BALANCE WHAT BUDGET?
Chase, Stuart
Balance What Budget? By STUART CHASE GOVERNOR BRICKER of Ohio has gone into the silences and emerged with the novel idea that the first thing to do after the war is to balance the budget. This is...
...3. Active debt, for which taxpayers get self-liquidating assets, such as the TVA, toll bridges, perpetual yield forest projects, Boulder Dam...
...The several administrative departments spend what they can...
...Technically, it is a preview of what he hopes to get in the way of taxes, and what he advocates in the way of spending, for the coming fiscal year...
...Sweden, Denmark, and several other nations have a budget procedure something like that of U. S- Steel...
...If the government prints money hand over fist, or borrows too much of it from the commercial banks—which amounts to the same thing—a run-away inflation will be set in motion which can wipe out the whole creditor class...
...Government debt is recognized as belonging in three broad categories: (Don't let me get going long on the debt, for Walton Hamilton said it all in a recent issue of The Progressive...
...The comparison is fair, I think, for a budget balanced every year is not an economic but a kind of theological commandment...
...Like a B-1Y, which can provide useful transportation or blow people to bits, the budget can be helpful or destructive...
...In wartime, it is not balanced unless taxes cover the dead weight debt for military outlays as well...
...It would silence forever theology about the budget, and put its balancing on the firm foundation of both science and common sense...
...Somebody has got to spend if men are going back to work...
...This is as big a piece of news as that the preachers are against sin...
...A real budget ought to show what we get for our national spending...
...That is the danger of not balancing it...
...that's what it is for, like a fiscal fire department...
...The last thing he wants to do is to increase his spending when sales are falling...
...So I am not addressing the believers but the heretics, who look on budget balancing with a cold, practical eye and inquire: What good is it...
...Self-liquidating projects are kept out of the budget entirely...
...1. Deadweight debt, for which taxpayers get no assets...
...My guess would be somewhere between 150 and 200 billion dollars of tangible stuff— land, forests, natural resources, power sites, dams, factories (war plants), housing projects, buildings, hospitals, machinery, machine tools, stock piles of raw materials, inventories, ships, transport planes...
...2. Passive debt, for which taxpayers get assets that earn little or nothing—assets such as the Lincoln Memorial, Yellowstone National Park, the Department of Interior building...
...We citizens have not been given an accounting of our properties...
...It makes clear that new passive investments should not be undertaken unless the government is willing to impose sufficient taxes to cover the annual amortization...
...Great chunks of Government spendings are for self-liquidating public works which in the end will not cost the taxpayers one thin dime...
...It tells the people exactly where they stand...
...On the other hand, if the business system breaks down, as in 1929, the budget is the only agent which can repair the damage, short of universal rationing, which we Americans do not like...
...This includes outlays for shot and shell, for doles, or for running expenses...
...Every idle dollar means an idle man-hour...
...If budget balancing were a law of life, the planet would now be uninhabited...
...There is enough in the national pocket right now to pay for the war out of taxes, without piling up any deadweight debt at all, but no politician is hardy enough to advocate it, and citizens probably would not stand for it...
...In the traditional budget these fabulous riches have been classed as running expenses, and thought of in terms of bureaucrats' salaries, orgies of extravagance, loss, leak, and friction...
...When both men and resources were fully employed, obviously the more the government spent the less there would be for taxpayers and business men to spend...
...Such a budget puts the Treasury in a goldfish "bowl...
...I think it safe to say that deficit financing is so universal a method for coping with depression today that no nation will ever again balance its budget at the cost of starving and destroying its people...
...Last year the TVA made 15 million dollars net profit, and it looks to be in a fair way to retire the whole investment in a generation...
...Deficit financing after that point will lead straight to inflation...
...The result is an estimated surplus or deficit...
...Finally, when the fiscal year is over on June 30, a very, very competent accountant can, with the help of God, determine that the Government has either taken in more cash income than it has paid out in cash expenditures—not counting transfers inside the Government—or paid out more cash than it has taken in...
...These should be amortized over their life, not dumped into budget expenditures the year they are built...
...Bricker rolls an eye to Heaven, and says she must be balanced when demobilization day comes...
...The Government should borrow money, print money, anything to get folks back to work...
...After Congress is through with making a monkey out of the executive arm, the Treasury Department prints all its tax forms over again for the 22nd time, and collects what it can...
...Everybody in Sweden expects it to go out of balance to check a depression...
...This was close enough to the facts, In those dear, dead days beyond recall, to make a balanced budget desirable even if not vitally necessary...
...Is there any scientific reason why Treasury balances must come out in the black each and every year...
...If the first happens, then citizens are supposed to throw their caps in the air, the Supreme Court does a stately waltz down the steps of the Capitol, and Wall Street repairs en masse to the Stork Club...
...It gives them a picture of what they own as well as what they owe...
...Parliament is not in the habit of kicking the chief executive's teeth in just for the hell of it...
...The Swedish government uses a form of budget which recognizes these distinctions...
...The Swedish budget goes out of balance as a matter of course in depressions, but shows a surplus in pros- • perous years...
...Throw out all the war goods which may presently be destroyed or become obsolete, and my guess still holds...
...If one believes in them they are sacred...
...On the practical plane, the Federal budget is a piece of fiscal machinery...
...How U. S. Steel Does It TVA outlays came out of the New Deal budgets too, and all the great bridges, super-highways, housing projects, flood control revetments, schools, hospitals, civic centers, financed by PWA or WPA...
...It would be interesting to see one of the cartoon boys try to get Grand Coulee Dam down a sewer by hand—Grand Coulee, which is four times greater than the Great Pyramid of Cheops, hitherto the largest structure ever built by man...
...Free enterprise, the gold standard, a balanced budget, are the holy trinity of fiscal theory...
...Citizens in the higher brackets cross themselves and say Amen...
...But when the country does not have full employment, when the economic system is on part time, no business man in his senses will expand his plant and hire more people...
...No, the blast furnace is capitalized as a permanent asset, and all that gets into running expenses is its maintenance and depreciation...
...If the Treasury showed expenses greater than tax receipts, it was argued that politicians were probably throwing money away on battleships or some other foolishness, and that taxpayers would suffer in the end...
...Heaven knows what...
...Furthermore, the budget is a schedule which both executive and legislature agree upon in advance...
...All governments now do this, no matter how loud the groans from the theologians...
...They work out the budget together...
...The U. S. Government has never done this with its enduring properties...
...We haven't the slightest idea of what we own...
...I speak now not as one of the nation's most loved crackpots, but as a certified public accountant (Massachusetts and New York...
...Being in business for service and not for profit, they would hardly adopt the complete form of corporation bookkeeping, but they remove their permanent structures from the annual budget and capitalize them...
...It is curious what ideas people will carry around in their heads without ever checking them against what is actually happening out there in the real world...
...This kind of budget is balanced when taxes are large enough to cover all running expenses, all interest, and amortization on the passive debt...
...Others are partially self-liquidating—like subsidized housing projects...
...When a nation goes to war, a balanced budget is quickly forgotten...
...This never happens, of course...
...Roosevelt asked for 10 billion dollars in taxes and got two billion dollars...
...As David Cushman Coyle said of business men in 1933: "They all think that new capital investment is great stuff everywhere except in any particular place...
...Few nations have balanced their budgets in orthodox style since 1914, even fewer since 1929, none since World War II...
...If business men cannot or will not spend it, the state must...
...The superb irony of it—a share owner in a 150 billion dollar enterprise complaining bitterly that he has nothing to show for his money but tax receipts...
...The popular idea has been—¦ see any cartoon in the New York World Telegram— that all Government outlays are waste and loss, fit only to run down a sewer...
...If the budget stays out of balance long enough, the economy will blow its top off...
...When U. S. Steel builds a new blast furnace, it does not charge the whole thing off to running expenses the year it is built...
...They have what is known as a "capital" budget...
...At my estimate, it is about as great as the national debt today...
...And a government, when it puts its mind on it, can do some pretty silly spending...
...This is the actual test of our particular brand of balancing the Federal budget...
...The chief executive is not in the habit of seeing how many cases of apoplexy born of fury and frustration he can generate in Parliament...
...If the Interior building cost $5,000,000 and is good for 25 years, only $200,000 a year will get into the budget...
...The whole Treasury procedure is pretty silly...
...Congress then takes this document, delivered usually in January, and knocks it into a cocked hat—as we noted this Spring when Mr...
...If it did it would get into a fine jam with the Bureau of Internal Revenue,.as well as mystifying: its stockholders...
...As such they cannot be reached by reason...
...It shows what must be collected in taxes to achieve a true balance...
...If the last happens, all flags are figuratively put at half mast, and the American Bankers Association drapes crepe on its hat...
...There was a time 40 or 50 years ago when a balanced budget meant that the Government was not dipping into the national income for funds which business men could invest to better advantage...
...If we had one here it would impose such a financial responsibility as Congress and the Administration have never known...
...Others are for enduring structures—like the Supreme Court building...
...The United States budget is looser than most...
...Kids in the sixth grade can figure out what the financial policy ought to be...
...Projects in the passive debt class are gradually amortized over the life of the asset...
...The Holy Trinity When men are unemployed, balancing the budget has an entirely different meaning...
...It is drafted by the President...
...Scandinavians Have A Way Our wealth as taxpayers and citizens is greater than that of all corporation and business wealth combined...
...But when full employment is reached, then beware...
Vol. 8 • July 1944 • No. 27
