That Four-Letter Word

Samuel Gompers, a founder of the A.F.L., once capsuled his philosophy in a single word: "More." That same four-letter word, it now appears, would best describe the spending principles of the Kennedy Administration.

Last week President Kennedy unwrapped his budget for fiscal 1964 (beginning next July), and lo, it called for more spending than ever. It had more of almost everything than the current budget--including red ink. Total expenditures: $98.8 billion, up some $4.5 billion from the current fiscal year, and $500 million more than the Government paid out in the peak spending year of World War II. Indicated deficit: $11.9 billion. Only a fraction of that deficit is attributable to the tax cuts that the President called for in his State of the Union message delivered earlier last week. Assuming that tax reduction would stimulate the economy, the Administration calculates the "net revenue loss" during fiscal 1964 at $2.7 billion. Thus, without any tax revision whatever, the new budget would still show a staggering $9.2 billion difference between outgo and income.

Straight from Dreamland. To hear New Frontiersmen tell it, the new budget is lean and hard, a direct result of heroic economizing. President Kennedy labeled it "frugal," said it represented the "minimum necessary to meet the essential needs." Defense Secretary Robert McNamara--it was said--had slashed $13 billion from the Army, Navy and Air Force requests; the Budget Bureau and the White House had lopped still another $8 billion or so out of the civilian agencies' budgets.

But despite all this proclaimed austerity, the new budget brought out cries of horror in Congress. Senate Republican Leader Everett Dirksen called it "incredible," and fellow Republicans in the Senate and House denounced it as "radical," "ridiculous," "morally wrong," and "straight from a dreamland of fiscal fantasy." Missouri's Democratic Representative Clarence Cannon, chairman of the House Appropriations Committee, said the budget was "monstrous," predicted that his committee would "find places to cut it substantially." Arkansas' Democratic Senator William Fulbright said the budget "seems extraordinarily high." And New Mexico's Democratic Senator Clinton Anderson pronounced the budget "discouraging."

"A Chilling Effect." As if the stated figures were not bad enough, most Congressmen recognized that Presidents are traditionally and notoriously overoptimistic in estimating the size of budget deficits. Missouri's Cannon complained on the floor of the House that over the past nine years the Administration budgetmakers have underestimated the red ink by a net total of $37.5 billion. "They were feasting on the delights of sweet anticipation," growled Cannon. "But now we are gnawing on the cold corncob of stern reality." For example, only a year ago Kennedy submitted a 1963 budget indicating a surplus of $500 million; that wishful bit of black ink has since changed into a massive blotch of red, currently estimated at $8.8 billion. With that in mind, Virginia Democrat Harry F. Byrd, chairman of the Senate Finance Committee, predicted that the actual deficit under the President's 1964 budget would run to $14 billion.

One potentially disastrous result of the new Kennedy budget is that it seriously endangers the whole tax-reduction, tax-reform program that the President has set as his major goal for 1963. Many members of Congress had expressed themselves as willing to go along with Kennedy's tax program--if the President were willing to cut spending. By presenting a budget with a huge deficit glaring forth like a baleful, bloodshot eye, Kennedy may have sabotaged his tax program. Said Alabama's Democratic Senator John Sparkman, a qualified liberal who was Adlai Stevenson's 1952 running mate: "Members are going to be hesitant to vote large tax cuts with a heavy deficit such as that." Echoed South Dakota's Republican Karl Mundt: "Unless the budget is reduced, it will have a chilling effect on the understandable desire to cut taxes." Indiana's Charles A. Halleck, G.O.P. leader in the House, charged that the new budget "makes a mockery of the Administration's brave talk of letting the taxpayer keep more of his own money."

A Sugar-Coating. Foreseeing that Congress would have a hard time swallowing his budget, the President tried to sugar-coat the pill. In his budget message, he divided the proposed expenditures into 1) national defense and space, plus interest on the national debt, and 2) "all other functions." Invoking the name of national security, he insisted that his spending splurge could be entirely accounted for by No. 1. Items:

sb DEBT INTEREST: Up some $300 million to a new peak of $10.1 billion, more than 10% of the entire budget.

sb DEFENSE: Up $2.4 billion to $55.4 billion, with part of the increase to go for planned pay raises for military personnel. In keeping with the Administration's defense policies, the budget provides for an intensified buildup in limited-war readiness, with added funds for tactical and transport planes and Army weaponry. The expansion of Polaris and Minuteman strategic missile forces is slated to continue at about the current pace. No money at all is listed for procurement of bomber planes or for the abandoned Skybolt project, and only a thin slice for prototype development of the RS-70 superplane, which has important friends in Congress.

sb SPACE: Up to $4.2 billion, rocketing from $2.4 billion in the current year. According to James E. Webb, head of the National Aeronautics & Space Administration, that $4.2 billion is an uncomfortably stingy "austerity budget." Congress is unlikely to insist on deep cuts--winning the "space race" with Russia is a vital, well accepted national objective. But of that $4.2 billion total, only $2.7 billion is budgeted for manned space flight, the real realm of the space race. The remaining $1.5 billion is to be spent for what the President calls a "wide range of programs of scientific investigation and development of useful applications."

These three categories total $69.7 billion, up $4.5 billion from expenditures in fiscal 1963. Kennedy's claim to frugality rests upon the remaining 30% of the budget--that bundle of "all other functions." By the Administration's arithmetic, the 1964 budget trims spending in this civil sector by $300 million--from $29.7 billion in the current year to $29.4 billion.

Some Flimflam. There is considerable flimflam even in this claim of meager cost cutting. Part of the "economizing" results from postal-rate increases already in effect. Another part is based on the hope--which may or may not be fulfilled--that private lenders will take over from the Federal Government several hundred million dollars worth of housing loans and farm price-support loans.

Finally, the Administration hopes to achieve a hefty saving on dealings in cotton. Last year U.S. textile firms reduced their cotton inventories drastically; the Commodity Credit Corp., therefore, had to buy up abnormally large quantities of cotton under the Government's price-support programs. In fiscal 1964, the Administration presupposes, the supply of cotton will decrease (because of a reduction in cotton acreage allotments) and the demand will increase (because of a pending Administration bill that would, in effect, lower the price of cotton to U.S. manufacturers). Accordingly, the Administration hopes to shrink cotton-support outlays by $200 million and, in addition, dispose of $500 million worth of the CCC's present $1.7 billion cotton inventory. If things work out, the CCC's ledgers will show a net improvement of $700 million on cotton transactions.

Aside from such quicker-than-the-eye "economies," the new budget proposes to spend not less but more for those "other functions." It even requests funds for some brand-new programs, notably $60 million to establish a National Service Corps (the so-called Domestic Peace Corps) to "strengthen the volunteer spirit in the provision of social services in our local communities."

Assuming that Congress accepts Kennedy's budget and that the budget does no worse than its proposed deficit, that would mean that the Administration would run up the national debt by $27 billion in just three years. The debt would then total nearly $316 billion--a figure which should give pause even to the most enthusiastic proponents of "more." In addition, the very size of Kennedy's gargantuan budget has probably thrown a damper on any psychological lift that the economy might be expected to get from tax cuts and tax reform.

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