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Mr. Asu. To serve those 2 percent, moneys were being spent to serve many times that number who really had no need and that money in the aggregate can better be used on such programs such as the increases being used in medicare. That is where the money goes to a-medicaid. particularly, that goes particularly to those in need. So, there is a trade off between those two.

Senator METCALF. Did you use the same criteria when you said we don't need the water and sewer money for the people in the areas where more people could be served ?

Mr. Ash. Sure, the trade offs of this kind were made all the way across. It was absolutely essential that they be done, that one choose between the programs in the best possible judgment that could be brought to bear to best serve the interests of the people and those that didn't.

Now, on this REA we didn't cut out the program, we merely changed the source by which they received their moneys and increasel the program by $200 million. They can still get 5-percent money, in place of the 2-percent money they formerly received. Two percent was brought into being when the Federal cost of money was 2 percent, way back in the thirties.

Senator METCALF. Mr. Ash, you have already proven that you don't know what you are talking about when you are recalling these things as a matter of law in agencies such as the Interstate Commerce Commission and other regulatory agencies.

Let me tell you that my first job as a lawyer was representing an REA cooperative. I have been interested in and concerned about regulation of electrical energy and the development of it in all the years that I have been in Government. Don't be telling me this story. You are starting to tell about an area that you don't know anything about and you are just as ignorant and just as uninformed as you are on the regulatory agencies.

Mr. Ash. Do you believe that those are not the facts that 9815 percent

Senator METCALF. The facts are that 2 percent of the people of America, in the rural areas of this country over all the years are still denied the opportunity to have lights and electricity and power, and they are denied the same opportunity that 98 percent of the people of this country have enjoyed and had an opportunity to have over the years that these REA programs have developed. We still need to have cheap interest rates that they are entitled to develop these unserved areas. If the Administrator of REA has done what he has done in many instances and made these loans to private power companies whose rates are higher, whose mileage is less, then certainly you don't have to eliminate a program. You should have more efficient administration of that program.

Mr. Asii. If I understand your facts, we are only one-half of 1 percent apart, so apparently we are working very close to the same facts as to the degree to which this program has served a very good purpose. I consider we are working from the same facts and therefore we probably both know what we are talking about.

Senator METCALF. You started to go into the historical development of this whole program, and as I say, you have eliminated a program that—to me and the Congress, to my colleagues in the Congress

re hoping the constituents in rural and remote areas of a State such as mine and to save enjoved over these years. But I still haven't gotten the informasuche ion how you decided that program should be eliminated, how you Fast decided the Federal Trade Commission shouldn't enforce the Flame Samable Fabrics Act, how you decide we should remove people from

enforcement of an investigation into multinational corporations, how na wiz : you make a decision that we will remove some of the Federal Power

Commission's authority, or the Federal Communication Commission's authority and leave full authority for other areas.

Mr. Ash. If you had a dollar available to go either, say, to REA me te or alternatively to medicaid and knew that if it went to REA the bigmet i gest portion of that dollar would not go to the various farmers you

describe but went elsewhere, I would think most people would come to a reasonable judgment that we might very well spend it for the interests of the United States.

Senator METCALF. I think all people would come to the judgment that you have a lousy administration down there and you should see that part of that dollar went to the people who needed it for electric energy and part of it went to medicaid.

Mr. Ash. The law does not allow discrimination among those that qualify.

Senator METCALF. You discriminate all the time. You eliminte one program, partially fund one program, pay no attention and fund another one. If that isn't discrimination, what is it?

Mr. Ash. Qualified applicants are qualified applicants, and the way the qualifications are written many do qualify who probably did not have the economic benefit when REA was originally programed.

Senator CHILES. Senator, we are going to have to recess. We have Mr. Butz coming at 2 o'clock.

Senator METCALF. I wish you would respond to my question, with all good will, I know that you have only been down there for 3 days, but I hope that there is something better than that outlined, the alleged 13 responsibilities you have, and you can tell me in a written response to this question how you make these decisions other than as Butz says, political trade off. Mr. Ash. Did he say political trade off? Senator METCALF. No. M1. Ash. It is not political trade off. When one is constrained even by the total amount to be spent, even in your home budget or my home budget, the trade off' you make isn't political, it is which buys you the greatest value for that limited amount of resources you have to spend. These are the judgments that were made and those are made by the best judgment that one can bring to bear just like you as a Senator

Senator Metcalf. What criteria do you have to bring to bear your best judgment ?

Mr. Asir. I think the very one as employed by yourself, in our opinion, that which is in the best interest of the United States.

Senator METCALF. Well, in my opinion your consideration of what is in the public interest isn't the same as what I consider, so will you tell me what you think the criteria of public interest is?

Mr. Ash. I would agree that program by program we will not necessarily agree as to which is the best interest.

Senator METCALF. I am not asking you to agree, I am asking you to tell me, that's all.

Mr. Ash. There is the same degree of subjectivity that you have indicated, but we have elaborated 13 specific subheadings.

Senator METCALF. That elaboration is completely irrelevant. It is completely unresponsive. I think you have been responsive to many of the questions here, but you haven't been responsive to the one that I direct to you now.

Mr. Ass. We will put something in the record if you wish on the subject.

(The Office of Management and Budget subsequently supplied the following information :)

A decision to reduce or eliminate funds for an existing Federal program follows from the application of several criteria, which may be summarized as follows:

Does the need which brought about the enactment of the Federal program still exist? The needs of the Nation change continually, and with them the needs for specific Federal programs. In some cases the needs are transitory, and pass; in others, Federal programs intended to fulfill a specific need become redundant when these needs are met with new, broader programs. We are continually called upon to identify and correct inequities created by providing excessive benefits to some by virtue of overlapping programs and insufficient benefits to others because of funding limitations of the broader program.

Does the program achieve its intended goal? Many Federal programs, particularly those in the social welfare area, are essentially large-scale social experiments, for social legislation is rarely enacted which foresees fully the joint effects of the complex incentives of all the participants in these programs. As a consequence, some of the efforts simply fail to accomplish the objectives that they are intended to serve.

Is the program meeting its objectives in a reasonably efficient way? Many programs fulfill the intended objectives, but at costs that far outweigh the benefits likely to be derived from the program. In some instances, the “real” beneficiaries of the program are not the beneficiaries toward which the program was directed. Often, after programs have been on the books for many years, their principal beneficiaries change and are not the intended, nominal beneficiaries. Assuming equal desirability of objectives, less efficient programs are considered for elimination before more efficient ones.

These are the principal criteria which have been used in making decisions about reductions or eliminations of funds for Federal programs. In some instances, funds for programs have been reduced or eliminated because, in the President's judgment, the relative importance of the objective or the inefficiency of the solution places them at a point where, in light of limited resources, they seemed to rank lower than other programs. In other instances, funding has been adjusted because programs have, in the President's judgment, fulfilled needs which no longer exist or failed to fulfill their stated objectives.

Senator Cules. There are several items that you have talked about in making answers for the record. For the sake of time, the number of times that comes up in your testimony and other testimony, we use the language “other developments” in the Anti-Deficiency Act. If we

Cat could have some answer as to how broad you think the parameter of

“other developments” is, and your answering of the legislative history thair of that language, it would be helpful for the committee.

(The Ofice of Management and Budget subsequently supplied the it:" following information for the record:)

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RESERVES FOR "OTHER DEVELOPMENTS" UNDER THE ANTIDEFICIENCY Act Subsection (c)(2) of the Antideficiency Act (31 U.S.C. 665(c)(2)) provides, in pertinent part, that—"In apportioning any appropriation, reserves may be established to provide for contingencies, or to effect savings whenever savings are made possible by or through changes in requirements, greater efficiency of (perations, or other developments subsequent to the date on which such appropriation was made available. ..."

The legislative history of the Antideficiency Act sheds little light on the precise meaning of the words “other developments" as used in the above quoted sentence. The Antideficiency Act in its present form results from its amendment and reenactment in section 1211 of the General Appropriation Act, 1951. A complete section-by-section analysis of this amendment was presented on the floor of the House by Congressman Norrell on May 10, 1950 (pp. 691+6016 Cong. Record of that date). This analysis merely uses the quoted wording of the statute to explain its purposes.

In light of the fact that spending under conventional appropriations is not mandatory, the authority to establish reserves because of "other developments subsequent to the date on which such appropriation was made available" should be construed broadly. Thus "other developments" would encompass any circumstances which arise after an appropriation becomes available for use, which would reasonably justify the establishment of a reserve.

Senator CHILES. On behalf of the committee, I want to express our appreciation for your appearance and the fact that you came back to us after being here for a long period of time on 1 day. We appreciate pour patience in returning.

Mr. Ash. Thank you, Mr. Chairman.
Senator CHILES. We will recess now until 2 o'clock this afternoon.

(Whereupon, at 1:20 p.m., the joint hearing was recessed, to reconvene at 2 p.m. the same day.)

AFTERNOON SESSION

Senator CHILES. We are delighted to reconvene our hearings, and have for our first witness Secretary Butz, Secretary of Agriculture, to testify for us this afternoon.

Mr. Secretary STATEMENT OF HON. EARL L. BUTZ, SECRETARY OF AGRICULTURE; ACCOMPANIED BY JOHN A. KNEBEL, GENERAL COUNSEL; AND JEROME MILES, DIRECTOR OF FINANCE

Secretary Butz. Thank you very much, Mr. Chairman. First, I have two of my associates here sitting beside me that I might want to call on in the discussion that ensues the formal presentation, John A. Knebel, General Counsel, and Jerome Miles, Budget Officer. With your permission, I would like to read the prepared statement and then open it up for discussion and questions,

I welcome this opportunity to appear before this committee to discuss recent actions taken by the administration relative to fiscal year 1973 expenditures by the Department of Agriculture.

gram funds.

I regret that I was not able to meet with you last Thursday, February 1. On that day, I was fulfilling a commitment to testify before the Senate Committee on Agriculture and Forestry on the same subject of Department of Agriculture expenditures.

As I understand it, your committee would like for me to discuss the rationale that lead to the decision in the Department of Agriculture to withhold some fiscal year 1973 funds appropriated by Congress for certain programs.

There are two questions, it seems to me. One is the question of judg. ment and prudence on the part of the Executive branch that led to the decision to withhold funds. The second question is the matter of legal justification for withholding the funds.

If you would permit me, I would like first to address our discussion to the question of judgment and prudence on the part of the Executive branch 'that led to the decision to withhold some fiscal year 1973 pro

A year ago, the President submitted a fiscal year 1973 budget which called for an expenditure of $246 billion. It showed a small surplus, assuming full employment conditions. By midsummer 1972, substantial additional appropriations had been added to the Federal budget by Congress. These additions had the effect of substantially adding to the budget deficit, and of further fueling inflation and spiraling costs.

The President then asked Congress to enact a spending ceiling of $250 billion-which was $1 billion more than the requests in the President's earlier budget proposals. The President appealed to Congress to enact a $250 billion spending ceiling to avoid imposing higher taxes on citizens, to slow the rise in prices, and to prevent a further reduction in taxpayers' purchasing power.

The proposal to limit spending was contained in the bill to increase the limitation on the public debt. The proposed spending ceiling and the increase in the limitation on the public debt were consistent based upon receipts anticipated through the end of fiscal year 1973. Both Houses favored the logic of the spending ceiling, as each House separately did act favorably on legislation to restrict fiscal year 1973 spendings to $250 billion. However, even though the limitation on the public debt was raised to $465 billion, the spending ceiling did not clear through the final steps necessary to become law.

In the fall 1972 presidential election campaign, the President argued strongly for his program of financial responsibility. The public had a clear choice between two philosophies relating to the direction of Government programs. The margin by which the President won the election was at least in part due to the fact that the people wanted to hold Government spending down.

Just last month, the President submitted a budget for fiscal year 1974, which showed an estimated overall deficit for fiscal year 1973on a full employment basis--of $2.3 billion. The President believes that by holding spending to $250 billion in 1973 and achieving a full employment balance in 1974 and 1975, the Government will do its part to achieve a healthier, more stable economy, and avoid a tax increase.

People are also tired of, and alarmed at, the steep climb of price levels which are an outgrowth of an inflation that is related to the level

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