Balance Whose Budget?

January 24, 1949

In the fourth year of peace, the President proposes to spend some $42,000,000,000. This is equal to the amount spent in the entire five peacetime years from 1935 to 1939 inclusive. And few people ventured to describe those Roosevelt spending years as models of economy at the time.

For national-defense spending alone, not counting foreign aid, Mr. Truman wants nearly $16,000, 000.000. This is more than was spent in the entire eighteen-year period from 1922 through 1939. And during nearly half of those years we faced an aggressive Japan and an ever more menacing Germany.

Such comparisons cannot be dismissed with the easy assertion that things cost more now. The Federal budget is a constantly mounting percentage even of our inflated national income.

The real comparisons are even graver. For when the operations of social-security trust funds are included, as they should be (because they involve compulsory tax payments). the proposed annual expenditures are not $42,000,000,000 but $46,000,000,000. Nor does the President’s budget include any allowance for military lend-lease, though he nevertheless declares that he expects “later to request funds” for this.

Apologists for this budget are already falling back on the familiar technique of trying to silence its critics by asking rhetorically: “Where would you cut?” Behind this taunt is the implicit assumption that the burden of proof is on those who wish to economize. The burden of proof, on the contrary, must be placed for each item squarely on the shoulders of those who demand the expenditures. And it is not enough for them to prove, even if they could do so, that everything that these expenditures will buy is “needed.” They must prove that the citizens of the country need each of these things even more than they need the things for which they would spend their own money if it were not taken away from them in taxes.

It is precisely this that Mr. Truman’s economic philosophy overlooks. He wants the government to meet this “need” and that “need.” He tacitly assumes that everything the government pays out is a net addition toward meeting these “needs.” It is nothing of the kind. It is merely a substitution. At best it meets one need only at the cost of making it impossible to meet some other need. The government has not a dollar to hand to A that it does not take from B, or perhaps from A himself. Mr. Truman assumes that A must be protected against his own improvidence and that B must be compelled to use part or most of his earnings to support A’s family instead of his own.

When Mr. Truman demands all sorts of government giveaway programs, and proposes to meet the added expense mainly by even higher taxes on corporations, he is in effect saying that our need for these giveaways is far greater than our need to improve our industrial plant, equipment, and tools to increase workers productivity, real wages, and the future production of the country.

It is not surprising that his program is riddled with internal contradictions. He wants, for example, to impose still heavier taxes on the steel companies. This will still further reduce their incentive for reinvestment in plant and leave them even less funds for such reinvestment. Then he declares that the need for more steel is so imperative that the government itself must build the plants that the steel companies are discouraged or prevented from building.

He regularly insists that the Federal budget must be balanced to avoid inflation. But he wants to do this not by smaller but by larger expenditures, which can be balanced only by still greater taxation. He can balance such a Federal budget only by an unprecedented peacetime drain on the budgets of all the rest of us. By destroying incentives and preventing capital accumulation, he will reduce the volume of production to be shared among everybody.