Evening star., 1948-05-22
Bottle of the Budget

With public attention fixed on the latest
moves in our cold war with the Russians,
an address last Wednesday by Senator
Byrd of Virginia received relatively little
notice. It is deserving of more consider
alton, however for it rounds out the pic
ture of the problem with which we have
come to grips and brings into focus the
danger that we may win the cold war at
the price of losing the struggle to stabilize
our own economy.
The fiscal year 194e begins this July l.
For that fiscal year Senator Byrd antici-
pates expenditures Of $43.8 billion, Fed
eral receipts of $40 billion and deficit OF
s3.s billion. He expects expenditures to
rise in fiscal years 1850 and 1851, while
receipts remain stable, with the result that
the deficits for those two years respectively
will be SIS billion and $96 billion
Senator Byrd says these estimates are
conservative, and it might also be said that
they are optimistic. For the mounting
expenditures will 60 largely for national
defense, and there is real danger that the
actual costs will outrun the estimated costs.
There is also some danger that the $40
billion figure for receipts is too optimistic,
since 1t Is based on continuing annual
national income OF $208 billion. The In
come figure, of course, may hold to that
level, but it has to be borne In mind that
II the national income should decline the
Federal Government will lose in tax re-
ceipts at the ratio of 81 to each s. Of re-
duction in income.
Assuming. however, that Senator Byrd'S
estimates are substantially correct-that
there will be no appreciable rise in ex-
penditures or decline in revenues-the out
look still is grim enough. For in fiscal
year 1851 we will face Federal deficit OF
$40 billion-a deficit greater than the en-
tire cost of operating the Federal Govern
ment in the years Immediately preceding
World War II.
Manifestly, we cannot go back to deficit
financing in peacetime on any such scale
as this if the credit of the Government Is
to be preserved and If our free enter
prise system Is to continue to function.
The question is how to bridge the gap
whether this is to be done by cutting ex-
penditures, by increasing revenues or by q
combination of the two.
senator Byrd leans SCrOnSly, as mas DeeH
the case with him for years, toward
economy as the primary solution. 1t is
extremely doubtful that Federal revenues,
on the basis of $208 billion national in
come, can be increased by anything like
$40 billion without imposing a literally
crushing burden on our national economy.
For example, according to the Virginia
Senator, per cent Federal sales tax
imposed at the retail level would bring in
only $23 billion. Or If the Government
were to confiscat every dollar of indi-
vidual income above 100000, the net tax
gain for the Treasury would be only $780,
OOOO0O-about per cent of the anticipated
deficit.
On the face of the matter, the greater
hope seems to lie in the direction of low
cred expenditures. On the basis of the
1851 estimate, the cost of government
Federal, State and local-will be about
$65 billion. That represents more than
80 per cent of the total national income
and is an utterly fantastic increase over
what government used to cost just a few
years ago. The fact has to be faced, how
ever, that it will be just about as hard te