It is a fundamental principle of our country that the people are sovereign.
While they recognize the undeniable authority of the state, they have
established as its instrument a Government of limited powers. They hold
inviolate in their own hands the jurisdiction over their own freedom and
the ownership of their own property. Neither of these can be impaired
except by due process of law. The wealth of our country is not public
wealth, but private wealth. It does not belong to the Government, it
belongs to the people. The Government has no justification in taking
private Property except for a public purpose. It is always necessary to
keep these principles in mind in the laying of taxes and in the making of
appropriations. No right exists to levy on a dollar, or to order the
expenditure of a dollar, of the money of the people, except for a necessary
public purpose duly authorized by the Constitution. The power over the
purse is the power over liberty.
That is the legal limitation within which the Congress can act, How it
will, proceed within this limitation is always a question of policy. When
the country is prosperous and free from debt, when the rate of taxation is
low, opportunity exists for assuming new burdens and undertaking new
enterprises. Such a condition now prevails only to a limited extent. All
proposals for assuming new obligations ought to be postponed, unless they
are reproductive capital investments or are such as are absolutely
necessary at this time. We still have an enormous debt of over
$20,000,000,000, on which the interest and sinking-fund requirements are
$1,320,000,000. Our appropriations for the Pension Office and the Veterans'
Bureau are $600,000,000. The War and Navy Departments call for
$642,000,000. Other requirements, exclusive of the Post Office which is
virtually self-sustaining, brought the appropriations for the current year
up to almost $3,100,060,000. This shows an expenditure of close to $30 for
every inhabitant of our country. For the average family of five it means a
tax, directly or indirectly paid, of about $150 for national purposes
alone. The local tax adds much more. These enormous expenditures ought not
to be increased, but through every possible effort they ought to be
reduced.
Only one of these great items can be ultimately extinguished. That is the
item of our war debt. Already this has been reduced to about
$6,000,000,000, which means an annual saving in interest of close to
$250,000,000. The present interest charge is about $820,000,000 yearly. It
would seem to be obvious that the sooner this debt can be retired the more
the taxpayers will save in interest and the easier it will be to secure
funds with which to prosecute needed running expenses, constructions, and
improvements. This item of $820,000,000 for interest is a heavy charge on
all the people of the country, and it seems to me that we might well
consider whether it is not greatly worth while to dispense with it as early
as possible by retiring the principal debt which it is required to serve.
It has always been our policy to retire our debts. That of the
Revolutionary War period, notwithstanding the additions made in 1812, was
paid by 1835. and the Civil War debt within 23 years. Of the amount already
paid, over $1,000,000,000 is a reduction in cash balances. That source is
exhausted. Over one and two-thirds billions of dollars was derived from
excess receipts. Tax reduction eliminates that. The sale of surplus war
materials has been another element of our income. That is practically
finished. With these eliminated, the reduction of the debt has been only
about $500,000,000 each year, not an excessive sum on so large a debt.
Proposals have been made to extend the payment over a period of 62 years.
If $1,000,000,000 is paid at the end of 20 years, the cost to the taxpayers
is the principal and, if the interest is 4% per cent, a total of
$1,850,000,000. If the same sum is paid at the end of 62 years, the cost is
$3,635,000,000, or almost double. Here is another consideration: Compared
with its purchasing power in 1913, the dollar we borrowed represented but
52 cents. As the value of our dollar increases, due to the falling prices
of commodities, the burden of our debt increases. It has now risen to 631/2
cents. The taxpayer will be required to produce nearly twice the amount of
commodities to pay his debt if the dollar returns to the 1913 value. The
more we pay while prices are high, the easier it will be.
Deflation of government after a war period is slower than deflation of
business, where curtailment is either prompt and effective or disaster
follows. There is room for further economy in the cost of the Federal
Government, but a co n of current expenditures with pre-war expenditures is
not able to the efficiency with which Government business is now being
done. The expenditures of 19161 the last pre-war year, were $742,000,000,
and in 1925 over $3,500,000,000, or nearly five times as great. If we
subtract expenditures for debt retirements and interest, veterans' relief,
increase of pensions, and other special outlays, consisting of refunds,
trust investments, and like charges, we find that the general expenditures
of the Government in 1925 were slightly more than twice as large as in
1916.
As prices in 1925 were approximately 40 per cent higher than in 1916, the
cost of the same Government must also have increased. But the Government is
not the same. It is more expensive to collect the much greater revenue
necessary and to administer our great debt. We have given enlarged and
improved services to agriculture and commerce. Above all, America has grown
in population and wealth. Government expenditures must always share in
this growth. Taking into account the factors I have mentioned, I believe
that present Federal expenses are not far out of line with pre-war
expenses. We have nearly accomplished the deflation.
This does not mean that further economies will not come. As we reduce our
debt our interest charges decline. There are many details yet to correct.
The real improvement, however, must come not from additional curtailment of
expenses, but by a more intelligent, more ordered spending. Our economy
must be constructive. While we should avoid as far as possible increases in
permanent current expenditures, oftentimes a capital outlay like internal
improvements will result in actual constructive saving. That is economy in
its best sense. It is an avoidance of waste that there may be the means for
an outlay to-day which will bring larger returns to-morrow. We should
constantly engage in scientific studies of our future requirements and
adopt an orderly program for their service. Economy is the method by which
we prepare to-day to afford the improvements of to-morrow.
A mere policy of economy without any instrumentalities for putting it into
operation would be very ineffective. The Congress has wisely set up the
Bureau of the Budget to investigate and inform the President what
recommendations he ought to make for current appropriations. This gives a
centralized authority where a general and comprehensive understanding can
be reached of the sources of income and the most equitable distribution of
expenditures. How well it has worked is indicated by the fact that the
departmental estimates for 1922, before the budget law, were $4,068,000,000
while the Budget estimates for 1927 are $3,156,000,000. This latter figure
shows the reductions in departmental estimates for the coming year made
possible by the operation of the Budget system that the Congress has
provided.
But it is evidently not enough to have care in making appropriations
without any restraint upon expenditure. The Congress has provided that
check by establishing the office of Comptroller General.
The purpose of maintaining the Budget Director and the Comptroller General
is to secure economy and efficiency in Government expenditure. No better
method has been devised for the accomplishment of that end. These offices
can not be administered in all the various details without making some
errors both of fact and of judgment. But the important consideration
remains that these are the instrumentalities of the Congress and that no
other plan has ever been adopted which was so successful in promoting
economy and efficiency. The Congress has absolute authority over the
appropriations and is free to exercise its judgment, as the evidence may
warrant, in increasing or decreasing budget recommendations. But it ought
to resist every effort to weaken or break down this most beneficial system
of supervising appropriations and expenditures. Without it all the claim of
economy would be a mere pretense.