Special Message to the Congress Proposing Federal Pay: and Revenue Increases and Urging Reform of the Postal Service

To the Congress of the United States:

Yesterday, the government negotiated a settlement with its postal employees.

This settlement could not properly be made in isolation from the needs of all Federal employees. In dealing with the special needs of the postal workers, the government representatives took into account the context of the Federal government's relations with its entire work force.

It should be noted that this negotiation took place only after the postal work stoppages had ceased.

One who works as a government employee agrees not to strike. But, concomitantly, the government has an obligation to insure each of its employees fair treatment so long as each lives up to his or her obligations.

The government is committed by law to a pay policy of comparability; that is, pay levels should correspond to those in business and industry. The agreed-upon government-wide pay increase complies with this standard.

This Administration is committed to a policy of pay-as-you-go. I believe that we have an obligation to provide revenues to meet the increased expenditures involved in this settlement. This is only good business and it is insurance against inflation.

I. I propose that the Congress enact a pay increase of 6% for all Federal employees, paid under statutory salary systems, including members of the armed. forces, retroactive to the last pay period at the end of calendar 1969.

2. At the same time, I urge the Congress to take action to reform the postal service. Had this action been taken earlier, the postal work stoppage would have been averted.

The Congress must recognize the need to modernize the postal system, to improve working conditions and to give employees and management an effective medium for bargaining.

The proposed postal reform will be worked out in an agreement between the postal unions and Department representatives. The settlement provides that this work will be completed by April 10. I feel confident that a reorganization can be agreed upon which will meet our mutual goals.

3. Immediately upon enactment of postal reform, the process of collective bargaining will begin. In recognition of improvements in postal operations, the results of such bargaining will include an increase in wages of at least 8% in addition to the government-wide increase.

4. It has also been agreed in negotiations this week that the inequities created by the need to wait 21 years to move from the entry to the top rate in a job classification should be removed by reducing this to an 8-year period.

Postal revenues: To pay as we go for the postal salary increase and to eliminate the current postal deficit of about $600 million, I urge that the Congress raise first class postal rates to 10¢ for regular first class mail as soon as possible. This increase will produce added revenues of approximately $2.3 billion.

We are going to move to bring all rates except those for the blind and non-profit organizations to levels where they will cover at least their demonstrably related costs. As a first step under this policy we are proposing measures which will increase second and third class postal revenues $ 120 million in FY 71.

An adjustment in the schedule of parcel post rates will also be sought to produce $125 million in revenues. Government mail reimbursements will be increased by $89 million.

In all, I am proposing added postal revenues by Congressional and administrative action of $2.6 billion. These revenues are essential to meet the salary needs of postal workers, to wipe out the postal deficit, and to contribute to the efficiency of the postal system.

General revenues: To pay for the 6% increase to all government workers, which will cost $1.2 billion in fiscal 1970 and $1.3 billion additional over the $1.2 billion already included in the fiscal 1971 budget, I propose that the Congress consider further actions which will result in some modification of our 1971 budgetary program. The 1970 additional outlays can be met from budgeted and surplus funds.

At the beginning of my Administration I made the basic decision that the Federal government must start to live within its means. The long inflation that began after 1965 had its roots in a string of unbalanced budgets capped by the $25 billion deficit in FY 1968. To restore order in the economy the Federal government's first responsibility was to restore order in its own finances.

The tax program which I put before the Congress a year ago called for a balanced set of reforms, at the same time making provision for total revenues that would match the prospective outlays.

Prospective revenues for FY 1971 in the tax bill that finally reached my desk last December were more than $3 billion below what my own recommendations a year ago would have provided. I expressed my grave misgivings about that revenue shortfall. I finally decided that, time having run out for the last session of the Congress, there was no alternative but to sign the bill and put before the Congress in my Budget Message a program of expenditures consistent with these reduced revenues.

That was done. It was an austere program. Important programs were sharply curtailed or entirely eliminated. A major omission was the overdue pay increases to Federal workers.

This tax bill has forced on the Federal government a level of wage outlays that is inconsistent with any reasonable estimate of wage level decisions in this session of the Congress.

Yet I cannot and will not participate in an excursion into fiscal irresponsibility. That would re-awaken skepticism about our determination to quell inflation, just when clear evidence of progress is in sight. And savings diverted into financing a deficit mean reduced funds and resources for housing, for State and local government projects, and for the capital formation essential to our on-going productivity and economic progress.

Therefore, I call upon the Congress and the Nation to face in future years the realities of our Federal budget. We must pay the bills for the wages that we vote. We must pay just wages in government. These involve more outlays than the revenues that last year's tax bill would produce.

I firmly believe that, given the facts, the American people will support the Congressmen with the courage to do what is right.

Putting the public interest first, it is fight to build confidence in the integrity of the dollar, which we will do by redeeming our pledge of an anti-inflationary budget.

Putting the public interest first, it is right to insist on a course of economic stability that will lead to price stability, job stability, and a balanced use of our resources.

I propose the following additional revenue which will neither require extending the surtax nor raising income tax rates: The 1971 budget forecasts the collection of $3.6 billion of estate and gift taxes in the coming fiscal year. I propose to accelerate collection of these taxes, which would add an estimated $1.5 billion in receipts in fiscal 1971. As a result of the pay increases recommended in this message, I estimate that $180 million per year will return to the government in personal income taxes.

The total of these added revenues the fiscal 1971 budget would be about $1.7 billion.

It will be recognized that this estate and gift tax acceleration will only provide additional revenue for one year. It will be necessary for the Congress to consider and adopt permanent revenue measures for FY 72 and following years to meet these additional wage outlays.

Within the next 10 days, legislation will be prepared to achieve the recommended wage increases, the reorganization of the Post Office Department, the postal rate changes and the 1971 gift and estate tax revenue measures described.

I cannot stress too strongly my support of early adoption of all of these interdependent and necessary actions. Each will relate to and depend upon the others. I request the Congress to act upon all, at once, to afford deserving employees an equitable pay adjustment, to provide badly needed reorganization to our postal service and to adopt the proposed pay-as-you-go revenue program to support these needed changes.

RICHARD NIXON

The White House

April 3, 1970