Part 28

I warn the Congress and the Nation tonight that this failure to act on the tax bill will sweep us into an accelerating spiral of price increases, a slump in homebuilding, and a continuing erosion of the American dollar.

This would be a tragedy for every American family. And I predict that if this happens, they will all let us know about it.

We--those of us in the executive branch, in the Congress, and the leaders of labor and business--must do everything we can to prevent that kind of misfortune.

Under the new budget, the expenditures for 1969 will increase by $10.4 billion. Receipts will increase by $22.3 billion including the added tax revenues. Virtually all of this expenditure increase represents the mandatory cost of our defense efforts, $3 billion; increased interest, almost $1 billion; or mandatory payments under laws passed by Congress--such as those provided in the Social Security Act that you passed in 1967, and to Medicare and Medicaid beneficiaries, veterans, and farmers, of about $4 1/2 billion; and the additional $1 billion 600 million next year for the pay increases that you passed in military and civilian pay. That makes up the $10 billion that is added to the budget. With few exceptions, very few, we are holding the fiscal 1969 budget to last year's level, outside of those mandatory and required increases.

A Presidential commission composed of distinguished congressional fiscal leaders and other prominent Americans recommended this year that we adopt a new budget approach. I am carrying out their recommendations in this year's budget. This budget, therefore, for the first time accurately covers all Federal expenditures and all Federal receipts, including for the first time in one budget $47 billion from the social security, Medicare, highway, and other trust funds.

The fiscal 1969 budget has expenditures of approximately $186 billion, with total estimated revenues, including the tax bill, of about $178 billion.

If the Congress enacts the tax increase, we will reduce the budget deficit by some $12 billion. The war in Vietnam is costing us about $25 billion and we are asking for about $12 billion in taxes--and if we get that $12 billion tax bill we will reduce the deficit from about $20 billion in 1968 to about $8 billion in 1969.

Now, this is a tight budget. It follows the reduction that I made in cooperation with the Congress--a reduction made after you had reviewed every appropriations bill and reduced the appropriations by some $5 or $6 billion and expenditures by $1.5 billion. We conferred together and I recommended to the Congress and you subsequently approved taking 2 percent from payrolls and 10 percent from controllable expenditures. We therefore reduced appropriations almost $10 billion last session and expenditures over $4 billion. Now, that was in the budget last year.

I ask the Congress to recognize that there are certain selected programs that meet the Nation's most urgent needs and they have increased. We have insisted that decreases in very desirable but less urgent programs be made before we would approve any increases. So I ask the Congress tonight:

--to hold its appropriations to the budget requests, and

--to act responsibly early this year by enacting the tax surcharge which for the average American individual amounts to about a penny out of each dollar's income.

This tax increase would yield about half of the $23 billion per year that we returned to the people in the tax reduction bills of 1964 and 1965.

This must be a temporary measure, which expires in less than 2 years. Congress can repeal it sooner if the need has passed. But Congress can never repeal inflation.

The leaders of American business and the leaders of American labor--those who really have power over wages and prices--must act responsibly, and in their Nation's interest by keeping increases in line with productivity. If our recognized leaders do not do this, they and those for whom they speak and all of us are going to suffer very serious consequences.

On January 1st, I outlined a program to reduce our balance of payments deficit sharply this year. We will ask the Congress to help carry out those parts of the program which require legislation. We must restore equilibrium to our balance of payments.

We must also strengthen the international monetary system. We have assured the world that America's full gold stock stands behind our commitment to maintain the price of gold at $35 an ounce. We must back this commitment by legislating now to free our gold reserves.

Americans, traveling more than any other people in history, took $4 billion out of their country last year in travel costs. We must try to reduce the travel deficit that we have of more than $2 billion. We are hoping that we can reduce it by $500 million--without unduly penalizing the travel of teachers, students, business people who have essential and necessary travel, or people who have relatives abroad whom they want to see. Even with this reduction of $500 million, the American people will still be traveling more overseas than they did in 1967, 1966, or 1965 or any other year in their history.

If we act together as I hope we can, I believe we can continue our economic expansion which has already broken all past records. And I hope that we can continue that expansion in the days ahead.

Each of these questions I have discussed with you tonight is a question of policy for our people. Therefore, each of them should be--and doubtless will be--debated by candidates for public office this year.

I hope those debates will be marked by new proposals and by a seriousness that matches the gravity of the questions themselves.

These are not appropriate subjects for narrow partisan oratory. They go to the heart of what we Americans are all about--all of us, Democrats and Republicans.

Tonight I have spoken of some of the goals I should like to see America reach. Many of them can be achieved this year--others by the time we celebrate our Nation's 200th birthday--the bicentennial of our independence.

Several of these goals are going to be very hard to reach. But the State of our Union will be much stronger 8 years from now on our 200th birthday if we resolve to reach these goals now. They are more important--much more important--than the identity of the party or the President who will then be in office.

These goals are what the fighting and our alliances are really meant to protect.

Can we achieve these goals?

Of course we can--if we will.

If ever there was a people who sought more than mere abundance, it is our people.

If ever there was a nation that was capable of solving its problems, it is this Nation.