REDUCING EXPENDITURES IN GOVERNMENT FOR THE FISCAL YEAR 1950 CONSISTENT WITH THE PUBLIC INTEREST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00682R000300050027-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 12, 2016
• Document Release Date: April 10, 2002
• Sequence Number: 27
• Publication Date: June 13, 1949
• Content Type: REPORT

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Cali ar o; 48
81ST CONGRESS to SENATE J REPORT
1st Session ~ No. 498
REDUCING EXPENDITURES IN GOVERNMENT FOR THE
FISCAL YEAR 1950 CONSISTENT WITH THE PUBLIC
INTEREST
JUNE 13 (legislative day, JUNE 2), 1949.-Ordered to be printed
Mr. MCCLELLAN, from the Committee on Expenditures in the
Executive Departments, submitted the following
REPORT
[To accompany S. J. Res. 1081
The Committee on Expenditures in the Executive Departments, to
which was referred the joint resolution (S. J. Res. 108) to reduce
expenditures in Government for the fiscal year 1950 consistent with
the public interest, having considered the same, reports favorably
thereon without amendment and recommends that the joint resolution
do pass.
PURPOSE
The purpose of this resolution is to bring about a reduction in
Federal expenditures for the fiscal year 1950. It is apparent that we
are rapidly approaching a return to deficit financing. There is grow-
ing concern throughout the Nation over this condition. It is impera-
tive that remedial action be taken.
Conditions have changed since. the President's budget was sub-
mitted to the Congress in January. It is obvious that the anticipated
Federal revenues, as reflected by the budget, will not materialize,
that unless Federal expenditures are reduced the gap between income
and outgo will be widened, and that instead of a deficit of 0.9 billion
dollars anticipated by the budget the deficit may reach $3,000,000,000
or more.
When the budget was submitted, the President recommended an
increase in taxes of $4,000,000,000, in order to meet the anticipated
deficit plus other anticipated governmental expenditures. While
additional taxes could be imposed so that tax revenues would meet
expenditures, the committee is of the opinion that a raise in the tax
rate might not produce the necessary additional revenues to prevent
a deficit, and that such action might seriously contribute to a further
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REDUCING 1"PE.
economic decline, and thus broaden and deepen the present trend
toward recession.
Having these considerations in mind, the Committee on Expendi-
tures in the Executive Departments has endeavored to work out the
best possible method of holding expenditures of the Government
within the amount of available revenue. Efforts thus far in the
Senate have largely taken the form of attempts to subject individual
appropriation bills to a. flat cut. These efforts have failed. Senate
Joint Resolution 108 would utilize, through the rood offices of the
President, the avaihrble facilities of qualiFted Feeral agencies such
as the Bureau of the Budget to effectuate an equitable distribution
of the necessary over-all reduction among individual agencies without
greatly impairing essential governmentalactivities.
The formula. prescribed in the resolution appears to be the best
approach to insure that comparatively small reductions will be
applied to those agencies which have already worked out real econ-
omies, in contrast with larger cuts th-a t. may be applied to those
agencies which have made very little retrcnc)runent thus far. This
method also makes possible reductions based on the comparative
importance of various Federal activities.
Three separate resolutions (S. J. Res. 94, 97, acid 102) dealing with
this problem were introduced in the Senate, and were. all referred to
the Committee on Expenditures in the Executive Departments. The
committee felt these, resolutions should be given immediate con-
sideration, and approached its task in full recognition of the impor-
tance of the problem involved, and under the assumption that equal
responsibility rests upon the Congress and the President to balance
the budget. Therefore, it solicited the assistance and cooperation of
the executive branch of the Government in developing all pertinent
facts in the course of the hearings with the desire to report out a
resolution that would be workable and which could be administered
so as to obtain the desired results.
After hearings were held on the three initial resolutions and the
provisions of each carefully considered, the committee drafted and
considered the subject resolution, Senate Joint Resolution 108, which
embodies some of the principal features of the three resolutions under
consideration. The sponsors and subject matter of these resolutions
are as follows:
Senate Joint Resolution 91, introduced by Senator Tydings for
hirnself and Senators t)'Conor and Reed, authorizes and directs [lie
President to reduce by 5 percent total estimated expenditures based
on "fanny and all appropriations" for the fiscal year 1950 "in a nman-
ner calculated to bring about the greatest economy in expenditures
consistent with efficient, operation. * * *" It limits to 20 percent
expenditure reductions in individual items of appropriation and re-
quires a statement in tine next annual budget of each reduction made.
An amendment subsequently proposed by Senator Tydings eliminates
the legislative and judicial branches of Lite, Government from the
scope of the resolution.
Senate Joint Resolution 97, introduced by Senator Wherry for him-
sclf and Senators Bridges and Ferguson, is similar to Senate Joint
Resolution 94, except that "in order to balance the budget,in the
fiscal year 1950, [lie President is authorized and directed to cut total
estimated expenditures for the fiscal year 1950 by not less than 5
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REDUCING EXPENDITURES I
percent nor more than 10 percent. It repeats the 20 percent limit
on individual items of appropriation, and the requirement for a re-
port on reductions in the next budget. In addition, it specifies that
the President shall certify reductions in appropriation accounts,
which shall then be impounded andnot expended.
Senate joint resolution 102, introduced by Senator Reed, authorizes
and directs the Director of the Bureau of the Budget to reduce by
10 percent the expenditure from all appropriations made for expendi-
ture in the fiscal year 1950 "in the manner calculated to bring about
the greatest economy in expenditures consistent with efficient
A 20-percent limit on the reduction of indi-
operation * * * 17
vidual items of appropriation is also included, along with the require-
ment of a report in the subsequent annual budget on all reductions.
In addition the resolution proposes a Board of Budget Review to
examine requests from agencies for restoration of specific reductions.
Should the Board determine during the 120 days after passage of
the resolution that a reduction "substantially" affects the efficiency
of an agency, it is directed to recommend partial or total restoration
of the reduction to the President, who "shall take any action deemed
necessary to restore such reduction or part thereof * * *?"
BACKGROUND OF PROPOSALS
The serious financial problem which now impends for the fiscal year
ending June 30, 1950, was first indicated in the President's Budget
which was transmitted to the Congress on January 3, 1949. That
document presented the following estimates 1 of income, of outgo,
and of deficit for the fiscal year 1950:
Estimated total 1950 budget receipts--------------------- 840, 984645, 347
Estimated total 1950 budget expenditures------------------ 41,857:777,869
Estimated 1950 budget deficit----------------------- -873,132,522
As above stated, the President's 1950 budget message proposed
additional tax legislation to meet the estimated deficit of 0.9 billion
dollars as follows:
In a period of high prosperity it is not sound public policy for the Government
to operate at a deficit. A Government surplus at this time is vitally important
to provide a margin for contingencies, to permit reduction of the public debt, to
provide an adequate base for the future financing of our present commitments,
and to reduce inflationary pressures. I am, therefore, recommending new tax
legislation to raise revenues by $4,000,000,000. Because of the normal lag in
the collection of taxes, however, tax receipts in the fiscal year 1950 would be
considerably less.
In presenting the financial program of the Nation, I have carefully considered
the economic situation of our country and the effect upon it of large Government
expenditures. The Economic Report, submitted recently to Congress, empha-
sized the compelling need for financial prudence by the Government at this time.
The actions taken in preparing this budget reflect that policy.
The Congress has not yet initiated the tax legislation which. the
President recommended. Meanwhile, the lower level of business
activity strongly indicates that total budget receipts will be much
less than were anticipated for the fiscal year 1950. The staff of the
Joint Committee on Internal Revenue Taxation issued a brief analysis
on May 14, 1949, estimating that instead. of the January budget esti-
mate of receipts of $41,000,000,000, the estimate should now be low-
' See table I of the budget document for the fiscal year 1950 (p. A4).
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EitiDITU11ES LN GOVERNMENT FOR 1950
Bred to 38.9 billion dollars, or a reduction of 2.1 billion dollars. This
reduction, taken in conjunction with the deficit presented in the Jan-
uary budget document, means a $3,000,000,000 deficit or more for
fiscal year 1950.
HEARINGS ON PROPOSALS
After referent e of the three resolutions to the Committee on Ex-
penditures in the Executive Departments, hearings were immediately
conducted at which member of the House Committee on Expendi-
tures in the Executive Departments cooperated actively by invitation.
At those hearings the sponsors discussed the most important policy
questions connected with the proposed resolutions.
The committee undertook to obtain from the most authoritative
sources revised information regarding the effect of the present reces-
sion upon Federal revenues. It. sought to obtain advice and informa.
tion from the Council of Economic Advisers, and a revised estimate of
anticipated revenues from the Treasury Department.
The Chairman of the Council of Economic Advisers or his repre-
sentative was requested to attend the hearings and submit "the latest
available facts and figures relative to probable economic developments
during the fiscal year 1950," and their effect on Federal revenues. In
reply the Chairman asked to be excused "because of the peculiarly
intimate and confidential relations of the Council to the President."
In response to a similar request by the committee a prepared state-
ment was presented on behalf of the Secretary of the Treasury which
read in part as follows:
The Treasury is not prepared to present any revisions at this time of estimates
for fiscal year 1950. The Treasury prepares estimates of future receipts, generally
twice a year, at the request of and for the use of the President, in connection with
the publication of the President's budget, early in January, and the President's
budget review, usually in August. Each of these estimates is made only after
a thorough canvass of hundreds of factors relating to the business and financial
conditions of the country. * * * The job of revenue estimating requires a
detailed, calculating operation that involves the services of highly trained special-
ists for a period of 5 or 6 weeks from the time the job is started.
When the representative of the Treasury Department was asked
why a similar request by the Finance Committee of the Senate in 1947
hats resulted in presentation of a revised estimate in about 2 weeks,
the representative asked for time to check. Shortly thereafter, a
letter, dated June 3, 1949, was received from the Treasury stating
that
* * * On April 19, 1047, the President had released a revised estimate of
the budget situation for the then current. fiscal year which showed only a total
figure for estimated receipts. On April 27 we received a request from Senator
Millikin (chairman of the Senate Finance Committee) for the detail of this esti-
mate. The detail of the President's statement and the information was sent to
Senator Millikin on May 2, 1947.
Since the Treasury indicated that it could not make the necessary
canvass to provide the committee with an accurate revision of budget
estimates of revenues in less than 5 or G weeks, or until all of the appro-
priation bills had been acted upon by the Congress, it was obvious
that such information would be too late for use by the committee in
time to consider and act on the pending resolutions during this session
of Congress,
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REDUCING EXPENDITURES IN GOVERNMENT FOR 1950 5:
FIXED VERSUS CONTROLLABLE ITEMS OF EXPENDITURE
At the request of the chairman, the Bureau of the Budget prepared
an extended tabular analysis of Federal expenditures, which was then
discussed in detail by its Assistant Director at the hearings in response
to questions of committee members.
This analysis, summarized in the accompanying full-page tabulation,
breaks down the total amount of estimated 1950 expenditures among
two broad types of commitment as follows: (a) Fixed or relatively
fixed expenditures, and (b) relatively controllable expenditures.'
Fixed or relatively fixed expenditures
Of this extensive general type of commitment, the first numbered
classification of "fixed charges" of $9,000,000,000 must be set apart
as not susceptible of any reduction in line with economy efforts. As
the tabulation indicates, "fixed charges" include large interest on the
public debt, veterans' pensions, and the annual payments which must
be made to the separate trust funds from which railroad employees
and Federal civil service employees are paid annuities as retirement
benefits.
The next classification is entitled, "obligated balances of prior year
appropriations," aggregates 6.5 billion dollars, and is less fixed in
character though it does not lend itself in any great degree to reduction.
Under present law annual appropriations for a fiscal year, which are
the most frequent type of appropriations, control obligations within
that year whereas resultant expenditures may be spread over several
years; that is, the annual appropriations control the total amount of
contracts awarded, goods ordered or other arrangements requiring cash
expenditure during the current or subsequent fiscal years. While no
further obligations may be incurred after the close of the fiscal year,
these obligations remain in effect for another two fiscal years during
which they may be liquidated as expenditures. This is the reason for
the 6.5 billion dollars of estimated payments which must be made
in fiscal 1950 because of "obligation balances, etc." carried forward.
These balances are fixed in character with the exception of those
obligations which may be cancelled or reduced without too great cost.
It should also be pointed out that some obligations carried forward
will make possible reductions in the new obligations which would other-
wise be necessary. Thus the trucks, and airplanes, and ships which
are delivered in the current year on the basis of old obligations carried
forward for liquidation would permit smaller new orders to be entered
and hence smaller new obligations to be incurred in the effort to
achieve the proposed reduction in program.
Because the Congress exercises its financial control (through appro-
priations) over obligations which in part will not be liquidated as
expenditures until later fiscal years, a fundamental technical difficulty
arises which, among other serious results, causes the Budget document
to be without internal cohesion. That document now consists of
some 200 pages of the President's budget message, and summary
tables almost wholly on an expenditure basis, supported by some 1,000
pages of immense and disconnected obligation detail for individual
appropriations.
z For similar past analyses see Congressional Records'of November 4, 1943 (pp. (3234-9237), of July 7, 1944
pp. A3743-A3747), of July 20, 1945 (pp. A3837-A3842), and of July 10, 1946 (pp. 9581-9582).
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6 REDUCING EXPENDITURES IN GOVERNMENT FOR 1950
Summary of analysis by Bureau of the Budget t of estimated Budge! erpcndittees 4y type of commitment, Meal
year fB5(1ritimated
FIXED ADO REI.ATIr RLY FLIED EXPE'intTrrR Epp 1950
expendi-
lures (in
millions)
1. Fixed charges: $5, d50
I
mereaLonput'llcdrht - --~- ---- ----?---?------------?---......_.. ------ 1:9
Ve grans' ArItninixtration ( nsinns. $2,111)----------------------------------------------- 2.170
Railroad Reltrement Brined (annual indefinite) -- --- ------------------------------- 716
Civil Service retirement and disability appropriated fund-_---_----_------------------ 313
All other. ------------------------------- -........................... .----------- ----------
Total. ---------------------------- 8,977
2. Obligated balances of prior year appropriations: 1, 435
Ecwmmn ic Cooperation: Foreign assistance--------------------------------------------
National Military Establishment:
Army tGreek-Turk aid; Finance, Quartermaster. Transportation, Engineering, and 1 l5i
Ordnance Services) ------- -------- ---------------------------------
Navy (maintenance, stock and working funds, aviation, aircraft construction, etc.)-.. 7311
Air Force (general expense; aircraft construction. etc.) ................................. 378 78
Civil functions (hospital and domiciliary farillties; (IARIOA) _ _ --..-----------------
Veteranq Administration: Salaries and expenses -----.--_----__---_. 112
Treasury, Department: strategic and critical materials ---. ----------- 103
All other.-- - - - - - - - - - - - - - - - - - - ? - - - - - - - -- - - - - - - - - - -? - - - - - - - - - - - - - - - - - - - - - - - T - - - - - - - 2, 181
bpd---------- _ 8.547
3. Appropriation to liquidate con(ract authorization --------------------------------------------- 3,036
4. Veterans' Administration: Readjustment b niiits--------------------------------------------- 2,118
8
5. Authorizations to expend nonapproprlated funds ................ ----------------------------
6. Grants to States: t)Sg
Social Security Administration: Public assistance---------------------------------------
Social Security Administration: Unemployment compensation -..----------------------- 1239
34
All other --------------------------------------------------------------------------------
Total---------------------------------------------------------------------- - ---------- 1.323
7. Public Works (AEC, Veterans' Hospital, Reclamation, Corfu; of Engineers) ------------------ 66
S. Appropriations for IU51 available !n 1950 (grants and payments to States) ------------------ 80
9. --
tinobligated balances of prior year appropriations (Army Quartermaster; Navy funds)----- .-. -86
Total fixed and relatively fixed expenditures -------------------------------------------- 24,293
tELATIvEI,v CONTROLLABLE. EXPENDITURES
10. Proposed 1950 legislation not yet enacted:
600
Universaltraining -------------------------------------
Other foreign aid---------------------------- ...---------------------- -------------------- 305
Military public works. special program, pay Increase, etc --------------------------------- 2360 90
Federal aid for education ------------------------------------------------------------------ 171
All other ------------------------------------------- ----- ---------
Total
d
'
tlun
11. Other relatively conin4labiP ex ten
s
National Military Establishment (AIr, $2,3(02; Army, $2,781; Navy, $2,912)---------- 8,055
------ 8,050
Relief (F.R]', $3,050; Greek-Turk Aid. VA) - .------ ----------?-------
National Military Establishment, clvii fitnelhnts, GARIOA .....----- -------------- --- 717
Veterans' Adminlslrallun: Salaries and expenses ---------------------------------------- 746
Department of Agriculture _ - ---- ------- --- ----- -- --- - 5419
Treasury i (elaarttneut (Bureau of internal Revenue, $219; strategic materials, $172) -------- 648
- - ----------------------------- 215
ltcpartttictit of State
Department or Commerce (CAA. $Ili) ---------------------------------------------- 158
Post Olliev t)epartment, net (gross $4M, less increase in rates, 8250). .---------------------
124
i)e[[tar[nteni of lusth?r ---- -- -------------------------------------------------
Federal Works Agency: Puhli-c TulldingS Aclminislralinn ------------------------------- 101
Al] outer,elascified _ .----- - ------------------------------------------------------------- 519 519
Not classified ---------------------
Total relatively controllable expenditures ----------------------------------------------- 17.565
Total estimated budget expenditures --------------- ----------- -------- --...... ?----- 241,858
t A nalysis of 1950 Appropriations and Estimated Feltenditures ss per the 1950 Budget, prepared by Bureau
of the Budget, May 24, 1949.
r Sae Table I of Budget document for fiscval year ending hate 30, 1950 (p. A4).
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REDUCING EXPENDITURES IN GOVERNMENT FOR 1950 7
Among the fixed and relatively fixed expenditures, there remain
seven numbered classifications of decreasing financial importance
(which add up to 8.8 billion dollars). As the tabulation indicates,
these classifications include appropriations required to liquidate
contract authorizations; veterans' readjustment benefits which are, at
least theoretically, slightly less fixed in character than the veterans'
pensions included in the first "fixed" classification above; and grants
to States, largely for public assistance and unemployment compensa-
tion, as to which a moral if not a legal obligation is involved.
As has been indicated, the above fixed or relatively fixed items of
expenditure, aggregating in all 24.3 billion dollars, represent areas
within which comparatively small reductions can be made in the total.
It should be emphasized, however, that, if the condition of Federal
finances is deemed sufficiently serious, it would not be impossible to
act rather severely even in this general area.
Relatively controllable expenditures
Out of the total estimated 1950 expenditures of 41.9 billion dollars
in the budget document, the elimination of the foregoing rather fixed
expenditures leaves residual "relatively controllable expenditures,"
aggregating 17.6 billion dollars. (Note that this total presupposes
increases of $250,000,000 in postal revenues, and that if postal rates
are not increased, the reductions to be made elsewhere to achieve the
general objective must be further increased by that substantial
amount.)
Of the two major classifications within this major area, the tabula-
tion shows that "proposed 1950 legislation not yet enacted," aggre-
gates 1.7 billion dollars. In many ways this classification represents
the most readily adjustable type of items for reduction in the budget
document because they were included to cover the President's recom-
mendations for new legislation during this session of Congress. If the
Congress fails to enact such legislation this amount becomes a reduc-
tion without further effort.
Finally, there is the second major classification, "other relatively
controllable expenditures," aggregating 15.8 billion dollars. It will
be noted that more than half of this amount is attributable to the
National Military Establishment, and that a large amount is ear-
marked for ECA and relief expenditures. As was indicated by various
witnesses before the committee at its hearings, it is clear that as a
practical matter the over-all objective under discussion can hardly
be achieved without a considerable reduction in these two areas.
Of lesser though considerable importance, it should also be men-
tioned that of necessity this final category of "other relatively con-
trollable expenditures" contains a variety of rather definitely fixed
items included among estimated expenditures of the different depart-
ments and agencies. These fixed items would tend to restrict the
amount of reduction which can be made.
The foregoing text demonstrates that approximately a $3,000,000,-
000 reduction, or 7.2 percent of total estimated 1950 expenditures of
41.9. billion dollars, must be made to bring those expenditures within
estimated revenues for the fiscal year 1950. This estimate of the
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amount of necessary reduction is probably too small rather than too
large but data are inadequate for a more exact statement.
As a practical matter but little of that total reduction can come from
24.3 billion dollars of fixed or relatively fixed expenditures in the fiscal
year 1950. Most of it must therefore come from the remaining
17.6 billion dollars of relatively controllable items, Of these lack
of action by the Congress on the new legislation proposed in the Presi-
dent's budget message will provide a direct means of effecting econo-
mics among the estimated expenditures included for proposed legisla-
tion. There will, however, remain a rather difficult task in making
reductions among the estimated military, relief and other "relatively
controllable expenditures" for the fiscal year 1950.
To accomplish the objective of bringing estimated expenditures
within estimated receipts, the Committee on Expenditures in the
Executive Departments has formulated Senate Joint Resolution 108
in lieu of Senate Joint Resolutions 94, 97, and 102. The 30 Senators
who sponsored the new resolution include all of the cosponsors of
the three original resolutions.
Section 1. Purpose and scope of reductions
This section directs the President to make a general reduction of
at least 5 percent and not more than 10 percent in estimated Federal
expenditures to bring them within estimated Federal receipts.
Estimated expenditures of $41,847,777,869 for the fiscal year 1950, as
shown in table I of budget document. (p. A4), exclude expenditures
from trust funds and similar items which are not operating costs of
the Government. Thus the resolution will have no effect on such
establishments as the Federal Deposit Insurance Corporation, which
has been operating from contributions from its member banks with
no expenditures from Federal funds. Nor does it include the General
Accounting Office, which is a part of the legislative branch of the
Government. On the other hand, it does include such items as the
Federal contribution toward the expenditures of the government of
the District of Columbia.
The above total estimate of expenditure is based on the proposed
appropriations and the conditions existing when the budget was
transmitted in January 1949. This section requires, however, that
this estimate of expenditures be adjusted for changes made by the
Congress in appropriation bills as enacted and for changes in estimates
of expenditures under borrowing authority.
Estimated receipts of $40,984,645,347 for the fiscal year 1950, as
shown in the same budget document table, must likewise be brought
up to date before the required percentages of reduction are applied.
They also exclude trust fund receipts, and similar items which are
not available to pay costs of operation.
This section closes with two definitions. The phrase "appropria-
tions and funds made available" is defined to include the amount of
any borrowing authority estimated for in the budget for the fiscal
year 1950, in order that such amounts may be reduced as are moneys
coming from appropriations or other funds. The term "agency" is
defined to mean any executive department, independent establish-
went, or corporation which is an instrumentality of the United States,
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and thus limits the application of the reduction to agencies in the
executive branch of the Government.
Section 2. Enforcement of reductions
This section authorizes the President to control, "notwithstanding
any other provision of law," the maximum amount of obligations or
commitments involving an expenditure during the fiscal year 1950
under any appropriation, fund, contract authorization, or borrowing
authority (including new borrowing authority enacted during the
present session of the Congress) to be incurred by any officer in the
executive branch. It also forbids officers in the executive branch to
incur such obligations or commitments as will require expenditures
in excess either (a) of relevant estimated budget expenditures includ-
ing expenditures related to any new borrowing authority, or (b) of
amounts specified by the President. The President is authorized,
however, to waive the prohibition "in individual cases upon the
happening of some extraordinary emergency or unusual circumstance."
The phrase "notwithstanding any other provision of law" was in-
serted in the resolution in recognition of the fact that reduction of
expenditures in certain fields may require the President to cut back
programs under which expenditures are more or less mandatory. To
cut expenditures under these programs it will be necessary for adminis-
trative officers, in effecting reductions, to carry out their programs at
something less than the full rate provided by law. Many estimated
expenditures in the budget carry out basic legislation which requires
automatic payments to fulfill the conditions specified in the statutes.
Certain appropriations could not have been reduced by the President
without the provision of this section authorizing him to act "no twith-
standing any other provision of law."
Certain corporations and agencies are now removed from the usual
appropriating procedures and controls and are authorized by law to
carry out ,their programs by borrowing from the Treasury or the
public. Unless the authority to obligate or borrow such funds can
be controlled by the President, he would be prevented from controlling
that area of expenditures.
The following two examples illustrate the use of borrowing authority
in the conduct of Federal operations: The Federal National Mortgage
Association, a subsidiary of the Reconstruction Finance Corporation,
is. authorized to purchase mortgages insured by the Federal Housing
Administration or guaranteed by the Veterans' Administration, within
a total borrowing authority of 40 times its capital stock and surplus.
To reduce the expenditures of the Reconstruction Finance Corpora-
tion, the President would have to reduce the expenditures applicable
to this mortgage-purchase program, now the largest RFC activity, by
limiting the commitments the Association may make under its basic
law.
Similarly, the Commodity Credit Corporation engages by statute
in supporting the prices of agricultural crops and commodities. It is
now estimated that this program will require net expenditures of
about $1,000,000,000 in the fiscal year 1950, utilizing part of its
$5,000,000,000 of maximum borrowing authority. The Commodity
Credit Corporation has already announced the prices it will support
for potatoes, small grains, butterfat, flaxseed, wool, and naval stores,
and farmers are expecting similar early announcements for wheat and
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for other major crops at the beginning of their marketing season. This
resolution authorizes the President in his discretion to reduce the Com-
modity Credit Corporation expenditures which arise from the use of
its borrowing authority.
It should be pointed out that the President is authorized to permit
the. exercise of borrowing authority or to restore any reductions he
may have made in borrowings in any individual cases to meet economic
and other emergencies which may arise. Thus, in the examples given
above, should the President reduce the borrowing authority of either
the RFC or the CCC and subsequent developments indicate the
necessity of restoring such reductions, or of increasing the borrowings
even above the estimates carried in the budget as adjusted, he is
authorized to do so.
Section S. General criterion for reductions
This section requires that all reductions be made "in It manner cal-
culated to bring about the. greatest economy in expenditure consistent
with the efficient operation of the Government." This criterion was
contained in all three resolutions on which the subject resolution is
based. Some features of this criterion are, covered in the general dis-
cussion of this report. It merits empluasis to state again, however,
that to achieve the prescribed average reduction specified it will be
necessary to make more than average cuts on some individual items,
and less than average cuts in other cases.
Section 4. Maximum reductions permitted
Much consideration was given by the committee to the difficult
question of specifying It limit, on the percentage of reduction beyond
which the President might not go in working out the details of this
r rogram. All three original resolutions contain identical provisions
initn-g reductions of expenditure to 20 percent of "any item of appro-
priation." Burin g the hearings the. sponsors indicated that this
limit was dictated by the desire to allay any fears that certain activities
would be cut too greatly or eliminated entirely.
On the other hand it was also argue([ during the hearings that the
delegation to the President of the difficult task of distributing over-all
reduction requirements among ninny it.en-s of governmental expendi-
ture should not be curtailed with detailed restrictions such as a 20-
percent limit- on individual items. It was also emphasized that such
a limitation on individual items would prevent the President from
making larger cuts even though there might be general agreement that
on a. few items it cut of a considerably greater percentage is justified.
Between these two points of view, the resolution applies it maximum
of 20 percent in the reductions to be i-tadein "the estimated expenditure
by any agency from appropriations and funds made available prior
to the expiration of (he first regular session of Ilne Eighty-first Con-
gress." This provision makes the areas of restriction broader than,
single items of appropriation, which were difficult to define. This
resolution admittedly places much powea? in the hands of the President,
but confidence must be lalaaced in Iaim to work out the whole program
under the formula- Congress prescribes.
The reduction program covered by the resolution does not take
into consideration any supplementary or deficiency appropriations
which may be voted for tie fiscal year 1950 at the second session of
the Eighty-foist Congress when it convenes half way through the
fiscal year 1950.
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RING Section 5. Certifications and reports 1
The concluding section. of this resolution contains two provisions
which were part of. the three origin,,}: resolutions. The first of these
requires the President to certify the following information to the
Secretary of the Treasury, so that it may be used to control expendi-
tures in the executive branch under both appropriations and borrow-
ing authority: (a) the estimated 1.950 expenditures as adjusted to
conform with the total amounts estimated for expenditure under
appropriations or funds, including borrowing authority; (b) the redue,
tions directed by the President under section 2; and (c) the reductions
in expenditures made from each appropriation or fund account, in
accordance with the provisions of this resolution. The resolution
contemplates that the President, at the 'start of each quarter, will
direct administrative officials to so limit obligations and commitments
as to effect the desired reductions in expenditures. At the end of the
quarter, the President will certify to the Secretary of the Treasury
the reductions which have been made in expenditures from appro-
priations and. funds, and amounts so certified may not thereafter be
expended. Adjustments of reductions in amounts remaining in such
appropriations or funds may be made in subsequent quarters. With
respect to expenditures under borrowing authority, however, such
certifications may 'be waived in subsequent quarters, pursuant to
section 2 of the resolution, upon the happening of some extraordinary
emergency or unusual circumstance.
The second provision of this and its predecessor resolutions is a
requirement that the President must make a report on the progress
of the reduction program to the Congress within 15 days after the
close of each calendar quarter in the fiscal year 1950. To emphasize
the importance which the committee attaches to the elimination of
all unnecessary personnel in the general reduction program, the final
sentence of this section provides that each quarterly report shall
specify the estimated reductions in personnel during such period.
It is the considered judgment of the Committee on Expenditures
in the Executive Departments that the enactment of this resolution
is necessary and in the public interest in order to avoid a large budget
deficit and balance the budget. .
O
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