Annual Budget Message to the Congress, Fiscal Year 1933.

To the Congress of the United States:

I have the honor to transmit herewith the Budget of the United States for the fiscal year ending June 30, 1933. The receipts and expenditures shown in detail in the Budget are summarized in the following statement:

SUMMARY OF RECEIPTS AND EXPENDITURES (EXCLUSIVE OF POSTAL REVENUES AND POSTAL

EXPENDITURES PAID FROM POSTAL REVENUES)

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1933 1932 1931

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General fund receipts $2,473,515,772.00 $2,204,257,200.00 $3,103,336,105.16 Special fund receipts 103,014,430.00 34,621,600.00 86,303,975.14 Total, general and special fund receipts 2,76,530,202.00 2,238,878,800.00 3,189,640,080.30 General fund expenditures 3,889,223,050.00 4,284,411,800.00 3,987,148,133.52 Special fund expenditures 107,449,400.00 77,428,000.00 104,515,774.89 Total, general and special fund expenditures 3,996,672,450.00 4,361,839,800.00 4,091,663,908.41 Excess of general and special fund expenditures over general and special fund receipts 1,420,142,248.00 2,122,961,000.00 902,023,828.11 Excess of trust fund receipts over trust fund expenditures 3,192,800.00 277,315.00 ................ Excess of trust fund expenditures over trust fund receipts ................... 693,016.96 ____________________________________________________ Total, excess of expenditures 1,416,949,448.00 2,122,683,685.00 902,716,845.07 ______________________________________________________________________

From this statement it will be seen that, in spite of an estimated increase of over $337,000,000 in receipts for next year and an estimated reduction in expenditures of more than $365,000,000, a large excess of expenditures is still indicated for the fiscal year 1933 under present laws. This condition requires that I make, in accordance with section 202 of the Budget and Accounting Act, recommendations to Congress for new taxes, loans, or other appropriate action to meet the estimated deficiency. My recommendations appear later in this message.

1932

For the fiscal year ending June 30, 1932, the receipts, originally estimated at $3,956,000,000, are now expected to fail of realization because of the severity of the depression and will fall below the estimates by $1,717,000,000. The principal elements entering into this decline in revenues are income-tax receipts, $1,140,000,000; customs receipts, $202,000,000; miscellaneous internal-revenue receipts, $132,000,000, and postponement of payments of principal and interest on the foreign debt, $247,000,000.

Expenditures are expected to increase over the original estimates by $437,000,000. This is the net difference between many items of increase and decrease. The principal increases, in part due to subsequent legislation, include added benefits to veterans, $135,000,000; speeding up of public works to aid unemployment, $160,000,000; Federal Farm Board revolving loan fund, $80,000,000; interest on the public debt, $24,000,000; postal deficit, $81,000,000; and settlements under the war claims act, $37,000,000. There are many other individual items of increase over the expenditures estimated a year ago which would materially swell the total of increases. Rigid reduction of expenses elsewhere supplemented by decreases in public-debt expenditures on account of the moratorium and smaller tax refunds than were originally estimated serve to offset the total increases. These changes in receipts and expenditures indicate a deficit of $2,123,000,000 which includes statutory debt retirement or a probable net debt increase of $1,711,000,000.

1931

For the fiscal year ending June 30, 1931, the actual receipts fell short of those estimated a year ago by $516,000,000. The principal elements in this falling off were internal revenue and customs receipts which, together, account for $506,000,000. The actual expenditures exceeded those estimated for the year by $207,000,000, and may be attributed to the special legislation calling for emergency drought relief and increased public works to relieve unemployment, coupled with the advance payment of $112,000,000 to the adjusted-service certificate fund, offset in part by reductions and economies in other directions. The net result was a deficit of $902,000,000, which included $440,000,000 for statutory debt retirement, or a net increase in the debt of $462,000,000, plus additional cash in the Treasury of $153,000,000, or a total debt increase of $615,000,000.

TAXES

We are now face to face with a situation where for a time the current revenues of the Government under our existing laws have fallen below the amounts required to meet the absolutely necessary expenses. This brings the question directly before us of the course that shall be pursued. As already stated the deficit for the fiscal year 1931 is $902,000,000 and the estimated deficits for 1932, $2,123,000,000, and 1933, $1,417,000,000, or a total of $4,442,000,000, which, after deducting statutory debt redemptions and increased cash in the Treasury, show for these three fiscal years a total probable net increase in the national debt of $3,247,000,000. Rightly or wrongly our tax system is very largely based upon business profits and in consequence is subject to great variables.

We can not maintain public confidence nor stability of the Federal Government without undertaking some temporary tax increases. It is obviously impossible to impose a degree of taxation which will balance the Budget for the current fiscal year. We should endeavor by increase of taxes and rigid curtailment of expenditures to balance the Budget for the next fiscal year except to the extent of the amount required for statutory debt retirements. We should assure its balance, including statutory debt retirements, for the fiscal year following.

I recommend that Congress provide for an increase in taxation for a definite limited period and upon the general plan of taxation which existed under the revenue act of 1924 with such changes as may be appropriate in the light of altered conditions. The Secretary of the Treasury has prepared recommendations along these lines which he will present at the proper time. It is proposed that this increase shall be definitely terminated in two years from next July. This plan, it is estimated, will realize $920,000,000 next year and thus meet the above conditions of balancing the Budget for the fiscal year 1933 except for the statutory debt retirement. It would balance the Budget including debt retirement in the fiscal year beginning July 1, 1933. It would provide about $390,000,000 for the current year, leaving us with the necessity of borrowing an amount which will represent a net increase in the public debt by about $1,320,000,000.

The plan of approximately reenacting the revenue act of 1924 has the great advantage that the Government is equipped by experience with similar legislation for its systematic and economical collection. The public has paid such taxes in the past and has found them not intolerable and has found that they do not prevent increased prosperity. By providing a definite date for termination of the temporary increase it will allow taxpayers to look forward to definite relief.

I further recommend that Congress inquire into the economic effect of the provisions of the present law relating to capital gains and losses.

APPROPRIATIONS

The estimates of appropriations recommended in this Budget for the fiscal year 1933, to carry out the financial program recommended above, are summarized in the following statement showing increases or decreases as compared with actual appropriations for the current fiscal year.

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Estimates, 1933 Increases Decreases

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Legislative establishment: Senate $3,241,564.00 .............. $7,728.00 House of Representatives 8,177,374.00 .............. 6,238.00 Architect of the Capito 4,257,415.00 .............. 5,401,007.00 Botanic Garden 231,022.00 $57,140.00 .............. Library of Congress 2,489,777.00 .............. 72,305.00 Government Printing Office 3,274,000.00 .............. 20,000.00 Miscellaneous 185,050.00 .............. 3,000.00 Total, legislative establish- ment 21,856,202.00 57,140.00 5,510,278.00 Executive office 429,380.00 .............. 43,000.00 Independent establishments: American Battle Monuments Commission 400,000.00 95,750.00 .............. Arlington Memorial Bridge Com- mission 1,000,000.00 ................ ............... Board of Mediation 169,865.00 .............. 18, 320.00 Board of Tax Appeals 635,000.00 .............. 18, 640.00 Bureau of Efficiency 199,940.00 .............. 330.00 Civil Service Commission l,542,720.00 .............. 115,622.00 Commission of Fine Arts 9,775.00 .............. ..............

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Estimates, 1933 Increases Decreases

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Independent Establishments -- continued Employees' Compensation Com- mission 4,986,926.00 255,946.00 .............. Federal Board for Vocational Education 10,285,405.00 199,425.00 .............. Federal Farm Board l,880,000.00 .............. 100,020,000.00 Federal Oil Conservation Board 17,500.00 .............. 2,500.00 Federal Power Commission 362,020.00 43,550.00 .............. Federal Radio Commission 431,360.00 .............. 34,020.00 Federal Reserve Board 1,692,800.00 83,600.00 ............. Federal Trade Commission 1,266,500.00 .............. 495,266.00 General Accounting Office 4,290,820.00 .............. 6,800.00 George Rogers Clark Sesquicen- tennial Commission 500,000.00 .............. 300,000.00 George Washington Bicentennial Commission 452,230.00 114,035.00 .............. Interstate Commerce Commission 9,661,410.00 .............. 2, 251,063.00 Mount Rushmore National Me- morial Commission 25,000.0 25,000.00 ............ National Advisory Committee for Aeronautics 1,012,310.00 ................ 38,760.00 National Capital Park and Plan- ning Commission ................ ................ 4,000,000.00 Personnel Classification Board 195,116.00 ................ 23,734.00 Puerto Rican Hurricane Relief Commission ................ ................ 1,000,000.00 Protecting interests of the United States in oil leases and oil lands ................ ................ 60,000.00 Public Buildings and Public Parks of the National Capital 4,701,575.00 ................ 1,092,042.00 Public Buildings Commission 125,000.00 ................. .............. Smithsonian Institution 1,250,964.0 44,540.00 .............. Supreme Court Building Com- mission 2,000,000.00 ................ 1,750,000.00 Tariff Commission 1,150,500.00 ................ 89,500.00 United States Geographic Board 11,678.00 1,000.00 ............. U.S. Shipping Board and Mer- chant Fleet Corporation 423,270.00 ................ 36,982,730.00 Veterans' Administration 1,072,064,527.00 124,624,649.00 ............ Total, Executive Office and in- dependent establishments 1,123,182,591.00 125,487,495.00 148,342,327.00 Department of Agriculture 197,454,976.00 ................ 49,828,154.00 Department of Commerce 44,719,304.00 ................ 9,615,926.00 Department of the Interior 70,627,152.33 ................ 14,667,954.40

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Estimates, 1933 Increases Decreases

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Department of Justice 53,900,364.00 2,671,163.00 ............ Department of Labor 14,488,397.00 ................ 505,803.00 Navy Department 343,000,000.00 ................ 17,101,593.00 Post Office Department: Postal Service payable from post- al revenues 658,724,487.00 12,240,710.00 ............ Postal deficiency payable from Treasury 155,000,000.00 ................ 40,000,000.00 State Department 16,714,071.89 ............... 1,792,234.45 Treasury Department 293,735,857.00 24,798,440.00 ............ War Department, including Panama Canal 423,940,302.00 ................ 36,138,348.00 District of Columbia 47,331,919.00 ................ 1,640,719.00 Total, ordinary, including Pos- tal Service 3,464,675,623.22 165,254,948.00 325,143,336.85 Reduction in principal of the public debt: Sinking fund 426,489,600.00 14,718,300.00 ............ Other redemptions of the debt 70, 313, 878.00 70,138,878.00 ............ Principal of the public debt 496,803,478.00 84,857,178.00 ............ Interest on the public debt 640,0000,000.00 35,000,000.00 ............ Total, including Post Office Department and Postal Serv- ice 4,601,479,101.22 285,112,126.00 325,143,336.85 Deduct Postal Service payable from postal revenues 658,724,487.00 12,240,710.00 ............ Total, payable from the Treas- ury 3,942,754,614.22 272,871,416.00 325,143,336.85 Annual appropriations 2,657,011,886.22 ............. 156,807,584.85 Permanent appropriations 1,285,742,728.00 104,535,664.00 ............ Total 3,942,754,614.22 104,535,664.00 156,807,584.85 _______________________________________________________________________

The bare comparison between appropriations proposed for the next fiscal year and those made for the current fiscal year, as shown in the above statement, fails to present a true picture of Government operations to the extent that in neither year do these appropriations represent the full amount available for expenditure, due largely to continuing appropriations from previous years. It is necessary to consider total expenditures in order to arrive at a true comparison between the two years. That comparison is given in the opening paragraph of this message and shows that the expenditures for 1933 are estimated at $365,000,000 less than those for the current fiscal year.

In framing this Budget, I have proceeded on the basis that the estimates for 1933 should ask for only the minimum amounts which are absolutely essential for the operation of the Government under existing law, after making due allowance for continuing appropriations. The appropriation estimates for 1933 reflect a drastic curtailment of the expenses of Federal activities in all directions where a consideration of the public welfare would permit it. Even with such reductions in the estimates of appropriations, the anticipated receipts under existing law, as stated above will be $1,417,000,000 short of the amount needed to meet Federal expenditures, including statutory debt retirement.

In viewing our financial requirements for 1933 the fact should not be overlooked that of the total of $3,942,000,000 of the estimates of appropriations payable from the Treasury contained in this Budget, $1,285,000,000 is represented by permanent definite and indefinite appropriations which by law are automatically made each year without further action by the Congress. Taking into consideration that in addition to this sum of $1,285,000,000 of permanent definite and indefinite appropriations there are other expenditures of the nature of fixed charges amounting to approximately $1,000,000,000 for which annual estimates of appropriations must be submitted, there is in reality an area of only about $1,700,000,000 of the total of $3,942,000,000 presented in this Budget which is available for consideration in seeking means to curtail our expenditures.

SHIPPING BOARD

The estimates for the Shipping Board for 1933 show a decrease from the appropriations for 1932 of $36,972,000. This is due mainly to the fact that no further appropriation is needed at this time for the construction loan fund for which $35,000,000 was appropriated in 1932, it being contemplated that the unexpended balance of that appropriation, together with repayments of loans and sales receipts transferred to the fund, will be sufficient to meet expenditures from the fund during 1933. For the shipping fund for which $1,970,000 was appropriated in 1932, no estimate for a further appropriation is being presented, as it is expected that the operating loss for 1933, which is estimated at about $5,250,000, can be met by utilizing cash balances and reserves.

VETERANS' ADMINISTRATION

There is requested in this Budget a total of slightly more than $1,072,000,000 for the Veterans' Administration, compared with a total appropriation for 1932 of approximately $947,000,000. About $21,000,000 of each of these amounts pertains to the civil service retirement and disability fund and is not properly chargeable to the annual cost of caring for our veterans, which thus becomes $926,000,000 for 1932 and $1,051,000,000 for 1933. Comparison of these amounts indicates on its face a net increase of $125,000,000 for 1933. However, it is now known that additional appropriations will be required for the fiscal year 1932 to the approximate amount of $260,000,000 of which $200,000,000 is to meet obligations due to the increase in the loan value of adjusted-service certificates and $60,000,000 to meet the requirements for military and naval compensation, Army and Navy pensions, and aid to State and Territorial homes for disabled veterans.

Taking these supplemental requirements for 1932 into consideration, the above indicated net increase of $125,000,000 becomes a net decrease of approximately $135,000,000. This net decrease, however, is due largely to the adjusted-service certificate fund requirements, which are $162,000,000 less for 1933. If the adjusted-service certificate fund be excluded from both 1932 and 1933, the estimates for 1933 represent an ultimate net increase over 1932 of $27,000,000. This amount is the net difference between several items of increase and decrease. The principal item of increase is found in military and naval compensation, which is up $42,000,000. Resulting from the increase in hospital and domiciliary facilities, the cost of administration, medical, hospital, and domiciliary services shows an increase of $4,460,000, and there is a further increase of $1,527,000 in the item for hospital and domiciliary facilities. Offsetting these increases is a decrease of $9,000,000 in Army and Navy pensions, $4,500,000 in military and naval insurance, and $7,762,000 in the Government life-insurance fund.

AGRICULTURE

The estimates for the Department of Agriculture for 1933 carry approximately $49,800,000 less than the appropriations for 1932. This decrease is accounted for in part by the fact that the 1932 appropriations contained $22,000,000 for seed loans and agricultural relief for which no estimate is required for 1933. There is a further reduction of $20,000,000 in the 1933 estimates from the 1932 appropriations for Federal-aid roads and forest roads and trails, as the regular programs for these works under existing authorizations were advanced to that extent in 1931 and 1932 by the funds made available in the emergency construction appropriations. The balance of the decrease is reflected in a reduction of $1,750,000 in the estimate for the acquisition of additional forest lands and $4,800,000 for other activities of the department.

TREASURY DEPARTMENT

The estimates for practically all of the organization units in the Treasury Department for the fiscal year 1933 are less than the appropriations for 1932, the notable exception being an increase of $57,400,000 in the items for the construction of new Federal buildings authorized and now in some stage of development and for the operation and maintenance of completed buildings. The principal items of decrease are $26,000,000 for refunding internal-revenue taxes illegally collected, funds now available for this purpose being considered sufficient for the fiscal year 1933, $3,200,000 for the Coast Guard, due principally to the completion of its programs for the construction of buildings and vessels; $934,000 for customs administration, as a result of falling receipts; and $512,000 for the Public Health Service, due principally to nonrecurring expenditures for equipping new hospitals and quarantine stations.

The prospective operations under permanent indefinite appropriation items in the fiscal year 1933 will be largely in excess of the current year. To provide for interest on our enlarged public debt, $35,000,000 additional will be required. Public-debt retirements required to be made from ordinary receipts will require $85,000,000 additional for the purposes of the cumulative sinking fund, receipts from foreign governments to be applied to debt retirements, and retirements from franchise tax receipts from Federal reserve banks.

BUILDINGS

The Federal public building program authorized by the act of May 25, 1926, as amended, is being advanced in a marked degree in furtherance of the movement for the relief of the unemployed. The total authorizations now amount to $620,000,000 in addition to the amounts authorized for certain old projects specifically brought into the program by the original act and amounting to upwards of $9,000,000. Of the total amount authorized $190,000,000 is for land and buildings in the District of Columbia. Moreover, at places where abandoned sites and buildings are sold the proceeds are to be applied against the cost of the new project. The estimated sale value of sites and buildings to be so replaced amounts to approximately $69,000,000 and about $6,700,000 has been realized from such sales up to the present time.

In accordance with the provisions of the legislation above referred to specific authorizations have been made for 817 projects at limits of cost aggregating $466,800,000. Under authority of these authorizations obligations have been incurred, up to June 30, 1931, amounting to $175,560,000, of which $73,633,000 were incurred in the fiscal year 1931. It is expected that obligations to be incurred in the fiscal year 1932 will amount to $155,000,000, and if this is brought about there will be a balance of over $136,000,000 available for obligation in the fiscal year 1933. It is apparent, therefore, that specific authorizations for individual projects already made are sufficient to carry the construction program through the fiscal year 1933.

To finance the projects which have been specifically authorized, on the basis of providing for maturing obligations, appropriations aggregating $207,030,000 have been made. The total expenditures thereunder to the close of the fiscal year 1931 amounted to $117,890,000, leaving an unexpended balance of $89,140,000, and it is estimated that $140,000,000 additional will be required to meet payments which will become due up to the close of the fiscal year 1933. To provide the additional funds which will be necessary to meet payments to the close of the fiscal year 1932 a supplemental estimate for $20,000,000 will be transmitted to Congress for consideration in connection with the first deficiency bill, and $120,000,000 is included in this Budget for payments to be made in the fiscal year 1933.

In addition to the building program referred to above, additional appropriations aggregating $28,680,000 have been made for the purchase of land in the District of Columbia. The expenditures thereunder to the close of the fiscal year 1931 amounted to $22,569,000, leaving an unexpended balance of $6,111,000 available for subsequent purchases. Additional appropriations under this authorization are not required at this time.

The War Department is also carrying forward a building program for the housing of military personnel, for hospitals, utilities, and administration activities, and for technical buildings for the Air Corps made necessary by the need for replacing World War temporary construction and to provide generally for the increase in the pre-war strength of the Regular Army, including the expansion of the Air Corps. There has already been appropriated $89,311,000 which, with the contract authorization of not to exceed $3,000,000 contained in the War Department appropriation act for 1932, practically exhausts the authorizations so far granted by law for continuing the program. The estimates for 1933 carry $2,250,000 to meet obligations under the contract authorization of $3,000,000. For the Panama Canal the estimates for 1933 provide $700,000 for new buildings and structures.

For the Veterans' Administration this Budget provides $12,877,000 for additional hospital and domiciliary facilities. Of this amount $10,877,000 is covered by the authorization of $20,877,000 provided by the act approved March 4, 1931, leaving $5,000,000 yet to be appropriated thereunder, and $2,000,000 is for completing the authorizations contained in the acts approved June 21, 1930, and July 3, 1930, for the erection of two national soldiers' homes, one in the South and one in the Northwest.

For the Navy Department, estimates aggregating $4,337,000 are included in the Budget to provide for hospitals, barracks, shop buildings, hangars, storehouses, etc.

For the Interior Department, a total of $1,815,200 is provided for new buildings, of which $642,510 is for the Indian Service, $312,700 for the National Park Service, and $860,000 for Howard University.

The estimates for the District of Columbia provide $3,818,500 for various buildings, including $1,600,000 for continuing the construction of the municipal center, $1,491,000 for school buildings, $490,000 for hospitals, and $237,500 for other purposes.

The estimates for the Department of Justice provide $962,000 for construction at the various penitentiaries and the industrial reformatory; for completion of the United States Southwestern Reformatory at El Reno, Okla., and the United States Hospital for Defective Delinquents at Springfield, Mo., $1,850,000 and $1,250,000, respectively; for Federal jails, $100,000; and for the National Training School for Boys, Washington, D.C., $124,000; a total of $4,286,000.

For the Department of State, $450,000 is provided to continue the acquisition of sites and buildings and the initial furnishing of buildings for the use of diplomatic and consular establishments and other agencies of the United States in foreign countries.

The total amount provided in this Budget for the procurement of sites and the construction of buildings is, therefore, $150,534,000--a very large increase over normal activities in this direction.

NATIONAL DEFENSE

The estimates for national defense under the War and Navy Departments for 1933 aggregate $644,650,000 as compared with the appropriations for 1932 for this purpose totaling $695,691,000, a decrease of $51,041,000. These amounts exclude all items of a nonmilitary nature. The net decrease for the War Department amounts to $33,952,000. This is due mainly to the fact that owing to lowered commodity costs there will be carried forward into 1933 large stocks of subsistence, clothing, and other supplies, and to a decrease in the present estimates from the appropriations for 1932 of funds to carry forward the Army building program. The postponement of other projects where practicable without serious detriment to the maintenance, operation, and training of the Army has also been a material factor in effecting reductions in the estimates for 1933.

Provision is made in these estimates for average active strengths of 12,000 commissioned officers, 924 warrant officers, and 118,750 enlisted men of the Regular Army, and 6,500 enlisted men of the Philippine Scouts; for an actual average strength of 185,000 officers and men of the National Guard; for the training of 20,722 members of the Organized Reserves for varying periods; for the enrollment and instruction of 127,565 students in Reserve Officers' Training Corps units in schools and colleges and the training of 7,200 of this number in 42 camps; and for 30 days' attendance at citizens' military training camps of 37,500 trainees. With one or two very minor exceptions these strengths are the same as those provided for 1932.

For the Navy Department the items contained in the estimates for purposes of national defense for 1933 amount to $342,606,000. The comparable amount appropriated for 1932 is $359,694,000. This indicates a decrease under 1932 of $17,088,000. This decrease includes $15,000,000 for ordinary maintenance and operating expenses of the fleet and the shore establishment, $8,000,000 for shore projects, and $7,150,000 for construction of new ships. It provides an increase of $15,000,000 for modernization of battleships. The items for ordinary maintenance and operation of the fleet and shore establishments provide for maintaining during 1933 an average of 79,700 enlisted men of the Navy, the same as provided for 1932, and an average of 15,343 enlisted men of the Marine Corps as against 17,500 men provided for 1932. Under these estimates no fighting vessels will be decommissioned and no navy yards or training stations will be closed. Other decreases in requirements are due in part to the continuation of the so-called "rotation plan" for the employment of vessels, recently adopted by the Navy Department, which lends itself to both economy and efficiency in fleet operations, and in part to reduced costs of supplies and materials.

The estimates of $31,400,000 for the construction of new vessels, compared with the appropriation of $38,550,000 for 1932, indicates a decrease of $7,150,000. This, however, is a facial decrease only. When the cash balances to be carried forward from prior years, and the amount to be made available by transfer from the naval supply account fund, are taken into consideration, the total that will be available for ship construction in 1933 is estimated at $57,000,000. The availability for 1933 exceeds in amount the expenditures for ship construction in any one of the last 10 years. The expenditures in 1923 were $46,682,000; 1924, $41,697,000; 1925, $34,022,000; 1926, $25,250,000; 1927, $27,430,000; 1928, $36,935,000; 1929, $46,760,000; 1930, $49,872,000; 1931, $37,944,000; and for 1932 are estimated at $53,000,000. The amount available for 1933 will provide for normal progress in construction of every vessel now authorized by law and permitted under treaty restrictions except six destroyers the laying down of which has been postponed and, in addition, for beginning construction of one more 8-inch-gun cruiser in January, 1933, which is the earliest date permitted under the terms of the London treaty.

RIVERS AND HARBORS AND FLOOD CONTROL

The estimate for the annual appropriation for the maintenance and improvement of existing river and harbor works contained in this Budget is in the same amount as was appropriated for 1932, namely, $60,000,000. The emergency appropriations made last December for public works with a view to increasing employment contained $22,500,000 for rivers and harbors, which is in addition to the annual appropriations of $55,000,000 for 1931 and $60,000,000 for 1932. Viewed alone this advance in the program would indicate that some reduction from $60,000,000 would be justified in the estimate for 1933. This, however, is not the case, as the Government has given tentative assurances as to early dates of fulfillment which will require the full amount of the appropriation requested for 1933.

For flood control the 1933 estimates of annual appropriations are $3,000,000 less than the appropriations for 1932, this difference being the amount of the emergency appropriation made last December.

The total of the estimates contained in this Budget for rivers and harbors (including maintenance and operation of Dam No. 2, Muscle Shoals) and flood control is $104,182,000, of which $70,142,000 is for rivers and harbors and $34,040,000 for flood control. The total of $104,182,000 includes $10,537,000 to meet the requirements under authorizations of law covering permanent specific and indefinite appropriations, advances and contributions, for rivers and harbors and flood control work.

RETIREMENT FUNDS

Pending a revaluation of the civil service retirement and disability fund, the estimate contained in this Budget for the financing of the Government's liability to the fund calls for the same amount as was appropriated for 1932, $20,850,000. For the Foreign Service retirement and disability fund, however, the estimate contained in this Budget is $416,000, as against an estimate and appropriation of $215,000 for 1932. This increase is based upon an actuarial valuation recently made by the Bureau of Efficiency and clearly indicates that the Government's liability to the fund was substantially increased by the act approved February 23, 1931. That act, however, continues without change the provision contained in the act of May 24, 1924, that the aggregate appropriations to meet the Government's liability under the retirement fund should at no time exceed the aggregate total of the contributions of the Foreign Service officers theretofore made, and accumulated interest thereon. While the estimate of $416,000 for 1933 may be made without exceeding the limitation contained in this provision, the restrictions thereof will preclude appropriations for 1934 in excess of about $322,000, and for subsequent fiscal years in excess of about $178,000 based on the present pay roll of the Foreign Service officers. Federal contributions of these amounts will be totally inadequate to maintain the solvency of the retirement fund.

The continuation in the act of February 23, 1931, of this restrictive provision indicates clearly that it was not the intention of Congress in the enactment of that law to confer additional retirement benefits upon Foreign Service officers which would prevent the solvency of the retirement fund being maintained by Federal contributions equal to, but not exceeding in the aggregate, the total of the contributions of the Foreign Service officers and accumulated interest on such contributions. The recent actuarial valuation, however, shows conclusively that some further legislative action will be necessary if we are to maintain the solvency of the Foreign Service retirement and disability fund. The Secretary of State is aware of this situation and will make appropriate recommendation to the Congress during the present session.

UNEXPENDED BALANCES

Last year in submitting the Budget for 1932 I called attention to the fact that in the preparation of the estimates of appropriations I had refrained from recommending that the requirements for 1932 be met in part by a reappropriation or extension of the availability of unexpended balances of appropriations for the then current or prior fiscal years. In making appropriations for the fiscal year 1932 Congress concurred in this change in policy, and I am therefore submitting the estimates of appropriations for 1933 on the same basis. I mention this because efforts for such economy as would be consistent with the public welfare have resulted in unexpended balances, both actual for last year and estimated for this year, which would have made it possible substantially to reduce the amount of direct appropriations requested in many of the estimates contained in this Budget had the old practice been continued. This reduction would have totaled about $70,000,000.

CONCLUSION

We have recently closed one fiscal year and are now advanced into another year where the depression in business has resulted, on the one hand, in a heavy falling off in receipts and, on the other hand, in large Federal expenditures to provide work to assist in the relief of unemployment.

The welfare of the country demands that the financial integrity of the Federal Government be maintained. This is a necessary factor in the rebuilding of a sound national prosperity. This Budget, with its recommended reductions in appropriations and increases in revenues, presents a definite program to this end involving three steps--first, a material reduction in the anticipated deficit for the current fiscal year; second, a relation between receipts and expenditures for the fiscal year 1933 which will avoid a further increase in the public debt during that year; and third, a balanced Budget for 1934.

To carry out this program it is important to emphasize the fact that we are now in a period where Federal finances will not permit of the assumption of any obligations which will enlarge the expenditures to be met from the ordinary receipts of the Government.

I am confident that the Congress realizes this situation and will give it full consideration in passing upon matters which may contemplate any such additions to our spending program. To those individuals or groups who normally would importune the Congress to enact measures in which they are interested, I wish to say that the most patriotic duty which they can perform at this time is to themselves refrain and to discourage others from seeking any increase in the drain upon public finances.

HERBERT HOOVER

DECEMBER 7, 1931.