Franklin D. Roosevelt photo

Press Conference

January 04, 1939

THE PRESIDENT: Steve [Mr. Early] suggests, because there are quite a number of new faces, we repeat that this is not a Press Conference in any sense of the word. It is merely an effort to be helpful in explaining the Budget Message and a lot of figures for your own help. That follows the custom of other years. Of course, the release of this is not until it is actually delivered to the Congress tomorrow at twelve o'clock.

Q. May I ask a question? There is a certain type of stories which, I understand, has been criticized, coming from this Conference. Would you care to elaborate on that?

THE PRESIDENT: For the benefit of interpreters or columnists, I do not think we want personal stories about wisecracks that are made or about my turning to the Director of the Budget, or the Director of the Budget not knowing the answer to the question. After all, that is between us and I think probably it is better that the columnists should not use that kind of stuff, if they do not mind.

MR. EARLY: It is just Off the record.

THE PRESIDENT: Yes, off the record. (Reading)

THE BUDGET AND THE NATIONAL INCOME

"Taxation yields almost all of the income of the Government, leaving less than 5 per cent to come from miscellaneous sources. Revenue from taxes depends mainly on two factors: The rate of taxation and the total of the national income. This holds true not only of direct taxes on personal and corporate income but also of what are known as ad valorem taxes or other forms of indirect taxes, for the very good reason that the volume and value of goods produced or articles imported vary with the rise or fall of the Nation's total income.

"We can and do fix the rate of taxation definitely by law. We cannot by a simple legislative act raise the level of national income, but our experience in the last few years has amply demonstrated that through wise fiscal policies and other acts of government we can do much to stimulate it.

"Today the Nation's income is in the neighborhood of 60 billion dollars a year. A few years ago it was much lower. It is our belief that it ought to be much higher.

"In order that you may know the amount of revenue which the Government may expect under the existing tax structure as the national income rises, the following table is submitted. It shows the estimated revenues which may be derived when national income reaches certain levels between 70 billion and 90 billion dollars."

"The table is not intended to indicate the national income for any particular year and, of necessity, the estimates are rough and may vary somewhat either way. Since taxes are paid from one month to fifteen months after income is realized, the achievement of a 90 billion dollar national income in one year will not, for instance, mean tax collections of 10 billion dollars in that same year. This table is an indicator and not a gauge.

"During the past nine fiscal years—a period which has seen the national income drop from a high of 81 billion dollars in the calendar year 1929 to around 40 billion dollars in 1932 and rise again to about 70 billion dollars in 1937—Federal revenues, even though on a higher tax base, have never completely covered expenditures.

"We require continual study of the revenues necessary to carry on the normal functions of the Federal Government and of the role which Federal policy should play in the stabilization of the national economy.

"This study includes a consideration of: (a) The practicability of reclassifying expenditures on a functional basis and the most appropriate methods of financing the different classifications; (b) the problem of human security including relief and its costs; and (c) the correlation between national income on the one hand and Government receipts and expenditures on the other.

"And analysis of receipts and expenditures by major classes over a ten-year period, as set forth in the following table, indicates the nature of the problems to be studied."

Now, this is a new breakdown of all kinds of old figures that they have had in the past. It is an effort to classify, in a somewhat new way which would be much more readily understood by the average man on the street, I think, than the old way.

The receipts are put down as they always have been, practically, but they have been reduced to a smaller number of categories than we had before.

Then, the expenditures have been classified into two kinds, large groups, ordinary expenditures and extraordinary expenditures, which is a rule-of-thumb method of doing it. We could argue among ourselves, and you could write sententious editorials about one item going in one group when it should go in another; but it is an effort to simplify public thought on what types of expenditures they go under.

These first expenditures, in the first group, refer to legislative, judicial and civil establishments, and that includes, at the bottom, independent offices and commissions and supplemental items. You will note that, out of the total budget, they run—in that first group of expenditures—to somewhere around an average of $700,000,000 to $800,000,000 in the last few years; in other words, definitely less than $1,000,000,000. That is what I was referring to this morning in the speech when I said that, obviously, anybody can, by cutting off certain functions, save a percentage on the State Department and the Department of Justice and the Interstate Commerce Commission, et cetera; but the percentage would necessarily be small unless you stopped the activities; and it would be a percentage of a comparatively small sum, in other words, less than $1,000,000,000.

National defense is an item which, of course, I referred to this morning as a very large item which the Congress can cut if it wishes to and make great savings. This year it is estimated that we shall spend $1,017,000,000 and next year, $1,126,000,000. That increase is made up almost entirely by the progress of work on the new battleships.

On veterans' pensions and benefits, it is $540,000,000 this year and next year, $539,000,000; in other words, the same figure. It is a very large item of over half a billion, as to which great savings can be made by the Congress, if it so wishes.

The next item is interest on the public debt. Then the next is refunds of receipts, the Agricultural Adjustment program, practically the same but not quite as much this year as in the year just passed; it will be $694,000,000 next year. There again, great savings are possible.

On social security, $833,000,000 this year and $928,000,000 next year. That is another large item which can be cut by eliminating part or all of the social security system.

On railroad retirement, that is automatically, under the present law, $112,000,000 and it goes up to $127,000,000. Of course that may be cut.

Supplemental items have gone down from $130,000,000 to $50,000,000.

Well, that gives you a total for the legislative, judicial and civil establishments of $865,000,000 plus these very large items for national defense, etc., down in that group, and that gives you a total increase in next year's budget over this year's from $5,251,000,000 to $5,537,000,000.

Then there is the new item on the next line which you have all been trying to find out about and which everybody gets wrong—the new national defense program, which calls for $210,000,000 in next year's budget.

Q. What do you mean by this year?

THE PRESIDENT: 1940's budget. In other words, what we want very much is to get the appropriation for national defense through at this time, $210,000,000 this year, well enough before the first of July so that we can get the actual national defense work under contract as quickly as possible after the first day of July. We want to get the thing going and it is estimated we can spend $210,000,000 during the following year from July 1, 1939, to 1940. The breakdown of that $210,000,000 you won't get until next Monday, Tuesday or Wednesday, when I send the National Defense Message up.

Q. That increase, you consider that a part of the work that was already authorized on battleships?

THE PRESIDENT: Yes.

Then you come down to the next item under extraordinary expenditures—a group of them listed under "Public works." All of these are of course, susceptible of being cut down. We have already estimated a cut on highways expenditures from $232,000,000 to $213,000,000; T.V.A. from $43,000,000 to $40,000,000; reclamation from $93,000,000 to $68,000,000; rivers and harbors improvement, from $83,000,000 to $60,000,000; flood control practically the same, it goes up from $98,000,000 to $101,000,000; public buildings from $60,000,000 to $62,000,000; grants to public bodies, including administration, drops from $392,000,000 to $366,000,000. What is that, Dan [Mr. Daniel Bell, Acting Director of the Budget]?

MR. BELL.: That is P.W.A. largely.

Q. That does not include social security?

THE PRESIDENT: No, social security is in the top group.

Q. The other is P.W.A.?

THE PRESIDENT: Yes. The total of that group [public works]drops from $1,229,000,000 to $1,044,000,000.

Then unemployment relief, still under the extraordinary expenditures, drops from $97,000,000 to $42,000,000 in the direct relief category; work relief, which is W.P.A., etc., drops from $1,604,000,000 down to $7,000,000. Of course that is picked up later, that is the last item. The Civilian Conservation Corps, is practically the same; it drops from $290,000,000 to $285,000,000. The supplemental items rise from $750,000,000 to $1,685,000,000, which, roughly, is the offset against that second item.

Q. Would you care to break that down, W.P.A., N.Y.A. and C.C.C.?

THE PRESIDENT: $1,500,000,000 for W.P.A.; $125,000,000 for N.Y.A., and $60,000,000 for Farm Security. That is over on another table; I could not tell you the number of the page.

Q. Will that indicate a shift from W.P.A. to some other form of relief?

THE PRESIDENT: No.

Q. Why was the change made? We got this all under W.P.A. before?

THE PRESIDENT: Yes, they still are.

Q. That is, the supplemental items will be W.P.A.?

THE PRESIDENT: But Farm Security was not.

Q. This supplemental item would include the W.P.A.?

THE PRESIDENT: Oh, yes.

Q. It does not imply the liquidation of W.P.A.?

THE PRESIDENT: No.

Q. Is that for a limited length of time or twelve months?

MR. BELL. We hope it will last the twelve months.

Q. You suggest no limitation on it?

THE PRESIDENT: It is the Annual Budget. You do not suggest any limitation on a regular budget. It is the fiscal year.

Q. Can you break down that $750,000,000 supplemental item under 1939?

THE PRESIDENT: That is all W.P.A.

Q. That will be for the remaining five months of the year?

MR. BELL: That is right. Farm Security and N.Y.A. got their money for the full year.

THE PRESIDENT: Then you come to a technical thing, loans, subscriptions to stock, et cetera, which goes from $271,000,000 to $120,000,000, and that has a supplemental item too. Dan [Mr. Bell], I think you are trying to conceal something. What is it?

MR. BELL: That is Commodity Credit.

THE PRESIDENT: So the total of the extraordinary expenditures drops from $4,241,000,000 down to $3,458,000,000.

So that, on your total expenditures, exclusive of debt retirement, you drop from a budget—that is the important item—you drop from $9,492,000,000 to $8,995,000,000 for the current fiscal year.

That leaves a net deficit of $3,326,000,000 as against a deficit in the current year of $3,972,000,000.

The increase in the gross public debt this year is $3,967,000,000 and for the following year it will be $3,326,000,000.2. Five Hundred and Fourteenth Press Conference

Dan, why is there a discrepancy between $3,972,000,000 and $3,967,000,000?

MR. BELL: That is adjustment of some items in the general funds, such as the retirement of National Bank notes.

THE PRESIDENT: That leaves a gross public debt at the end of each fiscal year of $44,458,000,000 for next year as against $41,132,000,000 this year.

Now, that table is a new breakdown on a simplified basis. The real table is on page—

Q. [interposing] Mr. President, could I go back to your gross public debt?

THE PRESIDENT: Yes, if you will wait one-half a second. The General Budget Summary you will find on page XXI, and that is the way it has been stated before, year after year, or you can use either one.

Q. How recent is this estimate of 1939 deficit? When were those figures—is that late?

THE PRESIDENT: Within two weeks.

MR. BELL: That is the one here [indicating]. Yes, within the last ten days.

Q. Mr. President, getting back to the W.P.A. or P.W.A., two items there, "Grants to public bodies, including administration" and "Other," those two items should be combined? Does that "Other" mean Federal allocations by the P.W.A.?

MR. BELL: Yes, to the various items. P.W.A. allocations to the departments and agencies of the Government.

Q. The two items are P.W.A., Federal and non-Federal?

THE PRESIDENT: Yes.

Q. In which item do the grants under social security, old age, et cetera, appear?

MR. BELL: Social security is up under the second block.

Q. This $750,000,000 for 1939, that means that some time in the near future you will ask Congress for a supplemental appropriation of $750,000,000?

THE PRESIDENT: It is really more than that. This is the cash expenditure during the balance of this fiscal year.

Q. So that it will be more than that?

THE PRESIDENT: Yes. We shall ask for an additional amount between-that is necessary for obligations before the first of July, and this represents only expenditures up to the first of July. I cannot give you the actual amount but it is a little more than this.

Q. $850,000,000?

THE PRESIDENT: I cannot give you the figure because you have to wait until we send it in to Congress.

Q. Any part of the new national defense program coming out of the W.P.A. or N.Y.A. listed under the $210,000,000?

THE PRESIDENT: No, do not mix them up.

Q. You list this $210,000,000 for national defense as part of a $500,000,000 program, the balance to be, in a sense an authorization?

THE PRESIDENT: Not necessarily. In other words, that is a thing, of course, for Congress to determine entirely. We have been in the habit of building the Army and Navy up two different ways. Well, take one illustration: There is the Vinson Bill which has set a naval building program for I do not know how many years ahead. Now, that is an authorization, and Congress is very apt to do it that way because it makes it easier for a succeeding Congress to follow along on the program—not that they always do. The other method is both to authorize and appropriate for the amount of money that can be spent in a year, provided that they are items which can be completed in a year.

Now, on this particular $210,000,000, it is part of a program which would take another two hundred and some odd million dollars to complete in another year or a third year, but we estimate that these expenditures—well, I will give you a simple illustration: Airplanes; we hope that for all the money we spend for airplanes out of this $210,000,000, the planes will be delivered, actually delivered and paid for, by the thirtieth of June, 1940. Now, that does not mean that at this session of the Congress we have to authorize 50,000 planes or 20,000 planes. If they want—it is in their discretion-they can perfectly well appropriate this $210,000,000. Perhaps on some of the items they will have to authorize the money on contracts for items that cannot be finished in the course of the following fiscal year.

I see no reason at this time—this is off the record, merely for your information—I see no reason why, since things are moving awfully fast in the world, we should lay down an enormous five-year or ten-year program for national defense. I think we ought to do as much as we feel we ought to do in the immediate future, and then wait until next year and see what we have to do then. We are always hopeful that something will come out of the foreign situation that will allow us to cut down and stop going ahead with this vast program. So all of this talk about a huge five- and ten-year program is a "lot of bunk."

Q. I notice that you listed appropriations rather than expenditures of $500,000,000. Would you like for that to be appropriated by this Congress, or just $210,000,000?

THE PRESIDENT: That is what we asked for. We asked for appropriations but only $210,000,000 would be spent this year.

Q. In order to give us a clearer picture of just how much new equipment would be involved in this new national defense, could you or Mr. Bell give us an approximate breakdown of the $1,126,000,000 as to what proportion of that is for maintenance and salaries and present equipment and what proportion is for increase in expansion and new equipment?

THE PRESIDENT: I think those are all for things which carry along with the current program. There are a few items in there that are new in one sense but in accordance with previous authorizations for general objectives. For example, there are some Navy ships going into commission next year, and therefore we are asking for an increase in the Navy personnel of what?— 6,000 men?

MR. BELL: Something like that.

THE PRESIDENT: Something like that to man the new ships. Now that is under the regular $1,126,000,000 item.

Q. Does the Army go up in proportion?

THE PRESIDENT: I think not.

MR. BELL: 165,000 men.

Q. That is the force under the program to be submitted later. That is what you will give the details on next week?

THE PRESIDENT: Yes.

Q. Do I say that only $210,000,000 will be spent?

THE PRESIDENT: Yes.

Q. That is out of the $500,000,000?

THE PRESIDENT: Yes, because some things you cannot pay for in one year. You do not get them delivered and you do not make the payments until you get them delivered.

Q. Is that on warships?

THE PRESIDENT: All kinds of things. . . .

Q. 6,000 men will be added during the fiscal year on the Navy?

THE PRESIDENT: Yes, but you had better get that from the—

Q. Isn't that contained in there?

THE PRESIDENT: It is in the book. I cannot tell you the page. The number of men—this is the Navy at the end of 1938, that is last June, was 105,000; at the end of this year it will be 110,000 and we are asking at the end of 1940, for 116,000. That is 6,000 more. That is because of the new ships going into commission.

Q. A99 (referring to the page number of the Budget Report) is the Navy. That is 116,000 from 110,000?

THE PRESIDENT: Yes.

Q. It is not clear to me, this distinction between $7,000,000 for work relief (1940) and then $1,685,000,000 (for supplemental items)?

THE PRESIDENT: It is just stuck under a different heading.

Q. That is what I did not understand, why there are two different headings. What is the difference?

THE PRESIDENT: [interposing] The $7,000,000 is a leftover from this fiscal year.

MR. BELL: It just came out that way.

THE PRESIDENT: I take it it is a reappropriation of money.

MR. BELL: It is a liquidation in 1940 of obligations incurred in 1939. These statements are on a cash basis and this is the cash going out of the Treasury.

Q. What is included under direct relief?

MR. BELL: That represents the old Federal Emergency Relief Administration. That is the liquidation of the Farm Security direct relief in the farm areas.

THE PRESIDENT: Food and clothing.

MR. BELL: That is right.

Q. That is on page A100—

THE PRESIDENT: [interposing] Wait, you are going awfully fast.

Q. Under the Navy appropriation you have got the Bureau of Aeronautics, which I assume is the Air Corps, increase from $48,000,000 for 1939 to $74,000,000 in 1940, an increase of about $25,000,000. Now, that is not going to be the sole increase?

THE PRESIDENT: No, this covers the existing program.

Q. And there may be a supplemental program and that also holds good for the decrease which is noted for the Army and the Air Corps?

MR. BELL: That is right. The Army program in this Budget applies to the Army program that was outlined.

Q. "Grants to public bodies, including administration," and also "Other." Does that mean that next year more cities can come down and get more money?

THE PRESIDENT: No; there is no further P.W.A. program listed in this budget.

MR. BELL: It is the liquidation of the old.

THE PRESIDENT: It is the liquidation of the old. . . .

Q. But no further P.W.A. program contemplated?

THE PRESIDENT: No.

Q. This is a reappropriation of 1940 and there will be a reappropriation in 1941?

THE PRESIDENT: It is not even that. This is on a cash basis. There does not have to be a reappropriation. This is a cash basis. We are only spending so much this year and so much the following year, and there will be a hangover the next fiscal year.

Q. Are P.W.A. grants included?

MR. BELL: No, there is a loan figure. It is hard to put them together. . . .

THE PRESIDENT: Then, we have an analysis on page VIII of these two groups.

In other words, I want the Government to do what a bank does. If a bank wants to finance some project which will pay for itself, what does it do? It lends on a first mortgage on fifty per cent of that project because there is absolutely no human probability, thinking in terms of a careful, conservative banker, that he will lose the fifty per cent of the money that the project will cost; that is because of the junior money, which is the equity money and therefore subject to the risk. The Government ought not to put down as a definite recovery item the equity in these projects. In other words, I follow strictly, one hundred per cent, the normal rules of banking.

Q. For example, suppose on that Boulder Canyon Project the Government had not entered the expense of $120,000,000 in the Budget but only such capital share as you have suggested. Then, each year, as this money is repaid, you enter, as receipts to the Treasury, the profits of that operation. At the end of fifty years, let us say, you have a series of Budget statements showing an income of $120,000,000 but no offsetting item showing the expense of the Government in setting it up. Won't the Government be $120,000,000 plus?

THE PRESIDENT: No. What you are coming down to is this: that as the returns come from Boulder Dam, not just the interest but the amortization, you immediately, each year, cut down two per cent of the original $100,000,000 or whatever amount it is. We pay off the debt. We use it as the straight payment of that debt.

Q. In other words, apply the income to the retirement of the debt?

THE PRESIDENT: Yes.

Q. Would you apply that rule on construction projects to the Government's investment, its equity in lending corporations like the Federal Farm Loan Corporation?

THE PRESIDENT: I think so. The Commodity Credit is doing it today.

Q. Do you need legislation to undertake a budget of that kind?

THE PRESIDENT: Yes. For instance, you remember in R.F.C., the predecessor to Dan [Mr. Bell] as Director of the Budget-who was it?

Q. Mr. Douglas.

THE PRESIDENT: President Douglas of McGill University.(Laughter) He told everybody, told the Press first and then told me afterwards, that Jesse Jones would only get fifty per cent of his money back; and, with a very long face, he kept saying that, and of course it was printed. Everybody believed that poor old Jesse was going to lose fifty per cent of all the loans he made.

Jesse Jones was fit to be tied. He said, "I do not know that I will get one hundred per cent back, with interest. My best guess is that I will get one hundred per cent back. I may make some losses but the losses won't exceed, in fact they will be less than the interest that I am getting on these expenditures. Therefore," said Jesse Jones, "I will bet my last dollar that I will get my capital back."

Well, we have been doing it for four years, and Jesse Jones has proved that he is right. He will undoubtedly have a lot of capital losses; but you take all the money that Jesse has loaned out and you will find that as to his original capital, using the interest to offset the losses, he will come through one hundred per cent.

Q. What I was getting at is, could we consider the capital investment, the equity investments of these corporations as assets of the Government?

THE PRESIDENT: Again I think it is a question of using the same methods as careful banks use. I do not think we should capitalize the equity.

Q. Then we should count these contingent liabilities as part of the Government debt?

THE PRESIDENT: Yes, that is true.

Q. Do I understand that you advocate these people going to the market and financing themselves?

THE PRESIDENT: In most cases they are doing it more and more. Jesse [Mr. Jones], you know, is getting out his own notes this year for the first time.

Q. Should we construe this as a recommendation to Congress, as a recommendation?

THE PRESIDENT: For study of this.

Q. In the beginning of relief, the very first relief was given as loans to states, and the states were to pay back that money. The next relief bill said that no money could be taken. The R.F.C. carried that for a long time as assets and in the last session I understand that was transferred to the Treasury. Does the Treasury carry it as assets or liabilities?

THE PRESIDENT: Of course if you set up any plan of this kind you have to run the risk of some Congress in the future kicking it overboard. That is always possible under our form of government. You cannot tell. They might—if you had borrowed some Government money on your home, some kind Congress in the future might forgive you the money because they liked you.

Q. Is there any hope for that, Mr. President? (Laughter)

THE PRESIDENT: (Reading)"Our financial statements, of course, should clearly reflect, in appropriate classifications, the amount of Government outlays for physical improvements that are not self-liquidating in character. We must take into account the necessity for making such of these and other changes as will permit the presentation to the Congress and to the public of more accurate and intelligible statements of the financial operations of the Government."

And, when I said that, I made a liar out of a lot of papers you represent. That is an absolutely true fact and a perfectly provable one; though a lot of papers have printed the opposite.(Reading)

"I should like to call your attention to the following table comparing for the 10-year period the amount of the Federal deficit and the increase in the public debt, with the amount included therein for capital outlays. It should be understood that this table is not intended to represent values on an earning basis. Nevertheless, under our policy of expanding capital outlays to compensate for variation in private capital expenditures and of making loans to meet emergency needs of our people, the table clearly shows that the greater part of the deficits and the larger part of the increase in the public debt have gone for permanent additions to our national wealth."

Now, please underscore that and make a note of it.

"Let us all fix that fact in our minds so that there shall be no doubt about it and so that we may have a clear and intelligent idea of what we have been doing. We have not been throwing the taxpayers' money out of the window or into the sea. We have been buying real values with it. Let me repeat: The greater part of the budgetary deficits that have been incurred have gone for permanent, tangible additions to our national wealth. The balance has been an investment in the conservation of our human resources, and I do not regard a penny of it as wasted."

I said to Herbert [Gaston] to put in something that will drive this home, to put it in so that the press will print it, so he wrote that last paragraph.

Now, here is the table: [Referring to the table on page XI of the Budget] You see how it runs. You can study that table.

Direct Federal public works, starting in 1931, on the left hand side, were $247,000,000 to $465,000,000 in 1940; $605,000,000 this year.

Recoverable loans and investments ran from $263,000,000 (in 1931) up to $234,000,000 this year and $123,000,000 next year.

Public roads from $174,000,000 (in 1931) to $232,000,000 this year and $213,000,000 next year.

The Civilian Conservation Corps work was $290,000,000 this year, $285,000,000 next year.

New construction projects of Works Progress Administration are $734,000,000 in 1939 and $488,000,000 next year.

Grants to public bodies for public works, $392,000,000 this year and $366,000,000 next year.

Now, those totals in those years ran very, very close, as you will notice, to the two top lines, the deficit, excluding debt retirement, and the increase in gross public debt. In other words, that is the proof of what was said in the two previous paragraphs.

Q. Why do you include the stabilization item?

THE PRESIDENT: I don't; that is down there so somebody won't say we left it out. It is not, strictly speaking, a recoverable item. Of course, we are going to suggest the renewal of the life of the stabilization fund. In other words, if Congress does not renew that $2,000,000,000 stabilization fund, it becomes an immediate asset of the Government which can be used for any purpose whatsoever.

It can be used to reduce the public debt, or build highways, or anything else. But I do want to say this, that there has been a good deal of loose talk about the stabilization fund. I do not think I am telling stories out of school. You know, you read in the papers in the past couple of days about the British stabilization fund being pretty hard hit. Actually, our stabilization fund has operated now for three years and we are rather proud of the fact that it not only is not less than the $2,000,000,000, but it is actually more today than it was in the beginning and, at the same time, it has given our foreign exchange, as you all know, a more stable position through these three years than the foreign exchange of any other nation in the world. In other words, it has been doing what we think is a darned good job for our foreign trade.

Q. What is the profit? You can divulge that under the law, if you wish to.

THE PRESIDENT: It was secretly told to the Senate Committee last spring and you people got it an hour later, so it is all right.

Q. This item of $3,234,000,000 of recoverable loans and investments, does that include the capital stock and surplus of the many agencies which are in the lending business?

MR. BELL: Yes.

Q. Do you think it would be recoverable without liquidating the affairs of those corporations?

MR. BELL: Of course not.

THE PRESIDENT: No. Just the same way you get stock in the bank. You cannot get your money back, practically, unless you liquidate the bank or have a market. . . .

(Reading)

"But I also hope that those revenues in times of prosperity will provide a surplus which can be applied against the public debt that the Government must incur in lean years because of extraordinary demands upon it.

"I believe I am expressing the thought of the most farsighted students of our economic system in saying that it would be unwise either to curtail expenditures sharply or to impose drastic new taxes at this stage of recovery. But in view of the addition to our public expenditures involved in the proposed enlarged national defense program and the program for agricultural parity payments, for which no revenue provision has yet been made, I think we might safely consider moderate tax increases which would approximately meet the increased expenditures on these accounts."

And thereby, off the record, hangs a tale. As I remember it, Pat Harrison [Senator Pat Harrison] gave assurances last spring that there would be taxes provided to take care of the additional agricultural parity payments; and nobody has come across with them yet. In other words, they might be called a deferred pledge, as yet unfulfilled.

Q. Are those the only new taxes which we are considering?

THE PRESIDENT: No. No form of tax but an amount of revenue to offset it to a total of $212,000,000 was promised.

Q. That is the only additional—

THE PRESIDENT: [interposing] That is the only thing that was promised last session.

Q. Will you also want the taxes for that national defense?

THE PRESIDENT: And national defense. . . .

Q. With national defense, $422,000,000?

THE PRESIDENT: That is right. In other words, what I am saying in effect is, "Carry out your promise and give me $212,000,000 additional revenue and add to that $210,000,000 for national defense, or a total of $422,000,000."

Q. Do you plan to suggest a means?

THE PRESIDENT No.

(Reading)

"It should be added, however, that it is my firm conviction that such new taxes as may be imposed should be most carefully selected from the standpoint of avoiding repressive effects upon purchasing power.

"Sound progress toward a budget that is formally balanced is not to be made by heavily slashing expenditures or drastically increasing taxes. On the contrary, it is to be sought by employing every effective device we may have at our command for promoting a steady recovery, which means steady progress toward the goal of full utilization of our resources. We can contribute very materially toward that end by a wise tax program.

"I am recommending the reenactment of the excise taxes—"

That includes also the 3-cent postage.

(Reading)

"—which will expire in June and July of this year, not because I regard them as ideal components of our tax structure, but because their collection has been perfected, our economy is adjusted to them, and we cannot afford at this time to sacrifice the revenue they represent. If the Congress should at this session adopt new taxes more scientifically planned to care for the defense and agricultural programs, it is quite possible that the existence of these new taxes will enable us in a later year to give consideration to abolishing some of the present excise levies.

"The revised estimate of receipts for the fiscal year 1939 as contained in this Budget is $5,520,070,000, and of expenditures, $9,492,329,000, leaving a deficit of $3,972,259,000."

Q. At that point, the revised receipts for this current year, there has been an increase of half a billion dollars over your July estimate. Can you tell us what the basis of that increase is? . . .

MR. BELL: Better business than was contemplated.

THE PRESIDENT: The way to put it is that, suppose beginning about September the Treasury experts began revising their estimates upward and by November they were still a little better and the last word, about ten days ago, they were still better.

Q. If the Congress does not meet the $422,000,000, the deficit would not be increased by that amount?

THE PRESIDENT: No. This is without any increase. An increase in taxes of $422,000,000 would take that amount off the estimated deficit.

Q. It is estimated by the Treasury that that would be raised by excise taxes. Would it make any difference to you what kind of taxes would raise it?

THE PRESIDENT: I mentioned that in my Annual Message, the paragraph that related to taxes which, in effect, are a drain on national income, and other taxes which, because of their form, are not a drain on national income.

The simplest illustration you can get is the tax you pay on your cigarettes, which puts a direct drain on national income because almost everybody in the country, including the ladies, uses cigarettes and probably ninety-eight per cent of the cigarettes smoked are smoked by comparatively poor people like us. It is a direct drain on national income.

On the other hand, estate and inheritance taxes are not direct drains on national income. They fall into the category that does not hit the spending power of the country.

Q. Does this tax program—do you have in mind the probability that there will be reciprocal taxation on Federal and state bonds and salaries?

THE PRESIDENT: Well, I have not said anything about it. I thought I would hold until a little later, what I am going to say about taxes on all bonds issued by any public body, state, local, municipal or Federal, and also income taxes on all Government employees, Federal, state and local. And, of course, as you know, it is a very simple proposition. Most people in the country are for it. There is a division among those people as to whether they think it is constitutional or not. There is a respectable opinion that it would be constitutional to do it, and other people say it would not. I think that the best way to get a decision is to pass a law and submit it to the Supreme Court.

Q. Do you think Justice Holmes was right when he said that members of the Supreme Court should pay a tax?

THE PRESIDENT: I could not comment on that out loud but I suggest you read the sixteenth amendment again. That is all you have to do.

Q. That would not amount to more than $100,000,000?

THE PRESIDENT: But gradually it would pick up over a period of years.

Q. The figure I saw was not over $100,000,000, and I think you have over $400,000,000?

THE PRESIDENT: I think that is rather low.

Q. Those salaries are awfully low?

THE PRESIDENT: Yes, but a lot of them come under it.

Q. Is this information you are speaking of, is that for our use?

THE PRESIDENT: I think you can use it. Don't you think so??

MR. BELL: It is in with your story.

THE PRESIDENT: It is a repetition of what I said last spring. If you tie it in with your story, it is all right.

Q. If the Congress should, at this session, adopt new taxes, will there be any specific recommendation for new taxes?

THE PRESIDENT: Probably not in the form of a message. There will be the usual consultations between the committees and the Treasury.

Q. You won't have a tax message?

THE PRESIDENT: No.

Q. Does that contemplate lowering the brackets on income taxes?

THE PRESIDENT: I suppose they will talk about it up there and talk to the Treasury.

Q. You are not going into the detail of the readjustment of the various Departments but, reading it hastily, I got the impression that there is a fairly moderate increase in personnel and buildings. Do you think I have the right impression on that? I am for the Federal establishment.

THE PRESIDENT: Yes, you are right, Earl [Mr. Godwin]. The reason is this, that, each year, Congress keeps on giving almost every Department, some new job to do. That is the size of it. And the only way to save money is, (1) to appropriate too little money and not do the job we are ordered to do, or (2) cut out the job, cut out the task.

Q. Would you or Mr. Bell say it is about an average increase?

THE PRESIDENT: Taking it by and large, it is less than an average increase.

Q. I have to insert here that you do not favor the processing tax?

THE PRESIDENT: It is just like all the other taxes. Do not make any inferences because I have not mentioned any by name. (Reading)

"The estimated receipts for the fiscal year of 1940 amount to $5,669,320,000, and the expenditures for that year are estimated at $8,995,663,000, resulting in a deficit of $3,326,343,000."On the rest of these, under recommendations, the first is to extend the present taxes; the second is the 3-cent postage, and the third is the C.C.C. I am asking that it [the C.C.C.] be continued at this session beyond its legal death day of June 30, 1940. The reason is that if we wait until the spring of 1940 to extend it, it actually costs the Government money, because the C.C.C. has to make its plans ahead. If the Congress will extend the life this year over the next year or two or make it permanent—it does not make an awful lot of difference which—it will save the Government money.

Q. In the gross public debt at the end of the fiscal year 1940 you are coming up to the amount of $44,000,000,000. Isn't that close to the legal limit?

THE PRESIDENT: Yes.

Q. Will you ask for any more?

THE PRESIDENT: Probably there will be a request for the expansion of the legal limit.

Q. On page XVI, in the second paragraph there, the second sentence, you say, "Supplemental estimates of appropriations will be submitted to meet the requirements of the Works Progress Administration, the National Youth Administration, and the Farm Security Administration for the fiscal year 1940." Does that mean supplemental estimates beyond and above those contained in this Budget?

THE PRESIDENT: No, it does not. What it means is this: that the actual figures for W.P.A.—as last year and the year before—we are not going to submit until we know more about it. That will be about April, as we did last year and the year before.

Q. The figure is given?

THE PRESIDENT: The figure is given; that is, our estimate at the present time, and, as far as we know, it won't be added to.

Q. You are hoping that this will cover?

THE PRESIDENT: Yes.

Q. On page A90 you have listed at least three Government credit corporations which are due to expire by law on June 30, 1939. They include the Commodity Credit Corporation, the Electric Home and Farm Authority, and the Export-Import Bank of Washington. For that reason no estimate is included in the 1940 Budget. Can you tell us now whether you intend to ask for the continuation of all those agencies after that time?

THE PRESIDENT: I think so.

Q. All three?

THE PRESIDENT: Yes. There is an amount in the supplemental that would take care of that if their lives were extended. In other words, administrative expenses.

Q. Under the heading, "Appropriations," the last thing in your message, you have it that the total appropriations which will be sought from Congress for 1940 will be $10,190,000,000, whereas the total expenses were to be $9,000,000,000. Can you give us any breakdown of the difference between those items?

THE PRESIDENT: Reappropriations.

Q. Anything in here for counter-espionage?

THE PRESIDENT: Yes, there were some increased items for F.B.I.,Naval Intelligence and the Military Intelligence.

Q. The Military increase is $35,000?

THE. PRESIDENT: Yes

.MR. BELL: The Navy is a little higher and the F.B.I. is $75,000.

Q. What do they total, the increase?

THE PRESIDENT: $125,000.

MR. BELL: Or $150,000; I do not remember the exact figure.

Q. Have you also increased the personnel of the Secret Service?

THE PRESIDENT: Not the Secret Service, no.

Franklin D. Roosevelt, Press Conference Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/209132

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