In order to maintain that program, and to do so in a manner fair to literally tens of millions of payroll savers and other buyers, holders of savings bonds must be assured that they will receive over time a reasonable rate of return.

In order to be effective, changes in rates must be reasonably flexible and responsive to rates on other forms of savings, both up and down. Once again, we are faced with a situation in which savings bonds rates may seriously lag other savings rates. Redemptions have begun to exceed new sales. Without a fair rate, this experience will deteriorate further. The result would not only be more borrowing in other forms, which is today relatively expensive, but a setback to the momentum of the entire program and the image it holds in the public mind.

I believe the most straight forward approach for the Congress to this problem would be simply to remove the ceiling on savings bonds rates, to provide in this area the same flexibility that we have for marketable securities of equivalent maturity.

The execution of debt management through the years by this and past administrations provides the best possible assurance that this authority would be used responsibly and fairly, in the interests of an effective savings bonds program and millions of our citizens who have entrusted their savings to us.

Thank you, Mr. Chairman.

[Tables I through VII accompanying Secretary Shultz' statement follow:]

TABLE 1.-PUBLIC DEBT SUBJECT TO LIMITATION, FISCAL YEAR 1974, BASED ON ESTIMATED BUDGET OUTLAYS OF $270 BILLION AND RECEIPTS OF $270 BILLION

TABLE II.-COMPARISON OF FISCAL YEAR 1974 RECEIPTS AS ESTIMATED IN JANUARY 1973, MAY 1973, MIDSESSION REVIEW, AND CURRENTLY

1 Includes +$300,000,000 for deferral to fiscal year 1975 of proposed legisiation dealing with private school tuition credits and $300,000,000 for substitution of pension reform legislation passed by the Senate for pension reform legislation proposed by the administration (primarily reflecting later effective dates.)

2 Consists of -$600,000,000 for dropping proposed legislation to increase taxes under the Railroad Retirement Tax Act and +$100,000,000 for enacted legislation to increase the social security tax base, effective Jan. 1, 1974.

3 Includes+$200,000,000 for anticipated legislation required to write off liability carried on outstanding silver certificates.

4 These incomes reflect, in part, historical revisions reported by the Department of Commerce in July 1973 and, therefore, are not directly comparable with prior income assumptions.

Note: Figures are rounded and may not necessarily add to totals.

Source: Office of the Secretary of the Treasury, Office of Tax Analysis, Oct. 12, 1973.

TABLE III.-FISCAL YEAR 1974 UNIFIED BUDGET RECEIPTS, OUTLAYS, AND SURPLUS OR DEFICIT

June 1 estimate_.

TABLE IV.-Fiscal year 1974 outlays

Billions of dollars

268. 7

Completed congressional actions:

Food stamp liberalization and repeal of wheat processing charges_
Veterans programs, including inactions on proposed savings___
Advance of Federal pay raise_.

Social security and medicaid benefits_

Other completed actions___

Subtotal, completed congressional actions--

Other changes:

Interest paid on the debt__

Interest received and other offsets (i.e., payments to Government

accounts)

1.1

0.4

0.3

0.2

0.4

2.4

1.5

-0.7

Farm price supports---

-1.0

Medicaid cost increases_

0.6

Outer Continental Shelf rents and royalties (offset against outlays).
Other changes (net) --

TABLE V.-CHANGE IN BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP

[Fiscal years; in billions of dollars]

1974

1972

actual

1973 actual

June estimate

Current estimate

Change

Federal funds..

185.6

4.6

TABLE VI.-CHANGE IN BUDGET SURPLUS OR DEFICIT (-) BY FUND GROUP

TABLE VII.-RELATION OF MARGIN FOR CONTINGENCIES TO UNIFIED BUDGET OUTLAYS

Source: Office of the Secretary of the Treasury, Office of Debt Analysis.

Mr. ULLMAN. Mr. Director, we will be happy to hear you at this time.

STATEMENT OF HON. ROY L. ASH, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, ACCOMPANIED BY HON. DALE MCOMBER, ASSISTANT DIRECTOR FOR BUDGET REVIEW

Mr. ASH. Mr. Chairman and members of the committee, in support of the requested increase of the statutory debt limit and supplementing the statement of Secretary Shultz, I will discuss the 1974 budget outlook and its effect on the debt.

When we appeared before you in June to request that the debt limitation be increased, we presented the results of our midsession review of the 1974 budget.

At that time, we estimated a unified budget deficit of $17.8 billion in fiscal year 1973 and $2.7 billion in fiscal year 1974. For the 2 years, the combined total of the deficits was $17 billion less than we had estimated in January. Now, fiscal year 1973 is over, and we have taken a new look at fiscal year 1974.

REVISED FISCAL YEAR 1974 ESTIMATES

The 1974 estimates contained in the midsession review were necessarily tentative. We did not know then what the 1973 budget results would be, and the Congress had not completed action on any of the regular 1974 appropriation bills.

Even now the situation is not clear. The Congress has yet to complete final action on several regular appropriation bills, including the two largest-Defense and Labor-HEW. The Congress is also considering a number of other bills that could have a major impact on 1974 spending.

In addition, there are the usual uncertainties about estimates made this early in a year, as well as the possible costs due to the present Mideast war.

While the budget outlook cannot be entirely clear at the moment, our objective is very clear. The continuing threat of inflation leaves no choice, a balanced budget in fiscal year 1974 must still be our mutual goal, the target at which we should aim.

Fiscal restraint is imperative for the foreseeable future if we are to bring inflation under effective control.

We believe that a balanced budget in fiscal year 1974 is achievable, if the Congress and the Executive work in concert and are resolute in their determination to hold the line on spending. One thing is certain, however: we will have to work at it. A balanced budget will not come easily.

RECEIPTS

In June, budget receipts for 1974 were estimated at $266 billion. Since then, prices have increased faster than we anticipated, causing an upward revision in expected price changes for the year. Primarily for this reason, there has been a further upward revision in our receipts estimate to about $270 billion, $4 billion above the June estimate. This is, we believe, an adequate upper limit on spending in fiscal year 1974.

OUTLAYS

The administration's resolve to keep total spending under firm control is reflected in the current estimate of $270 billion for fiscal year 1974. The midsession review estimate was $268.7 billion.

Since then, as the following table indicates, completed congressional actions have added nearly $212 billion, and increases in such relatively uncontrollable outlays as net interest, medicaid, veterans benefits, employee retirement benefits, and FHA payments have amounted to more than $2 billion.

Higher than anticipated rents and royalties from the Outer Continental Shelf lands and decreases in farm price supports will offset about $32 billion of the total increase. The net result of these several changes is a current estimate of approximately $270 billion for 1974 outlays.

[The table referred to follows:]