Evening star., 1949-05-15
Americas Fiscal Outlook Bok Crisis At Hand
the

fort TO strip the pending program
and budget TO the most urgent
essentials which cannot be post
poned. for without concerted ac-
ton now fiscal year 1851 will be
critical.
The full impact Of continuing
commitments made under the $40
billion budget Of the current year,
and the nearly $45 billion budget
Of the coming year will strike in
fiscal year 1851 when COD deliv-
cry will begin on the huge military
contracts. and promises TO pay on
long term civilian obligations like
housing and education will hit
their stride.
In the same fiscal year. 1851 we
shall feel also the full impact OF
whatever happens to tax sources
in this year and next.
Estimate of Experts
According TO tax experts the
principal revenue factor is person.
al income-the aggregate Of all
our individual income. In the first
two months this year 1t was down
from the last calendar quarter in
1948. While it was still above last
years average and the level Of the
corresponding date a year ago. it
may be significant that the trend
last year was up. This year it is
down. Wholesale prices-another
business gauge-are down. Unem-
ployment, as measured by veter-
ans and unemployment insurance
payments is increasing.
"The gravity of the fiscal situa-
tion confronting us is emphasized
by experts of the Joint Committee
on Internal Revenue Taxation
who estimate that even a 10 per
cent recession in the aggregate
personal income would result in a
loss of $5 billion in tax revenue"
ITO me the fiscal picture of our
Government is bleak. The pros
poets are fraught with the gravest
public consequences. The crisis is
virtually upon us. We have only
three courses open. The first is a
drastic reduction in spending.
The second is a substantial in
crease in taxes. The third is large
scale deficit spending.
The third course is unthink-
able. Under current circumstances
it's adoption would shatter public
confidence in Federal securities at
a time when the debt is a quarter
Of a trillion dollars. If Congress
embarks again on deliberate def
cit financing. I, for one. seriously
doubt whether we shall ever
again balance the Federal budget.
Our credit would be wrecked and
our system of Government de-
stroyed."
New taxes at such time as
this may easily accelerate a minor
business decline into a major re-
cession. Business is never more
sensitive to new costs and taxes
than 1t is on declining market.
ANY picture of our tax system
must include State. municipal and
county taxes. These taxes have
recently been increased at such a
rapid rate that no current esti-
mate on the total is now available,
but it is reasonable to assume
total take of at least $16 billion
in addition to Federal levies. There
is reason to expect that State,
and county deficits may
come simultaneously with Federal
deficits.
Reduction in Federal expendi-
lures can be accomplished only If
there is a desire for 1t and a will
to do it. Actually. we have as
sumed-and we are still assuming
Tremendous long-term expendi-
ture commitments with little ap-
preciable inclination for any Off
setting retrenchment. or even for
token reduction
Charges Waste
With the exception of the in
terest on the debt and several
other items Of similar character,
there is not a single category in
the expenditure side of the budget
that could not absorb a full 10
per cent reduction in administra-
tive costs without impairment of
essential functions. We know
that administrative efficiency and
economy should be the response
bility of the executive branch.
lit must be noted by the Legis-
lative Branch, however. that the
Presidents budget submitted in
January contains some 40 spend
ing proposals-exclusive of major
military and foreign commitments
require new legislation by
Congress. Some of these. it is true,
are for continuation of projects
already authorized and undertak-
en- but many Of them open up
completely new fields of Govern
ment spending. There was no
recommendation to discontinue
single existing function. Re-
trenchment in these new pro-
grams, projects and policies is the
of Congress"