team to balance the budget. That is exactly why I want this information.

Mr. HUGHES. O. K. Fine.

(The information requested follows:)

STATEMENT WITH RESPECT TO SAVINGS FOR 1953

Action of the new administration to reduce Government expenditures was initiated by the Director of the Bureau of the Budget on February 3, 1953, in a letter to the heads of the executive branch departments and agencies. The letter required not only that a review be made leading to reductions in the 1954 budget, but also that action be taken to reduce Government programs during the remainder of the fiscal year 1953.

The effort to reduce expenditures, although initiated by the Director of the Bureau of the Budget, is one in which all members of the administration are collaborating. The new department and agency heads are supporting strongly the objectives and the plan of action set forth in the Director's letter.

The letter called for a critical examination of existing programs, restraint in commitments for new programs, and a general drive for greater efficiency and reduced costs. More specifically, it placed restrictions on the hiring of personnel, required a review of both proposed and going construction projects, and required that the necessity for all other programs be questioned, with the objective of eliminating those not clearly necessary and holding the remainder to minimum levels.

This collaborative review has achieved the following results in the fiscal year 1953:

1. A closer followup of the status of all Government programs disclosed situations where appropriations were available in excess of requirements for the year. To assure that this excess availability would not be used during the year, additional reserves of over $900 million have been established. This action will result in some reduction in expenditures in 1953. More importantly, it withdraws authority to make obligations in 1953 which would commit the Government to expenditures in future years and increase the already heavy burden of past commitments which must be met from future revenues.

2. In addition to the establishment of Reserves, it was found possible to meet the costs of pay increases granted military personnel by the last session of the Congress out of savings in appropriations already made. The 1954 budget indicated that a supplemental appropriation of $1 billion would be required for this purpose.

3. Federal civilian personnel employment, as reported by the Civil Service Commission, dropped 50,000 between January 31, 1953, and April 30, 1953. Further reduction is expected by June 30 next, even though there is usually a seasonal increase in employment in this period.

4. Reductions in planned budgetary expenditures for 1953 have been sufficient to offset increased requirements of about $1 billion for mandatory agricultural price-support payments. Consequently the increased expenditures for agricultural price supports will not result in any increase in the $74.6 billion estimate of total budgetary expenditures made in the January budget.

In terms of ultimate economy, perhaps the most important result the new administration has achieved is to bring to officials and employees of the executive branch a changed, and to many a unique, concept of what good government is. They now know that costs and economy are important in the Federal Government, that the Government must get a full dollar's value for every dollar spent, and that sloppy and wasteful administrative practices no longer will be tolerated. To most Federal employees this is a welcome change. Its effect is already evident, not only in large items such as those above, but in such things as promptness of arrival at work, elimination or restriction of time out for coffee, and adherence to official lunch hours, all of which are indications of a general tightening up in former lax practices. As this changed concept permeates every level of the organization, savings will multiply and efficiency will grow. Without such a change true economy would never be possible.

The CHAIRMAN. Mr. Boggs will inquire.

Mr. BOGGS. Mr. Hughes, prior to coming with the Government, what was your business?

Mr. HUGHES. I was with the National City Bank of New York.

Mr. BOGGS. My memory may be failing me, but I am almost sure that I have met you before.

Mr. HUGHES. Very possibly.

Mr. BOGGS. It seems to me that we had a conversation about the excess-profits tax.

Mr. HUGHES. Very possibly. I still feel "agin" it.

Mr. BOGGS. My recollection was that you were very strongly against it.

Mr. HUGHES. Yes; I am still "agin" it.

Mr. BOGGS. Now, you are "agin" it, but you are asking us to continue it?

Mr. HUGHES. I am giving you the background of the budgetary situation, and we are faced with a condition, not a theory. It is a question of timing, and not a question of getting rid of it.

Mr. BOGGS. Now, Mr. Hughes, let me ask you what I consider a rather logical question. If the January budget showed expenditures of $78 billion plus, and your budget shows expenditures of 74 billion plus, it would seem to me that with a budget of $78 billion plus, there would be more reason to continue it than with a budget of $74 billion plus. And yet when we had $78 billion, you were very much against it.

But

Mr. HUGHES. Well, I thing it is a poor way to raise taxes. we have it now on the books. It is not a question of enacting a new kind of a tax.

Mr. BoGGs. Well, do you think we are keeping faith with the people, after having assured them first by the law itself-it is written into the law-that come June 30 this tax will expire? And although some people say they did not say or hear it, I have a vague recollection of hearing about tax reduction along about last October. And you admit that this is a very inequitable tax and a very unfair tax, and my recollection of my conversation with you was that it was about the worst kind of tax that the mind of man could devise.

Mr. HUGHES. I don't think I am alone in that, from what I heard the Secretary say today.

Mr. BOGGS. Yes, but the Secretary is also asking us to continue it. And what assurance do we have that come next January you will not come back and say, "Look at this budget we have got. It is terrible. We had better continue this tax some more"?

Mr. HUGHES. Adequate and final tax relief depends on really doing a job on the budget. However, with regard to excess-profits taxes specifically, the Secretary has made his statement positively that no extension beyond December 31 will be requested, and that any such proposed extension would be opposed.

Mr. BOGGS. You have done your job on the budget. Your budget is $74 billion. And even with your estimates, that means you are going to be out of balance by several billion dollars.

Mr. HUGHES. That is for 1954. We have 1955 coming up.

Mr. BOGGS. Between now and 1955, though, you have individual income taxes going off. You are also figuring that you are coming back to this committee to ask us to continue the 52 percent rate on corporations.

Mr. HUGHES. No; I believe that is part of the proposal which the Secretary has made.

Mr. BOGGS. You mean you want us to do that now?

Mr. HUGHES. That is the proposal.

Mr. BOGGS. Mr. Chairman, I did not know that. I was out this morning. This is a tax-raising bill. I thought Mr. Mills was exaggerating a minute ago.

You want us to do it all in the next few weeks, you mean?

Mr. HUGHES. That is a little bit out of my field, but the Secretary made the statement today.

Mr. BOGGS. How much money is involved in these taxes?

Mr. HUGHES. A total of about $8 billion in the whole package.
Mr. BoGGs. For a full year of operation?

Mr. HUGHES. Yes.

Mr. BOGGS. So that, assuming that this is not done, then your estimate for a full year of operation, of a deficit of $2.8 billion, is off by $8 billion in a full year of operation?

Mr. HUGHES. No; this is the estimate for 1954.

Mr. BOGGS. For 1954.

Mr. HUGHES. Yes; that is right. The estimate for 1955, of course, we haven't made up yet. It would be somewhat along the same order. But you would be faced with the additional loss of tax revenue if you did not continue the corporation tax, and you would be faced with a loss of revenue which would have to be included on the personal tax. Mr. BOGGS. Yes; but the figures that you have submitted do include the continuation of the excess-profits tax for 6 months.

Mr. HUGHES. That is right.

Mr. BOGGS. And the continuation of the corporate structure beyond April 30 of next year?

Mr. HUGHES. That is right.

Mr. Boggs. And the continuation of a similar amount of revenues from the excises which expire at that time?

Mr. HUGHES. Yes; that is right.

Mr. BOGGS. So that you have May and June, 2 months, of 1954, on the corporate and excise taxes, figures in this estimate?

Mr. HUGHES. That is right.

Mr. BOGGS. So that if you did not have the excess-profits tax, which, in a full year of operation, would be about $2 billion, and you had 2 months of excises expiring and 2 months of corporate decreases, even in 1954 your deficit would be greater than $2.8 billion, would it not? Mr. HUGHES. You mean if we did not make those moves?

Mr. BOGGS. That is right.

Mr. HUGHES. Yes.

Mr. Boggs. How much would that be?

Mr. HUGHES. Well, as a matter of fact, we have got it here under existing tax laws, 3.3. Because you have got the question of the effect of the Social Security also in there.

Mr. BOGGS. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Jenkins will inquire.

Mr. JENKINS. Let me ask you a question or two, Mr. Hughes.
On page 3 of your statement, you say:

These are the heavy c. o. d. commitments which the President has spoken about. Apparently that is language that you use in the budget and in the Treasury. But what does that mean to the common layman?

Mr. HUGHES. It is the common department store business of "collect on delivery."

Mr. JENKINS. Yes. Well, that is not the usual custom when, in Government appropriations, someone goes out and buys what he pleases and then comes in to collect for it, is it?

Mr. HUGHES. No. But, in effect, you are going to the shop and buying a piece of equipment, and you will tell them, "When you deliver it, we will pay you." And when the delivery date is next year, that means you are faced with it next year.

Mr. JENKINS. That is what I thought. But I was surprised, down further, 2 or 3 lines from the bottom, where it says that ran on for 5 years, until it amounted to $96 billion. Could it be possible that we would do that kind of business so loosely till we ran into debt $96 billion?

Mr. HUGHES. Well, we have during the course of those 5 years authorized, or rather appropriated, sums which are $96 billion in excess of the revenues during that same period.

In other words, we are building up for ourselves trouble for the future, in the extent of bills that we will have to pay at a faster rate than we are paying them off. We are accumulating deficits.

Mr. JENKINS. What branches of the Government spend money like that?

Mr. HUGHES. Of course, the Defense Department is the primary one on that type of appropriation. They account for about 80 percent, or something like that, of the total. Then you have Mutual Security, which relates to defense. And those are the big places. Mr. JENKINS. Is there any limitation on the amount of money they can spend that way?

Mr. HUGHES. The limitation of course, is the amount that is appropriated for them. They cannot spend except what has been appropriated.

Mr. JENKINS. Well, if that amount was appropriated, how could there be a deficit of $96 billion?

Mr. HUGHES. When you appropriate money, you, in fact, promise to pay it out of future years' revenues to the extent that it affects future years' business. In other words, if we buy an airplane for delivery in 1955 now, we appropriate the money now, but we don't pay for it until we get revenues in 1955. So that it is a carryover proposition, which affects future years' operations.

Mr. JENKINS. Then if we do not get enough money in 1955, we will still owe it?

Mr. HUGHES. Well, we will either owe it and run a deficit, or we will have to increase taxes in that situation.

Mr. JENKINS. Is there any limit as to how far in the future they could order something like that? Could they order it 10 years in advance, for instance?

Mr. HUGHES. No; it is all governed by the requirements of the particular period of construction. They present that when they present their proposals for appropriations. It is something which is going to take a lead time of 2 or 3 years, or in some cases 1 year, whatever it may be. And that is calculated out at the time it is passed by the Congress.

Mr. JENKINS. Well, what is the function of the Bureau of the Budget in cases like that? Does it have any responsibility to see that these promises are met, or that these payments are ready when the promises are fulfilled?

Mr. HUGHES. The Bureau of the Budget's job is to make sure that the amounts that are coming due during the year, as far as this particular function is concerned, are set forth on schedule so that you know exactly what has to be met.

Mr. JENKINS. Let us turn to page 4, the bottom of page 4 of your statement. You say this:

In summary, we enter the fiscal year 1954 with a number of adverse factors in our budget picture scheduled to come to a focus in the fiscal years 1954 and 1955.

Well, now, that is a kind of a startling statement to me, that you have things that are going to come to a focus in 1955. Is there anything that is going to come to a focus in 1955 that has not been appropriated for?

Mr. HUGHES. Well, there will be, of course, the regular continuing costs of Government.

Mr. JENKINS. You do not anticipate those. You reach them when you come to them?

Mr. HUGHES. That is right. But the extra and additional amount which makes the figure so large is the fact that during this past period there has been a building up of equipment and plants and machinery, and now these deliveries are coming in at an increasing rate, and reach the peak, so that you have to pay for more of them in 1955 than in the previous years. And that makes a heavier burden on your revenue and on your budget in that particular year.

Mr. JENKINS. I see there that you state, in that paragraph:

In summary, we enter the fiscal year 1954 with a number of adverse factors in our budget picture scheduled to come to a focus in the fiscal years 1954 and 1955. They are: The peaking of expenditures; * * *

Mr. HUGHES. That is right. That is what I was just talking about. Mr. JENKINS. That is budgetary language, but what does that mean to the ordinary civilian?

Mr. HUGHES. That means that you are going to get more things delivered that you have to pay for than you have been in the habit of receiving, and that makes a bigger amount of money that you have to pay out in that particular year.

Mr. JENKINS. Well, is that the case this year?

Mr. HUGHES. In 1954 and 1955. It is an ascending scale.

Mr. JENKINS. Well, if that is an ordinary procedure, that would be no reason why you can argue that you have to have more money and you want this tax.

Mr. HUGHES. It is not an ordinary procedure if you can bring your budgetary operations under control. In other words, that is the work that is being done to reduce those amounts and to bring them down to a figure that you can live with and operate within, without incurring these huge deficits. That is where the job is in reducing expenditures.

Mr. JENKINS. As I understand it, your argument and the argument of the Secretary in favor of extending this iniquitous tax is that you need the money. There, you say, in peaking up the expenditures, you