Senator MUSKIE. I am willing to vote for this tax package I introduced. I am not for a general tax increase until we make the taxes fair. Secretary BUTZ. Your proposal would in fact increase taxes by $18.5 billion.

Senator MUSKIE. That is right, and I propose that.

Secretary BUTZ. Let the record show

Senator MUSKIE. My record is clear, the administration is not.
Secretary BUTZ. The administration record-

Senator MUSKIE. The administration talks about keeping expenditures under the debt ceiling. Is the administration's 1974 budget in balance?

Secretary BUTZ. It is in balance on a full employment basis.

Senator MUSKIE. Mr. Secretary, debt ceiling does not reflect Keynesian philosophies.

Secretary BUTZ. It moves halfway toward a full balanced budget and the President has said we can do this without an increase in taxes and you just said you support an increase of $18.5 billion in taxes. Senator MUSKIE. Do not twist my words, Mr. Secretary. I have said I am not for an across-the-board increase in taxes.

Secretary BUTZ. You said you introduced legislation.

Senator MUSKIE. Because the system is not fair. I said I propose a tax reform package and invite your support, because I support it. Secretary BUTZ. The tax reform package does in fact increases taxes 18 and

Senator MUSKIE. It increases taxes for those who do not bear their fair share of the load.

Secretary BUTZ. The total is $18.5 billion.

Senator MUSKIE. That is right. I do propose that. And I do support it. Let me say to you

Secretary BUTZ. This is the chief difference between you and the President.

Senator MUSKIE. The chief difference between me and the President is more than one. There is more than one chief difference, I may say. There is a whole host of differences. But let me point out to you

Secretary BUTZ. My general counsel just said a difference of several million votes.

Senator MUSKIE. I would like to try that some time, Mr. General Counsel. I really would.

Maybe I would like to have the general counsel testify some time. But with respect to the ceiling which you pay in terms of the dollars, the debt ceiling does not fluctuate with somebody's interpretation of the Keynesian impact, in terms of dollars the President's 1974 budget is out of balance by almost $13 billion, if my recollection is correct. That will bring it up closer to the debt ceiling. I do not know how close. And you will have to ask for legislation raising the debt ceiling before this administration is out of office and that you know.

Would you promise me now in the next 4 years the President will not request an increase in the debt ceiling?

Secretary BUTZ. If this Congress passes the budget the President proposes for fiscal 1974, as you say, the $12-billion increase or $13billion increase in the deficit would bring us to within $4 billion, I believe you said, of the ceiling.

Senator MUSKIE. What do you do with the next which he has projected?

Secretary BUTZ. The President proposes in fiscal 1975 to have an actual balance in the budget in current dollars.

Senator MUSKIE. In current?

Secretary BUTZ. Yes, sir.

Senator MUSKIE. It will be interesting to see that.

The point is, the President has a deficit in 1974.

Secretary BUTZ. Yes, sir; he is moving halfway toward actual balance in the budget. He could move all the way next year except for the mandatory increase in the spending written in by the last Congress, like the 20-percent increase in social security when he asked for five.

Senator MUSKIE. Why did not the President denounce that in the election campaign last year? Why did he not?

Secretary BUTZ. Why was it tied in with the extension of the increase in debt limit?

Senator MUSKIE. The President wrote a letter to every social security recipient saying how delighted he was to sign that legislation, and are you now retracting that expression of approval? Are you? Secretary BUTZ. Apparently he must have been delighted.

Senator MUSKIE. Well, do not give me that as an argument to support your position.

Secretary BUTZ. But that is one reason why we cannot move all the way toward a balanced budget now.

Senator MUSKIE. Mr. Butz, the simple point is that what is involved is not the question of whether the budget is going to be in deficit in 1974 or in 1973; the question is whether or not the Executive is going to have all of the prerogatives in determining the pace at which we move toward it, the means we use to implement whatever goals we have, the share that the Congress will have in setting our budget goals, our debt goals, or all the rest of it.

You have just arrogated to the Executive a bigger and bigger piece of the authority to do.

Secretary BUTZ. The question goes further than that. Who is going to be responsible for a massive increase in taxes on our people or are we going to have a massive increase in taxes on our people? That is part of the question.

Senator MUSKIE. What the President seeks to do politically is to conceal his part in that role by shifting it all to the backs of the Congress, and what we are undertaking to do is pinpoint a joint responsibility. That is the difference between the President and us.

Senator CHILES. Mr. Secretary, I know that you say in your prepared statement that you are going to mention only briefly certain of these programs that we may assist the administration's judgment in selecting these particular programs for withholding.

Mr. Secretary, who passes the farm programs?

Secretary BUTZ. Farm programs are passed by the Congress. Senator CHILES. Then REAP and all of the other programs that you administer are programs that are passed by the Congress?

Secretary BUTZ. The Congress does not specify the specific practices in REAP, those have been developed administratively through the

years.

Senator CHILES. But the program itself, the REAP program was passed by Congress?

Secretary BUTZ. Yes, sir.

Senator CHILES. And the housing program?

Secretary BUTZ. That is right.

Senator CHILES. The Farmers Home? All of those were passed by the Congress?

Secretary Burz. Yes, sir.

Senator CHILES. So when you say you are assessing the administration's judgment in regard to these programs, do you think Congress has any judgment in regard to those programs?

Secretary BUTZ. Yes, sir; they no doubt did have to start with. The position of the administration, as I understand, and again I speak from a nonlegal background, is that the President spends the money appropriated under those programs if in his judgment it is wise to do so.

Senator CHILES. You sound a little different in your language now than you did when you came before the Senate Agriculture Committee, of which I was then a member, at the time you were seeking confirmation of this job, I asked this specific question. I said if Congress appropriates the money for specific agricultural programs, if you are not convinced that it should be spent, would you be for withholding the funds. And your answer, as I recall it is that, "We will try our best to execute the program as directed by the Congress. If we can do it with less money than authorized, we will certainly do it in the interest of the economy."

Secretary BUTZ. Well, I think the action we have taken is not inconsistent with that testimony.

Senator CHILES. Do you think what you have done to REAP is not inconsistent with that testimony?

Secretary BUTZ. I said if we can do it with less. We face this situation, as I said a moment ago, with a debt ceiling, with a budget that exceeded the debt ceiling, we would have to come back to extend the debt ceiling or break it, which would be wrong.

Senator CHILES. What about your language that we will execute the program directed by the Congress as best we can? Did you seek any direction of the Congress in making this administration judgment that you made?

Secretary BUTZ. No.

Senator CHILES. Did you ask Senator Talmadge?

Secretary Butz. I think it is consistent that we are doing it as best

we can.

Senator CHILES. Do you think it is consistent with Senator Talmadge and his feelings, or Congressman Poage? They are just the channel of the respective agricultural committees.

Secretary BUTZ. Well, Congressman Poage, of course, has his bill that is being voted on this afternoon over in the House of Representatives' side to make mandatory the restoration of this REAP program, and I know that Congressman feels very strongly about it.

Senator CHILES. Well, then, you did not seek any advice or any direction there?

Secretary BUTZ. That is correct.

Senator CHILES. You said when Congressman Whitten was questioning you at the hearings last year, you maintained that the President supported the release of the $55.5 million for REAP and $109 million for the REA loan funds at the time; we were talking about impoundment of those funds at that time. This, you stated, indicated his genuine interest in the problems of our farmers by his supporting the release, and in agriculture.

If that indicated his genuine interest in support of farmers and of agriculture, what does the latest action indicate?

Secretary BUTZ. I think you asked a very good question and let me attack it head on.

From the very first day I became Secretary I announced my goal was to raise the income of our farmers, to put more money in their pockets, hopefully from the marketplace. This was the President's goal.

I think in the last year we have been fairly successful. Farm income increased in 1972 by some $3 billion over the year before. It is the highest ever any way you want to measure it.

I think in that connection we have substantially succeeded in this regard. That continues to be our goal. It is the President's goal. It is my goal. It is the goal of the Department of Agriculture. It is the administration goal. And I think these other income supplementary features that we argue about are peripheral to that.

What I am saying, the situation changed last summer. Farm prices went up substantially, farm income went up substantially. And to the extent that it has, we are trying to reduce the participation of Government in agriculture.

Senator CHILES. Mr. Butz, on January 10 the Department announced that the Farmers Home Administration program had been discontinued. For an 18-month period the program would be studied and evaluated. During this time no new applications would be processed.

Department spokesmen have said that the study will seek to determine, among other questions, whether the program in question is the most effective means available for providing benefits to low-income families.

I am speaking now of low-income families and yet in your report you said that one of rural America's great handicaps has been its deficiency in housing. I am concerned that we have got to have 18 months in which we are not going to make funds available for these low-income families and yet this is the top priority.

You recited the story of Carl C.. of North Carolina, whose house is at the top of a steep, rutted, twisted road, was poorly heated by an old wood stove, pasteboard lining, badly cracked walls, and he could not keep out the snow, and some mornings it accumulated 2-inches deep on the floor. The C. family, in January 1971, moved into a comfortable three-bedroom home built with the help of two sons, a few friends, a carpenter, and an FHA loan.

Secretary BUTZ. Is that in the Rural Development Report?

Senator CHILES. Yes, sir. That is over your signature, that report. What happens to the Carl C.'s now; for the next 18 months? We were pretty proud we had something for Carl C. under the old report. Secretary BUTZ. Yes, sir. The loans are still available but not subsidized in the next 18 months; the administration took this action

not only in Farmers Home Administration, but in HUD, where we had a very substantial subsidy program for low-cost housing and where there have been a great many misuses, where we have made vertical slums instead of horizontal slums and it was decided

Senator CHILES. You did not think that about Carl C. when he got his home?

Secretary BUTZ. Any action in the pipelines continues. There are enough housing applications approved, I am told, in the pipeline right now to run us for approximately a year to a year and a half at virtually the same rate of new construction as we have had in the last year and a half or so, and during that interim the administration will attempt to get a sensible unified housing assistance.

Senator CHILES. I notice another statement that you once made, Mr. Secretary; you said, "I have seen some comments in the press to the effect that I am not a friend of the family farmers. I think nothing could be further from the truth. I grew up on a family farm, I understand their problems, I am sympathetic with them, in fact they have my full support."

I look over these cuts and I have a hard time jibing that now with your statment that you are for the family farmer.

Secretary BUTZ. Well, let's examine that now.

The only cut, the only place we have really cut is the REAP program. That averaged $239 per participating farmer last year.

Senator CHILES. The suspending of 18 months of FHA, that is a cut to the small family farmer: is it not?

Secretary BUTZ. To the rural residents more than the family farmer. Low-cost housing went to some family farmers but it was mostly rural residents that were using that.

Senator CHILES. It went to some sharecroppers.

Secretary BUTZ. Go down in your own State, a great deal of the low-cost interest subsidized housing is in clusters out in the country. Senator CHILES. You are not giving me much comfort, Mr. Secretary, pointing out what you did to my State, I will have to say that. If we are talking about the family farmer or the small farmer, I wonder did you cut any money out of the subsidies, let's say of over $10.000?

Secretary BUTZ. We certainly did. The subsidies this year have dropped very substantially.

In next year's budget they are being cut very drastically.

Senator CHILES. What money have you impounded from the subsidy program?

Secretary BUTZ. With our wheat growers we have cut the certificate payment to wheat growers by some $200 million.

Senator CHILES. Is that in your list of impoundments?

Secretary BUTZ. Yes, it is in CCC. It is there. That is money we have been paying out. We paid out some $4 billion like that last year. It is going to be cut by better than a billion dollars, and these are the very people you are talking about. They are taking the big cuts.

Senator CHILES. Are you making some proposals that we limit those subsidies to $10,000 a farm?

Secretary BUTZ. That will come up as a part of the legislation as we renew the Agricultural Act.

Senater CHILES, Can I look forward to that kind of limitation?