Evening star., 1931-12-08

<Ax2 va tliio tSflNS W Stlllt
especially the smaller units, and
finally expresses itself in further de-
preston of pr.ces and values, in re-
striction on new enterprise, and in
increased unemployment.
The situation largely arises from
an unjustiffed lack OF confidence.
We have enormous volumes of idle
money in the banks and in boarding.
We do not require more money or
working capital-we need to put
what We have to work.
The fundamental difficulties which
have brought about financial strains
in foreign countries do not exist in
the United States. No external drain
On our resources can threaten our
position, because the balance of in
ternat:onal payments is in our ia
vor; we owe less to foreign countries
than they owe to Us; our industrial
are efficiently organized; our cur
rency and bank deposits are pro-
tected by the greatest gold reserve in
history.
Our first step toward recovery is
to re-establish confidence and thus
restore the flow of credit which is
the very basis of our economic life.
We must put some steel beams in
the foundations of our credit struc-
ture. 1t is our duty to apply the
full strength of our Government not
only to the immediate phases, but to
provide security against shocks and
the repetition of the weaknesses
which have been proven.
The recommendations which I
here lay before the Congress are
designed to meet these needs by
strengthening financial industrial,
and agricultural life through the
medium of our existing institutions,
and thus to avoid the entry of the
Government into competition with
private business
Federal Government
Finance.
The first requirement of conf
dence and of economic recovery is
financial stability of the United
States Government. I shall deal
with fiscal questions at greater
length in the budget message But
l must at this time call attention to
the magnitude of the deficits which
have developed and the resulting
necessity for determined and cour-
ageous policies. These deficits arise
in the main from the heavy de-
crease in tax receipts due to the de-
preston and to the increase in ex-
penditure on construction in aid to
unemployment, aids to agriculture
and upon services to veterans.
During the fiscal year ending June
80 last We incurred a deficit of about
1908 100000, which included the
statutory reduction of the debt and
represented an increase of the ma
tional debt by $685. 100000. OF this,
however, Sl53. 900, 900 is offset by in
creased cash balances.
In comparison with the fiscal
year 1928 there Is indicated a fall
in Federal receipts for the present
fiscal year amounting to 1888, ,00O,-
900, Of which S1,034,000, 900 is in
individual and corporate income
taxes alone. During this fiscal year
there will be an increased expendi-
ture, as compared to 1928, on veter-
ans OF s255, 900, 900, and an increased
expenditure on construction work
which may reach $500, 000, 900. De-
spite large economies In other di-
rections, we have an indicated def
lcit, including the statutory retire
ment debt, OF S2,l23. 900 600, and an
indicated net debt increase of about
$1,7ll 600 900.
The budget for the fiscal year be-
ginning July l next, after allowing
Tor some increase Of taxes under the
present laws and after allowing for
drastic reduction in expenditures.
stu indicates deficit Of sl,417,-
000.0O0. After offsetting the statu-
tory debt requirements this would
indlcate an increase in the national
oeDt Tor the fiscal year 1888 of about
1921 ,0e0, 900.
Several conclusions are inevitable.
we must have insistent and deter
mlneds reduction in Government ex-
penses. We must face q temporary
increase in taxes. Such increase
Snould not cover the whole Of these
defclts Or 1t will retard recovery.
we must partially finance the deficit
ny borrowing. 1t Is my view that
the amount OF taxation should be
nxeo SO as to balance the budget
ior 1883 except for the statutory
oept retirement. Such Government
receipts would assure the balance of
the 1oiloWng years budget including
oept retirement. 1t is my further
view that the additional taxation
snoulo De imposed solely as an
emergency measure terminating def
nlteiy Two years from July l next.
Sucn basis viii give confidence In
the determination or the Govern
ment to stabilize its finance and will
assure taxpayers OF its temporary
character. Even with increased tax
ation, the Government will reach the
utmost safe limit or its borrowing
ran4nitu
which we are already obligated and
the recommendations here proposed.
To go further than these limits in
eltner expenditures, taxes or borrow
Ing Will destroy confidence, denude
commerce and industry of its re-
sources, jeopardize the financial sys-
tenn and actually extend unemploy-
ment and demoralize agriculture
rather than relieve it,
Federal Land
Banks.
I recommend that the Congress
authorize the subscription by the
Treasury of further capital to the
Federal land banks to be retired as
provided in the original act or when
funds are available, and that repay
ments OF such capital be treated as
fund available for further subscrip-
tions In the same manner. 1t Is
urgent that the banks be supported
so as to stabilize the market values
Of their bonds and thus secure capi-
tai for the farmers at low rates, that
they may continue their services to
agriculture and that they may meet
the present situation with consider
alton to the farmers.
Deposits I'm
Closed Banks.
A method should be devised to
make available quickly to depositors
some portion of their deposits in
closed banks as the assets of such
banks may warrant Such provision
would 70 far to relieve distress in