Evening star., 1931-12-13

OkOtu MILLS,
Of the Treasury, on Government
H. finances, delivered last night in
the National Radio Forum, ar
ranged by The washington Star and
broadcast over a Nationwide network
Of the Columbia Broadcasting System,
follows:
1 assume that the fact which is up
permoSt in the minds of all listeners
this evening is that recommendations
have been made to Congress with a
view to raising more than 5000 900 900
Of additional revenue in the fiscal year
ending June 30, 1888. I trust that
may be able to present to you the facts
OF the situation which required such
recommendations as to substitute, for
the natural reaction against a higher
tax bill, a genuinely favorable response
TO policy which is designed to assure
the continuance of the finances of the
Federal Government on a sound basis
Severe decline and depression in
business over the past two years have
very materially affected the budget,
particularly the Governments revenues
Income tax receipts, which are major
source of Federal revenue, averaged
S2,370 100000 in the fiscal year 1929
and 1880. Present estimates indicate
that income tax collections for the
fiscal year 1882 will be Sl,l40,0O1 900,
or decline of 1890, 100000. Esti-
mated ordinary rece. pts in 1882 from
all sources show a decline of about
Sl,7oO,OOO,000 from the average level
OF 1929 and 1920. The effect of the
depression has also been reflected in
larger expenditures, as the result of
unusual outlayS for relief and construc-
ton.
Three Means to Get Funds.
The Treasury closed the year 1881
with a deficit of 1908, 600 900. and
estimates indicate that the aggregate
deficits for the three-year period ending
in 1882 will be $4,400, 900 900. This is
the prospect, notwithstanding the fact
that, in forecasting the revenues. it has
been assumed that In the calendar year
1882 there will be definite improvement
In general conditions of industry and
trade.
There are only three ways of meeting
the needs OF the Government under
such circumstances, either by increased
taxation, by borrowing or by both. The
Treasury cannot of itself create funds
Whatever it spends must be obtained
either through taxation or through the
sale OF Government securities, and the
securities IN the end must be redeemed
py taxes. To attempt to cover the COM
plneo oenclts OF the three years in oues-
Clon entirely by borrowing is unthink-
able, and would present enormous diff-
culties. 1t must not be forgotten that
the very ability of the Government to
borrow depends not only upon the con-
vlctlon on the part of purchaser and
holders OF Government obligations that
the Government will maintain itself
m such a position as to meet at all
umes and under any circumstances its
own obligations, but that its finances
Will be conducted with such regard for
sound principles that Government Sc
curities will not suffer drastic deprecia-
tlon. II, in disregard of every dictate
OF financial and business Judgment we
should attempt to raise all of the addi-
tlonal sums required as a result of the
depression through the sale of Govern
ment securities we would. l am con-
noent, encounter real resistance on the
part OF investors, not only because of
the immense volume of new securities
TO be marketed-which would neces-
sarny depreciate the value of all exist
ing securities-but because of the ap-
prehension such a temporizing policy
would engender. -.
In the midst Of our difficulties. let
us not forget that there is nothing more
important to the Nation than the main
tenance unimpaired of the credit of the
United States Government.
Balanced Budget Ideal.
1t Is sometimes urged that, since in
the course Of IL years prior TO the fiscal
year 1881 we have reduced the total
debt by about SO 300 100000, some So
46o,000,0O0 OF this amount from sur
plus receipts we are justified in extern
hOFpNO-iF7of
force to the argument We have Gre
ated something in the nature of a re-
serve which we are warranted In draw
ing on, certainly to some extent. But
there are definite limitations. In the
rrst place, these earlier Surpluses re-
suited in large part from special non
recurring receipts, such as the sale of
capital assets, which were most prop
erly applicable to debt reduction. In
the second place when the sinking fund
was created, it was assumed that the
proceeds OF repayment Of loans to for
elgn governments would be available
in full for the retirement of very large
part OF our public debt, whereas the
amounts due us were subsequently, re-
ouced by the debt funding agreements
Ano, nnal1y, even If we assume that we
are justified in borrowing up to the
full amount of S3,46O, 600. 600. that sum
viii be almost absorbed by last wears
and this years deficits.
What, then, is the wise course to
pursue, under all the circumstances?
The ideal would be a balanced budget
In 1882 and in 1888 This ideal cannot
be reached in this fiscal year, since
half OF the year has already passed
and the size of the deficit makes it
impossible Of attainment. In the fiscal
year 1888, 1t is conceivable that We
might attain a balanced budget. but
our doing so would imply such an enor-
NOUS increase in taxation as to pre-
sent serious barrier to business recov-
cry. 1t seemed to the Treasury De-
Dartrnent that VIC ,,,iobt ,,.aat a..