FISCAL: Second Revision

Among the many things President Roosevelt did last week to indicate his honorable intentions toward a balanced budget (see p. 17), was to cast up an estimate of where he stood today. It was the President’s third formal statement on the current budget, and the second revision since last January when he spoke hopefully of a “layman’s balance” for fiscal 1938. By April that hope had faded to an estimated net deficit of $418,000,000, largely because of disappointing tax receipts. Last week the President had to hike his net deficit estimate once more to $695,000,000. Even so, unless the figure is again upped considerably, it will be the first time the deficit has been below a billion since fiscal 1931.

In that year Herbert Hoover found his Treasury in the red by about $900,000,000. In the following four years the annual deficits ran consistently above three billions, then hit a peak of $4,700.000,000 in fiscal 1936 (year of the Soldiers’ Bonus), dropped to $2,707,000,000 in fiscal 1937. Relatively small though the new figure for fiscal 1938 appears, it will be the eighth consecutive deficit—with government revenues only a shade short of the alltime high ($6,695,000,000 in booming 1920 when Wartime taxes were still in effect).

Income for the fiscal year is now expected to run ahead of the previous twelvemonth by $1,357,000,000, biggest gains being in income and social security taxes. But the estimated total has been revised downward from $7,293,000,000 to $6,650,000,000, a $643,000,000 drop largely reflecting poor results from the undistributed profits tax and less sanguine expectations for business and stockmarket.

Outgo. Total expenditures for fiscal 1938 are now estimated at $7,345,000.000, an increase of $89,000,000 over the original budget figure but $656,000,000 below fiscal 1937. Most conspicuous feature of the President’s outgo schedule was that, although spending for Recovery & Relief has been slashed $1,139,000,000 from the previous fiscal year, other government spending continued to mount by nearly $500,000,000. As the President pointedly observed, a good part of this could be blamed on Congress.

Since the April budget estimate was submitted, $208,000,000 of expenditures have been knocked off by Administrative action and another $115,000,000 by bookkeeping adjustments in the Old Age Reserve Account, a total reduction of $323,000,000. But reduced interest rates on loans to farmers will cost the budget $40,000,000; extension of PWA, $25,000,000; social security tax refunds. $36.000,000; the Railroad Retirement Act, $113,000,000; cotton loans (see col. 3), $130,000,000.

Debt. The net deficit represents a potential addition to the National debt now approaching $37,000,000,000. Thanks to the fact that the Government will buy more than $1,000,000,000 worth of its own bonds for special investment accounts, largely in connection with pension and social security measures, the Treasury will not have to resort to public financing. Indeed, the National debt in the hands of the public will probably be smaller at the end of next June than last June.

Lid. At the end of his budget statement President Roosevelt announced that he had definitely clamped the lid on two of the New Deal’s biggest honey pots, RFC and PWA. They will not be liquidated but their spending days are over. Each will carry out commitments now on the books but further loans or grants are to be barred.