Depression Reaches Washington

For ten years Secretary of the Treasury Andrew William Mellon has had fair fiscal weather. Ample taxes from a busy, thriving nation piled up whacking big surpluses for him to administer. Under the sun of Prosperity, the Public Debt melted like a snowman in May. A happy man devoted to his job, Secretary Mellon was kept awake at night by no great problems of government finance. Because his department operates one year behind current business conditions (though the Government's spending is planned a half-year ahead), the stock-crash of 1929 was only a far-off warning of coming trouble. Last July the Treasury contained the fat surplus of $184,000,000.

Last week, however, when 1930 income taxes were totaled, the U. S. Government felt the full impact of the economic storm. The biggest business in the land was visited by the low pressure area which had hung over all other business.

In March 1930, the Treasury received $559,000,000 in income tax payments with the normal tax rate temporarily cut 1%. This March, with the normal tax rate restored, receipts of $450,000,000 were anticipated. But as payments were tabulated, Treasury experts found they had underestimated the full depth of hard times, revised their expectations downward to $400,000,000, then to $375,000,000 and finally concluded that the Treasury would be lucky to get $340,000,000. Because about 55% of the Government's revenue comes from income taxes, this loss of more than $200,000,000 was a very serious matter. Commented an anonymous Treas- ury official: "An extremely disappointing showing."

To make matters worse, other sources of revenue were also dwindling, and Government expenditures were constantly increasing. Customs receipts were $128,000,000 behind last year; miscellaneous taxes were down another $38,000,000. Outgo for fiscal 1931, now almost three-quarters over, was $200,000,000 larger than for the comparable period last year. The total of these circumstances spelled only one word: DEFICIT. President Hoover last December estimated the shortage at $180,000,000 for next June 30. Soon he revised it up to $350,000,000. When Congress passed the Bonus Loan bill he boosted it to $500,000,000. Last week Treasury officials were talking of a deficit of $700,000,000 to $800,000,000-- the first deficit since 1920 and a monster when it came. The staggering size of the DEFICIT immediately provoked political speculation about an increase in taxation to pull the Treasury out of the red. Republican leaders last week predicted that tax rates would not be raised on the eve of next year's national campaign for the presidency. All agreed that the Treasury should bridge itself over by short-term borrowings. Typical was the statement of Ohio's Senator Fess. chairman of the Republican National Committee: "The size of the deficit is shocking to me. . . . No [tax] action will be necessary for some time, however, because the Treasury's requirements may be met by short-time certificates which will be taken up like hot cakes, due to the country's confidence in Andrew W. Mellon. . . . There will be a great demand for increased surtaxes for that always is a popular thing." Speaker Longworth reflected his party's great yearning for good times when he said: "I am hoping that reports of a gradual return of prosperity will be followed by a big upturn before the end of the year and that this will greatly increase the Government's revenues."

Insurgent Senator Norris soon and openly declared himself for raising the Federal inheritance tax. Senator Borah advocated increasing the income surtax.* But neither expected Congress to have the "courage" to meet the tax problem before the 1932 elections.

P: Last week Secretary Mellon did more short-term financing by selling $100,000,000 worth of 90-day Treasury bills. This sum was to be used for Bonus loans. According to Administrator Hines of Veterans' Affairs, 1,571,291 veterans have applied for these loans and to them more than 500,000 checks, averaging $377 each, have been mailed out. Bonus applications after the first rush had started to taper off; it appeared that total advances may be kept below $800,000,000.

*Last week Senator Borah for the first time accepted his salary at the regular $10,000-per-year rate. When in 1925 Congress raised its members' pay from $7,500 to $10,000, Senator Borah refused to take the increase on the ground that he had been elected to a $7,500 job. His re-election last November, he felt, entitled him to take pay at the new rate. Senators pay no income tax on their salaries.

This file is automatically generated by a robot program, so reader's discretion is required.