Special Message to the Congress on Budgetary Legislation.

To the Senate and House of Representatives:

I should not be discharging my Constitutional responsibility to give to the Congress information on the state of the Union and to recommend for its consideration such measures as may be necessary and expedient, if I did not report to the Congress the situation which has arisen in the country in large degree as the result of incidents of legislation during the past six weeks.

The most essential factor to economic recovery today is the restoration of confidence. In spite of the unquestioned beneficial effect of the remedial measures already taken and the gradual improvement in fundamental conditions, fear and alarm prevail in the country because of events in Washington which have greatly disturbed the public mind.

The manner in which the House of Representatives rejected both the revenue program proposed by the Treasury and the program unanimously reported by the Committee on Ways and Means; the character of the tax measures passed; the action of the House which would increase governmental expenditure by $132,000,000 for road building; the action further to enlarge expenditures in non-service connected benefits from the Veterans' Bureau at the very time when the House was refusing to remedy abuse in these same services; the virtual destruction of both the national economy program proposed by the Executive officials and the program of the Special House Committee on Economy; the failure of the House to give adequate authority for early reduction of government bureaus and commissions; the passage of legislation by the House placing burden of impossible execution upon the Federal Reserve System over the protest of the Federal Reserve Board; the threat of further legislation looking to uncontrolled inflations 1 --have all resulted in diminishing public confidence and offsetting the constructive, unified efforts of the Executive and the Congress undertaken earlier in the year for recovery of employment and agriculture.

1 The President referred to the following bills: the revenue bill (H.R. 10236), the Aimon bill (H.R. 9642), the Rankin bill (H.R. 8578), the economy bill (H.R. 11267), the Goldsborough bill (H.R. 11499), the Patman bonus bill (H.R. 7726), and the Lewis relief bill (H.R. 8088).

I need not recount that the revenues of the Government as estimated for the next fiscal year show a decrease of about $1,700,000,000 below the fiscal year 1929 and inexorably require a broader basis of taxation and a drastic reduction of expenditures in order to balance the budget. Nothing is more necessary at this time than balancing the budget. Nothing will put more heart into the country than prompt and courageous and united action in enacting the legislation which this situation imperatively demands, and an equally determined stand in defeating unwise and unnecessary legislation.

Most expeditious action is necessary if the revenues, appropriations, economy legislation and a balanced budget are to be attained before the beginning of the new fiscal year on July 1st next.

The details and requirements of the situation are now well known to the Congress and plainly require:

1. The prompt enactment of a revenue bill adequate to produce the necessary revenue and so designed as to distribute the burdens equitably and not to impede economic recovery.

2. A drastic program of economy which, including the savings already made in the Executive budget of $369,000,000, can be increased to exceed $700,000,000 per annum. Considering that the whole Federal expenditure, except about $1,700,000,000, is for uncontrollable obligations this would represent an unprecedented reduction. Such a program, to accomplish its purpose, must embrace the rejection of all measures that increase expenditures unless they be for undoubted emergency; the reduction in appropriations now pending below the figures submitted in the Executive Budget on December 9th last; a reconsideration of the legislation covering those economy projects which require repeal or amendment to the laws; and an effective grant of authority to the Executive to reorganize and consolidate and eliminate unnecessary government bureaus and establishments.

REDUCTION OF DIRECT APPROPRIATIONS

In the category of appropriations within the authority of the Appropriation Committees those Committees have given some months to devoted consideration of the Executive Budget, which as I have said in itself carried a reduction of $369,000,000 below the expenditures of the current year. Considering the situation in the country and a study of the results so far attained by the committees, together with a review by the Executive Officials, I am convinced that, subject to the inclusion of conditions mentioned later, a reduction of at least $230,000,000 below the Executive Budget can be made in the supply bills (of which some $70,000,000 or $80,000,000 may be the subject of deficiency bills at the next session). In order to effect these economies, to preserve the efficiency of the Government, and to assure the humane treatment of government employees, authority must be given to meet emergencies which may arise from such close budgeting by the transfer of not to exceed 15% of any appropriation to any other appropriation within the same Department, provided no appropriation is increased more than 15% but subject to the approval of the Director of the Budget; and to suspend the leave with pay so that the five-day week and its equivalent to salaried employees can be installed where necessary.

With the reduction proposed in the original budget, together with the further reductions here proposed, it will be necessary to discharge 50,000 to 100,000 employees, unless we divide the remaining work of the Government amongst the whole of its employees just as has been done in industry. I know of nothing more inhuman in the present situation than for the Government to add to the pool of unemployment and destitution when it is entirely unnecessary and can be provided against by the same measures which were undertaken by industry at the request of the Government itself nearly three years ago.

SPECIAL ECONOMY LEGISLATION

In the category of further economies which can only be made by changes in laws which would give authority to the Executive and the Appropriations Committees, many items were proposed by Executive Officers of the Government, and some portion of them were embodied in the bill presented by the Special Economy Committee to the House of Representatives. Less than $30,000,000 direct and definite savings were covered in the bill which finally passed the House. Many of the indeterminate and indirect savings in that legislation cannot be realized until late in the new year or after that.

Many of the recommendations which were rejected by the House of Representatives should again be considered. Aside from the economy proposals affecting employees which are here included in the above discussion of the Supply Bills, there are opportunities to increase the direct savings provided for in the House Economy Bill from $30,000,000 to from $130,000,000 to $150,000,000, plus many indeterminate items which would result in further economies.

These savings would be over and above the amounts of savings referred to in the direct appropriations. Without going into the merits or demerits of the proposals, they do represent the correction of abuses and the curtailment of unnecessary functions of the Government and embrace items that can be dispensed with during the present critical period.

CONSOLIDATION AND REDUCTION OF BUREAUS

In the category of economies that can be made by consolidation, reorganization, and elimination of the less necessary bureaus, commissions, etc., the authority given in the measure passed by the House of Representatives is so restricted that it cannot be made effective until late in the next fiscal year. In order to expedite this economy, I earnestly recommend that the Executive be authorized to proceed immediately in the consolidation of Public Works, and Personnel, partly provided in the House Economy Bill, Public Health, Merchant Marine, Conservation, Education, Munitions manufacture, Army and Navy hospitals, aviation fields, and other specific Army and Navy activities which may advantageously be consolidated for the purpose of economy and more effective administration. The savings to be made are indeterminate but very considerable. If made by Executive action within the above direction from the Congress they can be made promptly.

CONCLUSION

The imperative need of the nation today is a definite and conclusive program for balancing the budget. Uncertainty is disastrous. It must be in every sense a national program. Sectional, partisan, group, or class considerations can have no place in it. Ours is a government of all the people, created to protect and promote the common good, and when the claims of any group or class are inconsistent with the welfare of all, they must give way. Various groups and sections of the country have brought insistent and delaying pressures to bear for the adoption or rejection of various projects which would yield great economy and revenue. They have not realized that sacrifice by all groups is essential to the salvation of the nation. They have not recognized the gravity of the problems with which we are confronted. They apparently do not know that by their actions they are imposing losses on members of their own groups and sections through stagnation, unemployment, decreased commodity prices, far greater than the sacrifices called for under these suggestions. The government cannot be dictated to by organized minorities. Such action will undermine all popular government. I know that these actions do not reflect the will of the country, and I refuse to believe that the country is unable to reflect its will in legislation.

In conclusion, let me urge the national necessity for prompt and resolute and unified action, keeping constantly in mind the larger aspects of the problem and that the necessity for these measures is born of a great national emergency. If such a program should be agreed to by the leaders and members of both Houses it would go far to restore business, employment and agriculture alike. It would have a most reassuring effect on the country.

HERBERT HOOVER

The White House,

May 5, 1932.