1967: United States

Presented below are articles on Congress, politics, the budget, social welfare, the Supreme Court, foreign relations, and national defense.

Congress

The first session of the 90th Congress was a paradox: Rarely had a Congress met for so long and produced so little. This Congress was in session for 340 days. It was the fifth longest session since World War II, but by the time it was over on December 15 President Johnson—accustomed to congressional successes—was an unhappy man. He accused the Republicans in the House of lining up 'like wooden soldiers of the status quo,' saying 'yes' only when they could drown a 'good bill' in a 'wave of Republican reaction.' He said they rode the 'old Republican buggy' that 'can go only one way and that is backwards, downhill.'

The Republicans had their own view. The House minority leader, Representative Gerald R. Ford (R, Mich.), replied: 'The Great Society of Lyndon Johnson has become a runaway locomotive with a wild-eyed engineer at the throttle.' He said his party had contributed to a 'remarkable record of achievement and progress.'

To many observers the session appeared to be erratic and sometimes contradictory. Congress was again frustrated over the war in Vietnam, yet it provided all the money requested for it. Upset over rioting in the nation's ghettos, it kept legislation aimed at the causes of riots to a minimum. Worried about the state of the economy, it refused to yield on the president's request for a 10 percent tax increase to reduce the deficit and to help stem inflationary pressures.

The president was particularly upset over the failure of Congress to act on the tax increase aimed at raising an estimated $7.4 billion in additional revenue. With war spending pushing the deficit to a record of about $30 billion, the president argued that the country was facing serious inflation unless the tax bill cleared Congress. But one of his fellow Democrats balked. Representative Wilbur D. Mills (D, Ark.), chairman of the Ways and Means Committee, said he was not convinced of the threat of inflation and argued for spending cuts instead of a tax increase.

Congress handled some of the spending cuts itself. It cut about $6 billion from the president's budget and then forced an additional $3 billion slash as the price for even considering the tax increase. It gave the president his model cities bill for urban rehabilitation but reduced the appropriation by half, to $312 million. The president asked for $40 million for rent supplements to provide better housing for low-income families, but he got only $10 million. Foreign aid requests were reduced to $2.3 billion, the smallest appropriation in the 20 year history of the program and almost $1 billion less than the sum requested by the president.

At one point, in an effort to cut spending, the House rushed through a bill that just about put half the government out of business. This was eventually remedied and the salaries of federal employees were paid, but the point was made.

Apart from the reductions in funds for social programs sought by the president, Congress showed it had a mind of its own on other issues. It took no action on anticrime legislation, including a proposed gun control law; ignored civil rights legislation, including an open-housing bill, and decided to postpone action on some major consumer legislation, an East-West trade bill, and a measure to enable low-income families to purchase their own homes.

On the plus side, Congress passed a bill to raise Social Security benefits and approved the restoration of the 7 percent investment tax credit (suspended last year), a new air pollution control bill, the establishment of a public television corporation, a $40 million rat extermination program, and a general pay increase for federal employees. Funds were approved for the extension of the Teacher Corps and the Appalachian Regional Development Program. Congress also increased postal rates, raising first-class mail from 5 to 6 cents, domestic airmail from 8 to 10 cents, and postcards from 4 to 5 cents.

Presidential victory also came in the Senate's ratification of the outer space treaty governing the exploration and use of space and prohibiting the orbiting of nuclear weapons. The Senate also consented to the ratification of a United States—Soviet Union consular treaty. The treaty—the first bilateral pact ever negotiated between the two countries—won Senate ratification by a vote of 66 to 28, or a 3 vote margin over the two-thirds majority required. The treaty outlined procedures for operating consulates in each country and for providing each with quick access to citizens arrested and detained by the other country. It had been pending since it was signed in 1964, and the president saw it as a symbol of his efforts to improve relations with the Soviet Union.

The president's difficulties in 1967 stemmed in part from the virtual stalemate in the House resulting from the Republican gain of 47 seats in the 1966 congressional elections. The handwriting was on the wall at the beginning of the Congress. The Democratic House majority had been cut to 248 to 187, and it was clear the old coalition of Republican conservatives and Southern Democrats might well be revived in 1967 to stymie much of the president's program. The House Democratic leadership, led by the elderly John W. McCormack (D, Mass.), lacked the vigor to counter the trend, and before the session ended one leading Democrat, Representative Richard Bolling (D, Mo.), had called on McCormack to resign his post as speaker before the beginning of the 91st Congress in 1969.

The conservative coalition scored victories over Northern Democrats and liberal Republicans at least three dozen times in key votes. The coalition was less effective in the Senate, where the Democrats had lost only three seats in 1966 and had a comfortable 64 to 36 edge. But the Senate was less than fast-moving. It spent six weeks, for example, debating a legislative reorganization bill that never passed the House, and it spent another five weeks arguing about the financing of presidential election campaigns.

The upshot of the debate over campaign financing was inconclusive. The Senate merely voted to make its 1966 law on raising funds for presidential election campaigns inoperative. The act would have provided up to $30 million to the 1968 campaigns of both major political parties through voluntary taxpayer checkoffs on income tax returns. But in 1967 Congress decided in effect to hold up any distribution of the funds until it could get around to providing some written guidelines.

Congress also found time to debate the question of its own ethics, but it came to no conclusions about a new code of congressional behavior. Both the Senate and the House assigned committees to write ethics codes following the reprimanding of two members—Senator Thomas Dodd (D, Conn.) and Representative Adam Clayton Powell (D, N.Y.). Senator Dodd was formally censured by the Senate. Representative Powell was denied his seat won in the 1966 election. Both men had been accused of misusing public funds.

Foreign Affairs.

Congressional frustration was particularly evident in the area of foreign affairs. The war in Vietnam dragged on, the president requested more money to fight it, the letters from constituents continued to flow in, and the 'doves' in Congress showed some signs of winning converts. One new peace advocate, for example, was Senator Thruston B. Morton (R, Ky.). There were more harsh words from Senator J. William Fulbright (D, Ark.), chairman of the Senate Foreign Relations Committee.

Senator Fulbright won his committee's approval for a resolution which stated that it was the sense of the Senate that the president should not commit U.S. armed forces to hostilities in foreign countries without prior 'affirmative action' by Congress. The objective was to bring to an end the practice, begun by the Eisenhower administration and continued by the Johnson administration in the 1964 Gulf of Tonkin resolution, of seeking broadly and vaguely phrased congressional resolutions to endorse commitments that are subsequently defined more specifically by the administration. The senators who voted in the committee for the resolution undoubtedly had future Vietnams in mind. But the issue that provoked the resolution was a seemingly minor action, the dispatch by the government of three C-130 transports to aid the Congo government. To Senator Richard B. Russell (D, Ga.), a conservative internationalist and a 'hawk' on Vietnam, this move was representative of executive branch actions in overcommitting the United States throughout the world. He telephoned Senator Fulbright about his concern, and the 'commitments resolution' was later unanimously approved by the Foreign Relations Committee.

The congressional doves scored some additional points. The president early in the session asked for a $12.3 billion supplemental defense money bill for the war. Congress gave him the funds but added a statement to the bill declaring congressional support for efforts to prevent escalation of the war and to bring the conflict to an honorable conclusion. It also added words of support for the U.S. troops in Vietnam.

At the end of November the Senate adopted a new resolution urging the president to seek United Nations Security Council action on the Vietnam question. This resolution had the support of the administration, but neither the White House nor the resolution's sponsors entertained any real hopes that the UN could bring about an end to the war. But the resolution was illustrative of the point Congress was trying to make—that it wants more of a voice in the formulation of U.S. foreign policy.

The war in Vietnam was a major reason why the administration failed to win approval of its proposal to expand trade relations with Eastern Europe and the Soviet Union. Hearings were scheduled on the East-West trade bill but were never held. The general congressional feeling was against any expansion of trade with the Communist bloc until it changed its policies toward the Vietnam war. Congress, in fact, wanted to go the other way and to impose restrictions on existing trade with relatively friendly Communist countries. At one point the House called for an end to all U.S. assistance to countries that trade with North Vietnam. The administration said this would mean closing U.S. military bases in Britain and other countries. The amendment was dropped.

In its policy-making mood Congress also imposed restrictions on the sale of arms, particularly to the underdeveloped countries. Critics had claimed that U.S. policies had stimulated arms races between countries that could not afford them.

Domestic Affairs.

Congress showed little inclination to do much about the problems of the cities, partly because of a feeling among some members that approval of new federal aid to urban areas would be 'rewarding' the ghetto rioters of the summer. This feeling, coupled with the belief that the United States could not afford big spending both at home and abroad, dampened prospects for innovative domestic programs.

There was little interest in the civil rights legislation proposed by the president in 1967. He renewed his suggestions for a fair housing law, a ban against discrimination in jury selection, and provisions for the protection of civil rights workers—proposals that had died in the previous session. Only a proposal to extend the life of the Civil Rights Commission was approved.

One bill related to the civil rights struggle did make some progress, but it was not one sought by the White House. The House approved legislation to make it a federal offense to cross state lines to incite a riot. The bill did not get out of the Senate Judiciary Committee, however.

A major victory for the administration on the domestic side was congressional approval of the Air Quality Act of 1967. This law, substantially increasing federal responsibilities for pollution control in states where such control is found to be lagging, authorized $428 million for pollution control efforts in the next three years. However, the White House failed to persuade Congress to include authority to allow it to set national emission standards for the smokestacks of major industries.

The fate of two major pieces of domestic legislation—the bill extending the War on Poverty and the Social Security bill—was not clear until the final days of the session.

Congress provided $1.77 billion to fund the antipoverty program, some $300 million less than the amount requested by the president. But more important than the reduction in funds was the shift ordered by Congress in the operation of the Community Action Programs. It voted that money for all such programs should be channeled through and controlled by public officials. At present more than 80 percent of the community action agencies are run by private, nonprofit organizations. An even more drastic change in the poverty program was averted: The administration pulled out all stops and managed to defeat Republican attempts to dismantle the Office of Economic Opportunity and to place its functions under other federal agencies.

The Social Security bill, approved on the final day of the session, provided for an increase in pension checks of 13 percent for 24 million persons. The minimum monthly payment was increased from $44 to $55 as against $70 proposed by the administration. The bill also means that 75 million Americans who pay Social Security taxes will have more withheld from their pay in the future. The bill, in addition, makes important changes in the welfare laws. It contains tight new controls on aid to dependent children, controls aimed at forcing adults who receive such aid to find employment. Liberals served notice that they would fight next year to remove the new provisions because they put an unfair burden on the poor.

Final action on another major piece of social legislation—school aid—also came in the final week. For nearly a year Congress bickered over the bill to extend the present federal program of aid for elementary and secondary schools. It finally approved a $9.3 billion two-year extension. Much of the money will go to slum schools in urban and rural areas under a formula based on the number of poor children in the area.

Another major bill was the Public Broadcasting Act, which will provide help for public educational television. The bill provided for the creation of a nonprofit, nongovernmental corporation to help finance noncommercial quality broadcasting. For the next fiscal year the bill provided $9 million, but the question of long-term financing was not solved.

Also of much interest to the public was the passage of the new meat inspection law. Since 1960 Representative Neal Smith (D, Iowa) has been introducing a bill to close gaps in federal meat inspection laws. This year the administration proposed a tighter meat law, and Smith saw his chance. He sponsored the administration's bill along with his more extensive measure and found success. The new law applies to the 15,000 plants which are outside of federal jurisdiction because they are not involved in interstate commerce. The plants produce some 9 million pounds of meat a year, or 15 percent of all meat produced in the country. To the bill-signing ceremony President Johnson invited Upton Sinclair, the author who exposed unsanitary conditions in the meat industry in his book The Jungle in 1906.

Other consumer-type legislation had less success. For seven years a Senate committee had failed to act on a truth-in-lending bill requiring disclosure of the annual rate of cost of installment and loan credit. This year there was hope that Congress would act on this measure. The bill was passed unanimously by the Senate, but this time the House failed to act. Consumer legislation approved included bills for setting new safeguards for flammable fabrics, establishing a national commission on product safety, and providing for federal licensing of clinical laboratories operating in interstate commerce.

Very little progress was made on overhauling the draft system. The president, aware of inequities in the draft, had sought to remedy them with a new act that would not only extend the system but would also bring about a comprehensive reform. Armed with a report from a special study group, the president wanted to institute a random selection system to ensure that all registrants within a given age group stood an equal chance of induction—the so-called lottery system. Changes would also have been made in college deferments. Congress, however, approved only a simple extension of the law. The only reform in the bill was the reversal of the present 'oldest first' order of induction so that 19 year olds will be called before older men. The bill specifically prohibited the lottery system and any changes in the system of deferring college undergraduates. Former Assistant Attorney General Burke Marshall, who headed the presidential draft study, said the law made the 'system worse than it was before.'

Politics

The Presidency.

As President Lyndon Baines Johnson struggled to unite the country on critical foreign and domestic issues, he became the focus of much of the discontent that welled within the nation, and by year's end his rating in the public opinion polls had dropped considerably. The main cause of unrest was the escalating war in Vietnam. Americans are an optimistic people, accustomed to success and power. Thus, their continued inability to resolve the war was particularly tormenting. During the year every index of U.S. involvement in Southeast Asia multiplied: more troops, more bombing missions over North Vietnam, more targets taken off the restricted list, more casualties, and drastically increased costs. Yet nothing seemed to bring a cease-fire any closer.

President Johnson seemed to be taking the war more and more personally. His statements revealed a deepening conviction that by fighting in Vietnam the United States was preventing another world war, and that it must continue to fight, no matter what the cost.

Just before Christmas the president made a journey around the world, beginning with his attendance at memorial services for Australia's late Prime Minister Harold Holt in Canberra. There he met with South Vietnamese President Nguyen Van Thieu and officials from New Zealand, Thailand, South Korea, Laos, the Philippines, and Taiwan. After visiting U.S. troops in Thailand and Vietnam, he flew to Rome to meet with Pope Paul VI. In all, he traveled 27,600 miles in five days and nights, with the war uppermost in his mind at all times.

The president's strategy was to hold the middle ground, both militarily and politically. On the one hand, he tried to keep the war within manageable limits and not to provoke China. On the other, he was determined to make it increasingly costly for the enemy to fight, by committing more U.S. money and manpower. Nevertheless, faith in the efficacy of this policy declined as military frustration increased and emotions polarized. The dissenters ranged from those who wanted to invade North Vietnam and bomb China to those who urged immediate withdrawal, but they all agreed that the war should end and that Lyndon Johnson was not doing a good job of ending it. By year's end the president seemed to have achieved a reverse of the consensus he had so ardently sought. An October Gallup poll indicated that only 28 percent of the nation approved of his handling of the war. About half of the Senate publicly opposed his policies, and Walter Lippmann declared that the Vietnam conflict was 'the most unpopular war in American history.'

Even the president's supporters could not deny that the costs of the war had climbed sharply, from $6 billion in fiscal 1966 to $22 billion in fiscal 1968. Despite the president's insistence that the United States could both wage war and continue to care for its domestic needs, rising war costs inevitably led to reduced congressional spending for social welfare. The president submitted minimum requests for such programs as antipoverty and urban renewal, and a coalition of conservative Republicans and Southern Democrats slashed them even further. To many liberals this reduction demonstrated that the nation and its legislature clung to a distorted set of priorities. Despite the war, money was found for such pet congressional projects as new highways, space exploration, and improved harbors, but not for welfare, housing, or education.

To many Negroes the cutback on domestic spending was one more indication that white Americans were not prepared to provide equal opportunities for minority groups. Aspirations that had been awakened by the rhetoric of the War on Poverty remained unfulfilled, and feelings of frustration and betrayal festered in ghettos across the country. Negroes who could see the affluence of America any night on television grew more dissatisfied with their daily lot of misery. The worst riot of recent years ripped through Detroit, previously thought by many to be a model of progress in race relations and Negro advancement. Lesser outbreaks scarred the slums of Newark, Cincinnati, New Haven, and East Harlem in New York. If anything, however, the riots only hardened Congress' resolve not to reward civil disorders with welfare legislation.

Violent protest was not limited to the ghettos. For many young radicals the continuation of the war signified the irrelevance of rational debate and the futility of trying to change policy through argument. This feeling led some opponents of the war to move from dissent to active resistance, and marches, demonstrations, and sit-ins grew increasingly ugly and bitter. For many, especially young men facing the draft, the war and the government became symbols of a society dominated by huge institutions in which the place of the individual was being lost.

With the presidential election approaching, Johnson's unpopularity contained important political implications. Former Alabama Governor George C. Wallace appeared to be ready to run. Few observers doubted that he could draw strong support, not only from conservative Democrats in the South but also from many members of the lower-middle and working classes of the North who felt threatened by Negroes moving into their neighborhoods and trade unions.

President Johnson also faced a growing, if not completely unified, opposition from various dissenting groups that felt he should get the country out of Vietnam without pressing a military solution and turn the country's energy and resources to solving domestic problems. The National Conference for New Politics convened in September to consider ways of defeating Johnson in 1968, such as running a peace candidate for president on a radical third-party ticket. In the end, however, a majority of the delegates decided that electoral politics offered little hope for improvement.

Democrats.

A group of dissident Democrats decided in the fall that the president had to be challenged within the framework of his party. They believed that if the violent emotions that had provoked demonstrations and riots were not given a channel for political expression, democracy itself would be in danger. Many of these Democrats had hoped that Senator Robert F. Kennedy would challenge the president for the nomination in 1968, but observers pointed out that even if he could defeat the president, the struggle would cripple the party and open the way for a Republican victory.

Late in the year, however, a candidate did appear. He was Senator Eugene McCarthy of Minnesota, a witty intellectual who appeared to be motivated largely by moral opposition to the war and a strong feeling that some candidate should be offered as an alternative to Lyndon Johnson. Senator McCarthy announced in November that he would enter several primaries but conceded that his chances of wresting the nomination away from the president were very slim. Nevertheless, he hoped that his candidacy would solidify opposition to the Vietnam war and help pressure the president into seeking a negotiated settlement. This issue appeared to be more crucial than ever when, shortly after McCarthy entered the race, Secretary of Defense Robert McNamara announced his resignation, thus giving rise to rumors that a new escalation of the war was coming.

Republicans.

As President Johnson's popularity dipped, Republicans began to think they might actually have a chance to defeat him in 1968. The prime prospect for most of the year was George Romney, who in 1966 had won reelection to a third term as governor of Michigan by 570,000 votes. Leading Republican moderates, such as Governor Nelson Rockefeller and Senator Jacob Javits of New York, were convinced that former Senator Barry Goldwater had captured the nomination in 1964 because the moderates had failed to agree on a candidate among themselves. With this in mind they quickly announced their support of Romney and urged other moderate Republicans to do likewise.

With national attention thus riveted on him, Romney was forced to begin running months before he wanted to. The incessant exposure on television and in the press, eagerly sought by most candidates, hurt him as much as it helped, since he often came across as pompous and sanctimonious. More important, he was forced to take stands on major issues before he had carefully thought through his position. He made a statement on the Vietnam war in April that most observers, including the president, took to be an endorsement of the administration. Yet within a few months he began to voice reservations about the policy, and in September he accused U.S. officials in Saigon of having 'brainwashed' him into accepting official policy during a fact-finding trip. The remark swept across the country and apparently hurt Romney's chances seriously among voters, who thought it reflected indecisiveness. In addition, some Republicans said that Romney had already begun to lose support because of his poor campaign performance. By the time he formally announced his candidacy in November, observers were saying that unless Romney made a very strong showing in the primaries he would have a tough time getting the nomination.

Romney's woes illustrated the problem of the Republican Party. It was easy to criticize the president's conduct of the war but far more difficult to devise an alternative solution. As Romney's campaign sputtered, moderates started looking for a substitute. They soon found Governor Rockefeller, who had also won an impressive reelection victory in 1966. The New York governor had sought the nomination twice before and lost. He had disclaimed any further interest in the presidency, thus adeptly avoiding the public pressure that had torpedoed Romney. By September, Rockefeller had climbed to the top of all the opinion polls. Few political analysts doubted that he wanted the nomination, but it was clear that the only way he could get it would be to stay detached from the early brawling and emerge as a compromise candidate from a deadlocked convention. The only other moderate to receive wide consideration was Senator Charles Percy of Illinois, whose entire career of public service had spanned about one year. Also announcing his candidacy was Harold E. Stassen, making his seventh consecutive bid for the Republican nomination and describing himself as a 'peace candidate.'

The two leading conservative candidates were Richard Nixon and Governor Ronald Reagan of California. Nixon was the favorite among professionals, largely because of his broad support among local party officials and delegates to previous conventions. Although Rockefeller topped the public opinion polls, a survey of county chairmen in the party gave Nixon five times as many votes as any other candidate.

Some people thought Nixon was too familiar to inspire the enthusiasm among Democrats and independents which the Republicans must attract in order to win a national election. He was also criticized for not having won an election on his own since 1950. In an attempt to overcome the feeling that he could not win, the former vice-president decided to enter most of the preferential primaries.

A large share of Nixon's backing came from Southern and Western conservatives, who had been grateful for his support of Barry Goldwater and saw him as the best alternative — at least until Ronald Reagan came along. The California governor made no secret of his interest in a place on the national ticket and took several trips around the country to test the political climate. Reagan's stock rose throughout most of the year until he, like Romney, committed an act of political indiscretion. The governor vehemently denied a story his press secretary had already privately affirmed to reporters, and when the lie was discovered Reagan lost a bit of his most valuable resource, his reputation for integrity.

As they faced the election year the Republicans contemplated a series of difficult decisions. None of their possible nominees appeared to have enough strength to avoid a harmful intraparty conflict. In Congress they had opposed nearly every piece of major social legislation, hardly a record to attract Negro and liberal votes. Moreover, the Republicans had still not agreed on a Vietnam policy. At year's end their best chance appeared to lie in avoiding a clear stand that could be easily attacked and simply letting dissatisfaction with the president do its work.

Elections.

The issue of race dominated hotly contested mayoral races in three cities. In Cleveland, Democrat Carl B. Stokes, a Negro state senator, defeated the incumbent mayor in a primary and then beat Republican Seth Taft in the mayoralty race. In Gary, Ind., a Negro city councilman, Richard Hatcher, also took the Democratic nomination away from an incumbent, going on to defeat Joseph Radigan, a Republican furniture dealer, in the general election. In Boston's nonpartisan mayoral campaign Louise Day Hicks, who as head of the school committee became a symbol of white resistance to school integration, was defeated by Secretary of State Kevin White.

Stokes, Hatcher, and White all won narrow victories, and political leaders, some of whom had anticipated racial violence if the results had been different, praised the liberality of the communities and hailed a new era of interracial cooperation to solve the morass of urban problems. But other observers saw more ominous portents in the results. Cleveland is a heavily unionized city, but it almost elected the nephew of the late Senator Robert A. Taft, coauthor of the Taft-Hartley Act, which placed strong curbs on union activity. Gary had been dominated by a Democratic political machine, but the almost moribund Republican Party revived with the announcement of Hatcher's candidacy, which did not receive official Democratic backing. Boston came very close to electing a woman whose candidacy had been an embarrassment to many city leaders. The anti-Negro vote in each of these cities was substantial, and Stokes' and Hatcher's victories were largely attributable to the abandonment by many white families of the central city, and all of its problems, to the poor Negroes and Puerto Ricans.

It seemed likely that more and more major cities would be governed by Negroes. Walter E. Washington, a Negro housing official, was named by President Johnson to be the first commissioner of Washington, D.C., which is nearly 60 percent Negro. In Mississippi a Negro won a seat in the state legislature for the first time in decades, and Negroes also captured 21 local posts, including 5 for which they faced white opposition.

Even if Negro officials are more sympathetic to the needs of the poor than many current city leaders are, the new officeholders will be hard put to significantly improve the lives of their constituents without massive aid and technical assistance from the federal government and private industry. However, a conservative trend among U.S. voters where urban problems are concerned was reflected in Congress' failure to pass adequate aid legislation for the cities.

Budget

The 1968 budget message had little of the cut-and-dried flavor that characterized the messages of the previous few years. It proposed a level of spending and income that would produce the second-largest deficit since World War II. At the same time, however, the message reflected the general concern over high government expenditures in a period of inflationary pressures and the uncertainties felt in the best-informed circles about the future of Vietnam and the general economy. 'To permit a higher 1968 deficit,' the president told Congress, '. . . would run substantial risks of choking off the much-desired move toward lower interest rates . . . and renewing inflationary pressures . . . . On the other hand, to seek a lower deficit . . . could depress economic activity, reduce the incomes of individuals and corporations, and thereby fail to secure the revenues it was designed to achieve.'

In form, too, the 1968 budget message was much different from its immediate predecessors. Reflecting the rising influence of the 'new economics,' the message put new emphasis on the relation between federal fiscal affairs and national income. (For a discussion of the new economics, see ECONOMIC REVIEW.) For the first time, the president emphasized the national income accounts budget. At the same time, he deemphasized the less comprehensive administrative budget, the model that had been traditionally used. The third budget concept—cash receipts from and cash payments to the public—continued to receive as much attention as in prior messages.

Budget Concepts.

The administrative budget is the only real budget among the three accounting procedures used in the annual budget message. It is a statement of anticipated and proposed receipts and expenditures, regardless of whether such receipts are actually collected or paid in cash (it excludes social security and other trust funds). The cash budget, on the other hand, is really an income statement, not a budget; it covers all cash transactions made by the government (including trust-fund transactions). From an economic point of view, the cash budget is much more important than the administrative budget, for it is through the cash receipts collected from the public and the cash payments made to the public that government activities affect the economy. The national income accounts budget is not really a budget at all. It measures only those government expenditures and revenues that have a direct influence on the national income. Although similar to the cash payments account, the national income accounts budget differs from it in four ways: (1) It does not include loans; (2) it includes federal pensions; (3) it includes tax liabilities at the time they are incurred rather than when they are paid; and (4) it includes expenditures as of the day of delivery of the goods.

Contemplated Revenue.

In order to soften the inflationary impact of the budget and to remove from monetary policy some of the responsibility for keeping interest rates down, the president's message recommended a temporary surcharge of 6 percent on both corporate and individual income taxes effective July 1, 1967. The tax was expected to yield $4.5 billion and would not apply to the two lowest individual income tax brackets. It would remain in effect for two years or for as long as it is warranted by the unusual expenditures on Vietnam. (See TAXES AND TAXATION).

Based on the assumptions of a 4 percent growth in real output as compared to 5.5 percent in 1966, a 2.5 percent rise in the price level, a surcharge on taxes, and an increase in postal rates, the administrative budget estimated revenues at $126.9 billion for the year ending June 30, 1968.

By the spring of 1967, as the economy lagged behind expectations and came close to sinking into a recession, congressional staff studies estimated that even if the administration's tax proposals were adopted, revenue would be $4 billion less than had been forecast, because of a drop in corporate profits and a smaller-than-expected rise in individual incomes. Yet Congress did not act on the president's tax recommendation.

In early August the president sent to Congress revised figures on the budget. He then estimated that revenues, even with the 6 percent surcharge, would be $7 billion lower than was originally thought and that the deficit would go up to $23.6 billion (administrative budget); without a tax increase, the deficit could be as large as $28 billion. This, he said, would mean 'a ruinous spiral of inflation, . . . brutally higher interest rates, . . . an unequal and unjust distribution of the cost of . . . Vietnam, . . . a deterioration in our balance of payments.' In order to avoid so large a deficit, the president recommended a temporary surcharge of 10 percent on corporate income tax liabilities effective July 1, 1967, and a similar surcharge on individual taxes effective Oct. 1, 1967.

Contemplated Expenditures.

Expenditures in fiscal 1968 were expected to be much higher than were those in 1967: $135 billion compared to actual expenditures in 1967 of $125.7 billion (both figures are from the administrative budget). Cash payments would be $17.1 billion higher than in 1967, and national income payments would be $14 billion higher. Once again national defense and health and welfare would take the lion's share of the increase. Of the $17 billion increase in cash payments, $5 billion would be for defense and $7 billion for health and welfare (including social security and other trust funds). It was expected that the costs of Vietnam would not rise as much in 1968 as in 1967, but the same line of reasoning had been mistakenly applied to 1967 over 1966.

Among the increases proposed by the president were a 15 percent increase in social security benefits amounting to $4.1 billion to be financed by a general increase in employment taxes, $100 million more for water pollution control, a doubling of the $25 million allotted for the collection and analysis of economic and demographic statistics in the 1967 budget, and $280 million more for the economic opportunity programs.

It soon became clear that the estimates of expenditures in the 1968 message would be as far off the mark as the revenue estimates, principally because of war costs. By May the House Appropriations Committee had come to believe that the Vietnam war would cost $6 billion more than was contemplated and that defense spending would be closer to $80 billion than to $75 billion. In August the president, in his revised budget figures, estimated that expenditures might go as high as $143.5 billion (administrative budget), $8.5 billion more than in his message of January. Of this increase, defense would account for $4 billion.

For the first time in many years it was conceded that all three budgets would run deficits. The January message estimated these deficits at $8.1 billion for the administrative budget, $2.1 billion for the national income accounts, and $4.3 billion for the cash budget. With such a deficit the public debt would climb to over $335 billion by the end of the fiscal year.

Reaction to the Budget.

In Congress the reaction to the 1968 budget was singularly apathetic. The spokesmen of the Republican minority, Senator Everett Dirksen (Ill.) and Representative Gerald Ford (Mich.) characterized the budget as 'shabby and phony,' but they offered nothing more concrete. Congress in general seemed unenthusiastic about tax legislation, and opinion polls showed that the public was overwhelmingly opposed to any tax increase.

On the expenditure side, the size of operations awed many commentators. It was pointed out that contemplated expenditures were almost twenty times as large as the amounts spent at the height of the New Deal and that deficits had also risen steadily.

Reluctant to raise taxes, Congress was equally eager to put the onus for increased spending on the president while making no specific proposals for cuts. In the early fall the Ways and Means Committee voted to defer action on a tax bill 'until such time as the President and Congress reached an understanding on a means of implementing significant expenditure reductions and more effective controls.' Apparently this meant a $5-$7 billion cut in spending. After extensive maneuvering between the president and Congress over tax increases and expenditure reductions, the White House proposed to curtail spending by $4 billion. This and other revisions in fiscal estimates would bring the cash deficit down to approximately $20 billion.

Budget Operations In Fiscal 1967.

The final figures for the fiscal year ending June 30, 1967, showed cash expenditures of $155.3 billion, double those of 1954. On a cash basis, expenditures were $10 billion more than had been estimated in the message of January 1966. All of this unanticipated expense resulted from an inaccurate estimate of the costs of the war in Vietnam. Originally expected to cost $10 billion, it actually cost twice as much. Receipts were much more accurately estimated, and what error existed was on the conservative side. Nevertheless, the deficits were much higher than had been contemplated. The deficit in the administrative budget, $9.9 billion, was second only to the $12.4 billion deficit in 1959. The cash deficit of $1.8 billion was $1.3 billion more than was originally estimated, and the national income deficit of $7.5 billion was astronomically higher than the $0.5 billion originally forecast.

Social Welfare

The federal government's major programs to aid the nation's poor were subjected to unprecedented critical scrutiny by Congress this year. The three-year-old Office of Economic Opportunity (OEO), which administers the U.S. War on Poverty, was threatened with dismantling in the preelection year byplay of the House of Representatives. The House also offered major revisions for welfare payments to nearly 5 million needy persons in the controversial Aid to Families with Dependent Children (AFDC) federal-state program. These 5 million represent only about a sixth of the nation's poor, who include, according to a Social Security Administration formula, individuals with annual incomes of no more than $1,570 or families of four with no more than $3,130. Federal officials began to refocus many of the country's job-training programs, to better reach hard-core unemployed in cities, in which some neighborhoods have joblessness and underemployment rates among nonwhite youths ten times higher than the national rate for all ages.

War on Poverty.

Despite a relatively small budget and an endless controversy that has beset it from its inception with passage of the Economic Opportunity Act of 1964, the War on Poverty remained the most innovative of current government programs dealing with social problems. Through a wide variety of programs it has touched some 8 million impoverished people with the $3.91 billion appropriated through June 30. For fiscal 1968 the president asked $2.06 billion but received only $1.77 billion.

The storm over the War on Poverty has centered on the Community Action Program (CAP), largest of the programs administered by the OEO, either solely or by delegation to such departments as Health, Education, and Welfare; Labor; and Agriculture. In July, the CAP employed 95,000 persons, of whom 43,000 had been drawn from the poor. Thousands more served on policy-setting and advisory boards of the Community Action Agencies (CAA), which have sprouted in 1,056 communities. The CAA's services differ from community to community. However, they often include legal aid, family planning, health care, emergency loans, consumer training, job programs, and education.

The most successful CAP program in terms of widespread acceptance has been Head Start, a project designed to give impoverished children some of the benefits of middle-class children before they first enter school. Head Start provides medical and dental examinations, nutritional supplements in the form of one or two meals a day, classes of no more than 15 staffed by a teacher and two aides who stress doing rather than listening, involvement of parents through participation on advisory councils or as nonprofessional helpers in classes, and social services to meet problems of the children's families. Head Start accounted for 42 percent of the total CAP budget of $775.3 million and benefited 700,000 children, or only about a third of the 2.5 million preschool children in poverty. The first two years of Head Start showed that many of the benefits gained during an eight-week summer session faded once a child had entered the public school system. Thus, officials this year launched an experiment to carry through special elements of Head Start into kindergarten and the first grade.

The trouble in the CAP has come primarily over membership of the CAA's policy-making and advisory boards. An important provision of the Economic Opportunity Act requires that each CAP program must be carried out with the 'maximum feasible participation' of the residents of the area served, a concept foreign to the traditional, paternalistic methods of distributing welfare services. This has meant that the CAP has sometimes bypassed traditional agencies and public bodies tied in with a community's existing political and power structure. The decision-making role of the poor has been especially troublesome. In a relatively few, but highly publicized, cases, CAA's have staged open protests against public officials. The problem has been heightened in the deep South, where whites resent the elevation of Negroes to a high station on policy boards. Thus, OEO officials have almost from the start been hard put to protect the CAP. A major proposed change would write into the law an assurance that local officials and other community interests would have an important voice in local CAA's.

A more orderly instrument of change is the CAP's legal services program, which, through 600 neighborhood law offices staffed by 1,200 lawyers, served 300,000 persons in 45 states this year. The lawyers dealt with landlord actions, housing-code violations, sales agreements, bankruptcy problems, welfare regulations, workmen's compensation rulings, juvenile charges, and divorce and other family difficulties. CAP lawyers won 75 percent of the first 4,000 cases tried and won reversals of administrative decisions of government agencies 80 percent of the time. The program scored its most significant welfare victory on June 19, when a three-judge federal court in Hartford, Conn., ruled unconstitutional a state requirement that a person must have lived in the state a year to draw welfare. The opinion, which Connecticut is appealing to the U.S. Supreme Court, could provide precedent for wiping out similar residency requirements in 40 other states. One senator who found it sinister that one government agency should be sued by another sought to bar funds for legal services in such cases but failed.

Two other CAP-funded programs saw remarkable growth this year: family-planning services and Upward Bound. Upward Bound seeks to fill in the educational gaps of impoverished high school youth to enable them to go to college. This is done through special summer programs on some 200 college campuses and tutoring during the regular school year. About 22,000 young people were involved, of which more than 75 percent were expected to enter college. The OEO more than doubled its number of family-planning programs—from 54 to 121- in just the first half of the year. These programs, operating in 33 states, had served an estimated 300,000 women by the end of the year.

Job Corps.

The Job Corps seeks to serve severely disadvantaged young people between the ages of 16 and 21 by removing them from a slum environment and placing them in rural or urban centers where they learn job skills and receive remedial education. By July 1, 87,954 young men and women had taken part in the program, with 42,032 still residing at that time in the 123 centers across the country. Until recently the program was beset by high costs and dropout rates, uneven quality, and disciplinary problems, which stirred sharp congressional questioning of the program. President Johnson has proposed amendments to correct these shortcomings.

Neighborhood Youth Corps.

By midyear close to 900,000 youths had been enrolled in 3,340 local projects since the start of the War on Poverty. The Neighborhood Youth Corps provides full and part-time jobs—primarily in public service locations, such as hospitals, schools, recreation centers, and local governmental units—near the youths' homes, enabling many to resume or to continue their schooling. The program seeks to attack the high unemployment rate in the 16-21 age group, which this year was higher for nonwhites than for the entire labor force at any time since the Depression.

Adult Work Training and Work Experience Programs.

The OEO and the departments of Labor and Health, Education, and Welfare also carry on a number of programs that provide adults with jobs, job training, literacy improvement classes, or a combination of the three. Government officials this year attempted to coordinate these better by centering main responsibility in the Department of Labor. They also began a Concentrated Employment Program (CEP), funded partly by the OEO but run by the Department of Labor to reach hard-core unemployed in 19 cities and 2 rural areas. The CEP includes several government job and training programs. By the end of the year about 20 percent of total government manpower funds were devoted to the CEP, and there were plans to increase the figure to 55 percent in fiscal 1969.

Volunteers in Service to America.

By midyear a total of 7,219 persons had served in Volunteers in Service to America (VISTA) since the start of the War on Poverty. VISTA is the domestic equivalent of the Peace Corps. Most VISTA volunteers serve in projects related to the CAP and receive only small allowances for their work. The tour of duty is usually a year. This year 1,500 students served as associate summer volunteers, and another 27,300 performed part-time volunteer work in their hometowns under a VISTA offshoot called the Citizens Volunteer Corps.

The OEO also carries on programs to better conditions among migrant farmers and American Indians. Still other projects involve the elderly in such activities as caring for mentally retarded children and provide loans for and establish cooperatives among small farmers. Among OEO's scores of experimental programs are community development corporations to foster economic and housing ventures in low income areas.

Congress and the Welfare System.

The implementation of so many divergent programs in a relatively short time has resulted in a degree of administrative confusion that has, in turn, brought criticism. However, 1967 saw the beginning of much more widespread acceptance among the public of the War on Poverty effort, even as Republican members of the House called for the OEO to be done away with and its programs to be distributed among other agencies. The OEO, subject of numerous investigations since its inception, this year underwent perhaps its most exhaustive one at the hands of the Senate Committee on Labor and Public Welfare. After hearing testimony from 401 witnesses and poring over 60 reports from staff members and specially hired consultants who had talked to another 1,000 persons, the committee concluded that the OEO had done a good job and should be continued, but with certain administrative changes. Even in hearings before the House Education and Labor Committee, which compiled 4,000 pages of testimony, only one witness called for the elimination of the OEO.

Despite this favorable reaction, still more controversy erupted when riots occurred across the nation during the summer. Critics charged that the activist nature of the CAP contributed to some of the outbursts. The OEO hastily launched a survey, which absolved the CAP and offered evidence that the program had perhaps prevented similar disturbances in a number of cities that remained peaceful.

Final passage of amendments to the Social Security Act of 1935, which encompasses the nation's welfare programs, came in December. Provisions in the bill forced parents to accept work if it was available, froze the percentage of children eligible for aid in each state, and raised social security benefits by 13 percent.

Primary impact was on the AFDC category, through which some 1.2 million families, comprising nearly 5 million persons-3.5 million of them children—were receiving monthly aid payments at a rate totaling nearly $1.5 billion annually by the end of the year. Other aid categories provide funds for indigent persons who are over 65, blind, totally or permanently disabled, or unemployed.

The growth of AFDC rolls—they have doubled in ten years—has brought charges that 'handouts' encourage indolence and illegitimacy. At the same time, as much storm has arisen over the inadequate level of payments. In no state do they reach the poverty level formula of the Social Security Administration. In fact, only 17 states pay 100 percent of what they consider the minimum income needed for bare subsistence; 4 pay less than 40 percent of the standards they have established. According to the Advisory Council on Public Welfare, which completed a massive critique of the welfare system a year ago, 'Public assistance payments are so low and so uneven that the government is, by its own definition, a major source of the poverty on which it has declared unconditional war.'