Watch Those Lights

THE BUDGET

"It seems to me that it is a little dark in here," said Lyndon Johnson with feigned surprise to a group of U.S. businessmen at the White House one night last week. "If it is," he added, "it is because of the new budget; we are trying to economize on the light bill."

President Johnson appeared to be economizing on a lot more than the light bill in the fiscal 1965 budget that he sent to Congress last week. Everybody knew well in advance that the President would call for expenditures of $97.9 billion, down $500 million from the current budget, and a deficit of $4.9 billion. He said so in his State of the Union message three weeks ago. But, having already heard the punch line, Congress was anxious to hear the rest of the story. Just how was Lyndon going to do it? House Minority Leader Charlie Halleck thought he had the answer. Snipped he: "With mirrors."

Legerdemain on the Ledgers. Since the Budget and Accounting Act, requiring the President to submit to Congress an annual estimate of receipts and expenditures, was passed in 1921, every Chief Executive has practiced a bit of legerdemain on the ledgers. Johnson is as adept as any at the art, and he has in a measure practiced it in his first budget. A couple of billion-dollar items:

> Assuming that an $11.5 billion tax cut would be enacted by Feb. 1 (see below), Administration economists estimated a gross national product of $623 billion, up $38 billion. That assumption has already been knocked down, and the economists are now figuring on a $621 billion G.N.P. instead. And since the tax cut will be slower in materializing, so will the projected increases in personal income and corporate profits, which means that 1965's tax revenues will be lower than anticipated.

> A $1.2 billion cut in agriculture spending is partially based on the fact that wheat farmers, who rejected strict Government production control in a referendum last May, will receive lower price supports. This will save the budget $528 million. But it will cost the farmers the same amount--and in an election year that adds up to a heap of lost income. Even now the Administration is trying to push through voluntary controls that, if passed, would add hundreds of millions of dollars to the budget.

There are other feats of bookkeeping. The figure that makes all the headlines is the "administrative budget," but the best indicator of how much the Government is spending is the "national income account budget." It includes several expenditures omitted from the administrative budget, among them a hefty $29.4 billion item from such Government trust funds as Social Security. Next year's national income account budget: $121.5 billion, an increase of $2.4 billion from the current year. The figure would have been even higher but for the Administration's decision to sell off some $2.3 billion in such federal assets as housing mortgages. G.O.P. Representative Tom Curtis of Missouri, ranking House minority member of the Joint Economic Committee, took note of this disparity and complained that the President had rigged the budget to achieve swift expansion in Election Year 1964.

Over the Hump. The President took the G.O.P.'s criticism in full stride. "You know," he quipped, "you'd think if there was anyone in the world who would be pleased with a lower budget, it would be Republicans." The fact is that Johnson, in the face of built-in budgetary increases that come to $3 billion a year, was making the first real effort in years to reverse the spending trend. He set forth a philosophy that should indeed have pleased the Republicans. "Our fiscal program," he declared, "will shift emphasis sharply from expanding federal expenditures to boosting private consumer demand and business investment."

President Johnson had the considerable courage to cut hard in defense spending despite the obvious pressures from the military and some areas of industry. Three things helped him achieve a defense cut of more than $1 billion. First, many of the crash programs launched when Kennedy entered the White House have now been paid for, including the building up of the Army from eleven flabby divisions to 16 combat-ready units. Second, Defense Secretary Robert McNamara's cost-reduction program is expected to trim hundreds of millions from the next budget. Finally, as one Pentagon official put it, "we are over the hump in the funding of the large missile systems."

Atlas, Titan and Polaris are nearly all paid up. Atlas is already being phased out; 27 of the hard-to-handle liquid-fueled missiles are scheduled to be removed from "soft" surface sites at California's Vandenberg Air Force Base, Wyoming's Warren A.F.B. and Nebraska's Offutt A.F.B. by mid-1965. New-missile procurement is limited to 50 advanced Minuteman II missiles, capable, with their 9,000-mile range, of hitting Red Chinese targets from sites on the West Coast. Another 950 Minutemen will be in hardened under ground emplacements by the end of 1965, and the U.S. also has 176 submarine-borne Polaris missiles, 108 Titans, and a force of up to 1,300 long-range bombers. Said the President: "We are clearly capable of destroying an aggressor even if forced to absorb a first strike. Under these conditions, further substantial increases in our strategic forces would soon be of diminishing value." There are those who disagree--notably Air Force Chief of Staff Curtis E. LeMay and G.O.P. Presidential Aspirant Barry Goldwater--and there is likely to be an outcry in Congress for more funds.

Balance in Sight. Stung by last year's Donnybrook with Congress over foreign aid, Johnson asked for only $3.4 billion, the smallest request since the U.S. began pumping Marshall Plan aid into Europe in 1948. Of that total, $1.2 billion went under the Defense budget, thereby trimming the vulnerable economic aid request to $2.2 billion and giving Congress a smaller target.

Thanks to the cuts in defense and agriculture, the President was able to beef up outlays for politically attractive welfare programs. As Budget Director Kermit Gordon put it, "Over the past three years we have so improved our military strength that we can direct some money to meet human and domestic needs." Total welfare requests were $7.7 billion, up $900 million, and the most heralded item was Johnson's attack on poverty. But the actual new money requested for the attack came to only $250 million.

What worried some economists about the budget was that expenditures would spurt next year, once the election is out of the way. Treasury Secretary Douglas Dillon conceded that they "undoubtedly will go up, but I don't know about their going up greatly." He predicted that there would be a deficit next year. But by fiscal 1967, he added, the budget may finally be balanced.

Nothing Too Small. If everybody behaved like Lyndon Johnson, it might even be sooner than that. No item seemed too small for his attention. When a visitor noticed a dime on the floor of the Oval Room and picked it up, the President took it and nonchalantly pocketed it. When Lady Bird flew to Manhattan last week for the premiere of Arthur Miller's new play (see THEATER), she took the economy hop ($16.12, including tax), and the President's remark about the light bill was no joke. When Lyndon learned that it ran $4,600 a month, he nearly hit the chandeliers, ordered his staff to "turn out all those lights when there is no one in the house."

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