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No. 86 "The 1937 Budget: An Analysis of a Proposed Riot of Extravagance Recommended to the Congress with Misleading Official Interpretations and Representing a Brazen Repudiation of the Economy Pledge in the Democratic Platform of 1932," January 13, 1936.
No. 86 "The 1937 Budget: An Analysis of a Proposed Riot of Extravagance Recommended to the Congress with Misleading Official Interpretations and Representing a Brazen Repudiation of the Economy Pledge in the Democratic Platform of 1932," January 13, 1936. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_86 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 86 "The 1937 Budget: An Analysis of a Proposed Riot of Extravagance Recommended to the Congress with Misleading Official Interpretations and Representing a Brazen Repudiation of the Economy Pledge in the Democratic Platform of 1932," January 13, 1936. American Liberty League. American Liberty League. Washington, D.C. 1936. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. AN INVITATION TO JOIN THE AMERICAN LIBERTY LEAGUE We extend to every American citizen who believes in the fundamental principles which gave birth to the Constitution of the United States an invitation to become a member of the American Liberty League. You may indicate your acceptance of this invitation by filling in the necessary information as to your name and address on the enrollment blank below and mailing it to American Liberty League, National Press Building, Washington, D. C. There are no fees or dues. If you are willing and able to give monetary help for the League's support your contribution will be appreciated, as our activities are supported entirely by the voluntary gifts of our members. ENROLLMENT BLANK Date_ I favor the principles and purposes of the American Liberty League and request that I be enrolled as a /regular } member. L*contnbutingJ Signature_ Name (Mr. Mrs. Miss) County â™¦As a contributing member I desire to give $_ to help support the activities of the League: Cash herewith--Installments as follows: _ THE 1937 BUDGET â˜… â˜… â˜… An Analysis of a Proposed Riot of Extravagance Recommended to the Congress with Misleading Official Interpretations and Representing a Brazen Repudiation of the Economy Pledge in the Democratic Platform of 193a AMERICAN LIBERTY LEAGUE T^ational Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. Document No. 86 January, 1936 The 1937 Budget When you have finished with this pamphlet please pass it on to some friend or acquaintance who might be interested, calling his attention to the membership blan\ on page 24. â˜… The budget for the fiscal year 1937, submitted by the President to the Congress on January 6, 1936, provides for the greatest orgy of peacetime spending by any nation in the history of the world. The estimates disclose a program marked by a riot of extravagance on every hand. Nowhere does there appear the slightest trace of a purpose to adopt the policy of economy pledged by the Democratic platform of 1932. The President's interpretations of the fiscal situation are misleading and even deceitful. In numerous respects the message and the voluminous mass of accompanying statistical data are designed to gloss over or conceal the true picture of a budget status which is unprecedented and highly disturbing. The President stresses decreased appropriations (not expenditures) and a smaller deficit, but the budget points to greatly increased expenditures (including funds from the gigantic two-year work-relief appropriation of last year) and an almost stationary deficit in the face of much larger revenues. The Government under the Securities Exchange Act compels private corporations to file unequivocal and complete information as to their fiscal affairs. If any corporation should offer a statement as deceptive and confusing as the President's budget message, it would be prosecuted under the penal section of the statute. Salient facts include the following: 1. Expenditures proposed for the fiscal year 1937, including a supplemental work-relief item, will exceed those of the record-breaking peacetime total of 1936 by a billion dollars or more. 2. The deficit is likely to be almost as great as in 1936 despite an estimated increase in revenue of almost $1,250,000,000. 3. The date of a balanced budget remains indefinite, although revenues have reached a volume far in excess of the normal total during the period of surpluses in the decade up to 1931. 4. Failure to include a new estimate for work-relief leaves in an uncertain status the largest single item of the budget. 5. The stated purpose to ask later for work-relief funds, probably upwards of $2,000,000,000, obviously means an attempt to rush through an appropriation during the closing days of the session. 3 6. Deferred consideration of the work-relief appropriation is designed not only to prevent adequate discussion of the whole question of policy but also to avert a much-needed investigation of the blunders, inefficiency and irregularities of the program to date. 7. "Regular" expenditures have mounted far above the level of predepression costs. 8. A new permanent bureaucracy created by recent legislation increases annual costs by hundreds of millions of dollars. 9. Greater executive authority is sought under proposed legislation permitting shifting of funds within departments. 10. Drastic reduction in expenditures all along the line is not only possible but is the most urgent duty facing the Congress. A Political Perversion of Facts The introductory part of the President's budget message consists of a political exhortation in which he presents a distorted view of the underlying facts respecting the present budget situation. The President baldly and inaccurately attributes the large increase in revenues to a combination of New Deal policies relating to banks, agriculture, public works, home building, work-relief, interest rates, foreign trade, Government credit, industrial wages and speculation. The many legislative acts of this administration, he says, were all predicated on two interdependent beliefs: (1) that the measures would immediately cause a great increase in the annual expenditures of the Government, many of the expenditures being in the form of loans to be ultimately repaid, and (2) that "as a result of the simultaneous attack on the many fronts I have indicated" the receipts would sharply rise. He emphasizes the fact that the Revenue Act of 1935, which was the "soak-the-rich" measure, has not as yet produced any returns and will yield only the relatively small amount of $222,-000,000 during the fiscal year 1937. Without specifically saying so he conveys the impression that the large increase in revenues from about two and one-quarter billions in 1932 and 1933 to an estimated five and two-thirds billions in 1937 has come about without any increase in the tax burden. "I emphasize," says the President, "that the great bulk of increased Government income referred to above results from increased earning power and profits throughout the nation and not 4 from the new taxes imposed by the Revenue Act of 1935." The fact of the matter is that an upward revision of tax rates has taken place each year during the past four years. Income tax rates on both individual and corporation incomes have been raised until they are higher than in wartime. Estate taxes have been advanced far beyond the war levels. The numerous and varied new excise taxes are more onerous than during the War. Many of the new and higher taxes, such as on estates and incomes, were not reflected in additional revenues for a considerable time after their enactment. The very high taxes are now producing results and with a gradual improvement in business will show even greater yields. It is significant that the most pronounced industrial slump during the present administration followed the adoption of NRA codes and the most sustained advance commenced with the outlawing of the NRA by the Supreme Court. By reason of increased business activity that began after that decision and still continues, the yield from income taxes under the much higher rates is estimated for 1937 at nearly two and one-half times the amount of 1933. Miscellaneous internal revenue is estimated for 1937 at more than three times the total of 1933. Included in the revenues estimated in the budget for 1937 are $354,000,000 of processing taxes, now invalidated by the Supreme Court's decision on the day of the presentation of the budget message, and $433,000,000 from the new taxes under the Social Security Act of 1935. Tax Burden Very Great The increased revenues reflect the heaviest tax burden ever imposed upon the American people. It is not strange that the President, both in his regular annual message and his budget message, should give assurance that no new taxes are contemplated, unless to deal with the AAA situation or to meet new authorizations such as, presumably, for the soldiers' bonus. Inasmuch as this is a campaign year, there is probably reason to believe that the promise of no increase in taxes may be observed. Yet there was a similar promise a year ago and when the Congress was about to adjourn in late June a "soak-the-rich" tax act was suddenly presented by Mr. Roosevelt in the effort to meet the political menace of Huey Long. In minimizing the effect of the Revenue Act 5 of 1935, which he says made only "slight increases" in taxes on large individual and corporation incomes, excess profits, capital stock and estates, the President fails to point out that the law was designed primarily to strike a blow at large wealth and big business. The first point made by the President, that the New Deal measures were intended to cause a great increase in annual expenditures, is in direct conflict with his platform and campaign pledges to reduce Government costs by 25 per cent. Also it directly conflicts with, the following quotation from his economy message submitted on March 10, 1933: "I give you assurance that if this is done (meaning passage of the Economy Act) there is reasonable prospect that within a year the income of the Government will be sufficient to cover the expenditures of the Government." The suggestion as to the recoverable portion of Government outlays is one which is being stressed repeatedly by administration spokesmen. Study of the detailed tabulations in which expenditures are classified as non-repayable and repayable makes ridiculous any real claim that more than a small fraction of the total outlay will be recovered, at least at any early date. Out of a total of $10,819,881,696 expended for "recovery and relief" up to October 31, 1935, $6,756,841,463 is classed as non-repayable and $4,063,040,233 as repayable. However, of the latter item $1,231,280,838 is tied up in capital stock of various Government corporations and a considerable part of the remaining investments and loans is frozen in such a way as hardly to be classed as quick assets. For example, a $50,000,000 investment to date in Boulder Dam is theoretically supposed to be repaid as to the part chargeable to power in 50 years. More than $27,000,000 is invested on similar terms in reclamation projects. Many millions have been loaned for housing, subsistence homesteads and other projects on easy terms. It appears unlikely that there will be net repayments of as much as $1,000,000,000 during the next few years. Under policies pursued, repayments from loans by the Reconstruction Finance Corporation have been diverted to nonrepayable relief expenditures or to new loans. Budget Totals The Supreme Court's invalidation of the AAA processing taxes and agricultural benefits has created confusion with respect to these items in budget receipts and expenditures. In view, however, of the apparent purpose of the administration to find other means of obtaining revenues to pay subsidies to agriculture, no attempt is made to eliminate the invalidated items from budget figures herein given. The following tabulation includes the essential points of the estimates for the current fiscal year 1936 and for the next fiscal year 1937 as given in the budget accompanying the President's message: General and Special Accounts Receipts 1036 1937 Inccme Tax............................ $1,434,112,000 fl,942.600,000 Miac. Internal Revenue................ 1,911,691,000 2,650,214,000 Processing Taxes........................ 529,042,000 547,300,000 Customs ............................... 353,191,000 354,000,000 Miscellaneous Receipts................. 182,757,946 160,103,650 Total Receipts....................... $4,410,793,946 $5,654,217,650 Expenditures General (Daily Treasury Statement classification) ....................... $4,112,737,151 $4,999,486,738 Supplemental items.................... 80,000,000 600,000,000 Recovery and relief.................... 3,167,564,187 1 928,119,632* Unallocated emergency funds.......... 275,000,000 225,000,000 Total Expenditures.................. $7,645,301,338 $6,752,606,370* Deficit .............................. 3,234,507,392 1,098,388,720" Trust Accounts Receipts ............................. $286,435,409 $520,350,685 Expenditures ........................ 281,877,430 507,301,454 All Accounts Grand Total Receipts (General, Special and Trust Accounts)...... $4,697,299,355 $6,174,568,335 Grand Total Expenditures (General, Special and Trust Accounts)...... 7,927,178,768 7,259,907,824* Net Deficit (All Accounts).......... 3,229,949,413 1,085,339,489* Gross Public Debt at end of fiscal year .................................$30,933,375,017 $31,351,638,737* * Without new work-relief item for 1937. The totals as given above are from tabulations in the budget on the basis of the Daily Treasury Statement. They differ somewhat from totals on a new basis of classification in the President's budget message. The President uses totals for "regular" purposes which do not agree with the totals for "general" purposes under the Daily Treasury Statement classification. The expenditure totals in the tabulations are exclusive of postal costs defrayed from postal receipts. The trust accounts do not include the profit from the revaluation of gold. Figures for earlier years comparable to those used above will be found in the American Liberty League's Document No. 71 on Budget Prospects, published in October, 1935. 7 1937 Totals Show Increase One of the most curious statements in the President's message is that the budget estimates "show a decreased need for appropriations." Whatever the situation may be as to appropriations, it is the expenditure totals which are significant. The attempt to divert attention from expenditures to appropriations is an example of the misleading character of the message. Even if the President does not intend to ask for another $4,880,000,000 relief appropriation, the "regular" budget will be the largest on record as will total expenditures. The items for expenditure in the fiscal year 1937 total $6,752,606,370 in general and special accounts and $507,301,454 in trust accounts, a grand total of $7,259,907,824. The President intimates that the item for work-relief to be added later in the session may be as much as $2,000,000,000. Adding this $2,000,000,000 brings the total in general and special accounts to $8,752,606,370, which with the trust accounts makes a grand total of $9,259,907,824, more than $1,330,000,000 in excess of the corresponding total for 1936. On a basis of $2,000,000,000 for work-relief, expenditures in the general and special accounts will exceed by $1,107,305,032 those for the current fiscal year of 1936. In the light of this huge increase the assertion as to the "decreased need for appropriations" is farcical and intentionally deceptive. The total of expenditures for general and special accounts is estimated for 1936 at $7,645,301,338, which is greater than in any other year in the history of the nation except the War years of 1918 and 1919. Trust accounts for the year 1936 are estimated at $281,877,430 which bring the grand total to $7,927,178,768. While the general and special account totals are those ordinarily used and with which the public is most familiar, the trust accounts are merged with them in the totals for all years when listed in annual reports of the Secretary of the Treasury. When comparisons are made with earlier years, it is therefore necessary to include trust accounts. Receipts and expenditures in the trust accounts ordinarily are not far apart, but any surplus or deficit must be taken into account in figuring the Treasury's net surplus or deficit. The total in general and special accounts of $6,752,606,370 for the year 1937 includes $4,999,-486,738 for general purposes to which is added $600,000,000 in supplemental items, including amounts for the administration of the Social Security, Bituminous Coal and Railroad Retirement Acts, for which detailed estimates are not ready. There also is $928,119,632 under "recovery and relief" from specific allotments from the $4,880,000,000 fund and $225,000,000 of this fund unallocated. Deficits Assertions in the budget message regarding deficits are misleading. The President refers to "steadily decreasing deficits." With simulated pride he says that if the work-relief appropriation does not exceed $2,136,000,000, the deficit in 1937 will be no greater than in the current year when it is estimated at $3,234,000,000. The current deficit is now estimated to be somewhat less than last year. The President says he does not anticipate that the need for work-relief will exceed $2,136,000,000 and indicates that he will try to keep it below that amount so as to maintain a record of "steadily decreasing deficits." What the President fails to point out is that receipts in general and special accounts are estimated at $1,244,000,000 more in 1937 than in 1936, and that the receipts in 1936 are estimated at about $610,000,000 more than in 1935. If economy were the prevailing policy there would be little if any deficit in 1937. If expenditures continue to increase almost as rapidly as receipts, which is the situation at present, there will never be a balanced budget. The estimate of $1,098,388,720 as the deficit in general and special accounts for the year 1937 is misleading in view of the failure to include a work-relief item. While it is stated in the message that the actual deficit will be this sum plus the work-relief appropriation, the use of the relatively small total in the official tabulations has tended to give a wrong impression. The Public Debt The public debt is certain to continue to mount. Instead of an estimated gross total of $31,351,638,737 on June 30,1937, the actual debt will be this amount plus whatever money may have to be borrowed for work-relief and the bonus. If the administration's program is carried out, the debt by the end of the next fiscal year will be considerably in excess of $33,000,-000,000. This will be more than twice the debt of $16,185,308,299 on June 30, 1930, the beginning of the period of deficits. The year 1937 will be the seventh successive year in which there has been a deficit and an accompanying increase in the public debt. The Government is responsible not only for payment of principal and interest on its outstanding securities which are embraced in the public debt, but also under the present administration it has assumed contingent liabilities in connection with farm and home mortgage refinancing. The contingent liabilities for principal and interest for securities actually issued up to June 30,1935, totaled $4,150,655,429.96. This includes $2,666,576,480.21 for securities issued by the Home Owners' Loan Corporation, $1,233,090,-547.93 for securities issued by the Federal Farm Mortgage Corporation and $250,988,401.82 for securities issued by the Reconstruction Finance Corporation. The RFC has authority to issue its own securities to the public as do the Home Owners' Loan Corporation and the Federal Farm Mortgage Corporation. The practice followed, however, has been for this corporation to give its notes to the Treasury which obtains funds through regular financing operations. The RFC notes held by the Treasury and reflected in the public debt totaled $3,655,000,000 on June 30, 1935. The present actual contingent liabilities of the Treasury are less than half the authorized total. By reason of an assertion by the President in a speech at Atlanta on November 29, 1935, that bankers at the time of the bank holiday had told him that the public debt might safely mount to from $55,000,000,000 to $70,000,000,-000, debt possibilities have been much discussed in recent weeks. The opinion of the best authorities is that the important factor is whether the debt continues to increase under such conditions that its status is marked by uncertainty. If the budget is balanced and the debt remains stationary, a higher level than at present might perhaps be maintained. Continued deficits and constant uncertainty as to future policies unquestionably would seriously undermine the credit of the Government before any such total as $70,000,000,000 was reached. While the British debt per capita is greater than in the United States, it has not increased in recent years. Great Britain has attained a remarkable 10 degree of recovery under a policy of a balanced budget. The Bonus While nothing is said in the message about immediate payment of the soldiers' bonus, it is assumed that the President was referring to it when he said that "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." Passage of a bonus bill will mean an addition to the already heavy taxes or else a considerably larger deficit. There can be no doubt that the movement for immediate payment of the bonus has reached its present formidable stage by reason of the profligate expenditure of Government funds for all sorts of purposes of doubtful value. Members of the Congress naturally have been reluctant to vote against a bonus bill while voting other billions for projects perhaps even less worthy. Work Relief One of the most important questions before this Congress is that of relief. In his budget message the President makes it clear that it is his purpose to continue his policy of last year under which direct relief payments by the Federal Government have been replaced by work-relief expenditures at a vastly increased cost. He does not even suggest that the question of policy be considered by the Congress, within whose province it properly falls. Experience under the work-relief program offers no justification for this more costly plan in preference to direct relief. From all parts of the country has come evidence that the work-relief program has been a gigantic failure. As was predicted by those who criticized the Work-Relief Act last year, the expenditure of the huge fund will be followed by a request for another such fund. When the process of pouring out money will end is not clear. Certain it is, that expenditures both for direct relief and work-relief have been so handled as to create a situation wherein the Government will find it difficult to withdraw from this field. In view of the apparently settled conviction of the President that the work-relief program must be continued at least for another year, it is u absurd to suppose that the item should not be included in the budget at this time. If there were a budget request for a work-relief fund, hearings might take place at once before the appropriation committees with a view to an exhaustive study of the entire problem. Months might profitably be spent in consideration of the course to be pursued in the future and in an investigation of what has taken place thus far. Consideration of questions of policy might go forward even though it were understood that the administration might later change a tentative estimate of the amount needed. Doubtless the presentation of a supplemental estimate for work-relief in the spring will be accompanied by a plea for quick action on the ground of a necessity to replenish funds in many localities. With the political conventions imminent, the Congress will be in a hurry to get away. Little time will remain for proper deliberation. The situation will be more conducive to "rubber-stamp" action than when the President sought immediate approval of the $4,880,-000,000 appropriation in January, 1935, on the ground of dwindling relief funds. In 1935, while the House complied with the administration's orders for quick action without amendment, the Senate wisely took its time. The President knows that under the two-year authority in the present Work-Relief Act he is not forced to submit questions of policy to the Congress. By waiting as long as possible to ask for additional funds, he hopes to avoid a reopening of the relief issue. The administration should not be permitted to evade its responsibility both to account for what has taken place during the past year and to ask instructions with respect to the course to be pursued during the next year. Regular Expenditures A significant feature of the present budget is the abandonment of the pretense that expenditures for regular activities of the Government, as distinguished from the emergency activities, are being held below the pre-depression total. The administration has definitely shifted the Agricultural Adjustment Administration and the Civilian Conservation Corps from the classification under "recovery and relief" to the "general" classification. Recently, before the Supreme Court's adverse decision, the President assumed to announce that the AAA would be a permanent rather than an emergency creation. While the 12 original legislation was presented as a temporary measure, it permitted the control programs to be continued until such time as the President proclaimed the end of the emergency. The Civilian Conservation Corps will expire under the present law on March 31,1937, but the President intends to seek legislation continuing it permanently. The 1937 appropriations will include $405,-000,000 for a Federal public works program. This amount will be appropriated directly to the regular agencies which have charge of construction instead of being allotted by the President from special funds and classed as emergency items. The public works projects to be appropriated for do not represent all that might properly be classed as regular expenditures. Under the change in classification initiated in this budget and as used in the President's message, "regular" expenditures, exclusive of trust funds, in the year 1937 will amount to $5,649,-000,000. This is an increase of $2,205,000,000 over 1934 on the basis of the comparative total for the earlier year as adjusted in the message to accord with the new classification. With this latest shift in classification the official documents of the past year show three sets of figures for the ordinary costs of the Government, as distinguished from emergency outlays, for the years 1934, 1935 and 1936 and two sets for 1937. The year 1934 had been completed long before any of the three sets was published. Advance estimates therefore were not involved. Nevertheless, there are striking differences among the three totals for 1934. While the President's message now says that "regular" costs in 1934, as distinguished from those for "recovery and relief," were $3,444,000,000, his message a year ago used a "regular" total of $2,462,000,000. A tabulation in the new budget on the basis of the Daily Treasury Statement classification shows that "general" expenditures as distinguished from those for "recovery and relief" amounted in 1934 to $3,100,914,534. A little matter of a billion dollars is involved in the difference between the high and low figures! The different totals for other years appearing respectively in the President's budget message, his message a year ago and in the Treasury Statement classification are: 1935, $4,306,000,-000, $2,748,000,000 and $3,719,295,494; 1936 (est.), $4,776,000,000, $3,302,000,000 and $4,202,-737,151; and 1937 (est.), $5,649,000,000 (message) and $5,999,486,738 (Treasury basis). 13 Anyone who takes the trouble to dig into the figures will find that under the President's new classification "regular" expenditures in 1934, 1935 and 1936 exceed receipts. He has thus destroyed the fiction maintained heretofore that the budget has been balanced as to regular'ex-penditures. For 1937 receipts exceed "regular" costs by only $5,000,000. In view of the arbitrary and even inconsistent policies pursued by the administration in allocating expenditures for regular and emergency purposes, there is offered below a new classification of Government costs. It is designed to show the expansion of activities of the regular establishment of the Government. Comparative costs of the Government are given for the fiscal year 1924, which had the lowest total of any post-war year; 1932, which was just ending when the Democratic party in its convention at Chicago adopted a platform pledging a 25 per cent reduction in expenditures; 1935, which is the last year under the present administration for which final figures are available; and 1937, for which estimates are presented in the new budget. "Regular" expenditures under this classification include all activities of agencies which were in existence before the depression and of new agencies which are in fact or have come to be regarded as permanent. The AAA and the Civilian Conservation Corps have been shifted from the emergency column to the regular column as in the new budget. Minor agricultural activities also have been shifted. Other shifts from the emergency to the regular grouping, which are not in accord with budget or Treasury tabulations, affect highway construction, which for years has been conducted under the Department of Agriculture, and therefore is an ordinary activity, public building construction under the Treasury Department, river and harbor improvements under the army engineers, Boulder Dam and reclamation construction under the Interior Department, all construction under the Tennessee Valley Authority, and similar items which are of the same character as carried on before an emergency or "recovery and relief" budget was set up. In the official groupings funds for a part of each of these construction activities, which have been appropriated directly to the departments, have appeared as "regular" while the part allotted from emergency funds has been listed under "recovery and relief." All allotments to regular depart- 14 ments as well as for national defense and veterans are added to their ordinary appropriations in the classification given below. The items remaining under the emergency grouping are direct relief, work-relief, public works under the Public Works Administration, loans by the RFC and miscellaneous allotments, to new alphabetical agencies. It is necessary to include trust funds for all years in order to make the figures comparable to those for 1924. The effect is to increase totals somewhat but to reduce deficits. Postal expenditures met from postal receipts and the gold profit, which is carried by the Treasury in the trust accounts, are omitted. The tabulation of expenditures, which is entirely unofficial but altogether accurate, follows: It will be noted from the above table that all Government costs amounted to about three and one-half billions in 1924. The costs of the "regular" establishment as here classified had increased to four and one-half billions in 1932 when the Democrats promised a reduction of 25 per cent. Despite the campaign pledge, the present administration increased "regular" costs to nearly five and one-half billions in 1935. In the fiscal year 1937 "regular" costs will be up to more than six and one-half billions, or three billions more than in 1924. Such allotments as may be made from additional work-relief funds for "regular" purposes will further increase the total. Expenditures for veterans will be almost twice as great next year as in 1924. The sharp reductions made immediately after the present administration took office have been almost wholly nullified although the total is still below that for 1932. Costs of national defense are far above what they were at the beginning of the administration. The departmental item has been swelled for 1937 by costs under the Social Security Act and other new laws, as well as by the CCC. The total for special agricultural purposes for 1937 is a net figure reduced considerably from the gross total by repayments in credit activities. Increases in Departmental Costs Another tabulation is given herewith in which the increase or decrease in expenditures by regular establishments from the fiscal year 1933, which was divided between the Hoover and Roosevelt administrations, to the current fiscal year 1936 is shown. The totals include both regular appropriations to the departments and amounts allotted to them from special funds. The following tabulation, also unofficial, shows expenditures of certain regular establishments in 1933 and 1936 and the per cent of increase or decrease: Percent Increase or 1933 1936 (Est.) Decrease Legislative Establishment... (21,477,373 (23,783,030 11 Executive proper .......... 369,113 431,650 17 State Department .......... 15,225,569 19,462,700 28 Treasury Department (In- rlucling Public Huilding).. 267,504,959 215,942,200 19 Department of Justice..... 44,088,327 35,750,000 19 Inicrior Drpartmcm 'including Boulder Dam, Reclamation Projects).. 74,579,717 177,303,400 138 Department of Agriculture (Incli.dmi; lligl.nav (instruction) ................ 250,981,139 381,810,400 52 Department, of Commerce . 45,968,153 36,421,320 21 Department of Labor..... 13,677,842 24,796,100 81 Regular Independent Ot:;, ,s and Commissions other than Veterans' Administration ................... 45,237,407 49,001,869 8 National Defense .......... 667,892,953 905,068,588 36 16 Budget Supervision One of the steps taken by the President toward regularization is to recommend in his budget message that legislation be enacted to bring all agencies of the Government, including Government-owned and Government-controlled corporations, within the authority of the Director of the Budget with respect to apportionment of appropriations and other funds available to them. Such action would at least provide some measure of coordination and supervision of administrative expenditures. The President lists in his message 20 agencies which have been brought under the Budget Bureau by Executive order. There are a few glaring omissions from this list. Neither the Works Progress Administration nor the Resettlement Administration, the two agencies which have hired the greatest number of new employees during recent months, has come under the Budget Bureau. The budget contains a classification of the character and objects of estimated obligations under appropriations (not expenditures) sought for the year 1937. Out of a total of $5,166,280,-953.75, which is considerably less than estimated expenditures because of funds remaining available from the $4,880,000,000 work-relief appropriation, $1,500,451,436 is for current expenses; $2,150,593,686 for fixed charges, including interest on the public debt, pensions, World War allowances, grants, subsidies and contributions; $793,354,826 for rights and obligations, including public debt redemptions and purchases, investments, treaty obligations, repayments of deposits, refunds, awards and indemnities; and $691,499,957 for acquisition of property. The Government Payroll Another budget classification gives total expenditures for salaries of civil and military employees of the Government during the years 1935, 1936 and 1937 as follows: 1935 1936 (Est.) 1937 (Est.) Civil ............. $1,171,331,098 (1,391,220,181 (1,326,893,825 Military .......... 207,807,353 228,150,717 245,582,634 Total ........... (1,379,138,451 (1,579,370,898 (1,572,476,459 In view of the fact that detailed estimates have not as yet been prepared for appropriations under the Social Security Act, the Bituminous Coal Act and the Railroad Retirement Act, it is assumed that the payroll totals for the new 17 agencies created under them are not included in the amounts given above. Under new legislation the permanent as well as the temporary bureaucracy has been greatly expanded. In the President's message is the following tabulation of rough estimates for appropriations required in 1937 to administer new legislation enacted during the last session of the Congress: Social Security Act....................... $479,689,840 Railroad Retirement Act.................. 47,645,000 Bituminous Coal Act..................... 1,155,000 Amendments pension laws................. 45,581,132 Postal 40-hour week....................... 27,326,420 Elimination diseased cattle................ 17,500,000 Soil conservation ........................ 27,500,000 Agricultural research and extension........ 11,000,000 Reduction interest rate, Federal land banks 10,065,075 Total................................. $667,462,467 Estimated receipts from taxes under the Social Security Act, the Bituminous Coal Act and the Railroad Retirement Act for 1937 are $547,100,-000. While these acts levy taxes sufficient to finance their operation, the taxes constitute a permanent extra burden upon industry which is reflected in costs of industrial products. The regular cost of Government is increased by the amount of these items. To such extent as the taxes reduce profits and incomes, the amounts upon which the Government may levy taxes to obtain its ordinary revenues are reduced. It probably is not generally realized that eventually the taxes under the Social Security Act will reach billions annually. Greater Executive Power Sought In almost every recommendation to the Congress under the present administration greater power has been sought for the executive branch of the Government. The trend has been toward a personal government rather than a government of laws. One of the proposals in the President's budget message is for legislation to authorize transfers between appropriations within the same department. According to the President, such a provision will "add a measure of administrative flexibility and will tend to promote economical execution of the program as a whole." While it is true that greater flexibility would be given, the provision would be an entering wedge toward a further breaking down of the system of specific appropriations by the Congress. It would 18 reduce the responsibility of the Congress and make possible a still greater avoidance by the executive branch of the necessity of submission of new proposals to legislative scrutiny. The bungling job done by the executive branch in the allotment of funds under the Work-Relief Act has emphasized the desirability of advance investigation by congressional committees. In that case the funds were earmarked in a general way but with authority to the President to shift funds from one class of projects to another. The final allotments bore scarcely any resemblance to the allocations in the law. A Balanced Budget No amount of sophistry can justify a continuance of enormous expenditures on the existing scale. The "spending" method of promoting recovery has proved wasteful and has involved an undue burden upon the taxpayers. Policies designed to stimulate private industry rather than to restrict and harass it will be most effective in assuring a continuance of the upward trend which has been in progress since the decision of the Supreme Court in the NRA case. The budget can be balanced at an early date but no disposition to do so is shown. The increase in expenditures at a rate almost as great as the increase in revenues has become a national scandal. The President has failed to provide a balanced budget for 1937 and his policy offers scant hope for 1938. The first step should be an abandonment of work-relief, temporary substitution of direct relief and subsequent loans to such states as are unable to assume their proper responsibilities. The next step should be an investigation by congressional committees of the entire governmental structure and Congress should take advantage of the results thereof and of studies previously made with a view to attainment of the objectives pledged by the Democratic Party in the 1932 campaign and supported and emphasized by Mr. Roosevelt as a candidate. Under such a program expenditures can be brought close to a balance with revenues in 1937 and a complete balance can be assured in 1938. A balanced budget would give the nation the surest foundation for permanent recovery through restoration of confidence, a lightened tax load, efficiency and economy in governmental affairs and an abrupt halt in present inflationary trends of a menacing character. 19 PAMPHLETS AVAILABLE Copies of the following pamphlets and other League literature may be obtained upon application to the League's national headquarters: Statement of Principles and Purposes American Liberty League Its Platform The $4,880,000,000 Emergency Relief Appropriation Act The Bonus Inflation The Thirty Hour Week The Holding Company Bill The Bituminous Coal Bill Price Control The Labor Relations Bill The Farmers' Home Bill The TV A Amendments The Revised AAA Amendments The President's Tax Program Expanding Bureaucracy Lawmaking by Executive Order New Deal Laws in Federal Courts Potato Control Consumers and the AAA Budget Prospects Dangerous Experimentation Economic Planning Mistaken But Not New Work Relief The AAA and Our Form of Government Alternatives to the American Form of Government A Program for Congress The National Labor Relations Act Summary of Conclusions from Report of the National Lawyers Committee Straws Which Tell An Open Letter to the President By Dr. Neil Carothers How to Meet the Issue Speech by W. E. Borah The Duty of the Church to the Social Order Speech by S. Wells Utley The American Bar The Trustee of American Institutions Speech by Albert C. Ritchie Two Amazing Years Speech by Nicholas Roosevelt Legislation By Coercion or Constitution Speech by Jouett Shouse The Imperilment of Democracy Speech by Fitzgerald Hall The Spirit of Americanism Speech by William H. Ellis The Test of Citizenship Speech by Dean Carl W. Ackerman Today's Lessons for Tomorrow Speech by Captain William H. Stayton "Breathing Spells" Speech by Jouett Shouse The Duty of the Lawyer in the Present Crisis Speech by James M. Beck The Constitution and the Supreme Court Speech by Borden Burr The Economic Necessity in the Southern States for a Return to the Constitution Speech by Forney Johnston The National Lawyers Committee of the American Liberty League Speech by Ethan A. H. Shepley Our Growing National Debt and Inflation Speech by Dr. E. W. Kemmerer Inflation is Bad Business Speech by Dr. Neil Carothers The Real Significance of the Constitutional Issue Speech by R. E. Desvernine Arousing Class Prejudices Speech by Jouett Shouse The Fallacies and Dangers of the Townsend Plan Speech by Dr. Walter E. Spahr 20 21