What Does the Future Hold for the U. S. Taxpayer?


By JOHN W. HANES of New York, Finance Executive and Chairman of the Citizens National Committee

Delivered at the nineteenth annual meeting of California Taxpayers' Association, Los Angeles, February 21, 1945

Vital Speeches of the Day, Vol. XI, pp. 309-312.

I AM very glad to have a part in your deliberations here today. Despite the difficulties of traveling in wartime, I could not refuse an invitation to visit California. Besides, as Chairman of the Citizens National Committee, I felt duty-bound to join in paying tribute to the splendid work in furthering the cause of good government which the California Taxpayers' Association has been doing over the past two decades.

You have pioneered in a movement which has now assumed nation-wide proportions.

It is a movement that, for the hard-pressed taxpayer, is almost the sole beacon of hope in seeking a return, in the postwar period, to sound and sane government fiscal policies.

In California, more than in other states, you have kept alive that pioneering spirit which built America.

From the State's very beginnings its people have been confronted with unusual problems and a continuing series of economic "crises."

Indeed, many of these problems, as we look back on them, would have seemed almost insurmountable to a people less determined or less sure of their destiny.

These constantly recurring economic crises have been, in a sense, a by-product of California's superb natural advantages.

The process of developing these resources made California familiar with manpower shortages, housing shortages, capital shortages long before such matters reached the stage of being national problems.

It is not surprising that the war worker who came to work in your shipbuilding plants and airplane factories should wish to continue after the war living in California sunshine.

He is only responding to that human desire which has been such a dynamic factor in California's growth.

He may be utterly oblivious of the fact that his decision, along with millions of other people, helps to create still another acute economic problem once the war is over.

As part of your fore-mindedness in preparing for the postwar era, you have assigned to me the subect, "What Does the Future Hold for the United States Taxpayer?"

Certainly 135 million Americans would like to find the answer to this Sixty-four Dollar question.

We are all anxiously concerned about the postwar future and I am just as much baffled by that future as you are.

I don't know the answer.

But we can outline certain conditions which, given certain developments at the war's end, may influence what that pattern of the future is likely to be.

Should other conditions prevail, however, quite different results would follow, carrying us still further along the uncharted course of economic experimentation which has been pursued during the '30s.

As a first step in answering the question you have put to me, there are certain facts now visible which we know will strongly influence the "outline of things to come."

The best place to begin is with President Roosevelt's Report on the State of the Nation, made to Congress about a month ago.

A few paragraphs in that message sketch briefly the pattern of the President's postwar domestic program.

In the attention which the press gave to the Administration's war and foreign policies, those particular paragraphs did not receive the emphasis they deserved.

In the recent presidential campaign, perhaps the outstanding issue was that rather nebulous phrase, "full employment," dramatized by President Roosevelt in his speech setting postwar jobs at 60 million.

The returning veteran and the demobilized war worker, so the President declared, were entitled to a decent home, to a good education, to good medical care, to social security, and to an adequate income which would insure all such good things.

It was the federal government's obligation, the President asserted, "to see to it that these rights become realities."

None of us will quarrel over the desirability of such worthy objectives.

America has always been moving toward such goals, and, more than any other country, it has made genuine headwayin the diffusion of wealth among the people.

The only question posed is how to realize such a program.

Is this constantly rising standard of living to be achieved through efforts of the people themselves or arc such benefits to be provided by the government through a vast welfare program financed by borrowing against the future—in other words, by deficit spending?

Mr. Roosevelt, in his message to Congress, sought to spell out how these millions of jobs are to be provided.

They were to be created, he declared, by the construction of thousands of airports, by overhauling our entire national highway system, by initiating great housing projects in urban centers, by enlarging our social security system to cover 20 million additional workers, plus establishment of broad programs of public health and education.

The question to be answered right here is, "would such a program create jobs, or would it so weaken confidence in our domestic economy, that the depression of the '30s would be continued indefinitely?"

And then the President added: "Through a program of this character we can maintain a national income high enough to provide for an orderly retirement of the public debt along with reasonable tax reductions."

That sentence, I submit, was a declaration that we could have our cake and eat it, too.

He would continue to follow Harry Hopkins' advice to "spend and spend and tax and tax" and—by some magic process—at the same time also retire the public debt and reduce taxes!

Once more the President was resorting to the political device of reassuring the conservatives while giving the green light to the social planners.

Now let's glance at another set of facts no less important to the American taxpayer.

Let's leave the White House and take a look at what Congress is doing at the other end of Pennsylvania Avenue.

I call your attention to postwar appropriations from the public Treasury which already have been voted or tentatively approved:

Flood Control

$1.0 billion

Rivers and Harbors

5 "


1.5 "


1.25 "


1.35 "

In addition, still more billions will be required to fulfill American Commitments relating to:

(a) The International Monetary Fund and to the World Bank envisioned by the Bretton Woods Agreements;

(b) Increasing the capital of the Export-Import Bank;

(c) Providing Lend-Lease in the postwar period;

(d) Plus the billions needed to continue subsidies to agriculture for the maintenance of "parity" prices, as well as what are now called "rollback" subsidies designed to help the hard-pressed consumer by keeping down food prices.

Thus, without providing a single dollar for the ordinary expenses of the federal government, or the interest on the public debt, a budget of billions can be projected with which to implement our so-called "postwar program."

Next we come to the third set of facts which will strongly influence postwar fiscal policy.

These deal with the philosophy—the motivating forces-* that lie behind the 60 million job program.

They are the same controlling influences that, for the past 12 years, have dominated the financial polices of the administration.

Back in 1938, as some of you may remember, I went to work in the U. S. Treasury.

Jit that time, there was an influential group who were busy shaping the Administration's monetary and fiscal program.

They had developed the theory of what was called the "compensatory budget" which meant, in simple language, that government spending was to be regulated on the principle of a water spigot.

When times are bad and business needs a financial shot in the arm, government spending would be turned on; whenever prosperity appears and such artificial stimulants are no longer needed, then the spending is to be shut off.

Of course, this theory never did work because no matter what heights the national income may reach, we now know that it is difficult to persuade the representatives of the people to practice economy in government.

At that time, I tried to convince some of my colleagues that if, as they declared, deficit financing was such a good thing for the country, then why would it not be a good thing to create the deficit by lowering taxes, which would leave spending in the hands of the people rather than place it in the hands of government.

To permit the citizen to spend his own money in satisfying his own wants makes, it seems to me, for a far more healthy national economy than to have the government spend the same amounts on public works or other projects which would be charged up against succeeding generations.

Now while the "compensatory budget" never was politically practicable, the idea lingers on but is expressed in even bolder terms today.

To implement the President's postwar program, Senator Murray of Montana, for example, has introduced a bill to establish what is called a "job budget"—nothing more or less than a new term for the "compensatory budget" idea.

In the application of the idea, however, there is a wide difference.

A decade ago, federal handouts or subsidies were resorted to in order to raise "public purchasing power": now, to fulfill the President's pledge of jobs for all who wish to work, the social planner expects much more from government.

"Full employment" is to be provided through a three-way attack; first, by aid to veterans through what is called the G. I. "Bill of Rights"; second, by severance or termination pay to the demobilized war worker under plans similar to those incorporated in the Kilgore bill; and, third, by an all-inclusive job insurance measure such as Senator Murray now sponsors.

The attempt to place Henry Wallace in charge of the powerful RFC loaning agency must be viewed as an integral part of this program.

What the planners are after here is postwar control not merely over the lending of billions but, even more, over the hundreds of war plants which have cost the government about $16 billion; use of these facilities for purposes not disclosed ranks high in the 60 million job program.

There can be no greater mistake than to treat the President's proposals as though they were no more than so many glittering vote-getting promises.

Once more the American people are invited to embark on a journey, the end of which has been carefully concealed from the travelers.

The destination must be accepted largely "on faith"; they must trust the captain of the ship and not ask embarrassing questions.

Now I will let you in on a deep secret.

The Administration is not quite as nonchalant as it appears to be about government spending.

The Administration is today deeply worried—both over the present size of the federal debt as well as over its ultimate postwar dimensions.

Emphasis is being placed on high-production goals—on a peacetime national level approaching $200 billion or more—simply because, to those brought up in a spending philosophy, there is no other way out.

They would regard "economy" or any retrenchment in the government's activities, both military and non-military as a form of economic suicide.

In creating jobs, the spigot of spending would be turned on whenever employment fell below a total of 57 million persons.

No one knows how this 57 million total was reached.

In 1940, total employment was 47 million, with 7 million, 300 thousand unemployed.

There are only 36 million families in the United States.

There are only 78 million persons between the ages of 20 and 65.

One-half of these are women.

As "full employment" is now defined, it means many more jobs than in the last peacetime year.

It means that the women who went into industry to perform a patriotic duty are to be regarded as permanent jobholders.

Thus the "national budget", which the President outlined, really forecasts the establishment of a planned economy to usher in the reconstruction era.

In ordinary times nearly one-fourth of our national economy operates under complete federal domination and in this area planning can be quickly applied and gradually extended.

The public will not be conscious of the change, since the controls will be largely indirect.

The devices for operating the economy are at hand; they include taxation of individual and corporate income, vast federal expenditures on social programs for health, relief, and public works—and continued control of capital markets and management of the federal debt.

We know, for example, that refunding our short-term war loans calls for not only the greatest financial skill but will also create the climate for all postwar business undertakings.

National confidence will be registered in the interest rates on federal obligations as well as in the availability of capital to industry.

It will also be influenced by the size of the annual deficit, by the volume of public works which Congress authorizes, and by the extent to which unsound subsidies of one kind or another are continued into peacetime.

I am only sorry that the President, in outlining his plans for a "national budget" didn't take the people more completely into his confidence than he was apparently willing to do.

It is perfectly clear that economic experimentation is to continue on a scale even bigger than before.

The blueprint is ready; but the time has not yet arrived for its full disclosure.

For the details of this ambitious program of managing the affairs of 135 million people, we must turn to others who are assisting in its preparation.

I mean the CIO-PAC groups directed by Sidney Hillman and Philip Murray.

At least we must thank them for the absolute frankness with which they have disclosed their postwar objectives.

They do not even render lip-service, as do the politicians, to "free enterprise" or to a more effective "partnership between government and business."

They are for a managed economy, lock, stock and barrel, in which government accepts responsibility for all major economic decisions and industry merely obeys orders.

Based somewhat on the experience of the War Production Board, a new postwar central authority is to be created which would establish employment quotas for each industry, including both production and distribution.

Since job maintenance is to be mandatory, it thus becomes industry's obligation to get the maximum production possible out of its assigned working force.

Industry is to be organized along the lines of the Wallace "ever-normal granary" scheme in which output takes precedence over markets or prices.

Execution of this employment program is to be entrusted to councils organized in each branch of industry which periodically check production against employment quotas.

These quotas are like the "norms" which control the operation of industry in Soviet Russia.

Each step in this process, from raw materials to finished products, is backed up by government orders and government guarantees.

Thus, our free enterprise economy is transformed into a new system which can function at full speed, since all factors involving risk have been completely removed.

It is obvious, of course, that all competition—either within an industry or between industries—ceases to exist, under such a system.

Indeed, Mr. Wallace himself has branded such competition as uneconomic

Likewise, freedom for both the employer and the employee also disappears.

No one can enter a new line of business without government permission.

No one can leave one job to take another without clearance from government labor officials; indeed, the May "work or fight" bill clearly forecasts the outline of this labor "freeze."

The point is that under the economic philosophy that now prevails, and which the President proclaims for the future, the American economy ceases to be dynamic and constantly expanding but becomes rigid, like that of the Medieval Guild system.

Just as these ancient Guilds controlled all employment, setting up long apprenticeship terms and compelling sons to follow in the footsteps of their fathers because there was no other opportunity, so now, through government controls, we arrive at a similar static, dead-end economy.

Under such a system, individual "rights" simply cease to exist; they are merely so many archaic irritations to the planners in carrying through their Utopian designs.

Now the question may well be asked; How do such matters affect the future of the taxpayer?

Aren't we exaggerating our fears of "leftist" political trends which, once war is over, will quickly disappear—put to rout before a returning national prosperity!

You and I, believing as we do in a wholly different economic philosophy, arc unwilling to accept this totalitarian scheme as the only solution for our postwar problems.

Such a course means defeatism—a betrayal of the very ideals for which we have been fighting this war!

It means abandoning, without a fight, all that America has stood for in the past!

Recently, one of America's well known economic writers, Garet Garrett, issued a very challenging pamphlet; it was called "The Revolution Was"—with accent on the past tense!

Step by step, it recites the surrender of American liberties and the building of an all-powerful "welfare" state.

Yet it seems to me that Garet Garrett makes the same mistake—from a different direction—that Mr. Roosevelt has made.

Both underestimate the fighting qualities of John Q.Citizen.

He is not a pushover, or a guinea pig for social experimentation; nor is he willing to cede, without a fight; those liberties that have been handed down to him.

He is tougher and far more resilient than he gets credit for.

He is good-natured, altruistic to a fault; but when crowded too far, he can get very mad.

The American taxpayer, likewise, has been long suffering.

He has been generous and sympathetic to those in distress.

He has made sacrifices to aid the unfortunate.

But again, this attitude does not mean that he has turned his back on thrift, self-sufficiency, or his desire to lead his own life—independent of government welfare agencies or well-intentioned "do-gooders."

The over-burdened taxpayer is today not quite as complacent as he used to be. He is becoming slightly "fed up" with star-gazing for the future.

He is becoming much more realistic and questioning about where all the spending and planning is likely to lead us.

It is organizations such as yours that can really become an important force in shaping that future. But to do so you must think and act on a plane of boldness at least equal to that of your opponents.

Only the taxpayer can set the limits on taxation; if he is timid and hesitant, he will get little consideration.

When he is militant and righteously aroused, the politician steps softly.

So I say to you—and to the groups in thirty-five other states similarly organized—speak up for those rights that have, been inalienable from citizenship.

Oppose every effort of government to change its own status from servant to master of its people.

Make yourselves heard in Washington in tones that will drown out all those who are seeking government handouts or special privileges at the expense of the taxpayer.

Once the war is over it is perfectly possible for a courageous Congress to begin promptly to cut taxes.

Despite what any government official says to the contrary, under a decent business administration, the individual income tax can be reduced by fifty per cent—corporate taxes can be cut in half.

The tax laws can be made far more simple.

The load can be distributed much more equitably.

The laws can be administered much more fairly, with the final result that the job-producing machinery of our economic system will be tremendously stimulated.

But taxes won't be reduced unless taxpayers get mad and demand it.

Given this kind of militancy in attacking the cancerous growth of government spending, I can see a future of hope for the American taxpayer.

Without a revival of that kind of independence, the future is difficult indeed.

We still have the choice as to the road which we, as a nation, can take.

It's up to you to decide which way it will be.