HOW TO CUT THE U.S. BUDGET

THE most contentious book of the season has a nowhere plot, grey characters, and not even the beginnings of a bedroom scene. It certainly will be on nobody's Christmas list, except perhaps that of the Soviet embassy, whose operatives religiously study it as the best single guideline to U.S. frustrations, strengths and dreams. This remarkable volume is the federal budget (478 pages; Government Printing Office; $1.50), and right now it is a lively subject of national debate and confusion. Practically everybody agrees that the federal budget is bloated, but practically nobody can agree on just where to cut. It is no exaggeration to say that the issue will profoundly affect elections, prices and everyone's pocketbook in 1968 and beyond.

The debate goes much deeper than the short-term issue of who will get what share of Government largesse. The discussion is essentially about national goals and priorities. For which of its goals should the U.S. spend less--or more?

So far this year, Congress has scaled down some goals by trimming appropriations $4.5 billion, and not all those cuts were wise. Last week, under pressure from Congress, President Johnson offered a further cut of $2.6 billion by paring 10% from outlays for "controllable" programs and 2% from personnel costs. Even with that, federal spending in this fiscal year will climb to $136 billion, as measured by the administrative budget, and the deficit will be close to $20 billion--highest since the World War II era. That threatens to tighten credit and increase interest rates, raise consumer prices and debilitate the dollar. Obviously, the budget must be cut still further, and it can be cut.

In deciding where to reduce, Congress and the President should ask three questions about every major item of expense. They are, in order of priority: Is the expense really necessary for the national security? Would a postponement on this program now only lead to much greater costs in the future? Will this expense improve the life of most Americans? By applying those questions to the budget, it is possible to see--item by item--where spending should, and should not, be reduced.

DO NOT CUT

sbEDUCATION. Because it has great social consequence, is economically productive and the key to solving the nation's racial problems, education should be handled with extreme care in the effort to save money. University of Chicago Economist Theodore Schultz calculates that the steadily improving education of the U.S. labor force has increased real national income by one-fifth. But Congress is imprudently making some penny-wise reductions in worthwhile federal programs. Example: in fiscal 1966, the Government supported 15,000 graduate students, many of whom intended to become college professors; this year the number is down to 10,500. The saving is about $22.5 million, hardly enough to justify a move bound to aggravate the teacher shortage.

sbFOREIGN RELATIONS. Another place not to cut is the Peace Corps, dollar for dollar the nation's most successful venture in foreign affairs. The House Appropriations Committee wants to squeeze the Peace Corps budget from $115.7 million to $105 million--a shortsighted trimming that would reduce the number of new recruits from 10,300 to 7,300. As for foreign economic aid, Congress appropriated $2.16 billion this year, down from $2.42 billion last year. Considering the close relationship between world poverty, ignorance and war, any further severe cuts in foreign aid now could create the need for larger defense budgets later.

sbPOVERTY. Despite some scandals, and mismanagement, the antipoverty program draws surprising endorsement from the nation's wisest money managers. Besides feeling a moral obligation to help the poor, businessmen support the spending for the sound economic reason that it will upgrade the nation's manpower resources and create new consumer markets. Says Martin Gainsbrugh, vice president of the National Industrial Conference Board: "This is the one domestic program that we are not willing to cut."

sbSUPERSONIC TRANSPORT. The SST is much more than a flying frill. The $142 million that Congress authorized for it this year will go far to improve the U.S.'s worst international financial problem: the balance of payments. Aircraft make up the nation's second biggest export (after food), and the U.S. has sold $2.4 billion worth of commercial jets to foreign buyers. The SST market will be much richer--estimates run to $40 billion over 20 years. Hoping to crack it, the Soviets and a British-French consortium are already building SSTs, and the U.S. has to hustle to catch up.

CUT

sbAGRICULTURE. The richest field for cutting is down on the farm, home of the nation's most coddled minority. Farm subsidies are now $3.3 billion--compared with less than $1 billion under the Eisenhower Administration in 1960--and one-fifth of the handouts go to farmers who earn more than $10,000. Not only are subsidies a cause of rising food prices, but it makes little sense for the Government to pay farmers to produce less when hunger stalks half the world. A poll of 5,000 farmers by the influential Farm Journal showed that 63% of them favor an end to price supports.

sbDEFENSE. Without slackening the Viet Nam war effort, now costing $30 billion a year, the U.S. can substantially reduce its $74.5 billion defense budget. Much of the $2 billion in military construction budgeted for 1968 can safely be postponed. The Pentagon can save another $500 million to $1 billion by bringing home many of the 50,000 U.S. troops stationed in South Korea and many of the 200,000 in Europe. Foreign military aid, now $510 million, also could be chopped by half.

sbSPACE. Another $1 billion can be lopped off military and space research and development. Example: the Air Force will spend $430 million in fiscal 1968 on a manned orbital lab, but NASA is doing almost exactly the same job in its space program. Among the many other U.S. space projects that can be delayed is one costing $2 billion over the next five years to put a manned satellite into orbit for twelve months straight.

sbSEAWAYS & AIRWAYS. Ripe for reduction is the $600 million yearly subsidy to the aged, ailing merchant marine. A presidential task force recommended a two-thirds slash over a long-term period, but so far the powerful U.S. shipbuilding lobby has blocked the plan. In the air, the $54 million subsidy to regional airlines could be brought down much further because efficient small jets have bolstered the profits of the little lines.

sbPUBLIC WORKS. The rich aroma of pork converts even the most ardent budget cutters into big spenders. "Sometimes you have to put that feeling of economy behind you," said Senate Minority Leader Everett Dirksen, pleading for a $400,000 appropriation to start a dam at Decatur Ill. Dirksen got what he wanted, as did the others from both parties who approved the $4.6 billion public-works bill for fiscal 1968. Among its many nonessentials is the Delaware River-Tocks Island park; projected costs for it have grown from $90 million to $198 million. Well over $1 billion in similar public works could be postponed.

In sum, by paying more attention to priorities than to pressure groups, the U.S. can comfortably cut the budget by at least $5 billion--above and beyond what the President has already proposed. Surely such a reduction would be so desirable that it deserves status as an important national goal in itself.

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