Government programs are of such importance in the development of production
and employment opportunities--domestic and international--that it has
become essential to formulate and consider the Federal Budget in the light
of the Nation's budget as a whole. The relationship between the receipts,
expenditures, and savings of consumers, business, and government is shown
in the accompanying table.
Considering the whole Nation, total expenditures must equal the total
receipts, because what any individual or group spends becomes receipts of
other individuals or groups. Such equality can be achieved on either a high
level of incomes or on a low or depression level of incomes.
Tremendous orders for munitions during the war shifted production and
employment into high gear. Total goods produced and services rendered for
private as well as for Government purposes--the Nation's budget-reached
about 200 billion dollars in the calendar year 1944. Federal, State, and
local government expenditures represented half of this total.
Corresponding estimates for the past 3 months depict the national economy
in the process of demobilization and reconversion.
The wartime annual rate of Federal expenditures has been reduced by 32
billion dollars, while the Nation's budget total has dropped only half as
much. The drop in total value of production and services has been less
drastic because increasing private activities have absorbed in large
measure the manpower and materials released from war production and war
services.
The largest increase in private activities has occurred in business
investments, which include residential and other construction, producers'
durable equipment, accumulation of inventories, and net exports. Under
conditions of global war, expenditures for private construction and
equipment were held to a minimum and inventories were depleted. With the
beginning of reconversion these developments have been reversed.
Residential construction and outlays for plant and equipment are on the
increase; inventories, too, are being replenished. International
transactions (excluding lend-lease and international relief which are
included under war expenditures) showed an import surplus under conditions
of global war. In the past 3 months private exports have been slightly in
excess of imports, for the first time since 1941.
Consumers' budgets show a significant change. On the income side, their
total has declined but little because the reduction in "take-home" pay of
war workers is, to a large extent, offset for the time being by the
mustering-out payments received by war veterans and by unemployment
compensation received by the unemployed. On the expenditure side, however,
consumers' budgets, restricted during the war, have in creased
substantially as a result of the fact that scarce goods are beginning to
appear on the market and wartime restraints are disappearing. Thus,
consumers' current savings are declining substantially from the
extraordinarily high wartime rate and some wartime savings are beginning to
be used for long-delayed purchases.