The history of efforts to reduce expenditures is discouraging. The story of waste and extravagance in many Government operations and the continual growth of the total spent for the various special pressure groups has been spread forth on the record. Often when a new budget is presented at the beginning of the year, there are emphatic and undoubtedly sincere protestations of determination to accomplish positive economies. Time after time when the final record is in, it turns out that the reductions are not as big as we hoped for. Time after time, other unbudgeted items of expenditure have offset some or even all of the savings so laboriously accomplished. There are many practical obstacles to effecting reductions. The President says he is powerless because of some law passed by Congress, The Congress has very little staff of its own for investigation; it says it is helpless because of noncooperation on the part of the Executive in carrying out cuts effectively. Both cite pressure from the public against the specific cuts proposed. Opposition is often instigated by various groups of one kind or another interested in and affected by the particular items, sometimes under the guidance and promotion of publicity staffs or other paid employees of the Government departments. Experience emphasizes that teamwork is needed in cutting through the various obstacles. It is impossible for either the President, the Congress, or the public to do a real job alone without the help of the others. Since the individual citizen feels he can do very little to reduce these billions of dollars, he tends to become apathetic. He feels unprepared to pass on the reasons for the various expenditures, listed in millions or billions of dollars. These sums are too large to understand clearly. The real facts concerning the need for them are beyond his information and knowledge. Yet, a prerequisite for expenditure reduction is the realization on the part of people in all economic groups that unnecessary expense cannot be tolerated, even if it means giving up pet projects. May I return to our recommendations a little later, after reviewing the data that shows the present state of expenditure control. In the attached tables, the tax foundation has taken the 1952 expenditure program proposed in the Executive budget and identified the extent to which Congress has lost annual control through the appropriation process. The tabulations give the details, based on such information as is available. We suggest that the Budget Bureau, the General Accounting Office, and the Treasury Department review them, if you so desire, and report to your committee any modifications or explanations they may find necessary. The summary table (see p. 8) that is, the first table, distributes the budgetary expenditures of the Federal Government for fiscal 1952 into two major groups: Expenditures relatively uncontrollable, and expenditures relatively controllable through the annual congressional appropriation process. The first group is then broken down into six subgroups, according to the factors influencing annual controllability of those items by Appropriations Committees. Tables 1 to 8 present the detailed breakdown of the expenditures in each group and subgroup, the first six detailing the relatively uncontrollable expenditures and the last two showing relatively controllable expenditures. Now we go to the individual tables. Table 1 (see p. 9) shows expenditures from obligational authority of prior years. These $34.5 billion of expenditures are, for all practical purposes, beyond the control of the Appropriations Committees. They are the result of appropriations and other authorizations already granted and already obligated. These expenditures take place as a matter of course as payment is made for goods and services for which the Government is committed. In other words, half of the present budget is beyond actually any effect of control in any given year. Table 2 (see p. 10) is the first of five tables The CHAIRMAN. Let me interrupt you, Mr. Magill. Do you assume, then, that an authorization is equivalent to a commitment? Of course, that is not always true. Mr. MAGILL. No; that is not always true, but the staff analyzed that on the basis, as I understand it, that these commitments were, in effect, made, that they expended Representative REED. It is a sort of a moral obligation? Mr. MAGILL. Yes. The CHAIRMAN. Well, when appropriation bills are before us, it is argued that a moral obligation is involved; but when the basic legislation authorizing the program is before us, it is argued only authorization is involved, and appropriations are not mandatory. Actually, once a program is authorized, the pressure on Congress and the Appropriations Committees for money in increasing amounts is tremendous, isn't that right, Mr. Cannon? Representative CANNON. But, of course, the mere fact that an expenditure is authorized does not mean that the Committee on Appropriations must make the expenditure. The Committee on Appropriations is frequently confronted with the insistence that because the House has just voted an authorization, the committee must appro priate the money. Our answer is "No," that an authorization is merely a potential expenditure and we do not have to appropriate for it unless in the opinion of the Committee the expenditure is warranted. The CHAIRMAN. As a matter of fact, though, is it not true that nearly all authorizations, are finally followed by appropriations? Mr. MAGILL. Yes; that is true, because the opinion in the House which brought about the authorization is then in turn exerted on the Committee on Appropriations and, as you say, as a matter of practice, that usually follows, but not necessarily. The CHAIRMAN. Thank you. Mr. MAGILL. As I understand it, most of these expenditures we are concerned with here, are going to be made from balances of funds granted in prior years. That takes up the greater part, and that seems to be $30 million out of the 342. Table 2 (see p. 10) is the first of five tables covering expenditures made under existing programs in which the annual amounts are relatively uncontrollable because of commitments or formulas or other specifications in authorizing legislation. Table 2 deals with contributions to trust funds, payments of claims, and payments required by treaties and international agreements. These expenditures total a little over $1 billion and by their nature, they are obviously beyond the annual control of the Appropriations Committees. Table 3 (see p. 10) is "Expenditures under permanent and indefinite authorizations." This includes expenditures whose size are mostly dependent on factors outside the control of Appropriations Commit 90490-51-2 tees. Instead, they depend largely on the amounts collected or required to be spent under contractual arrangements or definite legislative commitments. In this table, the expenditures are class.fied into permanent indefinites, permanent definítes, and annual indefinites. Of the $7 billion total the largest item is interest on the public debt. Another large item is the post-office deficit, which appears at the end of that table. Table 4 (see p. 12) lists expenditures under "open-end" programs. This $5 billion item consists mostly of aid programs-agricultural aid, State aid, aid to veterans. Almost invariably the amounts of these expenditures are dependent on formulas set forth in basic legislation, and on economic conditions. The Appropriations Committees may estimate differently from the Budget Bureau with respect to these programs, but eventually the amounts spent will depend on the formula and the number of persons or instances requiring the application of the basic formulas. For example, the Budget Bureau may estimate that 2,000,000 veterans will receive Government aid to go to school; the Senate Appropriations Committee may reduce this estimate to a million. The money to be spent on the program, however, depends on the actual number of GI recipients, whether it is 1 million or 2 million or, as can happen, 3 million. Table 5 (see p. 13) shows a fourth type of expenditure largely dependent for its specific amount upon authorizing legislation and economic conditions. These are the net expenditures of Government enterprises, which are influenced to a very small degree by Appropriations Committée control over administrative expenses. The gross disbursements and receipts of the Government enterprises are dependent upon basic legislation and upon economic events requiring disbursements and reimbursements under the various programs. The negligible role of the Appropriations Committees in this area is indicated by the fact that gross disbursements for fiscal 1952 are estimated at over $4 billion, while net expenditures included in the Federal budget wash out to minus $219 million. The CHAIRMAN. That is largely because of the fact that these are paid in and paid out? Mr. MAGILL. That is right. Table 6 (see p. 14) is "Other relatively uncontrollable expenditures." This serves as a catch-all for items not listed in tables 1 through 5. The expenditures in table 6 similarly depend for their amount on formulas, events, and circumstances largely beyond the control of the Appropriations Committees. Tables 7 and 8 show the second major group: Expenditures under relatively controllable programs. These total $23.8 billion. Table 7 (see p. 15) lists the domestic, nonmilitary categories of expenditures under relatively controllable programs. These are divided into two parts: Those under proposed legislation and those under existing legislation. The former are definitely under control of Congress since substantive legislation needs to be passed before the Appropriations Committee can act. Because of the nature of the expenditures under existing legislation, the Appropriations Committees can determine the specific amounts that should be spent each year. Table 8 (see p. 16) lists the military-international categories of controllable expenditures for 1952. Annual control of this area by Congress may be questioned as not realistic because of lack of information upon which to base judgment. Nevertheless, Congress has control so far as procedures are concerned. The significance of these tabulations lies in the fact that expenditure control means tax control. Without actual control over expenditures, Congress cannot prevent taxes from rising, unless we are to go into an inflationary tail-spin. If Congress can reduce Federal spending by regaining the control it should have over expenditures, it can halt the disturbing expansion of the tax burden. When the Committee on Federal Tax Policy started a year ago to consider how additional revenue might be raised, we were shocked to discover how close we have already come to the limit of tolerable taxation. Experience in a half-dozen countries has shown that when the Government begins to take more than 25 percent of the national income, inflationary forces set in and the economy slows down. In calendar 1950, all Government in the United States took about 29 percent of the national income, a figure which was arrived at by the Joint Committee on Internal Revenue Taxation. Even if we assume a higher level of national income this year and next, the tax increase in the bill now under consideration will raise the Government take to about 32 percent. Moreover, whatever the value of these calculations, you gentlemen know better than anyone that it is most difficult to find any new source of revenue that is not subject to the gravest objections. When sales taxes on common articles get up to 80 percent (cigarettes) and a 20-percent sales tax is common (admissions, luggage, telegrams, cameras), when surtaxes have progressed to such an altitude that a special section must be inserted into the tax bill to prevent some individuals from being required to pay in taxes more than their total income-then it is certainly time to reexamine the expenditures that make the taxes necessary. In presenting these data on expenditure control, we do not wish to suggest that facilities of control will by themselves be a panacea for all our fiscal problems. All the control in the world will do no good if Congress does not want to cut expenditures, and that, in turn, of course, means that the people do not want the expenditures cut. But, conversely, all the enthusiasm in the world to cut expenditures and Congress has evidenced much of this lately-avails little when it is discovered that Congress has annual control over only a little more than a third of expenditures. The tabulations I have just reviewed demonstrates the need for immediate action if Congress is to recapture control of expenditures for the coming fiscal year. We recommend, therefore, 1. That Congress consider immediately those features of Senate Concurrent Resolution 27 which aims to establish congressional control of expenditures in the annual appropriations bill. 2. That Congress employ the "clean-slate" approach to appropriations. This means that Congress should suspend all spending authorizations except for the military and interest on the public debt. It should then restore those expenditures vitally necessary in the present defense situation. After such suspension, the Bureau of the Budget should be directed to submit an alternate expenditure budget for fiscal 1953 which does not exceed estimated revenues for that year. 3. That, since the problem of maintaining congressional control over expenditures is a continuing one, your committee initiates a thorough study of the problem to find the best long-term solution to the present lack of control. (Your committee would need, of course, all the help it could get from well-trained staffs of technical advisers. The Committee on Accounting established by the Budget Bureau, General Accounting Office, and the Treasury should be asked to help along with such outside analysts as the committee deems useful.) At present, no one even seems to be sure just where responsibility for control of expenditures should lie. Congress must make this determination so that responsibility is fixed. Somehow, we must produce more goods than we ever produced before, to meet defense needs on top of our expanding civilian economy. We must not throttle our productive machine with taxes. We must maintain the value in the dollar. We can do all this if we will establish the same control over fiscal affairs that we have already brilliantly established in the fields of scientific research and physical production. We are taking advantage of available time to prepare our physical defenses for the dark days that may lie ahead. Our atom bombs and tanks and planes accumulate. But our fiscal defense, as evidenced in something as basic as expenditures control, sags badly. There may not be much more time left. Thank you. (Mr. Magill furnished the following tables for the record:) Summary table-Federal budget expenditures, by factor influencing annual congressional control, fiscal year 1952 [Millions] Factor: Total. Relatively uncontrollable expenditures. 1. Expenditures from obligational authority of prior years 2. 2. Contributions to trust funds, payments of claims, and payments required by Contributions to trust funds and other retirement payments. Payments required by treaties and international agreements. 3. Expenditures under permanent and indefinite authorizations. Annual indefinite authorizations. 4. Expenditures under "open-end" programs. Agricultural aid Expenditures $71, 594 47,830 $34,516 1,140 $1,024 116 6.517 35,983 9 525 5,010 48 4 1.402 $ 3, 525 (7) 8647 23.764 4,837 1.110 $3,727 18, 927 15,632 3,295 Each succeeding group contains only those expenditures which have not already been included under another preceding group. Including 1952 expenditures from 1952 appropriations for liquidation of contract authority. Including $3 million of grant programs representing implied commitments to States which can be legally controlled through the annual appropriation process. Including $279 million of grant programs representing implied commitments to States which can be legally controlled through the annual appropriation process. Including $7 million of grants representing implied commitments to States (for administering veterans' programs) which can be legally controlled through the annual appropriation process. Not subject to annual appropriation control. Net amount out of 1952 obligational authority: gross disbursements estimated for fiscal year 1952 amount to $4,182 million, gross receipts are estimated at $4,401 million, leaving net expenditures of $219 million for fiscal year 1952. 8 Including $341 million of grant programs representing implied commitments to States which can be legally controlled through the annual appropriation process. Including $798 million of programs representing implied commitments to veterans which can be legally controlled through the annual appropriation process. |