Federal Budget for Fiscal 1966 - St. Louis Fed · The Federal Budget for Fiscal 1966 J_ HE Federal...
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by CHARLES A. WAITE The Federal Budget for Fiscal 1966 J_ HE Federal budget presented to Congress in January shows a shift in emphasis from defense and space to programs for education, health, aid to the elderly, and for the war on poverty. This shift is evident on all three budget bases. For example, for the first time since 1950, cash budget outlays for defense, international programs and space activities will account for less than half of the total cash payments to the public. In the national income Federal Fiscal Position on Three Accounting Bases Billion $ -5 Deficit National income Accounts Basis / -10 1961 1962 1963 1964 1965* 1966* Fiscal Years *Estimates from the Budget of the United States in Fiscal Year 1966 U.S. Department of Commerce, Office of Business Economics 65-2-7 accounts (NIA) budget, defense pur- chases, which comprised better than one-third of the total rise in expendi- tures in the budget of only two years ago, show virtually no increase in fiscal 1966 over the previous year. Outlays other than purchases of goods and services, such as transfer payments to persons and grants-in-aid to State and local governments—programs which are essentially for civilian purposes—ac- count for over 85 percent of the increase in expenditures. A similar pattern is shown in the administrative budget. Federal expenditures are expected to rise fa-om fiscal 1965 to fiscal 1966, with the amount depending on the budget concept used. The adminis- trative budget proposes an increase of just over $2 billion in expenditures. In both the cash and NIA budgets outlays are up $6 billion. The budget estimates assume a GNP of $660 billion in calendar 1965 or an increase of about 6 percent, somewhat less than the 6% percent rise in 1964. Personal income is estimated at $520 billion, up about $29 billion from the previous year while corporate profits before taxes are projected to rise from about $57 billion to $61 billion. If the economic assumptions under- lying the budget presentation turn out as projected, Federal receipts in fiscal 1966 under all three budget bases are estimated to increase, despite revenue losses from the proposed $1% billion reduction in excise taxes and the sec- ond stage reduction of corporate and individual income taxes under the Revenue Act of 1964. Administrative budget revenues are expected to rise by over $3.2 billion; cash receipts from the public will be up more than $6 billion, and NIA receipts will rise by $5 billion. Revenues are expected to advance more rapidly in the cash and NIA budgets than in the administrative budget mainly because the latter ex- cludes the rise in the Social Security payroll tax rates and in the earnings base scheduled for January 1, 1966. All three budgets are expected to remain in deficit through fiscal 1966, although they show divergent move- ments. From fiscal 1965 to fiscal 1966 the deficit on the administrative budget basis declines by $1 billion to about $5 billion, the cash deficit remains virtu- ally unchanged at about $4 billion, and the NIA budget deficit increases by $1 billion to $6 billion. Summary data for the three budgets are shown in table!. Table 1.—-Federal Government Receipts and Expenditures, Fiscal 1964-66 (Billion dollars) Administrative Budget: Receipts ^__ _ E xpen ditures Surplus (+) or deficit (-) _ Cash Budget: Receipts Expenditures Surplus (+) or deficit (-) . National income and product account: Receipts. -__ . _ Expenditures Surplus (-H or deficit (-)_ 1964 actual 89.5 97.7 -8.2 115.5 120.3 -4.8 114.7 118 5 -3.9 1965 estimate 91.2 97 5 -6.3 117.4 121.4 -4.0 116.0 121 0 -5.0 1966 estimate 94.4 99.7 -5.3 123.5 127.4 -3. 9 121. 0 127.0 -6.0 Sources: "The Budget of the United States for Fiscal Year Ending June 30, 1966," and U.S. Department of Commerce, Office of Business Economics. Outlook for remainder of fiscal 1965 The NIA budget receipts and ex- penditures by major component are presented in table 2 for the fiscal years 1964-66 along with quarterly data for calendar 1964. Total receipts are expected to show a marked increase in the first half of calendar 1965, largely resulting from lower-than-usual refunds and higher- than-usual settlements for individual in- come taxes due to under-withholdings in calendar 1964. On the expenditure side, a small rise is expected in national defense pur- chases. Transfer payments to persons in early 1965 should also rise due in part to accelerated dividend payments Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis February 1965
Transcript of Federal Budget for Fiscal 1966 - St. Louis Fed · The Federal Budget for Fiscal 1966 J_ HE Federal...
by CHARLES A. WAITE
The Federal Budget for Fiscal 1966
J_ HE Federal budget presented toCongress in January shows a shift inemphasis from defense and space toprograms for education, health, aid tothe elderly, and for the war on poverty.This shift is evident on all three budgetbases. For example, for the first timesince 1950, cash budget outlays fordefense, international programs andspace activities will account for lessthan half of the total cash payments tothe public. In the national income
Federal Fiscal Position onThree Accounting Bases
Billion $
-5
DeficitNational income Accounts Basis
/
-10
1961 1962 1963 1964 1965* 1966*
Fiscal Years
*Estimates from the Budget of the United States in Fiscal Year 1966
U.S. Department of Commerce, Office of Business Economics 65-2-7
accounts (NIA) budget, defense pur-chases, which comprised better thanone-third of the total rise in expendi-tures in the budget of only two yearsago, show virtually no increase in fiscal1966 over the previous year. Outlaysother than purchases of goods andservices, such as transfer payments topersons and grants-in-aid to State and
local governments—programs which areessentially for civilian purposes—ac-count for over 85 percent of the increasein expenditures. A similar pattern isshown in the administrative budget.
Federal expenditures are expected torise fa-om fiscal 1965 to fiscal 1966,with the amount depending on thebudget concept used. The adminis-trative budget proposes an increase ofjust over $2 billion in expenditures.In both the cash and NIA budgetsoutlays are up $6 billion.
The budget estimates assume a GNPof $660 billion in calendar 1965 or anincrease of about 6 percent, somewhatless than the 6% percent rise in 1964.Personal income is estimated at $520billion, up about $29 billion from theprevious year while corporate profitsbefore taxes are projected to rise fromabout $57 billion to $61 billion.
If the economic assumptions under-lying the budget presentation turn outas projected, Federal receipts in fiscal1966 under all three budget bases areestimated to increase, despite revenuelosses from the proposed $1% billionreduction in excise taxes and the sec-ond stage reduction of corporate andindividual income taxes under theRevenue Act of 1964. Administrativebudget revenues are expected to riseby over $3.2 billion; cash receipts fromthe public will be up more than $6billion, and NIA receipts will rise by$5 billion. Revenues are expected toadvance more rapidly in the cash andNIA budgets than in the administrativebudget mainly because the latter ex-cludes the rise in the Social Securitypayroll tax rates and in the earningsbase scheduled for January 1, 1966.
All three budgets are expected toremain in deficit through fiscal 1966,
although they show divergent move-ments. From fiscal 1965 to fiscal 1966the deficit on the administrative budgetbasis declines by $1 billion to about$5 billion, the cash deficit remains virtu-ally unchanged at about $4 billion, andthe NIA budget deficit increases by $1billion to $6 billion. Summary datafor the three budgets are shown intable!.
Table 1.—-Federal Government Receipts andExpenditures, Fiscal 1964-66
(Billion dollars)
Administrative Budget:
Receipts ^ _ _ _E xpen dituresSurplus (+) or deficit (-) _
Cash Budget:
ReceiptsExpendituresSurplus (+) or deficit (-) .
National income and productaccount:
Receipts. - _ _ . _ExpendituresSurplus (-H or deficit (-)_
1964actual
89.597.7
-8.2
115.5120.3-4.8
114.7118 5-3.9
1965estimate
91.297 5
-6.3
117.4121.4-4.0
116.0121 0-5.0
1966estimate
94.499.7
-5.3
123.5127.4-3. 9
121. 0127.0-6.0
Sources: "The Budget of the United States for Fiscal YearEnding June 30, 1966," and U.S. Department of Commerce,Office of Business Economics.
Outlook for remainder of fiscal 1965
The NIA budget receipts and ex-penditures by major component arepresented in table 2 for the fiscal years1964-66 along with quarterly data forcalendar 1964.
Total receipts are expected to show amarked increase in the first half ofcalendar 1965, largely resulting fromlower-than-usual refunds and higher-than-usual settlements for individual in-come taxes due to under-withholdingsin calendar 1964.
On the expenditure side, a small riseis expected in national defense pur-chases. Transfer payments to personsin early 1965 should also rise due inpart to accelerated dividend payments
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February 1965 SUEVEY OF CURRENT BUSINESS
from veterans' life insurance trustfunds. Other major components willremain fairly stable through fiscal 1965.
With revenues rising faster than ex-penditures in the first half of calendar1965, deficits of about $4^ billion(seasonally adjusted annual rate) areexpected, or about $1 billion below therate of the last half of 1964.
The Three Federal BudgetMeasures
The three measures of Federal finan-cial transactions differ from one anotherwith respect to both coverage and tim-ing. The administrative budget, whichserves as the basis of recommendedlegislative action, excludes trust fundoperations, which have grown rapidlyin recent years. Several importantparts of the Government's program,such as Social Security, Federal-aidhighways, and unemployment insuranceare carried out through trust fundoperations.
The consolidated cash statement pro-vides a more comprehensive picture ofthe flow of cash transactions (excludingborrowing) between the Federal Gov-ernment and the public. It includesthe receipts and expenditures of trustfunds as well as the general fund.
The national income accounts budgetdiffers from the cash budget in that itcounts most taxes as receipts at thetime the liability is incurred rather thanwhen the Government actually receivespayment. On the expenditure side,the NIA budget attempts to synchro-nize Federal purchases with other sec-tors of the national accounts. As aresult, many goods, chiefly militaryhardware, are counted as Federal pur-chases at the time of delivery ratherthan at the time checks are issued, asin the administrative budget, or whenfunds are withdrawn from Treasuryaccounts, as in the cash budget.Another major difference between thecash and the national income accountsbudgets is the exclusion from the latterof transactions involving financialclaims, e.g. loans, and exchanges ofsecond-hand or existing assets. Theseflows are excluded because they do notdirectly affect current output or income.
Table 3 contains a detailed reconcilia-tion of the various budgets.
Differences in budget patterns
Although in periods of rising incomesreceipts on an accrual basis usuallyincrease more rapidly than collections,the opposite is anticipated in fiscal 1966.Collections of corporate profits taxesare expected to exceed accruals becauseof the acceleration of corporate pay-ments under the provisions of the 1964Revenue Act, and the lower tax rateseffective January 1, 1965. (Fiscal 1966will be the first year to reflect the fullimpact of the tax cut.) In addition,the anticipated reduction in excisetaxes, like the reduction in corporatetaxes, will be reflected in lower liabili-ties in the national income accountsas soon as the lower rates become effec-tive, whereas cash collections of excisetaxes will reflect these changes onlyafter a brief lag. By way of contrast,personal income taxes on the NIAbasis are expected to run slightly aheadof collections despite the lower taxrates on calendar 1965 income. Thepersonal withholding rate, which wasreduced from 18 percent to 14 percentin March 1964, is unchanged this year.
Expenditures are expected to increaseabout the same amount on both thecash and national income accountsbases, although there are some differ-ences in detail. A sharp decline in netoutlays under Federal lending programs
due largely to an anticipated increasein sales of mortgages by the VeteransAdministration and loans by the SmallBusiness Administration is expected todecrease cash payments, but will haveno effect on national income accountexpenditures. However, this is offsetin fiscal 1966 by an expected drop inCommodity Cred;t Corporation certi-ficates of interest, which will reduceNIA expenditures but have no corre-sponding effect on cash outlays.
Fiscal 1966 ReceiptsFederal Government receipts under
the NIA budget are expected to be up$5 billion from fiscal 1965 to fiscal 1966.
Personal income taxes are estimatedto rise nearly $2 billion. The advancein personal income assumed in thebudget for the coming year will producea substantial expansion of the individ-ual tax base. However, the relativeincrease in projected taxes shows asomewhat smaller gain than personalincome because fiscal 1965 personaltaxes are being inflated by unusuallyhigh net settlements on 1964 incomes,and because tax rates will be lower infiscal 1966 than in 1965. The secondstage reduction of income tax ratesenacted in the Revenue Act of 1964went into effect January 1, 1965.Since withholding rates were notchanged, the main direct impact ontax receipts will show up in lower non-withheld taxes.
Table 2.—Federal Receipts and Expenditures in the National Income Accounts, 1964-66(Billions of dollars)
Federal Government receiptsPersonal tax and nontax receiptsCorporate profits tax accruals _ _Indirect business tax and nontax accruals _Contributions for social insurance
Federal Government expenditures.Purchases of goods and services
National Defense _ _ _OtherLess: sales. _. _
Transfer paymentsTo persons _Foreign (net) . _ _
Grants-in-aid to State and local governmentsNet interest paidSubsidies less current surplus of government enterprises
Surplus (+) or deficit (— )
Fiscal year
1964actual
114.751.423.516.023.8
118.566.156.210.8
.9
30.428.81.69.88.14.1
-3.9
1965esti-mate
116.050.323.916.825.0
121.065.955.411.61.1
31.830.11.7
10.78.54.1
-5.0
1966esti-mate
121.052.224.716.128.0
127.066.755.612.31.2
35.233.41.8
13.08.63.5
-6.0
Quarterly, seasonally adjustedat annual rates
1964
I
114.851.223.915.923.9
117.264.354.011.51.2
31.129.51.59.88.33.7
-2.4
II
112.347.324.416.424.2
120.267.157.011.0
.9
30.729.11.6
10.48.43.6
-7.8
III
114.048.224.416.624.7
119.265.555.211.2
.9
30.829.11.7
10.68.43.9
-5.2
IV
n.a.49.3n.a.16.625.0
120.165.355.311.31.2
31.529.42.2
10.78.44.2
n.a.
Sources: "The Budget of the United States for the Fiscal Year Ending June 30,1966," and U.S. Department of Commerce,Office of Business Economics.
761-192 O-65-2
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10 SURVEY OF CURRENT BUSINESS February 1965
Corporate tax accruals for fiscal1966 are projected in the budget to be$% billion above fiscal 1965. Corpo-rate profits before taxes are estimatedto rise $4 billion in calendar 1965 orabout two-thirds of the 1963-1964increase. The tax estimate takes intoaccount the $1 billion reduction inaccruals which is expected to resultfrom dropping the top corporate ratefrom 50 percent to 48 percent onJanuary 1, 1965.
Excise tax cut proposal
The major change in Federal taxpolicy in fiscal 1966 is the proposal tocut excise tax liabilities $1% billioneffective in July. The budget did notspecify the particular manufacturers'
or retail excises to be reduced. Thelist of goods on which the excises maybe cut or eliminated will very likelynot be announced until shortly beforethe proposed legislation is ready forCongressional consideration, in orderto avoid anticipatory drops in thesales of taxed items. The budgetalso calls for increases or extensions oftaxes or user charges for airlines andthe inland waterways. Excise taxesare discussed in a separate section inthis issue of the SURVEY.
Indirect business tax accruals in thenational income accounts budget areexpected to drop only $% billion fromthe fiscal 1965 level. This is less thanthe proposed excise tax cut becauserising activity will boost the yield from
Table 3.—Relation of Federal Government Receipts and Expenditures in the NationalIncome Accounts to the Budget
(Fiscal years, billions of dollars)
RECEIPTS:
Budget receipts
Less: Intragovernmental transactions • _ _ • • • _ _ _ _ _ _ _Receipts from exercise of monetary authority _ _ __
Plus: Trust fund receipts.- _ _ __
Equals: Federal receipts from the public (consolidated cash receipts) __ _ _
Adjustments for agency coverage:Less: District o f Columbia revenues _ _ _ _ _ _ _ _ _ _
Adjustments for netting and consolidation:Plus: Contributions to Federal employees' retirement funds, e tc __ _ _ _Less: Interest, dividends, and other earnings _ _ .
Adjustments for timing:Plus: Excess of corporate tax accruals over collections; personal taxes, social insurance contri-
butions, etc _ _
Adjustments for capital transactions: *Less' Realization upon loans and investments, sale of government property, etc
Equals : Receipts — national income accounts
EXPENDITURES:
Budget expenditures
Less: Intragovernmental transactions - - _Accrued interest and other non-cash expenditures (net) _ _ _ _ __ __
Plus: Trust fund expenditures (including Government-sponsored enterprise expenditures net).
Equals: Federal payments to the public (consolidated cash expenditures) _ _ __
Adjustments for agency coverage:Less: District of Columbia expenditures -
Adjustments for netting and consolidation:Plus: Contributions to Federal employees' retirement funds, etcLess: Interest received and proceeds of government sales _ _
Adjustments for timing:Plus: Excess of interest accruals over payments on savings bonds and Treasury bills-
Excess of deliveries over expenditures and miscellaneous items 2. _ _ _ _ _ _ _ _ _ ___Tjfiss; Commodity Credit Corporation foreign curreTiny p.x(Vha,ngp.s
Adjustments for capital transactions: *Less: Loans — FNMA secondary market mortgage purchases, redemption of IMF notes, etc__
Purchase of land and existing assets
Equals: Expenditures — national income accounts _ _
1964actual
89.5
4.2.1
30.3
115.5
,3
2.01.4
-.7
.6
114.7
97.7
4.22.0
28.9
120.3
.3
2.01.4
.91.5.6
3.4.5
118.5
1965 1966
Estimate
91.2
4.2.1
30.5
117.4
•3
2.11.9
-.9
.4
116.0
97.5
4.2.9
29.0
121.4
.4
2.11.9
.81.7.8
1.4.5
121.0
94.4
4.4.1
33.6
123.5
.3
2.22.1
-1.8
.5
121.0
99.7
4.4.8
32.9
127. 4
.4
2.22.1
.61.2
' .7
.7
.5
127.0
1. Consist of transactions in financial assets and liabilities, land and secondhand assets. Acquisition of newly producedtangible assets are included in expenditures for goods and services as defined in the national income and product accounts.
2. Includes increase in clearing account.
Sources: "The Budget of the United States for the fiscal year ending June 30,1966," and U.S. Department of Commerce,Office of Business Economics.
these taxes as well as from customsduties and because of the proposedincreases in highway and other usertaxes.
Increase in social insurance taxes
Increased contributions for socialinsurance account for $3 billion or morethan half of the total increase inrevenues under the NIA budget.Higher Social Security rates, coupledwith a proposed expansion in the wagebase—both slated to go into effectJanuary 1, 1966—are responsible formost of the rise. Higher unemploy-ment insurance rates are also likely iflegislation proposed in the budgetis implemented.
The budget calls for an increase inthe taxable income base for the old-age, survivors, and disability insuranceprograms from $4,800 to $5,600. Italso proposes to increase the payroll taxfrom the current 7.25 percent (half onemployees and half on employers) to8.5 percent, instead of the 8.25 per centnow scheduled by existing law. Ofthe proposed 1.25 percentage pointincrease, almost half (0.6 percent) willbe allocated to the proposed newhospital insurance program. The higherunemployment tax rate provides forimprovements in the Federal-State em-ployment security system, includingextended coverage, strengthened financ-ing and a longer period of eligibilityfor unemployment benefits for workerspermanently attached to the laborforce.
Fiscal 1966 ExpendituresNIA budget expenditures will in-
crease more rapidly than receipts infiscal 1966, rising about $6 billion overthe preceding year.
National defense purchases, followingthe $% billion decline expected infiscal 1965, should level off in fiscal1966 at about $55% billion. Smallincreases for Department of Defenseand National Aeronautics and SpaceAdministration (NASA) are expectedto be partially offset by a slightreduction for the Atomic Energy Com-mission.
Although Defense Department out-lays show little change from fiscal1965, further improvements in militarystrength and the development of new
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February 1965 SURVEY OF CURRENT BUSINESS 11
weapons are called for in the budget.For example, increased funds are rec-ommended for the development of theNike-X anti-missile system and amore powerful submarine-launchedballistic missile.
On the other hand, the 1961-64buildup in military strength is nowlargely completed and older missilesand bombers will be phased out infiscal 1966. The general level of de-fense spending has been markedlyaffected by savings under the Depart-ment's cost reduction program; infiscal 1964 these economies are estima-ted by the Defense Department to havebeen about $2% billion. Additionalsavings—such as from the reduction,consolidation and discontinuance of 95military installations—are expected ul-timately to raise this total to about $5billion per year.
For the first time in several years thebudget does not ask for authority toincrease the size of strategic forces.Although replacement will continue,the emphasis now appears to be on up-grading current forces for accuracy,striking power, and invulnerability toattack, rather than on increasing the
Change in Federal GovernmentReceipts *
Billion $ Change-4 0 4
* National Income Accounts basis
U.S. Department of Commerce, Office of Business Economics
currently planned number of missiles,bombers, or Polaris submarines.
Table 4 shows the breakdown of ad-ministrative budget expenditures pro-grammed for the Department ofDefense. The stability of militarypersonnel and operation and mainte-nance costs reflects the virtually un-changed number of persons on activeduty. Purchases of equipment are alsostable, with a decline in missile pro-curement offset by increases in weapons,equipment and ammunition for generalpurpose forces. Kesearch and develop-ment expenditures are off slightly sincean increasing number of weapons sys-tems have passed the full-scale develop-ment stage, and in fiscal 1966 emphasisis being placed on improving thesesystems. Funds are also included forthe manned orbiting laboratory pro-gram. Outlays for military construc-tion and military assistance are sched-uled to decrease slightly while familyhousing and civil defense programs re-main at fiscal 1965 levels.
Small rise in space outlays
The proposed $200 million increase forNASA may be compared with an averageannual rise of over $1 billion since fiscal1962, and is the smallest since the programwas fully underway. Total NASAexpenditures are expected to exceed$5 billion in fiscal 1966. New obli-gational authority requested, an indi-cator of future spending, is virtuallythe same amount as enacted for fiscal1965.
Programs for manned space flightaccount for about two-thirds of theNASA budget. Flights of the two-man Gemini spacecraft will be con-ducted in fiscal 1966 as well as extensivetesting of a more powerful Saturnlaunch vehicle and the Apollo space-craft. The only major new projectto be initiated in fiscal 1966 is theVoyager, an unmanned vehicle thatwould land an automated capsule onMars to search for life.
Outlays for atomic energy programsare down close to $0.2 billion from thepreceding year. Reduced procurementof uranium, as well as fewer construc-tion projects and less procurement ofequipment, are the major reasons forthe decline.
Nondefense purchases are estimatedat $12% billion, up $% billion fromfiscal 1965. The moderate increase isdue largely to somewhat higher payrollsand reflects a contingency allowancefor a pay raise for civilian employeesand a small rise in the number of non-defense employees to staff new pro-grams. Although a request for furthersalary adjustment will await a reporton the comparability of Federal payrates with those of industry, allowancehas been made in the budget for civilianand military pay increases. About$J4 billion of the nondefense rise isattributed to an increase in CommodityCredit Corporation inventories.
Other expenditures rise
Although purchases of goods and serv-ices are directly part of final demand,other government expenditures whichare (excluded from the GNP—transfers,interest, grants-in-aid and subsidies—affect income and influence personalconsumption, business investment andState and local purchases. Betweenfiscal 1965 and 1966 these expendituresare expected to increase over $5 billion.
Transfer payments to persons are
Changes in Federal GovernmentExpenditures
* National Income Accounts basis
U.S. Department of Commerce, Office of Business Economics
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12 SUEVEY OF CURRENT BUSINESS February 1965
estimated to account for 60 percent orover $3Ji billion of this increase. Thisestimate does not include any allow-ance for medicare benefits, which arenot called for in fiscal 1966. Thisincrease—the largest since fiscal 1961—is due principally to a rise of nearly$2% billion in Social Security benefits.Along with the normal increase of over$% billion expected under present pro-grams, pending legislation is designedto increase cash benefits by 7 percent.Under this proposal, benefit paymentsin fiscal 1966 are up $2 billion, of which
Federal Grants-in-Aid to State andLocal Governments*
15
TOTAL
Highways
Public Assistance
Other
* National Income Accounts basis
U.S. Department of Commerce; Office of Business Economics
close to $% billion represent paymentsretroactive to January 1, 1965. Civilservice retirement pay is estimated tobe up about $0.2 billion. Veterans'pensions, research and developmenttransfers and railroad retirement pay-ments are expected to remain stable.
Grants-in-aid to State and local gov-ernments are scheduled to increase byover $2 billion, or more than twice asmuch as the rise from fiscal 1964 tofiscal 1965. New or expanded pro-grams for educational assistance and anexpansion of the war on poverty pro-gram account for about two-thirdsof the rise. Proposals to give financialassistance to public schools servingchildren of low income families, toassist in the purchase of books for bothpublic and private school children andto provide other aids to elementary andsecondary schools account for $% billionof the increase. Other educationgrants, under legislation enacted lastyear for higher education, libraries,vocational education, etc. will rise over$% billion. Grants channeled throughthe Office of Economic Opportunity forthe war on poverty are estimated to beup $% billion. Several other projectsconnected with the anti-poverty pro-gram, but administered outside theOEO are also expected to show in-creases. During fiscal 1966, accordingto the budget, an estimated 600,000persons will be enrolled in work, edu-cation and training programs financedunder the Economic Opportunity Act.In addition, several million individuals,mainly young people, will be directlyassisted by community action organi-zations opeiating throughout thecountry.
Among other grant-in-aid programs,public assistance is up $% billion, re-flecting higher case loads and new legis-lation providing for assistance to needyelderly patients in mental and tubercu-
losis hospitals and for health care ofchildren from indigent families. Thefirst full year of the program to developAppalachia is also expected to raisegrants. Federal aid to highway con-struction is estimated to be off about$% billion from an unusually high fiscal1965 expenditure level, attributable toacceleration of construction in Stateswhere programs have been lagging.
Subsidies (less the current surplus ofgovernment enterprises) are expectedto decline more than $% billion belowthe fiscal 1965 level, due in part to achange in the timing of feed grainacreage diversion payments. Lowerprice support levels for cotton, rice andfeed grains are also called for in thebudget. The postal deficit is expectedto remain stable. Other NIA budgetcategories such as net interest paid andforeign transfer payments are estimatedto be only slightly higher in fiscal 1966.
Table 4.—Defense Department BudgetaryExpenditures, Military Functions andMilitary Assistance, Fiscal Years 1964-1966
(Billion dollars)
Total
Military personnel „
Operation and maintenance-
ProcurementAircraft.MissilesShipsOrdnance vehicles, etcElectronics & communi-
cations _ _ _ _ _Other
Research, development, test,and evaluation
Construction, military
Family housing
Civil defense
Military assistance _ _ _
Revolving & managementfunds
1964actual
51.2
14.2
11.9
15.46.13.62.11.6
1.3.8
7.0
1.0
.6
.1
1.5
-.5
1965estimate
49.3
14.8
12.2
13.35.52.61.81.4
1.1.8
6.7
1.0
.6
.1
1.2
-.7
1966estimate
49.0
14.8
12.2
13.25.52.31.91.6
.9
.9
6.4
.9
.7
.1
1.1
-.4
Source: "The Budget of the United States for Fiscal YearEnding June 30, 1966" and U.S. Department of Defense.
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