State of the Union | Page 4

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 economy is a highly complex and sensitive mechanism. Hasty and ill-considered action of any kind could seriously upset the subtle equation that encompasses debts, obligations, expenditures, defense demands, deficits, taxes, and the general economic health of the Nation. Our goals can be clear, our start toward them can be immediate--but action must be gradual.
Second. It is clear that too great a part of the national debt comes due in too short a time. The Department of the Treasury will undertake at suitable times a program of extending part