Midsummer Inventory

The good war news last week insinuated its way even into the drab and cautious mathematics of the Bureau of the Budget. Emerging from his annual midsummer inventory, stocky, able Budget Director Harold Smith announced that at least $3 billion can now be shaved off U.S. war expenditures by the end of the fiscal year, June 1945.

Even so, Budget Director Smith was being professionally pessimistic. The $3 billion drop assumes only that the German war will be over some time between now and next June, and that the Japanese war will still be going on. A quicker finish to the German war, and expenditures are certain to plunge on down in a really substantial drop.

Yet the overall size of the biggest budget in U.S. history--$99 billion--will remain about as big as when Franklin Roosevelt first submitted it last January. Demobilization will stop Army paychecks for thousands of G.I.s, but the costs of mustering-out pay will be just beginning. Finally, the spending by UNRRA and other postwar agencies will go up, as the Army & Navy cuts down.

Budget Director Smith had other good news. The U.S. debt is not rising as fast as Franklin Roosevelt anticipated last January. Reason: the U.S. is taking in nearly $5 billion more in taxes than it expected to, thanks to 1) the new revenue laws, 2) "more experience in contract negotiation," and 3) higher income-tax returns than hesitant Henry Morgenthau dreamed of. Two months ago the U.S. national debt reached $201 billion; by next June it will be $251.3 billion--just $9 billion short of the legal limit (which Congress can always raise), but $6 billion less than President Roosevelt prophesied. Nonetheless, it is ten times as big a debt as in Andrew Mellon's day, when U.S. citizens still shuddered over the $25-billion debt piled up in World War I.

But, butted Budget Director Smith, the U.S. is now a $200-billion country (his estimate of U.S. 1944 income). Of the $200 billion, the Federal Government will take back $45 billion in taxes--six times as much as in 1941--while state governments will chew up another $9 billion. The U.S. citizenry will still have about $145 billion to spend, and only $100 billion of goods and services to spend it on. What is left over may still worry some editorial writers as an "inflationary gap," but it did not seem to worry Budget Director Smith. He took a contented look at price-and-wage control, at war-bond sales, and the natural American disinclination to pay a lot for a little, and satisfied himself that in "the last few months . . . the American economy has reached a state of balance." He took, however, a bureaucrat's look at the future: "This balance is of a very delicate nature and . . . would be destroyed if we should relax wartime controls too early."

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