THE U.S. BUDGET: 1956.: The Administration Is Betting on the Black

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THE U.S. Government is headed for more red ink in the current fiscal year—on the official estimates. Income will hit $62.1 billion, spending $63.8 billion, for an overall $1.7 billion deficit. But are the estimates correct? In Washington last week, the talk was that they were pessimistic, that next June 30 would see the first balanced budget in five years. If so, tax cuts might be in store for the U.S. As a result, a hot debate is bubbling up. Last week Virginia's Democratic Harry Byrd, chairman of the Senate Finance Committee, said flatly that he would fight a cut in taxes. But Democrats are not in agreement: Georgia's powerful, middle-reading Senator Walter F. George favors tax cuts for low-and middle-income groups if the U.S. swings into the black.

The prospects for a balanced budget depend on two all-important assumptions : a continued cut in spending and a continued rise in revenues. Both are far from certain. One big problem is the high cost of national security, which makes up 61% of the budget. For the first three months of fiscal 1956, U.S. military spending alone was at a $36.1 billion annual rate, some $2.1 billion more than originally figured in the revised budget last August. The increased outlay for defense, however, is offset by sharp drops in other phases of the national security program. The military phases of the mutual security program for U.S. allies abroad are currently running some $1.2 billion below the $2.1 billion August estimate. Beyond that, the Atomic Energy Commission is spending less than its budget, while purchases for the national stockpile are considerably lower than forecast. Thus Administration economists think that overall spending for national security may hit the forecast of $38.7 billion on the nose, or even be down by as much as $1 billion.

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The big question mark in the budget is the farm-support program. In August, estimates were that $2.2 billion would be needed for price support, some $1.1 billion less than fiscal 1955, but $1.1 billion higher than originally estimated last January. But with bumper crops and declining farm prices, no one thinks that even the revised estimates are high enough. Falling hog prices, for example, forced the Administration into an $85 million buying program a week ago.

On the bright side of the budget ledger is the continuing rise in revenues. In August, when budget planners predicted a $1.7 billion deficit, the figures were based on Government income of $62.1 billion. But the forecast underestimated the growth of the U.S. business boom. The increase in personal income is expected to push personal income tax receipts from $32.8 billion to $33.2 billion. Furthermore, corporate profits are expected to run well over the estimate of $40.6 billion, may hit $43.5 billion by year's end. Additional tax revenue: $1.5 billion. Altogether, the Treasury's income from all sources may climb to $64 billion in fiscal 1956, nearly $2 billion more than expected. Thus, the budget would balance though expenditures dropped no lower than the $63.8 billion forecast in August.

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