How We Support the World

July 27, 1953

The Senate Appropriations Committee has received a staff report which questions whether the French “will ever put their fiscal house in order and balance their budget by collecting the proper amount of taxes as long as they receive United States aid. . . . Taxation of the rich is on a primarily low level. . . . What we are doing with our economic aid is simply giving the French a certain amount of money and exercising no real control over how it is spent.”

These observations are harsh but justified. Yet there is nothing particularly new about them, except that a Congressional committee staff has now had the courage to make them. It has been inherent in the situation all along that without American dollars the government of France (or of any other country receiving our aid) would either have to spend less money or increase its own taxes. It is also inherent in the situation that the only way in which we could exercise real control over how our dollars are spent would be to dictate and supervise every item of the French budget—which no one has dared to propose.

It is obvious that it does little good—that it is in fact fatuous as well as futile—to “earmark” our foreign-aid funds for specific purposes, to set up special “counterpart funds,” and all the rest. To the extent that we pay for France’s defense, France does not have to use its own money for defense. Therefore its government can use the money it saves on defense to spend for any other purpose it pleases: In the fiscal year 1952, in fact, 62 cents out of every dollar it spent went for nondefense items.

On July 14, a dispatch from Harold Callender, Paris correspondent of The New York Times, attempted to answer the Senate committee staff’s report, but missed the point completely. The Mutual Security Agency, wrote Callender triumphantly, “controls the use of the funds granted to finance a specified list of defense purchases . . . or to increase French productivity. Its control is constant.” But none of this proves that the French would not otherwise be spending their own money for these purposes, or that they could not have increased their own taxes to do so.

As I wrote in illustrating this point in Will Dollars Save the World? published six years ago: “If you make a loan to a family that keeps a car for pleasure, nothing is gained by the assurance that the particular dollars you have loaned have gone only to buy food, and that the automobile was bought and run with the family’s own earnings. Even if you could verify by the numbers on the bills that your particular dollars were spent only for food, you would know that your loan was being used in effect to keep the car—because the family would otherwise have to give up the car and use its own earnings for the food.”

So it is just as fair to argue that the dollars we pour into France pay the deficits on its nationalized industries, or support its overexpanded social-security system, or relieve its rich citizens of taxes, as to contend that they go only for defense or the purposes for which they are “earmarked.” It is also just as fair to say that we are prolonging our excess-profits tax, with all its admitted harm to our new enterprises, efficiency, and production, in order to help subsidize Europe’s socialism, or to relieve Europe’s wealthy citizens of heavy taxes so that they may continue to patronize the luxury hotels on the Riviera.

We are doing all this because we have got ourselves snarled up in economic, political, and moral confusions. We have been sold the idea that we must assume something vaguely called “world leadership”—which turns out to mean “assuming our world responsibilities”—which turns out to mean supporting people all over the world so that they may realize what they call their “legitimate aspirations.” We have acquired a Santa Claus complex, an Atlas fixation, and a giveaway mania. And we are solemnly told by our own leaders that if we ever halt our foreign bounties the world will “lose confidence in us,” and our allies will last only as long as our handouts.