But if at the same time there is an increased workload, it means generally that that work is either performed poorly or it is let go by the board. It may result in letting some work go that perhaps in sum total would not make too much difference.

It will result in some cases in getting a good deal of the work done without any appreciable effect on the welfare of the Nation. It is not discriminatory in the sense that appropriations are voted, decided, and handled on an individual basis.

A rider of the Jensen type disregards cases where the Congress has made a deep cut and cases where it may not have made any cut. The "meat ax" approach is effective in the sense that you cut total costs, but you don't know always quite what you are doing when you make them.

Senator MONRONEY. I agree that it has some dangers. It seems to me if it were modified to where somebody would have to justify the reemployment of jobs vacated, so that you would have some control over the people who now automatically fill every single vacancy as fast as it occurs, that you might have an approach there that would help you to reduce personnel.

Mr. LAWTON. That may be true.

Senator MONRONEY. One other thing. Has there been much consideration given to capital expenditures budget as well as your current expenditure budget? It seems to me that in trying to search for the true story on Government spending we have to figure the expenses that we put out every year that are out the window and gone, and that is personnel and current expenditure.

But each year in the budget there are hundreds of millions, if not billions, of dollars that represent an investment which in industry or local units of government would be carried on a long-term basis.

Mr. LAWTON. That runs into quite a few billions of dollars. We have prepared and published in the last two budgets an analysis which shows the investment side of the budget. We haven't attempted to set up the budget on an investment basis although we have in the performance type budget segregated capital from operating expenditures in each item where it is possible.

We have published in the 1951 and 1952 budgets special analysis showing the so-called capital and investment items that include expenditures for the acquisition of physical assets as well as loans and other items of that type. For example, in 1952 the estimated expenditures for the acquisition of physical assets by the Federal Government, excluding military purchases, were $334 billion.

The expenditures for current aids or grants for various purposes, as distinct from investment-type expenditures, amount to about $14 billion, mainly to business, agriculture, veterans, and foreign countries. Senator MONRONEY. Those are not necessarily physical assets? Mr. LAWTON. They are not physical assets in one sense, and in another sense they are aiding others to acquire physical assets.

Senator MONRONEY. What I am talking about are the public works capital expenditures which over a period of 30 or 50 years will keep on rendering definite public service, but they are written off every year as if they were nothing more than a leaf-raking project.

The highways, for example, in the States, I would include in that; also public buildings and hydroelectric programs. Items like that are actually investments and not expenditures.

Mr. LAWTON. For the acquisition of Federal physical assets, excluding military programs, the 1952 budget includes a total of about $2,600,000,000 for public works and over $1,100,000,000 for major equipment and related items. For non-Federal physical assets, such things as highway aid, school construction, things of that sort which are still physical assets but are held in the hands of State or local governments, Federal funds will increase these by about $700,000,000 in 1952. So in total about $4,400,000,000 are for acquisition or improvement of Federal, State, and local physical assets.

Senator MONRONEY. That was actually not spent in terms of current expenditures but were for physical improvements of long-term duration?

Mr. LAWTON. That is right. revenue producing. Others are as in the case of flood control. programs you also create assets. the housing loans.

Some of those are items which are
items which are revenue protecting,
In the course of some of your loan
The REA loans, for example, and

Senator MONRONEY. As to Fanny Mae money, that was brought to my mind a year or two ago, when as to the Federal Mortgage Insurance Company, Congress put up about $900,000,000, if I remember correctly, and that was written off, as far as the average budgetary consideration is concerned, as an expenditure.

Actually you have $900,000,000 worth of first mortgage loans that any life insurance company or any other business would have carried as a very definite current asset.

Mr. LAWTON. But the reverse is true in 1952 because we will have some $500,000,000 returned to the Treasury from those same assets. We are counting that also.

Senator MONRONEY. It seems to me that that kind of fuzzes up your budget where you get $900,000,000 against you one year and a $500,000,000 windfall the next. I don't know of any kind of business that can work with that kind of a fiscal system. The public cannot discern those things. When you talk of Federal expenditures they think this is payroll expenses and this is current expenses, instead of giving some consideration to what is investment and what is a long-term capital investment.

Mr. LAWTON. We have talked and studied the subject of investment capital budgets at various times. We have run into a lot of imponderables in the business of evaluating assets. What are physical assets? How do you depreciate or amortize them?

If you go to a capital budget you should amortize your investment so that at the end of its useful life you are ready to replace it with funds at hand. You cannot do that with an airfield, or craft carrier, even though they represent capital investment.

Senator HOEY. In military equipment you cannot do it.

Mr. LAWTON. You also get into a problem in such areas as grants to States. While some grant programs create physical assets, these physical assets are in the hands of a State or local government. There have been various proposals for capital budgeting from both inside and outside Government. The purpose of many of these proposals, however, was frequently to start a huge expansion program by placing it unler a capital budget tent rather than going through an annual appropriation procedure.

Senator MONRONEY. I thought in connection with the better understanding by Congress and the need perhaps for some better staffing of our appropriations committee on a joint basis, those things could be brought out and made a little clearer to Congress, and through them to the public, as to just what part of these expenses are gone forever and what part do represent long-term gain for the country.

Mr. LAWTON. As I say, we have shown that in considerable detail in the budget. But is it pretty far back in the book. Not many people get that far back. I am afraid.

Senator MONRONEY. That is all that I have. Thank you very much, Mr. Lawton. Thank you very much for your testimony.

Senator HOEY. At this point I should like to place in the record a copy of a letter which the chairman of this committee wrote to the Secretary of the Treasury with reference to authorizations to expend from public debt receipts and permanent appropriations in the Federal budget together with a reply of Acting Secretary Foley which sets forth considerable detail regarding those items, and the expenditures that are made under these authorizations without adequate annual review by the Congress.

(The documents referred to are as follows:)

UNITED STATES SENATE,

COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS,
January 25, 1951.

Hon. JOHN W. SNYDER,

Secretary of the Treasury, Washington 25, D. C. DEAR MR. SECRETARY: In our consideration of various aspects of the current budget document there arises once again a number of large "authorizations to expend from public debt receipts." I understand that these items are inserted annually in the budget document to fill out the expenditure picture, and have never been considered by the Appropriations Committee of either the Senate or the House of Representatives despite the constitutional requirement that “no money shall be drawn from the Treasury, but in consequence of appropriations. made by law."

Similarly, there appear in the current budget document various permanent appropriations, both definite and indefinite in size, which, once enacted, automatically go into effect each fiscal year until repealed. While they do not conflict with the constitutional prohibition cited above, they are objectionable insofar as they also escape the fresh consideration which Congress should give annually to all aspects of Federal spending in the light of changing conditions.

I am giving thought to urging this committee to submit legislation to require annual scrutiny and action by the two Appropriations Committees on both types of items, regardless of what other legislative consideration they may receive. I shall, therefore, appreciate your furnishing us with available information covering (a) complete lists of relevant items over recent years, (b) the reasons or circumstances for their initial selection and continuation, (c) possible statutory changes to correct the situation, and (d) such views pro and con as you may have on the subject.

Your early consideration and attention will be especially helpful.

Sincerely yours,

JOHN L. MCCLELLAN, Chairman.

THE SECRETARY OF THE TREASURY,
Washington, March 14, 1951.

Hon. JOHN L. MCCLELLAN,

Chairman, Committee on Expenditures in the Executive Departments,

United States Senate, Washington, D. C.

DEAR MR. CHAIRMAN: Reference is made to your letter of January 25, 1951, acklowledged on January 26, relating to authorizations to expend from public debt receipts and permanent appropriations in the Federal budget. You state that you are giving thought to urging your committee to submit legislation requir

ing annual scrutiny and action by the Appropriations Committees on both types of items, regardless of other legislative consideration they may receive.

It may be helpful to review some of the background relating to these items. It has been the practice of Congress in some instances to authorize expenditures by providing in basic legislation that the expenditures shall be treated as public debt transactions. This means that authority is given for the use of the proceeds realized from the issuance of public debt securities to be expended for the purposes of the act. Such congressional authorizations to use public debt receipts either have provided for the expenditures to be made directly by the Treasury, or for Government corporations or agencies to borrow funds from the Treasury with which to make the expenditures. Expenditures under such authorizations are construed by the Treasury and the General Accounting Office as withdrawals from the Treasury pursuant to appropriations. Regardless of whether direct appropriations or public debt transactions are used to finance expenditures the effect on the amount of the outstanding public debt and the amount of Federal budgetary expenditures would be the same.

The public debt transaction technique was first employed in 1932 when Congress authorized the Treasury (Reconstruction Finance Corporation Act, approved January 22, 1932) to supply funds to the Reconstruction Finance Corporation in exchange for notes of the Corporation. The underlying theory was that the expenditures financed by such borrowings would be of a recoverable nature and that repayments would be used to retire public debt. It should be noted, however, that shortly thereafter the Congress authorized the Reconstruction Finance Corporation to make advances to other Government agencies to be used for various purposes, including substantial outlays for recovery and relief. Subsequently the Congress authorized the Secretary of the Treasury to cancel notes of the Reconstruction Finance Corporation in the total amount of these advances. The result of these actions was to make indirect appropriations from the Treasury to finance certain expenditures of a nonrecoverable nature.

In some cases the Appropriations Committees of the Congress have given consideration to authorizations in the nature of public debt transactions and have included them in appropriation bills. For example, the General Appropriation Act, 1951 (Public Law 759, 81st Cong., approved September 6, 1950), contains authorizations for the Rural Electrification Administration and the Farmers Home Administration to borrow from the Treasury to carry out their loan programs, such borrowings to be treated as public-debt transactions. For your convenient reference there are attached excerpts of this law.

Also of interest in this connection is the following comment of the House Committee on Appropriations which is taken from House Report No. 384 on the Department of Agriculture appropriation bill, fiscal year 1950:

Page 29: "Farmers Home Administration:

*

* The budget estimates

are for direct appropriation from the Treasury. In former years the farm tenant loans were authorizations to borrow from the Reconstruction Finance Corporation. The committee sees no reason why the funds for these programs should not be loan authorizations rather than appropriations since they are to be repaid to the Treasury. In this connection they are no different from loans for the rural electrification program. The committee has, theretofore, eliminated the direct appropriations of the funds referred to and has included in the bill instead loan authorizations, the money to be borrowed from the Secretary of the Treasury, as is now the case with REA loans."

Since authorizations by Congress to treat expenditures as public-debt transactions constitute appropriations, whether this type of authorization is to be continued seems to be a matter for the Congress to determine. For your information there is attached a list of recent authorizations to expend from public-debt receipts.

With regard to permanent appropriations, the 1952 budget document contains a complete listing of this type of appropriation, beginning on page 1001, showing amounts appropriated for the fiscal year 1950 and estimates for 1951 and 1952. This table includes a reference for each appropriation item to the United States Code or applicable statute relating to the legal authority for the appropriation. Each permanent appropriation is also set forth in the detailed obligation schedules in the budget document with an explanation of its purpose and of the program being carried on. It seems to me that the disclosure of information pertaining to permanent appropriations in the annual budget gives the Apppropriations Committees ample opportunity to question representatives of the agencies administering the appropriations and to take remedial legislative action

if there is evidence that the mandate of the Congress is not being carried out. You may be interested in table 27, page 529, part IV, of the "Combined statement of receipts, expenditures, and balances of the United States Government, 1950," which reflects the expenditures and balances for each permanent appropriation. Similar tables have been included in combined statements for prior years.

The Permanent Appropriations Repeal Act, 1934 (approved June 26, 1934, 48 Stat. 1224), repealed a number of permanent appropriations that had been on the books for varying periods of time. In its consideration of that act committees of the Congress heard testimony of representatives of many agencies of the Government, including the Comptroller General of the United States. After careful consideration of this testimony the Congress allowed certain appropriations to remain permanent in character.

Except for information published in the committee reports and hearings in connection with the Permanent Appropriations Repeal Act, the Treasury has no information on the justification of permanent appropriations relating to other agencies. In the case of the Treasury Department there are several permanent appropriations where I believe that no good purpose would be served by conversion to approprpiations of an annual type. The appropriation to pay interest on the public debt is a good example. The full faith and credit of the United States stands behind the payment of interest on the public debt in the same way that it is pledged to the payment of the public-debt principal. The interest must be paid and it is very important in order to maintain the high standard of the Government's credit that it be paid on time. I know that this view is fully shared by the Congress. However, if the interest appropriation were included in annual appropriation bills, it is possible that a delay in enactment of appro priations might some day delay a payment of interest due on the public debt. Another example of a permanent, indefinite appropriation where nothing would be gained if it were changed to an annual appropriation is the amount required each year to refund overpayments of income taxes and other internal revenue collections. The larger part of these refunds arises out of overwitholding of personal income taxes. Because interest is paid on refunds of taxes it is important that the refunds be made promptly to avoid unnecessary interest expense. Toward the end of the fiscal year 1948, when the refund appropriation was annual in character, it was necessary to suspend payment of refunds for a period of several weeks because the appropiration was exhausted. Congress had made a substantial reduction in the appropriation which it was necessary for it to restore in order to complete the refund program for that year. In May 1948, when the House Appropriations Committee was considering a supplemental estimate of appropriation to enable payment of refunds to complete the program, Treasury representatives requested that the committee give consideration to establishing the appropriation on a permanent, indefinite basis. The report of the House Appropriations Committee (Rep. No. 2089-80th Cong., 2d sess.) on the supplemental Treasury and Post Office appropriation bill, 1949, contained the following:

66* * * inasmuch as individual income taxes are paid on the basis of the calendar year and other taxes are paid on various other bases rather than the Government fiscal year, it is most difficult to adjust the appropriation to a fiscal-year basis.

"Although only a few of the many imponderables involved are herein set forth, the calculation of the sum necessary for this purpose cannot be made in advance. The amount paid is dependent entirely on the law and facts in each individual case and is in nowise related to availability of appropriations. "Therefore, to meet these contingencies and to assure availability of adequate funds to make payments promptly, the committee recommends a continuing appropriation of such amounts as may be necessary."

Accordingly, the Supplemental Treasury and Post Office Appropriation Act, 1949, approved June 19, 1948 (Public Law 727, 80th Cong.). instead of providing for appropriation of a definite amount, authorized payment of refunds of internal revenue taxes in such sums as hereafter may be necessary.

It is my opinion that with respect to those permanent appropriations administered by the Treasury Department no administrative saving would be accomplished and no useful purpose would be served to require their inclusion in annual appropriation bills. In fact, such action could be detrimental to the best interests of the Federal Government.

As I have already indicated estimates of expenditures under permanent and indefinite appropriations are fully set forth in the annual budget docu