Secretary BUTZ. We now have a limitation of $55,000 and I do not know what the Congress will do in the legislation.

Senator CHILES. Will the administration, or will you recommend that we limit that to the largest farm?

Secretary BUTZ. Our position on that has not been firmed up yet. As I read the sentiment of the Congress, it is likely that it will be cut. Senator CHILES. It is pretty likely that is what has happened to Carl C. Has your position been firmed up for him?

Secretary BUTZ. The Carl C.'s position you talk about has been improved with improved agricultural income, but the Carl C.'s, plainly the ones you are talking about, do not get the bulk of their income from agriculture.

Senator CHILES. He does not get any of the $55,000 a year?

Secretary BUTZ. If we had that Carl C. that you are talking about, if he is atypical, he would have gotten more nonfarm income than he got farm income. Non farm income opportunities are up, employment is up, unemployment is down, wage rates are up, and farm income is up and money is still available to finance that on a nonsubsidized basis.

Senator CHILES. Mr. Secretary

Secretary BUTZ. It will be a high risk loan, but without direct interest subsidy?

Senator CHILES. Your attitude about him being atypical seems to be a class that you placed him in. That seems a little different from the rural report and the way you describe him in there, how proud you are that we have been able to do something for him or he has been able to help himself with the help of his brother.

Secretary BUTZ. We are proud of that.

Senator CHILES. No; we are saying he is atypical. If he is atypical he will not

Secretary BUTZ. We are proud of the programs. I do not want to give you the impression no good has been accomplished by those programs. Good has been done by the REAP program and by this subsidized housing program. It is a question where it ranks on your priority scale if you have to cut back in your budget outlays.

Senator CHILES. That is an interesting answer, Mr. Secretary, where it ranks on our priority scale. I understand that in your report shaping the future, you stated the quality of the American environment is another great concern of the Department. Water and air pollution, chemical residues in soil, feed and food, the problem of disposal of livestock waste, encroachment, overurbanization and industrialization on some of the Nation's finest farmland and on general deterioration of the landscale in cities and countrysides have given environmental protection and improvement a top national priority.

Secretary BUTZ. I think it still has that. There was an appropriation made to the Environmental Protection Agency last year that Senator Muskie referred to, half of which is being withheld but the other half is more than we ever had before and a good part of that is available, more than that under the program of revenue sharing. It is one of these things of high priority in the State and people decide that they can use some of that money for community projects in this country.

Senator CHILES. Well, I note from another statement that you made in a speech you said, well, can pollution be controlled?

Secretary BUTZ. Of course it can. We understand how to do it. What is it going to cost?

One of the best statements I have seen on this is in U.S. News and World Report a few months ago and they estimated it would cost $71 billion to clean up our streams, our air, and abate noise pollution. Can we afford something like this? That was over a 10-year period they were talking about. That is about $7 billion a year. It is a lot of money, but it is not very much. We are going to have a trillion dollar gross national product this year; if we take $7 billion or even $19 billion a year, that is 1 percent of our gross national product, and I am sure. we can control that sum on a rational program of environmental control in this country.

Now, what we have to do is search for a proper risk-benefit ratio as we approach this matter of environmental control, ecological control in agriculture, we want optimum risk-benefit ratio. It would be impossible, it would be impossible without modern agriculture to feed 205 million Americans even at subsistence level.

Senator CHILES. Mr. Secretary, at that time, April 26, 1971, you thought $10 billion a year was a reasonable program.

Secretary BUTZ. Well, what is the appropriation now of EPA for example?

Senator CHILES. After it has been cut?

Secretary BUTz. Yes.

Senator CHILES. Five billion dollars over 2 years.

Secretary BUTZ. That is the appropriation just for one phase, that is the water account. We are still doing some work on this. We are making these grants to the States and the States can do it, the cities can do it.

When I said the $10 billion figure annually, I counted in all of our expenditures, including those made by the utility companies.

Senator CHILES. Did you count in the expenditures made under the REAP program?

Secretary BUTZ. At that time, yes, sir.

Senator CHILES. We can subtract those now?

Secretary BUTZ. Ten. I was simply saying $10 billion a year, 1 percent of our GNP, when it got to a trillion dollars, and we are past that now. If we count our investment as a society in pollution control, it is well in excess of $10 billion. As a matter of fact, I think I understated it in April 1971.

Senator CHILES. It came through already.

Secretary BUTZ. Our total expenditures for pollution control must surely be well in excess of $10 billion now when you count the corporate investment, including the investment our farmers are making. Our farmers are doing pollution control all the time on their own as they build feed lots.

Senator CHILES. Oh, you were counting what the farmers were going to spend?

Secretary BUTZ. I was counting what society was going to spend and I said we could afford 1 percent of our GNP for pollution control. That was a very small sum and I stand by it. I was not talking about Federal expenditure all alone; I was talking about the total investment of society in pollution control and we substantially exceed that right now.

Senator PERCY. Mr. Secretary, I will start with the premise that I do not think there is any doubt that under certain conditions the President of the United States has the authority to impound funds. This has historical precedence and it has been done by Presidents for many, many years. Certainly during times of war you do not have too much question about it.

Why do you suppose that, considering there is precedent for it, there is more a hue and cry at this particular time when President Nixon has done it than ever before in my recollection? There were rumblings under President Johnson when highway funds were impoundedGovernors came down-but now this seems to have Congress aroused, special committees established pressure groups pouring into Washington.

What is the nature of this impoundment that has been so different than the precedents that have been enumerated by the administration in its testimony before this committee?

Secretary BUTZ. I think the Chief difference, Senator, is that this time the President had the courage to substantially move in on programs that had a lot of political overtones in back of them, perhaps, as I said awhile ago, that have had low executive branch priority for years through half a dozen administrations, yet they have political popularity.

I was interested last week, in the Agriculture Committee where I was testifying before Senator Talmadge's committee on this very thing, to note the list of witnesses that followed me. As I looked down through the list of witnesses that followed me, practically all were opposed to the cuts being made. I saw there the National Limestone Institute, National Association of Drainage Contractors, National Association of Irrigation Contractors, National Association of Land Developers, National Association of Homebuilders, and I thought, these are boys who farm the farmers. They are the ones in here making the noise about this.

We have trade associations here in Washington that can reach 3,000 people in the country, and generate 10,000 letters in this town in a week. We have touched exposed nerves, and I think that makes the essential difference now.

Senator PERCY. The chairman mentioned price support programs. How much, for instance, do we put into price support of tobacco?

Secretary BUTZ. Not very much in recent years. We have had a 5 cent per pound export subsidy on tobacco, and approximately 45 to 50 percent of our tobacco has been exported. That has cost us in the neighborhood of $26 million a year.

Four or 5 years ago we got in a difficult surplus situation, but the Tobacco Stabilization Corp. has worked that out with very tight production controls. Tobacco has not been one of our expensive support programs.

Senator PERCY. But the total budgetary impact would be how much money?

Secretary BUTZ. This year?

Senator PERCY. In 1974.

Secretary BUTZ. In 1974, the outlays are estimated at about $17 million on old crop tobacco exports. This year we have discontinued the export subsidy on new crop tobacco. It would be virtually zer

cost on the new crop. CCC will make money on tobacco in 1973. That is an unusual situation.

Senator PERCY. In looking at places to get money, to help reduce the pressure on the budget, how hard a look was taken at the price support program? In principle, I believe this is something, over a period of years, I had hoped we would try to wean ourselves away from. There is a reduction reflected in the fiscal 1974 budget, the largest probable drop in that program that we have had for a number of years. How much more do you think might be available if you cut deeply in the area, and how far could you cut, and what factors were taken into account in the political pressures that would result if heavy cuts were made in that program?

Secretary BUTZ. Senator, the cuts made in next year's budget are in large part the result of bringing substantial acreage back into production in 1973.

We are freeing for production, in 1973, some 40 million acres that had been held out in 1972. As you do that, automatically the payments decrease to some extent. On the other hand, there were certain built-in costs in the thing that were beyond our power to reduce. We are mandated, for example, to pay not less than 15 cents a pound on cotton production. In the case of wheat produced for domestic consumption, we pay the difference between the average price the first 5 months of the market year and parity.

On feed grains, we were mandated to pay certain minimums. Hopefully, we will take a look at some of those requirements in the new legislation coming up. But even so, we are reducing our direct payments by something like $12 billion in 1974 over fiscal year 1973.

Senator PERCY. Secretary Butz, could you give us a list-as other witnesses have of the conditions that you feel permit the President to impound funds within the constitutional authority that he has? What set of circumstances must, and should exist, before he does this? Secretary BUTZ. We would be delighted to supply such a list.1 Senator PERCY. Can you give us, offhand, the circumstances that justify in your mind the present nature of this inquiry?

Secretary BUTZ. I think, to recap what I have already said, it is a question of facing a budget ceiling a debt ceiling here--with expenditures that either have necessitated an increase in revenue or an increase in the ceiling-in the ceiling itself. That was the circumstance that the President faced here and took the course of reducing expenditures.

Senator PERCY. Does it make any difference in your judgment as to whether the President impounds the funds permanently and thus destroys the program, or does so on a temporary basis in order to break some sort of condition which he feels is a crisis or emergency that would cause that action to take place?

Secretary BUTZ. Yes, sir; I think you have distinguished two sets of circumstances that should be differentiated.

The President took this drastic action for the remainder of fiscal 1973. He has submitted the 1974 budget to the Congress, which continues on his recommendation some of the economies that he imposed when he impounded funds in 1973.

The Congress could pass its budget this year and have a chance to pass on those recommendations.

1 Not received in time for this printing.

Senator PERCY. By its action in the REAP program, the fundamental nature of the program has been changed. Without getting into the rightness or wrongness of that particular action, has the administration ever proposed legislation and fought for legislation that would have done it through the legislative process rather than impoundment process?

Secretary BUTZ. Well, we never had legislation on the exact practices that should be carried out in REAP. That was a matter of administrative decision. There has been language written in the report on the appropriation bill, especially on the House side, about changes occurring in practices under the REAP program. Last year, there was some provision made for sort of a grandfather clause that any practice that was done in the counties in 1970 should be continued at the option of the counties.

The administration has been trying to minimize those practices in REAP that were essentially production-increasing, and to encourage practices that were essentially pollution-control practices.

Senator PERCY. If a set of emergency conditions or crises conditions do not exist and cannot be used as the justification for changing programs-let's say we had a balanced budget, no fiscal crisis, we are not at war-do you feel the President has, under the present constitutional powers, the right to change at will the programs enacted by Congress?

Secretary BUTZ. Well, now, you are asking me a constitutional question. Again, I go back on precedents.

Presidents have done that when the country was not at war, when there was no fiscal crisis in the budget. At that time, as far as I am aware, the Congress did not challenge the right of the President to do that.

Senator PERCY. Do you feel the changes that were brought about by you, and your participation in obviously requesting the President to participate in contributing toward a budget cut, would bring us more in line with the maximum overall figure he had in mind? Was there adequate consultation with the Congress on this? Were congressional leaders in the field in which you have been interested consulted as to where if they were given the problem-they might see fit to make cuts?

Secretary BUTZ. I think it is not fair to say they were consulted. I had come and talked to the leaders of our Agriculture Committee just prior to the announcements of the cuts, but it is not fair to say they were consulted.

Senator PERCY. I think that covers the principal questions that I had of you. I must say in talking with many farmers in my own State I have to inquire in what some of the programs were moneys required for them now, what the rate of interest was we were paying at the time the 2-percent loan program was put in as against the cost of that money the Government now

Secretary BUTZ. Incidentally, 1.96 at that time, was the average cost of money to the Government.

Senator PERCY. There is a vast difference now.

One thing that I would like amplification on; there was a comment made either in the Presidential message or in a statement that you made, I have forgotten which.

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