Title: Address at the Thirteenth Regular Meeting of the Business Organization of the Government
Date: June 10, 1927
Location: Washington, D.C.
Context: Addressed to members of the Government’s Business Organization in Washington D.C. on the state of the National Budget, economy, and addressing the Mississippi Flood of 1927
We have been writing a new page in the history of governments these last six years. No less urgent than had been the call to arms was the call for relief from the gigantic burden which the World War imposed upon the people. They had made their sacrifices to enable the Federal Government to meet the great emergency. It was for that Government to take the lead in the effort to restore their financial and economic structure. This task it willingly assumed. The plan to accomplish it, the Budget system, was prepared by the Congress. That act gave the Chief Executive the opportunity of assuming his full responsibility as the head of the business organization of the Government. It pledged the support of the Congress to Budget principles of operation. That pledge has been faithfully kept.
It is only necessary to point to our prosperity to show the influence which better business in government has had on the welfare of the people. The progress achieved by this coordinated effort of the executive and legislative branches of this Government is beyond all expectation. If we hold the ground we have gained, and we must hold it, success will be complete. This will be just as difficult as the task of reaching our present milestone. Elimination of nonessentials and direct savings have about reached their limit. To hold our position will therefore require even more care and attention. It will be a perpetual challenge to the ability and resourcefulness of those in charge of the public expenditures.
It is essential that we take periodic counsel together. For this purpose we gather in open meeting twice each year. These meetings were a new departure in the conduct of the business of nations. We have found them necessary to coordinated action. Here we meet on a common footing, with one objective–the welfare of the people. These meetings are therefore of national importance. It is here we report to the people on our stewardship and plan our policies for future operations. A business without a policy is a poor business. We are conducting the greatest business in the world, and it is necessary that we have defined policies of operation. The achievements of these last years can be attributed to the fact that we have adopted such policies. We have reconstructed our finances. We are rapidly rehabilitating our physical plant. All of this has been accomplished not alone because we have been more favored than other governments in the matter of income, but by sound scientific business management–by the practice of economy. This has made possible the material reductions in our tax rates. It has enabled us to pay as we go and at the same time vastly reduce our public debt and interest charges.
I do not hesitate to say that one of the greatest safeguards of this Nation, financially, socially, and morally, lies in constructive economy in government. It will do much to defeat attempts to undermine our traditions and disrupt our institutions. Economy does not mean the neglect of essentials. Rather does it mean adequate provision for them by the elimination of all waste. It gives the added protection which comes from the means to meet a time of emergency. The Federal Government has set an example not alone to the other governments in this country but to other nations in the practice of economy. Extravagance may bring momentary pleasure and apparent benefit, but it creates a condition which is bound to affect the future adversely. In our operations we are building for more than the present. The foundation is being well laid with a support of the people in which we find encouragement to continue our efforts in their behalf.
At these meetings we have for consideration our operations for three fiscal years. First is the current year, fast drawing to a close. With less than three weeks remaining, we are practically assured of a surplus of about $599,000,000. Our expenditures will be less than last year. We have not only held our position but have made an advance. There is cause for enormous satisfaction. I realize the tremendous contribution you of the Federal service have made toward bringing about such a successful result. This meeting is the sixth milestone, marking increasing progress. Our main consideration to-night, however, is next year’s business and planning for the year to follow–the fiscal year 1929.
We are about to start a new year, for which you have your appropriations. They represent the people’s money collected by the Congress to run the Government. It is your duty to see that these moneys are wisely spent. Those responsible for any waste of these moneys, those who by lax administration fail to conserve them, are failing in their duty. We are not operating for profit in the commercial sense of the word, but we are operating for the profit of the people. The success of our operations is measured by the contentment, the prosperity, the enlarged opportunity of the people. Because of this our responsibilities assume a higher and more sacred character.
In carrying on the business for which you have your appropriations you are not directly concerned with Federal income. Your operations, however, have a direct influence on the subject of income. To the extent that you conserve your appropriations and wisely plan your operations we shall require less money from the people. This is no time to advocate expansion in expenditures. The normal growth of the Nation will require additional outlays, and our efforts should and must be to absorb these by more economical administration. This means scientific business management, and it has been demonstrated that the Budget system makes this kind of management possible. To perfect our business organization and have it yield more and better service for each dollar spent must be our aim. The object back of all this is to take a minimum of the people’s money consistent with giving the service to which they are entitled. We have already made stupendous progress in this direction.
The indications to-day are that our income for 1928 will be more than sufficient to cover our estimated expenditures. The forecast is that it will leave us with a substantial surplus estimated at around $338,000,000, as against about $599,000,000 anticipated for this year.
The fact that this surplus of about $599,000,000 is in excess of the amount estimated in the Budget transmitted to the Congress December 6, 1926, might well, in the absence of explanation, lead to the belief that our revenues have greatly exceeded our expectations. Such is not the case. The estimated aggregate receipts on account of customs and internal revenue as set forth in that Budget were $3,426,485,000. The latest estimates indicate that these receipts will be $3,442,000,000, an increase of but $15,515,000. In other words, in estimating revenues from a large variety of sources, amounting to almost three and one-half billion dollars, the Treasury, based on present estimates, erred by less than one-half of 1 per cent. The reasons for the gratifying size of the surplus must be sought elsewhere. On the side of receipts there is a moderate increase in credits from the sale of capital assets, such as railroad securities. On the other side of the ledger ordinary expenditures will be approximately $100,000,000 less than expected. This includes about $20,000,000 postponed to next year because of the failure of the second deficiency bill. The tax refunds will fall $25,000,000 short of the estimate, due to a change in the revenue law. Then, again, the fact that the French debt settlement has not been ratified has necessitated a revision of the amount chargeable under the head of debt retirement.
As a guide to the future, this year’s surplus is of doubtful value. It includes a number of extraordinary receipts that can not be counted on for more than a limited period. Back income taxes and the capital-stock tax will yield $287,000,000. Deducting from this $125,000,000 of internal-revenue refunds, leaves a net income of $162,000,000 from a source which will rapidly grow smaller. Collections from farm-loan bonds and other miscellaneous securities will make a nonrecurring item of $63,000,000. Railroad receipts, which can not be looked to for any substantial amount after 1929, will account for $90,000,000. These items alone aggregate $315,000,000 of our 1927 surplus.
We are sure of a surplus of $599,000,000 for this year, but the $338,000,000 for next year, 1928, is necessarily an estimate. But here it is important to point out that no less than $133,000,000 of our expected receipts for next year will be derived from the sale of capital assets. This resource is well-nigh exhausted. The proceeds thereof, because of their nonrecurring character, can more appropriately be devoted to debt rather than tax reduction. Moreover, in 1928, back-tax collections will continue to exceed refunds, adding to that year a revenue which we can not safely count upon for future years.
In considering the possibility of tax reduction, we must keep in mind that our revenue laws can not be written from the standpoint of a single year, but must be expected to yield adequate revenue over a period of years. It is essential therefore to discount temporary and nonrecurring items and to base the estimated revenue on those resources which can be looked upon as essentially permanent in character. We have no fear our present revenue laws will not produce ample income to carry on the business of the Government. But this does not justify an enlargement of our expenditure program. Rather does it dictate and demand that we make renewed effort to keep within our present expenditures. One thing is certain. Unless we succeed in holding expenditures at about their present level, hope of further tax reduction will be gone.
In the face of each of the three reductions in taxes since the fiscal year 1921 we have continued to accumulate surpluses at the end of each year. We should not overlook, however, the great influence these surpluses have had in making tax reduction possible. Their application to the further reduction of the public debt has permanently reduced our interest charges. It has been an investment for the people of their own money. In the business of government, as in private business, the time to liquidate indebtedness is in the time of prosperity. The reduction of fixed charges serves a twofold purpose. It materially assists in maintaining prosperity and would be particularly helpful in adversity.
There could be no more striking illustration of the benefit accruing from this policy than is furnished by a comparison of the interest charges of the years 1972 and 1928. Due to debt reduction and the refunding operations conducted by the Treasury, interest payments next year will be $63,000,000 less than for the current year. This is a most remarkable showing. It is a permanent annual saving. The mere recital of the figures brings out more clearly than any words the great burden of interest charges. From April 6, 1917, to June 30, 1927, the Government will have paid the stupendous sum of 68, 318, 571, 388 in interest alone.
Another task now facing you is the preparation of your estimates for the fiscal year 1929. We are striving as always to pave the way for further reduction of debt and of taxes. This in itself necessitates unremitting effort to hold the level of our expenditure program. After a careful study of our probable financial condition in 1929, it is my desire that the estimates of appropriations for that year be held within a total of $3,300,000,000. This is exclusive of reduction of the debt, the Postal Service, and tax refunds. This maximum has not been fixed arbitrarily. It is the result of careful study of probable financial conditions in 1929. Fixed charges have been balanced against the best possible estimate of receipts. In establishing this maximum for estimates for 1929 I expect the Budget Director to limit the calls of the various departments within that amount. His task will be simplified by the full cooperation which he will have from you.
If you view it absolutely necessary to ask or more funds for certain activities for 1929 than you have for the current year, every effort should be made to effect a corresponding saving in your other activities. I am sure your estimates for 1929 will indicate your continued loyal support of the well-established and definitely understood policies we have been following. We have learned that constructive economy has not impaired efficient administration, but rather, has improved it. We have placed our house in order and have pledged ourselves to keep it in order. Each year has shown a marked improvement in the conduct of our business. I know that your estimates for 1929 will show a continuation of this improvement.
In connection with your plans for 1928, I reiterate the principle established during these Budget years, that the amount made available by the Congress constitutes the maximum of expenditure and not the minimum. You must divest your minds of thought of possible accessions to the amounts given and administer your activities with the purpose of effecting every proper saving. You must consider the grant of budgetary funds made by the Congress as final for the year for the purposes appropriated. Except to meet the requirements of new legislation the submission for executive consideration of estimates for additional funds should be restricted to cases of absolute urgency arising from conditions which could not have been anticipated in the annual Budget. In recent years actual deficits have been few, and in most cases unpreventable. There have been cases, however, where administrators have so obligated their funds in the first months of a year that unless Congress afforded relief necessary activities would have been stopped. I am determined there shall be an end to procedures of this sort. Good administrators will plan their operating campaigns to conform with the appropriations made by the Congress. There is no place in the Federal service for other than good administrators.
The vast, fertile, and productive reaches bordering the Mississippi and its tributaries have been subjected to great disaster. The loss of life and property is appalling. All that possibly can be done to alleviate distress and suffering is being done. As it develops that additional funds are required for this purpose, I am confident they will be provided. Control measures that were considered by all as ample to full protection have proven inadequate. Such a disaster must never happen again. A survey is now being made to determine what is needed. That survey will be laid before the Congress. From a business standpoint we must anticipate from this disaster a reduction in our prospective revenue and an increase in our prospective expenditures. I am confident this will be an added incentive to effect savings elsewhere.
Before turning this meeting over to General Lord, I want you to know I appreciate what you have done. I am sure the people also realize and value your efforts. They are giving closer and closer attention to the operations of their Federal Government. Their interest is essential to its perpetuation. They know what has been done and what is being done in their behalf. There must be no relaxation of effort. Wiser from the lessons of the year just closing, we should the more intelligently attack the problems facing us the coming year and more scientifically appraise our needs for the year following. To do more work and better work with a smaller outlay of the taxpayers’ money is the supreme test of successful administration.
I now turn this business meeting over to the Director of the Bureau of the Budget. If fidelity and ability, untiring industry, and consistent purpose ever entitled any man to the considerate appreciation of his fellow countrymen, such appreciation is due to General Lord. Because of his effective leadership, supported alike by the Congress and the administrative forces of the different departments, the burdens of the people of this Nation are markedly less, their prosperity is infinitely greater, their whole life is richer and more abundant. He not only preaches the word, but he lives by the word. It is a pleasure to listen to him and an honor to serve with him. General Lord.
Citation: Everett Sanders Papers, Library of Congress
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