Budget Message

One of the dullest publications of Government Printing Office is The Budget of the United States Government. In it inveterate collectors of useless information may occasionally turn up the fact that $5,897-38 was spent to send the Marine Band to the G. A. R. encampment; or that an unexpended appropriation of $5,004.25 was reappropriated to buy land for landless California Indians. But the meat of this fat volume is its introduction written by the President and dispatched to Congress as his annual Budget Message.

For 1938. Before taking up the budget of the next fiscal year (1939) in a special message read to Congress last week the President reviewed the budget for fiscal 1938 ending next June. Revising his figures on the current budget for the fourth time since he predicted a "layman's balance" a year ago, President Roosevelt estimated receipts at $6,320,000,000, expenditures at $7,408,000,000. Result: a 1938 net deficit of $1,088,000,000. The change in the past year from an estimated balance to a billion-dollar deficit was caused largely by an overestimate of income tax revenues, an underestimate of the possibilities of Recession.

For 1939, the new budget, the forecast for receipts was $5,919,000,000, for expenditures $6,869,000,000. Result: a 1939 net deficit of $950,000,000. On the outgo side the President tentatively set down Defense at just under a billion, Relief at just over a billion, then added: "Due to world conditions over which this Nation has no control, I may find it necessary to request additional appropriations for national defense. Furthermore, the economic situation may not improve--and if it does not, I expect the approval of Congress and the public for additional appropriations if they become necessary to save thousands of American families from dire need." Thus 1939's net deficit of $950,000,000 is not an estimate of probabilities, is in fact little more than a pious hope, for the two biggest expenditure items, Defense and Relief, are left open, will probably be upped.

Trend. Only comfort the President could give Congress was that the trend of deficits had turned downward from the 1934 peak. But 1939 will bring the Government's ninth consecutive deficit--three of them Herbert Hoover's, six Franklin Roosevelt's. The deficits for fiscal years in millions of dollars:

1931 481

1932 2,735

1933 2,602

1934 3,630

1935 3,002

1936 2,687*

1937 2,707

1938 1,088

1939 950

Actually if expenditures for Defense and Relief exceed the tentative estimates--or revenue falls short of expectations--by $150,000,000, the trend will be reversed, the deficit will again start up.

New Level. Before the War the cost of the Federal establishment ran about three-quarters of a billion annually. The War left it perched on a four-billion level. Depression has jacked it up once more. In his opening message to Congress the President said it was impossible to reduce Federal expenditures "much below $7.000,000,000 a year without destroying essential functions or letting people starve."

Outgo. In the 1939 budget, as in all budgets, the biggest single item is the cost of past and future wars. The Army and Navy will get at least $991,000,000. Veterans' pensions and benefits come to $539,000,000. And $976,000,000 will go for interest on the public debt, nearly half of which was contracted in an attempt to make the world safe for democracy.

The rest of the public debt was contracted in the attempt to make the U. S. safe for democracy--a good bit of it by Herbert Hoover. This attempt is still going on, and in the 1939 budget the main democracy-saving items include a minimum $1,226,000,000 for Relief including the C. C. C.; $586,000,000 for farmers; $933,000,000 for Social Security and rail-road retirement; $619,000,000 for public works, which includes everything from post offices to TVA. The actual cost of operating the permanent civil establishment--Congress, the executive offices, the judiciary, all departments except War (military) and Navy, all independent boards & bureaus--is a mere $760,000,000.

Income. Biggest single source of Federal revenue is income taxes. In 1939 it is hoped that income taxes will yield $2,414,000,000. The other big source is miscellaneous internal revenues, budgeted for 1939 at $2,190,000,000. The chief items under this heading are liquor taxes ($565,000,000), tobacco taxes ($529,000,000), gift, estate and capital-stock taxes ($461,900,000) and manufacturers' excise taxes ($423,000,000). Customs yield a niggardly $390,000,000. Wonderfully productive are Social Security taxes, which will amount to $599,000,000.

Economy. On only one class of expenditures did the President request Congressional economy--Pork. He wants Congressmen to forego some of the usual appropriations for post offices, highways, reclamation projects, rivers & harbor developments.

National Debt. During the 19205 the debt was cut from its post-War high of $24,000,000,000 to less than $17,000,000,000. By the end of fiscal 1939 the estimated debt will be $38,528,000,000. This is an increase of $21,727,000,000 since 1931 which represents the total of the nine accumulated deficits.

Non-Inflation. Having discovered an almost inexhaustible source, Social Security funds, from which to borrow money the Treasury is venturing less and less into the open market. During fiscal 1939, the Government will have $1,163,000,000 from various trust, old age, pension and retirement funds to invest in its own securities. As it is, the public hoi is only some $30,000,000,000 of the national debt, the rest being salted away by the Federal Reserve System and other Government agencies. And henceforth unless the deficits grow considerably bigger, debt m the hands of the public will not increase. The result of this Government self-financing is that credit inflation has ceased although deficits continue. For the direct inflationary effect of deficits is caused by the necessity of the Treasury to swap its bonds for bookkeeping bank credit.

-Exclusive of soldiers' bonus payments. With them included the deficit for 1936 was $4,361,000,000.

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