Sound Fiscal Policy
OUR TASK IS DIFFICULT
By JOHN W. BRICKER, Governor of Ohio
Delivered at a Republican Dinner, Washington, D. C., and broadcast over WEAF, February 10, 1944
Vital Speeches of the Day, Vol. X, pp. 308-311.
WE meet in memory of the immortal Lincoln, founder of the Republican Party. He personified the great common man. He glorified American opportunity. His spirit still lives in our party and we take inspiration from his life and service. Only history will fully reveal his great contribution to civilization. But we do know that he added immeasurably to the cause of freedom. His life was permeated with a deep and abiding faith in his fellowman. He believed that the constitution and the foundation principles of the republic were adequate in times of great stress and strain. He proved that under them our people could wage war and emerge free. Lincoln defined the function of government in these terms: "to lift artificial weights from all shoulders; to clear the paths of laudable pursuit for all; to afford all an unfettered start and a fair chance in the race of life."
A cleavage exists today in our country which is fraught with greater consequences to our future as a nation than at any time since Lincoln's day. That cleavage cuts across our political, economic and social life. The question confronting every individual citizen and every legislative leader may be simply stated. Shall government direct the lives of our people or shall it create conditions which will enable our people individually and hopefully to find their own way? Shall we continue our march toward absolutism or shall we preserve the free atmosphere which our people have breathed since our country was founded? Shall we maintain a great governmental structure to which we are servile or shall we establish conditions which will enable us to remain a great self-reliant people?
The New Deal has clearly presented these issues. From the days of the ill-starred N. R. A., our people have been bewildered and oppressed by the edicts and decrees of a power-seeking government, determined to become their master. Let not these issues be evaded. They must be presented to the American people. The Republican Party in the coming campaign will take its stand on a platform, "To afford all an unfettered start and a fair chance in the race of life." The Republican Party is the liberal party in America. The New Deal is reactionary. It reaches back for centuries to old world devices for extending its power and depriving people of their rights. We must win this year. We will win with honor. To win by avoiding the issues would be a hollow victory indeed for America. The New Deal is the American counterpart of the sweep of absolutism which has destroyed so much liberty around the world. It lacks faith in our people. It assumes that people cannot take care of themselves, but must be taken care of by a paternalistic government. So it has built up a dominating bureaucracy, and used it for selfish political purposes.
The New Deal philosophy has extended into every branch of government. It has expressed itself in many ways. It assumed in the very beginning that the executive branch of the government is paramount. The Congress was relegated to an inferior position. Legislation was drafted by representatives of the executive. A Congress dominated by a servile New Deal majority submitted. Often the power of patronage was used. Every conceivable political device was employed to build the power of the executive.
Congress surrendered the purse strings to the executivethrough lump sum appropriations. As a result congressmen were placed at the mercy of the executive.
Then came the attack upon the Supreme Court. An attempt was made to relegate it to a position of subservience to the executive.
The program included an unceasing suppression of state and local governments. You will recall that in the early days of the New Deal, legislation was sent to the governors of our states with a "must" attached to it. It came directly from the executive branch of the federal government.
That was not all. An attack was made upon the various groups of citizens. Class was set against class. Businessmen and industrial leaders were maligned. Labor was divided and one group was played against the other. The farmer was suppressed and regimented. Small businessmen in many instances were driven out of business.
I live with the people who live under this bureaucratic system and I know the impact of this expanding system of government on their daily lives and feel their reactions to it. In my judgment the safest program for our country lies not in fitful movements of reform and reaction but in steady progress through adherence to our representative system of government.
The time has now come to take the policy making power of government out of the hands of the arrogant bureaucrats and return it to the hands of the elected representatives of the people.
The material accomplishments of our people under self-government are unmatched. With only one-sixteenth of the world's population, we have produced more automobiles than all the rest of the world, one-third of the radio sets, one-half the telephones, one-third of the railroad mileage. We stood first in air transport, manufactured one-third of the steel and utilized one-third of the electric power. This was not due to our great natural resources alone because other countries have had them. Under our free political atmosphere we have made better use of our resources and more people have enjoyed a higher standard of living than in any other country of the world.
What better evidence of the soundness of our traditional system do we have than our record of war accomplishments? In spite of the manifold discouragements of our industry at the hands of the New Deal during pre-war years, it magnificently met the challenge of war. We not only produced the instruments of war needed by our own forces but we became the arsenal of the nations fighting with us against the Axis. This achievement of industrial management and workers constitutes one of the brightest pages of our history.
This has been accomplished in spite of the weakness of the New Deal in handling labor relations. It could never have been accomplished except for the loyal support of labor in this country. But I want to say to you as members of my party in Congress that in time of war when men and women are dying to preserve free government and the very right of labor itself to organize—that no man or no union should be permitted to strike. I do not care whether that strike is against management or government, the consequences are the same. Some life is endangered by every idle hour. Every strike delays victory.
But this is not all—labor is irreparably injured in the eyes of the public and these strikes will cause the soldiers to return to this country from the battle fronts with distorted opinion of the loyalty of labor in this country. I do not care whether the strike is induced by selfish labor leaders or unthinking members of the union, die result is the same. This is a problem of government. If we can wage a war on every battle front of the world, we can certainly keep the wheels of industry turning. A law should be enacted by this Congress laying down fundamental principles for the administration and adjudication of labor disputes and the prohibition of strikes in the time of war. The recently suggested National Service Act is no answer to this problem at this late date. The strike problem of this country can be solved by proper legislation and by fair and just administration of the law.
The boys at the battle front are demanding such action. Fathers and mothers of those who are losing their lives are demanding such action and that demand will be expressed in the election this fall. Republicans of this Congress-respond with a constructive program. Such action instead of destroying rights of labor will preserve them. The time is here to support labor which wants to work and quit coddling selfish labor leaders for the sake of the votes which they say they can deliver in an election. If politics and votes had been forgotten by this administration we never would have had the distressing confusion which has confronted us in this field.
The real genius of our system of government lies in faith in the worth of the individual citizen and respect for the dignity of the human personality. Upon that faith we shall stand and wage the campaign ahead.
I am proud to be a member of the Republican Party. I deem it a high privilege to address my fellow Republicans who have given such valiant service both in the field of domestic affairs and in our war program during one of the most critical periods of our history. One cannot overestimate the contributions of the Republican members of Congress to the tremendous task of converting this nation of peace-loving citizens into the invincible force now making itself manifest in all parts of the world.
Winning the war is not a partisan opportunity. It is an American responsibility. All of us resent the effort of any political leader to make "Win the War" a political slogan. That became the watchword of every patriotic American on December 7, 1941, and will remain so until the day of victory. It is a matter of deep satisfaction to all of us that the people of this nation saw fit to reward our party both in recent congressional elections for its demonstrated alertness and high sense of responsibility. The Republican Party has never been willing, when entrusted with power, to sell the day in order to serve the hour. In serving one generation, it has also given thought to coming generations. Our party is justly proud of its past and it is exceedingly sure of its future because of its consistent purpose.
We shall win this Fall unless selfish interests prevail in the counsels of our Party. I come to you tonight confident of victory for the Republican Party and say to you with the deepest of sincerity that I am more interested in winning the coming election for the Republican Party and in defeating the New Deal philosophy of government than I am in being President of the United States.
One of the many striking differences between the Republican Party and the New Deal is in leadership. There are many leaders in our Party who would make excellent candidates for the presidency and whom I would be proud to support and who, if elected, would do the job that must be done to save the priceless heritage of this republic. The New Deal has only one candidate.
The decision of the American people would be to preserve their traditional freedom if the issues and facts were squarely presented to them. But the real danger lies elsewhere. There is danger in the size and in the power of the federal establishment itself, with three and one-half million civilian employees and the encroachment it has made upon the proper functions of the states. There is danger
in bureaucratic restrictions so arbitrary, intricate and difficult as to smother the spirit of initiative and enterprise of our citizens. There is danger of further steps in pursuance of the ruthless and reckless aim to destroy our system of checks and balances, one of the cornerstones of our liberties. There is danger in the kind of heedless grasp for power that led to the departure from the salutary limitations by tradition of a President's tenure. Each of these dangers is sufficient in itself to give us serious concern but their aggregate effect is staggering and must be removed if we are to continue our accustomed way of life.
But I am of the opinion that the paramount task to which we need to address ourselves at war's end is to restore order and sanity in our fiscal affairs and our system of taxation. Let us now consider some of the aspects of this problem.
The many fiscal experiments of the New Deal have created a disorderly pattern of spend, waste, borrow and tax. Too , often this program has been inspired by political opportunism. In time of war great expenditures are necessary. War means taxes until it hurts. It means lending every dollar possible to our government which may and should involve temporary sacrifice. But in war it is our bounden duty to insist that our government be single-minded toward the war effort and as frugal in the ordinary activities of government as it asks us to be.
The question with which we are confronted is whether these New Deal pre-war fiscal policies are to continue after victory.
On June 30, 1939, two months before the Germans began their drive into Poland, the federal debt stood at forty and a half billion dollars. This was almost exactly eighteen billion dollars more than the amount of the debt on June 30, 1933, some four months after the New Deal administration took office. Even more startling is the fact that the debt in 1939 was fourteen billion dollars greater than it was on August 31, 1919, which was the all-time high up to that date and resulted from World War I. We have been told in high-sounding phrases by publicly employed economists "Think nothing of our national debt. Just borrow more. Public debt has no similarity to private debt because we owe it to ourselves." There might be some sense to such a statement if we all had equal incomes, equal bond holdings and paid equal taxes. The truth is that under our economy it makes no difference to the individual taxpayer whether the debt is held internally or externally.
The second theory of the New Dealers is what they call "the compensatory budget theory." This theory means that government must stabilize the economy at high employment, It presupposes that when private spending and investment decline and consequent unemployment results, the government will inject purchasing power through increasing public expenditures. This theory has no relation to the judicious fiscal timing of necessary public works. The other part of this theory holds that when private spending and investment rise again to bring about full employment, taxes will be increased to mop up the excess purchasing power which gives the inflationary spiral its motivating impulse.
This is an over-simplification of the problem. It assumes that public expenditures and taxes can be turned on and off as an electric light switch. The analogy does not hold when we study financial history. Modern public expenditures are more like a release of a small boulder on a mountainside. As it proceeds down its erratic course, it gains momentum, releases other boulders which become an avalanche, destroying the lives and property of peaceful inhabitants on the mountain and in the valley below before it comes to rest.
The necessary increase in the public debt caused by war, plus the debt caused by waste and reckless government spending, plus the cost of the tremendous political organization built up at the taxpayers' expense, present a problem fraught with great danger if continued in the post-war era.
Our citizens ought to know the end of such a policy. The first result of the continuance of the unsound fiscal policies of the New Deal will be the loss of autonomy of the state governments. This will come when financial independence of state and local government ends. The further we follow the course of directly expanding our federal expenditures and deficit financing, the less will be the resources available for state and local governments. The federal government has entered practically every field of taxation except that on land. This is about all that is left to local governments. It has led local governments to depend upon state aid and Washington contributions.
In 1932 when the New Deal came into power, the federal government collected twenty-two percent of our total taxes, In 1939 the federal portion had jumped to thirty-eight percent. Even with the increased tax income, the federal government spent more than it collected and adhered to deficit financing. Much of this came about because the federal government entered more and more into functions that before had been locally administered.
Changes in economic and social conditions do require from time to time the reallocation of governmental functions. But some New Dealers have expressed the opinion that the federal government should use substantially the entire taxing power and dole out to the states and local governments what Washington wants them to have. This would make state and local government a mere sham and pretense. When the states and local governments become financially dependent upon Washington, the whole federal structure will have been destroyed.
Since the submission of the 1945 budget, it is estimated that by June 30, 1945, we shall have a national debt in excess of two-hundred and fifty billion dollars. This may well require a post-war interest charge of five to seven billion dollars. This with the other costs of government must be paid primarily by those who create the income of the nation.
As long as the government does not allow its debt to go beyond where it can be serviced without entrenching upon our system of private enterprise, our economy is not in danger. But with such a debt we realize immediately that the interest alone becomes a serious burden upon production.
In the post-war period the annual operating expense of the federal government has been estimated at about fifteen billion dollars. Taxes can rise so high that they will ultimately become unbearable, paralyzing production by taking so much profit that no incentive remains to take a chance.
If we pursue deficit financing in the post-war period, we shall inevitably reach the point where, barring wholesale inflation, private enterprise will be unable to keep labor fully employed, making it necessary for the government to borrow more and more in the attempt to relieve unemployment. But in that event those from whom the government must borrow will either be out of business or already taxed to such an extent that they will have no money to lend. Government credit will then be impaired. This happened in modem Italy and also in modern Germany. Free enterprise and representative government will then be gone. This necessarily follows because in the post-war era constantly mounting federal taxes increase the equity of the government in our income which is our wealth. This means the steady transfer of ownership of our wealth, which includes our industries, from private persons to the government. We would have lent our wealth to the government on the "owe it to ourselves" theory until, with any marked decline in ournational income, we would owe so much to ourselves that we would be unable to pay ourselves the interest, much less anything on the principal. This means ultimate default. The wealth of the nation would be held by the government or in other words owned in common. This is socialism, if not communism.
Make no mistake about it, the most effective way to overthrow our republican form of government is to continue to follow the New Deal fiscal policies in the post-war period.
The post-war financial problems can be solved and our American way of life can be protected. But they cannot be solved until we have an administration in Washington which throws out the bureaucrats, theorists, spenders and borrowers and adopts and adheres to policies of economy, common sense and sound business methods. A balanced federal budget at the earliest possible time after the war is won will create more jobs than all the projects government can devise.
The first essential looking to sound fiscal policy is a responsible cabinet government in Washington. This means the elimination of many independent boards and commissions and holding the department heads responsible. If any cabinet member is unable to handle his problems, get one who can. The overlapping of boards, bureaus and commissions, the superimposing of czars upon the departments, the cross-checking of one authority upon another, result in costly confusion, endless bickering and public distrust.
With a properly organized administration in Washington there is no need even in war for three and one-half million civilian employees. There are over one-hundred thousand of them in my state alone—five times the number of state employees. Nothing would encourage the American people more, nothing would enhance the war effort to a greater degree than to send back into productive industry or to the army or navy the hundreds of thousands of unnecessary federal employees.
In summary a sound constructive post-war tax policy must be based upon the following principles:
1. Simplification of tax laws and regulations including reports and returns.
2. Stability in tax laws and regulations to enable business to map out constructive future programs without constant fear of changes and new theories being adopted.
3. Adherence to the principle that the taxing power exists primarily for the purpose of raising necessary revenue and does not exist to be used as an undercover method of effecting social changes.
4. Adoption of tax measures which will leave adequate sources of revenue available to states and local governments to enable them to maintain their financial independence.
5. Strict adherence to fiscal and tax policies which will stimulate and encourage venture capital and private enterprise to provide jobs in private employment.
6. A reduction in federal taxes as soon as possible after victory.
I offer to you no Utopian picture of ease with abundant money for all raised by borrowing from ourselves. The task confronting us is a difficult one, but courage, hard work and a great faith will carry us through.
At the darkest hour of the Civil War a group of men called upon Abraham Lincoln. They suggested that the cause of the Union was lost and that he should give up. He answered them in these words:
"When I was a young man in Illinois I boarded for a time with a deacon of the Presbyterian Church. One night I was aroused from my sleep by a rap at my door and I heard the deacon's voice exclaiming, 'Arise, Abraham, the day of judgment has come!' I sprang out of my bed and rushed to the window, and there I saw the stars falling in a shower. But I looked beyond those falling stars and far back in the heaven I saw fixed and immovable, the grand old constellations with which I was so well acquainted. No, gentlemen, the world did not come to an end then, nor will the Union now."