Now let me say further, the President does not have to sign these bills. I am a little bit tired of the rhetoric that indicates that Congress is solely responsible for the size of the budget, particularly when it comes to private bills, such as the kind a contractor might be able to get through. Not only is the President not forced to sign these bills, which he usually does, he doesn't have to create the atmosphere among the people which creates a demand for these kinds of bills, and then come along and say, when Congress responds as it frequently does to the demands of the Executive, that the blame is on Congress. But I do feel this area is one that we have all got to study, including the President and the Congress. I might say one other thing on specifics. I am getting a bill ready, I think I am, at any rate, which I have had in mind for some time but for which I couldn't get the support. Now I think I have got considerable support to cut out about $2 billion in the support programs in agriculture, which has a carryover into the foreign area because of Public Law 480. Maybe we can do something here. But I just love to get into this business because people ask me where can we cut, and believe me, I think in most instances we can cut and improve the programs, because we are flooding the carburetor. Now let me pose a line of questioning that I don't expect to develop here. In fact, I think probably our Subcommittee on Economic Statistics will want to pursue it, but I want to mention it to you, Mr. Schultze, now that I have a chance. In the national income accounts, of course, the difference between that budget and the administrative budget and the cash budget to a large degree is that we do not include what would be called "investments" in the NIA; am I not correct on that? Mr. SCHULTZE. No, sir. Representative CURTIS. All right. Mr. SCHULTZE. The only item of investments which we exclude from the NIA is the net lending of the Federal Government. Representative CURTIS. That is what I am talking about. Mr. SCHULTZE. It is financial investment. You mean financial investment. Representative CURTIS. Yes, financial. That is what I meant by the term "investment." I didn't mean capital. I would have said capital investment. Mr. SCHULTZE. For financial investments the amount for 1968 in the administrative budget nets out to about a minus $300 million; in cash budget terms it is $1.6 billion. Representative CURTIS. It hinges over the definition of what is to be considered an investment, and this leads to the line of development which I hope we will do in the Economic Statistics Subcommittee. For instance, when we put in these 40-year development loan funds, and I think they are excluded, are they not, from the NIA? Aren't they excluded? Mr. SCHULTZE. They may be, but let me check. Yes, they are excluded as lending. Representative CURTIS. Well, these are the kind of things, and CCC. Mr. SCHULTZE. No, CCC we put in. Most CCC commodity loans are in the NIA. Representative CURTIS. You put them in. Mr. SCHULTZE. Because such a large proportion of these loans end up as purchases of the commodity, the transaction is treated as purchases when the loan is issued rather than when it is defaulted. Representative CURTIS. Now the other thing, and this is again just to develop the question, we will put in 2-percent paper and 3-percent paper and so forth. These are "hybrid" kinds of things I would say, because they aren't really marketable securities. Therefore, there is really a charge against the Treasury in the event that we seek to—well, in the long run Mr. SCHULTZE. That goes in. Representative CURTIS. Do you put it in? I thought you didn't. Mr. SCHULTZE. Let me make sure of that. The interest subsidy gets in because it is in the interest figure, but the loan or repayment is excluded. Representative CURTIS. Well, this is the area that I need to become educated in myself, to relate what is in and what isn't. And it would revolve around, would it not, what we consider an investment? I guess the test we are applying is against the market on what is an investment? Mr. SCHULTZE. No, sir. Well, what we are really doing is developing a consistent set of accounts for business, consumer, and Government, and adding them up in terms of expenditures and receipts to get total national income and receipts. Now in doing that, we put in the spending of the Federal Government, but not its lending. Any expenditures that come from lending go into the sector which does the actual purchasing. So it is not a matter of whether it is an investment or not, so much as whether it is a financial transaction. Representative CURTIS. Let me use the word "lending." Mr. SCHULTZE. Right. Representative CURTIS. Then we come to a definition of what is a real loan. Mr. SCHULTZE. Yes. Representative CURTIS. I regard these development loan fund loans as stretching the term "loan," but this is the area I would like to discuss, because then probably the thing revolves around the term what is "lending." Mr. SCHULTZE. I agree. Representative CURTIS. Is it really "lending" or "giving"? Mr. SCHULTZE. You are quite correct, Mr. Curtis. I think what we really need are two things. First of all, we need the recognition that really no one budget concept serves for all purposes. Representative CURTIS. I am highly in accord with the NIA budget, and think it is great. My only criticism at the beginning was that the crucial problems that face the Congress this year and faced it last. year on fiscal policies had to do with the deficits in the administrative budget. And I just don't want the public's attention or the Congress distracted from the deficits in the administrative budget. I was afraid the rhetoric of the administration, in their new-found enthusiasm for the national income account budget, was doing that. I share the enthusiasm for the NIA budget. Mr. SCHULTZE. Aside from taking exception to the word "rhetoric" I guess I will stay quiet. Representative CURTIS. That is a perfectly Mr. SCHULTZE. It is a good Greek word. Representative CURTIS. Now, it is a neutral word, isn't it? You can have good rhetoric and bad rhetoric. Mr. SCHULTZE. With that emendation, fine. Chairman PROXMIRE. And with that emendation we bring to a close this hearing. I want to commend you, Director Schultze, for a wonderful performance. You have been before the Ways and Means Committee for many hours, day after day. You have been before us for 3 hours this morning. We have disagreed with you on many things. You have kept your temper extremely well, and you have been very alert throughout this, and have been very, very helpful. Thank you very much. Mr. SCHULTZE. Thank you, sir. Chairman PROXMIRE. We will reconvene on Monday morning at 10 o'clock to hear the Secretary of the Treasury. (Whereupon, at 1:15 p.m., the committee adjourned until Monday, February 6, 1967, at 10 a.m.) THE 1967 ECONOMIC REPORT OF THE PRESIDENT MONDAY, FEBRUARY 6, 1967 CONGRESS OF THE UNITED STATES, The joint committee met at 10:05 a.m., pursuant to recess, in room S-228, the Capitol, Hon. William Proxmire (chairman of the joint committee) presiding. Present: Senators Proxmire, Talmadge, Symington, Jordan of Idaho, Miller, and Percy; and Representatives Reuss, Griffiths, Moorhead, Curtis, Widnall, and Brock. Also present: John R. Stark, executive director; James W. Knowles, director of research; Donald A. Webster, minority economist. Chairman PROXMIRE. The committee will come to order. Our witness this morning is the very able and distinguished Secretary of the Treasury, who is certainly right in the heart of economic policy in the administration. Mr. Fowler, you have submitted a very excellent statement. We would be delighted for you to go right ahead. STATEMENT OF HON. HENRY H. FOWLER, SECRETARY OF THE TREASURY, ACCOMPANIED BY JOSEPH W. BARR, UNDER SECRETARY; FREDERICK L. DEMING, UNDER SECRETARY FOR MONETARY AFFAIRS; STANLEY S. SURREY, ASSISTANT SECRETARY; AND ROBERT A. WALLACE, ASSISTANT SECRETARY Secretary FOWLER. Thank you Mr. Chairman and members of the Joint Economic Committee. I will go through my initial statement; then I would like to make a few comments and deal with an additional supplementary statement which has been prepared for inclusion in the record. We meet after a year of bumpy but successful economic transition. During this time, our fully employed economy has adjusted to the requirements of a rapidly expanding defense effort. From all present indications, the most difficult part of that adjustment now lies behind us. In the past 18 months, the economy had absorbed a $15 billion increase in national defense expenditures without resort to wartime controls, and this is no mean feat, gentlemen. I lived here through the war production board days, and World War II, and the Korean war days, then as Director of Defense Mobilization, and as Administrator of the Defense Production Administration, and it has been something of a marvel to me the way the private economy has responded in flexi |