Statement by the President Reviewing the 1953 Budget.

THIS REVIEW sets forth the changes in the Budget of the United States for the fiscal year ending June 30, 1953, which have taken place since it was originally transmitted to the Congress last January. It is a reappraisal of the Government's financial program for the fiscal year 1953.

Budget receipts are now estimated at $68.7 billion, $2.3 billion less than was estimated in January.

Budget expenditures are now estimated at $79.0 billion, $6.4 billion less than was estimated in January.

On the basis of these revised figures, a budget deficit of $10.3 billion is now in prospect for the fiscal year 1953. This is $4.1 billion lower than was estimated in January.

Almost 85 percent of the estimated receipts for the fiscal year 1953 will come from direct taxes on corporations and individuals. Direct taxes on corporations are now expected to yield $24.8 billion, $3.0 billion less than was estimated in January. The revision is the result of a lower estimate of corporation profits for the calendar years 1951 and 1952, and added experience with the provisions of the Excess Profits Tax Act of 1950 and the Revenue Act of 1951. It is now estimated that direct taxes on individuals will yield $33.5 billion, about $500 million more than was estimated in January.

BUDGET TOTALS

(fiscal years. In billions)

1953 estimated 1951 1952 actual actual January Revised Receipts $48.1 $62.1 $71.0 $68.7 Expenditures 44.6 66.1 85.4 79.0 Surplus (+) or Deficit (--) +3.5 --4.0 --14.4 --10.3

The revised estimate of budget receipts for 1953 is $6.6 billion higher than actual receipts for 1952, an increase of more than 10 percent.

Nearly 74 percent of total budget expenditures in the fiscal year 1953 will be for six major national security programs--military services, international security and foreign relations, atomic energy, defense production and economic stabilization, civil defense, and maritime activities. It is now estimated that expenditures for these programs will be $58.2 billion as compared to the January estimate of $65.1 billion.

An additional 14 percent, or $10.9 billion, will be for interest and veterans' benefits. The remaining 12 percent, or $9.9 billion, will be for all other activities of the Government.

New Obligational Authority

New obligational authority for the fiscal year 1953--the sum total of all new authority to incur financial obligations on behalf of the Government--is now estimated at $80.9 billion. Of this amount, the Congress has already enacted $79.1 billion, and $1.8 billion is proposed for later transmission.

In the budget, it was estimated that $84.3 billion in new obligational authority would be needed for the fiscal year 1953. However, because of subsequent amendments to the budget and congressional changes in the legislative proposals on which the original estimate was based, the amount actually requested of the Congress was $86.0 billion. The Congress reduced this amount by $6.9 billion. Major reductions included $4.9 billion in the funds for the military functions of the Department of Defense and foreign military assistance, $557 million in the funds for civil defense, $314 million in the funds for atomic energy, $112 million in the funds for foreign economic assistance, and $183 million in the funds for development of land and water resources.

Of the $1.8 billion in new obligational authority proposed for later transmission to the Congress, nearly $1.5 billion is to pay the costs of recently enacted legislation. The major items to be transmitted later are $800 million for combat duty pay and mustering out pay for members of the Armed forces, $514 million for increases in veterans' services and benefits, and $315 million for increased Federal contributions to the States for public assistance. The total also includes a contingency reserve of $125 million, to cover the cost of claims, judgments, and other items for which specific amounts cannot now be determined.

Major Changes in Estimated Expenditures

Major changes resulting in the net reduction of $6.4 billion from the January estimate are as follows:

1. Expenditures for military services, including foreign military assistance, are expected to be $6.3 billion lower, because of reductions in appropriations and some slowing of military production resulting from the work stoppage in the steel industry.

2. Because the new obligational authority enacted for foreign economic assistance and other programs was substantially lower than anticipated in January, expenditures for international security and foreign relations are expected to be $437 million lower.

3. A reappraisal of the amount of funds needed for production expansion programs financed under the Defense Production Act and substantial reductions in appropriations for price, wage, and rent controls have resulted in a downward revision of $458 million in estimated expenditures for finance, commerce, and industry.

4. Expenditures for education and general research are expected to be $361 million lower, because the January figure included funds for carrying out proposed legislation providing for aid to elementary and secondary schools and for loans and scholarships to college students, which was not enacted.

5. Expenditures for general government are expected to be $231 million lower, partly because the January figure anticipated an appropriation to begin amortizing the Government's accrued liability to the Civil Service retirement and disability trust fund, which was not enacted, and partly because appropriations for other general government programs were reduced.

6. Expenditures for veterans' services and benefits are expected to be $282 million higher, because of recently enacted legislation which increased readjustment benefits and compensation and pensions.

7. Farm price support loans and purchases are expected to be substantially higher than was anticipated in January, with the result that the revised figure on expenditures for agriculture and agricultural resources is $326 million higher.

8. Because of a further expansion of the atomic energy program recommended and approved after the budget was transmitted in January, expenditures for natural resources are expected to be $407 million higher.

9. Inasmuch as the postal rate increases recommended in the budget were not enacted, the postal deficit is now expected to be $135 million higher than was estimated in January. As a result of this increase, as well as larger highway grants to the States and higher maritime expenditures than had been anticipated, expenditures for transportation and communication are now expected to be $220 million higher.

The following sections discuss in greater detail the major changes in estimated expenditures for 1953 by function. The revised figures are based on new obligational authority already enacted, anticipated supplemental appropriations which will be submitted to the next session of Congress, and amendments to the budget which have been made since January.

Military Services

In this review, the expenditure figure for military services includes estimated expenditures for foreign military assistance. Normally, these estimated expenditures would be included in the international security and foreign relations category, but this review does not attempt to separate them from the overall figure for military procurement and production. The requirements of the foreign military assistance program and those of our own military establishment are met out of our total military output. Although it is possible to make a fairly accurate estimate of total expenditures for military procurement and production, it is not possible at this time to forecast how these expenditures will be divided between the two programs, because allocations of military equipment between our own Armed forces and those of our allies will be affected not only by the continuation of hostilities in Korea, but also by the varying impact of the recent work stoppage in the steel industry on the production of individual military end items. In any case, however, deliveries of military equipment to our allies in the fiscal year 1953 are expected to be very substantially larger than in 1952.

Expenditures for military services, including foreign military assistance, are now estimated at $52.9 billion in the fiscal year 1953. This is $6.3 billion less than was estimated in January.

The revised figure is based on the following factors:

1. New obligational authority enacted for the military functions of the Department of Defense and foreign military assistance was $4.9 billion less than the amount recommended to the Congress.

2. The rate of military production and construction is expected to be somewhat slower until the required amounts of steel for military purposes are once more available.

3. The total cost of recently enacted military pay legislation will be substantially higher than was estimated in January, because the legislation included provisions for mustering out pay and combat duty pay, which were not anticipated in the budget.

Most of the expenditures in the military services category are for the military functions of the Department of Defense. The rate of these expenditures is expected to reach a peak in the latter part of the fiscal year 1953, and then level off for a time before moving to lower levels as the peak requirements of major procurement programs are met.

Military personnel costs for 1953 are now estimated at $12.0 billion, $1.0 billion more than was estimated in January and $1.2 billion more than was spent for this purpose in 1952. The upward revision of the 1953 figure is due to the fact that the total costs of recently enacted military pay legislation will be higher than anticipated. A supplemental appropriation of $800 million will be needed for combat duty pay and mustering out pay. The increase over 1952 reflects the planned expansion of our armed strength to the goal of 3.7 million men, and the full-year effect of the military pay increase, which was effective for only the last 2 months of the fiscal year 1952.

Expenditures for the maintenance and operation of defense installations and equipment are now estimated at $11.1 billion, $1.0 billion less than was estimated in January. The reduction is due largely to the fact that appropriations for this purpose were $1.3 billion less than recommended to the Congress. If fighting in Korea continues, it may be necessary to request additional funds later in the year.

Expenditures for major procurement and production, including foreign military assistance, are now estimated at $23.0 billion, $5.0 billion less than was estimated in January. The revised figure is based upon a reappraisal of the volume of anticipated military production in the fiscal year 1953. The increase of $8.9 billion over actual expenditures in 1952 anticipates a substantial increase in our output of aircraft, tanks, ships, field artillery, ammunition, guided missiles, trucks, and other military equipment.

Expenditures for all other Defense Department military functions are now estimated at $5.7 billion, which is about $1.2 billion less than was estimated in January and $1.3 billion more than was spent for these purposes in 1952. The downward revision of the January estimate reflects a reappraisal of the rate of progress in the military public works program. The increase over 1952 is largely in the fields of research and development and military public works.

Expenditures for the stockpiling of strategic and critical materials are now estimated at $1.0 billion, $100 million less than was estimated in January. The downward revision is due largely to a reevaluation of the availability of stockpile materials, a decline in prices of some materials since the January estimate was made, and revisions of the purchase schedule for 1953.

International Security and foreign Relations

Expenditures for international security and foreign relations, excluding foreign military assistance, are now estimated at $2.4 billion in the fiscal year 1953. This is $437 million less than was estimated in January.

Most of the reduction occurs in foreign economic assistance. Because the appropriations for this program were substantially less than was anticipated in January, expenditures are now estimated at $2.1 billion, $381 million less than was estimated in the budget.

Expenditures for the conduct of foreign affairs are now estimated at $264 million, $56 million lower than was estimated in January. The decrease is due principally to reductions in appropriations for the information program and for salaries and expenses.

Finance, Commerce, and Industry

For finance, commerce, and industry programs in 1953, expenditures are now estimated at $375 million, less than half of the amount estimated in January.

Most of the reduction is due to a reappraisal of the amount of funds necessary for the production expansion programs financed under the Defense Production Act. Several previously planned projects were eliminated, and more accurate estimates of the working capital requirements and net ultimate cost of the programs were made, with the result that it was unnecessary to request the additional $900 million in borrowing authority anticipated in January. Expenditures for the production expansion programs--including administrative expenses-are now estimated at $267 million as compared to the January estimate of $654 million.

Expenditures for price, wage, and rent controls are now estimated at $62 million, as compared to the January estimate of $149 million. The Congress made substantial reductions in appropriations for these programs, and specified that they should be ended on April 30, 1953.

Transportation and Communication

Expenditures for transportation and communication programs are now estimated at $1.9 billion. The increase of $220 million over the January figure results mainly from the fact that the postal deficit is now expected to be higher than anticipated, and highway and maritime expenditures are also expected to be higher.

A postal deficit of $579 million is now in prospect for 1953. This is $135 million higher than was estimated in January, chiefly because the postal rate increases recommended in the budget were not enacted.

As a result of increased highway construction, Federal-aid highway grants to the States are expected to be about $40 million higher than was anticipated in January. Since the amount enacted to liquidate these obligations was less than the budget recommendation, a supplemental appropriation of about $115 million will be needed for this purpose. Additional funds also will be needed for the construction of access roads to defense installations.

Expenditures for promotion of the merchant marine are now estimated at $225 million, $61 million higher than was estimated in January. This change results primarily from the fact that the National Shipping Authority will operate fewer vessels than had been anticipated, with a consequent reduction in the amount of net operating revenues available to offset expenditures for other maritime activities.

Natural Resources

Expenditures for natural resources--including atomic energy--are now estimated at $3.6 billion, $407 million more than was estimated in January and $706 million more than was spent in 1952.

The increase in both instances is due primarily to a further expansion of the atomic energy program recommended and approved after the budget was transmitted in January. As a result of this further expansion, expenditures for atomic energy in 1953 are now estimated at $2.3 billion, $525 million more than was estimated in January and $652 million more than was spent in 1952.

For land and water resources--including power--expenditures are now estimated at $1.1 billion, $105 million less than was estimated in January. The reduction is due primarily to reductions in appropriations for Bureau of Reclamation programs, for Corps of Engineers flood control and multipurpose projects, and for development of Indian land and water resources.

Agriculture and Agricultural Resources

Expenditures for agriculture and agricultural resources in the fiscal year 1953 are now estimated at $1.8 billion, $326 million more than was estimated in January and $762 million more than was spent in 1952.

The higher estimate for 1953 and the increase over 1952 are due largely to an anticipated increase in expenditures for farm price support. During the fiscal year 1952, the Commodity Credit Corporation sold more price support commodities than it acquired, and ended the year with net receipts of $139 million. During the fiscal year 1953, however, it is expected that higher production from the 1952 crops will increase the national carryover, primarily of wheat, and that the Corporation, through loans and purchases, will add substantial amounts of price support commodities to its inventories.

Expenditures for farm ownership and operation loans are expected to be $239 million, $31 million more than was estimated in January. The higher estimate is due to an anticipated increase in net crop and livestock loans discounted by the Federal intermediate credit banks, and an anticipated increase in farmers' Home Administration loans to finance crop production and to help reestablish farmers suffering from flood damage, drought, and other natural disasters.

Labor

For labor programs, expenditures in the fiscal year 1953 are estimated at $248 million, $2 million more than was estimated in January. Three-fourths of the total is for grants to States to pay for administrative costs of public employment offices and unemployment compensation.

The revised estimate for 1953 includes expenditures from an anticipated supplemental appropriation for the work of the Bureau of Mines under the recently enacted mine safety law.

Housing and Community Development

Expenditures for housing and community development programs--including civil defense-are estimated at $657 million in the fiscal year 1953. This is $21 million less than was estimated in January.

Because of a substantial reduction in appropriations, expenditures for civil defense are now estimated at $80 million, less than one-fourth the January estimate of $339 million.

Expenditures for defense housing and community facilities are now estimated at $85 million, less than one-third of the January estimate of $274 million. The reduction is due largely to the fact that the amounts authorized for these programs were substantially less than anticipated in January.

On the other hand, net expenditures for purchases of mortgages and for direct housing loans to veterans are expected to be $450 million higher than anticipated in January. The January estimates for these two programs assumed that by 1953 the supply of private mortgage funds would be sufficient both to permit increased sales of mortgages by the Federal Government and to reduce the need for future Federal support of both defense and nondefense housing. These assumptions have not yet been realized.

Education and General Research

For education and general research in the fiscal year 1953, expenditures are now estimated at $263 million--less than half the $624 million estimated in January.

The earlier figure included $355 million for the following recommended legislation which was not enacted: (1) general aid for the operation of elementary and secondary schools, (2) the extension and expansion of the program of assistance for the education of children on Federal property and in emergency and critical defense housing areas, and (3) loans and scholarships to college students.

Expenditures in 1953 are expected to be $84 million higher than the actual expenditures in 1952, chiefly because of a large increase in school enrollments in areas affected by current mobilization activities, which will require higher Federal payments to the States under existing legislation.

Social Security, Welfare, and Health

Expenditures for social security, welfare, and health are now estimated at $2.7 billion--$5 million more than was estimated in January.

As a result of new legislation, it is estimated that expenditures for public assistance will be $1.3 billion, $75 million higher than was anticipated last January. The revised figure takes into account an anticipated supplemental appropriation of $315 million, of which $170 million will be needed under the current program and $145 million for new legislation which will raise Federal contributions to the States beginning October 1, 1952.

Expenditures for railroad retirement, representing for the most part transfers to the trust fund of tax receipts from the railroads and their employees, are now estimated at $690 million, $33 million less than was anticipated in January.

The revised estimate of expenditures for public health programs is $327 million, $14 million lower than the January figure. For other social security, welfare, and health programs, expenditures are expected to be $333 million, $23 million less than was estimated in January.

Veterans' Services and Benefits

For veterans' programs in the fiscal year 1953, expenditures are now estimated at $4.5

billion. The increase of $282 million over the January figure is the result of new legislation enacted since January. The total cost of this new legislation in 1953 is estimated at more than $500 million, but the January estimates anticipated some of this cost.

Expenditures for readjustment benefits are now estimated at $992 million, $179 million more than was estimated in January. The increase results from enactment of the Veterans Readjustment Assistance Act of 1952, providing education and training, loan guarantees, unemployment compensation, and other benefits for veterans with service since June 27, 1950. It is expected that a supplemental appropriation of $284 million will be needed under this law during 1953, its first year of operation, as compared to the January estimate of $75 million.

Expenditures for compensation and pension payments in the fiscal year 1953 are now estimated at 92.4 billion, $118 million more than was estimated in January. The increase is chiefly the result of new laws which raised both compensation and pension rates and liberalized eligibility conditions for nonservice-connected pensions. For 1953, supplemental appropriations of $218 million will be needed under the new laws, as compared to $100 million anticipated in the budget.

General Government

Expenditures for general government programs in the fiscal year 1953 are estimated at $1.3 billion. This is $231 million lower than was estimated in January.

The principal reason for the reduction is that the Congress appropriated $136 million less than the amount recommended to cover the Government's current employer-obligation to the Civil Service retirement and disability trust fund and to start amortizing the Government's accrued liability to the fund.

Funds requested for expanding the staff of the Bureau of Internal Revenue were not approved, and substantial reductions were made in the appropriations for maintaining and operating Government buildings, for supplies and equipment, and for record-breaking activities.

Interest

Interest payments in the fiscal year 1953 are now expected to be $6.4 billion, $176 million higher than was estimated in January.

Although the budget deficit for 1953 is expected to be lower than anticipated in January, the interest-bearing debt during the early part of the year will be higher, because of (1) differences in the timing of Treasury borrowing, and (2) greater concentration of interest payments on certain of the most recent issues in 1953, with less carryover into the following year than had been anticipated. Interest rates on certain types of debt, such as savings bonds, also are somewhat higher.