But it does notestablish a goal for decreasing the rate ofinflation, as it does for reducingunemployment, and is flawed by that omission."
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The Act is flexible enough to allow foralternatives should the quest for fullemployment prove to be incompatible withinflation control. Beginning in the thirdyear after enactment of the bill, thePresident may propose to the Congressmodifications of the employment goal to delaythe time of its achievement if economiccircumstances require it.
Second, the bill recognizes the likelihoodthat its employment and inflation targets willbe very difficult to achieve simultaneously aslong as a purely macroeconomic approach topolicy is employed. It therefore recommendsto the President a large number of"structural" options. Among these options arecountercyclical employment programs includingpublic works and public service employment;countercyclical revenue sharing and regionaland structural employment policies to reduceunemployment among particular groups and inparticular places. Youth employment,training, counseling, and other options areincluded in the provisions to achieve thegoals of the Act.
The bill's stated order of prioritiesplaces primary emphasis on promotion ofprivate-sector performance to create the bulkof the job opportunities needed to meet thelegislation's employment goals. This would bedone through general and targeted fiscal andmonetary policies and programs aimed atsimultaneously reducing both cyclical andstructural unemployment. The next levels ofpriority action prescribed focus on expansionof employment in the private sector throughFederal assistance and through the use ofexisting Federal jobs and job trainingprograms. New programs could be proposed nosooner than two years following enactment inorder to give the private sector an
662
opportunity to respond to employment needs.Jobs provided through new programs, for themost part, would be confined to lower pay andskill levels. Thus, the legislation guardsagainst the automatic increase of bureaucracyor the creation of massive new programs.
While the bill emphasizes private sectorperformance, it also contains a clearprohibition against government interferencewith private sector activity. It states that"no provision of the Act shall be used, withrespect to any portion of the private sectorof the economy, to provide for governmentcontrol of production, employment, allocationof resources, or wages and prices, except tothe extent authorized under otherlegislation."
The process for implementing the Act beginswith the Economic Report of the Presidentwhich is sent to the Congress each January.Under the new law, the Report would discussthe goals of the Act and how theAdministration proposes to meet these goals.Part of the latter must include an outline ofbudgetary policy for the next five years as itrelates to the intent of the bill. Shortlyafter submission of the President's Report,the Federal Reserve System will be required toreport how its intended monetary policiessupport the President's stated numerical goalsfor employment, production, and prices.
The expanded Economic Report of thePresident will be sent to the Joint EconomicCommittee. The Committee will seek the viewsof various legislative committees and expertwitnesses. The Joint Economic Committee will
663
then report a concurrent resolution endorsingor modifying, as appropriate, the President'snumerical targets, as well as his intendedpolicies. Changes in these targets will berecommended 1;hen thel, are needed.
The Joint Economic Committee will discusswith the Budget Committees the relationshipbetween appropriate goals and theirconsistency with the First Budget Resolution.Under the proposed procedure the BudgetCommittees will be better able to make theirdecisions because more information about thecourse and intention of monetary policy willbe made available to them. This will permitthem to develop a more reliable set ofeconomic assumptions on which to base theiroutlay and revenue targets.
If we resort to tight fiscal and monetarypolicies as the only way to control inflation,then the twin goals of low inflation and lowunemployment will be unattainable. TheHumphrey-Hawkins bill offers a realisticsolution to this unpleasant problem. InChapter V we outline ways of approachinginflation control without resort to the harshtraditional remedies, and in Chapter VI weoutline the policy requirements that areneeded to bring more of the structurallyunemployed back into the mainstream of ournational economic life.
We strongly endorse the Humphrey-HawkinsBill and urge its swift enactment by-the
Congress.
The Path to a High Employment Economy
According to estimates in the President'sEconomic Report, last year the Americaneconomy was operating almost $75 billion
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dollars or 5.3 percent below its fullcapacity. The Administration expects that theeconomy will reach its high employmentpotential sometime in late 1981. Adopting theCommittee goals would speed up this timetable.
In the 1977 Economic Report of thePresident, the historic series for potentialGNP was substantially revised. For a numberof years the benchmark level of resourceutilization implicit in the Council'sestimates was an overall unemployment rate of4 percent. The new estimates assume that fullemployment of fixed capital is reached whenthe manufacturing capacity utilization indexcalculated by the Department of Commercereaches 86 percent. This new definition ofpotential GNP is consistent with a 4.9 percentunemployment rate in 1977 and 1978 and a rateof 4.8 percent in 1981. The unemployment rateconsistent with a specified capacityutilization rate will vary as the compositionof the labor force changes.
The present Council of Economic Advisershas examined these revisions and has concludedthat they represent a major improvement. TheCouncil notes, however, that furtherimprovements are possible. We agree that theaccurate definition of potential GNP and thehigh employment unemployment rate are mattersthat demand further analysis. ,The Council ofEconomic Advisers and the Joint EconomicCommittee should continue to refine theiranalysis of this issue.
Regardless of the final determination of anappropriate high employment unemployment rate,it seems clear that the dangers of triggeringadditional inflation increase as theunemployment rate falls below 5 percent. The"full employment" estimates presented belowaccept the Council's definition of potential
665
GNP as a reasonable guide to the output levelswe can expect to achieve through macroeconomicpolicy tools without creating excess demandinflation. However, we do not accept theassociated 4.9 percent unemployment rate as anappropriate goal for social policy. Webelieve that the 4.9 percent level ofunemployment can be reached usingmacroeconomic policies and that an interimtarget of 4 percent unemployment can beachieved by adding appropriate structuralprograms. The key to achieving low levels ofunemployment with stable prices is tosupplement sound fiscal and monetary policieswith structural programs designed to attackunemployment and inflation. In Chapters V andVI, we explore a number of possible approachesto these problems.
Full Employment Budget Estimates
The full employment budget estimates can bequite helpful in understanding the directionand magnitude of fiscal policy changes. Theseestimates are more complicated than usual thisyear and therefore must be interpreted withcare.
Part of the confusion arises from thedifferent methods of calculating the fullemployment budget estimates. The budgetdocument shows such estimates on a unifiedbudget basis for fiscal years. The unifiedbudget basis estimates show the fullemployment deficit increasing each year from1977 to 1979. In the report of the Council ofEconomic Advisers, full employment budgetestimates are shown on a national income andproduct accounts (NIPA) basis by calendaryears. These estimates show the deficitincreasing between 1977 and 1978, thendeclining between 1978 and 1979. Both sets ofestimates are shown in Table III-1.
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Table III-1. High Employment Deficit (-)(billions of dollars)
1977 1978 1979
Unified Budget Basis(fiscal years)',
National Income andProduct Account Basis
(calendar years)
-10 -32 -37
-17.9 -26.9 -22.6
Source: The Budget of the United StatesGovernment, FY 1979; the Economic Reportof the President, January 1978.
0
667
Confusion can be reduced by focusingattention on only one set of estimates.Economists generally regard the NIPA estimatesas being the most useful for judgingmacroeconomic policy. This is because theNIPA attempts to measure current income andproduction. Transactions which represent anexchange of existing assets such as loans arenot included in the NIPA. Income and outlaysare recorded in the NIPA when the income isearned or the liability is incurred withoutregard to when the transaction actuallyoccurs. This method of accounting gives abetter indication of when Federal policyaffects the economy than alternative methodsthat record transactions at the time checksare written. Other major differences betweenunified budget and NIPA estimates relate totiming adjustments and the accountingtreatment of asset sales.
Estimates of full employment receipts andexpenditures have been prepared by the JECstaff on a half-yearly basis and are shown inTable 111-2. These estimates assume thePresident's budget policy for 1979 is enactedbut they adjust 1978 expenditures to reflectthe lower levels currently anticipated.
Table 111-2. High Employment Budget Estimates(NIPA basis, bi ons of dollars,
To utilize the full employment estimates asa measure of discretionary fiscal policy, oneshould look at changes in the deficit. Themovement from a $15 billion deficit in thefirst half of 1978 to a $33 billion deficit inthe second half indicates an $18 billionmovement in the direction of greater fiscalstimulus. This is the result of thePresident's proposed tax reduction which wouldbecome effective in the fourth quarter of1978. After the middle of 1978 the changes inthe deficit are very small, indicating thatdiscretionary fiscal policy will be relativelyneutral. However, by the last half of 1979the various sources of fiscal drag begin toexert a restraining force, which causes thefull employment deficit to diminish.
The full employment budget surplus, as wellas changes in that surplus, are fiscal policyindicators that have been asked to supply moreinformation than they can reasonably beexpected to provide. On the one hand it isimportant to know what the budget surplus ordeficit would be if the economy were at fullemployment. If this computation discloses analarmingly large deficit, policy might wish toavoid the addition of sizeable new permanentexpenditure programs that would add to thefiscal base and be ill-advised becauserecovery in the private sector could thencause total expenditure in the economy to beexcessive and therefore inflationary.
However, it is very important thatestimates of what the budget surplus would beif the economy were at full employment are notaffected by new expenditure programs if theseprograms are to be phased out as fullemployment is approached. This is for theobvious reason that the programs neither addto nor subtract from the budget deficit orsurplus at full employment.
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To estimate full employment revenues, theadded revenues that would result from amovement to full employment are estimated andthese are added to actual revenue to obtainfull employment receipts. Similarly, on theexpenditure side the reduction in unemploymentcompensation that would occur from moving tofull employment is calculated and this isdeducted from actual expenditure to obtain theestimate of full employment expenditure.
Unfortunately, the treatment of otherexpenditure components is not consistent withthis procedure. Countercyclical revenuesharing; extended unemployment compensationbenefits; outlays on food stamps, welfare, andmedicaid; and even social security benefitsare either deliberately triggered by theunemployment rate or automatically fluctuatewith it. Yet no account is taken of this inthe full employment budget computation.
On the other hand, because we also wish tomeasure the magnitude of the impact ofdiscretionary fiscal policies, the CEAcalculations raised the full employmentdeficit when, for example, countercyclicalrevenue sharing programs were introduced.This would have no effect on the fullemployment surplus since the revenue sharinggrants are eliminated as full employment isapproached.
This hodge-podge approach should bechanged. Full or high employment budgetcomputations should be clean, clear, andconsistent estimates of where the budget wouldstand if the economy were producing atpotential levels of GNP. This should beseparated from measures of discretionaryfiscal impact. It is unrealistic to ask onecalculation to describe movements in fiscalpolicy and to tell us what the budget wouldlook like if the economy were operating atpotential levels of output.
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Table 111-3 below shows the levels ofreceipts and expenditures which might beexpected if the economy were operating atpotential levels of output and if theforegoing recommendations were put intopractice. The level of receipts is unchangedfrom that shown in Table 111-2 butexpenditures are lower because many programs-- e.g., Aid to Families with DependentChildren (AFDC), Aid to Families withDependent Children-Unemployed Fathers (AFDC-UF), food stamps, medicare, countercyclicalgrants -- are sensitive to the unemploymentrate. As Table 111-3 shows, beginning withthe tax reductions in the second half of 1977and continuing through 1979 the FederalGovernment is providing substantial support tothe economy.
Table 111-3. Federal Receipts and ExpendituresAt Potential Levels of GNP
(NIPA basis, billions of dollars, seasonallyadjusted annual rate)
1977:1 1977:2 1978:1 1978:2 1979:1 1979:2
ReceiptsExpendituresDeficit (-)
398.5 406.0396.4 429.3+ 2.1 -23.3
434.7444.6- 9.9
450.5479.0-28.5
Source: Joint EconoMic Committee.Note: This table assumes the fiscal year 1979is adopted as proposed by President Carter.
464.8495.6-30.8
budget
v
495.2519.4-24.2
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It would be a mistake to interpret thissupport as stimulating economic growth becauseboth the net export sector and the State andlocal sector are draining purchasing poweraway from the economy. For example, in 1977State and local governments ran a surplus of$29.2 billion -- almost three times as largeas the deficit shown in Table 111-3 above. Ifthe net export deficit of $9 billion isincluded, one quickly reaches the conclusionthat in 1977 the purchasing power supplied bythe Federal Government was grossly inadequateto offset that being drained away by othersectors.
The foregoing discussion raises animportant question: can we expect to balancethe budget as we return to potential levels ofoutput? 1he answer depends largely on thebehavior of other sectors of the economy.State and local governments are currentlyrunning a surplus of $13.7 billion in theiroperating budgets. This will not continueindefinitely, but neither do we expect it todisappear in 1978. At the same time, they arerunning a surplus of $15.5 billion in theirsocial insurance funds. This surplus hasgrown slowly and can be expected to continue-- in fact, for the next several years it willrise faster if State and local employmentcontinues to expand. Our net export positiondeteriorated rapidly in 1977 -- as recently asthe fourth quarter of 1976, we were running a$3 billion surplus -- and this situation couldturn around again. Although we expect netexports to remain in deficit in 1978, as theeconomies in the rest of the world improve andas we learn to conserve energy, our netexports should return to a position close tobalance. Taking all of this intoconsideration we cannot reject the conclusionthat it will be necessary to run a deficit inthe Federal budget even after we return to
673
potential levels of output in order to offsetpurchasing power drains from other sectors ofthe economy. However, as the economy returnsto full capacity the amount of supportnecessary from the Federal Government(measured as a percentage of potential GNP)should diminish.
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IV. MONETARY AND FISCAL POLICY
The best economic news about the last yearis that from the fourth quarter of 1976 to thefourth quarter of 1977 almost four million newjobs were created in spite of the relativelymodest 5.7 percent real growth rate over thesame time span. Unfortunately thiscombination was made possible by very slowproductivity growth.
Much of the productivity lay occurredbecause production and employment growth in1977 were heavily concentrated in lowproductivity sectors -- wholesale and retailtrade, services, and Government. It is thisfact, too, which explains why manufacturingcapacity utilization rates have not risen assharply as might have been expected incorrespondence with the huge increases inemployment. Finally, this situation threatensfuture stagnation of real wages and moreinflation as money wage increases add to unitlabor costs without the benefit of moderationby productivity growth.
Unemployment is still excessive among mostgroups in the labor force. Many adult malesare unemployed because our manfuacturingestablishment is still well below itspotential and because industrial constructionremains depressed. Nevertheless, morebalanced growth of demand could quickly reduceexcess productive capacity in the near future.Because our labor force has grown so rapidly,we may be in the process of creatingstructural imbalances that will combine futurecapacity shortages with labor surpluses,thereby producing continued stagflation.
Increased EmploymentJanuary 1977-January 1978,,(Seasonally Adjusted)THOUSANDS OF PERSONS
Service Producing Goods ProducingSi " elomonmarySOURCE: Bureau of Labor Statistics
m lii• & fab• mt °
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The paradox of our present situation isthat future considerations point to the needto raise the share of investment in the GNP,whereas the continued presence of excesscapacity, together with other factors thathave created an inclement investment climate,have caused the performance of capitalspending to be exceedingly disappointing.Nonresidential fixed investment in 1977 wasonly 8.8 percent of GNP -- far too little toprovide the plant and equipment needed toprovide jobs and rising real incomes for agrowing labor force.
It goes without saying that the task formonetary and fiscal policy is to sustain therecovery of the economy without exceedinginflationary speed limits. To do this specialattention must be paid to the lagging capitalspending sector. This is essential to providethe demand needed for sustained growth and toavoid impending structural problems.
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Monetary Policy
It is fair to say that the brunt of supportfor recovery in the last three years has comefrom fiscal policy while monetary policy hasremained preoccupied with the problems ofslowing inflation and with the internationalcondition of the dollar. The rate of real Ml(currency plus deposits) growth was negativein 1975; it became barely positive in 1976;and it reverted to zero in the first half of1977. */ One consequence of this one-sidedmonetaiy-fiscal policy mix is that consumptionand government spending have expandedstrongly, while investment and net exportshave been retarded. Housing, to be sure, hasmade a good recovery, but one has to bear inmind how far it had to come from its depressedconditions of 1975.
The budgetary and internationalconsequences of monetary policy are exploredin subsequent sections of this chapter. Herewe are concerned with the effect on capitalspending. Restrictive monetary policies haveraised interest rates, thereby lowering bondprices. While many factors have acted todepress the stock market, tight moneycertainly cannot have helped. High interestrates and low bond prices attract funds to thebond market and this exerts downward pressureon stock prices.
*/ Senator Bentsen states: "There is however'Eonsiderable disagreement among monetaryexperts regarding whether the real rate or thenominal rate of growth of the money supply isthe proper index by which monetary policyshould be judged."
Interest Rate Changes- Treasury BillsPERCENT PER ANNUM
The combination of high interest rates andlow stock prices creates an environment thatis exceedingly inhospitable to capitalspending. High interest rates make borrowingcostly, and low stock prices make theflotation of new capital issues difficult andunrewarding. As measured by stock and bondprices, the market value of firms' physicalassets is now very low relative to theirphysical replacement costs. As long as thatcontinues to be the case, the incentive toconstruct new capital facilities will be veryweak.
The clearest and most immediate way toalleviate this situation is through moreexpansionary monetary policy. Without anexpansionary monetary policy, the growth andunemployment goals set forth in Chapter IIIare not attainable.
Policy in 1977 and 1978
The nominal stock of money, as measured byM1 grew 7.4 percent between the fourth quarter&-of 1976 and the fourth quarter of 1977.* Thisis the fastest rate of monetary growth since1972. Despite this, and despite anyspectacular growth in real GNP, short terminterest rates (as measured by the Treasurybill rate) rose from an average of 5.0 percentin 1976 to 5.3 percent in 1977. At year endthe bill rate was over 6 percent.
*/ iSenator Proxmire states: "This growth ofThe money supply over the past year hasexceeded the high end of the target goals. Iquestion if different managers would havechanged this policy more than marginally."
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The quarterly pattern in 1977 was even morepuzzling. Whereas the annual rate of Mlgrowth was 6.2 percent in the f ir3t half ofthe year, the growth rate rose dramatically to11.0 percent in the third quarter.Nevertheless the Treasury bill rate inSeptember was more than 70 basis points aboveits June level even though GNP growth in thethird quarter was unspectacular. The economyexperienced a paradoxical situation in whichfaster monetary growth was more than offset bya slowing of velocity growth. The result isthat the rate of monetary growth has had anunpredictable effect on interest rates and onthe rate of economic expansion.
What is the explanation for the thirdquarter that found a higher rate of monetarygrowth associated with higher short-terminterest rates? Monetarists maintain that anincrease in the nominal rate of monetarygrowth raises inflationary expectations andthat this puts an inflation premium intointerest rates. However, that hypothesiswould imply a rise in long tern, interestrates, and these rates moved very little in1977.
At its quarterly appearances before theBanking Committees the Fed announces itstargets for the growth of the monetaryaggregates for the coming quarter. However,there generally is no explanation of how theFed intends to react if the actual rate ofmonetary growth deviates from its targets.This fact created a great deal of trouble inthe last half of 1977 when the rate of M1growth was much higher than the target ranges.In the third quarter, for example, the targetrange for Ml was from 4 to 6-1/2 percent,whereas the actual rate of monetary growthproceeded at an annual rate of 11 percent.
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In this situation the Fed could haveannounced that it had decided to supporteconomic growth and was therefore raising itstargets. But this option was not availablebecause the Chairman had consistentlymaintained that growth of the monetaryaggregates had been excessive throughout therecovery. Under these circumstances, a risein the announced monetary growth targets wouldsurely have been interpreted as evidence thatthe Fed was letting up in its battle againstinflation.
In the third quarter the rate of monetarygrowth and the targets went their own separateways. The Fed claimed that it could notreally exert effective control over the moneysupply. Convinced that the Fed would notraise its targets, the sharp divergencebetween the actual and the target rates ofmonetary growth produced the general belief infinancial markets that the Fed wouldsubsequently squeeze down the rate of monetarygrowth in order to get back on target. Thiscreated the expectation of an impendingmonetary crunch and caused an unloading ofvarious types of assets in favor of cashbalances. There was, in more traditionalwords, a sharp increase in liquiditypreference. The result was a slowdown in therate of velocity growth combined with a verysteep rise in short-term interest rates.
This diagnosis suggests that monetarypolicy may have inadvertently short-circuiteditself. Because of the low target range andthe expectations created by an above targetrate of monetary growth, the faster rate ofmonetary growth caused velocity growth todecline. This was not accompanied by-theusual expected decline in short-term interestrates. In fact, in the third quarter,interest rates actually rose. This causes a
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serious problem for the economy since it meansthat we cannot enjoy the benefits of a fasterrate of monetary growth because they areautomatically offset by countervailingmovements in velocity.
The present system of congressionaloversight of the Federal Reserve System isclearly in need of reform. It produces thekinds of unfortunate events described above,and it has not served to inform the Congressadequately of the intentions and consequencesof monetary policy. Our recommendations forreform are presented below.
As noted in our discussion of the outlook,the 4.5 to 5.0 percent real growth projectionfor 1978 and the 4.0 to 5.0 percent projectionfor 1979 presume the adoption of thePresident's budget, including his proposal totreduce taxes by about $25 billion on October1, 1978. Without the tax reduction, theeconomy would be very weak at the end of 1978;.even with it a marked slowdown is expected in1979. Presently planned fiscal policy forfiscal year 1979 is certainly not sufficientto reach our growth targets. It must berecalled that the upper ranges of our forecastpresumed a reasonably accommodative monetarypolicy throughout the period.
For reasons discussed subsequently, mostforecasters do not expect monetary policy tobe highly stimulative in 1978. DataResources, Inc. (DRI), for example, looks forthe rate of Ml (currency plus deposits) growthto fall from its 7.4 percent rate of 1977(fourth quarter over fourth quarter) to ratesof 5.7 and 6.3 percent in 1978 and 1979respectively. These monetary growth rates,combined with the Administration's fiscalproposals, are not sufficient to financeprojected nominal GNP growth without a
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continuation in the updrift of short-terminterest rates. This is consistent with theexpectations which the Council of EconomicAdvisers outlined in its Report. As a resultof this inappropriate policy mix, DRIforecasts a real GNP growth rate of about 4.5percent in 1978, and an even less satisfactoryrate of 3.9 percent in 1979. Unemploymentunder these conditions will still be wellover 6 percent in 1979, and capital spendingwill continue to lag as the consequence ofhigh borrowing costs and low stock prices. Itmust be remembered, in appraising this issue,that under the President's Budget proposalsthe economy will receive no additional fiscalstimulus until late 1978.
A Joint Economic Committee staff analysiscompared the effects of a monetary policy thatwould bring short-term interest rates back tothe average Treasury bill rate of 5.3 percentin 1977 to a DRI baseline solution. Theattainment of the interest rate target wouldrequire the fourth-over-fourth quarter rate ofMl growth to be stepped up to about 7 percentin 1978, and to 8 percent in 1979.
It is important to note that "stepping up"means raising the rate of monetary growthrelative to the forecasted rates of monetarygrowth and not relative to the 1977 rate.Indeed, if--he 7.4 percent rate of 1977 couldbe maintained, the Committee's goals wouldvery likely be met. Meanwhile, however, it isvery important that the Fed's monetary growthtargets be raised so as to avoid the problemscreated by divergence of the actual from thetarget rate noted above. We believe that the1977 M1 growth rate would probably be adequateto achieve the interest rate policyrecommended below.
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Since monetary policy affects the economywith a considerable lag, the staff analysisshows little effect until late in 1978. Butin 1979 GNP would be $40 billion higher, thereal growth rate would be increased a fullpercentage point, and the unemployment ratewould be one-half of one percentage pointlower. Thus, monetary growth above 7 percentcan eliminate all risk of recession in 1979and contribute some 500,000 additional jobs.
The effect of this change in the policy mixwould be to provide impetus to the investmentsector. Nonresidential fixed investment maybe $7 billion higher in 1979 and home buildingmay rise by more than $13 billion. Because ofthe clear need to stimulate investment, a moreexpansionary monetary policy should be high onour list of policy priorities.
Expansionary monetary policies tend toreduce the Federal budget deficit whileexpansionary fiscal policies do the opposite.Our staff estimates that attainment of a 5.3percent short-term interest rate target willreduce the deficit by from $10 to $15 billionin 1979. The stronger economy will generateadditional revenue from all taxes -- personal,business, social insurance, and indirect --and it will reduce outlays for unemploymentcompensation and welfare. In addition, thelower interest rates will reduce the cost offinancing the national debt.
The growth of the money supply should besuch that the rise in short-terminterest rates is reversed. Pollcy-in1978 should tend to move short-termrates toward their 1977 levels. Short-term interest rates should be maintainedat these lower levelsI-n 1979,
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Obstacles to Monetary Exeansion: TheInternational Position of the Dollar
Witnesses before the Committee havesuggested that the principal reason forexpecting monetary growth rates to be heldback in 1978 is the Federal Reserve'sperceived need to prevent the dollar fromfalling relative to foreign currencies.Recent increases in the. Federal funds andrediscount rates bear witness to the desire toshore up the dollar even at the expense ofdomestic expansion. If this orientation ofmonetary policy is continued, the pessimismexpressed by some of our witnesses will bejustified.
On the other side of this debate are thosewho believe that our large trade deficitimplies the need for a decline in theinternational value of the dollar. Thispolicy would tend to improve the competitiveposition of our export industries and wouldraise the cost of imports, thereby divertingemployment from foreign to domesticproduction.
We believe that so many special factorspresently influence our trade balance thatneither of these views is acceptable withoutmodification. Flexible exchange rates play animportant role in allowing gradual adjustmentto take place before severe imbalancesdevelop. But depreciation of the dollar tosuch an extent that it would eliminate thedeficit is simply not feasible or desirable.The prospect of continuing current accountsurpluses for the OPEC cartel impliescontinuing current account deficits for therest of the world. If the United Statesexperiences satisfactory rates of growth, itwill bear a substantial share of that deficit.
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Much of the trade deficit stems from thefact that the United States is at a stage ofthe business cycle different from her majortrading partners. Relatively strong growth inthe United States has led to a rapid increasein U.S. imports. Slow growth abroad has meantweak markets for U.S. exports. Since thevolume of trade adjusts slowly to exchangerate variations, a sharp drop in the value ofthe dollar would, in the short run, simplylead to higher prices for imports (and thusmore inflation) and greater turbulence ininternational money markets. Because of thedollar's role as the world's principal reservecurrency, severe fluctuations in its value canimpede orderly world economic growth bydistorting trade and investment decisions.
The faster the dollar drops, the greaterare the risks that the OPEC cartel will raiseits prices. Rising oil prices would furtherdepress the dollar and this could then lead toanother round of increases in oil prices.Although domestic fuel prices are almostcertain to rise in the future, it ispreferable that this be brought about througha reasoned and planned domestic energyprogram, rather than through the kind ofexternal shocks that were visited upon us in1974. It will be several years before anational energy policy can significantlyreduce our imports of energy. But bysignaling the adoption of a long-term strategyto reduce the U.S. trade deficit, a nationalpolicy would help stabilize the internationalvalue of the dollar.
The view that the dollar must be rigidlydefended at all costs is equally unacceptable.Directing monetary policy towards such a goalwould return us to the Bretton-Woods system inwhich international considerations tookpriority over domestic economic objectives.
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Such a policy would perpetuate the tradedeficit, even as it eliminates the overalldeficit by artificially stimulating capitalinflows. It would be deflationary not onlybecause a perpetual trade deficit represents aperennial net purchasing power drain, but alsobecause it implies high interest rates andtherefore vitiates the important role thatmonetary policy should, play in revivingcapital spending.
The Joint Economic Committee has long beenon record as opposing the use of monetarypolicy for international purposes. Similarly,we have been opposed to the use of foreignexchange market intervention for the purposeof achieving a domestic monetary objective.We reaffirm this view. */
/ Senator RibToff states: "This statementis too strong. I would agree that monetarypolicy should not be used primarily forinternational purposes."
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Domestic recover is too important anobjective to permit monetary policy tobe diverted to other goals, We thereforeoppose the recent increase in theFederal "funds rate and the rediscountrate because they represent delberateattempts to use domestic monetaryinstruments to achieve an internationalpurpose. Intervention in fore gnexchange markets should be Strictlylimited to measures designed to correct"disorderly markets. , *-/
*/ Senator Ribicoff states:Ts inherently both ainternational instrument.disorderly markets."
"Monetary policydomestic and
We currently have
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Our deteriorating foreign trade position isa source of serious concern. We believe that,over time, a part of our trade deficit can beremedied by the speedy adoption of a nationalenergy policy and that the remainder of theproblem is inherently temporary and externalin origin. Once growth rates abroad pick up,the U.S. current account will strengthen, aswill the dollar. Sound policy calls forpatience and the resistance of efforts torestrict trade by resorting to protectionistmeasures. Dumping, to be sure, is to bedeplored and may require an appropriateresponse if the countries involved refuse tochange their trade practices. On the otherhand there is little evidence that Americanindustry is losing its internationalcompetitive edge. Efforts to limit importswould surely be offset by foreign retaliatoryresponses against our exports, Protectionismmight not increase the number of jobs in theU.S., and it could well undo the verysignificant progress we have made through theyears in liberalizing trade.
It is important to the maintenance of theinternational value of the dollar that capitalbe encouraged to flow into the United States.However, as we have stated many times, thisshould not be done through monetary policiesbecause such monetary policies wouldnecessarily be restrictive and interfere withdomestic recovery. */
*/ Senator Ribf-coff states: "This statementTs too strong. I would agree that monetarypolicy should not be used primarily forinternational purposes."
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Under the circumstances it seems entirelyappropriate for this Committee to urgeAmerican banks to reconsider their lendingpolicies in a way that would reduce theirforeign leading operations somewhat in favorof more generous lending policies to domesticbusiness. A moderate shift in bank portfoliosin the recommended direction would take agreat deal of pressure off the dollar andwould help to finance the capital spending weso badly need. It would also takeconsiderable pressure off the Federal Reservebecause it would permit interest rates to bebrought down without excessively rapid growthin the money supply.
This is a reasonable request to make of ourbanking system. The United States provides aninvestment climate of political and economicstability not common elsewhere. Taking thisinto account, interest rates are notunfavorable. Lending opportunities surelyabound. Further, with the new Witteveenfacility, foreign credit demands should beeased. It will then make sense for our banksto look homeward more than they are presentlydoing.
Correction of our international tradeimbalance necessitates that we take measuresto restrain our huge appetite for foreign oil.The United States enjoyed a net export surplusof $7.8 billion (NIPA basis) in 1976, at whichtime we were spending $35 billion on foreignoil. However, the trade surplus moved into adeficit of $9 billion in 1977; $10 billion outof the total swing of $16.8 billion wasattributable to increased oil imports. Untilrecently, we were able to pay for our importedoil by our export sales. However, it is alsoquite clear that we cannot hope to continue toincrease our oil imports by $10 billion eachyear. Fortunately, much of this increase in
Balance of Traxde 1976,1977BILLIONS OF DOLLARS 1976 1977200 169
1977 was attributable to special factorsincluding the stockpiling program, the veryharsh winter of 1976-77, and the drought inthe West which forced utilities to resort tooil to supplement --their inadequatehydroelectric resources. In 1978, Alaskan oiland the hoped-for OPEC price freeze providereasons for optimism.
There is no doubt that we must develop anenergy program that reduces our reliance onimported oil. Such a program must consist inpart of reduced consumption of oil and ofgreater domestic production of oil andsubstitute fuels. Producers must be providedwith incentives to raise production andconsumers must be provided with incentives tocurtail consumption. It seems inevitable thatthis cannot be done without substantialincreases in fuel prices. Although theMembers of the Committee have varying viewsabout the President's energy program, westrongly believe that energy price increasesshould be phased in slowly. Abrupt priceincreases would produce a sharp reduction inconsumer real income and needlessly subjectthe economy to the same kind of stagflation-producing shocks that were experienced in1974. We are also persuaded that thefragility of the recovery makes it absolutelyimperative that energy taxes be handled insuch a manner that they impose no fiscal dragon the economy.
Fiscal Policy
The President's budget proposal for FY 1979is for outlays of $500.2 billion and receiptsof $439.6 billion, implying a deficit of $60.6billion. This deficit is roughly the same asthe Administration's estimated deficit of$61.8 billion for FY 1978 and suggests that
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fiscal policy, despite a major proposed taxreduction and reform program, is planned to beneutral in FY 1979. That is# it will neitheradd to nor subtract substantially fromaggregate demand, relative to the budget forFY 1978.
Expenditure Policy
The Administration estimates thatexpenditures will total $462.2 billion infiscal year 1978 and $500.2 billion in fiscalyear 1979. After allowance for inflation,this implies an expenditure increase in realterms of roughly 2 percent. It should benoted, however, that the $462.2 billionestimate is $4 billion above the levelspecified in the Second Concurrent Resolutionon the Budget for fiscal year 1978. In orderto spend this amount, Congress would have topass a Third Concurrent Resolution on theBudget. Further, current spending is runningslightly below the $458 billion level approvedin the Second Concurrent Resolution.According to the Congressional Budget Office,the rate of spending is currently in the $450-455 billion range. This implies that thePresident's outlay estimates for FY 1978 aretoo high and that spending in fiscal year 1979will grow 4 to 5 percent in real terms ratherthan the 2 percent that has been claimed.Comparisons of the second ConcurrentResolution and the President's estimates forfiscal year 1978 are shown in Table IV-lbelow.
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Table IV-1. Federal Outlays - Fiscal Year 1978(billions odolIlars)
SecondConcurrent Presidpnt's PotentialResolution LBudgit Status
National Defense 110.1 107.9 105.2International Affairs 6.6 6.5 6.3General Science,
Space and Technology 4.7 4.8 4.7Natural Resources,Environment & Energy 20.0 20.2 18.8
Note: T ui tional categories listed hereare those shown in the Second ConcurrentResolution. Presidential budget estimateshave been adjusted accordingly.Source: Second Concurrent Resolution on theBudget, and Senate Budget Scorekeeping Report,March 6, 1978.
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Although the President's Budget appearsreasonable in light of historical spendingpatterns, there are several areas where thespending estimates could prove to be too low.For example, the President has proposed aprogram to aid college students from middle-income families. According to the Budget,funds for this program were included in the$1.7 billion contingency fund. This samecontingency fund is also supposed to includemoney to pay for the urban program scheduledfor presentation later this year, Inasmuch asthe original urban aid program called foradditional spending of $3-4 billion, it isdifficult to see how the $1.7 billioncontingency fund will prove to be adequate tofund these two initiatives, as well as theother contingencies which will arise duringthe year.
Elsewhere in this Report, we recommend newinitiatives to address our. structuralunemployment problem. If adopted, theseprograms would add about $1-1/2 billion to1979 expenditures.
Economic Priorities in the Budget
The best way to understand the Government'spriorities is through an examination of theannual budget. As the President stated in hismessage, this year's proposed budget "is theAdministration's first full statement of itspriorities, policies, and proposals formeeting our national needs."
The key to judging budgetary priorities inany given year is an analysis of the planneduse of discretionary budget authority, Budgetauthority gives the best indications of futureplans because it often carries over from oneyear to the next; outlays in the current year
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are heavily influenced by earlier decisions onbudget authority. Discretionary budgetauthority represents the amount *in requestedappropriations over and above what theGovernment is required to request because ofpast decisions. The budgetary consequences ofpast decisions are contained in the Office ofManagement and Budget's (OMB) current servicesestimates.
The current services estimates are based onthe anticipated costs of continuing ongoingFederal programs and activities at 1978 levelswithout policy changes. OMB characterizes theestimates as an answer to the question, "Howwould the budget come out if we simply leftthe Federal Government on automatic pilotthrough next year?" The discretionary budgetproposals are the difference between thecurrent services- estimates and the amountsrequested in the Budget.
Table IV-2 shows a breakdown of governmentfunctions and compares current servicesestimates with the President's actualrequests. Column 3 in the table shows theincremental differences. For example, ther-erequest for National Defense is $2 billionhigher than what would have been spent had theprogram been left on automatic pilot.Similarly, an additional $4.5 billion in newbudget authority is being requested forEducation, Training, Employment, and SocialServices.
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Table IV-2. Current Services Estimates and PresidentialBudget Proeosais-for Fisca 1-Year 1979
.Budget Author-t by FunctionS(billions of dollars)
Current Presidential DiscretionaryServices Proposal Change
Source: Sgpc--i---Analyses of the Budget of the U.S. Government,Fiscal Year 1979.
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Two cautionary notes must be made aboutthese figures. First, the current servicesestimates for a number of functions arequestionable. As a general rule, currentservices estimates include anticipatedinflation. Where inflation is not taken intoaccount -- principally, Veterans' Benefits andGeneral Purpose Fiscal Assistance -- thecurrent services estimates are understated andthe differences between them and the budgetrequests are overstated. Secondly, thefigures by themselves may be misleading unlessone understands the context of the program andhow the funds are intended to be spent.
Large amounts of discretionary budgetauthority are being requested for functionsthat produce relatively little domesticeconomic activity. In this category areNational Defense ($2 billion), InternationalAffairs (which receives $2.3 billion, mostlyfor the Witteveen facility) and Energy ($2.7billion, mostly to import and store foreignfuel).
The growth in Defense appears to beprimarily in the support categories for a widevariety of conventional forces. This growthis partially offset by a large decline instrategic forces caused largely by a plannedreduction in the number of Trident submarinesto be built this year. The reduction inTrident construction tends to understate theoverall increase in Defense.
The largest single increase is for GeneralPurpose Fiscal Assistance ($7.1 billion).
.This item consists of the proposed taxablemunicipal bond option intended to provideinterest rate subsidies to States andmunicipalities who want to sell taxable bonds.Although the bonds would be used mostly tofinance capital improvements, it is not clear
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that a greater volume of improvements will beundertaken just because they are financed inthe taxable bond market,. It is alsointeresting to note that despite the largerequest for budget authority, theAdministration anticipates spending very fewof these funds.
Large increases in discretionary authorityare being requested for Transportation ($3.0billion) and Education, Training, Employment,and Social Services ($4.5 billion). Most ofthe Transportation increase is the result ofchanging the Urban Mass Transportation'sfunding from contract authority to annualappropriations. While this represents animprovement in the presentation of the budget,it does not indicate a commitment of increasedresources to T ansportation. The increasesrequested for Ec :ation, Training, Employment,and Social Services are spread across a numberof programs. In the employment area, however,the proposed increase in budget authorityprovides no additional public serviceemployment jobs. Budget authority requestsare actually being reduced slightly for theYouth Employment and Demonstration Act andsignificantly for the Jobs Corps program. Therequested increase for the ComprehensiveEmployment and Training ServicesAdministration may not be adequate to coverthe increased costs of Title I that willresult from the rise in the minimum wage.
There are relatively small discretionaryincreases requested for the Agriculture,Community and Regional Development, and Healthfunctions. The request for Veterans' Benefitswould show a decline if inflation were takeninto account. The increase requested forIncome Security will mostly be absorbed byinflation. Much of the large request shown
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under Allowances is to pay for FederalGovernment civilian pay raises.
An examination of the President'sdiscretionary budget choices reveals littleevidence that a major change in priorities istaking place. There are some signs that afoundation is being laid for future changes.But so far, this year's priorities are similarto those of prior budgets. Further, there islikely to be less economic stimulus in thebudget requests than is apparent from thefigures because of the composition of theincreases.
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Urban Policy and Housing
The President has stated his commitment tothe revitalization of declining urbaneconomies. The Budget, however, contains nomajor initiatives for the cities, does notredirect Federal assistance into areas ofgreatest need, and does not provide forimproved coordination of existing programs. */We await the announcement of theAdministration's urban policy, but remaindoubtful that urban problems can besignificantly reduced without eliminating theshortcomings in the existing programs.
*/ Senator Proxmire states: "The cities nowreceive $65 billion or more a year from theFederal Government. This is ample and shouldnot be increased. Instead, a major effortmust be made to reorder priorities and tochannel funds into areas of greatest needrather than to meet the demands of the mostaffluent and politically powerful groups inthe cities who have clout all out ofproportion to their numbers.
"The emphasis by the Secretary of Housing onnew starts, the change in the formula forCommunity Development, and the effort to getFNMA to do its job are correct and the kind ofre-ordering of previous priorities which canget the job done."
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Despite the NIPA data which indicate anannual State and local government surplus of$30 billion, many localities still faceserious fiscal problems. These data should becollected and released on a State-by-Statebasis indicating operating revenues andpension trust fund accounts for each State.Many proposals to assist urban areas have beenbrought to our attention. The followingdeserve serious consideration:
o As a general rule, Federal programs inurban areas could target assistance to peoplein greatest need. Too often government fundshave been distributed in a way that does notachieve the objectives that Congress intended.
o The Countercyclical Fiscal AssistanceAct of 1977 expires on September 30, 1978.This Act could be made permanent. Assistancecould be made available by using localunemployment rates as the trigger rather thana national rate which masks high rates oflocal unemployment.
o The Administration has proposedextending the Investment Tax Credit to applyto industrial and utility structures as wellas plant and equipment. It is feared that theeffect may be to divert private investmentaway from older cities. Consideration couldbe given to adjustments which place investmentin rehabilitation on a net equal footing withinvestment in new construction.
o The deterioration of public facilitiesin the cities has been exacerbated by therecent recession. The deferral of maintenanceand repair of roads, sewers, and bridges posesa grave threat to the cities' greatest asset-- their infrastructure. The FederalGovernment could provide guidelines forlocalities to inventory their public facility
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maintenance, repair, replacement, andexpansion needs. Such an inventory could berequired for participation in the CommunityDevelopment Block Grant and EconomicDevelopment Assistance programs.
o The existing housing rehabilitationprogram could be significantly expanded toimprove the housing stock and increase jobopportunities in cities with deterioratingresidential areas.
o The Public Works and EconomicDevelopment Act of 1965 could be funded at itsauthorized level of $1 billion. An increasefrom the budgeted amount of $533 million wouldrequire no new legislation and would assistdistressed areas in revitalize theireconomies.
o Many of the cities which areexperiencing population growth are finding itdifficult to meet the increased demands forhousing, roads, sewers, schools, and otherpublic facilities. Every effort must be madeto prevent these cities from developing theproblems which confront our older cities. TheDepartment of Housing and Urban Developmentcould provide extensive technical assistanceto these areas. Preventing blight is lesscostly and less difficult than eliminating it.
o A National Domestic Development Bankcould provide long-term, low-interest loans tomunicipalities, private industries, andnonprofit organizations for economicdevelopment purposes. This Bank could providemunicipal loans for development of publicfacilities as well as business loans,including venture capital for businessinvestment in high unemployment localities.
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o Many small cities are beset with seriousproblems. Small cities, however, find itdifficult to compete with larger cities forFederal funds. Special consideration may benecessary to ensure that small cities are ableto meet their needs.
TotalSpending
In broad terms we endorse the tax-expenditure policy mix proposed by theAdministration. This does not imply thatmoderate expenditure increases and taxreductions are the only means of providingeconomic stimulus. Certainly the alternativeof greater spending and lower tax reductiondeserves consideration, and we have clearlyindicated that in any event monetary policymust be expansionary. *1/
*/ Senator Proxmire states: "I reject thisalternative. We should cut spending, and ifpossible, increase tax cuts, not the other wayaround."
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The possibilities for expanding existingspending programs are Umite• We haverecommended increases in pubc sector jobprograms and countercyclical grants, and wehave also indicated areas where thePresident's Budget estimates appear to be low.These proposals yield a total expenditureestimate of $500-505 billion.
If we choose to rely exclusively onspending increases to provide economicstimulus, we would need to consider major newinitiatives. While we are not prepared tomake specific recommendations at this time,there is certainly no shortage ofopportunities. National health insurance andwelfare reform are two issues which have beendebated and which, depending upon the specificproposal, could imply sizeable spendingincreases. We are also very aware of thedeficiencies in our transportationinfrastructure and of our enormous urbanneeds. Many farmers are also in trouble andneed help.
There are, obviously, many ways to raisespending should we decide to do this ratherthan lower taxes. The problem is to buy thetime necessary to plan the programs so thatthe funds will be spent productively and atthe same time provide a speedy economicimpact.
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In fiscal year 1979, total Federalexpenditures should fall within $500- 50billion and total tax receipts shouldJbeapproximately $440 billion, */ Thisfiscal policy, combined with monetarypolicy discussed above, will achieve theeconomic goals set forth in this Report.
*/ Senator Proxmire states: "I believeexpenditures are at least $25 billion too highand that the Government could be moreefficient at the lower figure."
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It may seem surprising that the 1979 Budgetprovides almost no net additional stimulus incalendar year 1979 even though it contains aproposed income tax reduction of about $25billion. The reason is that the tax reductionis largely offset by tax increases that willtake place automatically in 1978 and 1979.
*/ Senator McGovern states: "The JointEconomic Committee does not discuss theAdministration's individual tax proposals inthis Report. However, there is one reformproposed by the President that is so urgentand so long overdue that I feel it is myresponsibility to call attention to it and tourge its enactment.(Continued on page 4S)
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If social insurance payroll taxes were torise by the same percent as the forecastedrise in nominal GNP in calendar year 1978, thetaxes would increase by about $13 billion.However, the forecasted increase is closer to$19 billion. The extra increase of about $6billion is attributable to the fact that boththe social security tax rate and base rose atthe beginning of 1978 and to the fact that theminimum taxable Federal base for unemploymentinsurance increased from $4,200 to $6,000,thereby raising Federal payroll taxes onemployers, and forcing many States to raisetheir unemployment insurance payroll taxes.
Because of the progressivity of thepersonal income tax, this tax tends to riseautomatically by 1.5 to 1.6 times thepercentage rise in nominal personal income.If income taxes were proportional, they wouldrise by about $19 billion in calendar year1978. But because of the progressivity factorthey will rise by $29 billion. The differenceof $10 billion between the two figures is thefiscal drag attributable to the personalincome tax. Added to the disproportionatepayroll tax increase, this amounts to a netfiscal drag from these two sources of about$15-$16 billion, and wipes out about two-thirds of the stimulus that would be providedby a $25 billion tax reduction.
Those who propose to reduce taxes by morethan $25 billion certainly have a strong case.They can point to the severe fiscal drag thatwill occur in 1978. They can also emphasizethat this drag will be magnified to $30billion in 1979 when the new social securitylaw begins to affect the level of payrolltaxation.
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In general we are favorably disposedtowards the Administration's specific taxreduction proposals. Because of thecombination of tax reduction withcontroversial tax reforms, a somewhat largertax reduction than the President's $25 billionmay emerge.
Congress has recently enacted a socialsecurity financing bill that relies entirelyon increased payroll taxation and that islikely to have very serious economicconsequences. Payroll taxes charged toemployees are generally regressive so thatincome tax relief may not provide an adequateoffset. Payroll tax increases on employersraise labor costs and are passed forward intohigher prices. This reduces consumer realincome and consumption and thereforesimultaneously adds to inflation andunemployment.
We are impressed by the proposal to fundHospital Insurance under Medicare (HI) andDisability Insurance (DI) through generalrevenue. For calendar year 1978 this wouldeliminate the need to raise $33 billion inpayroll taxes.
Serious consideration should be given to a$33 billion reduction in payroll taxes as asubstitute for the Administration's taxproposals. Since business costs would bereduced by about $16 billion, corporate taxliability would rise by about $5 billion, sothat the net revenue loss would be about $28billion. Employers would benefit from lowerlabor costs and higher profitability; outputand employment would expand; inflation wouldbe slowed; and our tax system would become farfairer and more equitable. Unlike theretirement system, benefits from DI and HI arenot closely linked to contributions and there
1'
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is therefore no particular justification forfinancing these programs from earmarkedpayroll taxes.
Fortunately, there is ample time to undothe harm of the recently passed socialsecurity bill because Congress wisely delayedthe addition of any new taxes until 1979.Some provisions of the bill, such as theelimination of double indexation of benefits,were badly needed changes which should beretained.
Congress should immediately begin areview of the social security financinglegislation recently enacted. Specialattention must be given to the long-termmacroeconomic consequences o anyfinancing proposal.
Because of the extraordinary drains causedby the deep and protracted recession, theUnemployment Insurance (UI) system is infinancial distress. States and the FederalGovernment have raised their payroll taxes onemployers. This has been very harmful to theeconomy because it raises labor costs andtherefore adds to inflation and unemployment.
The Administration's proposal to reduce theFederal tax rate on employers from 0.7 percentto 0.5 percent of taxable wages merelyreverses the rate increase that went intoeffect in January 1977. It would be moreuseful to rescind the Federal tax baseincrease (from $4,200 to $6,000) that wentinto effect in January of 1978 since this baseincrease raises the minimum taxable base forthe States and therefore forces many of themto raise their UI taxes.
7,11
Additional measures to assist UI areurgently needed. Specifically,
(1) Federal Trust Fund deficitsattributable to Extended BenefitTandSupplementary Benefit programs should beforgiven by a one time emergencytransfer from the general fund to theFederal Ui Trust Fund. Such a transferfs entirely ap ropr ate since UI wasnever intended to have to deal Wit
Ton -term unemployment. The transferwould add nothing to the budget decit.
(2) Assistance to the States inreducing-present debt should be providedby transfers from the general fund. So-called "cost equilization" grants areentirely appropriate. These grantsSh-o-ul be allocated on the basis of thi4
amount of extraordinary unemploymentsuffered in a State during the recentrecession, It is important that theallocation not be related to the size ofa State's Trust Fund deficit, since thatwould penalize those States that haveworked to maintain the financialViability of their UI systems and woulMbe a "bailout" for States that have not.
_* Senator Bentsen states: "I disassociatemyself from this recommendation."
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(3) The present system of imposingFederal pena ty taxes on employers inStates whose UI systems are in debt tothe Federal Trust Fund accounts shoul-dbe"' discontinued because it causes Statesto -raise employer payroll taxes dur-i-ngperiods of high unemployment. Thissystem should be replaced by a 5 to 10year repayable loan program, and theincentive to repay should be provided ba modest interest charge rather than byharmful-taxes onl employers. The term ofthe loan should be extende a yearfor any year in which unemployment in aState exceeds 6 percent.
(4) General funds should be infusedinto the State UI System, whenever theunemployment rate in the State risesabove 6 percent. This would enableStates to avoid tax increases duringperiods of high unemployment.
We believe that these reforms are extremelyimportant. The viability of our unemploymentinsurance system makes it imperative that theFederal Government assume major financialresponsibility during periods of economicemergency. Failure to do so merely meanshigher burdens of payroll taxation onemployers with the consequence of moreinflation and higher unemployment.
Crowding out
The prospect of a $60 billion deficit hascaused renewed expressions of concern aboutthe possibility that Federal competition forfunds would raise interest rates and "crowdout" private investment spending. It istherefore important to re-examine this issue.
713
Crowding out would certainly be theconsequence of an increase in governmentspending or a reduction in taxes at a timewhen the economy's resources are fullyutilized. Under such circumstances, the shareof national output that accrues to one sectorof the economy cannot be expanded withoutreducing the share that goes to other sectors.However, this is not currently a problembecause the presence of idle resources makesit possible for all sectors to expandsimultaneously.
To conduct a greater volume of Lusiness,individuals and businesses will need moremoney in their pockets and in their bankaccounts. When the Federal Reserve fails tosupply this accommodation, interest ratesrise. To get the money balances which theyneed, people will attempt to borrow and tosell some of their earning assets -- bonds,stocks -- and as a result of this, bond priceswill fall and interest rates will rise. Thisproduces monetary crowding out of interest-sensitive expenditures. However, suchcrowding out is entirely avoidable bysufficiently accommodative monetary policy.On March 7, 1975, we reported to the SenateBudget Committee as follows:
If heavy government borrowing does driveup interest rates, it will be becausethe Federal Reserve has not madesufficient credit available, not becausethe financial system cannot handle theflows.
We continue to subscribe to this view.
Nevertheless, one may ask why the budgetdeficit remains so large despite verysubstantial economic recovery. One answer isthe bias of recent years towards restrictive
714
monetary policy combined with expansionaryfiscal policy. This policy bias has weakenedinvestment. A second reason is the verysizeable surplus that is now being run byState and -local governments, This surpluscame to $29.2 billion in calendar year 1977 onan NIPA basis and it represents a netwithdrawal of purchasing power that isappropriately offset by the Federal deficit.A third reason is our foreign trade deficit.As long as imports exceed exports, there willbe a net drain of purchasing power out of theUnited States. Unless we are willing to letsuch a drain slow the economy, we will have tooffset it either with a deficit in our Federalbudget and/or with other measures thatstimulate spending in the private sector ofthe economy.
Improvements in Policy Coordination
Many committees in the Congress areconcerned with economic policy. It is theunique responsibility of the Joint EconomicCommittee to review the overall economicsituation and to ensure that policies areadequate, consistent, and properlycoordinated. Under the Employment Act of1946, the Joint Economic Committee reports toCongress early in the year on the President'sEconomic program, and in this Report theCommittee provides its own evaluation andrecommendations on the entire program and itscomponent parts.
Monetary policy is a central ingredient inthe annual policy strategy, and it istherefore essential to review monetarypolicies in detail and to consider theirimpact and interrelation with other elementsin the economic outlook. Of particularconcern to us is the appropriateness of the
715
monetary-fiscal mix. We must ensure thatmonetary and fiscal policies do not work atcross purposes. To see that these policiesare coordinated in the common interest is oneof the essential functions of the JointEconomic Committee.
Over the years we have frequently calledattention to serious inadequacies in thecoordination of monetary and fiscal policy.It was this concern that led us in 1975 tourge that the Federal Reserve report regularlyto the oversight committees on its monetarypolicies and the operation of such policies.Subsequently, legislation was enacted torequire quarterly reporting to the House andSenate by the Federal Reserve.
While the legislation has represented agreat improvement over past practice,subsequent experience has disclosedimperfections, and an experience such as thatof the third quarter of 1977, which wasdescribed earlier, leads us to urge furtherchanges in the congressional Federal Reserveoversight process. As noted earlier, thereare some technical deficiencies of the FederalReserve's reporting system, and we are. alsovery concerned with the development of arational monetary-fiscal strategy. To dealwith both of these problems, we make thefollowing recommendations:
The Federal Reserve should issue awritten report to the Congress shortlyafter the reeipt of the Economic Reportof the President. After consultationwith the House and Senate BankingCommittees, the Joint Economic CommitteewI review the report and make itsrecommendations. The Federal Reserve'sreport would be expected to meet threebasic requirements:
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(1) It would analyze the desirability,consistency, and feasibility of thequantitative goals for employment,
growth, and inflation for theforthcoming fiscal year as-set fortthe President.
(2) It would provide the FederalReserve's own quantitative forecast ofeconomic activity for the forthcomingyear on a quarterly basis.
(3) It would discuss in exactquantitative -terms how the propos-edmonetary--eolicies are designed toreconcile the President s -targets and
the Federal Reserve's own forecast.
This reform would eliminate many seriousproblems. It would provide this Committeewith the information it needs to perform itspolicy coordination role effectively. Itwould also ensure that monetary and fiscalpolicies aim at the same goals rather thanwork at cross purposes as has happened all toofrequently in the past. Such biases as theone that has supported consumption but heldback investment during the course of thecurrent recovery would be eliminated.
717
It should be understood that the FederalReserveSYstem is responsible andaccountable to the Congress. In theevent that there is conflict between thetargets of the Administration and thegoals of the Con ress, the FederarReserve must be guided by the will ofthe Congress.*/
*/ Senator Ribicoff states: "We should notforget the benefits of an independent FederalReserve System. While I support moves towardincreased communication and coordination, Iwould oppose any attempt to eliminate orseriously damage the independence of theFederal Reserve System."
718
Finally, in the past the Budget Committeeshave been hampered in their attempts toestimate future expenditure and revenue levelsbecause these variables will depend on thestate of the economy, and that cannot be knownwith any certainty as long as there is noprecise knowledge about the intentions ofmonetary policy. We therefore make thefollowing recommendation.
The timing of the Federal Reserve'sreporting cycle should be changed tomake -...it: coinc6ide Wththe con'gressiOnlaf
uget cycle. The Chairman of theFederal Reserve would therefore appearbefore both Banking Committees in timeto permit these committees, and t eJoint Economic Committee, to report tothe Budget Committees on monetary icprior to the First and Second ConcurrentResolutions on the bud-get_-*/
*/ Senator Proxmire states: "Thisrecommendation is subject to the actions ofthe House and Senate Banking Committees. AsChairman of the latter I reserve judgement onit. "
719
None of these proposals is in any wayinconsistent with, nor are they meant tochange, any of the requirements of the FullEmployment and Balanced Growth Act describedin Chapter III. It is essential to reform thepresent Federal Reserve reporting system andto ensure the planning and coordination ofmonetary and fiscal policies in the nationalinterest. Passage of the Full Employment andBalanced Growth Act would 'greatly facilitatethe aims set forth here.
720
Continuation of Senator McGovern's statement.
"The proposal in question is the President'splan to scrap the present system of providingeach family with exemptions of $750 perdependent and to replace this with a percapita tax credit of $240. This reform wouldgreatly improve the equity of our income taxsystem since the exemptions are of principalbenefit to high income taxpayers. Toillustrate, if a high-income family that paysa marginal rate of 40 percent has anadditional child, that family will save 40percent of $750 or $300 in taxes. On theother hand, a low income family paying a 10percent marginal rate would save only $75.This is clearly an unfair system. If it werereplaced by the $240 tax credit, both familieswould save $240 if they gained an additionaldependent.
"I would like to carry the President'sproposal one step further. A low incomeperson whose computed tax liability (prior todeduction of the credit) does not come to$240, cannot avail himself of the full amountof the credit. I therefore propose that thecredit be made fully refundable. This wouldfurther improve the equity of the tax system;it would provide a family of four with aminimum income of $960 and therefore establishthe basis for a rational start towards welfarereform. It would provide an incentive formore low-income persons to file a simple taxreturn and to acquire social security numbers.This would be of tremendous assistance to theso-called "outreach" programs that presentlyspend large sums attempting to identify andlocate low-income persons so that they canreceive the various benefits to which they areentitled. Finally, by consolidating thepresent $30 per capita credit with the new$240 credit, combined with the elimination of
721
the exemption, the personal income tax wouldbe greatly simplified.
"I have asked the staff to estimate the budgetcost of this proposal and have learned thatits cost would be about $21.5 billion incalendar year 1978. In view of the veryserious danger of a recession in 1979, itseems to me that this proposal would not onlybe humane and improve the equity of our taxsystem, but would be very sound fiscal policyas well."
722
V. THE CONTROL OF INFLATION
Inflation continues to be among the mostserious and intractable problems confrontingour economy. Under the impact of increasedoil prices and poor world food harvests,consumer prices rose 11.0 percent in 1974. In1975, despite enormous slack as the economyreached the bottom of the worst recessionsince the Great Depression, the Consumer PriceIndex (CPI) still grew 9.1 percent.Substantial improvement occurred in 1976 witha slowing of the inflation rate to 5.8percent, but this once again gave way to aworrisome rise of 6.5 percent in 1977. It isimportant to note that none of the cited yearscould be regarded as years in which aggregatedemand was excessive.
The central theme of our 1977 MidyearReview of the Economy */ was that inflation isthe principal impediiment to the recovery ofthe economy. That theme is still valid. In1975 it was thought that an annual real growthrate of 7 percent was feasible and that fullemployment could be restored no later than1980. Because of the failure of inflation toabate, policymakers are fearful that rapidrates of real growth will set off new waves ofinflation. This fear has been a seriousimpediment to the adoption of stimulativepolicies designed to speed the recovery of theeconomy.
*1 -The 1977 Midyear Review of the Economy,Report of the Joint Economic Committee,Congress of the United States, together withMinority and Additional Views, September 30,1977.
723
Inflation and Recovery
Excessive unemployment calls forexpansionary policy, but this risks renewedinflation, while a high rate of inflationcalls for restrictive policy, thereby riskinghigher unemployment. Unfortunately, duringthe 1970s inflation has hampered theimplementation of the Employment Act byfostering the adoption of economic policiesthat slow economic growth and increaseunemployment.
A notable example is the Federal Reserve'saction to reduce the real quantity of Ml by afull 9 percent from the end of 1972 to themiddle of 1977. Another is the cautiousfiscal policies pursued during this sameperiod. We have had very large budgetdeficits, but these have been the automaticconsequences of the recession. The recessionhas depressed revenues from all tax sources,and it has raised outlays for unemploymentcompensation, welfare, food stamps, and thelike. The bulk of the deficits have been dueto these automatic factors which overshadowthe effects of the discretionary policies thathave been put in place. Although Congress hasgranted tax relief and has created new publicservice and youth employment programs, it isnevertheless true that the budgets of the lastfew years have provided very little net newfiscal stimulus, and the budget for FY 1979 isno exception. Fear of inflation has been theprincipal source of this fiscal caution.
Inflation produces restrictive effects thatautomatically slow growth and raiseunemployment. It lowers tne real quantity ofmoney, raises interest rates, and reducesinvestment. It also reduces the real value of
724
public debt and has an adverse wealth effectthat may lower consumption. Perhaps worst ofall, it moves taxpayers into higher brackets,even without benefit of any rise in realincome, so that their average tax rateincreases, real disposable income thereforedeclines, and consumption expenditure iscurtailed.
We have repeatedly pointed out thatinflation cannot be dealt with through demandrestriction without exacting intolerable costsin terms of lost production and employment.
Dr. Otto Eckstein, President of DataResources Incorporated, has made the resultsof a study of stagflation available to theCommittee. This study shows that inflationcould be reduced to about 4 percent by 1981 byrestrictive policies that would steadily raisethe unemployment rate to about 10 percent. Inan alternative, but equally unacceptablescenario, it was calculated that inflation canbe reduced to about 4 percent by 1983, but atthe cost of an immediate sharp rise inunemployment to about 8 percent and subsequentindefinite maintenance of the unemploymentrate at that level. Experiments by othercompetent researchers are consistent withthese unacceptable trade-off estimates.
Clearly, demand restriction is not theanswer to a cost-push inflation triggered bysharp increases in oil and raw materials costsand propelled onward by subsequent spirals ofwages and prices attempting to keep up witheach other. We have maintained our oppositionto demand restriction consistently and we aregratified that the present Administration isin full agreement. In his Economic Report,the President states (p. 17):
725
Recent experience has demonstrated thatthe inflation we have inherited from thepast cannot be cured by policies thatslow growth and keep unemployment high.Since 1975 inflation has persistedstubbornly at a 6 to 6-1/2 percentrate--even though unemployment went ashigh as 9 percent and still stands above6 percent, and even though a substantialproportion of our industrial capacityhas been idle. The human tragedy andwaste of resources associated withpolicies of slow growth are intolerable,and the impact of such policies on thecurrent inflation is very small.Moreover, by discouraging investment innew capacity, slow growth sows the seedsof future inflationary problems when theeconomy does return to high employment.Economic stagnation is not the answer toinflation.
In view of the basic agreement thatstagnation is not the answer to inflation, thequestion before us is how to stop inflationwithout resorting to the tight budgets andmonetary restriction that have been thecenterpieces of the futile and costly anti-inflation policies of the last several years.
726
Inflation Prospects
Earlier in our Report, we accepted theAdministration's goal of 6 percent rate ofinflation in both 1978 and 1979 as a limitedimprovement that is attainable. As a goal, 6percent is realistic. As a projection, it canonly be termed optimistic. There are several'reasons for this conclusion.
If recovery proceeds as hoped we may run upagainst specific capacity bottlenecks. Such aprospect sounds remote with unemployment stillabove six percent, but the lagging capitalspending that we discussed in the precedingchapter makes it entirely possible. Ifreliance is placed exclusively on monetary andfiscal policy, we cannot expect the inflationrate to decline as the economy approaches fullemployment and full capacity because this willbe accompanied by tightening of labor,materials, capital goods, financial, andproduct markets.
In addition, government policies keeppushing up costs and prices. While some ofthese policies may be unavoidable andjustifiable, they nevertheless raise prices.Even when the price increase comes from a one-time change such as a decision to increase apayroll tax, or a decision by a State toincrease its sales taxes, the higher pricesbecome a part of the cost of living. Thisaffects subsequent wage negotiations, andthis, in turn, affects the behavior of unitlabor costs, and therefore is likely onceagain to show up as a price increase.Consequently, even one-time changes that raisethe price level tend to become embedded in thewage-price spiral.
727
To cite a few examples of inflationaryFederal policies, in 1977 the importation ofcolor television sets was sharply limited by aquota system, and at present a new program isbeing implemented that would deny domesticconsumers the option of using low-cost foreignsteel. Import quotas were also placed onshoes, and the International Trade Commissionhas been pressured by demands for protectionfrom the manufacturers of a wide variety ofproducts. As our Mid Year Review noted, "Oneof the best ways to slow domestic inflation isto avail ourselves of inexpensive supplies offoreign goods." */ Recent trends have moved inthe opposite direction and, in the light ofour trade deficit, there is little ground forhoping that this situation will change in thenear future.
During 1977 price supports on milk andother agricultural products were raised.Although we do have a serious farm problem
*/ The 1977 Midyear Review of the Economy, p..600
728
at the present time, it is important torecognize that the traditional approach ofraising farm prices through supply restrictioncontributes to inflation. Farming is ahazardous occupation, and farm income isvolatile and in need of stabilization. Butcertainly in the era of rapid and stubborninflation, it would be preferrable to achieveincome parity by means other than pricesupports. */
*1 Senator McGovern states: "The Committeereport is correct in its statement that we nowhave a serious farm problem. I take issue,however, that traditional approachesnecessarily contribute to inflation. In thefirst place, the Committee print does notaddress itself to posing an alternative to thenecessity for raising net farm income nor doesit recognize that it is more probable that anyinflationary tendencies that result from pricesupports are ascribable to other sectorswithin the food chain. Adjusted net farmincome for 1977 fell to 20 billion dollars.It was $30 billion in 1973. Farmers cannotproduce for a market whose prices are belowtheir cost of production. I feel that it isshortsighted for the Committee to concludethat it is preferable to achieve parity bymeans other than price supports withoutconsidering what means of achieving parity itwould consider to be in the national interest.
"May I further point out that in my judgmentthe Committee has failed to focus on theintensity of the present farm crisis. Myyears of public service indicate to me thatthe present day revolt is more serious thananything the Congress has seen since the1930s. For these reasons, I respectfully wishto disassociate myself from that paragraph ofthe report relating to agricultural prices."
729
Environmental regulations are laudable butthey deter investment and they raise prices.More careful scrutiny o~f the employment andinflation generating effects of suchregulations is badly needed.
Minimum wages were raised during 1977 from$2.30 to $2.65 (effective January 1, 1978),and under the new law additional increases arescheduled for 1979 and 1980. While designedto provide minimum income to low-incomeworkers, it tends to decrease their prospectsfor employment. In addition, higher laborcosts are transmitted into higher prices, andthis may tempt the Federal Reserve to pursuemore restrictive monetary policies.
Some people are harder to employ thanothers and minimum wage legislation oftencreates the severest employment problems forthose it is most intended to assist. Wetherefore suggest that an experimental systemof wage subsidies for employers be designedfor high unemployment labor markets that wouldequalize employment opportunities for
730
unskilled teenage Americans. Hopefully, thiswould remove many of the present obstacles tothe hiring of young people -- especiallyminority teenagers -- and it would permit themto develop work habits and skills that wouldprovide future value to the economy far inexcess of the cost of the program.*/
*/ Representative Reuss and RepresentativeLong add the following: "Should such aprogram prove successful on an experimentalbasis, yielding demonstrable increases inemployment without displacing workers who donot qualify for subsidy, then I recommendfurther experimentation with a differentialminimum wage for new teenage workers incertain job classifications in, say, threeselected labor markets. Such experimentationwould serve to test whether any benefit may behad by allowing young people to earn pocketmoney at sub-minimum rates in jobs that mightnot otherwise exist. Such a program should bedesigned with the strictest safeguards againstany undermining of wage standards for thosealready employed or likely to become employedby the natural growth of employment inexisting organizations. If experimentationwith wage subsidies shows that such safeguardscan be designed, then it is my opinion thatdifferential minimum wages offer the prospectof a sufficiently attractive alternative (atno cost to the budget) to outrightunemployment, to justify such limitedexperimentation."
o • "-- %.
731
In January 1977 the Federal payroll tax onemployers that finances the FederalGovernment's share of the unemploymentinsurance (UI) program was raised from 0.5percent of taxable wages to 0.7 percent. Thispast January the taxable wage base increasedfrom $4,200 to $6,000. In combination, thetwo changes doubled the payroll taxes perworker that employers must pay to the FederalGovernment for unemployment insurance. Sincethe Federal base sets a minimum base for theStates, the rise in the base is forcing manyStates to raise their payroll taxes. As notedin the previous chapter, employer payroll taxincreases raise labor costs, are pushedforward into higher prices, and lead toadditional inflation and unemployment.
Similarly, the new social security law hasadverse serious consequences for growth andprice stability. The legislation calls forsteady increases in both the tax rates and thetaxable wage base for both employers andemployees. For employees the tax is generallyregressive and burdensome. For employers itimplies a tripling in the payroll taxes peremployee they have had to pay to financesocial insurance in the last decade. Thissubstantial rise in payroll taxes will raiselabor costs, it will contribute to thecurtailment of production and employment, andit will increase the level of prices. Thislegislation poses a serious threat to growthand price stability throughout the indefinitefuture.
.Congress has yet to pass an energy bill.Necessary as it is, the legislation willsurely cause the prices of oil, natural gas,and other fuels to rise. It is important thatthese price increases take place slowly sothat consumers of energy, whether industrial
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732
Indexing and Incomes Policy
There are two approaches to inflation thatdo not rely on policies that slow growth andraise unemployment. One is to learn to livewith inflation by moderating its harmfuleffects through programs of inflationcorrection or "indexing". The other approachis to attempt to stop the inflation by anincomes policy. The two approaches are notincompatible. European economists have tendedto view indexing of the personal income tax asan indispensible ingredient of a successfulincomes policy because high marginal rates oftaxation are among the principal factors thatdisrupt incomes policy agreements. In theUnited States we have tended to view the twoapproaches as incompatible and conflicting ineconomic philosophy. That is because we havefoolishly permitted indexing to become anideological issue.
As noted in the previous chapter, theAdministration's tax proposals will offset theunfortunate impact of inflation on our taxsystem in 1978. However, Congress shouldbegin giving consideration to measures whichwill offset these effects without requiringannual legislation. For example, we mightconsider following the Canadian practice ofchanging the exemption level, bracket limits,and tax credits of the individual income taxat a rate equal to the rate of inflation. Inthis way the real values of the exemptions,brackets, and credits would remain constant,and the average tax rate would not rise unlessthe real income of the taxpayer increased.Such "indexing" of the individual income taxwould eliminate one of the major sources ofautomatic restriction discussed in Chapter IV.
Another reform is to discontinue taxingnominal capital gains. When a capital asset
733
or residential, can adjust to the higher costswith a minimum of disruption.
At present, there is no program thatoffsets the inflationary impact of suchessential measures as the proposed energyprogram and the other price raising policiesthat have been noted above. We should adoptpolicies that would help to offset theinflationary impact of other governmentprograms. As noted in Chapter III, theproposed Humphrey-Hawkins bill enumerates anumber of direct anti-inflationary measuresthat could be taken. We urge theAdministration to move expeditiously on suchprograms even before enactment of theHumphrey-Hawkins bill.
Apart from overall fiscal and monetarypolicies, Federal actions have tended to raiserather than lower the rate of inflation. Thissituation needs to be reversed. The specificmeasures that raise prices either need to bemore carefully considered or to be offset in asystematic and intelligent manner.
One example of a policy that would act asan offset to Federal price level raisingprograms would be a payroll tax reduction. Asdiscussed in the previous chapter, $33 billionin payroll taxes could be eliminated byremoving hospital and disability insurancefrom social security. This would reduceFederal payroll taxes by almost one third andwould have enormously beneficial consequencesfor production, for employment, for businessprofitability, for equitable taxation, andfinally, for slowing inflation.
734
rises in value at a rate no greater than therate of inflation there is no real gain. Thecurrent practice of taxing nominal capitalgains is, therefore, a capital levy thatvaries arbitrarily in response to the rate ofinflation. Whether or not real capital gainsshould be taxed is a separate issue.
A third possibility is to discontinue thetaxation of nominal interest and replace thisby a taxable real interest rate equal to thenominal' rate of interest minus the rate ofinflation. This would eliminate suchinequities as those that occurred in 1974 whensmall savers earned nominal (and taxable)interest of 6 percent, but lost ground in realterms as their savings were eroded by aninflation rate that greatly exceeded thenominal rate of interest.
A final proposal is to provide small saverswith an opportunity to inflation-proof theirsavings by making available Federal Governmentpurchasing power bonds in small denominations.This would be particularly helpful to thesmall savers who do not have the resources toovercome the fixed brokerage costs that fullaccess to capital and real estate marketsprovide. This charge would createdifficulties for savings and loan institutionsand, therefore, would have to be accompaniedby changes in Regulation Q. The latter is areform that many believe to be overdue, but itshould be accompanied by measures that ensurean adequate supply of mortgage credit.
We are quite aware that proposals toprovide for inflation correction are gainingsupport, and we realize the need to moderatethe arbitrary redistributive effects ofinflation need to be moderated. At the sametime, we cannot yield to inflation. Incomespolicy, defined as direct government
735
involvement in the wage-price determinationprocess, is employed in various forms innearly every industrial country. It was triedin the United States in the early 1960s and ithelped to hold back inflation during theperiod of rapid economic expansion of 1961 to1965.
Conventional incomes policies tend to breakdown when demand in the economy is so strongthat employers gladly grant wage increasesthat exceed the guideposts in order to retainvalued employees, and foreign experiencesuggests that incomes agreements tend to breakdown under the pressure of unanticipated andsharp cost-of-living increases such as occurwhen the costs of imported food and fuel risesuddenly. It has also been clear from theexperience of foreign countries thatconventional tax policies may be incompatiblewith an incomes agreement. Such agreementsgenerally imply a willingness to accept afreeze in the relative shares of the nationalincome between wages and profits. However,high marginal income tax rates and increasesin social security taxes raise theGovernment's share of national income and thisputs pressure on the incomes agreement.
Aggregate demand in the United States isnot excessive at present; yet cost pushfactors keep the inflation rate rising at anannual rate of 6 percent. Since demandrestriction is a costly and inefficient way toslow this kind of inflation, this is the timeto consider the reintroduction of an incomespolicy.
We have long been on record as opposed tocomprehensive wage-price controls and we donot recommend them now. However, we aredeeply concerned that pressures will mount forsuch policies if we do not get inflation under
736
control. We should therefore implement anincomes policy now so that we will not bedriven into more drastic measures later.There is no anti-inflation program that, byitself, is adequate to reduce the inflationrate significantly. Many anti-inflationinitiatives must be pursued if progress is tobe made in slowing the rise in prices.
At present, the Council on Wage and PriceStability (CWPS) is the principal governmentagency responsible for analyzing theinflationary effect of public and privatesector activities. Under its statutoryauthority, CWPS reviews the inflationaryimpact of government policies, programs, andregulations, and together with the Office ofManagement and Budget, reviews theinflationary impact statements preparedpursuant to Executive Order 81811 as extendedby Executive Order 11949. The Council alsomonitors and reviews private sector price andwage increases.
We believe that public policies designed tocontain inflation must contain both short-runand long-run strategies. We have previouslyrecommended that the functions of CWPS must bestrengthened and expanded in order to enforcethe Federal Government's commitment to reduceinflation. Last year in our Report, westated:
Legislation should be enactedauthorizing the Council on Wage andPrice Stability to require?renotification of planned priceincreases from selected industries andto delay for modest periods wage orprice increases which could have seriousinflationary effects on the economy.
737
The President should support the effortsof the Council on Wage and PriceStability by directing all governmentagencies to cooperate with it and tomake available such information andassistance as the Council may require.The President should also be prepared tohelp make available to the public. thefacts, findings, and recommendationsdeveloped by the Council.
We continue to believe that prenotificationand delay of wage and price increases inselected industries is a reasonable starttoward an incomes policy, short of voluntaryor mandatory controls, which would allow theCouncil to review and comment on thejustification for wage and price increases.In addition, prenotification and delay of wageand price increases would help give theAdministration and the Congress time toconsider and develop long-run measures toreduce inflation.*/ **/
*/Representative Reuss states:'Prenotification is a useful idea unde-:certain circumstances. However, the prese>atnervous business climate is suchr thatprenotification requirements may do more harmthan good. Such requirements may impali thewillingness of business to undertake newventures and to expand their capacity, and asa consequence impede the attainment of £felrecovery and full employment."
**/ Senator Bentsen has provided additionalviews on this recommendation at the end of theReport.
738
We also support the Administration's effortto require Executive Branch agencies toprepare an economic analysis of proposedregulations and to submit it to CWPS forreview. This procedure will help check theFederal Government's additions to inflation.CWPS could focus more national attention onthe Federal responsibility to fight inflationby including in its annual report an analysisthat would summarize Federal actions whicheither raised or lowered prices.
As part of its annual report to theCongress, the Council on Wage and PriceStability should determine whetherFederal actions have resulted in a netreduction or increase in inflation. Anyspecific actions which have had asignificant impact should be thoroughlydiscussed and these impacts should bequantified.
Increasing the power and authority of CWPSalone is not sufficient. Additional measuresmust be adopted which will attack thestructural underpinnings of inflation. Oneidea which deserves serious consideration is atax-based incomes policy (TIP). GovernorHenry Wallich of the Federal Reserve Boardtestified before the Committee and discussedtwo basic versions of TIP.
One has been characterized as the carrotapproach, while the other has beencharacterized as the stick. The approachesare not incompatible and they could easily becombined. There is a central theme. To raisethe demand for labor and to raise employment,it is important to reduce the real labor coststhat confront employers. On the other side,the desire of workers for higher realcompensation works against the expansion ofemployment. By using the tax system to lower
739
real labor costs to employers while raisingthe real after tax compensation to employees,both higher employment and wage-pricestability can be attained.
The stick proposal is commonly known as theWallich-Weintraub plan. It would impose a taxpenalty on firms that grant wage increases inexcess of a predetermined governmentguideline. It would therefore provideemployers with incentives to resist excessivewage demands.
As Governor Wallich pointed out, thisproposal would restrain wages but because thepenalty tax would be paid by employers,evenhandedness would be maintained. Becausecompensation of employees comprises 75 percentof national income, reducing wage increaseswould necessarily slow price increases. Theproposal is highly flexible in that the taxcould be imposed as an increase in thecorporate income tax, as a payroll tax, orthrough disallowance of tax deductions of anyexcessive wage increase.
The so-called carrot proposal associatedwith Arthur Okun is a second TIP variantspecifically directed to the present economicsituation. However, except for numericaldetails, its application is general. Okun'splan is to provide tax relief as an incentiveto workers and businesses to "enlist in acooperative anti-inflation effort." For 1978Okun proposes that participating firms pledge:
740
... to hold its employees' average rateof wage increase below 6 percent and itsaverage rate of price increase below 4percent. */
In return for voluntary participation inthis plan, employees of the firm would receivea tax rebate of 1.5 percent of their wageincomes with a ceiling of $225 per person. Atthe same time, the participating firm wouldreceive a tax rebate on its business incometax liabilities of 5 percent.
One of the advantages of the Okun plan isthat it is voluntary. The basic idea is thatwage bargains should be based on a targetinflation rate, and that the workers who agreeto bargain on the basis of this target ratewill not be penalized if the actual inflationrate exceeds the target rate because theirparticipation in the wage-price restrainingprogram entitles them to tax rebates that makeup for any wage losses incurred by lessaggressive bargaining.
Okun estimates that his plan will costabout $15 billion a year in tax reductions. Asecond attraction of the proposal therefore isthat while it slows inflation it alsostimulates production and employment.
The Wallich-Weintraub and Okun proposalsrely on market incentives rather than oncoercion and control. We are aware that eachprogram has many shortcomings andadministrative complexities. Dr. Rudy Oswald,Research Director of the AFL-CIO, brought many
*/ Arthur M. Okun, "The Great StagflationSwamp," The Brookings Bulletin, Vol. 14, No. 3(Fall 1977), 6.
741
potential problems to our attention.Nevertheless, inflation is so serious andpervasive that we must address these problemsand design a program which can be implementedin the near future. We believe it is time forthe Congress to consider some such proposal.We prefer the Okun-type approach because it isvoluntary. Yet it is an approach that hasgenuine force and could be quite effective.*/
V1 Representative Reuss adds the followingsuggestion: "Undoubtedly it will takeconsiderable time before we and theAdministration are fully convinced that TIP isan appropriate means of controlling inflation.Meanwhile, it is important that we learn moreabout TIP. I therefore recommend that theCouncil on Wage and Price Stability (CWPS) beasked to study various TIP proposals andreport to us on their effectiveness and ontheir ability to be implemented in practice.Further, I ask for periodic reports from CWPSestimating the extent to which the inflationrate would have been altered had a TIP policybeen in place, its effect on incomes, and itsbudget costs, if any. Adoption of thisproposal would be an important and appropriatestep in making CWPS the inflation monitoringagency we have always intended it to be."
-742
Instituting a tax5.*sed incomes policy andincreasing CWPS power' and authority are just afew promising examples of a direct attack oninflation. In Chapter III, we emphasized thecontribution the Humphrey-Hawkins bill couldmake by focusing on a series of specificpolicies that could contain and reduceinflation without restricting aggregatedemand. The Administration has taken severalsteps in the right direction on the inflationfront. We would like to see them take severalmore. As we argued elsewhere, the Council onWage and Price Stability should be greatlyexpanded and strengthened. The inflationaryimpact of Federal programs must be carefullyassessed, and price reducing Federal policiesshould be given priority. The key point isthat a series of individual programs can makea substantial contribution to reducing overallinflation.
743
VI. STRUCTURAL UNEMPLOYMENT
The economy is now in its thirty-fifthmonth of recovery following the trough of the1974-1975 recession. Employment has increasedby a total of 7.8 million persons since thebottom was touched in early 1975. More thanhalf of the total increase in employment, 4.1million, occurred in 1977, the largest annualincrease on record. All major demographicoccupational groups, except farmers,experienced substantial employment gains.
Joblessness has declined from a recessionpeak of 9 percent in May of 1975 to 6.3percent at the end of January 1978. Theprospects for continued expansion ofemployment and continued reduction ofunemployment as we approach potential levelsof real output will depend heavily uponcarefully designed policy.
Primary reliance on aggregate fiscal andmonetary policies, while needed to continue toraise employment, may begin to generate newinflationary pressures as the economyapproaches full capacity. Given thecombination of rapid labor force growth andslow capital stock growth, the risk will beespecially great if the policy mix continuesto be characterized by almost total relianceon fiscal policy for economic stimulus. Theoverall unemployment rate for January 1978 isless than 1.5 percent from the point (4.9percent) where tightening labor marketconditions for prime age workers are expectedto begin bidding up wages. Consequently,expansion generated by general macroeconomicpolicies and programs may only reach theperiphery of the Nation's deep and chronicjoblessness caused by structural, demographic,and geographic problems. However, it must beemphasized that no structural programs will be
744
effective unless there is sufficient overallactivity to create a demand for additionalworkers.
As the slack in the economy declines,greater stress must be placed on microeconomicapproaches targeted at the structurallyunemployed. Concern for the welfare of suchpotential workers should dictate actionregardless of the state of the economy. Butthe need to supply continuing labor marketdemands for qualified workers, and to checkthe inflation that would otherwise occur,provides any additional incentive needed tomove in this direction.
The employment gains for all nonfarmworkers during the recovery were accompaniedby very rapid increases in civilian laborforce participation. As a result, the numberof new ýob seekers and labor market re-entrants equaled or exceeded the expansion ofjob opportunities in some important areas. Asindicated by Table VI-1 the unemployment ratefor minority women remained unchanged whilethe jobless rate for minority teenagersactually increased since the recession trough.Intolerably high levels of joblessnesscontinues to exist for minorities, teenagers,and women. In fact, in relative terms onlythe employment rate for white males hasimproved and all other groups are worse off.Table VI-l shows a two-tier labor force, onewhich is white and male and benefits the mostfrom stimulative macroeconomic policies, andone which is composed of minority workers manyof whom require effective, targeted structuralprograms if they are to be permitted to engagein productive employment.
Table VI-I. Selected Unemployment Indicators
UnemploymentRate
1975:2 1977:4
Ratio of Uneinploy-ment Rate to Nat'lUnemployment Rate
1975:2 1977:4
Percent ofCivilian
Labor Force
1975:2 1977:4
Percent ofUnemployment
1975:2 1977:4
White TotalWhite Males, 20+White Females, 20+White Teenagers
Source: Unpublished Bureau of Labor Statistics data and Joint Economic Committee staff.
-"
746
The ratio of the unemployment rate ofminority adult women and minority teenagers tothe national unemployment rate increasedsignificantly during the recovery period. Theratio of the unemployment rate of minoritywomen to the national unemployment rateincreased by nearly 35 percent, from 1.3 to1.8 by the fourth quarter of 1977. The blackteenage unemployment rate ratio increased bymore than 40 percent.
As emphasized throughout this Report,monetary and fiscal policies designed topromote vigorous and sustained economicexpansion are essential to lower both thenational unemployment rate and theunemployment rates for various groups insociety. Table VI-2 indicates that theeconomy still has an ample supply ofunemployed labor in all categories. Thesecond quarter of 1969, shown in the firstcolumn of the table, is the prerecessionquarter with the lowest unemployment rate.The second column shows the unemployment ratesat the beginning of the recession. As shownin the last column, all of the fourth quarter1977 unemployment rates, except that for whiteteenagers, were higher than the comparablerates in either of the base periods. Thereare at present no tight labor markets asmeasured either by demographic groups oroccupational classifications.
Increased aggregate demand will also serveto reduce joblessness among minority workers,teenagers, and others who fall into thecategory of the structurally unemployed.However, these reductions will be less thanthe reduction in the unemployment rate ofwhite adult workers. During the Committee'sannual hearings the Secretary of Labor,estimated that potential output will beachieved when overall unemployment is reduced
Total, 16 years and overMen, 20 years and overWomen, 20 years and overBoth sexes, 16-19 years
White, 16 years and overMen, 20 years and overWomen, 20 years and overBoth sexes, 16-19 years
Black and other, 16 years and overMen, 20 years and overWomen, 20 years and overBoth sexes, 16-19 years
Occupations
White-collar workersProfessional and technical workersManagers and administrators,
except farmSales workersClerical workers
Blue-collar workersCraft and kindred workersOperatives, except transportTransport equipment operativesNonfarm laborers
Service workersFarm workers
1969:2 1974:3 1977:4
3'. 42.03.7
12.2
3.11.83.4
10.6
6.43.66.1
25.0
5.63.73.5
16.3
5.13.55.1
14.2
9.76.78.1
33.3
2.0 'T.31.3 2.3
.9 1.82.8 `4.02.8 4.83.8 6.82.1 4.4
N.A. 8.2N.A. 4.96.4 10.64.4 6*.41.9 A- 2.9
-4 rce: Bureau of Labor Statistics, unpublished data.
24-Ob6 0 - 78 - 48
*4*6.64.86.8
16.7
5.84.26.0
14.1
13.3]0.111.838.3
4.12.9
2.74.95.77.65.39.25.7
11.47.94.1
748
to 4.75 percent. Yet as indicated by TableVT-3 which presents hypothetical jobless ratesin 1983 and assumes an overall unemploymentrate of 4.75 percent, unemployment willcontinue at unacceptable levels for teenagersand all minority workers.
Table VI-3
Hypothetical Unemployment Rates in 1983
LevelRate (000 omitted)
Total, 16 years and over 4.8 5,044
White 4.2 3,854
Men, 20 years and over 3.1 1,566Women, 20 years and over 4.2 1,459Both sexes, 16-19 years 11.0 829
Black and Other 9.2 1,190
Men, 20 years and over 7.2 463Women, 20 years and over 9.4 523Both sexes, 16-19 years 22.1 204
Source: Testimony of Secretary of Labor RayMarshall. Joint Economic Committee AnnualHearing, February 10, 1978.Note: This table assumes an overallunemployment rate of 4-3/4 percent and ncchange in historical structure.
Special measures are needed to aid thestructurally unemployed, -- those who remainwhen the economy reaches potential outputlevels. These special measures can
749
dramatically help reduce overall unemploymentand the unemployment rate differentialsbetween particular demographic groups. As theSecretary of Labor testified:
If, by structural programs, we are ableto reduce the 1983 differential betweenthe black and white rates ofunemployment from a ratio of 2.2 to 1.0to a ratio of 1.5 to 1.0, the overallunemployment rate would fall by 0.4 of apercentage point.
If we develop programs that cut in halfthe differential between theunemployment rate for those aged 16-24and that for adult men, the unemploymentrate would fall by 0.6 of a percentagepoint.
If the adult female unemployment ratecould be reduced from 30 percent higherthan the male rate to 1.5 percenthigher, the overall unemployment ratewould fall by 0.25 of a percentagepoint.
These illustrations show the important rolethat structural unemployment programs can playin improving the operation of the labormarket.
Youth Unemployment
Although teenage employment grew last yearby 341,000, these gains weredisproportionately enjoyed by whites, andyouth unemployment still accounted for nearlyone-half of all unemployment in 1977. Thejobless rate for workers aged 16 through 24was 13.6 percent. For teenagers alone it was
750
17.7 percent and for young persons 20 to 24years old the rate was 10.9 percent.
Black teenage unemployntent increased by23,000 in 1977 and averaged 41.1 percent forthe year. Joblessness among Hispanicteenagers increased slightly, but theirunemployment rate decreased to 22.3 percentbecause their labor force expanded even morerapidly. Unemployment among American Indianson reservations is also exceedingly high --about 40 percent in 1977.
Several reasons have been suggested ascauses of youth unemployment. It has beenasserted that the minimum wage has causedyouth unemployment to increase. However, inthe 1970s the minimum wage has been lowerrelative to the average wage of productionworkers than it was throughout most of the1950s and 1960s. Therefore, based solely onrelative wages, there has been a comparativeadvantage in hiring young people in the 1970s.Most studies show that the significance of theminimum wage is small, and the testimony ofDr. Joseph Kasputys of Data Resources, Inc.confirmed this fact.
The problem of teenage unemployment is notthe inability to hold a job, but to get one inthe first place. In 1977, 42.8 percent oftotal teenage unemployment was among youthswho had never worked before. The situationwas even more critical for minority teenagers.Nearly one-half of minority teenageunemployment in 1977 was among persons who hadnever worked before.
Adult Women
The unemployment and employment problems ofwomen are similar to those of young people.
751
Since 1970, the female unemployment rate hasbeen higher than it was in the latter half ofthe 1960s. The disparity between the femaleunemployment rate and male unemployment ratehas worsened. As testimony from Dr. BeatriceReubens indicated, in the fifteen years from1947 to 1961, the women's rate exceeded themale rate by one percent or more in only twoyears. In the succeeding sixteen years, thedifferential exceeded one percent or more inevery year. She concluded, "It appears that anew, higher level of female unemployment ratesin relation to male unemployment rates mayhave been established."
Much of the disparity between the male andfemale unemployment rates is accounted for bya wiLening gap between female and male ratesin the 25-44 year old age group, probablybecause reentrants to the labor force form alarger share of female unemployment than maleunemployment and reentrants are most likely tofall into the 25-44 year old age group. In1977, 37.3 percent of the unemployed females20 years and older were reentrants into thelabor force, while 19.3 percent of theunemployed males 20 years and older werereentrants.
Two other factors should be noted withrespect to female unemployment. First, hiddenunemployment -- defined as persons toodiscouraged to look for work and therefore notcounted as labor force participants -- is muchgreater among women than among men. Accordingto the Bureau of Labor Statistics, during1967-1976 there were approximately twice asmany female discouraged workers malediscouraged workers. Consequently, theofficial unemployment rates underestimate thedisparity between female and male unemploymentrates.
752
Second, although 36 percent of the womenwho were unemployed in 1977 had employedhusbands, this does not mean that joblessnessis not a serious problem for such women. Inmany families it is essential for the wife tosupplement the husband's income in order toattain an adequate standard of living. Thefrequently propounded notion that all womenjob seekers are not seriously in need ofemployment would make them second classcitizens. Needless to say, this attitude andits implications are unacceptable.
In the case of both youth and women whoseprimary labor market problem is a lack of jobskills and a relative lack of job experience,easing their entry and re-entry problems intothe labor market is the necessary first steptowards reducing their unemployment.
Eliminating Bottlenecks
The central focus of eliminating theseproblems must be to provide better mechanismsto match job seekers with jobs. Much of thepresent responsibility for this task lies withthe U.S. Employment Service. But theService's link with private employers has notbeen fully and effectively developed. Anunderstanding between the Employment Serviceand private business of each other's needs andservices is necessary before job seekers willbe effectively matched with job opportunities.Congress should consider increasing employmentservice funding to improve and expand theservices it offers to private business.
Schools, businesses, and unions shouldexpand the scope of the activities that linkclassroom activity to work. There areapproximately 600,000 persons enrolled underTitles II and IV of the Comprehensive
753
Employment and Training Act (CETA) who couldbe matched with private sector jobopportunities. Greater coordination betweenCETA Prime Sponsors and private businessshould be developed to place these persons inthe private sector when their public serviceemployment ends.
To help offset wage and fringe benefitcosts, CETA Prime Sponsors should be
given the resources for provision of"bonuses" to private employers for
employment of selected hard-to-employworkers in the private sector.
Such a program could easily be monitored bylocal Prime Sponsors to prevent abuse and itwould fit into the existing CETA framework.Prospective employees must have the requisiteskills for employment. Public serviceemployment and manpower training programs mustbe geared to providing the skilled labor whichmeets the needs of employers.
Current Federal manpower training programsprovide the basic training and retrainingnecessary to equip unemployed workers withskills to meet entry level requirements, butthese programs are inadequately funded. Suchprograms should be expanded by_ about $1-1/2billion over the next two years. Trainingprograms should also put more emphasis onupgrading employees from entr level jobs inorder to assure their employability. Careerladders should be developed to give employeesgreater incentive to remain with an employer.
Geographic Employment Problems
Many areas of the country continue to facehigh rates of unemployment and net employmentlosses. At the same time they suffer from
754
relatively slow or even stagnant economicgrowth.
Between 1960 and 1970, central citiesemployment in the East declined 2.4 peLcent,while it rose by 7.0 percent in the Midwest,23.1 percent in the South, and 28.0 percent inthe West. The 1974-1975 recession inducedfurther job losses in the East, but it alsoaggrivated the situation in central citiesacross the country.
The decline in central city employmentopportunities is especially serious forminorities. In 1977, 54.4 percent of thenonwhite civilian labor force resided incentral cities, while minority central cityunemployment accounted for 60.2 percent oftotal minority unemployment. Concurrently,the central city minority teenage unemploymentrate increased from 40.5 percent to 43.0percent and employment has declined. Thenonwhite teenage central city employment-population ratio has declined from 22.1percent in 1975 to 21.2 percent in 1977.
Although th2 unemployment problem forminorities is primarily an urban problem, thegeographic aspects of structural unemploymentare significantly related to poverty areas.In 1977, nearly 15 percent of the whitecivilian labor force and 39.9 percent of thenonwhite civilian labor force resided in urbanand rural areas officially designated aspoverty areas. Among blacks and otherminorities, most of the civilian labor forceliving in poverty areas resided inmetropolitan areas; among whites, most of thecivilian labor force living in poverty areasresided in nonmetropolitan areas.
As Table VI-4 shows, in metropolitanpoverty areas the overall white and nonwhite
755
Table VI-4. Distribution of the Labor Force and ofUnemploent in Poverty and Nonpoverty IM.reas
Source: Employment and Earnings,January 1978, p. 173.(a) Poverty areas are.those census
Bureau of Labor Statistics,
geographical divisions in which10 percent or more of the residents were poor according to the 1970census.
PovertyAreas (a)
756
unemployment rates were significantly higherthan their respective rates in metropolitannonpoverty areas. The greatest differentialsin both cases occurred among adult males andteenagers. In nonmetropolitan areas, with theexception of nonwhite adult females, theunemployment rates in poverty areas wereactually lower than their corresponding ratesin nonpoverty areas.
Structural changes in the economy havecreated growth differences between regions.First, there has been a pronounced regionalshift in the distribution of manufacturingemployment over the last twenty years. NewEngland, Mid-Atlantic and East-North CentralStates have lost a large share ofmanufacturing employment since 1956. Thelargest loss has been in the Mid-AtlanticStates which had 25.2 percent of manufacturingemployment in 1956 but have only 18.4 percenttoday. Other changes in manufacturingemployment by region during the period 1956-1976 are indicated in Table VI-5.
Table VI-5. Manufacturing Employment
(percent distribution)
1956 1976
Total United States 100.0 100.0New England 8.7 7.0Mid Atlantic 25.2 18.4East North Central 27.9 24.8West North Central 5.7 6.6South Atlantic 11.2 14.5East South Central 6.4 7.9West South Central 4.7 7.3Mountain 1.3 2.3Pacific 9.0 11.1
Source: U.S. Department of Labor, Bureau ofLabor Statistics
757
To aid in the fight against structuralunemployment, the Committee supports theAdministration's recommendation for continuedfunding of 725,000 CETA public serviceemployment jobs through fiscal year 1979.
The Committee recommends two steps to helpinsure that public service employment achievesthis goal:
First, the "overhead" payments permittedto Prime Sponsors should not be made onthe basis of wages paid. Existinglegislation permits overhead paymentsfor nonwage costs equal to 15 percent of"the wage bill. This provides that thelargest overhead payments will be forhighest paying jobs, exactly those jobsnot matched for the structuralunemployed. As an alternative, theoverhead payment could be made to varyon the basis of an employee's labormarket skills or could be made to varyinversely with the wage level.
Second, tenure in public serviceemployment should be limited to 18months. Requiring this periodic turnoverwould increase the public service jobopportunities and the availability ofon-the-job training for the structurallyunemployed.
Expansion of public service employment as acountercyclical tool has created a dependencyamong many local governments on CETA. In somecities, up to one-third of the city work forceis composed of CETA employees. Many of thesecities still suffer from revenue shortfalls,the need to maintain current levels ofmunicipal services, and a declining tax base.The continued decline in unemployment raisesthe prospect of the termination of CETA
758
programs in many localities. If this happens,the severe fiscal conditions of some of theselocalities, now partially relieved by CETAfunding, will become even more intense.Therefore, consideration should be given tonew programs which would provide fiscal reliefto localities that will be affected by loss ofCETA funding before that loss occurs.
The Administration's budget contains $400million in outlays to provide incentives forprivate business to hire the hard-to-employ.We strongly support this effort. Privatebusiness involvement in manpower trainingprograms for the hard-to-employ is less todaythan it was a decade ago. TheAdministration's proposal to create localPrivate Industry Councils, made up of businessand labor representatives, to provide localjob training slots is a positive step towardincreasing private sector involvement in thisarea. We call attention to an extensive listof successful job training and employmentprograms which are being operated by manycompanies in cooperation with local councilsthroughout the nation. A useful survey ofthose listed programs has been published bythe Committee for Economic Development. Suchefforts should be encouraged and expanded.The long-term solution to the unemploymentproblem resides in the private sector, whichemploys 5 out of 6 Americans.
759
VII. THE CURRENT SERVICES BUDGET
Section 605 of the Congressional Budget Actof 1974 requires the Office of Management andBudget to submit by November 10 of each year"the estimated outlays and proposed budgetauthority which would be included in theBudget ... for the ensuing fiscal year if allprograms and activities were carried on duringsuch ... year at the same level ... andwithout policy changes." It further requiresthat the Joint Economic Committee "shallreview the estimated outlays and proposedbudget authority so submitted, and shallsubmit to the Committee on the Budget of bothHouses an economic evaluation thereof on orbefore December 31...." The followingdiscussion is presented in accordance withthis requirement.
When the Joint Economic Committee presentedthe first Current Services Budget estimates inDecember of 1973, they were explained asfollows:
The figures for 1975 in this study arebaseline projections. They are not anattempt to predict the future or toanticipate the official 1975 Budget.However, they represent an effort toshow how existing programs will changebased on current law and projectedchanges in prices, wages, andworkloads .*/
*/ The 1975 Budget: An Advance Look, a staffstudy prepared for the use of the Subcommitteeon Priorities and Economy in Government of theJoint Economic Committee, Congress of theUnited States, December 27, 1973, p. 10.
760
In subsequent reports we elaborated on thisidea:
A baseline, or current services budget,is especially helpful in caluatingalternative budget proposals made by thePresident and Congress. Since thebaseline assumes no policy changes, thedifference between an up-to-datebaseline and the budget estimatespresented in the Presidentialrecommendations submitted in Januarywould be the policy proposals of thePresident.*/
The problem generally encountered in tryingto apply these ideas to the actual numbers wasthat up-to-date estimates were seldomavailable. The current service estimates wereprepared in November or December of each year,and by the time the President's estimates weresubmitted in late January or February, theeconomic assumptions had changed enough tokeep the numbers from being preciselycomparable. The result of this procedure wasthat the estimates were not as helpful asCongress had hoped when the CongressionalBudget Act, requiring their submission, waspassed.
*/ An Economic Evaluation of the CurrentServices Budget, Fiscal Year 1977, a staffreport prepared for the use of the JointEconomic Committee, Congress of the UnitedStates, December 22, 1975, p. 4.
761
In an effort to improve the usefulness ofthese figures, in 1977 the Director of theOffice of Management and Budget requestedpermission to engage in a one-year experiment.During this experiment, the current serviceestimates would be presented as part of thePresident's Budget submission and wouldtherefore be based on the same economicassumptions as the President's policyrecommendations. This experiment wasundertaken with the concurrence of theChairman of the Joint Economic Committee, theHouse and Senate Budget Committees, and theHouse and Senate Appropriations Committees.
In our judgment, this experiment has been asuccess. The presentation of the currentservice estimates in the budget summaryclearly shows the impact of the President'spolicy recommendations on the budget. Thediscussion in Special Analysis A, whichcompares the current services estimates withthe President's Budget request on a program-by-program basis, is a significant improvementover previous reports.
Presenting the Joint Economic Committee'sviews in the context of our Annual Report hasthe added advantage of allowing a morecomplete evaluation of the economic analysisunderlying both the current services estimatesand the President's recommendations. We havetherefore focused our comments in this sectionof the Report on specific recommendationsregarding the current services estimates andhave left the economic analysis for othersections.
The Congressional Budget and ImpoundmentControl Act of 1974 should be amended toallow the President to submit currentservices budget estimates concurrentlywith his budget proposals and to allow
762
the Joint Economic Committee to submitits evaluation of these estimatesconcurrently with its annual report tothe Congress.
Although the reporting procedures have beenimproved, we still consider the currentservice estimates themselves inadequate. Ourprimary objection is to the treatment ofinflation. The current practice is to includean allowance for anticipated inflation in thecurrent services estimates for those programswhere inflation adjustments are mandatoryunder existing law or those programs includedin the Department of Defense. Estimates forprograms which are not military or are notlinked by law to the cost of living include noinflation allowance.
This unequal inflation treatment means thatthe current service estimates are sometimesmisleading and unnecessarily difficult to use.For example, if one compares the currentservice outlay estimate for the Department ofDefense -- military ($114.3 billion) with thePresident's request ($115.2 billion), onecould correctly conclude that the Presidenthas requested a real increase in militaryspending. However, a similar comparison forthe Veterans Administration (a currentservices estimate of $18.9 billion compared toa Presidential request of $19.2 billion) couldlead to the erroneous conclusion that thePresident has requested a real increase hereas well. If the Veterans Administrationestimate had included an inflation allowance,the current services figure would haveexceeded $20 billion and, by comparison, theAdministration's estimate would appear to be areal reduction. By the Administration's ownestimates, if an inflation adjustment had beenmade for all programs not limited by statutoryceilings, the current service outlay total
763
would have been about $3 billion higher thanthe estimate presented.
The Administration's treatment ofinflation in tHe current servicesestimates is misleading and confusing.All programs in the Budget shouldreceive comparable inflation treatmentin the current services estimates.
Since 1963 when we held hearings and issueda report on the "Federal Budget as an EconomicDocument," the Joint Economic Committee hasstressed the need to view the Budget in thecontext of a broad, long-range set ofprojections. Gradually, with the adoption ofPlann irg-Prog ramming-Budget ing (PPB) systemsin 1965, the Legislative Reorganization Act in1970, a:id the Budget and Impoundment ControlAct in 1974, the Executive Branch ofGovernment has moved in the direction ofproviding more long-range estimates. Thefiscal year 1979 budget which provides currentservices estimates on an aggregate basisthrough 1983 is a further step in thisdirection.
The usefulness of 5-year budget projectionsis not to predict what budget totals willactually be in future years but to examine thescope for and desirability of changes inbudget pol icy. Since no one can foreseepolicy changes several years into the future,we are convinced that the current servicesprojection method is the most sensible way tomake long-range budget projections. Wecommend the Administration on the work donethus far and recommend that it be extended.
In future budgets, the 5-year currentservices estimates should be expanded toinclude functional and agency-leveldetail.
24-066 0 - 78 - V
764
ADDITIONAL VIEWS OFVICE CHAIRMAN LLOYD BENTSEN
REGARDING THE PRENOTIFICATION RECOMMENDATION
I disassociate myself completely from thisproposal which I regard as a very seriousmistake. Despite its reluctance to admit it,this Committee is recommending mandatoryprice and wage controls. The Reportrecommends that the Council on Wage and PriceStability be given authority "to delay formodest periods wage or price increases." Theauthority to delay wage or price increases islogically the authority to fix and controlwages and prices. So despite the Report'sdisclaimer that this proposal is "areasonable start toward an incomes policy,short of voluntary or mandatory controls,"the Committee is in fact calling formandatory wage and price controls.
Government dictation of wages and priceshas never worked to control inflation inpeacetime. Wage and price controls attackthe symptoms of the disease, but not thedisease itself. They may provide a temporarydisguise, they may present a comfortingillusion, but sooner or later consumers willconfront the harsh reality of shortages, lowquality products, and hundreds of devicesdesigned to circumvent the controls. Priceand wage controls put the economy in astraightjacket which invariably results ininequities among both workers and businessenterprises.
We should have learned by now that wageand price controls cannot be imposed on oureconomy without exacting a heavy cost in theform of serious misallocation of resources,inefficient production, and the potentialdomination of our daily lives by faceless
765
government bureaucrats. We should havelearned by now that excessive governmentregulation of business, which results inwaste and inefficient production, is one ofthe major reasons for our inability to bringdown the cost of living. It is, therefore,fundamentally unsound to recommend additionalbureaucratic authority to regulate theprivate enterprise system in the name offighting inflation.
Most leaders of business and laborstrongly oppose the concept of wage and pricecontrols. Businessmen fear that controlswill result in less investment, lowproductivity, and slow growth. Labor leadersknow that it is more difficult for workers tocircumvent wage controls than it is forbusiness to get around price controls. Bothbusiness and labor leaders correctlyrecognize that there is no easy, simplesolution to the problem of inflation. Wewill bring inflation under control when wereduce excessive government regulation ofbusiness, which drives up the cost of doingbusiness; when we develop ways to encouragecompetition through the entry of newbusinesses into our Nation's marketplaces;and when we provide adequate incentives forbusiness to invest in more productivemachinery and equipment.
766
ADDITIONAL VIEWS OFREPRESENTATIVE HENRY S. REUSS
I agree with the analysis and majorconclusions of this report. It lacks only aconcise statement on an action program for theeconomy that is required. In my view, the keyelements of such a program are these:
Unemployment: We need a maximum attack onstructural unemployment suffered by youngpeople, minorities, and residents of thecentral cities. The President should detachhis proposal to double public serviceemployment, from 700,000 jobs to 1.4 million,from his welfare reform program and send it toCongress for immediate action. Measures tostimulate private-sector employment: wagesubsidies, tax credits for new hiring, and (onan experimental basis in several labormarkets) minimum wage differentials for highunemployment areas or new labor marketentrants.
Taxes: The rate increases recentlyeffected in the Social Security payroll taxshould be rolled back. Additional scheduledrate increases should be repealed. Thedifference ($5 billion in 1979) should becollected from general revenues, with acompensating reduction in the amount ofpersonal income tax relief proposed by theAdministration.
The proposed extension of the investmenttax credit to structures should be dropped.Instead of this measure, which will exacerbatethe decline of job opportunities in thecentral cities, job-preserving measures shouldbe enacted: a tax credit for rehabilitationonly, for example.
767
Monetary Policy: I agree with the report'sassessment that a moderately expansivemonetary policy is needed in the year ahead.The shift to relative monetary ease, should,however, be accompanied by some relativefiscal restraint. This can be achieved bysubstituting direct job creation measures fora larger dollar volume of less effective taxreduction.
Enevq: ' The proposed wellhead tax ondomestic crude oil has become a politicalstumbling-block and should be dropped. Theenergy bill with the remaining four elementsof the President's plan should become lawpromptly. Work should then begin on a PhaseTwo energy program, including more support forthe development of alternative energy sources,such as solar, wind and geothermal, and astandby gasoline rationing system to ensurefair allocation in the event of a supplyshortage.
Agriculture: As the report points out,higher price supports are an inefficienty andinflation-causing way to ensure a decentincome to farmers. The Administration shoulddevelop instead (1) a supplementary program ofdirect income supports, enabling the familyfarm to weather bad years without imposingunnecessary costs on consumers or sociallywasteful restrictions on production; and (2) ameaningful war-on-hunger program.
International Policy: We must continue toresist protectionist, interventionist, andinflationary measures designed to close ourtrade gap or support the precarious level ofthe dollar. Such measures are ineffectual orundesirable or both. In the short run, thepressure on the dollar will continue, andthere is little the monetary authorities canor should do about it, disorderly markets
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aside. In the long run, if our tradingpartners expand their economies, our exportswill pick up; and if our energy policysucceeds in reducing our reliance on importedoil, our import bill will decline. These twomeasures can cure the patient: tinkering withthe thermometer cannot.
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ADDITIONAL VIEWS OFREPRESENTATIVE LEE HAMILTON
I generally support the goals andrecommendations of the Committee's AnnualReport. The Report provides a clear view ofmany of the major economic problems thatconfront the Nation and suggests new andpromising directions for economic policy. Myadditional views reflect a desire toemphasize some of the added complexities thatlie in the path the Committee recommends.Because any report must narrow its focus, Ialso want to mention economic problems thatshould be considered by future Joint EconomicCommittee reports.
Humphrey-Hawkins
The Committee Report strongly endorses theFull Employment and Balanced Growth Act of1977, better known as the Humphrey-Hawkinsbill. I find myself in sympathy with thebroad purposes of the Act and many of thespecific proposals it contains. The emphasison setting long-term goals as a guide foryear-to-year policy is basically sound.There is a definite need to assurecoordination of monetary and fiscal policies.The bill pushes our view beyond thetraditional remedies of macroeconomic policyto the need for specific structural programsto attack inflation and unemployment.Nonetheless, I do not share the unrestrainedenthusiasm that some of my colleagues havefor Humphrey-Hawkins and I do havereservations about it. My reservations boildown to two interrelated points.
First, can we deliver on the promises thatHumphrey-Hawkins is making to the Americanpublic? Is it desirable: in a day of deep
•cik •- i• .• : • !•3• • _• • • • L •-•- •
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public cynicism about Government'sperformance, to encourage the view that it ispossible to reach a 4 percent overall rate ofunemployment by 1983 without a seriousoutburst of inflation? Second, does the billprovide enough emphasis on fightinginflation?
If we succeed in achieving the goalscontained in this Report, the economy willreach its full potential some time in 1981.At that point, there will still be millionsof Americans out of work and the unemploymentrate should be in the neighborhood of 4.8percent.
The hard fact is that it is unlikely thatwe will be able to achieve all of our Jesiredeconomic goals. The likelihood is -hat wewill have to face difficult trade-offs amongprogram goals, full employment, inflation,and balanced budgets. I am not at all surethat Humphrey-Hawkins treats the Americanpeople with the candor about our centraleconomic realities that they deserve.
How can we go beyond the short-term goalsof this Report and not trigger newinflationary pressures? The answer hasalways been that specific structural programswill get us the rest of the way withoutpushing up prices.
At the annual hearings of the JointEconomic Committee we heard extensivetestimony about what structural programs hadworked in the past, how existing programscould be improved, and even what approacheswe might adopt in the future. It is also apossibility that the added pressure of ourambitious employment goal will force theAdministration and the Congress to be more
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imaginative with regard to employmentprograms. In effect, goals may become themother of invention.
But we must keep in mind that theHumphrey-Hawkins bill sets an extremelyambitious target. We may not be able to meetit. The bill itself recognizes that economiccircumstances of one sort or another mayforce a delay in reaching the 4 percent goal.We should be honest with the American peopleabout how difficult it will be to reach the 4percent unemployment rate in 1983 and toughwith ourselves in moving away from the goalif economic reality dictates.
Usually -viewed as just a full employmentbill, Humphrey-Hawkins also puts considerableemphasis on reducing inflation. However, thebill specifically directs the President toadopt a number of policies that will tend tolower prices. I am in full sympathy withmany of the specific proposals for fightinginflation and the importance the bill assignsto reducing inflation. Nevertheless, I stillhave some reservations about whether the billcan effectively reduce the price level.Reaching a 4 or even a 4.8 percentunemployment level will tighten labor marketsand strain productive capacity. That is asituation that could well lead to moreinflation. The individual programs containedin the bill promise some relief, but maysimply not be enough.
I just do not have any feeling that thePresident's anti-inflation program issucceeding. With the basic inflation ratestuck at at least 6 percent, we are gettingno relief from inflation, and I have noconfidence that relief will come soon.Inflation apparently is the most intractableof all our economic challenges. Most of the
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witnesses before this Committee suggestedinflation is more likely to accelerate thanto decelerate.
I am not comfortable with an exclusiveemphasis on growth and investment as the wayto cure inflation any more than I amcomfortable with the view that restrictivepolicies applied long enough will wringinflation out of the economy. I think wemust be willing to try other approaches. Iapprove the Report's interest in the proposalto grant tax relief for price and wagerestraint. It would probably be imprudent tointroduce such relief before subjecting it tomuch wider discussion and evaluation withregard to its effectiveness andadministrative feasibility, but the momentumof inflation is so great this proposal shouldbe seriously considered immediately.
Other steps must also be taken. Those ofus in government must become much moreserious about assuring that government actiondoes not raise costs. So often, governmentregulatory and tax policies generate theirown inflationary pressures. I like theCommittee's proposal that the President'sCouncil on Wage Price Stability reportannually on which government programs haveraised prices and which have lowered them.It may be too soon to adopt Arthur Okun'ssuggestion that we should set a target ofzero new Federal impact on the price level,but we should begin to move in thatdirection.
We must set our course for decliningFederal deficits coupled with the skillfuluse of a wide variety of employment programsdesigned to deal with structuralunemployment. Well tailored training, publicservice employment, youth programs,
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antidiscrimination laws, and better labormarket information can all help us achievefull employment without adding to inflation.I was particularly impressed with therecommendations of the Committee for EconomicDevelopment to encourage private sector jobsfor the hard to employ through the use ofincentives such as tax credits, stipends fortrainees, or an exemption from the minimumwage.
During the annual hearings of the JointEconomic Committee, a number of witnessesstressed the fact that we just did not knowhow to control inflation as effectively as wecould the level of production or employment.I do not disagree with that. But we mustalso recognize that in many cases inflationis less a result of ignorance than ofpolitical expediency. As Gardner A'kley hasreminded us, the major obstacle to containinginflation is not a lack of knowledge, or evena lack of devices to deal with it, but a lackof political will and leadership to take theright action at the right time. If theHumphrey-Hawkins bill is to be an effectiveguide to future public policy, it willrequire both good judgment and rare politicalcourage.
Deficit
For fiscal year 1979, the President hasproposed taxing and spending policies thatwill result in a deficit of just over $60billion. although I am uneasy about a largedeficit this far into the recovery, I amprepared to tolerate a deficit of that sizefor this year. So long as unemployment ishigh and there is slack capacity in theeconomy, there is little danger of inflation
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from excess demand. What I do not accept isone deficit after another, and we areperilously close to that situation.
The principal targets of national economicpolicy are growth, low levels ofunemployment, and price stability. It can becostly and self-defeating if these goals aresacrificed for admittedly secondary targetslike the balanced budget. But the costs ofbudget deficits cannot be ignored. If wecontinue to run massive budget deficits yearin and year out we run the risk of furthereroding public confidence in the Government.The size of the deficit may not worry theprofessional economist, but it does worry theaverage American. By one recent poll, 65percent of all Americans think a balancedbudget is a "very important" goal and another24 percent think it is a "fairly important"goal. The huge deficits may have more to dowith the lack of confidence in the economythan many experts realize. Within the boundsof prudent economic policy we should begin toget serious about moving to reduce ourdependence year after year upon these hugedeficits. By relying principally on theprivate sector for growth and the new jobsdemanded by a growing labor force, we canbegin to reduce our dependence on Federalspending. The President has taken the righttack in emphasizing the private sector andworking to reduce the share of Federalexpenditures in our gross national product.And the cost of interest on mounting Federaldebt can be a burden on the taxpayer foryears to come. Within the bounds of prudenteconomic policy we have to start movingtoward a balanced budget.
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The Intern tional Value of the Dollar
In recent months the value of the dollarhas decreased relative to the Japanese yen,the Swiss franc, the German mark, andEuropean currencies tied to the mark. Thefall has been steep and disorderly.
For several years now, the United Statesand other major economic powers have lived ina world of flexible exchange rates. By andlarge, they have served us well. High levelsof world demand coupled with the oil shock of1973 led to high and widely divergent ratesof domestic inflation. The Bretton-Woodssystem that assumed only occasional changesfrom otherwise fixed exchange rates wouldhave been hard-pressed to function in theearly 1970s.
The sharp fall in the value of the dollaragainst certain key currencies should not beinterpreted as a fundamental weakness of thedollar. It may be regrettable, but it is notdisastrous. Compared to the currencies ofall our major trading partners, the dollarfell by about 5 percent in 1977 -- far lessthan the 20 percent fall against the yen. Itshould also be'remembered that the dollar andother key world currencies have fluctuated invalue several times since the Bretton-WoodsSystem ended in 1971.
* At the same time, we cannot turn our backon a special international responsibilitythat comes with the dollar's role as theworld's principal reserve currency. Sharpand disorderly fluctuations in the dollarcreate the kind of uncertainty that canaffect trade and investment decisions. Inturn, such decisions could lead to a loss ofgrowth and employment opportunities for manynations.
776If the decline of the dollar continues, it
could cause severe political difficulties formany of our allies. The sheer rapidity ofthe dollar's fall against the currencies ofGermany and Japan has already created asevere threat to their export industries.Slow growth and painful adjustments for theirmajor industries could be the result.
The steady erosion of the internationalvalue of the dollar is also of understandableconcern to the OPEC cartel. Not only is oilpriced in terms of dollars, but many of theOPEC members have substantial dollar-denominated assets. A further drop in thevalue of the dollar could percipitate anincrease in the price of oil and a movementaway from American investments.
The fall in the international value of thedollar, therefore, is a matter that demandsthe careful consideration of theAdministration. On the other hand, it is notso serious as to constitute a crisis eitherfor the domestic or international economies.In addition, we must recognize that theUnited States is limited in what it can do tocontrol the international value of thedollar. The Joint Economic Committee isproperly critical of using domestic monetarypolicy to stabilize the dollar. By tendingto attract more foreign capital to the UnitedStates, higher domestic interest rates wouldtend to increase the foreign demand fordollars and therefore the value of the dollarrelative to other currencies. That processis both uncertain and costly. There isalready a substantial interest ratedifferential between the United States andWestern Europe. That has not been enough toovercome the expectations that additionaldecreases in the international value of thedollar are sure to come. Higher domestic
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interest rates will also come only at theexpense of slower growth, less investment,and higher rates of unemployment. Theinternational economy is crucially importantto the United States -- the value of ourexports is now almost 50 percent greater thanthe total value of residential construction.But the domestic economy remains ourprincipal focus. Using monetary policy tostabilize the international value of thedollar would be a case of allowing theinternational tail to wage the domestic dog.-
We can intervene in foreign exchangemarkets to make sure adjustments in theinternational value of the dollar aresmoother. I support recent activities of theDepartment of the Treasury and the FederalReserve System that move in this direction.Intervention designed to actually support acurrency, however, is costly and onlytemporarily effective.
We should also do everything we can todeflate widespread expectations that thedollar may fall further in value. ThePresident's recent strong commitments tomaintain a sound dollar are helpful.Although a national energy program will nothave a direct effect on the trade balance forsome time, it would be an unmistakable signalthat the United States has begun to adopt along-term strategy to reduce its oil importsand its trade deficit. The same could besaid about aggressive and imaginative plansto reduce inflation and increase exports. Weshould also exercise our imagination in theinternational arena -- searching out thosepolicies and proposals that can helpstabilize the dollar without sacrificingdomestic growth. In any case, the UnitedStates should make it clear that itunderstands the pressures on German and
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Japanese industry that have come from such arapid increase in the relative value of themark and yen.
Proposed Direction for Future JEC RePorts
Traditionally, the Annual Report of theJoint Economic Committee has dealt withspecific economic problems as well as thebroad macroeconomic issues. With a strongemphasis on the need for structural programsto fight both inflation and unemployment,this year's Report is very much in thattradition. Looking ahead to future Committeereports, I would like to suggest some areasthat merit detailed study by our Committee.
Research and Development. Research anddevelopment (R&D) have played a critical rolein American growth since the end of World WarII. New products have expanded vastly therange of choice confronting the Americanconsumer, and new processes have steadilyreduced the amount of labor, capital, andmaterial needed to produce American goods.By contributing to increased productivity,R&D fights inflation and makes American goodsmore competitive in foreign markets.
The need for further R&D is evident inalmost every industrial sector of thecountry. American productivity is no longergrowing as rapidly as it did for most of thepost-World War II period. Many industriesmust find more efficient ways to function orface constant pressure from foreign imports.America's longstanding strength in hightechnology items can only be maintained by aconstant R&D effort. The sharp increase inenergy prices forces us to find new sourcesof fuels as well as new ways to conserveenergy. The Joint Economic Committee should
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*take a detailed look at the current status offuture prospects for R&D in the UnitedStates.
Small Business. Too often the seriousproblems-of SmaTf business are lost in afocus on broader, more abstract problems.But small business occupies a unique andvaluable role in the American economy. Inmany ways, small business is the urbanequivalent of the family farm. Forgenerations of Americans, small enterpriseshave offered everyone the opportunity tobuild his own future. In addition, smallbusinesses have been the source of aconsiderable share of the Nation's newinventions. There can be no doubt that thesmall businessman is under intense pressures,many of which are caused by governmentpolicy. It is time we took a detailed lookat the problems that beset small business inAmerica and what public policy can do aboutthem.
Agriculture. Administration afterAdministration has been content to keepAmerican agriculture on a roller coaster thatmixes sudden prosperity with hard times. Weneed to take a close look at the changes thatare sweeping American agriculture. Supportprograms should be designed to assure theAmerican farmer an adequate income withoutrelying solely on price increases.Mechanisms to stabilize agricultural pricesand income should also be explored. Americahas been blessed by unparalleled bounty inagricultural resources. It is a part of theeconomy that we neglect at our peril. Thefarmer, as well as the small businessman,deserves our sympathetic consideration of hisproblems.
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780
ADDITIONAL VIEWS OFSENATOR WILLIAM PROXMIRE
I believe that both the President'sproposed $500 billion budget and thisCommittee's estimate of expenditures of $500to $505 billion are too high. Theseexpenditures represent an enormous burden onAmerican taxpayers. They should be cut by aminimum of $25 billion and better yet, by $35billion in order to provide a freeze onFederal outlays of about $465 billion as thedistinguished financial expert Henry Kaufmanproposed before the House Committee on theBudget.
First of all, this is an achieveable cut.It represents only a 5 to 7 percent cut in thePresident's budget and would provide for totalbudget outlays at about the fiscal 1978 level.Further, as one who has routinely examined thebudgets of numerous Government agencies as amember of the Senate Appropriations Committee,I assert without fear of contradiction thatthere is not a single general Governmentfunction where a 5 to 7 percent cut of thefunds could not result in a more efficient orless wasteful program combined with betterservice to the American public. One can namethe function--defense, foreign aid, deliveryof mails, welfare, housing, education, lawenforcement, highways, public works,reclamation, sugar or mineral subsidies,etc.--and know from experience that the budgetcould be cut without harming the function.
Second, modern economists have for too longmerely looked at the overall or "macro"effects of spending. Very little attention,if any, is paid to the genuine benefits of theproposed increase in outlays. They arejustified on such spurious grounds asnecessary to "keep even" because of inflation,
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to stimulate the economy to offset fiscaldrags, or as no more than provided by acurrent services budget.
The general has overcome the specific.Spending is justified for these economicpurposes without any or few argumentsjustifying their specific benefits. We areurged to keep wasteful military projects goingto avoid cuts in jobs, to continue pork barrelpublic works programs because the localcommunities want them, and to universalizespending because if all 50 states aren't cutin on the proposal it will fail of passage.The amounts of money which are taxed by theFederal Government from the earnings orsavings of 220 woillion Americans forinefficient purposes has grown beyond anyjustification on macro-economic grounds.
It is true, as Justice Holmes remarked,that with taxes we buy civilization. But weare not required to buy a wasteful or bloatedor super-civilization.
Third, the new totals are essentiallyunprecedented. Henry Kaufman put itsuccinctly in testimony before the HouseBudget Committee on February 6, 1978. Here'swhat. he said:
"The sharp acceleration in Federalexpenditures during fiscal 1978 and 1979 hasfew parallels in the postwar years.
"Judged against the size of the economy,Federal budget outlays in fiscal 1978represent a record postwar high of 22.6% oftotal GNP. While this ratio is expected todecline to 22% in fiscal 1979, it will stillbe the fourth highest in the last 25 years.
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"The yearly percentage increase inofficially projected expenditures, totalling15% for fiscal 1978, has been exceeded onlytwice in the past 25 years, once in arecession year (1975) and another in a war-related year (1967). It is twice as large asthe average annual rate of increase over this25-year period.
"The officially proposed increases inFederal expenditures are far greater on apercentage basis for this time in the businesscycle in the present economic expansion thanin the previous four business recoveries."
Finally, I wish to remind my colleagues andthe public of what former Senator Paul H.Douglas, once Chairman of this Committee saidon this subject. The phrase he coined wasthat "A liberal need not be a wastrel."Wasted funds build no schools, feed no hungrychildren, clothe no person, and help no one inneed.
There is now general agreement that properand appropriate Government functions are fargreater than every envisaged by the FoundingFathers or by the so-called ruggedindivualists of the industrial age. That isno longer in question.
But what is in question is our ability tolive within our means, to use public fundswisely and efficiently, and whether theGovernment is to provide subsidies to everyoneeverywhere.
We are probably providing more welfare forthe well-to-do than for those in genuine need.
I believe we should carry out Lincoln'sdefinition of the legitimate objects ofGovernment as doing for the people "whatever
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they need to have done, but cannot do at all,or cannot so well do for themselves in theirseparate and individual capacities."
Even a generous interpretation of thatsentiment would allow us to reduce Governmentspending by more than the $25 to $35 billion Ihave proposed.
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ADDITIONAL VIEWS OFSENATOR GEORGE MCGOVERN
The President's Economic Report of 1978 isobviously less restrictive than those of thelast few years. I believe it provides auseful starting point for budget policyconsiderations, and this Joint EconomicCommittee Report, by and large, represents anexcellent positive critique of the budget asa document of economic policy.
In some respects the President's Budget isencouraging. I am heartened by theAdministration's recognition of the need fora fiscal stimulus to reduce projectedunemployment rates that are stilldisgracefully high. It is also worth specialnote that the fiscal 1979 military budgetwould have been some $2.9 billion higher ifthe B-1 bomber had not been cancelled.
my basic concern is that tne President's1978 Economic Report represents too cautiousand traditional an approach to curbinginflation and lowering unemployment. It hasprovided very little new fiscal stimulus, andthereby lacks almost entirely any socialvision. Events have brought us beyond theluxury of viewing fiscal and monetary policyas socially neutral blueprints.
As a result, I have to say that I am insharp disagreement with the Administration'sapproach on several fundamental questions.
First, we have already raised a regressivetax -- the social security payroll tax; nowwe hear that part of the justification for a$25 billion cut in the more progressiveincome and excise taxes is to compensate forthe payroll tax hike. The combination makes
no sense. It will make a bad tax systemworse. In part, middle-income workers willbe paying more to finance a new tax break forpeople in higher brackets. I will proposeinstead that we forgo the $25 billion taxcut, and that we pay $7.7 billion of thesavings into the social security trust fundso we can cancel next year's increase inpayroll taxes.
Second, with the remaining $17 billion insavings, as well as with funds which can besaved by permitting a smaller increase inmilitary spending, I believe we ought to moveto stimulate the economy through directinvestments in high priority publicinvestment.
There are a number of other pressing needsthat cry out for attention.
One area of emphasis should be a systematiceffort to help our major cities through theirsevere financial crises. A substantialpublic sector contribution to urbantransportation, housing, and other publicservices would both help meet that crisis andprovide millions of jobs where they are mostneeded. I note that the National League ofCities and Conference of Mayors has justrecently called for an $11.3 billioncommitment beyond that proposed by thePresident to enterprises of this kind. Thatis the kind of program we could afford if wewere to forgo a quick tax cut as the standardremedy to a sluggish economy.
Research and development in the use ofrenewable energy resources could pay thehighest of dividends -- by helping to providethousands of jobs while at the same timeeroding our terrible growing reliance onimported oil.
786
I would also favor a substantial program tobolster farm income. The national farmers'strike has helped spotlight the fact that thenew farm program adopted last year, while adistinct improvement, is still gravelyinsufficient. We are in real danger oflosing the family farm structure that iscentral to a productive, efficientagriculture. And if that happens it will bea crushing blow to farmers and consumersalike.
Another priority investment should be inrail transportation -- particularly inreconstructing and upgrading rail lines.Here, too, we could provide large numbers ofjobs, while at the same time investing in thekind of energy-efficient transportation thecountry urgently needs.
What I want to underscore is my firmconviction that a tax cut now is not thewisest method to achieve economic stimulusand social progress. A properly conceivedbudget can both stimulate the economy and sethopeful new priorities.
Certainly no taxpayer will turn down a taxcut. But I believe the American people alsounderstand that their country needs thingswhich personal spending cannot give it. Ithink they understand that healthy cities,employed workers, prosperous farms, andefficient rail lines will enrich us all farmore than a few dollars in tax cuts for eachfamily or business.
In my opinion this Annual Report isexcellent. The only shortcoming I wish todwell upon is its failure to specify anddiscuss in detail those areas of social andhuman needs which deserve our priorityattention. I see no reason why we can't
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develop priorities for addressing publicneeds (energy, for example) and analysis ofhow treatment of these needs will affectemployment, inflation, balance of payments,capital development, etc. Unless we create amechanism for this kind of evaluation andcoordination, our most serious social andeconomic problems will continue to bediscussed and treated separately, whichcannot be in our best interests. It is myhope that in the future the Members and staffwill use this Report to comment moreexplicitly on the President's Economic Reportas a blueprint for meeting the unmet needs ofour people.
I believe the Joint Economic Committee hasbeen especially perceptive in outlining waysto attack inflation directly and inexplaining the role that monetary policy canand should play in stimulating the economy.Finally, by clearly pointing out that risingproductivity and employment are the truemeasures of our economic well-being, not thesize of the deficit or the level of Federalexpenditures, the Committee has correctlyredirected our attention to the basic issuesat hand. Hopefully, all this effort willhelp to create a new and wiser publicunderstanding of our economy.
MINORITY VIEWS
ON THE
1978
ECONOMIC REPORT OF THE PRESIDENT
( "d99)
790
I. INTRODUCTION
The picture on economic growth is notencouraging, and the policies being proposedby the Administration will not meet ourgoals.*/ However, we believe there arepolicies that will meet our growth objectiveswithout threatening price stability. Webelieve that such non-inflationary growth ispossible, that it is desirable, and indeedthat our major social and economic problemscan be solved if we pursue sound policies.Savings and investment are needed to producegrowth without inflation, and these are thefocus of this report.
*/ See the Additional Views of CongressmanClarence J. Brown of Ohio on the seriousnessof the economic outlook.
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II. REVIEW AND OUTLOOK FOR 1977-78
1977 was a moderately good year. Althoughthe rate of growth slowed appreciably from thefirst to the fourth quarter, annual real GNPgrew a respectable 4.9 percent for the year asa whole. Unfortunately, the slowing ofactivity was accompanied by an increase in therate of inflation (as measured by the chainprice index) to an annual rate of 6.2 percentin the fourth quarter. The inflation ratereflected an acceleration of farm prices, thegovernment pay increase, and rising prices forhousing and business investment. Employmentfor the year expanded at a fast clip -- 3million workers -- but because of the largeincrease in the labor force, the unemploymentrate dropped only 1 percentage point by theyear-end. Industrial production grew almost 6percent; auto unit sales increased 11.1percent over 197b; and housing starts edgedover a 2 million unit rate in the latter halfof 1977. State and local expendituresaccounted for substantial increases ingovernment spending. The fourth quarter endedwith a net export deficit of $15 billion incurrent dollar terms. The personal savingsrate has increased from a low of 4.1 percentin the first quarter of 1977 to 5.5 percent inthe fourth quarter.
The outlook for policy for the rest of 1978 4Aand 1979 is influer,.:: by two main factors;namely, the shape and condition of the currentexpansion and tOe narrowness of the gapbelieved to exist between potential and actualGNP. The Administration has proposed threegeneral conclusions concerning the expansion.(1) The expansion has been largely"uncoordinated." Some sectors have provided asubstantial push throughout its three-yearcycle, while other sectors have either grown
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slowly or have remained stagnant. (2) Thisimbalance may prolong the expansion beyond theaverage postwar recovery period of four years.Because not all sectors have exceeded theirpast peaks of activity, growth in the laggingsectors will provide continuing stimulation tothe economy. (3) There is additional room foreconomic stimulation because capacityconstraints have not begun to exertthemselves, and so there is less danger of areignition of inflation.
The Administration has made little attemptto harmonize the growth of the varioussectors. As a result, the last year has beencharacterized by the continuation of suddenspurts of economic growth and periods offlatness. Personal consumption expenditureincreases and accelerated inventory investmentspurred GNP growth in early 1976 and the firsthalf of 1977, but 1978 should witness slowerincreases. Residential investment made astrong recovery (averaging over a 2 millionunit rate in the last half of 1977) but is notexpected to continue at that pace through1978. Business investment has continued tolag, although desultory promises ofaccelerated activity from orders for capitalgoods emerge occasionally. The outlook forState and local spending is not verypromising, and the sluggish growth of exportsis expected to continue exerting a significantdrag on the economy, though perhaps less thanin 1977.
The Administration has proposed a non-stimulative tax program, which only offsetsthe increasing tax bite from social securitytaxes and the impact of inflation on taxrates. The Administration has admitted thattheir tax cut proposals will not be sufficientto encourage economic growth; it is quiteprobable that additional stimulus will be
At best, we must expectnecessary in 1979.
793
1978 and 1979 economic activity to do well inspite of the government and not because of it.
The extent to which capacity utilization ofbusiness has risen has direct implications forthe Administration's conclusion that excessindustrial capacity presently leaves room foradditional stimulus without increasinginflation. The industrial production indexfor total manufacturing reached 82.8 in thefourth quarter of 1977. For industrialmaterials, the index stood at 82.3 for thesame period. It is generally understood, thatoperating rates in harmony with moderate pricebehavior are well below 100 percent ofcapacity utilization, e.g. 88 percent was thepeak rate for manufacturing in 1973, wheninflation reached 8.8 percent, as measured bythe Consumer Price Index. Moreover, theaggregate capacity utilization indices oftendo not accurately portray the situation in theindividual industries. Some industries mayalready be experiencing capacity constraintseven though other industries are operating atcapacity rates well below the average.
If capacity bottlenecks occur in selectivebasic industries, inflationary pressures couldoccur which also would exert pressure on othersectors. In addition, capacity utilizationindices do not measure such things asdistribution systems which could imposesignificant constraints upon manufacturers.For example, a recent shortage of availablerailroad cars in the West curtailed neededcoal shipments to the Midwest which wassuffering from a shortage of coal.
Inflationary pressures also can emerge fromsources other than capacity problems.Agricultural prices have been depressed forthe greater part of 1977. However, farmprices are expected to rise more rapidly in
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1978 and will exert upward pressure onconsumer food prices. As discussed in moredetail in the agricultural section, theAdministration has not addressed this issue.The only major Administration proposal for theagricultural sector is set-asides, and thesewill neither assure adequate supplies, norprotect the viability of farms and farmers.More important to this discussion, set-asideswill possibly increase inflationary pressures.
Another source of inflationary pressure isFederally mandated cost increases -- that is,the bigger bite of social security taxes, theincrease in the minimum wage, and therequested, although undetermined, new energytaxes. These measures will cause significantupward movement in business costs and willconsequently push upward on prices.Unfortunately, the Council on Wage and PriceStability continues to have an uncertainmission and even less certain powers.Witnesses before the JEC have described theAdministration's anti-inflation program aslargely worthless. Moreover, witnesses fearedany discussion of wage or price guidelinesmight fuel fears of eventual price controls.
Dr. Gerard Adams from Wharton EconometricForecasting Associates stated that "some(government policy impact) is unavoidable, butit is terribly important for Congress torealize and the President to realize that manyof the regulatory measures which have beenimposed on the economy do have an inflationaryimpact." He stated that "I am very skepticalthat voluntary price-wage guidelines...leadanywhere, and I am even more skeptical ofprice-wage ceilings or freezes or anythingelse." Dr. Jack Carlson of the U.S. Chamberof Commerce named still other cases of Federal
795
inflationary pressure-- farm price supports,Federal pay increases, and labor law reform aslegislative measures with an inflationaryimpact.
Another source of inflation is thecontinuing depreciation of the dollar, adevelopment for which there is no fullyacceptable solution. Imports are costingbusiness and consumers more. For businesses,the higher costs of materials, parts, and sub-assemblies will have to be reflected in higherdomestic prices. For consumers, the higherprices may well generate increasinglyaggressive wage demands in the near future.
Wage settlements are a key element of costpressures. For example, whatever the finalresolution of the coal strike, one aspect isclear: the terms of the original contractrejected by the workers called for a 37percent wage increase over three years. Sucha settlement necessarily would haveinflationary implications for the remainingcollective bargaining agreements to benegotiated in 1978.
Because 1978 will be a light bargainingyear, deferred increases and cost-of-livingadjustments will be major elements in thetotal wage-rate increase for the year. Newcontract negotiations are expected to affectabout 2 million workers with the largestgroups in construction, food stores,transportation equipment and Postal Serviceworkers. From already existing contracts atleast 6.3 million employees will receivedeferred wage increases averaging 5.1 percent(In 1977, the average deferred wage increasewas 5.9 percent). Moreover, 4.1 million ofthese workers probably will receive cost-of-living increases. The Consumer Price Indexwent up at an average rate of 6.5 percent in
24-066 0 - 78 - 51
796
1977 (6.8 percent December 1977 over December1976) compared to 4.8 percent the previousyear. Contract formulas typically do notprovide for one-to-one increases, but thegrowing use of cost-of-living escalatorclauses in collective bargaining does resultin a more ingrained momentum.
The life expectancy of the business cycleis also involved in the Administration'sconclusion concerning capacity constraints.As mentioned previously, the average postwarupswing has lasted four years. In the presentcase, recovery has continued for three years,although there have been several hesitations.However, not all upswings will last theaverage length, and there is no convincingrationale for believing expansions mustcontinue until full utilization of all sectorsoccurs. Recoveries have disintegrated in thepast, even though some sectors had not yetreached their full capacity.
In addition to the shape of the currentexpansion so far, the outlook for policychanges for the rest of 1978 and 1979 isinfluenced by the size of the gap betweenactual and potential GNP. In their AnnualEconomic deport, the Council of EconomicAdvisors presented a chart (shown below) thatshowed GNP growth to be within a range of 3.3to 3.8 percent through 1981. however, in theOutlook section, the Council of EconomicAdvisors maintained that a "seven-year growthpath" for GNP of 5 percent per annum was boththe best that could be done and the minimumnecessary to meet the Administration'semployment and budget goals. This impliesthat the expected actual growth rate on along-term basis (i.e., seven years) is fasterthan the potential rate -- an event impossibleby definition -- at the same time it issupposedly impossible to reach potential GNP
797
for the next five years! Clearly, the conceptof potential GNP -- which was never too sharp-- is becoming steadily more confused.
*1
798
TABLE I.-I
ACTUAL AND POTENTIAL GROSSNATIONAL PRODUCT
BILLIONS OF1,700
1,600
1,500
1,400
1,300
1,200
1,100
1,000 11.41 , , a ala fi ll- 111111 I t l i III I lI1970 1972 1974 1976 1978 1980
SOURCES: DEPARTMENT OF COMMERCE AND COUNCILOF ECONOMIC ADVISERS.
799
Potential GNP is an estimate of what theeconomy could produce at high rates ofutilization of the available factors ofproduction -- labor, capital, and naturalresources. It follows that the factors ofproduction must be present in order to beutilized or fairly accurate estimates offuture availability must be made. It can beargued that because of the severity of thelast recession, the level of the capacity ofthe U.S. economy was permanently lowered. (Asan illustration, the line in the chartrepresenting potential GNP should be shifteddownward so the line is more nearly parallelto actual GNP from 1974 to present.) Becausethe capital base required as underpinning forthe projection of potential GNP over the nextseveral years (as shown in the chart) wassimply never put in place as a result of thelast recession, current estimates of the levelof potential GNP must be lowered, andtherefore the size of the gap must be smaller.
If the projection of the level of potentialGNP is shifted downward, it suggests anentirely different situation than the 3.3 to3.8 percent range proposed by theAdministration. (The CEA has assumed that thetrack for potential GNP remained the same evenafter the 1974-75 recession.) More properly,the projection should have a lower startingpoint and a faster rate of increase --according to the Council itself, somethingvery close to 5 percent. Using the chartagain as an illustration, the line forpotential GNP should be lower, but its slopeshould be steeper. without this adjustment,one is inclined to ask just what the potentialline represents for 1978, 1979, and 1980? Ifwe cannot reach the potential level for atleast several years, but we can grow fasterthan potential for more than five years, justwhat is the Council's concept of potential GNP
800
growth? Is it something more properly called"unattainable potential"?
The implications of the two perspectivesconcerning GNP potential are significant. Thecapacity limitations for the economy may bemuch closer than is presently assumed, andperhaps resources, other than labor, are beingutilized more heavily. If there is not asgreat a gap between actual and potential GNP,inflationary pressures may be an even moreimminent problem. If the growth rate ofpotential GNP over the next five to sevenyears is not between 3.3 and 3.8 percent, butcloser to 5 percent, policymakers should takeextreme care to tailor the economic stimulusto the real needs of the economy. Excessiveshort-term stimulus could exacerbate inflationvery quickly, yet insufficient longer-termstimulus would allow the gap to widen evenmore than portrayed under the currentprojection. Specific policies to deal withthis potential anomoly are discussed in thefollowing chapters.
801
III. ECONOMIC GROWTH: WHY AND HOW
The Need for Growth
The United States is about to experienceits first year of a $2 trillion GNP. It couldhave been $3 trillion.
Since 1950, the average annual growth ofthe U.S. economy in real terms has been 3.7percent. Many other major industrializedcountries have grown at annual real ratesaveraging in excess of 5.5 percent, and somehave averaged more than 6 percent. If theUnited States had grown on average 1.5 percentfaster each year since 1950, at a rate of 5.2percent, its GNP would now be $3 trillion.
With a $3 trillion economy, incomes wouldbe 50 percent higher than at present. Jobswould be plentiful. Federal revenues thisyear would be $200 billion higher, enough toprovide for a balanced budget, welfare reform,national health insurance, and unquestionedmilitary pre-eminence, with enough left overto let us reduce payroll and income taxesinstead of raising them. Of course, pricestability would have been another spin-off ofthe growth of real output and the balancedbudget.
The Minority does not mean to cry overspilt milk. Our purpose is to illustrate thepower of compound interest, and the benefitsto be had within a generation from fastereconomic growth.
Faster growth, higher incomes, andplentiful jobs are exactly what theunemployed, the underprivileged, and theminorities of this country have been seekingfor many years. It is no accident that the
802
greatest gains in income, jobs, and dignityfor minority workers have come during periodsof rapid economic expansion. In recent weeks,the NAACP has issued a clear call for a returnto rapid economic growth and the creation ofreal jobs in the private sector. Bitterexperience with unproductive, dead-end publicjobs programs has convinced many black leadersthat young people need the skills which can belearned and benefits which can be earned inthe production of goods and services.
The social security tax increases justenacted are drawing sharp criticism evenbefore they go into effect. In fact, thesetax increases are but the tip of the iceberg.
Benefits currently promised will requireincreases in social security taxes by 50percent, from 12 percent of payroll to 18percent of payroll, over the next 70 years, ifreal wages grow only as rapidly as the SocialSecurity Administration predicts (1.75-2percent per year). It is widely assumed thatthe next generation will be unwilling to paysuch taxes, either in t-le form of payrolltaxes or sharply higher income taxes. Recentpolls already show a decline in public supportfor the Social Security System. For thesereasons, some have suggested reducing benefitsor raising the retirement age to 68 forworkers just entering the System. But thisassumes that nothing can be done to get incometo rise more rapidly than the Social SecurityAdministration anticipates. If wages can beencouraged to grow, revenues will rise withouta tax rate increase.
The Minority believes that it is far betterto increase real wages by 50 percent more thanthe Social Security planners predict, than toimpose a 50 percent increase in the tax rateon currently expected real income. An
803
increase in the annual U.S. growth rate byonly 0.6 percent would produce such a wageincrease within the 70-year planning period.We urge that steps be taken (as describedbelow) to bring about the needed increase inthe rate of economic growth.
Savings and Growth
Anyone hoping for more rapid economicgrowth must be concerned with savings. Onlythat part of national income which goes intosavings is available to cover investment andthe government deficit.
Once the government chooses a deficit, theonly way to get more investment withoutexpanding our foreign debt is to raisesavings. The ratio of investment to GNPbasically determines the country's growthrate. Only by increasing savings can the realgrowth rate be raised. This is especiallytrue in the face of a massive diversion ofinvestment to non-growth uses, such aspollution control and the coal conversionportion of the Energy Program.
The government could help growth byreducing government spending to lower thedeficit. However, a tax increase to reducethe deficit would also reduce saving byreducing the after-tax return to saving andwould be counterproductive.
As described below, one way of encouragingsaving is to lower personal income tax ratesacross the board. This would allow everytaxpayer to keep a higher percentage of theadditional interest or dividends earned fromadditionaT saving, and thus, would make savingmore attractive.
804
Ancther approach would be to tax incomeonly when it is spent, thereby not taxing netsavings. A tax deduction for savings would becreated. For savings accounts, the deductionwould be interest plus deposits minuswithdrawals. For stocks and bonds, thededuction would be purchases and reinvesteddividends minus sales. (Net withdrawals orsales would be negative deductions and wouldbe added to taxable income.)
Other nations have out-saved and out-grownthe U.S. by wide margins over the years.Table III-1 shows the results of the relativelylow saving rate, which the Energy Plan, andhigher social security and income taxes,threaten to make worse.
TABLE III.-4
WAGE INCREASES, INVESTMENT, AND SAVING
1965-75Percent Change
In Real Wages andFringe Benefits 1/
Investment as Percent ofCNP- Averages, 1960-73
Total minusTotal Homebuilding
HouseholdSavingsRatios'76 Est.
United States
Canada
Japan
France
Germany
Italy
United Kingdom
15.7
48.5
137.9
77.4
78.1
116.4
53.9
17.5
21.8
35.0
24.5
25.8
20.5
18.5
1/ Includes pension programs and other fringe benefits.Sources: Bureau of Labor Statistics, OECD.
13.6
17.4
29.0
18.2
20.0
14.4
15.2
0oa,
6-8%
10-12%
24-26%
16-18%
14-16%
22-24%
12-14%
806
Productivity and Savings
Once saving is stimulated, it must be putto work creating capital investment and jobs.
A higher rate of investment is necessary inthe short run to bolster our current economicexpansion. But in the long run as well, weneed massive capital outlays. Various studiesin recent years have pointed to the hugevolume of capital investment needed over thenext decade -- trillions of dollars -- toexpand, replace, and modernize our productionfacilities to accommodate economic growth, tohelp us reach full employment, to achievegreater energy independence, and in general,to raise our standard of living. (Even forthose who advocate "zero economic growth" as away of enriching our overall quality of life,huge amounts of capital formation are stillessential in order to develop new products andnew processes of production which are moreeconomical in their use of resouces and lessdamaging to the environment.)
Increased productivity (output per unit ofinput) is the key to economic growth and morejobs . Over the past 25 years, improvement inlabor productivity has accounted for more thantwo-thirds of the growth in the real grossnational product.
From 1949 to 1968, private non-farmproductivity increases averaged about 2.6percent per year. From 1968 to 1977,productivity rose by only 1.4 percent peryear. This slowdown in the growth of outputper worker hour is one of our most seriouseconomic problems. Without faster gains inproductivity, inflation is aggravated, andimprovement in real incomes, if it comes atall, comes to some at the expense of others.
807
Productivity depends on: (1) increases inthe amount of physical capital per worker; (2)technological innovation that brings moreoutput from each unit of resources, capital,or labor; (3) qualitative improvements in thelabor force through better education,motivation, and manpower training; (4)improved mobility of labor and capital,permitting resources to shift from lowproductivity sectors to high productivitysectors; and (5) management innovation toimprove the way labor and capital are used.
Of the factors listed, increased andimproved capital per worker is one of the mostpotent forces for productivity and economicgrowth. From 1949 to 196b, the capital-laborratio grew at an annual rate of about 3percent. Over the last decade it has grownmuch more slowly, about 1 percent a year. Ifcapital required to meet government-imposedpollution and abatement regulations isdeducted, the capital-labor ratio growth iseven less.
The slower growth of the capital-laborratio in the past decade is at the root of ourrecently reduced rate of' productivityincrease.
We must turn out productivity trends aroundthrough large-scale investment in new businessplant and equipment. This can best beaccomplished by direct tax rate reduction toincrease the after-tax return to saving andinvestment. Tax rate reduction, plus measuresto reduce the risks associated with theregulatory climate, can promote the expansionof business plant and equipment spendingneeded for economic growth.
808
Fiscal Policy and Growth
Demand or Supply Problems
Every administration witness to appearbefore the Joint Economic Committee discussedproposed tax changes in terms of aggregatedemand, or total spending. Herbert Stein hasquestioned this approach, asking how demandcan be stimulated by a tax cut if thegovernment does not reduce its spending. Whatthe government gives away with the tax cut, itmust take back with increased borrowing tofund the spending.
Other economists have pointed out that theAdministration approach fails to take accountof the impact of tax rates. on aggregatesupply. For example, in every year without atax ate reduction, inflation pushes peopleinto higher tax brackets, even when they haveno increase in real income. Their average taxrate rises, which means that their tax burdenrises faster than inflation, and they haveless to spend. However, there is anadditional effect which demand theorists tendto overlook.
Inflation raises the average tax rate byraising the marginal tax rate. It is marginalincome, the last few hundred dollars of thetaxpayer's earnings, which falls into higherbrackets and is taxed at a higher rate. Thegovernment takes a larger slice out of thelast few hundred dollars of each person'swages, profits, interest, and dividends.These higher rates also apply to any increasein wages, profits, interest, and dividendswhich could be earned by working longer,saving more, or investing more.
The problem of higher tax rates resultingfrom inflation is not a minor matter.
809
Inflation is producing real tax increases of$7 to $9 billion per year on individuals.Millions of workers have seen their incomestaxed in higher and higher brackets.
Furthermore, the change in marginal taxrates can affect behavior. At the margin,leisure might be substituted for labor,because the reward to labor has fallen.Consumption could tend to replace saving andinvestment because the reward to saving andinvestment falls. On the other hand, higherreal tax rates will tend to force workers toask for higher pay increases than mightotherwise have been the case, in order tocompensate for their lowered real after-taxincomes. In any event, these shifts inbehavior cause real GNP, investment, and jobcreation to drop, even if the governmentspends the money to keep nominal demandconstant. Nominal demand cannot offset theshift away from productive activity as taxesreduce the rate of return to labor,- saving,and investment._*/
*/ See the discussion of marginal taxrackets in the additional views of SenatorJavits.
810
This adverse effect on GNP occurs whenevera tax is imposed. For example, a payroll taxreduces the after-tax wage of labor, andraises the after-tax cost of labor to thefirm. The supply and demand for labor fall.So do employment and GNP.
Similarly, a tax on the use of oil and gasreduces the after-tax receipts of theproducers, and raises the after-tax prices ofgoods and services to consumers, which reducesthe value of their wages. Output of gas andoil falls. The supply of labor falls.Employment and GNP fall.
This drop in output will occur even if theenergy taxes are handed back to consumers insome fashion unrelated to work effort. Demandmay be maintained, but the supplydisincentives remain. Furthermore, we knowall too well that when money is poured throughWashington, a substantial- amount of it, ineffect, "sticks to the funnel." There isconsiderable waste in any such incometransfer. For this reason, the Administrationis wrong to think that the proposed energytaxes and energy rebates will have no netimpact on economic activity. Consequently,netting these tax changes out in thepresentation of the budget gives a misleadingpicture of the budget's economic impact.
The inability to take account of the supplyof productive effort is the biggest failure ofdemand management economics. Unfortunately,this shortcoming is shared by most of themajor econometric models used by policymakers.
811
Inflation and Growth
Personal Taxes
In the short run, tLie impact of inflationon personal income taxes can destabilize theeconomy. Many economists believe that thehigher personal income taxes generated byinflation between 1972 and 1974 contributedheavily to the recession of 1974-75. In astudy prepared for the Joint EconomicCommittee, Thomas Dernberg concluded that thetax code should be adjusted (indexed) annuallyfor inflation to keep tax rates from risingwithout an open debate and vote by theCongress. He suggests that "an indexedpersonal income tax would have helped to avertthe collapse of 1974, that it would tend tostabilize the level of economic activity, thatthere is little presumption that it wouldcontribute to inflation, and that it might,indeed, do the opposite if it relieved costand supply pressure."
'The reason that inflation is a tax problemis that the tax system treats every increasein income as if it were real income. The taxsystem does not take into account the factthat a worker's real income has increased lessthan his or her nominal income -- the entirenominal income gain is taxed. Thus, with thesustained high inflation of recent years,workers have had wage increases reduced notonly by inflation but also by the higher taxesthat must be paid as inflation pushes incomesinto higher tax brackets.
As high inflation continues, as marginaltax rates remain high, and as decreasingproductivity gains reduce the real componentof wage increases, the economic effect ontaxpayers becomes more severe. James T. Lynn,
24-066 0 - 78 - 52
812
former Director of the Office of Managementand Budget, estimates that during this decadeinflation-induced taxes will take $82 billionfrom the American taxpayer, if Congress doesnot take compensating action.
In the long run, inflation has anothereffect, a subtle but devastating influence onsaving. Inflation acts through the tax systemboth to reduce personal saving, and tomisdirect what saving is done intoinefficient, even unprofitable investments,thereby reducing economic growth.
It is not commonly realized that inflationand the tax changes since 1964 have had theeffect of raising marginal tax rates in spiteof the fact that average tax rates have beenheld fairly steady. Increases in the standarddeduction, and adoption of the general taxcredit, have held down effective tax rates,while increased nominal income has been taxedat higher marginal rates.
Economists have long warned that a broadtax base with low tax rates is less disruptiveof economic growth than a narrow base withhigher rates. Unfortunately, the tax systemhas been moving in the wrong direction since1965.
It begins to pay a taxpayer to look intothe use of tax shelters when his income risesto the point where it is being taxed atmarginal rates a bit in excess of 30 percent.The number of taxpayers in those brackets hasrisen dramatically in the last 12 years. In1965, less than 2 percent of taxable returnsreached brackets above 30 percent. By 1974, 7percent of returns were in that category.This year, the figure is nearly 10 percent.Taxpayers in these brackets have incomesroughly three times the median income. Thus,
813
the share of national saving done by thesetaxpayers is likely to be at least three timeshigher than their share of the number oftaxable returns filed would indicate. Thepercent of total personal saving whichpotentially could be lured into tax sheltershas risen from perhaps 10 percent to about 30percent since 1965.
At the present time, less than $3 billionis collected in tax revenues on existingtaxable income by having marginal tax rates inexcess of 50 percent. Much of the potentiallytaxable income in these brackets has beensheltered or simply not earned. To increasethe taxes on this income group will onlyresult in a lower tax take, as more of theirincome would be shifted to non-taxable formsof income.
The amount of income actually beingdirected into certain types of tax sheltershas risen several hundred percent irl the lastfew years. Many brokerage houses are findingit harder to interest customers in commonstock, while finding it very difficult to keepup with the demand for tax exempt bonds andtax exempt mutual funds and unit trusts.
It is very likely that marginal tax rateshave risen to the point where they are causinga substantial reduction in this country'sgrowth rate. There is even a reasonablepossibility that marginal tax rates are sohigh that they have actually reduced Federalrevenue. The Minority strongly urges theTreasury and the Joint Economic Committee toinvestigate these possibilities.
Corporate Taxes
Inflation depresses the growth of businessactivity, job formation, and wages by
814
interfering dramatically with depreciation.The tax code only permits a tax deduction ofthe historical cost of plant and equipment.When inflation increases the cost of new plantand equipment, the firm finds that the moneyit has set aside for replacement isinadequate. It must use taxable income tosupplement its depreciation allowances just tomaintain its productive capacity-- just tostand still. Thus, actual economicdepreciation is understated, and corporateprofits are overstated. Inflation "disallows"the deduction of a real cost of doingbusiness, increases the firm's tax liability,and reduces its ability to grow.
The Bureau of Economic Analysis regularlyreports a data series designed to show thetrue value of corporate profits afterallowance for real depreciation and the costof replacing inventory. The goal is anaccurate measure of business health. Reportedprofits are reduced by the "capitalconsumption allowance adjustment" and by the"inventory valuation adjustment." Whatremains are true "economic profits." Thesemay be reduced by corporate tax payments toproduce "economic profits after tax," or setout in constant dollars to produce "realeconomic profits."
Treasury Secretary Blumenthal has beenquoted as saying, "I can't explain the stockmarket. I didn't understand the market when Iwas in business, and I don't understand itnow." Yet, there is nothing mysterious aboutthe behavior of the stock market. The broadly-based Standard and Poor's 500 index, expressedin real dollars, shows that stock prices havebeen accurately matching changes in realeconomic profits for years. After-tax real
815
economic profits are well below the levels of1965 to 1968. The stock market is reflectingthat fact.
816
TABLE 111.-2
ECONOMC PROFITS OF DOtWSTIC CORPORATION
Calendar Year
Current dollars(billions)
44.7
44.6
52.3
57.0
63.9
73.8
79.8
76.3
82.6
77.7
64.1
72.6
87.2
92.2
74.0
93.1
119.9
129.8
1972 dollars(billions)
65.1
64.3
74.1
79.6
87.8
99.3
104.0
96.5
100.0
89.6
70.2
75.6
87.2
87.1
63.8
73.2
89.6
91.8
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
817
The market is also reflecting a sharp risein the effective corporate tax rate, definedas taxes paid divided by economic profits.Two tax rate series are presented. One isbased on economic profits, as described above.The other is based on a profit series with onefurther adjustment. The capital consumptionallowance adjustment estimated by the BEAappears to many observers to be too small.Recently, the SEC was empowered to requirelarge corporations to file a special report oathe cost of replacing their existingequipment. The results of the survey suggestthat the BEA allowance may be only half theproper amount. Profits in the second serieshave been adjusted accordingly, by doublingthe capital consumption allowance adjustment.
Either way one looks at the depreciationallowance, one sees a sharp rise in theeffective tax rate on pre-tax economicprofits. The rate increased frvm roughly 40cents on each dollar, after the tax cuts of1962 and 1964, to roughly 50 or 60 cents by1977. These are increases of 25 to 50 percentover the 1965 rate.
818
TABLE III.-3
EFFECTIVE TAX RATES ON 1I. S. CXRPORATIOKS BY FISCAL YFARWFEDERAL, STATF AND L-OCA
TAX COLLECTIONSNIPA PROFITS 1
49.51
53.1%
44.1%
42.7%
41.21o
40.4%
40.9%
46.8%
39.4%1
48.44,
52.60
44.9S
46.3%
4S.41
52.22%
64.7%
42.6%
50.8%
TAX COLLECTIONSADJUSTED , RF ITS 2
52.41
55.8%
44.5%
41.5%
39.6%
38.5%
39.0%
44.6%
37. 6%
46.3%
50.7%
44.3%
45.6%
44.2%
52.0%
72.5%
48.7%
58.8%
1. NIPA profits are pre-tax economic profits -- National Income and ProductsAccounts domestic corporate profits after inventory valuation and capitalconsumption allowance adjustments.
2. Adjusted economic profits equal NIPA profits less an adjustment to thecapital consumption allowance adjustment implied by the new SEC replacementcost data. The added annual "adjustment" equals 100% of the old adjustment.
SCourtesy of flouse Republican research Camnittee Economic Task Force
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
197b
1977
819
The stock market is reflecting real factorsand will continue to be depressed as long asreal economic profits are expected to remainat very low levels. The expected increase inenergy taxes, social security taxes, andunderdepreciation over the next few years aresufficient to explain the market's continuedpessimism.
Minimizing the Damage
The best way to end the damage whichinflation is doing to the economy is to movetoward price stability. This will require agradual reduction in the rate of growth of themonetary aggregates over many years.
In the meantime, other steps should betaken. The Congress should reduce marginalpersonal income tax rates and should examinethe tax code annually to make sure thatincreases in nominal income do not exposetaxpayers to increasing marginal tax rates inthe future. On the corporate side,replacement cost depreciation should beconsidered, to allow firms to set asidesufficient funds to maintain and modernize ourstock of productive capital. These two stepswould go a lorlg way toward guaranteeing rapidincreases in jobs and after-tax wages.
820
IV. MONETARY POLICY: DOMESTIC AND INTERNATIONAL
Great concern has been expressed in manyquarters that monetary policy has not beeneasy enough in recent months to produce rapideconomic growth. This concern has intensifiedsince the beginning of the year, when theFederal Reserve moved to strengthen the dollarin relation to foreign currencies.
The Minority feels that this concern isunwarranted. Indeed, rising inflation at homeand reduced demand for the dollar overseasindicate that the dollar is, if anything, inexcess supply. The recent very modestincreases in interest rates are clearly signsthat the public expects a rise in the rate ofin inflation. The increases in interest ratesare due to a rise in the inflation premium,not to an incipient credit crunch.
Recent History
During 1977, Ml (the narrowly-defined moneystock consisting of currency plus demanddeposits) grew at a rate of nearly 7 1/2percent. This rate was even higher, in excessof 8 1/2 percent, for the first'three quartersof the year. In the last 13 weeks, Ml hasgrown at a 4 percent annual rate. Judgingfrom other figures, this lower rate may be anaberration.
Also during 1977, M2 (a broader moneymeasure made up of M1 plus time deposits atcommercial banks) grew 9 percent. Since theturn of the year, M2 has grown at an annualrate of about 6 1/2 percent. Historically, M2has moved more closely with GNP than has Ml.
821
While Ml and M2 rose rapidly in 1977, theyhave occasionally grown faster, though notoften. At the same time, the monetary base(bank reserves and currency, the base on whichbank credit, Ml, and M2 are built) was settinggrowth records. It rose about 9 percent in1977, and its major component, Federal Reservecredit, rose at least 10 percent on the year,and at a 12 percent rate in the last half.Since the turn of the year, the monetary basehas grown at a 15 percent annual rate. Thistoo is an aberration due to a short-term surgein reserves in January, but it does indicatethat no great tightening of monetary policyhas occurred.
In fact, continued expansion of themonetary base and Federal Reserve credit at1977 rates would be contrary to the Fed'sannounced intention to reduce the rate ofgrowth of the monetary aggregates in order tocurb the rate of inflation and to halt thedecline of the dollar on the foreign exchangemarkets.
There are other reasons for believing thatthe monetary aggregates are growing rapidlyenough to sustain the economic recovery.Liquidity can be assured through a variety ofmeans:
1. Velocity of circulation may rise. Ithas proven to be flexible in thepast, usually rising with inflationand interest rates as people try toshift out of money into interestbearing assets.
2. Many foreign governments, especiallythose with heavy oil revenues,continue to be large buyers of U.S.government securities, recyclingpetrodollars and shifting investmentmoney to the U.S., the most rapidly
822
growing major Western nation.Admittedly, how much longer thesecountries will hold Americansecurities is problematical if thedollar continues to decline.
3. Many private holders of dollars havereduced their demand for the dollaras it has declined in value. Multi-national firms and foreigners cantransact business in a wide varietyof currencies. When the dollarappears unsettled, they can and do goelsewhere. This frees large sums foruse in the U.S. money markets.
Money and Investment
The Administration hopes that newmanagement at the Federal Reserve will producean easier monetary policy. It hopes to lowershort-term interest rates to stimulateinvestment. If recent history is a guide,this policy will not work.
Nominal short-term interest rates havelittle to do with real long-term investment inplant and equipment. Real long-term interestrates are the rates relevant to investmentdecisions.
Easy money will generate inflationary fearswhich will raise nominal short-term interestrates. Eventually, nominal long-term rateswill rise as well. The effect on real long-term interest (nominal interest rates minusthe expected inflation) rates is unclear.
Inflation increases uncertainty and raisesthe tax burden on individuals and businesses.It understates depreciation and reduces thereal return on all forms of businessinvestment. It discourages saving by pushing
823
individuals into higher tax brackets, reducingtheir after-tax return on stocks and bonds.Whatever all this means for real interestrates is immaterial, since it also impliesless saving and less investment regardless.
In testimony before this Committee, JosephKasputys of Data Resources, Inc., presentedDRI's comparison of two methods of inducing agiven amount of investment. One method was toreduce the corporate tax rate or alter theinvestment tax credit. The other was toincrease the money supply in an effort toreduce interest rates.
The tax reduction method resulted in a dropin the rate of inflation by nearly 1 percentover a five year period, compared to thebaseline forecast. The easy money methodraised the rate of inflation by between 1 and2 percent.
Clearly, tax policy is a far lessinflationary way to increase investment thanis monetary policy, even assuming an easymoney policy could work. In fact, a moderatemonetary policy may be used to curb inflation(a move which would also help investment)while a properly designed tax policy couldsimultaneously increase investment and realgrowth.
International Considerations
The Administration's faith in an easy moneypolicy may be misplaced for still anotherreason. Such a policy would conflict with theAdministration's international economic goalsof a strong dollar, stable exchange markets,and a coordinated economic recovery of alliedand Third World countries.
824
Easy money would produce a declining anderratic dollar. A declining and erraticdollar would wreak havoc with all nations'exports, imports, and employment in the shortrunt and with the U.S. rates of inflation inboth the short term and long term. A fallingdollar hurts U.S. consumers and does notproduce jobs for American workers. A fallingdollar does threaten worldwide tradedisruption and recession.
The Administration has decided not tointervene to support the value of the dollarin relationship to other currencies. ThePresident has recently restated the positionthat the U.S. will intervene in the foreignexchange markets to offset disorderlyconditions, but not to affect basic trends.The success or failure of this policy dependsupon a clear understanding of the processes atwork.
Many observers apparently believe that theFederal Reserve has raised interest rates tosupport the dollar by attracting an inflow ofinvestment funds. These observers fret aboutthe impact of the higher interest rates on thedomestic economy. Other observers feel thatthe Federal Reserve can buy dollars on theforeign exchange markets to support theexchange rate, while creating dollars in theU.S. to hold down short-term interest rates.Both views are off the mark.
Interest rates have not risen by more thanexpected increases in inflation. Tjis hasproduced no added drawing power for foreignfunds. Strengthening the dollar is done byrestricting the supply of dollars on the worldmarket, not by raising interest rates.
825
The market for dollars is worldwide. Theworld supply of dollars and the world demandfor dollars determine the value of the dollarin terms of other currencies. Alltransactions impact on the exchange rates --trade and capital flows affecting demand,creation of dollars and other currenciesaffecting relative supplies. There is norigid segmentation of the market into domesticand foreign sectors.
Two types of operations affecting the worldsupply of dollars are carried out by theFederal Reserve Bank of New York. Through theForeign Exchange Desk, the Bank can engage inswap arrangements with foreign central banks,acquiring foreign currency with which to buydollars on the foreign exchange markets.These purchases reduce the world supply ofdollars and support the dollar's value.Through the Open Market Desk, the Bankincreases or decreases the quantity of dollarsby buying or selling Treasury securities.This is how monetary policy is normallyconducted.
A dollar is a dollar is a dollar. It wouldmake no sense for the Bank to be reducing theworld supply of dollars through the ForeignExchange Desk while increasing the supplythrough the Open Market Desk. Consequently,the two Desks are under one management. Theiractivities are coordinated. The ForeignExchange Desk, dealing in terms of a fewhundred million dollars, has been used on aday-to-day basis to smooth out disorderlyconditions in the exchange markets. However,such sums are dwarfed by the billions ofdollars which are created or destroyed eachweek at the Open Market Desk. Only as the Fed
826
moves gradually to slow the growth of themonetary aggregates through its open marketoperations will the basic trend in the valueof the dollar be altered.
Exchange Rate Policy
International economic policy, andespecially exchange rate policy, areintimately connected with monetary policy.
In 1977, the U.S. had a trade deficit onthe order of $30 billion. However, there ismore to the balance of payments than the tradeaccount. The trade deficit was partiallyoffset by a surplus in services ofapproximately $9 billion. The remainingcurrent account deficit was covered byearnings on foreign assets and by capitalinflows (borrowing or sale of equities) fromabroad. Stocks, bonds, and governmentsecurities are, in a sense, our biggest"export. "
The dollar has not fallen simply because ofthe U.S. trade deficit. The U.S. had a tradedeficit every year from 1776 to 1914.However, because this was a rapidly growingcountry with great investment opportunities,capital inflows covered these deficits.Foreign lenders knew that their investmentwould be backed by increased real output, andthey had no hesitation in buying Azr-ricanbonds.
Over the past ten ears, excessive dollarcreation has generated inflation, lower realprofits, higher taxation, and higher realcosts of production in the U.S. The reducedafter-tax returns have led to savings andinvestment rates that are the lowest in thedeveloped world, and our long-term growth
827
prospects are poor. These facts and prospectsare a direct threat to our ability to fund ourtrade deficit with "exports" of commercialpaper, bonds, and government securities.
The U.S. current account deficit is largelythe result of the growth of the U.S. economyat a time when other nations are in recessionor are growing only slowly. Many of ourlargest trading partners, including Canada,Germany, Japan, Britain, France, and Italy,suffered falling real output in one or morequarters of 1977. Consequently, our purchasesof their products grew normally, while theirpurchases of our exports lagged. As the worldeconomy recovers, the U.S. deficit will fall.
To use the current trade deficit as theprimary reason for passage of theAdministration's energy proposals is faultylogic from two perspectives. First, only one-third of our increased import bill since 1975is due to oil. There is an energy problem inour balance of payments, but it is clearly notthe only problem, and its resolution will notresolve the trade deficit. Secondly, theheavy taxes proposed in the energy plan willraise U.S. production costs, reducing ourcompetitive position. Furthermore, the plan'semphasis on energy conservation rather thanproduction will result in more oil importsthan strictly necessary. Congress should notbe pushed into hasty action on the energyprogram.
Over the last year, the dollar has slippedin value approximately 5 percent relative toother currencies, on a trade-weighted basis.This drop has increased the rate of inflationin the U.S. Robert Solomon, a recent witnessbefore the Committee, has stated that therecent dron in the dollar has already addedabout 1.2 percent to the U.S. price level.
24-0b6 0 - 78 - 53
828
A falling dollar is far more inflationarythan is commonly realized, and far less likelyto improve our trade balance than is commonlysupposed.
The devaluation theory which has beendominant since the 1930's had no real testuntil the collapse of the Bretton Woods systemof f ixed exchange rates in the currencydisorders of the late 1960's. This theoryheld that a devaluation would discourageimports by raising their price and makeexports relatively cheaper for foreigners tobuy. If domestic and foreign buyers reactedstrongly enough to the price changes, thetrade balance would eventually improve.
The theory predicted a rise in pricesgenerally limited to imports. Thus, we seecalculations that a 5 percent fall in thedollar will raise prices on the 7 percent ofour spending which goes for imports, with aprice level impact of 0.35 percent (.05 x.07). Spillover effects on other prices areassumed to be minor.
In fact, the situation is more complicated.
When the dollar declines, about 60 percentof any price adjustment occurs in the U.S. andabout 40 percent in the rest of the freeworld. (The adjustment burden is distributedinversely with the sizes of the economiesinvolved. The U.S. has roughly 40 percent offree world GNP. A very small country, withlittle impact on world prices, would bearnearly the entire burden of adjustment.) The60-40 ratio means that a 5 percent decline inthe dollar will cause world prices of tradedgoods to rise about 3 percent more than normalin terms of dollars and about 2 percent lessthan normal in terms of other currencies.These changes will have spillover effects
829
which will help to increase U.S. pricesgenerally by the same 3 percent over a twoyear period, while helping to reduce generalinflation in other countries by about 2percent.
First, both U.S. import and export priceswill tend to rise by about 3 percent in dollarterms to the new world price. Why wouldexporters charge less than the going worldprice? Then prices of close substitutes forimports, and of products similar to exports,will also rise. For example, wheat bound forBoston and wheat bound for Bombay sell for thesame world price in Chicago. Domestic steeland auto prices will firm in response tohigher prices on imports. All tradablecommodities, whether exported, imported, orproduced and consumed domestically, will tradeat the world price.
These predictions are firmly grounded inthe law of markets and in historicalobservation. Efficient, centralized marketswith modern communications bring all worldbuyers and sellers into contact. Then the lawof one price dictates that identical productssell for identical prices at any moment intime.
Once basic commodities and large numbers ofmanufactured goods rise in, price, cost ofliving allowances and wage negotiations bringmatching wage increases and extend the priceincreases into the service sector. With rawmaterials and wages rising, costs catch upwith prices, and any initial stimulus toexports, or disincentive to imports, isundone.
830
Most of a devaluation is uselessly spent inraisng domestic prices and costs, with littleimprovement in our competitive posture ortrade balance.
The price impact from the recent fall inthe dollar is already well in excess of thepredictions of traditional theory. The priceincreases following the U.S. devaluations ofthe early 70's also tend to support the modernview. Another recent case in point is thesubstantial Mexican devaluation, which wasquickly followed within a year by a 32 percentrise in Mexican prices.
Debasement of a nation's currency is not acure for fundamental policy errors. Nationscannot enrich themselves at their neighbors'expense. A declining currency increasesinflation, raises taxes, reduces saving andinvestment, and weakens a country's economyinternationally and domestically.
Strengthening the economy requires anotherapproach. A drop in Federal spending as apercent of GNP would permit substantialpersonal, payroll, and business tax reduction.This would result in a drop in the real costsof production in the U.S. It would help thetrade balance, increase our growth rate,restore confidence in the U.S. economy and thedollar, and make it easier to sell our bondsto cover any residual deficit.
831
V. TAX POLICIES
Effects of Social Security Increases on Tax Poligy
The President has stated that his tax cutwould offset the higher social security taxesand the *effects of inflation on theprogressive income tax system. These twoeffects have a serious impact on the taxpayersof this country.
The social security tax increases wereproposed as a solution to the financialinstability of the social security system.The bill the President signed into law is, inessence, a "tax solution." This piece oflegislation increases the tax burden on thepublic, by almost one-quarter of a trilliondollars by 1987.
The new social security legislation willincrease both the tax rate and the maximumwage base that can be taxed. The tax rate (toboth employers and employees) increases from5.85 percent to 7.15 percent by 1986. The taxrate is boosted dramatically in 1981 and 1985,which will present the winners of the 1980 and1984 national elections with growing taxpayerresentment.
Under the new legislation the wage basewill increase very rapidly by 1981. In 1977the wage base was $16,500 and indexed by therate of wage increase. The new legislationwill increase the wage base to $17,700 thisyear, $22,900 next year, $25,900 in 1980, and$29,700 in 1981. After 1981 the wage basewill then again be indexed by the wage rate.The rate and base increases will greatlyincrease the tax take from social security
832
participants. Over the next ten years, thenew social security legislation will amount toapproximately $227 billion in increased taxeson payrolls.
The increase in social security taxes willhave its largest effects on taxpayers in thenext three years because of the boost of thetax rate by .8 percent (on both employer andemployee) and the lifting of the base by$13,200. And the brunt of the new Cartertaxes falls in the same old place -- on themiddle-income taxpayers. The President's planassures this heavy burden on the middle-incomegroup by increasing the maximum wage base tolevels that are in the middle-income range.Consequently, as the rate increases, themiddle-income people will be hit the hardestbecause theirs will be the highest salariesbelow the maximum wage base. Conceivably, asocial security tax of any level could beacceptable, if presented as a purchase of agood: one's pension. The more generous thepension, the larger the tax. However, theSocial Security System is more in the natureof a simple income transfer program; wageearners currently pay social security taxesfor today's, not tomorrow's, annuitants.Policy should therefore concentrate on howthis burden should most equitably be spread.
The Minority does not believe that the wagebase should be increased to higher levels toredistribute the tax burden. The Minorityseeks to reduce the Carter tax burden for alltaxpayers, not to increase it for a fewtaxpayers. The Minority is particularlyconcerned with reducing that burden on themiddle class because the new social securitytaxes are especially harmful to them.
833
The following table shows how the middleclass will be affected by the new legislationsigned into law by President Carter. It issafe to assume that a social security taxableincome of $13,000 would be in the middle-income range. If we assume that the medianwage will increase by 8 percent per yearbetween 1977 and 1981, we can determine theeffect on this middle-income group in the nearfuture.
834
TABLE V.-I
Tax Rate
Wage Ceiling
13,000 Covered Income
FICA Tax/13,000
1977 1978
5.85 6.05
16,500 17,700
13,000 14,040
760 849
1979
6.13
22,900
15,163
929
1980
6.13
25,900
16,376
1,003
1981
6.65
29,700
17,686
1,176
835
Notice that the tax on this income levelincreases by 55 percent. While this is badenough, we must consider that the income rangeof the middle class has a much higher limitthan the $13,000 in covered income. Mostexperts would include an income of $20,000 (incovered income; in 1977 dollars) in the middlegroup. Because a portion of their salary wasexempt from social security taxes before thenew legislation, this middle-income level haseven larger percentage increases in their tax.
24-066 0 - 78 - 54
1980 1981
Rate
Wage Ceiling
$20,000
FICA Tax/20,000
5.85 6.05
16,500 17,700
20,000 21,600
965 1,070
836
TABLE V. - 2
1977 1978 1979
6.13
22,900
23,330
1,403
6.13
25,900
2S,194
1,544
6.65
29,700
27,209
1,809
837
Table V-2 shows that the social securitytax increases by 88 percent between 1977 and1981 for an income of $20,000 indexed at an 8percent annual wage increase. The newlegislation is very harmful to those middle-income individuals who had a portion of theirincome exempt from OASDI taxes or those middleincome individuals who through pay increaseswould have moved above the maximum wage base.The latter would include a large number of themiddle-income group.
The social security tax is shared equallyby employer and employee. Each group willseek to recoup their share of the $227 billionof their wages or profits lost to these highertaxes in the next ten years. The employeewill demand higher wages which will be paid bythe employer partly out of higher prices. Theemployer will also have to offset his higherlabor costs with higher prices. While the taxreduction offered by the President (and stillpending in Congress) will help to ease thepressure on prices, by 1979 the pressure willincrease as a majority of the taxpayers willexperience an increase in taxes.
The employment effects of the largeincreases in social security are of majorconcern to the Minority members of the JointEconomic Committee. As the social securitytax that the employer must pay on eachemployee increases, the employer will be lesswilling to keep present employees or to hireadditional workers. Also, as the employee'ssocial security tax increases, he willexperience a drop in the reward to work.Because the incentive to work has beenreduced, the employee may seek not to work atall and rely on government aid, or he may seekcompensation in the form of leisure (such aslonger vacations).
838
These effects on inflation and unemploymentcaused by the social security tax increasesshould not be taken lightly. The Committeehas heard testimony supporting this belieffrom a wide range of experts both in and outof the Administration.
The Carter Tax Package
While the Carter tax plan offers a netaggregate tax reduction in 1979, there areserious deleterious effects on specific incomegroups.
In truth, the Carter tax plan is a taxincrease for many persons in our economy whoare sacrificed to reduce the taxes of othertaxpayers. It is structured around theerroneous belief that to provide tax relieffor some Americans and to pay for bloatedgovernment expenditures, the government mustincrease the tax burden on other Americans.While it is important to identify those whowill have their taxes increased, the Minorityfeels that at this time any increases in taxesfor anyone in our society is wrong. Inaddition, it is an ill-founded belief thatincreasing the taxes on the upper-incomegroups will result in vast tax revenues thatcan then be "returned" to lower-income groupsin the form of new government programs or taxreductions. The fact is there is just notthat much money in the higher income bracketsbecause there are not that many people earningthese high incomes.
Size of the Package
Most economic forecasters have been warningfor more than a year that some form ofadditional economic stimulus will be needed if
839
the economy is to remain strong through 1980.Significant tax cuts are necessary if socialsecurity and inflation-induced tax increasesare to be offset and if the tax burden, as apercent of GNP, is to fall. The tax cut mustbe larger still to offset the major energytaxes proposed by the President and modifiedby the Congress become law.
Unfortunately, the Administration taxpackage does not offset the tax increase thatwill be occurring over the next several years.The Administration promises that there will befurther tax cuts several years down the road.Nonetheless, most individual and businessesface substantial tax increases by 1980. Thesetax realities outweigh vague promises in theformation of consumer confidence and businessinvestment plans.
The accompanying tables compare theimpending social security, inflation-induced,and energy tax increases with the net tax cutsin the Carter tax package. Compared withfiscal year 1977 tax rates, the President'spackage will increase taxes by $.8 billion in1979, $7.4 billion in 1980, $21.4 billion in1981, $21.6 billion in 1982, and $18.4 billionin 1983.
prepared by the staff of the Joint Cmunittee on taxation.tIncludes fiscal 1978 increase af $7,200,000,000 and fiscal 1979 iinpa..t of $18,b00O(0,00.-Lstimate based on S to 6 percent inflation rate.based on energy tax bill passed by to-use.
841
The size of the Carter tax package does notappear to be adequate to keep the economymoving. This is a serious problem. Theeconomic indicator which has historicallygiven the longest warning time of approachingrecession is formed by dividing the BEA indexof coincident indicators by the index oflagging indicators. That ratio has turneddown. It peaked in April of 1977. Manyobservers believe that a recession, or atleast a serious reduction in economic growth,is likely by mid-1979. The economy cannotwait until 1980 for a second tax bill toremedy the shortcomings of the first.
The President has stated that the Federalgovernment must reduce the size of its taxtake, as a percent of the gross nationalproduct. We agree with that view.
Shape of the Package
The size of the Carter tax package ismerely inadequate. The shape of the packageis actually harmful.
Across tax brackets, the packagediscriminates against middle-income taxpayersand especially those covered by socialsecurity. Within tax brackets, itdiscriminates against taxpayers with largefamilies, households with two workers, workersdependent on overtime to make ends meet, andtaxpayers in the middle or top portions ofmany of the brackets.
Average Tax Burdens
Treasury Secretary Blumenthal told theCommittee that all but a handful of taxpayerswould benefit from the Carter tax package.
842
Unfortunately, this is true only if th?analysis is restricted to the income tax.Social security tax increases will completelyoffset the benefits from the income tax cutsfor most workers with income above $25,000 >ythe end of 1978 and above $20,000 by 1979.Even more amazing, when the effect ofinflation on the tax rates over the next twoyears is added in, we find that familiesearning only $17,000 in 1979 will be paying ahigher real tax than they do today.
TABLE V.-4
The Effect of Inicoime aiid FICA Tax Changes 3n Effective Tax Rates,1977 Law to Proposed 1979 Law(Four-Person Favuly, One-Earner)(Mna mut in dollars)
1977 Taxes I/income- Equivalent:level : 1977
: income 2/Income : FICAtax 1/ :tax A/
Totaltax
: Combined:effective: tax rate
1979income
Incometax I/
i19I9 Taxes
FICAtax V/
: CoiibinedTotal:efffective
tax : ta:c rate
Combined tax :Chanu in tax:liability with: :Effective:1977 effective:Amount: tax
40,000 35,519 5,606 965 6,571 18.50 40,000 6,630 1,404 8,034 20.08Office of the Secretary ofOffice of Tax Analysis
the Treasury
876 -129 -1.29
1,340
2,082
2,509
3,100
4,018
5,032
7,400
-102 -0.85
- 9- -0.60
- 37 -0.20
36 0.18
21L 0.86
282 0.94
634 1.59January 25, 1978
Tax law in effect December 31, 1977.Deflated by expected increase in CPI fror. 1979 levels shown in column 1Assumes itemized deductions equal to 23 percent of gross income in 1977 andunder the proposed 1979 law.
20 percent of gross income
Calculated under 1977 wage base ($16,500) and tax rate (5.85 percent). Employee share onlyCalculated under 1979 wage base ($22,900) and tax rate (6.13 percent). Employee share only.Under the Administration's welfare proposal, taxpayers in this income class will have a net tax reductionfrom the liberalized earned income credit.
1979 '
1_/2/
3/
6_/
1977Lawto ropsed19719 Taxe
I
844
Median family income in 1978 is estimatedto be between $15,000 and $16,000 (the lastprecise figures available from the CensusBureau are for 1976). By 1979, median incomewill be somewhere between $16,500 and $18,000.This means that by 1979, the majority ofAmerican families will be paying a higherpercent of their income in Federal taxes thanthey do today.
The picture is even worse if we look onlyat taxpaying families. People in roughly thebottom fifth of the income distribution pay noincome tax. The median income of taxpayingfamilies is about $3,000 higher than medianfamily income. Thus, the majority oftaxpaying families will earn more than $18,000or $19,000 in 1978 and more than $19,500 or$21,000 in 1979.
Well over half of all taxpaying familieswill experience a real increase in their taxburdens by 1979, even with the Carter taxpackage. The exceptions (allowLng some leewayfor differences in family size) will be thosefamilies currently earning less thanapproximately $14,000 to $15,000 (less ifsingle) and those not subject to socialsecurity taxes.
Thus, it is apparent that the Carter taxpackage fails dramatically when it comes toproviding tax relief for middle-incomefamilies, especially those who pay socialsecurity taxes.
Tax Rates on Future Income
Whatever one thinks of the desirability ofgreater income redistribution, the move to amore steeply progressive tax schedule posescertain problems. It increases the rate at
845
which any given level of inflation pushespeople into higher tax brackets. In fact,with many people being dropped from the taxrolls, and with government spending stillgrowing, many taxpayers must, of necessity, bepushed into higher brackets to pay the bill.While the rates in each tax bracket will bereduced under the President's proposal,inflation will soon move millions of taxpayersinto higher brackets and higher tax rates thanthey have ever paid before.
Thus, while it may appear that thereduction in marginal tax rates in eachbracket by 1 to 4 points proposed by theAdministration will raise the after-tax rewardto greater work effort and saving by asubstantial amount, inflation, plus the risein progressivity in the tax plan, will work tooffset this effect.
Progressivity is increased by the proposedswitch from the $750 personal exemption to a$240 credit. While the $240 credit wouldlower the tax burden for most taxpayers belowthe 32 percent bracket, it would alsoeliminate the $750 deduction from taxableincome. In many cases, this would movefamilies into higher tax brackets.
TABLE V.-5
Mariinal Tax Rates. 7uint PReturns. After Rate R•D t4?W•i n A tr,. l t)Af n .,..,
101,SOOI I 1, 50121.500131,S0O141,500151,500161,500176,500181 ,SO0201,500
The zero bracket is not shown in this table. To include the zero bracket increase all taxable incomes s3b The $240 credit eliminates tax for returns with total taxable income falling in this bracket.(c) Brackets in which many taxpayers could experience either no reduction, or an increase, in marginal rates.
103,000113,000123,000133,000143,000153,000163,000178,000183,000203.000 and
3wn by $3,200.
3,5004,0005,0006,0007,000
11,00015,00019,00023.00027,00031,00035,00039,00043,00047,00051,00055,03057,00065,00067,00079,00091,00093.000103,00011 3,000123,000133,000143,000153,000163,000178,000183,000203,000ove r
-- ~~ ~~~~ 'M IV ' - • i -" ' " -r n - = mr•t v i |
I .....
847
For example, elimination of $3,000 indeductions for a family of four which used tohave $2,500 in taxable income, would raisethat family's taxable income to $5,500. The$2,500 in taxable income is now taxed atmarginal rates of 16 percent. The $5,500taxable income, now taxed at a 19 percentmarginal rate, will only be taxed at an 18percent marginal rate under the President'splan. Nonetheless, 18 percent is higher thanthe original 16 percent. For this family'smarginal tax rate, the move to a higher taxbracket more than offsets the proposed ratereduction in that bracket. Their average taxrate and total tax will be lowered by theswitch to the credit. But any additionalearnings acquired by working overtime, orhaving both spouses work, will be taxed moreheavily at the margin.
For as many as one-half of all taxablejoint returns, the switch to the credit willcause a rise in taxable income sufficient topush the family into a higher tax bracket. Inperhaps half of these cases, one-quarter ofthe total, the new tax rate in the new bracketwill be as high or higher than the old taxrate in the old bracket. This effect is lesspronounced for single taxpayers, and morepronounced for larger families than forsmaller families.
The Administration could have avoided mostof this mess, while still helping lower-incometaxpayers, if it had kept the exemptions whileraising the minimum value of the general taxcredit by an appropriate amount. If it had,the incentive effects of reduced marginal taxrates would not have been lost in such apeculiar fashion, for so many taxpayers.
848
It is particularly unfortunate that thefailure to reduce marginal tax rates begins tobe especially pronounced in the 32 to 42percent tax bracket, exactly the region inwhich people start to profit by switching intotax shelters. To remedy the problem, theMinority recommends that, if the $240 creditis adopted, families be allowed the option ofretaining the current $750 exemption orswitching to the Credit.
Business Tax Changes
The Administration has proposed net taxcuts for business valued at $5.7 billion in1979, $7.2 billion in 1980, and $6.7 billionin 1981. These involve a reduction of 4points in the corporate tax rate, and anexpansion of the 10 percent investment taxcredit (now limited to equipment) to coverstructures and to offset a larger share oftaxes. The reductions will be partly offsetby a reduction in DISC export subsidies,elimination of deferral of taxes on foreignsouce income, reduced business entertainmentdeductions, elimination of the minimum taxdeduction for ordinary taxes paid, and othertax reforms.
Unfortunately, the tax cuts being promisedare more than offset by increases in socialsecurity taxes and proposed energy taxes.Business can expect an additional burden ofmore than $6 billion in 1979, $20 billion in1980, and $27 billion in 1981 in these newtaxes.
Thus, business is facing net tax increasesof a few hundred million in 1979, $13 billionin 1980, and $20 billion in 1981. This comes
849
on top of the severe erosion of the value ofdepreciation allowances by inflation describedabove.
Business tax relief should be larger thanthat proposed by the Administration.Replacement cost depreciation and deepercorporate tax rate reduction would be mosthelpful in spurring productivity, reducingunemployment, and raising wages.
Investment Tax Credit
The extension of the investment tax creditto structures, and to offset largerpercentages of profits, is possibly aninefficient use of tax reduction dollars,compared to deeper cuts in the corporate taxrate.
The investment tax credit as a tool forpromoting growth is viewed with suspicion bysome economists. The credit is not areduction in marginal taxes on production anddoes not act directly to stimulate output. Itis equivalent to a lump sum payment to thefirm for employing a particular type of input.
Milton Friedman has pointed out that thequantity of investment depends on the amountof investment funding available. The ITC doeslittle to increase national savings. Thus,the primary effect may well be a shift ofinvestment from ineligible to eligibleequipment, from structures, inventory, andadded manpower or manpower training to newmachinery.
Norman Ture has compared the ITC withcorporate tax rate reduction and finds thereduction in the marginal tax rates to be a
850
far more effective stimulus to output and jobcreation.
Chase Econometrics reaches similarconclusions. The ITC is of little effect atlow rates of capacity utilization, while areduced corporate tax rate raises the rate ofreturn to production at all levels of output.In addition, businesses surveyed by Chaseappeared to view the credit as too changeableto be relied upon in investment planning.
Furthermore, urban development experts areconcerned that the extension of the ITC tostructures will make it more attractive forfirms to build from scratch in the suburbsrather than remodel older buildings indepressed urban areas.
Deferral of Taxes on Foreign Income
The proposal to eliminate the deferral oftaxes on foreign source income is ill advised.Foreign subsidiaries of American firms are animportant source of export orders. It isunwise to put these firms at a competitivedisadvantage overseas.
Furthermore, the Treasury may end up losingmoney on this reform. If U.S. subsidiariesrepatriate foreign earnings, they will facehigher foreign taxes on remitted dividends.This will increase amounts claimed under theforeign tax credit. Alternatively, if U.S.firms try to pay the U.S. taxes out ofdomestic income, they will have less moneyavailable for domestic job formation.
851
Alternative Tax on Capital Gains andElminaton of Deductions for Reqular Taxes
Current law allows a deduction _rompreference income subject to the minimum taxof an amount equal to regular taxes paid. TheAdministration proposes to end this deduction,as well as the alternative tax on capitalgains. The chief impact will be to raisefurther the tax burden on capital gains, whichare a large part of preference income. Thiscan only serve to reduce economic growth.
Capital gains are already overtaxed. Theyare not ordinary income, and we should not betrying to tax them as if they were.
Capital gains occur when the price of anearning asset rises. The price increase isgenerally caused by a perceived increase inthe future earnings of the asset. Thosefuture earnings will be taxed when they occur.To tax the rise in the asset's value as wellas the future earnings is to double tax thoseearnings. For this reason, no major nationtreats capital gains as ordinary income.
Any move to increase taxes on capital gainswill worsen the existing double taxation ofsaving, as compared with consumption spending.Income is taxed as it is earned. It may bespent or used to purchase an income earningasset. Ideally, the tax system would beneutral between the choices. However, ifincome is spent, only a small sales tax islevied. But if it is saved, a substantialshare of the earnings are taxed. If thesaving is in the form of a fixed dollar asset,such as a bond or savings account, inflationerodes the principle. If not, any gain inprice, whether due to inflation or a real
852
increase in value, is taxed as a capital gain.The tax code discriminates against growthactivities in favor of consumption.
Budget Totals, Taxes, and Rebates
The Administration has placed much emphasison the small rise in real terms of Federaloutlays for 1979. The real increase isroughly 2 percent. Unfortunately, the fullimpact of the President's budget proposals isnot reflected in the budget totals.
One glaring example of the problem is thenetting out of the energy tax and rebateproposals before they appear in the budgettotals. The Administration proposes toincrease taxes on energy production and use bysome $8.3 billion. They also propose toprovide r bates and credits on the order of$7.2 billion. All that appears is a netincrease in receipts of $1.1 billion.
While it is technically correct to subtractthe rebates and credits from the receiptscolumn, it is also true that the economicimpact of a tax and transfer program is thesame whether the transfer is effected byoutlays or credits. The tax burden onproducers of energy and industries which useenergy still results in less energy productionand higher product prices. The transfer ofmoney to consumers of heating oil or thebuyers of coal-burning equipment does not undothis impact, whether it is done by tax rebatesor by Federal check.
Thus, the budget looks as if it hasrevenues of $439.6 billion and outlays of$500.2 billion. In fact, the budget behavesas it it has receipts of $446.8 billion andoutlays of $507.4 billion.
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When off-budget items and the true economicimpact of the proposed energy tax credits arefactored in to the budget totals, we seelittle evidence of a firm hand onexpenditures, and no sign that the much-heralded zero-based budgeting concept hasproduced any results to date.
Tax Policies affecting Small Business
Small business provides employment for overhalf of the workers in the private sector andcontributes 43 percent of our GNP. Thus,small business is an important contributor tothe economy; if small business is healthy, itis a major boon to the health of the economyas a whole; if small business is sick, it is adrag on the economy.
The one overriding problem facing smallbusiness in the United States is externalfinancing, especially equity financing. Thisis a problem for business as a whole butespecially for small business. The cost offloating securities is prohibitively higherfor small firms compared to large firms.Security offerings by small firms may be sounusual as to require a separate marketmechanism. Small businesses are perceived asbeing, ipso facto, more risky than largebusinesses, and therefore, risk premiums arehigher. And finally, what external financingis done is usually in the form of debt ratherthan equity -- for several years now the stockmarket has presented a nearly impossibleenvironment for raising capital via new equityfor small businesses.
At the same time that external financing isa difficult problem for small businesses,especially new companies. Internal funds fromafter-tax earnings are becoming more difficult
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to achieve due to increasingly big bites ofcorporate income and other taxes. Our taxlaws have methodically eroded traditionalincentives for investment. For example, the1969 Tax Reform Act increased capital gainstaxes from 25 percent to a 35 percent maximum.In addition, the minimum tax provisions haveraised the potential capital gains tax to 49percent. At the same time, the risk of anyinvestment has been doubled by permitting onlya 50 percent write-off of capital losses.
Increasing the differential between the taxrate on realized capital gains (by eliminatingor reducing the capital gains tax), and thatpaid oa ordinary income, would be one solution-- this would encourage companies to retainand reinvest their earnings in new plant andequipment rather than paying them out individends.
But the best route to stimulate smallbusiness capital formation and provide thenecessary internal financing for otherbusiness purposes is substantial reduction inthe corporate tax rate. Moreover, the smallbusiness exemption should be raised from thecurrent $50,000 to a minimum of $150,000 oftaxable income.
Although such a reduction would help allcorporations, it especially would help smallcompanies that do not have large incomes andmust rely heavily on retained earnings.
Other tax provisions that would help smallbusiness are:
Adjust depreciation schedules to reflectreplacement costs of assets, with carry-forward provisions to aid firms that are notyet profitable.
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Defer capital gains taxes if the proceedsfrom an investment in a qualified smallbusiness concern are reinvested within alimited period of time in another smallbusiness concern.
The foregoing proposals would be helpful tosmall business and, in turn, would contributeto the health of the whole economy. Costestimates for these proposals have not beendeveloped, but they would not cost as much asthe Carter tax package, and they would be morehelpful in stimulating long-run economicgrowth and employment. As discussed in aprevious section, the Minority members of theJoint Economic Committee also stronglyrecommend an across-the-board reduction in themarginal rates of personal taxes, which alsowould aid unincorporated small businessmen.
One serious problem facing all business,but which small business may find especiallyhard to deal with, is the heavy cost ofFederal regulation. We note the study oz.Federal regulation being prepared by theSenate. Governmental Affairs Committee. Weurge that particular consideration •"e given tothe impact of regulation on small business,and to the comparative disadvantage of smallbusiness in contesting unreasonable agencyrulings.
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V1. EMPLOYMENT
The Employment Situation in 1977
Over 1977, employment grew by 4.1 million,or 4.7 percent, marking the largest numerical12-month gain ever recorded in the post-WorldWar II period. Employment for adult men grewby 1.8 million, for adult women by 1.7million, and for teenagers by nearly 650,000.Employment in blue-collar and service workgrew relatively more than other occupations.
Accompanying this substantial increase inemployment was a correspondingly largeincrease in the civilian labor force, whichended the year at 98.9 million persons. The12-month rise was nearly 3 million. The laborforce participation rate in December easedback to 62.8 percent, just below the all-timehigh of 62.9 percent in November.
Because of the large labor force growth,the numbers of unemployed dropped by only 1.1million, and the unemployment rate was 6.4percent, a decline of 1.4 percentage pointsfrom December a year ago. Over the year,jobless rates dropped markedly for white men,women, and teenagers, and black adult men,while no downtrend was evident among blackwomen and teenagers.
These statistics underscore some of theconcerns expressed at the White HouseConference on Balanced National Growth and.Economic Development. Vernon Jordon of theNational Urban League maintained that a largepart of minority unemployment especially forminority youth still is due to discrimination.Statistics show that even with the same amountof education, blacks suffer disproportionatelyhigher unemployment rates than whites.
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Another graphic illustration of thevariance of employment opportunities forblacks is the situation in the Sunbeltregions. Although many new industries, andconsequently new jobs, have settled in thoseareas, black unemployment remains very high inthat region. This has happened even thoughminorities represent a larger share of thepopulation. Unfortunately, they alsoconstitute the isolated rural poor, the leastskilled, and the most poorly educated.
The evidence that minorities and youth havenot participated as freely as have othergroups in the jobs created by the expansion ofthe economy over the last several years doesnot come as any real surprise. These areprecisely the groups with characteristics thatmake them harder and more costly to absorbinto the ranks of the employed workers. Whatdoes cause concern among black leadershipoccurs in the discussion surrounding policiesto achieve full employment.
The first point of concern is that thefull-employment unemployment rate will be setso high that it will be virtually meaninglessas an appropriate goal. Some of these fearswere sharpened by the Council of EconomicAdvisors' acceptance of the benchmarkunemployment rate at 4.9 percent in 1977(compared with 4.0 percent in 1955) afteradjustment in the age-sex composition of thelabor force. There is no doubt that afixation upon one number can be misleading andresult in misdirected policies.
What may be more important, however, is thepossible relaxation of public policy once apolitically acceptable number is reached. Forexample, once the unemployment rate reaches5.0- percent, just how much pressure will be
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put on government to achieve a lower rate,particularly if meeting that goal might induceadditional inflationary pressure?
Policies for Full Employment
While debate still rages about the specifictarget for the unemployment rate underconditions of full employment, agreement onthe necessity for a double-pronged attack toreach full employment has gradually evolved.This involves: (1) a high enough rate ofeconomic growth to absorb the growing numberof entrants in the labor force and to reducethe present high number of unemployed, (2)structural programs that target on groups withspecific unemployment problems such asminorities, youth, and older workers.
Although economic expansion is a crucialelement in the movement of disadvantagedgroups in the labor force into jobs, thepurpose of this section on employment policiesis to treat structural problems exclusively.Suggestions on structural programs have comefrom witnesses before the Joint EconomicCommittee and from the White House Conferenceon Balanced National Growth and EconomicDevelopment. One theme stressed repeatedlywas that the structural programs must involvea high degree of local initiative andauthority. In addition, structuralunemployment programs should be incorporatedwithin other regional and urban strategies.
Another element was the involvement notonly of large firms but small businesses. Thelatter have many of the added jobopportunities, particularly in the fastexpanding service sector. John Burns, fromthe Committee on Economic Development, pointedout that half of the jobs in this country are
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in firms with a hundred employees or less andthat three-quarters of the jobs are in firmswith fewer than five hundred employees.
Not much emphasis was placed on thedevelopment of new initiatives. It was more ofa commitment to use tools already establishedin a more flexible framework. A widerdissemination of information about workableprograms, a concerted effort to involvebusiness leadership on local and nationallevels, and the use of intermediateorganizations that would serve as liaisonsbetween businesses and the disadvantaged wererecommendations to better implement trainingand education programs.
Beyond a grass roots approach, effectiveincentives for employers to participate inthese programs can be created by tax creditsand subsidies from the Federal government.These incentives can suit various alternativepurposes:
1. Tax credits to encourage business tolocate in central cities. In theAdministration's tax program, theinvestment tax credit is* availableboth for the construction of newutility and industrial structures andthe rehabilitation of existingstructures so the proposal will haveno anti-urban bias. If theinvestment tax credit spursrebuilding in central cities, jobswil flow to the areas ofconcentrated high unemployment. Ithas been suggested that theinvestment tax credit be channelledmore narrowly by limiting it to areaswith high unemployment rates.However, the more restriction andconsequently, more expensive
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paperwork, put on the use of such acredit, the less businesses will be.disposed to take advantage of thecredits.
2. Employment tax credits. These havebeen directed to youth, the hard-coreunemployed, and minorities. Anexample is S. 2436, proposed bySenator Javits, which provides arefundable tax credit to business,equal to one-half of the increase inunemployment insurance wages over abase period. This credit isapplicable to youth aged 16 to 19 whohave been either unemployed 15 weeksor longer or enrolled in a CETAemployment or training program for atleast 15 weeks.
3. Wage Subsidies. One of the assumedeffects of the increased minimum %ageis that the marginal productivity ofmany new entrants into the laborforce, especially youth, does notequal their marginal cost forbusinesses. A wage subsidy wouldallow businesses to recoup part ofthe wages paid and, thus, encourageemployers to hire youth.
4. We continue to believe that a viablesystem of local labor-management-government committees as described inthe section on urban policy actioncan have a favorable impact on theamount of structural unemployment.
Participants in JEC hearings and in theWhite House Conference made it clear that atraining element must be associated with alltax incentive and subsidy programs or theemployment gains would prove illusory in thelong run.
P
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There is a brick-and-mortar policy aspectthat national, state, and local governmentbodies also must undertake. Businessmenpointed out that while tax and subsidyincentives were very important, a basic andsuitable infrastructure had to be available toencourage the relocation of business to a newarea. The necessary infrastructure wouldinclude a transportation network, adequatehousing for workers, effective police, fire,and sanitation support, and effectiveinsurance at reasonable rates.
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VIIq AGRICULTURE
Some of America's farmers are hurting. Infact, grain farmers and farmers in severalother sectors of agriculture are desperate.Livestock and poultry farmers, dairymen andfruit and vegetable farmers had a pretty goodyear in 1977, but these bright spots inagriculture do not offset the overall negativeatmosphere in the farm sector.
Net farm income (including net inventorychange) has dropped from a peak of $33.3billion in 1973 to $20.6 billion in 1977. Ofcourse, 1973 was a good year for farmers andperhaps an unfair base year comparison. But,even with that perspective, farmers arerestless.
The squeeze comes in prices received byfarmers for their products versus the pricespaid by farmers for costs of production andhousehold operations. For example, the PricesReceived index (1967 - 100) rose sharply in1973 and averaged 179 that year; it rosefurther to 192 in 1974. The Prices Paidindex, on the other hand, averaged only 144 in1973. Since then, the relative position ofthese indices has painfully reversed itself,with Prices Received dropping to 183 in 1977and Prices Paid rising very sharply to anindex of 202 last year. In 1973, the parityratio, adjusted for government payments tofarmers, stood at 94. By January 1978 it haddropped to 67, the lowest level in 45 years.
The problem is that commodity surpluseshave depressed prices, leaving many wheat andfeedgrain farmers in financial difficulty.For many, especially some new farmers, debt-to-equity ratios are reaching precarious
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levels, threatening both their financialstability and the stability of those financingthem.
The plight of farmers has brought forthmany proposals for solving the problems --some good, some bad, some drastic. Some callfor making it illegal to sell anyagricultural product below 100 percent of theparity price. Others call for a return tohigh price supports, set-asides, and thecontrols of the 1950's and 1960's.
In the interests of farmers, consumers, andtaxpayers, we should be careful to avoidpolicy mistakes like those made after WorldWar II. Farmers don't want the governmentagain to become the dominant force in themarket. The policies and programs of the1950's were primarily concerned withattempting to assure fixed returns to farmers,but they had the effect of insulatingagriculture from the need to adjust tochanging conditions. This only delayed the
~ time when adjustments had to be made. One ofthe adjustments was that thousands of smallfarmers went out of business.
Small bureaucratic errors in programformulation during that era resulted insubstantial costs to taxpayers and alsodamaged the Nation's pre-eminent position asthe world's greatest agricultural exporter.
Holding prices at levels that areinconsistent with the underlying demand andsupply situation creates excess capacity andrequires strict controls on the amountproduced. This leads to all kinds ofmischief, loss of freedom, inefficiencies andfrustrating farm policy administration.Farmers should be free to control their own
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operations and permit market prices to playtheir traditional role in directing productionand consumption.
Within this concept, there is a role -- butnot a dominant one -- for government.Government should be responsible for placing afloor over the pit of disaster, but beyondthis, government should devote itself toimproving the functioning of the marketplace.Examples of useful government services arenegotiation of sales abroad, marketsupervision, supervision of grades andstandards, outlook information, relatively lowloan levels and target prices that wouldpermit prices to fluctuate freely most of thetime, and overseas food aid, such as PublicLaw 480.
Market-oriented agricultural policy wouldinvolve less government involvement than wehad in the 1950-1970 period. But within thatmarket concept, there are specific things thatcan be done to bolster farm incomes:
1. Let farmers intelligently choose theproper level of output of theirproducts, in keeping withsupply/demand conditions andrelatively free market prices.
2. Develop and strengthen marketingorganizations, structures, andprograms for both domestic andforeign farm product sales.
to help deserving farmers meetcurrent financial crises.
5. If we hope to help agriculture or anyother sector of the economy, we mustcontrol the overall rate ofinflation.
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In the following paragraphs we elaborate onsome of these points:
Legislative Proposal in Keeping with the Free
Market Concept
The current set-aside program is notworking well because the incentives don'tattract many farmers. On the other hand,increasing the incentives too much would posethe danger of excessive government involvementin commodities. One possible compromise hasbeen proposed which deserves careful debateand consideration. Under this proposal, S.2481, the government would establish aflexible schedule of prices and productionset-asides that would permit an individualfarmer to choose his own target price, up toparity: however, the higher he went up theprice scale, the lower his permittedproduction would be. Thus, farmers would havea flexible mechanism whereby they couldvoluntarily control their production, and eachindividual could reflect the target level andset-aside that was best for his farmoperation, based on the sliding scale.
Under this type of program a farmer couldachieve parity without corresponding priceincreases to the consumer and with onlyrelatively modest outlays from the FederalTreasury.
Enhanced Marketing
Government can do more than it has beendoing to aid farm marketing. We need betterinformation, research, and regulatoryservices.
Through their organizations, farmers mustdevelop the capacity to understand the market
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system, to manage their production, and toform associations to negotiate contracts withhandlers in advance of production.
Agricultural cooperatives can be a dynamicforce in farm marketing in keeping with thepreservation of our competitive enterprisesystem. These cooperatives can providebusiness units large enough to competeeffectively with other enterprises.Government should not intrude into theoperation of cooperatives.
Expand Commercial Export Markets
The expansion of commercial exports is thekey hope for prosperity in Americanagriculture.
U.S. agricultural exports have increasedfor seven consecutive years now, reaching $24billion in 1977. However, indications arethat exports will trail off slightly in 1978,to about $23 billion.
Our highly efficient agricultural systemenables us to compete for export markets inspite of the fact that many U.S. exports aresubject so some form of restriction in foreigncountries. But what we have done so far isnot good enough. We must do more to expandour foreign markets. We slipped badly ingrain exports last year (ending June 30).While Canada, Australia, and Argentinaincreased their wheat shipments by 3.7 millionmetric tons, U.S. wheat exports fell by 5.8million metric tons. Fortunately, 1978 looksmuch better, and we should substantiallyregain the ground lost in 1977.
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There is an urgent need to increase sharplyour promotional efforts. The $23.5 millionthat the U.S. will spend this year to promotesome $23 billion of exports is an investmentof only one-tenth of 1 percent. Ourcompetitor, Australia, by contrast, willinvest ten times as much on a proportionalbasis. A recent House Agriculture Committeestudy shows that U.S. export promotionexpenditures totalled $16.8 million in 1970.The $21.4 million spent in 1977 is only $13.6million in 1970 dollars, a real dollarreduction in effort.
Actually, farmer organizations have beenmuch more aggressive in promoting andmarketing American farm products than has beenthe government itself. Export promotion byco-ops and organization of "Unitrains" tocarry carloads of a single commodity directfrom farm areas to export ports have helpedkeep American agriculture moving abroad.
One thing we should not do is rely on adeclining dollar to stimulate export sales.As the dollar declines in value, it raisesinflation and inflationary expectations in theUnited States. Energy prices, materialsprices, and wages build upward momentum asinflationary expectations continue even afterthe initial devaluation of the dollar,eliminating any benefit to farmers from thefarm price increases a devaluation may bring.Therefore, in the long run there is no benefitto farmers from a weaker dollar. What isneeded is a direct drive on export promotionby the government, without regard to thestatus of the dollar on world markets. (Seeother observations on this point in thesection on International Considerations.)
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Specifically, the Minority members of theJEC recommend the following six-point programto help sell American agricultural productsabroad:
1. Liberalize restrictive trade barrierswhich limit the flow of agriculturalexports. Emphasize to importingcountries that we can guarantee thema dependable supply of farmcommodities.
2. Provide short- and intermediate-termgovernment credit (through theCommodity Credit Corporation) toother countries for the purchase ofU.S. farm products. */
*, Representative Clarence J. Brownrecommends that we permit these CCC loans tototalitarian economies such as the People'sRepublic of China, the Soviet Union, and theEastern European nations. In addition, Mr.Brown recommends that we adjust our tariffpolicy to provide most favored nation tariffstatus to certain countries, including somecommunist countries (although not suchcountries as Cuba, North Vietnam, or NorthKorea until other disputes are settled). Suchsales can help pave the path for peace -byincreasing the dependence of these nations onAmerica for their food. Moreover, these salesagreements should comport with recommendationfive (5) below.
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3. Expand Export-Import Bank financingof loans for farm commodity exportscommensurate with agriculture's shareof total U.S. exports.
4. Implement existing legislation thatpermits foreign nations to purchaseour grain and store it in the U.S.for subsequent export.
5. Push for steady and regular annualexport sales over long periods,rather than huge bulges from year toyear.
6. Expand our agricultural trademissions.
The Farmers' Heavy Costs
Rising farm costs in the face of fallingprices received by farmers are putting asqueeze on many otherwise sound farmoperations. It now costs more to process,transport, and distribute food each year ($58billion) than to produce the food itself onthe farm ($56 billion). Food processors,marketing firms, and distributors -- themiddlemen in the agribusiness world -- receivea bigger share of the food dollar than do thefarmers. And while the farmer has recentlybeen subject to falling profits and profitmargins, profits earned by middlemen continuetheir upward trend. Like the farmer, themiddleman faces higher costs for labor,energy, materials, construction, andgovernment regulation. But unlike the farmer,the middleman is able to pass along his highercosts to the consumer.
For example, in 1977 the average familypaid $41 more for its domestically-producedfood than it did in 1976. But $39 of thatincrease went to the processors and othermiddlemen, not to the farmers.
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Thus, the villain in the farm economy isinflation. Increases in the minimum wage,huge jumps in social security taxes, andproposed energy taxes will create even largercosts for farmers and middlemen alike.
It is better to raise parity for farmersby reducing prices paid by farmers than toraise prices received by farmers.
In this regard the Minority emphasizes amajor item in the cost of food production anddistribution, i.e., the cost of over-regulation by government. The GAO hasestimated that the annual tax cost ofgovernment regulation of the food industry isnearly $1 billion. At least 75 Federalagencies have the power to control ruralAmericans in some way or another. The needfor "sunset" legislation in the agricultureand food industry is obvious.
The goal for U.S. farmers is rising realincomes. This can best be accomplished in anatmosphere of freedom, which admittedly hasits fluctuations, but allows for real gainsover the long run. Prices must not bedictated by government. This stance, combinedwith aggressive export promotion andgovernment policies that attack, rather thanpromote, inflation are the sure path toprosperity for American agriculture.
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VIII. URBAN POLICY*/
The near bankruptcy of New York City in1975 and the prospect of another New York Citycrisis this year underscore an unfortunateaspect of our political life -- that theUnited States lacks a national urban policy.
By virtually every statistical measure,America's larger -- and especially her older-- cities display the symptoms of economicwaste and stagnation. As the followinganalysis shows, the problems of urban areashave been building up for several decades.Furthermore, the problems are not confinedsimply to the so-called northern tier states.but instead can be found in cities of allsizes in virtually every part of the country.
*/1 Senator Hatch has additional views onurban problems.
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Most of the problems of society, fromancient times on, have been the problems ofcities. "Congestion" is really urbancongestion; air and water pollution is usuallyurban pollution; crime rates in urban areasare higher than in rural ones. Ironically,the rising expectations of our affluentsociety have generated accelerating demandsfor services which many cities, given theirrelatively fixed tax base, cannot afford.Cleaner air, better education, modern medicalcare, efficient transportation systems, and aneffective police department able to cope withmodern society's problems are typical of theexpensive demands which we place ongovernment; yet each of these examples is alsotypical of the items with which mayors mustdeal in making up their own budgets.
There was a time when economic trends couldhave kept up with these aspirations of modernurban society more easily than they can now.Urban development during the 19th century wasrelatively well balanced, and our cities as awhole continued to grow vigorously into the1920's. During this time, growth in thecities was faster than growth in the UnitedStates as a whole. This was the period whenour urban industrial centers attractedmillions of foreign as well as displaceddomestic agricultural workers. The growthsectors in our geography were urban, and notsuburban.
According to Census Bureau figures,suburban growth had begun to outpace growth incentral city areas by 1930, and this trend hasaccelerated up to the present day. Thedisparities became so great that cities suchas New York, Chicago, Philadelphia, Detroit,and Pittsburgh actually-lost population duringthe 1950's. During the 1960's, according toCensus Bureau statistics, 70 major core cities
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lost population. A greater consequence, theurbanized areas of the country -- the NewEngland and mid-east states -- also lost inoverall population during this period.
A breakdown of these population movementsalso reveals a disturbing pattern of incomelevels and employment. Fragmentary surveysindicate that core city areas in all parts ofthe country today are showing fewer ind feweremployment gains than suburban areasregardless of the overall level of economicactivity at the national level. Rates ofunemployment are also higher in central cityareas than in the suburbs regardless of thecity's size or its location; fragmentary datasuggest that non-white unemployment in corecity areas is also higher than non-whitesuburban unemployment. Finally, central cityresidents have lower incomes than theirsuburban counter-parts and a lower share ofthe higher-paying jobs.
As a result, many of the nation's cities,especially its central cities, are caught in amire of stagnation, dragged down by high taxrates on an inadequate tax base on the onehand and by the lack of competitive publicfacilities on the other. As we have noted,these conditions are exacerbated by nationalpopulation trends and by the economicprinciples which favor growth outside thecentral city areas.
Policymakers have not ignored theseproblems. Thus, the 1930's saw precedent-setting legislation in the field of housing,and the 1960's witnessed the growth of GreatSociety programs. With an increased emphasison the fiscal problems of State and localgovernments per se, the early 70's haveproduced the general revenue sharing program,counter-cyclical fiscal assistance, and
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several examples of grant-in-aidconsolidation. Increases in aid to State andlocal governments, in fact, claimedapproximately 40 percent of the Federalgovernment's budget increases in the decade1965 to 1975.
Most of this assistance has been in theform of categorical grant-in-aid programs,block grants, and revenue sharing (includingcounter-cyclical fiscal assistance). Thecommon denominator to this assistance wasmoney, whether in the form of grants, loans,or loan guarantees. Relatively littleconsideration has been given to urban policyper se.
We now see how shortsighted this approachhas been; because in fact we have had aFederal "urban policy," a de facto urbanpolicy which was well intentioned, but whichhas brought many central cities to where theyare today.
Most urban economists acknowledge thatFederal policies are in a large partresponsible for the poor fiscal condition ofmany urban governments. For example, a RandCorporation study cites Federal grants forsewage and water treatment facilities, theinvestment tax credit, the national highwayprogram, mass transit, airport subsidies,pollution control, and the minimum wage asexamples of Federal policies which either haveor may have affected central cities adversely,in favor of suburbs. A recent study by theUrban Institute concludes that "directly orindirectly, provisions of the federal tax codehave tilted the terms of economic competitionin favor of suburban development anddevelopment of new regions of the country,thereby accelerating the abandonment ofcentral city housing, contributing to the
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deterioration of the existing urban capitalinfrastructure, and precipitating the declineof the central city tax base."
Federal macroeconomic policies have a majorimpact on local economics as well. Thestatistics on urban employment and businessformation tend to correlate to the swings inthe national economy. Furthermore, we areconcerned that a national economic policywhich fails to promote business confidencewill also fail to promote the urban economyitself.
There have, of course, been some positiveaspects of Federal urban policy. Transferpayments -- i.e., social security,unemployment compensation, and SSI payments -have prevented the urban poor from becomingtotally destitute. In some cases, theexistence of a widespread system of transferpayment support has meant a significantdifference in the overall health of the urbancore economy itself. For example, a survey ofpersonal income growth in five older citiesbetween 1970 a'id 1975 shows that the largestgain in income during this time came fromincreases in transfer payments than fromprivate sector wages, salaries, and otherincome. By extension, Federal aid other thancash transfer payments -- such as medicaid,housing subsidies, food stamps -- has alsohelped urban areas generally as well as theresidents of these areas.
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The thrust of recent Republican policyinitiatives such as general revenue sharing,counter-cyclical fiscal assistance,s and thegrant consolidation proposals*/ contained inPresident Nixon's special revenue sharingprogram have all been directed at increasingthe freedom of, and reducing the red tapeassociated with, the administration of localgovernment. We still believe that greaterprogress in reducing the amount of Federalinvolvement in local decisionmaking isnecessary.
*/ Senator Javits states, "I support theefforts at grant consolidation, provided thereis no tendency to reduce improperly theoverall amount of support, under cover ofgrant consolidation."
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In reaching our recommendations on urbanpolicy, we take note of the following findingsand conclusions:
1. Federal urban policy is poorlycoordinated and inadequatelymonitored. The fact that theTreasury Department administers theNew York City program and that theCommerce Department has considerableurban development responsibilitiesindicates that urban policymaking isfragmen':•d at best. The samefragmentation is reflected, though toa lesser degree, in the congressionalcommittee structure. Furthermore, wedo not know the effects on our urbanareas of various Federal policies.The congressional statement of policyfor the Department of Housing andUrban Developrment itself makes littledistinction between the smallestcommunity and the largest city. TheNew York City crisis is an example ofa national issue which found theFederal government bereft ofappropriate policies; the- SeasonalLoan Program that was finally adoptedhas proved to be only a stopgapmeasure.
2. Confusion in urban policy oftenarises from th2 failure todistinguish between income supportprograms and economic developmentactivities. In our view, urbanpolicy should avoid concentrating somuch on income maintenance for urbanpopulations as to become a means ofperpetuating the urban poor.
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3. The urban economy is closely tied tothat of the country as a whole. Arecent study indicates that core cityjob levels were sustained duringperiods of rapid economic growth butfell during recessionary times. Thesame study indicates that industriesshowing rapid national growth alsoshow more growth in cities. In otherwords, balanced and continuednational economic growth is thesingle most effective urban policy wehave today.
4. The most important single factoraffecting urban development in thepast ten years has been populationshifts from urban to suburban areasand from the slower growing to themore rapidly growing regions of thecountry. Commerce Departmentstatistics indicate a directrelationship between populationgrowth on the one hand and growth inreal personal income on the other.Those sections of the country withthe slowest or with negativepopulation growth, have alsoexperienced the slowest rates ofgrowth in per capita personal income.By contrast, the so-called "sunbelt"states, including the Rccky Mountainstates, have had above average growthin both these categories.
The President's urban policyrecommendations were being finalized as theseviews went to press. However, certain aspectsof these recommendations have been in thepublic domain for some months, and the generaloutlines have been described by Administrationspokesmen. In our view, the important aspectsof a national urban policy are as follows:
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The most effective and fool-proof urbanpolicy is a sustained level of balancedeconomic q growth.'Therefore, our tax, fiscal,and monetary policy recommendations alsoconstitute the chief recommendation of thisurban policy section. We know that urbanareas respond unevenly to changes in economicgrowth, and do not conform precisely to theups and downs of the business cycle in theNation at large. In other words, there areleads and lags in the response of cities inall parts of the country. However, asustained period of growth helps urban areasregardless of size or location. Severalspecific tax proposals in these views wouldalso help serve the needs of urbandevelopment. In particular, we cite the taxproposals with regard to small business and toreducing structural unemployment.
Urban areas are especially hard-hit byinflation. Therefore, an effective anti-inflation policy is a necessary component of anational urban policy. Because the urban taxbase is relatively rigid and does not respondto sudden changes in the economy, theinflationary shocks of the past decade havebeen especially severe. For example, the realpurchasing power of urban areas actuallydeclined between 1970 and 1974, as fuel costssky-rocketed and labor costs rose in anattempt by municipal unions to keep pace withinflation. The additional fuel bill for NewYork City alone in 1974 was estimated at $250million.
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Municipal employees' salaries constitutethe largest single item in any urban budget,and hence the biggest opportunity for savings.Nevertheless, there are not sufficientincentives for urban governments to resistunnecessarily large wage demands. We affirmthat the appropriate salary level formunicipal employees must be set throughcollective bargaining between the appropriategovernmental body and the municipal employeeunion. We also accept the principle thatdifferences in salary levels across thecountry will arise because of many factors,including the existence of different salarylevels in private industry. However, we alsobelieve that greater attention needs to bepaid to the productivity of municipal workersand to the economic impact of the Federal andlocal regulations and programs which many ofthem have been hired to enforce. */
_ Senator Javits states, "While municipalemployee salaries may possibly constitute anarea for savings, they can be a shrinking basewhere, as in New York City, major lay-offshave already been necessitated. Hence, othereconomies must be sought in those situations,as well as a buildup of municipal revenuesthemselves, preferably through enhancedbusiness activity."
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We believe that part of the problem ofnational urban policy is one of organization.Our government is poorly organized for makingpolicy. Thus, we recommend that greaterefforts be made to coordinate theadministration of Federal urban policy. */
We do not know adequately the effects onour cities of legislation which may have beenenacted in pursuance of widely differingpolicy goals. Therefore, we recommend thatthe President assess the impact which thoselegislative programs with major urban effectshave made on our cities. We also recommendthat major legislative proposals by theAdministration carry an urban impact statementso that the unwanted effects of legislationcan be avoided.
While we support the concept of welfarereform, we urge that welfare reform per se notbe used as a substitute for a bold andinnovative urban policy. Because welfareexpenditures constitute a large percentage ofurban budgets, there will be a temptation tolook upon welfare reform as the preferredmeans for helping out our cities. This routemust be avoided. Otherwise, we consign ourcities to the role of warehouses for theNation's poor and frustrate any progresstoward other meaningful reforms in urbanadmiistration and finance.
The distribution of Federal grants-in-aidand Federal procurement must be rigidlyscrutinized and re-assessed with a view
- Senatori3av-ti 'and Representative Hecklerrecommend an Office of Urban Affairs in theWhite House in order to provide the requisitehigh-level coordination and support of anational urban policy.
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towards determining whether urban areas andthe urban regions of the country have beenunfairly discriminated against. There isample evidence to support the view thatmilitary bases and Federal grants-in-aid favorthose parts of the country which are alreadyfaster growing. On the other hand, severalinnovations have been made in recent years tointroduce criteria into grant-in-aiddistribution formulas which recognize theproblems in older sections of the country andthe problems of urban areas where prices areoften higher. We urge that work be continuedin developing suitable criteria for Federalspending that our urban areas not be short-changed.
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Above all, we believe that national urbanpolicy must affirm the central role of privateenterprise in developing and maintaining theeconomic base of our cities. This means thaturban governments must actively cooperate withbusiness and with non-municipal employeeunions in developing strategies for growthwhich are appropriate to the peculiarconditions in the city at hand. while theFederal role in this process must necessarilybe minimal, there is conceivably room forFederal assistance in developing city-widebusiness-labor-government councils to givethis form of cooperation the high profile thatit needs. Such councils should activelyadvise City Hall on means to attract and holdthe high quality labor force -- bothprofessional and blue collar -- that privatefirms must count on. Past experiments withmunicipal councils of this kind have shownthat they can be instrumental in providingtraining programs, attracting new business,clarifying the needs of the business and laborcommunities, and improving the labor climateand business confidence in the area. V/
_*-7Senator JitS states, "I support theconcept of-an-Urban Development Bank. Such abank should be a major vehicle for Federalloans and loan guarantees in promotingdevelopment in our cities. The bank should beequipped with the appropriate technicalexpertise for engaging in technical assistancein municipal development and finance.
884
ADDITIONAL VIEWS OFSENATOR JACOB K. JAVITS
Traditionally, the Minority report hasserved the valuable function of challengingthe Majority's viewpoint and recommendations.Because of the grave dangers that I see on theinternational economic front in 1979, I feelcompelled to assume that role.
The evidence of the problem is all arounduss the weakness of the dollar the laggingrecovery and the relatively low level ofcapital formation in the industrializedcountries; the problems of recycling the vastaccumulation of financial resources in thehands of a small number of oil exportingcountries of the Persian Gulf; and thepersistent coupling of unacceptableunemployment and inflation in industrializedcountries.
The choice of the solutions that thedeveloping and developed countries make insolving these problems will determine thehealth and stability of the U.S. economy.Because of the interdependent economicrelationships between the U.S. and the rest ofthe world, the U.S. and the otherindustrialized countries must provide thebasis for the cooperation in chartering acourse to establish a viable world economyrather than one which faces recession, evendepression in the next few years.
My proposals touch several strategies --financial assistance and trade policy withseparate elements for the developed and forthe developing countries.
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1. In spite of efforts by oil-importingcountries to increase their exports to OPECand Third World countries or to increase theirinternational debt to finance their oil bills,OPEC's surpluses amounted to almost $133billion in 1974-76t with a surplus of anadditional $45 billion estimated for lastyear. OPEC countries have placed theirinvestment funds largely in short-term assets,deposited in the industrialized world'sfinancial intermediaries (mainly commercialbanks). Because of the nature of short-terminstruments, the "recycling of OPEC funds" hasbecome a game of balance-of-paymentsaccounting with every dollar of deficit beingbalanced by a surplus dollar. There is noguarantee that this money will be used forcapital equipment investment to stimulate non-inflationary and productive growth. If thistype of investment does not take place, oil-importing countries will have no way toestablish a higher growth rate and to build uptheir industrial capacity to pay off theirdebts.
Because of the danger of potentialdisruptions of world financial markets if OPECmanagers rapidly shift these short-termassets, we must develop a large pool ofcapital using at least half of the reserves ofWestern currency -- mainly dollar denominated-- that are being held by the surplus OPECcountries. These funds must be converted fromshort-term assets to long-term investments.
However, governments of the industrializedcountries must be prepared to meet OPEC'slegitimate concerns for the preservation ofthe value of their funds. A guarantee of arate of interest reflecting expected inflationrates and a formula which allows the
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withdrawal of surplus funds in an orderlymanner should ease any initial misapprehensionof the OPEC nations.
This capital pool which should be about$150 to $250 billion (representingconservatively 50 percent of OPEC's surplusesover the next 10 years) should be used tostimulate investments in return for a pledgefrom developing countries to establishrational trade policies. Country criteria forinvestment funding should include evidence ofhigh product demand and insufficientindustrial capacity and the maintenance of afavorable investment climate.
2. In addition, we must increase on abilateral basis all forms of our aid programs,international lending, direct privateinvestment and bond financing. We must improvethe delivery of the U.S. aid program i.e.,the International Development Cooperation Actof 1978, which I have cosponsored.
On a multilateral basis, we must providegreater capital to the international financialinstitutions such as IBRD and the World Bank.Also, the Congress should authorizeimmediately the $1.7 billion requested by theAdministration for the Witteveen Facility ofthe International Monetary Fund.
3. In addition to the aid mentioned above,we should help the developing countriesincrease their export earnings by providingeconomic opportunities in the developedcountries. This can be accomplished byprograms which seek to stabilize commodityprices. We should engage in specifiedcommodity agreements, provide some financingof selected buffer stocks and underwrite someexport earnings through economic programssimilar to the Stabex Plan under the Lome
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Agreement. Some accomodation must be madewith the developing countries on a "secondwindow" that will provide soft technicalassistance to commodity producers covered bythe Common Fund. We should expand our systemof Generalized Trade Preferences, which willpermit the LDC's to increase their exports ofmanufactured and semi-manufactured products.
4. The spin-off to the U.S. fromencouragement of productive investment andgreater economic development to take place inthe developing countries is the provision ofexpanded markets for U.S. and otherindustrialized countries' products.
I believe that one of the problems whichimpedes U.S. industrial growth is the lack ofsufficient overseas markets for U.S. products.The Administration must develop a seriousexport expansion program and create greaterinterest on the part of U.S. industry andagriculture in exporting.
The Government especially should encouragesmall- and medium-sized firms with no priorinternational experience to explore theoverseas market potential for their products.
Because I believe that the Administrationshould improve business confidence through taxpolicy, I do not favor the elimination of DISC(Domestic International Sales Corporation) andthe ending of tax deferral on undistributedprofits earned abroad by affiliates of U.S.businesses.
Domestic Economic Situation
I applaud the key points made in theMinority Report that greater productivityresulting from increased investment is neededto finance our economic growth. Unless we, as
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a Nation, maintain our competitive edge byimproving productivity, U.S. business vil beunable to take advantage effectively of thegrowth of foreign markets for its products.Investment in human capital is the cornerstonein achieving productivity growth. As an addedbonus, increased productivity, combined withsubstantive growth in technologicaldevelopment, can counter the erosion ofbusiness profits through inflation.
As my legislative record makes very clear,I have sponsored Labor-Management Committeesand pushed profit sharing and pension reformsin order to involve workers in the mainstreamof corporate activity. The Human ResourcesCommittee, on which I am Ranking. MinorityMember, continues to examine these proposalsfor Labor-Management Committees and expects toact on them in the 95th Congress. Not onlywill advantages accrue to the businesscommunity, but the human needs of workers alsocan be satisfied. It is the marginal worker,the one who needs to develop skills, that wewant to incorporate into the ranks ofproductive employment.
On the issue of the Minority Report'srecommendations for social security, I mustseparate myself from my colleagues. TheMinority is opposed to increasing the wagebase for social security. If there is achange to be made, the wage base should beincreased, not decreased. This opinion stemsfrom my fundamental belief that the increasesin social security taxes were legislated aftercongressional realization that the cost ofhigher benefits must be paid by the recipientsof those benefits. Increases in the wage basewill mean ultimately larger benefits to the
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workers on retirement. We could not continueto legislate a system that permitted higherand higher benefits without recovering thecosts.
We must consider the plight of the low- andmiddle-income taxpayer. In February of thisyear, I cosponsored S. 2503, a bill whichwould have substantially eased the burden ofsocial security taxes on low- and middle-income taxpayers. This proposal would haveremoved the disability insurance and hospitalinsurance (Medicare) programs from payroll taxfinancing and, instead, funded these programsfrom Federal general revenues. Payroll taxeswould continue to finance old age andsurvivors benefits.
S. 2503 will reduce the payroll tax burdenby almost one-third; make the Social SecuritySystem actuarially sound for the next 75years re-establish a 100 percent reserve fundto protect beneficiaries from inflation andrecession; and return the system to itsoriginal design as a retirement program.
As a result of my position on socialsecurity financing, I would rearrange some ofthe incremental components of theAdministraion's Tax Reform Package. Inflationhas boosted taxpayers' incomes into highermarginal tax brackets without a correspondingincrease in real living standards.
While I believe that some of the tax cutsshould offset this phenomenon, the rest of thepackage should be shifted largely to businesstax cuts. As explained in my earlier section,we desperately need more business investment.Personal consumption has not lagged in thisrecovery, but investment spending has. Weneed to cut corporate tax rates, increase theinvestment tax credit, accelerate the
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depreciation rate, and give incentives whichstimulate further increases in research anddevelopment. Business means jobs, and whilegovernment programs can aid the structurallyunemployed as well as maintain adequate levelsof economic activity, there is no substitutefor private sector initiatives.
In addition, I cannot agree with thedoctrine put forward by supply-sideeconomists. It is conceivable that highmarginal tax rates could encourage some tosubstitute "leisure for labor" because thereward to labor has fallen, as the MinorityViews point out. I would even add that thisphenomenon is more likely to take place inaffluent countries where people can moreeasily afford to forego the small amounts ofadditional real income they would receive fromworking for extra earnings at these highmarginal tax brackets. But it is just aspossible that a worker whose real after-taxincome falls might be forced to work harder --perhaps at a second job -- in order to keep upwith inflation, the mortgage payments, the newcar, etc.
With regard to savings and consumptionbeing affected by marginal tax rates, I am notsure that the relationship is all that simple.The incentives from a combination of inflationand high marginal tax rates could be just asstrong to change one's pattern of saving(e.g., municipal bonds, real estate, etc.) asto substitute consumption for saving.Ultimately I am concerned that the real after-tax incomes of workers have fallensubstantially over the past ten years. Highmarginal tax rates have prevented workers' payincreases from keeping pace with inflation.It is this fact, in my view, which underscoresa basic failing in our economic policy.
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As a final note, I Would urge additionalconsideration of the need for planning withregard to an urban policy, balanced nationalgrowth, structural unemployment, and otherdomestic issues. The White House Conferenceon Balanced National Growth and EconomicDevelopment emphasized repeatedly that meetingnational employment and unemployment goalscould only be made within the context ofnational, regional, and local planning. Ithas become absolutely apparent to me that ourproblems cannot be solved on an ad hoc basis,but instead, must be interwoven in order togain maximum results for the time, money, andinvolvement put into their development.
892
ADDITIONAL VIEWS OFCONGRESSMAN CLARENCE J. BROWN
Noting the importance of timing in makingdecisions designed to affect the economy, Ifeel that it is already too late to avoid thesequence of inflation and recession over thenext two to three years. This all-too-familiar cycle of the past decade is theresult of the routinely high rates ofinflation which have affected the U.S. economyas a result of the steadily growing Federaldeficits since the beginning of the Vietnamera. Federal tax and spending policies stillpredicated on the experiences of the GreatDepression should have been changed a decadeago when it became apparent that inflation hadbecome endemic to the U.Sb and other deficit-ridden national economies. Germahy and Japan-- even Great Britain and France -- have facedup to the need for spending restraint and, asa result, their currencies are showing-morerelative strength than ours. Our economy andour dollar would be even weaker but for thefact that we are still the largest and themost self-contained of all the world's majortrading nations.
The evidence of wrong-headed policy is allabout us and hardly needs to be emphasized:the Administration's energy proposals, thegrowth of Federal regulation, the growing realtax burden, the impact of two severewinters,the coal strike, the lack of competitivenessin many major industries (the ones whoseunder-utilization pull down total plantcapacity utilization figures), the risingwholesale prices, and the lack of investitient,and on and on -- many of which have been dealtwith in this report.
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Exacerbating the present situation is agrowing sense of drift produced by an absenceof decisiveness in national leadership. Thissame situation (for different reasons)worsened the slide of 1974.
Psychological factors can be significant toeconomic change. Disillusionment andfrustration with the ability of government tocure all "the heartache and the thousandnatural shocks that flesh is heir to" has beenevident for some time. And very few thingshave happened in the year since the last ofthese annual reports was published to offerany reasons to change that perception.However, I am confident that traditionalAmerican self-reliance will pull us throughwhatever lies ahead. At the very least, agovernment that cannot help should not bepermitted to hinder.
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ADDITIONAL VIEWS OFSENATOR WILLIAM V. ROTH, JR.
I concur generally with the views expressedby the Minority, but I believe the need forsubstantial and permanent tax rate reductionsand for strengthened international economicpolicies deserve further emphasis.
As the Minority Views correctly point out,the President's proposed tax package will notoffset the increased social security taxes andinflation-induced tax increases. In additionto being too small, the President's taxproposals will soak the middle-incometaxpayers of this country. In particular, hisproposal to replace the $750 personalexemption with a $240 tax credit and hisproposed changes in itemized deductions willsubstantially increase the tax burden onmiddle-income taxpayers.
Larger Tax Cuts Needed
The President's claim that 96 percent ofall taxpayers will benefit from his tax cutproposal is simply not true. By failing totake into account the impact of inflation andthe social security tax increases, everyfamily of four now earning more than $17,250will be paying higher taxes under thePresident's proposal. By 1980, every familyof four now earning $10,000 or more will bepaying higher taxes under the President'sproposal.
The following chart shows the net impact ofthe President's tax program on families offour at various income levels whose incomemerely kept pace with the Administration's owninflation estimates of 5.9 percent in 1978,
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6.1 percent in 1979, 5.7 percent in 1980, and5.2 percent in 1981. The figures representtax cuts (-) and tax increases (+).
24-066 0 - 78 - 58
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IMPACT OF CARTERR "TAMX IXRA
1979
- 98-100- 37 4+ 14 4+186+247+377 4+549+710
1980
- 61162592
270* 458
063S9601129
1977 Income
S 8,00010,00015,00017,50020,00025,00030,0003S,00040,000
1981
+ 31+ 111+ 157* 257+ 449+ 848+1110+ 1389+1661
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As the chart shows, middle-income taxpayersface substantial tax increases over the nextthree years under the President's taxproposals, and the President is misleading theAmerican people by claiming they will bepaying lower taxes.
The following chart compares theAdministration tax cut claims with the actualtax cuts (-) or tax increases (+) which willoccur next year. As the chart shows, theAdministration has overestimated the impact ofits tax cuts for virtually every income level.
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OODPARISON OF CARER TAX CUT CLAIMAND AWCUAL TAX CUT/TAX INCREASE
As the figures show, the President's taxcuts are not large enough to offset the socialsecurity and inflation-induced tax increases.We need a tax cut which will both offset thesetax increases and substantially reduce thetotal tax burden on the working taxpayers ofthis country.
The Tax Reduction Act
The Roth-Kemp Tax Reduction Act (H.R. 8333;S. 1860), which I have introduced withCongressman Jack Kemp, is expressly designedto restore incentive to the economy byincreasing the after-tax reward for work,production, and investment. This bill, whichis co-sponsored by 163 Members of Congress,would provide substantial tax relief to allAmericans, and its adoption would stimulateeconomic growth and create millions of newjobs in the private economy.
The Tax Reduction Act would provide across-the-board tax rate reductions for bothindividuals and businesses, phased-in over athree-year period.
For individuals, the bill would reduce taxrates by an average of 33 percent, reducingthe present tax rates which range between 14and 70 percent to rates ranging between 8 and50 percent.
For businesses, the tax rates would bereduced from 48 to 45 percent and the smallbusiness surtax exemption would be increasedfrom $50,000 to $100,000.
The immediate adoption of the Tax ReductionAct would assure the type of long-termeconomic growth needed to create-jobs in theprivate economy. The principal obstacle to
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strong economic growth is the excessive taxburden imposed on the American economy. Thehigh rates of taxation now imposed on theeconomy are strangling economic growth,increasing inflationary pressures, and chokingoff private initiative, investment, and thecreation of jobs. An across-the-board taxreduction is the best way to remove theserestraints on economic growth.
The Tax Reduction Act is modeled after thelegislation proposed by President Kennedy inthe early 1960's to get this country movingagain. Kennedy realized then, as we shouldrealize now, that the largest single barrierto a higher rate of economic growth is theheavy drag of Federal income taxes. TheKennedy tax rate reductions reduced individualtax rates from a range of 20 to 91 percent tothe present range of 14 to 70 percent, andreduced corporate tax rates from 52 to 48percent. These across-the-board tax ratereductions stimulated a five-year period ofunprecedented economic growth, low inflation,and high employment.
The Tax Reduction Act would providesubstantial relief to all taxpayers, with thelargest percentage tax cuts going to lower-and middle-income taxpayers. When fullyeffective, the bill would reduce the taxburden on a family of four earning $8,000 by90 percent, reduce the tax burden on a familyof four earning $10,000 by 50 percent, andreduce the tax burden on a family of fourearning $15,000 by nearly 40 percent. Thoseearning more than $20,000 would have this taxburden reduced by about 33 percent.
The economic impact of these across-the-board tax reductions would be enormous. Byreducing the tax burden on the economy, the
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cost of working and producing would bereduced, and production, employment,investment, and wages would increasesubstantially.
According to one econometric projection,the Tax Reduction Act would increase thiscountry's gross national product by $43billion and result in the creation of 1.2million jobs by the end of 1978. By 1985, thebill would increase GNP by $240 billion andcreate 5.5 million jobs.
Although critics contend these taxreductions would increase the budget deficit,history proves otherwise. In every tax ratereduction enacted since 1946, the estimatedrevenue losses have not occurred, and in factrevenues have increased because of the taxrate reductions. This is because tax ratereductions expand the economy, createtaxpaying jobs, reduce Federal spending onunemployment benefits, and expand the Federaltax base. In the case of the Kennedy tax ratereductions, the Treasury Department estimateda six-year revenue loss of $89 billion. Butthe tax reductions stimulated the economy somuch that revenues actually increased by $54billion.
As President Kennedy said 15 years ago, wemust free up the private sector to giveconsumers, workers, and employers theopportunity to get this country moving again.Instead of relying on increased governmentspending, we should reduce the tax burden onthe private sector. The massive increases ingovernment spending, and the budget deficitswe have experienced for 18 out of the last 19years., have drained resources out of theprivate economy, resulting in higher taxes,higher prices, and higher levels ofunemployment. The American people do not want
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a bigger government with bigger governmentdeficits. They want less government spendingand lower taxes, and tough controls arenecessary to reduce the growth of Federalspending. Working Americans need this kind ofrelief, and the American economy needs it inthe interests of jobs, equity, and realeconomic growth in the private sector.
International Trade Policies
Turning to international economic policy, Ibelieve that the United States will be facingmuch tougher international competition in thecoming years. International economic policyhas become much more complex, but at the sametime, there are increased opportunities forthe United States to create jobs and promotesound growth through the sale of Americanindustrial and agricultural goods andservices.
I am deeply concerned that the UnitedStates is not properly organized to cope witha rapidly changing international economicenvironment much less to take advantage of thegreat opportunities in that environment. Wehave seen that in a few short years, theJapanese can virtually destroy an Americanindustry, but we have paid very littleattention to how to forecast such dangers, togive our industries early warning, and toprovide them with the kind of protection orhelp they need to make appropriateadjustments.
Time and time again, United Stateseffectiveness in the international economicarena is sapped by bureaucratic turf fights.This kind of wrangling 4oan only weaken ourability to bargain effectively with foreign
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countries. As Harold Malmgren, a formerDeputy Special Trade Representative, recentlytestified:
In fact, my own negotiating experienceis that if the man across the tablesenses divisions behind the U.S.negotiator, he will exploit them. Hewill try to bring one U.S. agency intoconflict with another, if he can. If hesenses a way to peel away one issue fromanother, he will.
I believe that in addition to strengtheningcoordination on broader international economicpolicy issues, we should consolidate into asingle Department of International Trade andInvestment the. many existing offices andagencies dealing with foreign commercial andinvestment policy issues. The InternationalTrade and Investment Reorganization Act, S.1990, which I have introduced together withSenator Ribicoff, would create such aDepartment by joining together the SpecialTrade Representatives with the international,commercial, and investment functions of theDepartments of State, Treasury, and Commerce.The statistical functions of the InternationalTrade Commission would also be placed in theDepartment, and the Export-Import Bank andOverseas Private Investment Corporation wouldbe semi-autonomous elements of it.
This Department would reduce duplicationand streamline decision-making oninternational trade and investment issues. Itwould join the trade negotiating and theretalitory functions, thus strengtheningUnited States bargaining leverage in tradenegotiations. By consolidating the officesand people who collect trade and investmentstatistics and make analytical studies, itshould help develop improved forecasting of
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potential trouble areas and the development ofintermediate and long-range strategies foravoiding serious adjustment problems andtaking advantage of new market opportunitiesfor U.S.-produced goods and services.
I firmly believe that if the United Statesis going to have a first-rate foreign economicpolicy, we need a first-rate governmentalapparatus for developing and implementingthose policies. Like the other major economicpowers, we should have a single agency forhelping promote U.S. exports, protecting U.S.industry from unfair competition, andnegotiating with foreign countries.
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ADDITIONAL VIEWS OFSENATOR ORRIN G. HATCH
ANDSENATOR JAMES A. McCLURE
Econometric Models
We are in strong agreement with theMinority Views on supply problems and taxesand on the need for economic growth. We wantto express our concern that policymakers arereducing job opportunities, living standards,and the growth of the economy by relying on an"keconomic policy that neglects the economics ofsupply.
The econometric models used in theformulation of public economic policy assumethat the levels of GNP and employment and therate of economic growth are demand-determined.Following the view that the greater thespending, the greater that GNP and employmentwill be, economic policy focuses on increasingaggregate demand. Policymakers arepreoccupied with shifting the aggregate demandschedule along the aggregate supply schedule,largely through the use of fiscal policy.
Policymakers have ignored the fact thatfiscal policy produces shifts in aggregatesupply in addition to shifts in aggregatedemand. Fiscal policy affects the tax burdenand produces incentive or disincentive effectsthat affect aggregate supply. For example, ifmarginal tax rates are changed, two importantrelative prices that affect output arealtered. One is the price that governs thechoice at the margin between additionalcurrent income or additional leisure. Theother governs the choice between additionalfuture income (savings) or additional currentconsumption. The higher the marginal tax
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rates, the less after-tax reward there is tosaving and work, and the less that additionalleisure and current consumption cost in termsof foregone after-tax current and futureincome.
A fiscal policy that raises tax ratesreduces work effort and the supply of savingsfor investment and reduces the level ofaggregate supply. Thus, it is possible forfiscal policy to retard production even as itincreases aggregate demand. If the real taxburden is, as Milton Friedman and otherdistinguished economists say, equal to totalgovernment spending, a fiscal policy designedto increase government spending may shift thesupply schedule backward as it shifts thedemand schedule forward. This would explainwhy fiscal policy in recent years hasincreasingly worked to raise the price levelrather than to raise the real output of goodsand services.
A fiscal policy that reduces tax rateswould increase the likelihood that aggregatesupply would respond to an increase inaggregate demand. Traditional multiplieranalysis ignores the supply-side effects offiscal actions. As a result, it does not givean accurate comparison of the effects on theeconomy of increases in government spendingand reductions in personal income tax rates.
Traditional economic policy has a problemof transition from the short run to the longrun. In the short run, policymakers try tomaximize demand. According to a recent reportby the Congressional Budget Office, a savingsrate in excess of 7 percent of consumers'disposable income is bad for the performanceof the economy ("Closing the Fiscal PolicyLoop: A Long-Run Analysis," December 1977).According to the CBO report, which purports to
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be a long-run analysis, the economy will bestrong if the savings rate is less than 6percent.
The problem with this view, if carried toits logical conclusion, is that if all incomeis spent in order to maximize demand, therecannot be savings to finance the investmentthat increases the productivity of labor andmakes the economy grow. More attention tosupply-side economics may let policymakersescape the short-run treadmill in whichbusiness will not invest unless consumerdemand is strong, and strong demand means asavings rate below 6 percent and few realresources for investment.
The neglect of supply-side economics isbest illustrated by the forecasts in recentyears by two of the three big commercialeconometric models of the result of areduction in corporate income taxation.According to the econometric simulations, theresult of increasing the after-taxprofitability of business investment would bea decline in investment and GNPI This bizarreprediction illustrates the pitfalls in aneconomic theory based on the assumption thatoutput is demand-determined. It is this kindof misguided theory that has led to bigspending, big government, and big trouble.
Urban Policy
Whereas we agree with the statement that"urban policy should avoid concentrating somuch on income maintenance for urbanpopulations as to become a means ofperpetuating the urban poor," we believe thatmost of current and proposed policyperpetuates the urban poor and the financialplight of urban centers.
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Many economists believe that our largecities are becoming warehouses for the poorbecause political entrepreneurs sawopportunities to build their spendingconstituencies and acted upon them.Politicians and welfare bureaucracies havebeen successful in causing migrations of poorto their constituencies by offering a higherliving standard in terms of welfare benefitsand leisure than could be obtained by workingin lower income areas from which they came.Once there, handouts are traded for votes, andthe political machine rolls on. As themachine rolls on, it rolls over the productivecitizens and the taxpayers, and they respondto the rising tax rates and deterioratingpolice and educational services by removingthemselves from the machine's jurisdiction.As the Minority Views point out, "a survey ofpersonal income growth in five older citiesbetween 1970 and 1975 shows that the largestgain in income during this time came fromincreases in transfer payments rather thanfrom private sector wages, salaries, and otherincome."
The other part of the machine'sconstituency has been municipal employees. Asthe Minority Views point out, "municipalemployees' salaries constitute the largestsingle item in any urbanbudget...Nevertheless, there are notsufficient incentives for urban governments toresist unnecessarily large wage demands." Ofcourse there are not, because politicians inpursuit of their self-interest trade benefitsin the form of current salaries and futurepensions for the bloc vote of a large and wellorganized group.
Strangely, the Minority Views suggest thatthe urban problems of escalating budgets anddeclining tax base are a result of affluence
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which has generated accelerating demands forservices such as "cleaner air, bettereducation, modern medical care, efficienttransportation systems, and an effectivepolice department." The question is: Hasaffluence made our cities poor by generatingdemands that they could not afford, or havepoliticians made our cities poor by buildingtheir spending constituencies and securingtheir political future at the expense of theeconomic viability of the cities? Are somecities in trouble because they have providedquality educational and police services, orbecause increasingly their budgets have beenallocated to their spending constituencies andnot to their taxpaying constituencies?
A first principle of economics is thatsubsidies increase the supply of that which issubsidized. If we subsidize with Federalbailouts the political behavior that hascontributed to the plight of some of ourcities, then we can expect an increase in thiskind of behavior. If we make it pay, it willspread to additional cities. If we establishincentives that will generate this behaviornation-wide, we will succeed in ruining theentire country. As the Minority Views pointout, "increases in aid to state and localgovernments, in fact, claimed approximately 40percent of the Federal government's budgetincreases in the decade 1965 to 1975." Andthings got worse. Obviously, by subsidizingthe growth of political spendingconstituencies, the Federal government insuredthat they continued to grow.
We should not make it pay for cities toconduct their financial affairs inirresponsible ways nor help them keep largenumbers of people in welfare-dependentpositions. Unfortunately, under currentpolicy, when cities succeed in getting into
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financial difficulties, Federal money is theirreward. This policy means success for urbanpoliticians and ruin for the country.
The Minority Views point out that the olderurbanized areas of the country are losingpopulation from their privately-employed andtaxpaying ranks, but the Minority Views failto relate these facts to the taxing andspending policies of these urbanized areas.Instead, it is suggested that the loss ofworking population is the result of some"economic principles which favor growthoutside the central city areas." If therelative decline of central city areas is notrelated to the taxing and spending policies ofthose areas, and if the relative growth ofsuburban areas is due to some inherenteconomic advantage that makes them moreefficient in the use of resources, then toadopt a policy that would interfere with theshift of resources out of urban and intosuburban areas would reduce the overalleconomic performance and rate of growth of thenational economy. We believe that our urbanareas are more likely to be restored by re-establishing in them incentives for financialand political discipline than by underwritingon the Federal level the kind of incentivesthat have led them to their present plight.
