The Federal Debt
WE MUST ACT QUICKLY OR SUFFER
By FREDERICK C. SMITH, Congressman, Republican, of Ohio, (Eighth District)
Delivered over the Mutual Broadcasting System, October 3, 1940
Vital Speeches of the Day, Vol. VII, pp. 46-47.
THE subject I am going to discuss this evening may not be so very popular with some of you. Here in Washington it is very unpopular. If a Congressman seriously discusses the condition of the Federal Finances and debt he is liable to be accused of being against adequate military preparedness, or possibly even of being unpatriotic.
Of course this does not mean much because long before the question of preparedness came up it was unpopular here to talk about economy in the operation of the Government. So that being accused now of being unpatriotic because one advocates prudent spending of taxpayers money doesn't have the weight it might if economy had been more popular before.
Anyway this attitude is both baseless and unfair. There is nothing whatever to indicate that those of us who would keep watch on the Treasury are any less desirous of supplying our defense needs, or that our motives are less pure than those with whom we may not always see eye to eye. I believe that any person charged with the responsibility of managing taxpayers money can do no greater or more patriotic service to his country than to keep a watchful eye on its national credit and finances.
Has not the conserving of the credit and resources of the government, in time of peace, as well as in time of war, always been one of the principal tasks of statesmen? Indeed, if I read history correctly, to so manage these, especially in times of national stress as to achieve maximum results and at the same time do the least amount of harm to the economy, has ever been the acid test of true statesmenship,—and, incidentally, perhaps of patriotism too. In so doing, isn't this looking to future generations, as well as to the present one, and isn't this the very stuff that patriotism is made of?
The wisest and best public officials never failed under any conditions to guard with the greatest care the revenues and expenditures entrusted to their care. With respect to the military, they have always been keen in realizing that
it can never exceed in strength and effectiveness its source of supply, the Treasury. They have known that this is the country's basic protection, its very first line of defense against external attack. As the Treasury is, so will be the defense. If this is well managed there will be efficient defense. If not, there can be only inefficient defense. This is so self-evident that it should be unnecessary to mention it.
I consider there never was a time when our country was in greater need of careful watching of our national finances than there is now. Surely it is generally realized that there has been much inefficient and wasteful spending here in Washington in the last few years. Before the new defense program was started, the Treasury was far from being in the best condition. The public debt was already soaring to dangerous heights.
It appears we are now involved in a most vicious process— a weakened treasury, yet the need of imposing additional large sums for defense, which in turn weakens the treasury still further. In this way our first line of defense is being continuously undermined.
This is something all of us do not see, but it is taking place and if it continues the time will surely come when its evil effects can not help but be harmful to our defense program.
Is it not, therefore, imperative now that we do everything possible to stop this? Should not all of us now make diligent effort to bring about government economy, to eliminate all unnecessary and wasteful spending to make our Federal tax dollar go just as far as we can?
It is the sole purpose of this discussion to urge that we all work to this end.
Let us consider a few of the more important conditions of our debt and tax problem. Long before the depression the Federal Government showed a strong tendency toward extravagance. Before the World War it was costing us
less than $800,000,000 a year to operate the Federal Government. During the War, of course, the cost went very high, up to $18,000,000,000. After the war it failed to drop back to its pre-war level. The war had done something to fasten new costs upon us, as wars always do. The lowest cost reached after the war, in 1927, was 3 1/2 billions a year, more than 4 times the pre-war costs. Then it started to climb again until it reached the high figure of roundly 9 1/2 billions in 1940.
Before the World War the Federal debt was about $1,225,000,000. The war boosted it to 25 1/2 billion. From this point it dropped to roundly 16 billion in 1930. At this point it started to climb again and reached the high figure of 42 billion in 1940.
In 1916 the amount of the Federal debt would have been sufficient to buy up one-tenth of all the property in Ohio at its assessed value. Today it would buy all the property in Ohio, Pennsylvania, Indiana, Illinois, Michigan and Wisconsin.
The total deficit of all the administrations up to the end of the fiscal year 1930, covering a period of 141 years, which includes the cost of all wars and all our previous depressions and panics was roundly 26 1/2 billions. The total deficit from 1930 to 1940, covering a period of only ten years, all peace time, including but a small part of the new defense costs was roundly 30 billions.
But think of this,—the total cost of the Federal Government from the time of its founding through 1930, 141 years, was roundly one hundred billion dollars. Then from 1930 to 1940, only ten years, all peace time, Congress has spent, appropriated and authorized to be spent more than 90 billion dollars. That is, we have as good as spent in the last ten years almost as much as was spent in the 141 previous years.
The total amount of wealth in the entire United States is roundly only 300 billion dollars. So that our Federal Government has in the last ten years spent almost a third as much money as the total value of all the wealth of our country!
The debt at the end of 1941 will be about 50 billion dollars. By the end of 1942, it will be about 60 billion. This Congress only since last January has appropriated and authorized to be spent 23 1/2 billions. This would be enough money to buy all of the property in Ohio, Indiana, Illinois and Wisconsin.
People should also realize that the heavy additional costs of defense are not to be merely temporary. This is to be a permanent program.
How much will the conscript army and two ocean navy add to the taxpayers' burden?
The new program calls for a standing army of perhaps no fewer than 1,500,000 men. Certainly no fewer than 1,250,000 men will be added to the number in the armed forces we had in 1939. On the basis of previous army costs I have estimated it will cost to maintain this added force roundly 4 1/2 billion dollars a year.
It has been reliably estimated the upkeep and maintenance of the two ocean navy will add roundly 1 1/2 billions. The interest cost on the increased debt that is involved in this program will add roundly 425 millions. This totals roundly 6 1/2 billion dollars, which will be the added annual cost of the conscript army and two ocean navy.
Government expenditures have averaged annually in the last 7 years roundly 8 billions. Adding this amount to the 6 1/4 billions, we have a total of 14 1/4 billion dollars, the annual cost to taxpayers for operating their Federal Government.
We have gone in the red about 26 billions in the last ten years with expenditures very much lower. What possible prospect is there for collecting 14 billion dollars in taxes a year when we have been able to collect in the last 7 years on an average only about a third of that amount?
Tax collections in the last 7 years have averaged roundly 5 billion dollars. So in order merely to balance the budget, without paying anything on the debt, we will have to increase taxes 9 billion dollars a year.
If we add the costs of all the federal programs to those of the state and local governments, the annual bill to the taxpayers of the United States is 22 billions of dollars. That would be sufficient to buy up all of the property in Ohio, Indiana, Illinois, and half of Michigan.
Farmers, laboring groups, small salaried employees and the other low income groups will have to pay more than 18 billions of this.
Now the conditions I have described to you are real and they cannot be laughed off or ignored. If we continue in this course a day of reckoning is sure to come. National bankruptcy is certain to overtake us. We all wish to do everything possible to strengthen our defense. We should appropriate every dollar that is necessary for this purpose, but that does not indicate that we should be the least uneconomical in spending this money. Certainly we should try to make every dollar go as far as possible. Above all the Congress should do something to eliminate the enormous waste that is taking place.
Here is where a grave wrong is being done to our people, allowing this waste to continue when our defense needs make it so imperative that we conserve to the last penny all of our resources.
My plea is to stop this waste, and to eliminate every Government function that can possibly be dispensed with. Literally billions could be saved without doing the least harm to government functions. Indeed, I think the saving of them would be greatly beneficial.
When this is done we should levy enough taxes to meet all the costs.
I wish all the people of this Nation would join in this effort. Just as we need unity in national defense so no less we need unity here. And we dare not delay action any longer.
Bankruptcy is one of the greatest disasters that can befall any people. This was the primary cause of Russia's breakdown in the World War, and therefore the Communism that overtook it. Insolvency of government treasuries was one of the principal causes of the hell that is sweeping over Europe today. The bankrupt condition of the French Treasury was one of the principal causes of her recent downfall. The bankruptcy of Germany after the war provided an ideal soil for developing totalitarianism.
A distressed National Treasury, together with excessive taxes caused the French Revolution. In fact these have had more to do with causing revolutions and wars than all other agents combined. The chronic revolutions in Latin America are traceable almost solely to excessive taxation and bankrupt state treasuries. Surely we do not want this terrible scourge to befall our Nation.
But in my judgment we must act and act quickly to avoid it.
Bankers, Manufacturers, Farmers, Working People, or whoever you may be, listening in, won't you help in a nationwide movement, by organizing your own groups, or communities, to meet this threat of national bankruptcy and save our country from ruin? Write me if you believe this should be done and I shall do all I can to help.