THE BUDGET:..
BUDGET CONTROL AND IMPOTODMENT ACT
The Budget has become the nation's principal tool for deterimining
governmental goals and economic gorwith, affecting nearly every
facet of American life (in fact, the results of the economic
policy and spending policy adopted by the Congress will
greatly affect the trends in future budgets). Previously
the Congress lacked a comprehensive mechanism for establishing
priorities among goals and for determining the shape of economic policy
through the budget process. Previous budget reform efforts
enhanced and centralized budget authority in the Executive Branch while
permitting increased fragmentat^cgi of ^ujget authority in the
Congress. Most importantly, A ft necessitates the setting
of targets and eventual binding levels on federal spending,
revenues and deficits, and also ceilings for the 16 budgetary
functional categories. If the dry run for the FY 76 budget
was an example of what can be expected there will be much
partisan controvery over overall spending, spending for social
programs, and the size of the deficit.
IMPOUMMENTS
One provision of the Budget Control and Impoundment Act
was to guard against impoundment of funds appropriated by
the Congress. Yet, the 0MB has been able to elinirate spending
that the Administration feels is too high by proposing rescission
of funds appropriated by the Congress that exceed the BamxHxs
Administration budget requests. Since the President does not have
to spend funds that it proposes for rescissions for 45 legislative
days, a strategic placing of a proposed rescission ( near
a series of adjournments or recesses) can cause a several
month delay in funding of a program.
BASIC ECONOMIC POLICY
There should be controversy over the basic economic policy of
the Adminstration and the Congress. During the last session,
the Administration seemed to feel that it was important
to fight inflation by holding down spending and by placing
a spending ceiling on the budget. This even included vetoing
a bill that would have provided jobs for Americans even when
the unemployment rate was above 9%. The Democrats on the
other hand, feel that it is necessary to use other measures
to get the U.S. on the road to economic recovery. In the last
session supported legislation which concentrated on unemployment
(Providing jobs), a massive tax cut, housing construction
subsidies, and reform of the tax laws to preclude tax shelters
on certain industries (oil depletion) and proposals
closing tax loopholes for Big business and higher income
brackets.
TAX CUT
Ford, after proposing massive tax increases in the beginning
of 1975, did an about fact and proposed a massive tax cut
of $28 billion whihc would be offset by a spending cut
of the same size and a spending ceiling of $395 billion.
The President eventually "compromised" with the Congress
by exchanging the extension of the tax cuts for a nonbinding pledge that the Congress would agree to cut FY 77
outlays dollar for dollar.
DEFICIT SIZE
There will continually be qontroversy over the size of the
deficit. The Administration believes in an economic policy
of reduced federal spending, tight money policy and
a balanced budget to solve the nation's economic psixEisxx
ills. They feel that from overstimulating the economy
with increased spending programs, new inflationary
pressures and higher interest rates would occur.
WASTEFUL SPENDING
With such an emphasis on fiscal restraint, many more programs will
come under scrutiny to see if they are necessary.
THE BUDGET/FEDERAL SPENDING
All parties agree that there must be greater fiscal restraint,
less unemployment and tower inflation and greater economic
growth. They disagree though in the methods to achieve these
ends.
CRITICISMS AND CONTROVERSY OVER THE FY 77 BUDGET
1^The DOD appropriation increases $10 B.in the budget to
over $100 B. Congress will most certainly cut some of this
money fcom the DOD's obligational authority.
2. Congress will almost certainly reject a plan to consolidate
59 of the costliest education, health, school nutrition
programs into four block grants. Many doubt that the states
could pick up the slack of the cuts in the programs.
3. There has been criticism that Ford understated the rate
of unemployment which would occur/ Ford favors giving
tax advantages to business which would eventually expand
the work force. Other individuals favor direct federal
employment programs.
4. Ford's tax incentive benefit the wealthier classes rather
than the less ^ell to do.
5. Tax credits might be more desirous than increasing personal
exemption taxes for $750 to $1,000.
Current programs would have to be reduced by $15 billion
6
to stay within the ceiling.
HIGHLIGHTS OF THE BUDGET
1. Higher Defense spending
2. S.S. tax rate on employers and employees would rise
at the start of the next year to close an emerging gap
between outlays and receipts.
3. Consolidation of federal programs in the areas of health,
education, child nutrition, and other social services into
block grants to states with few strings attached.
4. Phasing out of recession programs of public service jobs
and extended unemployment benefits.
5. Eventual increase in the exemption for each taxpayer from
$750 to $1,000 if spending targets are met.
6. Deferring taxes on money invested in corporate stock by
families making up to $40,000. per year.
7. Tax advantages to corporations to increase economic productivity
and expansion and eventually enlargening the work force.
8. Make it easier for one generation to pass on family farms
and small farms to anther generation.
UNCONTROLLABLE SPENDING- '** /I/ /J rtc.^1 • r?^'^&~ /^rULC
A problem with all budgets which increases the budget without
allowing for any real growth stems from uncontrollable spending.
In FY 76 3/4 of the current FY 76 outlays were considered
they could not be decreased or increased
uncontrollable
without changes in existing laws. Includes,: Medicare, Medicaid,
S.S., public assistance, Railroad retirement, Federal pensions,
unemployment, interest on the national debt, general revenue sharing
FY 77 BUDGET
Receipts
Outlays
Deficit
-
$351.3 B,
394.2
43.0
FORCAST OF THE ECONOMY
7.7% unemployment
5.9 consumer price index for 1976