This cash rebate to individuals amounts to 12 percent of 1974 tax payments—­a total cut of $12 billion, with a maximum of $1,000 per return.

I call on the Congress to act by April 1.  If you do—­and I hope you will—­the Treasury can send the first check for half of the rebate in May and the second by September.

The other one-fourth of the cut, about $4 billion, will go to business, including farms, to promote expansion and to create more jobs.  The 1-year reduction for businesses would be in the form of a liberalized investment tax credit increasing the rate to 12 percent for all businesses.

This tax cut does not include the more fundamental reforms needed in our tax system.  But it points us in the right direction—­allowing taxpayers rather than the Government to spend their pay.

Cutting taxes now is essential if we are to turn the economy around.  A tax cut offers the best hope of creating more jobs.  Unfortunately, it will increase the size of the budget deficit.  Therefore, it is more important than ever that we take steps to control the growth of Federal expenditures.

Part of our trouble is that we have been self-indulgent.  For decades, we have been voting ever-increasing levels of Government benefits, and now the bill has come due.  We have been adding so many new programs that the size and the growth of the Federal budget has taken on a life of its own.

One characteristic of these programs is that their cost increases automatically every year because the number of people eligible for most of the benefits increases every year.  When these programs are enacted, there is no dollar amount set.  No one knows what they will cost.  All we know is that whatever they cost last year, they will cost more next year.

It is a question of simple arithmetic.  Unless we check the excessive growth of Federal expenditures or impose on ourselves matching increases in taxes, we will continue to run huge inflationary deficits in the Federal budget.

If we project the current built-in momentum of Federal spending through the next 15 years, State, Federal, and local government expenditures could easily comprise half of our gross national product.  This compares with less than a third in 1975.

I have just concluded the process of preparing the budget submissions for fiscal year 1976.  In that budget, I will propose legislation to restrain the growth of a number of existing programs.  I have also concluded that no new spending programs can be initiated this year, except for energy.  Further, I will not hesitate to veto any new spending programs adopted by the Congress.

As an additional step toward putting the Federal Government’s house in order, I recommend a 5-percent limit on Federal pay increases in 1975.  In all Government programs tied to the Consumer Price Index—­including social security, civil service and military retirement pay, and food stamps—­I also propose a 1-year maximum increase of 5 percent.