State of the Union | Page 4

belong to the State and local
governments--recruiting, training, and organizing volunteers to meet
any emergency. The immediate job of the Federal Government is to
provide leadership, to supply technical guidance, and to continue to
strengthen its civil defense stockpile of medical, engineering, and
related supplies and equipment. This work must go forward without lag.
V.
I have referred to the inescapable need for economic health and
strength if we are to maintain adequate military power and exert
influential leadership for peace in the world.
Our immediate task is to chart a fiscal and economic policy that can:
(1) Reduce the planned deficits and then balance the budget, which
means, among other things, reducing Federal expenditures to the safe
minimum;
(2) Meet the huge costs of our defense;
(3) Properly handle the burden of our inheritance of debt and
obligations;
(4) Check the menace of inflation;
(5) Work toward the earliest possible reduction of the tax burden;
(6) Make constructive plans to encourage the initiative of our citizens.
It is important that all of us understand that this administration does not
and cannot begin its task with a clean slate. Much already has been
written on the record, beyond our power quickly to erase or to amend.
This record includes our inherited burden of indebtedness and
obligations and deficits.
The current year's budget, as you know, carries a 5.9 billion dollar

deficit; and the budget, which was presented to you before this
administration took office, indicates a budgetary deficit of 9.9 billion
for the fiscal year ending June 30, 1954. The national debt is now more
than 265 billion dollars. In addition, the accumulated obligational
authority of the Federal Government for future payment totals over 80
billion dollars. Even this amount is exclusive of large contingent
liabilities, so numerous and extensive as to be almost beyond
description.
The bills for the payment of nearly all of the 80 billion dollars of
obligations will be presented during the next 4 years. These bills, added
to the current costs of government we must meet, make a formidable
burden.
The present authorized Government-debt limit is 275 billion dollars.
The forecast presented by the outgoing administration with the fiscal
year 1954 budget indicates that--before the end of the fiscal year and at
the peak of demand for payments during the year--the total
Government debt may approach and even exceed that limit. Unless
budgeted deficits are checked, the momentum of past programs will
force an increase of the statutory debt limit.
Permit me this one understatement: to meet and to correct this situation
will not be easy.
Permit me this one assurance: every department head and I are
determined to do everything we can to resolve it.
The first order of business is the elimination of the annual deficit. This
cannot be achieved merely by exhortation. It demands the concerted
action of all those in responsible positions in the Government and the
earnest cooperation of the Congress.
Already, we have begun an examination of the appropriations and
expenditures of all departments in an effort to find significant items
that may be decreased or canceled without damage to our essential
requirements.
Getting control of the budget requires also that State and local
governments and interested groups of citizens restrain themselves in
their demands upon the Congress that the Federal Treasury spend more
and more money for all types of projects.
A balanced budget is an essential first measure in checking further
depreciation in the buying power of the dollar. This is one of the

critical steps to be taken to bring an end to planned inflation. Our
purpose is to manage the Government's finances so as to help and not
hinder each family in balancing its own budget.
Reduction of taxes will be justified only as we show we can succeed in
bringing the budget under control. As the budget is balanced and
inflation checked, the tax burden that today stifles initiative can and
must be eased.
Until we can determine the extent to which expenditures can be
reduced, it would not be wise to reduce our revenues.
Meanwhile, the tax structure as a whole demands review. The Secretary
of the Treasury is undertaking this study immediately. We must
develop a system of taxation which will impose the least possible
obstacle to the dynamic growth of the country. This includes
particularly real opportunity for the growth of small businesses. Many
readjustments in existing taxes will be necessary to serve these
objectives and also to remove existing inequities. Clarification and
simplification in the tax laws as well as the regulations will be
undertaken.
In the entire area of fiscal policy--which must, in its various aspects, be
treated in recommendations to the Congress in coming weeks--there
can now be stated certain basic facts and principles.
First. It is axiomatic that our