THE BUDGET: The Test of Necessity

This budget carries out the policy of this Administration to move toward reduced taxes and reduced Government spending as rapidly as our national security and well-being will permit . . . Government must play a -vital role in maintaining economic growth and stability. But I believe that our development, since the early days of the Republic, has been based on the fact that we left a great share of our national income to be used by a provident people with a will to venture. Their actions have stimulated the American genius for creative initiative and thus multiplied our productivity.

—From President Eisenhower's Budget Message

In the first federal budget presented by a Republican Administration in 21 years. Dwight Eisenhower last week set a new tone and trend. He called for1) lower taxes, 2) less Government spending, 3) reduced appropriations for future years, 4) a smaller deficit, and 5) the transfer of some Federal Government activities to private enterprise and to local governments. It was, said the President, the kind of fiscal program that used "necessity—rather than mere desirability—as the test for our expenditures."

Both Budget Director Joseph Dodge and Treasury Secretary George Humphrey called press conferences to brief newsmen on the details. After tax reductions totaling almost $5 billion (as a result of rates already reduced and revisions proposed—see below), they estimated the Government's income for fiscal 1955 (beginning next July 1) at $62.7 billion. Sources of that income, in billions:

Individual income taxes $30.3 Corporation taxes 20.3 Excise taxes 10.2 All other 1.9

Against that income the Administration proposed expenditures of $65.6 billion, $5.3 billion less than the latest estimate of expenditures for this fiscal year, $8.4 billion less than the last fiscal year. The general classification, in billions:

National Security $44.9 (defense, military aid, atomic energy, etc.)

Fixed Charges 14.1 (interest on debt, pensions, etc.)

All Other 6.6 (most nondefense operations)

In the gap between income and expenditures, Dodge and Humphrey found themselves with a deficit of $2.9 billion. (Without the January 1 tax cuts, the Ad ministration, with the same expenditures, could have figured on a $2 billion surplus for the next fiscal year.) Even with the $5 billion loss in tax revenue, the Government's "cash budget" — the money it actually takes in, balanced against the money it pays out — will show a surplus of $115 million. Chief reason: payments to the Government for social security, not counted in the main budget,, exceed expenditures by about $2 billion.

Phenomenal Slice. Perhaps more im portant than the cut in expenditures is the budget's reduction in "new obligational authority," i.e., authority to make contracts (45% of the actual spending proposed in the 1955 budget will be from obligational authority granted in earlier years). The President asked for $56.3 billion of such authority, $4.4 billion less than the current year, $23.9 billion less than 1953's total and $35.1 billion below the Korean war peak in fiscal 1952.