Inside the Economy: Window-Dressing on the Federal Budget
PRESIDENT JohnsonÛªs latest budget deficit would have been the biggest since World War It if he had not sold more than $4 billion of financial assets to help pay the GovernmentÛªs bills.</br></br>The chief executive was anxious to hold the official red-ink entry below the record-smashing SI2.427 billion deficit that former President Eisenhower piled up in fiscal 1959. The asset sales gave him his paper victory.</br></br>The Johnson deficit totaled $9.9 billion. If the President had not carried out the multi-billion-dollar sales, his deficit would have shot past the $14 billion mark. The only bigger deficits in U.S. history were the live World War II deficits that were chalked up during the fiscal years 1942-194(1.</br></br>Most of Mr. Johnson's asset sales were accomplished through the controversial certificate of participation gimmick. The Federal National Mortgage Association marketed $2.9 billion of participation certificates while the Export-Import Bank sold an unexpectedly large $1.2 billion.</br></br>THE PARTICIPATION certificates arc an ingenious device for selling the GovernmentÛªs financial assets to private buyers. Gen. Eisenhower pioneered their use early in his Administration but stopped selling them after 1954. They now arc widely known as ÛÏSchultzc BondsÛ because Budget Director Charles L. Schultzc was chiefly responsible for bringing them back as a major money-raising technique.