Back to the Chopping Block

Time: 10 p.m., Saturday, Jan. 10.

Place: Headquarters of the federal Bureau of the Budget adjacent to the White House. Action: Weary officials put the last touches on the Nixon Administration budget. The big policy decisions have already been made at the Western White House in San Clemente. Proposed spending for fiscal year 1971, beginning next July 1, stands at $203.5 billion; by increasing minor taxes and taking other steps, an anti-inflationary surplus was projected. The next scene in the annual production belongs to the printers, standing by to complete a document of some 1,700 pages for presentation to Congress on Jan. 27.

All going according to script? Hardly. Last week Richard Nixon sent his budget back to the chopping block. Budget Director Robert Mayo, though aware on that Saturday night of the second thoughts developing in high places, had no instructions to stop the machinery. Treasury Secretary David Kennedy and his economists were skeptical about economic forecasts and revenue estimates supporting the prediction of a surplus. Real growth in the gross national product (GNP) had all but ceased in the final quarter of 1969. Continued doldrums (see BUSINESS) would mean lower tax yields. That concern brought Kennedy into agreement with Economist Arthur Burns, who, on Feb. 1, will leave his post as Counsellor to the President to become chairman of the Federal Reserve Board. Burns had been arguing for tighter restrictions on Government spending on the grounds that the Reserve Board's limitations on the money supply, severe though they have been, could not alone cope with inflation.

Romney's Slice. During the afternoon of Jan. 10, Burns solicited the help of George Romney, Secretary of Housing and Urban Development. As they talked, Burns urged Romney to help lead a new effort to pare federal spending. The following Monday, Romney met with John Ehrlichman, Nixon's assistant for domestic affairs. Romney laid out a scheme for further across-the-board cuts in the budget, saying that his department would take a reduction as high as 5% if other Cabinet-level agencies did. Knowing that the President had his own misgivings about the budget, Ehrlichman took Romney in for a talk with Nixon.

Within hours, the White House was summoning department heads for an unusual executive session of the Cabinet set for 3 p.m. Tuesday. No staff aides were invited. Attendance was held to 15: Nixon, Mayo, the twelve department chiefs and Donald Rumsfeld, director of the Office of Economic Opportunity. Normally, Cabinet meetings last 90 minutes or less. This one was to take three hours and 15 minutes.

"We've cut," said Nixon. "We've economized. But we can do even better. Now let's do better." The President gave the floor to Romney, who made his pitch: "The economic decision-makers are convinced that inflation will continue. Having put our hand to the plow to curb inflation, we must convince the economic decision-makers that we are not going to turn away. A little difference can make a big difference." More specifically, Romney proposed a 21% slice in all departmental budgets, which would reduce the total to $198.5 billion. He suggested a further economy of $1.2 billion to be achieved by freezing all federal pay raises. As an example, he said, the President and all his senior political appointees should take an immediate 25% salary cut.

Stray Millions. The proposals for a uniform departmental budget cut, a pay-raise moratorium and personal salary reductions got nowhere. Nixon, however, made it clear that Government spending had to be cut down as close to $200 billion as possible. But snipping out $3 billion or so, even from a spending schedule of $203.5 billion, is far from easy. Expenditures such as debt service and pensions are mandated by law. Programs in other areas had already been subjected to the big squeeze. Yet the presidential directive insisted that more gristle be found. Higher excise taxes on consumer products--which Congress would probably block anyway--had been rejected as a means to build up the surplus. The Administration's budget, Nixon declared, must be "credible."

Thus the search began for stray millions. The new program to share federal revenue with the states will be retained--but trimmed from $535 million to $500 million. The defense budget, already chopped heavily, will lose perhaps another $400 million. Even the Justice Department, which had previously escaped the economy wave, will undergo some minor pruning. All department heads were directed to report back within days on their savings proposals. The Democratic Congress, however, is not so vulnerable to presidential discipline. Capitol Hill is still rebelling against some Nixon austerity measures in the current budget year. Under the twin fears of voter reprisals in November and recession this year, Congress is likely to continue appropriating more money than the President cares to spend. Whatever ultimately happens with the budget, Nixon's well-publicized crusade for economies leaves the political record clear as to the identities of the spenders and the savers.

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