Eccles on Economics

Fiscal 1940 will not have been swaddled in Franklin Roosevelt's budget message until this week, but its pre-natal cries promised a worthy successor to fiscal 1939. the bouncingest budget ($8,985,000,000) of all. They brought worrying to the bedside such influential Democratic physicians as John Nance Garner, South Carolina's Jimmy Byrnes, Virginia's Harry Flood Byrd. In Boston last month Senator Byrd expounded his worries about spending which he blamed on the "crackpot" .theories of Marriner Stoddard Eccles, chairman of the Federal Reserve Board. This week Chairman Eccles, a banker who favors pump-priming within limits, answered by a letter which he gave to the press, lecturing Critic Byrd and the nation on "the pertinent facts" about the Budget, Taxes, Debt.

"The pertinent facts," according to Mr. Eccles, "are the volume of total debt in the country, the interest on that debt, and the income out of which interest may be paid." Chief Eccles' arguments:

Total Debt, public and private, "is no greater today than it was in 1929." All that the present all-time high national debt of $39,406,000,000 means is that the Government is borrowing and using "otherwise idle funds of individuals and corporations. Private enterprise has been in no position to employ profitably anywhere near the total of the country's savings.

"Interest ... on the Federal debt amounts to only a little more than 1% of our national income. . . . Owing to the decline in the rate of interest, the total of interest payments today is far less than in 1929."

Income, on the other hand, "out of which debts are serviced," increased $30,000,000,000 between 1932 and 1937. "Have you not overlooked the fact that as national income increases, tax revenues increase, even without a rise in tax rates? . . . Tax receipts of the Federal Government increased from $2,080,000,000 for the fiscal year ending June 30, 1933 to $6,242,000,000 for the fiscal year ending June 30, 1938.*"

Mr. Eccles also proceeded to expound his economic theories by asking Mr. Byrd questions:

"Do you think it was 'natural forces' that produced the recovery after 1933? ...

"Are these additions to our national wealth, additions resulting from public expenditures that are based upon increase of public debt, more 'wasteful' than the expenditures in the late twenties, based upon private debt, whereby billions of dollars were diverted to uncollectable foreign loans and to build at inflated prices huge skyscrapers, office buildings and apartment houses, many of which have never been sufficiently occupied to maintain the investment?"

*Not, however, without new and increased taxes.

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