Evening star. [volume] (Washington, D.C.) 1854-1972, 1954-01-22
The Budqet-G. o. p. Model

responsibility, contains something old and SOn1e-
thing new. The old is the continued projection
of deficit financing, for the fourth consecutive
fiscal year, although the estimate of $685. billion
in expenditures as compared to receipts Of $627
leaves q smaller deficit, $40 billion, than has
been the case in any year since the surplus year
Of fiscal 1851 The new is series of tax rec
ommendations-f1rst in opposition to the sched-
uled reduction OF corporate income tax rates
and certain excise rates, and, second, 25-point
program for general revision of the revenue
structure. In estimating 1855 receipts at $62.7
billion the administration assumes that these
proposals will be carried out by Congress.
This assumption is one of two major gam
bles. or calculated risks, which the administra-
ton is taking in the new budget. For the failure
OF Congress to go along with the tax recommen-
dations especially on the reversal of reductions
already scheduled In corporate and excise tax
rates. could cost the Treasury as much as an
additional $23 billion in fiscal 1855 and thereby
increase the deficit to as much as $50 billion
The second calculated risk pertains to the
national security section of the budget in which
1855 estimated expenditures are set at $449
billion as against estimate of $48.7 for the
current fiscal year. The reduction is traceable
mostly to the new concept of defense in which
greater emphasis is laid upon air power and new
Navy ships.
There is perhaps, third calculated risk
in the administration figuring, namely that
the country will not be suffering an economic
depression or even a serious recession during
fiscal 1855. For while the revenue estimate for
1855, at $627 billion, is below the 1854 estimate
and below the actual receipts of 1858, 1t is based
according to administration spokesman, on q
high level Of business activity" IF this level
should fail 1t would, of course, result in lower
tax returns and probably in larger deficit.
Indeed the administrators position on tax
changes-those which already have occurred
and those which 1t now favors or opposes-is in
itself reflection of concern for the mainte-
nance of this high level of business activity For
example, the tax reductions which became effec-
tive on January of this year, plus the revisions
proposed in the pending 25-point program,
involve approximately S. billion of tax relief to
individual and corporate taxpayers in the fiscal
year 1855. Postponement Of these changes would,
in other words, have permitted the administra-
ton to present estimates of budget in balance
or perhaps in surplus for 1855 rather than one
showing continuing deficit. But as Secretary
of Treasury Humphrey told correspondents dur
ing briehng on the budget and the tax rec
concentrations the proposed reduction in Gov
eminent spending of $123 billion in one year
could be seriously damaging to the national
economy If some of this money were not handed
back to the people through tax relief.
The administration probably will have its
greatest tax problem, bearing directly upon this
1855 budget, in trying to persuade Congress to
continue the present corporation income tax
rate at So per cent-it is scheduled to drop to
Al per cent on April of this year-and to MAIN
tain various excise taxes, scheduled for reduc-
an estimated SIS billion and the second about
81 billion in fiscal 1855. There is considerable
feeling on Capitol Hill and elsewhere that an
easing of corporation income taxes and of excise
duties would be stimulating to business at
critical time. Chairman Reed of the House
Ways and Means Committee is one spokesman
for this point of view and his position of infu-
ence in tax matters may endanger the Presi-
dents recommendation.
AS for the 25-point program the Ways and
Means Committee already Is at work and has
approved several of the recommendations. Most
of the changes spell tax relief-some to individ-
uals, some to corporations, some to little tax
payers and others to big oneS-although few
would result in increased receipts to the Gov
eminent. The net effect, however, is expected
to be loss of $1.3 billion in revenue for fiscal
1855 and 50 billion in succeeding full years. In
point, although there are political cross-currents
around the matter of who is to get what relief.
Thus, the proposals for greater liberality in
dealing with dependent children, widowed heads
of families, medical allowances and such are
likely to receive bipartisan sympathy. Others,
such as proposals for reducing the present
double taxation on dividends and liberaliZing
plant depreciation allowances, may encounter
Observation-Disclosures the facts hardly justify it
as being designed to help privileged" group
Election-year pressures also play part in
the congressional attitude toward appropria-
tons and expenditures, but the administration
may find it easier to hold the line on its budg-
eted outlay. Most of the budgeted reduction in
spending and in new obligational authority
necessarily comes in the national security Sec
tion-including the Department of Defense
mutual military program, atomic energy and
stockpiling of strategic materials 1t is not
however, an across-the- board reduction but
rather selectiye one which will have the end
effect in the Presidents opinion, of strengthen
Ing our security rather than weakening It,
An examination Of specific items tends to
bear out the Presidents opinion and to encour-
age confidence in the new concept of security
structure. Figures are down, for example, for
personnel costs-only the Air Force being sched-
uled for a personnel increase during the year
Figures also are down for vehicles, ammunition
and housekeeping They are at about the 1854
level for aircraft, ships and public works con-
struction. They are higher for such projects as