Address at the Sixteenth Regular Meeting of the Business Organization of the Government

Members of the Government's Business Organization:

The present fiscal year will bring to a close eight years of conducting the finances of the Government of the United States under the Budget system. It was put into operation to save the country from economic disaster. It has been fully justified by the results. In the first instance, the President, of course, is responsible for the direction of the system. In the second place, that responsibility is shared with the Congress in making appropriations. In the next place, the responsibility for efficient expenditures rests with the chiefs of the various departments. But in the final analysis, success could have been achieved only by the loyal cooperation and faithful service of the great rank and file of the Government personnel. To that great body, of which you are the representatives, the people owe a debt of gratitude, which I especially wish to acknowledge at this last Budget meeting of my administration. With out their devotion to the cause of constructive economy we could have done nothing. With it we have been able to do everything. The victory has been their victory, and the praise should be their praise.

When we began the task in June, 1921, of reconstructing our public finances, it looked almost impossible of accomplishment. The entire Government structure was permeated with extravagance. The expenditures for that fiscal year, exclusive of debt reduction, were about $5,000,000,000. The interest charge alone was more than $1,000,000,000, and our outstanding indebtedness was nearly $24,000,000,000. The business of the country was prostrate. Its different branches of agriculture, commerce, banking, manufacturing, and transportation were suffering from severe depression. Employment was difficult to secure. Wages were declining. Five million people were out of work. The price of securities, even of Government bonds, was very low. It was difficult to find any market for commodities. Confidence in our entire economic structure had been shaken. Progress had stopped.

It is easy to see what the condition of the people would be under such circumstances. Those who had property, even though it was much diminished in value, could take care of themselves, as they always can. But to those who were carrying on business with borrowed capital and had outstanding notes and mortgages there seemed nothing ahead but ruin. Wage earners and their families were faced with want and misery. The cause of this distress was not difficult to ascertain. The country had been living beyond its means. It had been spending much more than it was earning, which meant that it had been using up its capital. The savings of previous years were being exhausted, principally through Government extravagance.

This was not a pleasant picture to behold. If relief were possible, those who were able to provide it could well afford to be charged with considering nothing but the material side of life, with advocating a penurious and cheeseparing policy, and with neglecting to supply the public needs. If a remedy could be found, when it was put into operation business would revive, profits would increase, employment would be plentiful, wages would be good, the distress of the people would be relieved, and a general condition of contentment and prosperity would prevail. Whatever criticisms there might be against those who had labored to secure this result, the satisfactory condition of the country would be a sufficient answer and a sufficient reward.

The evils and abuses of Government extravagance were perfectly apparent. It was believed, and as experience has demonstrated, correctly believed, that the distress of the country would be relieved if Government extravagance ceased. It was for this purpose that the radical and revolutionary system was adopted of centralizing in the President the primary authority for the recommendation of all departmental estimates and establishing, for his information and advice, the Bureau of the Budget.

Seemingly without effort, but actually by hard and effective work, the change was wrought. Each of the succeeding years brought an ever-increasing improvement in the business of government. Expenditures diminished until 1927 when, exclusive of the amount applied to debt reduction, they reached a point below the $3,000,000,000 mark. This was $2,000,000,000 below 1921. Billions were cut from the public debt with a large saving of interest. The first tax reduction came in November, 1921, and was followed by three succeeding reductions. Funds were saved to meet the cost of our much-needed public improvements, which had been in abeyance during the war period. Short-time notes and long-time bonds were paid off and refunded at lower rates.

Working in that spirit which forcefully asserts itself in time of need the executive and legislative branches of the Government, with the backing of the people, have inserted a golden page in our history. It fittingly portrays that peace hath its victories no less than war. In the short period of seven and one-half years the public debt has been reduced $6,667,000,000. The total saving in interest alone from this and refunding operations is $963,000,000. Four reductions in taxes have returned to the people approximately $2,000,000,000 a year which would have been required had the revenue act of 1918 remained in force. Two and one-half million people have been entirely relieved of all Federal taxation.

One of the first essentials in the work of making the Federal Government a real business organization was the welding of the various departments and independent establishments into a harmonious, efficient concern. We found 43 independent departments and establishments each operating under its own customs and rules, utterly regardless of the existence of other departments which were parts of the same great establishment, the United States of America. There was little community of thought or harmony of action. Deep-seated hostility between certain Government agencies existed. That the National Government ought to be one great entity responsible for the happiness of 120,000,000 of people was entirely overlooked in the exclusive devotion of groups of Federal officials and employees to one particular subordinate department. This same obsession often characterized the relation between bureaus in the same department. Heroic effort was needed to substitute national loyalty for department and bureau loyalty. Efficiency and economy in operation were hopeless under such conditions. The situation called for a revolution in the attitude of Government agencies toward each other. Exclusive devotion to their subordinate even though important departments must give place to loyalty to the whole Government. To effect this great transformation a wide coordinating plan was put into effect. Representatives from the various departments and establishments were called together and organized into effective committees and boards to simplify and unify procedures and eliminate tortuous, wasteful, and unbusinesslike methods. In this way all the major activities of the Government were studied and harmonized by the efforts of our own personnel. Out from this study and effort sprang a business that organization compares favorably with like establishments in the business world in efficiency and unified control. Harmonious cooperation has won.

In pre-Budget days not a single administrative form indicated there was such a thing as a National Government. The several departments had their own business forms in varying and confusing mutiplicity. To-day we have 38 Federal forms displacing the many hundreds that served to confuse business and add to the cost of government. Not a single specification contributed to good Government business. To-day we have 602 standardized specifications which cover in large part the entire field of Federal requirements. We are using one uniform Government lease in place of several hundreds of departmental leases, while uniform construction and supply contracts in connection with our standardized specifications are contributing daily to good business and material saving. Our great real estate and rental interests, our hospitalization, our buying, selling, and printing, our patent interests, and office methods are subject to the same careful study and supervision. Out in the field we have our area coordinators and our 280 Federal business associations with 63 more in the making. These unique Government agencies are spreading the gospel of efficient government economically administered. They are our most trenchant exponents of cooperation. The intangible savings resulting from this coordinating work amounts into millions yearly. The work is not spectacular, but it is the very foundation of good business. I believe that the Federal Government to-day is the best-conducted big business in the world. To these faithful workers in our coordinating agencies, in Washington and elsewhere, the country owes a great debt of gratitude. This picture of widespread commitment to good government throughout the service - and extravagant government is not good government - is most inspiring and encouraging. We have demonstrated that saving results from efficiency, and efficiency comes from saving.

Largely because of such work as this, less than two years from the time when the lowest point was reached, the country was very generally restored to normal conditions. From that time on there has been an upward swing, broken only by short static periods or slight temporary recessions. The closing months of 1928 and the opening weeks of 1929 have seen American industry and commerce at the highest point ever attained in time of peace.

In order to understand more clearly what the effect of these efforts has been on the country, it is only necessary to compare some of the major economic factors of 1928 with those of 1921. The output of our factories increased during that interval nearly 60 per cent; in some cases, such as iron and steel production, it was more than doubled. The production of the mining industries as a group was at least 50 per cent greater last year than seven years before. The construction of new buildings was much more than twice as great in 1928 as in 1921. The advance was especially notable and gratifying in the building of homes and schools. Check payments outside of New York City, where the volume is much affected by stock-exchange transactions, have increased by about 57 per cent over 1921. Railway traffic has been about one-third greater than in the earlier year and has been carried on with far greater efficiency and dispatch. The number of automobiles registered is now nearly three times as great as at the beginning of 1921, and the number manufactured during 1928 was more than three times as great as during 1921. Electric power production last year was considerably more than double what it was seven years before. From practically nothing, the business of radio broadcasting has become enormous, and the number of radio-receiving sets produced exceeds 13,000,000. The burdens of our housewives have been immeasurably lightened and their lives broadened by the introduction of numerous electrical conveniences and devices, most of which were unknown a few years ago.

The extent that the financial reserves of our citizens have increased is strikingly apparent. Savings deposits rose from $16,500,000,000 at the end of the fiscal year 1921 to more than $28,000,000,000 on June 30, 1928. Between 1921 and 1927 the amount of life insurance in force very nearly doubled, and the total of such protection came to exceed $87,000,000,000. The assets of building and loan associations have risen from less than $2,900,000,000 in 1921 to more than $7,178,000,000 in 1927.

The record of the advance in education in this country during recent years has been truly astonishing. Figures for 1927 and 1928 are not yet available, but in the short period of six years, between 1920 and 1926, the number of students in our high schools, colleges, and universities grew from about three to nearly five millions. There has been an immense increase in the output of reading matter of all kinds.

With all our increase in production the numbers of persons employed in several of our major activities have, apart from the sharp recovery after the depression of 1921, tended to decrease. At present there are fewer persons employed in manufactures, mining, railway transportation, and agriculture than in 1919, and the increase as compared with 15 or 20 years ago is decidedly less when compared with the total population of the country. This change means the elimination of waste and is an evidence of advance in living standards. With the constantly rising efficiency and greater production per man the quantity of goods available per capita of the population has increased materially. It has also been possible to set some workers free to furnish us services as distinguished from commodities - services of distribution, automobile travel, recreation, and amusement. By this means the whole number of persons employed has increased.

I do not claim that action by the National Government deserves all the credit for the rapid restoration of our country's business from the great depression of 1921 or for the steady progress that has since taken place. Unquestionably, however, wise governmental policies, and particularly wise economy in Government expenditures with steady reduction of the national debt, have had a dominant influence. The people gained confidence in themselves because of increasing confidence in their Government. The reduction of taxation made possible by the cutting down of Government expenditures left more income in the hands of the people, enabling them to increase their expenditures and thereby not only to obtain greater comforts but to add to the demand for commodities; it likewise helped to provide funds for building up the capital of the country and augmenting its productive capacity.

The public needs have not been neglected. We have been able to embark upon a building program which for public works, hospitals, and our military housing requirements will cost nearly half a billion dollars. We are amortizing the cost of the adjusted service certificate fund of veterans of the World War and the retirement funds of our civil establishment at a cost of $132,000,000 a year. Additional funds are being devoted to flood-control work and improvements made necessary by disasters which have overtaken our own States and outlying territory. These expenditures could not have been financed without an economical administration. We could not have had tax reductions and the added expense of these necessary things without careful and orderly management of the business of government.

In this period of greatest prosperity the purely business phases of administration, the interests of commerce, and the encouragement of industry have not been permitted to absorb our attention and mortgage our revenue to the exclusion of the more humane objects and purposes. The duty and privilege of providing for our veterans and employees who have need of relief have not been neglected. The employees’ Compensation Commission in 1928 paid out $3,267,000 for the benefit of injured Government employees, while the expenditure for pensions, compensation, insurance, and care for the veterans of various wars exceeded in 1928 $600,000,000. In all these fields of need the Government has disbursed with generous hand, and its hospitals and homes for its wards thickly dot the land. In times of great disaster it opened the doors of its Treasury.

On the artistic, altruistic, and patriotic side there has been no parsimonious withholding. The beautiful Arlington Memorial Bridge that is spanning the Potomac, the preservation and marking of historic spots, the character of the public buildings being erected throughout the country, eloquently deny the charge that we are only a commercial Nation with no regard for anything but the pursuit of the dollar. During these late years there has been a steady growth of interest in the higher and better things, and I am convinced that the tone and character of the Nation has constantly improved.

We are giving the people better service than ever before. The post office is extending to the people, rich and poor, ever-increasing facilities. The Public Health Service protects us from plague and other evils with a painstaking care heretofore unequaled. In all our lives, sleeping and waking, we are guarded and protected and helped by the Federal Government in more and more ways. This has been done under the restrictions of a policy of drastic economy, which have saved from waste the funds to make increased and better public service possible. You certainly have given abundant reason for being proud of our great Government.

In spite of all these remarkable accomplishments, much yet remains to be done. We still have an enormous public debt of over $17,000,000,000. In spite of all our efforts for economy, our great savings in interest, and our four reductions in taxes, the expenses of the Federal Government during the last year are showing a tendency to increase. While much has been done in reducing the costs, by far the largest item of credit is due for preventing increased expenditures. A short time ago there were pending before the Congress, and seriously being advocated, bills which would have doubled our annual cost of government. At the present time committees have reported, and there are on the calendar in the Congress, bills which would cost more than a billion dollars. Had there not been a constant insistence upon a policy of rigid economy, many of these bills would have become law.

It would be a great mistake to suppose that we can continue our national prosperity, with the attendant blessings which it confers upon the people, unless we continue to insist upon constructive economy in government. The margin between prosperity and depression is always very small. A decrease of less than 10 per cent in the income of the Nation would produce a deficit in our present Budget. The costs of State and local governments are rapidly mounting. From $3,900,000,000 in 1921 the National Industrial Conference Board estimates that they reached $7,931,000,000 in 1927. This is such a heavy drain on the earnings of the people that it is the greatest menace to the continuance of prosperity. It is a red flag warning us of the danger of depression and a repetition of the disaster which overtook the country in the closing days of 1920. It is a warning that should be heeded by every one intrusted with the expenditure or appropriation of public funds. It is the reason that further commitments by the National Government for any new projects not absolutely necessary should be faithfully resisted.

The results of economy which have meant so much to our own country, and indirectly to the world, could not have been successful without the Bureau of the Budget. It has been able in eight years to reduce estimates by $2,614,000,000. The ability with which that bureau has been managed is due to its director. Since I have been President it has been under General Lord. In all our meetings I have spoken of him in terms of commendation. He has continued to justify all I have ever said in his praise. I wish to take this last opportunity which I shall have during my administration publicly to express to him again my appreciation of the high character of his work and my increasing confidence in the Budget system. No friend of sound government will ever consent to see it weakened. No one who admires fidelity and character in the public service will ever fail to be grateful for the services of General Lord, who will now address you.