in the year in which the new obligational authority increase takes place. (The information follows:) MAJOR INCREASES IN 1973 BUDGET AUTHORITY AND RELATED OUTLAYS Mr. MAHON. Gentlemen, it would be good if we could use the hearing that we held yesterday and today as somewhat of a basic document for this session. With that in mind, it should reveal the facts as best you are able to present them and as best we are able to present them. I hope, in looking at your remarks, you will feel at liberty to insert pertinent additional information, quotations, references, and tables. We will undertake to do the same. TRIBUTE TO SAMUEL COHN This Government owes a great deal to the civil servants. Reference had been made this morning to Mr. Samuel Cohn. I believe you said yesterday this was the 26th budget on which he has worked. He has been very cooperative with us under all administrations. He is a man of great ability. I believe this Rockefeller Public Service Award which you have received, Mr. Cohn, is considered the most prestigious that a civil servant can receive. I think you are due a great deal of credit. I wanted to take note of that at this time. QUESTIONS ON OVERALL BUDGET BY MR. HATHAWAY At this point the record will include questions on the overall budget set forth by Mr. Hathaway in letters to Dr. Shultz and Dr. Stein and their respective replies. (The information follows:) January 28, 1972 Doctor Herbert Stein Chairman Council of Economic Advisers Dear Doctor Stein: I'm sorry I didn't have an opportunity to question you at the hearing yesterday. I would like you to comment on the following questions for the record. Last year the Administration came out with a planned deficit designed to bring about full employment. Obviously it didn't work. This year the Administration seems to have the same plan, except that the deficit is larger. What is our prognosis? In 1969 the unemployment rate was 3.9%. To what do you attribute the substantial increase in unemployment since that time? Sincerely, WDH/fs CC: Clerk, House Committee on Appropriations William D. Hathaway THE CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISERS WASHINGTON February 18, 1972 Dear Mr. Hathaway: This is in reply to your letter of January 28, 1972 asking me to reply to certain questions for the record of the hearings of the House Committee on Appropriations held the previous day. A year ago we were not forecasting that full employment would be reached in 1971. We were forecasting a substantial decline of unemployment during the year, which would continue into 1972. Our forecast hinged on a rapid rate of monetary growth and a decline in consumers' saving. The fiscal policy accompanying the forecast was believed consistent with the rapid economic expansion we foresaw but was not the main driving force in it. We recognized at the time, of course, that we were forecasting a more rapid expansion than most other economists were forecasting. For reasons which we explained in the Economic Report of January 1972 this forecast was not met, and a radical change of policy was initiated in August 1971. We now have a more stimulative fiscal policy than a year ago. We also have a positive program to restrain inflation and new measures to improve our balance of payments. Moreover, the economy was rising much more vigorously as 1971 closed than it had been as 1970 closed. We believe that the combined effect of the forces already at work in the economy, plus the policies adopted by the Government, will be a strong, steady expansion of the economy, bringing the unemployment rate down to the neighborhood of 5 percent by the end of 1972. The rise of the unemployment rate since 1969 is the result of the response of the economy to the inflationary boom which had been allowed to develop from 1965 to 1968, including in that response the steps taken by the government to check the inflation. The unemployment rate we have been experiencing is an aspect of the transition from inflation to stability, and, as already indicated, we expect the rate to decline during the year. Sincerely yours, Herbert Stein Herbert Stein Honorable William D. Hathaway House of Representatives Congress of the United States Washington, D. C. 20515 January 28, 1972 Honorable George P. Shultz Director Office of Management and Budget Dear George: In view of the time aqueeze yesterday afternoon, you really didn't have an opportunity to respond to my questions. However, I would like you to state for the record why you feel Congress should enact an expenditure limitation this year when, for the past three fiscal years, Congress has appropriated within the budget. Even when outlays mandated by non-appropriation bills are considered, the Congress has managed to stay below the recommended budgetary outlays in two out of the past three fiscal years. Also, since the President has considerable discretion to spend or not to spend, even if Congress did appropriate a little over the budget, wouldn't the President's discretionary power over spending take care of any minor excesses? Finally, if the Congress passes an expenditure limitation, what assurances does Congress have that the monies appropriated will be spent for the purposes for which the Congress intends? For example, if Congress were to cut back on defense expenditures by $1 billion and put that money into education, would the President spend the additional money appropriated for education? It was good to see you at the hearings. Sincerely, WDH/fs cc: Clerk, House Committee on Appropriations William D. Hathaway |