by the end of the fiscal year 1959. In addition to these privately financed loans, the amount of direct loans outstanding on June 30, 1957, was $17.5 billion, compared to $20.3 billion expected as of June 30, 1959.

In order that Government credit programs will make a maximum contribution to economic growth and stability, this administration has placed special emphasis upon achieving a more consistent policy among them. For this purpose, it is necessary that such programs: (1) charge adequate interest rates on all new loans; (2) substitute private financing for Government loans and mortgage purchases wherever possible; and (3) be subject to effective budgetary control.

In many cases, present legislation sets maximum interest rates that do not permit the Treasury or the lending agencies to cover present costs. At my request, legislation has been submitted to the Congress requiring that, insofar as consistent with the purposes of each program, all costs of future loans be paid by the borrowers who benefit from the loans. Such legislation, by removing or reducing hidden subsidies, would make a significant contribution toward better budgeting.

Loans or mortgage purchases by the Federal Government should be available only if private financing cannot be obtained on reasonable terms. In several important areas Federal guaranties or insurance have encouraged greater participation by private lenders and reduced reliance on direct Government loans. Legislation should be enacted to authorize other Federal lending programs to substitute guaranties or insurance of private loans to the maximum feasible extent. Moreover, for all loan guaranty programs, the Government should be authorized to permit interest rates high enough to attract private lenders. I suggest that all limitations or ceilings placed on interest rates be reviewed, and that authority be provided to vary the rates for guaranteed or insured loans in line with market conditions and under proper safeguards.

A few Federal credit programs and a few other enterprise activities, as well, are not now subject to budgetary review and audit control. I again recommend that the Government Corporation Control Act be amended to provide for such review and control over all Government corporations authorized to use Federal funds.

Charges for special services.-When the Government provides a service conferring a special quasi-commercial benefit on identifiable individuals or groups above and beyond the benefits to the public generally, I believe

it should charge the beneficiaries for the special service, rather than place the full burden of cost on the general taxpayer.

This principle has been put into practice in the financing of the new highway program through the payment of excise taxes by highway users into a highway trust fund. The forest and public lands highway programs of the Department of Commerce, however, are still financed from general revenues. Since most of these highways are on one of the Federal-aid systems, I recommend that their financing be transferred to the trust fund. Legislation will also be recommended to provide for payment from the trust fund of the expenses incurred by the Treasury in collecting taxes going into the trust fund, similar to the present practice of paying for the costs incurred by the Department of Labor in determining wage standards for highway contracts.

In the field of aviation, the Federal Government provides a wide range of special services benefiting private users of the airspace. As I have previously pointed out, it is increasingly appropriate that these users pay their fair share of the costs. As first steps toward this end, this budget proposes that a tax of 32 cents a gallon be levied on jet fuels and that taxes on aviation gasoline be increased to 32 cents a gallon from the present 2 cents, with increases of 3/4 cent per year for 4 years in both taxes up to 62 cents a gallon. The receipts from taxes on aviation gasoline, which now go into the highway trust fund, should be kept in the general revenues to help finance the operations of the airways.

Legislation should also be enacted to raise patent fees, and to charge employers of longshoremen for the costs of administering disability compensation. Recommendations elsewhere in this message to adjust postal rates and authorize more adequate interest rates on Government loans also will serve to reduce unnecessary subsidies to special groups.

In addition to the above specific recommendations, all Government agencies have recently been instructed at my direction to prepare legislative proposals generally designed to remove present restrictions or limitations on their authority (1) to recover full cost to the Government of services that provide special benefits to individuals or groups and (2) to obtain a fair market value for the use or sale of federally owned resources or property.

By enactment of the legislation proposed in this budget and of other proposals which I shall make from time to time, we can move closer to

the ultimate goal of an equitable system of fees and charges throughout the Government.

LABOR AND WELFARE

Expenditures for labor and welfare, including the education and basic research programs classified under this heading, are estimated to be $3.6 billion in the fiscal year 1959, $200 million more than for the current year. The increase is primarily for scientific research and education programs. Previous recommendations for new programs, such as general aid for school construction, are being deferred.

A large portion of the expenditures for labor and welfare programs consists of grants-in-aid to States and local governments, and cannot be reduced without changes in basic authorizing legislation. At this time, I am proposing revisions in the legislation governing five of these grant programs which will lead to some small reductions in the Federal budget for the fiscal year 1959, and to some larger reductions in later years. Under these proposals, the proportion or amount of Federal participation would be reduced for schools in federally affected areas, for hospital construction, and for public assistance. I am also recommending action on legislation relating to revenues so the States can assume responsibility beginning in 1960, and Federal aid can cease, for vocational education and waste treatment plant construction. Continuing work by the Joint Federal-State Action Committee, as well as thoroughgoing reappraisals by Federal agencies on their own initiative, should lead to further recommendations for reducing grant-in-aid programs in future years, with the States assuming more of the responsibility for these activities and themselves collecting more tax revenues to finance them.

Science, research, and education. In the face of Soviet challenges, the security and continued well-being of the United States depend, as never before, on the extension of scientific knowledge. Our technological progress requires a higher level of support for basic scientific research from both private and public sources. It also demands a growing supply of highly trained manpower-scientists, engineers, teachers, and technicians.

To this end, I am recommending an expanded program for the National Science Foundation and a new program for the Department of Health, Education, and Welfare. These programs will be closely coordinated. The Foundation is promoting science education and training primarily through grants to universities or fellowships to individuals.

1 Compares with new obligational authority of $3,189 million for 1957 and $3,571 million for 1958.

The program for the Department of Health, Education, and Welfare will strengthen our general educational base, complement the activities of the National Science Foundation, and be channeled mainly through grants to States.

This budget proposes appropriations of $140 million for the National Science Foundation in 1959, more than three times the amount currently authorized. To permit immediate action in stepping up the Foundation's activities, the budget also includes a supplemental appropriation of $10 million for 1958.

These recommendations will enable the National Science Foundation to proceed vigorously in expanding support for basic research. Of the 1959 appropriation, $58 million, double the 1958 amount, is provided for research grants, for research facilities and equipment, and for related activities.

Assistance to basic research is provided also in physical sciences by the Bureau of Standards and in life sciences by the National Institutes of Health. Expenditures included in other parts of the budget for basic research by the Atomic Energy Commission, the National Advisory Committee for Aeronautics, and the Department of Defense will be higher than in the current year. Most of the expenditures will be for research projects carried on by university scientists and, as a byproduct, will contribute importantly to the education of graduate students.

The second major part of the National Science Foundation program is to help meet the need for improving and extending science education. The 1959 budget for the Foundation provides $82 million, including $3 million of administrative expenses, for this purpose, or about five times the present amount. Most of this is for expansion of programs which have proved their worth in improving high school and college science education. These programs include (1) action to interest able students in science careers, (2) measures to improve the methods of teaching and the content of courses in mathematics and science and to give supplementary training to college and high-school teachers, and (3) provision for fellowships to highly qualified college graduates and scientists for advanced study in science and mathematics.

I am recommending that legislation be enacted to authorize a temporary program for the Department of Health, Education, and Welfare to provide grants to help stimulate the State, local, and private action. necessary to meet certain critical educational needs. The major objective of this new program will be to provide matching grants to strengthen State departments of education and local school systems, particularly in the administration and teaching of science and mathematics. The new grant program will also foster improvement of general education