Members of the Government's Business Organization:
In these meetings I find a real encouragement. I approach them with knowledge of that has been done. I leave them with increased hope for the future. We gather here to consider the business operations of the government. It is here we discuss our policies and aims, so that all may contribute understandingly to their fulfillment. We represent the most colossal business organization of the world. Its activities touch almost every known interest. Because of this it is important that we proceed along definite business lines. And this becomes even more important when we pause to consider the one and only object of our operations - the welfare of the American people. The profit of our labors go to the people. This is our constant inspiration for loyal, faithful, and devoted service.
In speaking of the business operations of the Federal Government we are not greatly concerned with the amount of responsibility attaching to an office. Rather are we concerned with the manner in which that responsibility is discharged. It is in the discharge of our duties that we find success or failure. In the vast business of the Federal Government we must necessarily measure the product in the aggregate. This aggregate is the sum total of all of our efforts. No matter how high or how low the position held, each of us in the Federal service contributes to the aggregate of the product. We are often charged with inefficiency. But I am fully convinced that the facts demonstrate that, measuring efficiency by the aggregate of the product these last years, there is no business body more efficient than the business organization of the Federal Government. You have the opportunity and privilege of serving all of the people. It calls not alone for efficiency, but for high ideals of service - a conception of duty where selfish interests and selfish desires have no place. It calls for loyalty and patriotism. We are serving a cause which to us should be sacred above all things - the cause of the people of this great Nation. Errors of judgment are excusable. These is no excuse for disloyalty. If there be persons in our organization who have not been loyal, who have not lived up to the ideals demanded by the cause we serve, they have not only contributed nothing but they have subtracted something from the efforts of the loyal. They should be displaced.
When five and a half year ago we set about to put our finances in order, we were faced with a public debt of $23,977,000,000. It is easy to save when not in debt. It is an entirely different thing to save and economize when in debt. The record of this intervening period has shown that the vast public debt was an inspiration for real accomplishment. We have seen that debt reduced by more than $4,334,000,000 in the five years which ended June 30 last. In the five years the schedule fixed by law for debt reduction from our ordinary receipts was exceeded by $2,096,000,000. In other words, on June 30 last we were over two billion dollars ahead of the schedule. This excess debt reduction represents an extraordinary annual saving in interest of nearly $100,000,000. And in the same period of time we have seen three substantial reductions in rates of taxation. This has been accomplished not at the expense of the character of service rendered by the Federal Government, but manifestly and plainly to all for the benefit of that service. The outlook to-day is that a large sum can be applied this current fiscal year to the further reduction of our debt. If this is realized, our debt on June 30 next will stand well below $19,000,000,000. We will be then ahead of the schedule more than two and one-half millions of dollars.
The public debt has a direct connection with the question of military preparedness. To the extent that we are able to reduce our public debt and to eliminate the vast charges of interest thereon, to that extent are we adding to our military preparedness; and to the same extent are we lightening the burden of the people of this country. Probably of all the great nations of the world, we are in the most fortunate financial condition. But, aside from the many and other more important reasons, we should, from a financial standpoint alone, refrain from any gesture which could possibly be construed as militaristic. There are in this Nation people who advocate policies which would place us in a militaristic attitude. There are others who beguile themselves with a feeling of absolute safety and preach a doctrine of extreme pacifism. Both of these are dangerous to our continued peace and prosperity. What we need, and all that we need, for national protection is adequate preparedness. In that is reflected our traditional attitude toward all nations. It contains no gesture of offense and no gesture of weakness.
I am for adequate military preparedness. It is a question to which I always give the most serious thought in my recommendations to the Congress in the Budget message. As Commander in Chief of the Army and of the Navy, the Chief Executive of this Nation has an emphatic responsibility for this phase of our welfare. As a nation we are advocates of peace. Not only should we refrain from any act which might be construed as calling for competition in armament, but rather should we bend our every effort to eliminate forever any such competition. We can not and should not divorce our own interests in this direction from the interests of other nations. Rather should we view the matter from the standpoint of the best interests of all the nations. Surely the best interests of all are found in directing to the channels of public welfare moneys which would otherwise be spent without reproductive results.
There has been great improvement in the business operations of our Government. This is due primarily to the establishment by the Congress of a scientific plan for carrying on the Nation's business. But the real accomplishment has been in the execution of this plan by the executive branch of the Government with the unwavering support of its general principles by the legislative branch. We have learned that impulsive recommendation or impulsive action is out of harmony with good business administration. In these days of effort to make each dollar count we have learned the lesson of mature thought and mature deliberation. We are giving relative weight to each of our requirements and are measuring them in the light of their real importance and necessity. And upon this same principle we are looking forward and building or the future.
It is rather difficult to visualize the real effect of this successful effort for constructive economy in the business of the Government. We see certain tangible results, but there are others equally, if not more, important. We can visualize the vast reduction in our public debt. There is brought home to us the benefits of the three substantial reductions made in states of taxation. We know the firm grasp which we have taken on our expenditures. But there are other things not so apparent. Prosperity in this country has been increasing from year to year since the depression of 1920. The calendar year which just closed was one of unprecedented business prosperity in the history of this Nation. Your efforts contributed materially to this favorable situation. The reduction in taxes gave the people a greater proportion of their own income for investment in profitable industry. It thereby returned more money to the channels of agriculture, trade, and commerce. And aside from all of this is the great influence which the economical operations of the Federal Government have had on the people of this country. An extravagant and poorly managed central government necessarily has an adverse influence on the people. And just the reverse influence flows from a well-ordered and well-managed central government.
One of the great lessons we have learned in the transaction of our business is the value of coordinated effort. Coordination in any business is essential to success. The Nation's business is no exception. For many long years the executive departments and establishments separated independently, with little or no concern for the common good of all. This is no longer the case. The old order of things has disappeared. In its place we have a well-coordinated executive branch of the Government. Departmental lines have given away and departmental prerogatives have willingly surrendered to policies and practices which are adopted for the best interests of all. The facilities at the disposal of the Federal Government are extraordinary both in class and character. In our personnel are represented the highest talent of science, profession, and trade. We are utilizing our facilities and talent not alone departmentally but interdepartmentally. The extent to which we are doing this is increasing us our vision of its possibilities is enlarged.
Coordination has brought a clearer conception of what is required of us - a clearer conception of what our real duty is. For your assistance in coordinating the routine business of government we are maintaining certain coordinating agencies. These in effect are your agencies, their business is your business, and one work they are doing is your work. I refer to the chief coordinator, his assistants, and the several coordinating boards. They are rendering valuable service, and I urge you to give them your hearty cooperation.
We are gradually but surely covering the ground for standardization of methods and practices to cover operations which are common throughout the service. Standardized Federal forms are replacing the individual departmental forms. We are still in the period of transition, but the foundation has been well aid, and we are building on that.
Keeping pace with the improvement in our business operations is an improvement in our physical plant. This has been made possible by holding down our ordinary current requirements so that we could make profitable investment. The building programs prescribed by the Congress will extend over a period of years. The cost is thereby wisely distributed so that it can be absorbed without embarrassment. The completion of these programs will remove an overhead cost and effect a permanent saving. This is wise spending. It will bring a real profit, which is the essence of constructive economy. In all directions we are taking up the slack. We are striving in this way to provide for enlargements in existing necessary lines of effort and for the assumption of the cost of additional projects essential to the public welfare without materially increasing the sum total of our annual expenditures. We are having a fair measure of success in this. In 1925 we spent $3,529,000,000; in 1926, $3,584,000,000; and it is now estimated that we will spend in 1927, $3,643,000,000, and in 1928, $3,572,000,000.
With a full Treasury and revenues at flood it requires courage to continue along the lines we have been following these last years. I am speaking not alone from an executive standpoint but also from a legislative one. I realize the great pressure for increased appropriations brought upon the Congress and I realize the enviable record which it has made in supporting the principles of its Budget law. It is significant that the Congress has not granted the total amount requested in any single Budget. It is pleasurable and easy to give. It is difficult to withhold. If the Treasury vaults were thrown open and its accumulated capital drawn upon until not a dollar were left, even then would we not be able to satisfy the demands that probably would be made from various groups and from various localities. And who will say that these demands may not have justifications? Projects that eventually will be resolved into completed works, purposes, and policies that in time to come must be adopted and financed, if accepted in their entirety to-day would throw a tax burden upon the people that would cripple business, check prosperity, and convert our annual surplus into an annual deficit. What needs to be done should be done. Great developments are sure to come. They should come, however, as the result of orderly procedure with an eye always to the best interests of the taxpayers. For extravagance and unnecessary provision - a waste of the people's money - there is no justification. I intend always to recommend sufficient appropriations to do what is necessary to be done and what should be done. If I err in my judgment I prefer to err on the side of having rather than on the side of spending.
In business administration the matter of personnel is of first importance. It is a matter in which justice to the employees and justice to the people must be equally conserved. It is the money of the people which pays the salaries of our employees. These salaries constitute the largest single item in our overhead costs. The Federal service should be adequately manned, but not overmanned. It may be impossible to secure this exact level, but every effort should be made to approximate it. Since the end of the fiscal year 1921 the number of employees in the Federal executive civil service, excluding the Postal Service, has been reduced 70,000. This has not impaired efficiency of operation. Rather has it been one of the contributing factors in increasing efficiency. The chief incentive for perfecting new and improved methods of business is reduction in cost. That incentive, which exists everywhere in private business, should certainly exist in the business of the Federal Government. We are serving more stockholders than any other business. When reductions of force are justified, they must be made. This does not mean that we have no concern in the welfare of employees separated from the service by reason of reduction in force. I have recently issued an Executive order that the names of those so separated having satisfactory efficiency records be placed upon the reemployment registers of the Civil Service Commission and that all new appointments be made from the qualified eligibles thereon until the registers have been exhausted.
The Government has given evidence during the last few years of its continuing interest in the welfare of its employees. The recently amended retirement act has materially improved the financial outlook for those employees who leave the service because of age. The new travel allowance law has provided adequate rates of reimbursement for those traveling on the business of the Government. The classification act of 1923 is continually operating to improve the salary status of the personnel in the executive departments and independent establishments. We are concerned with the question of adequate and proper salaries for our employees. This is both a natural and a necessary interest.
In the last fiscal year there were 21,486 employees at the seat of Government in grades 1 to 4 of the clerical, administrative, and fiscal service, with a salary range from $1,140 to $2,040. They compromised 46 per cent of all employees classified under the act of March 4, 1923, and their average salary was $1,549. The average salary in that year of 8,039 employees of banks, financial institutions, and insurance companies in nine of the largest cities east of the Mississippi River, with duties comparing fairly with those of the Government employees in the four grades mentioned, was $1,329. This shows a difference of $220 per year in favor of these employees in Washington. Since the field services are on a comparable salary basis, this favorable difference applies to the much larger number of employees performing the same kind of service in the field.
The Federal Government exists only for the good of the people. If we do not make very dollar count in doing the needful things, we unduly enlarge the amount required from the people. The same is true if we unduly enlarge the functions of the Government. In spite of three substantial reductions in tax rates, we have taken from the people something more than actually necessary to carry on the business of the Government. From this has accrued the yearly surpluses which have been invested in the further reduction of the national debt and the profit arising there-from through reduction in interest. These surpluses would not have accrued had the business of government not been well managed.
This year promises a substantial surplus, and we have every hope for a surplus the next-year. It is too early to forecast whether or not there can be a further permanent reduction in taxes in the near future. We are waiting a test of the producing ability of the revenue act of 1926. But what we can, should, and must do to-day is to keep a firm grasp on our expenditure program. This is essential if we are to reap the full benefits of a favorable revenue under the existing law.
In planning your next year's expenditure program keep constantly in mind the necessity of holding the level of spending to a degree consistent with efficient and productive results. Every dollar waste, every penny misspent, is confiscation of capital - a withdrawal of working funds from the field of useful development and production. And in giving consideration to plans or proposals for enlarging the functions and activities of the Government apply to them the measure, not of desirability, but of necessity.
In making your apportionment of funds for the coming year, I want to emphasize again the necessity of setting aside a reasonable amount in reserve to meet the contingencies which may happen during the year. We have found this a profitable practice. These reserves should not be released to meet ordinary or routine requirements. The true spirit of the reserve of which I speak is to have something in hand to meet contingencies. If these do not arise, the reserves are then reflected in a direct saving. They always reflect an indirect saving to the extent that they make it unnecessary to call upon Congress for additional funds.
Six years ago the costs of the Government were over $5,500,000,000, or $51 per capita. Total taxes were nearly $4,900,,000,000. The index figure of the cost of living was over 190. To initiate a policy of constructive economy at that time require a great deal of courage. To all appearances it was almost impossible of accomplishment. The time when it would give any actual relief seemed to be so far in the distance that there was little incentive to make the required sacrifices to secure it. In this short period of time the progress has been nothing less than astounding. We have reduced the costs of the Government nearly $2,000,000,000, so that they now stand somewhat over $3,500,000,000. The per capita costs have been reduced more than $20, so that they now stand at somewhat over $30. The total taxes have been reduced about $1,500,000,000, so that they are now just over $3,400,000,000. This is a saving of $5,000,000 for each working day. The index cost of living has come down to 176.
This readjustment of the finances of the Government has been a large contributing factor in the prosperity which the country has enjoyed. Out of our surplus earnings we have paid off nearly a quarter of our national debt and furnished billions of dollars to stabilize and refinance other parts of the world. Measured by its productive capacity and by its distribution in wages and its results in the general raising of the standards of living, it is far in excess of anything ever enjoyed before by any people anywhere at any time. If we had the courage to adopt this policy when its beneficial results appeared to be far in the future, now that we are in the midst of their enjoyment we ought to have the courage and the self-control to continue it. There is not a home anywhere within the broad confines of this Republic which is not better off because of the services which you have rendered and the sacrifices which you have made. These results are unprecedented in the financial history of the world. They have place America at the pinnacle of success and prosperity. It is our business to do our part to keep it there.