"The Figures Prove It"
No mortal is permitted unfailingly to predict the future. With these words Franklin Roosevelt last week opened his 1937 budget message to Congress.* Continued the President: "It is, therefore, a cause for congratulation . . . that a consistent, broad national policy, adopted nearly three years ago by the Congress and the President, has thus far moved steadily, effectively and successfully toward its objective." With equal truth President Roosevelt might have said: No mortal is permitted unfailingly to remember the past. In his budget message to Congress just two years ago last week, he had said: "We should plan to have a definitely balanced budget for the third year of Recovery [fiscal 1936] and from that time on seek a continuing reduction of the national debt." Since that time much food has gone under the belts of the unemployed, many leaves have been raked, many dams and bridges have been built, and 192,143 men have been added to the Federal payroll. In the light of these events, the President last week triumphantly declared: "Our policy is succeeding. The figures prove it. Secure in the knowledge that steadily decreasing deficits will turn in time into steadily increasing surpluses, and that it is the deficit of today which is making possible the surplus of tomorrow, let us pursue the course that we have mapped." In the figures of the President's message, although he did not call direct attention to all of them, were the following outstanding facts: 1) Revenues in fiscal 1937 will reach the highest point since 1920. 2) Because of this large revenue the deficit in fiscal 1937 will be smaller than any in the previous four years--unless the Treasury has to pay out a billion or two on the Soldiers' Bonus. 3) The ordinary expenses of the Government will reach a higher total than the Government ever spent in any year since fiscal 1921 when War obligations were still being cleared up. Since these are "regular" expenditures they may be expected to continue indefinitely. 4) The total expenses of the Government including probable amounts for relief but excluding the Bonus are likely to be higher than in any previous year of Recovery or Depression.
Revenues. The figures of the 1937 Budget did indeed prove much. The President estimated final receipts for fiscal 1936, now half over, at $4,411,000,000, a 112% increase over fiscal 1933, a 9% increase over fiscal 1929. Receipts for fiscal 1937 he set at $5,654,000,000, more revenue than the U. S. Government ever had in any year except 1920. This huge expectation arose from the following estimates: $547,000,000 from the New Deal's social security, railway pension and Coal Act taxes; $547,000,000 from the New Deal's processing taxes;* $354,000,000 from customs; $2,103,000,000 from miscellaneous internal revenue (of which liquor taxes make up one quarter and tobacco taxes almost an equal share); $160,000,000 from minor sources; and $1,943,000,000 from income taxes. This income tax yield is 77% greater than the income taxes collected in the fiscal year which closed last June. Lest the public should groan at paying so much in taxes the President pointed out that a large part of the increase was expected not from higher rates but from increases in the incomes subject to tax: "Only about $222,000,000 will be collected in 1937 as a result of new schedules in the Revenue Act of 1935."
Expenditures. "To run all the regular activities of the Government," declared the President, "I will need a total of $5,069,000,000. These regular activities include interest on the public debt, major public works, operations of the Civilian Conservation Corps, and Agricultural Benefit payments, but do not include strictly Work Relief items. I expect to pay for these regular activities with estimated receipts of $5,654,000,000, leaving an excess of receipts of $585,000,000. . . . The item for relief remains. Without that item the budget is in balance." Last year and the year before Franklin Roosevelt also announced that the Government's revenues were in excess of its ordinary expenses. More conservative in his bookkeeping this year and with more revenue to count on for this kind of semi-budget balancing, he counted the cost of CCC and AAA as "ordinary" rather than "emergency" expenses--an indication that he had expected both these prime features of the New Deal to be continued indefinitely. Moreover construction of battleships, formerly charged in part to relief and recovery ("to make jobs"), now is to be counted as direct national defense. Many public works construction projects will also be transferred to ordinary expense in the "regular" budget. Result is that the cost of running the ordinary departments of Government appears to be zooming. Every regular department of the Government shows substantial increases in its costs for 1937 over 1936 and 1935. The Departments of Agriculture (not including AAA), Commerce, Interior, the nonmilitary activities of the War Department, and independent offices all will spend more than twice as much in fiscal 1937 as they nominally spent in fiscal 1935. Labor and Navy will spend over 75% more. The "regular establishments" as a group--exclusive of veterans' pensions, interest on the public debt, AAA, CCC--are to spend $2,586,000,000 in fiscal 1937 as compared to $1,083,000,000 in fiscal 1935. In part this represents more conservative bookkeeping, in part mounting expenses for administering new laws such as Social Security, the Guffey Coal Act, etc. Completely forgotten was the 1932 Democratic campaign promise to reduce the regular cost of Republican government by the striking figure of 25% (TIME, Nov. 21, 1932).
Relief. It is no easy matter to spend billions and billions of dollars month after month at top speed. President Roosevelt has regularly overestimated his Administration's capacity in this respect. Of $10,569,000,000 which he foresaw the U. S. spending in fiscal 1934, only $6,745,000,000 was actually disposed of. Year by year afterward he overestimated the New Deal's spendings in only less conservative fashion. But with an election only ten months off this kind of conservatism no longer appeals to him. Said he last week: "The finances of the Government are in better condition than at any time in the past seven years. I say this because, starting with the autumn of 1929, tax receipts began a steady and alarming decline, while at the same time Government expenditures began a steady rise; today tax receipts are continuing a steady climb which commenced in the summer of 1933, whereas budget estimates for the next fiscal year will show a decreased need for appropriations." To make budget estimates show a "decreased need for appropriations," the President simply declined, for the time being, to make an estimate of the total cost of carrying unemployed through fiscal 1937. When fiscal 1936 closes $1,103,000,000 of this year's $4,000,000,000 work relief fund will, he estimated, be unspent. This amount will be obligated for various public works, etc., undertaken but not completed. Except for this odd billion the President included no relief funds in his budget estimates. Said the President simply: "We have too recently reached our goal of putting 3,500,000 people at work and the beneficial effects of this program and from increasing expenditures on public works cannot be foretold as accurately today as it can two months from now. ... I shall transmit [relief] estimates with far greater knowledge and, therefore, with greater accuracy in sufficient time before the adjournment of this session. . . ." Counting, therefore, on spending for relief in fiscal 1937 only $1,103,000,000, the budget showed a nominal deficit (exclusive of debt retirement) of $518,000,000, compared to an expected deficit of $2,682,000,000 for fiscal 1936. Thus unless $2,164,000,000 is spent in fiscal 1937 for WPA the deficit is going to be reduced. That WPA expenditures can be held to $2,000,000,000 is possible. But unless such appropriations are held to $921,000,000, which is not likely, the U. S. will actually spend more in fiscal 1937 than it is spending in fiscal 1936, will, in fact, spend more than it has yet spent in any year since fiscal 1919.
Bonus. The 99% probability that Congress will order payment of the Bonus this year was ignored by the President in his estimates of the Government's spending for fiscal 1936 and 1937. Only one indirect reference did he make to the Bonus: "If the Congress enacts legislation at the coming session which will impose additional charges upon the Treasury for which provision is not already made in this budget, I strongly urge that additional taxes be provided to cover such charges. It is important as we emerge from the Depression that no new activities be added to the Government unless provision is made for additional revenue to meet their cost." Taxes. Again the President announced: "No new or additional taxes are proposed." But the words were written before the Supreme Court declared AAA unconstitutional.
Public Debt. Two years ago the President, planning to spend some $17,000,000,000 in two years, estimated that the Public Debt would reach $31,834,000,000 by June 30, 1935. Since the New Deal in neither of those years succeeded in spending as much as it planned, the actual debt was only $28,701,000,000 on that date. In the current year spending is also expected to fall below last year's estimates. Hence Franklin Roosevelt's estimates last week were able to show that although deficits are continuing two years beyond the date he set for balancing the budget, the estimated debt for the end of fiscal 1937 will be $31,351,000,000, roughly half a billion dollars less than the estimate set two years ago for the end of fiscal 1935. However, because of the omission of WPA expenditures from the 1937 budget, it is likely that in June 1937 the actual debt of the U. S. will exceed the President's estimate.
Comparison. Most instructive example of the course of New Deal spending is offered by comparative figures, showing (in millions of dollars) the actual receipts and expenditures of fiscal 1935 along with estimates by the President for fiscal 1936 and 1937:
Expenditures 1935 1936 1937
"Ordinary" Expenses $1,083 $1,568 $2,586
Veterans 605 718 790
Interest on Debt 821 742 805
Tax Refunds 45 47 49
AAA 743 621 619
CCC 436 528 220
Emergency" Expenses 3,069 2,869 1,103*
Total Outlay 6,802 7,093 6,172*
Revenue 3,800 4,411 5,654/-
Annual Deficit 3,002 2,682 518/-
*The Government's fiscal year runs from July 1 through June 30. Fiscal 1936 began last July; fiscal 1937 begins next July.
*An imaginary item after the Supreme Court's invalidation of AAA.
*Just a starter, since no allowance is made for: 1) future work relief appropriations; 2) payment of the Bonus.
/-Includes upwards of half a billion in processing taxes not collectible.
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