The Great Bite

For a cast-iron conservative, Treasury Secretary George Humphrey found himself in an embarrassing and awkward role last week: defender of the biggest peacetime budget in the nation's history. The budget that President Eisenhower had just sent to Congress called for expenditures of $71.8 billion in 1958, nearly $3 billion more than in fiscal 1957 (ending next June 30). It was a balanced budget, but the estimated surplus, $1.8 billion, was too narrow to permit tax cuts. Ike proposed to use it to pare a chip off the $270-odd billion national debt.

Humphrey's dissatisfaction with the budget was obvious in his remarks at his Washington press conference. Asked a newsman: "Who do you blame for this increase?" Replied Humphrey: "Everybody. Congress enacts laws. Various groups of the public keep turning to the Federal Government for everything in the world to be taken care of. It is just everybody."

But when pinned down, Humphrey said: "This budget was made up with the very greatest care. This is apparently the best we can do at the present time." Underlying this reluctant admission by so hard-bitten a foe of big budgets was one of the really important facts of the 1950s: the Republicans who went to Washington four years ago, expecting to shrink Big Government drastically, now find themselves caught up in the New Republicanism that tacitly accepts Big Government as a necessity imposed by the political and social realities of life in the mid-century U.S.

Where the Money Goes. Reflecting population growth and the increasing costliness of Atomic Age armaments, the last three Eisenhower budgets have trended upward, but economic growth has kept receipts sloping upward too. The forecast of a 1958 surplus assumes that the economy will go on booming this year, enough to bring in an added $3 billion in taxes:

Where does the money come from? By the 1958 estimates, individual income taxes will account for 51% of the-take, corporation income taxes for 29%, excise taxes (which Ike is asking Congress to extend at the present rates for one year) for 12%, miscellaneous sources for the rest.

Where does it go? Listed in the 1,249 pages of the 4 3/4-lb. 1958 budget is a staggering array of proposed expenditures, including $587,000 for relocating Botanic Garden greenhouses in the District of Columbia, $26,500 for installing new bowling alleys in the Panama Canal Zone and $590,000 for purchasing 50 hopper cars for the Alaska Railroad (but no new funds for the Joint Congressional Committee on Reduction of Nonessential Federal Expenditures, which must try to get along on the money left over from the $22,500 appropriated in 1957).

Some 60% of the total expenses fall into one huge category: defense, including atomic energy and foreign military aid. The ending of the Korean war, along with increased adoption of nuclear weapons, made possible manpower cuts that reduced defense spending in 1954 and again in 1955, but then rising armament costs inevitably began pushing the total upward:

"Major national security," as the budget calls it, by no means covers the nation's total bill for defense. The overseas information and exchange program (upped 33% in the new budget) is in part a cold-war accessory. So is foreign economic and technical aid, which swells and shrinks, but always remains expensive:

On top of defense costs, the nation has to go on paying for past wars. In the 1958 budget, "veterans' services and benefits" run to a whacking $5 billion--more than the combined expenses of the Departments of State, Justice, Labor, Commerce, and Health, Education and Welfare. Interest on the national debt (mostly piled up in wartime) takes an even bigger slice--10% of the total budget. The heaviness of this burden is a powerful argument in favor of using any 1958 surplus for debt reduction instead of trimming taxes. In 1956 and 1957, the Administration set budget surpluses aside to pare the debt $3.3 billion. But as a result of the inflation-fighting "tight money" policy, the interest that the Treasury had to pay crept up:

Items related to present and past defense add up to 80% of the 1958 budget, leaving about $14 billion for all other federal activities, from combating floods and narcotics smugglers to minting pennies and keeping up the price of peanuts. Close to $5 billion of this will go for various agricultural programs; the bill for dealing with farm surpluses alone will run to about $3 billion. Ironically, Ike & Co., after .risking a loss of farm votes in 1952 by opposing rigid price supports, have consistently been forced to lay out more money for farm-price stabilization than any Democratic Administration ever did:

Non-farm welfare, conservation, housekeeping and the remaining operations of the Government account for about one-eighth of the budget. In this sector, the 1958 budget notably calls for increased spending for conservation and a $470 million boost for the Health, Education and Welfare Department (total: $2.8 billion), to cover such undertakings as the partial financing of medical and dental schools and aiding states in combating juvenile delinquency.

Rumbles & Misgivings. Ike's biggest budget drew harsh rumbles of disappointment and dismay from many of his fellow Republicans. Huffed Chicago Daily News Publisher John Knight: "The schemes now being sponsored in Washington make Henry Wallace look like a piker." To the Wall Street Journal, the 1958 budget seemed "solid testimony to a failure."

George Humphrey himself, in a rare display of ambivalence, reflected some of these misgivings in answering press conference questions:

Q. Do you support those parts of the current budget which propose increased expenditures?

A. We ought to improve.

Q. Where would you cut?

A. I think there are a lot of places in this budget that can be cut. If Congress can find ways to cut and still do a proper job, I would be very glad to see it. I think we have to be very selective. You just can't do everything.

Later he added reflectively: "I would certainly deplore the day that we thought we couldn't reduce expenditures of this terrific amount. If we don't reduce them over a long period of time, I predict that you will have a depression that will curl your hair, because we are just taking too much money out of this economy that we need to make the jobs."

But considering the necessities it has to deal with, Ike's new budget is actually rather snug. To keep the budget balanced with the nation's population bounding upward (10 million in four years), with popular demand for Government services running strong, and with armed Communism continuing to menace the free world, is a considerable achievement--possible only because the Administration's encouragement of economic growth has kept national income expanding. If the gross national product rises as fast as the budget estimates assume, 1958's expenditures will represent a slightly smaller share of the nation's output than 1957's.

Flintily Uncuttable. On Capitol Hill, the budget brought the inevitable predictions of congressional surgery, but apart from foreign aid (certain to be pared), there is nowhere for Congress to do a lot of economizing. Veterans' benefits and debt interest are flintily uncuttable, and Congress is unlikely to take much away from the farmers. Cutting defense expenditures might be dangerous. As for welfare, it has become an even more enduring feature of U.S. federal budgets than cold-war expenses because the welfare aspects of the New Deal are woven into the fabric of the nation. In proposing welfare projects to meet an insistent public demand, the Eisenhower Administration put it up to Congress to vote the funds. If the Democratic-controlled Congress takes it upon itself to say no here and there, it might be doing the Administration a favor. George Humphrey certainly would not mind.

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