$51,000,000,000-a-Year Man

Fishkill Farms, the Hudson Valley home dear to the heart of Treasury Secretary Henry Morgenthau Jr., lay frozen and snow-specked under grey mists this week. The Mclntosh apple trees, which Henry Morgenthau loves to see at blossom time, stuck bare, stubby branches into a winter wind. The rose bushes which he likes best of all (his favorite is called Better Times) stood like dry sticks in little mounds of protecting earth. Not until April would Fishkill Farms come to life again.

But Henry Morgenthau, stewing and fretting in Washington, with figures spinning in his brain like migraine spots, must have cast many a longing thought toward his 2,400 icy acres. Two thousand four hundred is a good, round, friendly number: big enough to be impressive, small enough to be comprehensible, easy to remember, subdivide, add to and even forget at bedtime. No man ever yet was hauled to a padded cell for trying to imagine what 2,400 of anything would look like, even coated with ice.

Not so the figures that danced in the Treasury Secretary's mind. These were giddy abstractions which raced round and round without stopping, mathematical fictions multiplied to the nth power, soaring off into the eternity of lightyears, jerking out eyeballs like an endless corridor in a lobster nightmare.

It Must Be Done. The President's budget message had laid down a fabulous task for Morgenthau. The U.S. planned to spend or lend $109,000,000,000 in the next fiscal year: the Treasury Secretary would have to get the money somewhere. He could borrow some of it, and that was easy: the U.S. was still rich in money and there was almost no place for it to go but Government securities. But the President wanted $51,000,000,000 raised without borrowing--and that was a job for a fiscal Hercules.

It meant $16,000,000,000 in new revenue (plus the $35,000,000,000 which present taxes will produce), from a citizenry which is just now learning what the 5% victory tax does to paychecks and will yelp with pain at the income taxes due in March. It meant compulsory savings, which sensitive Henry Morgenthau considers unAmerican. It might even mean sales taxes, which social-minded Henry Morgenthau hates even to talk about. It meant, in short, that the unhappy Secretary would have to find some way of wheedling, squeezing, talking or forcing into the Treasury an amount that is 1) one and a half times as much as it cost the nation to wage World War I, 2) more than all U.S. Treasury Secretaries put together collected in taxes from the nation's beginning to the end of World War I.

It Can't Be Helped. There was no escaping the job. This year the U.S. people working harder than ever before in history, will pocket $132,000,000,000 in pay or dividends. But most of their labor will go off to war: as tanks, airplanes, guns and the grinding work of soldiers. They will produce only $70,000,000,000 of the things that people buy: food, clothes, furniture, a seat at the movies or a table at a nightclub. As a nation, they could hand over the rest of their money to their Government--the whole $62,000,000,000 of it and be just as well off. If they give their Government less, they will have more in their pockets, but not a bit more on their backs or in their stomachs.

When he presented his budget to Congress last fortnight, Franklin Roosevelt said that its Wagnerian arithmetic reflected the determination of U.S. citizens to "pass the ammunition." They are already passing the ammunition, in the form of shells and cartridges. Taxpayers will now pass the ammunition in the form of money --or take the consequences later.

A good, fair, vigorous tax policy can 1) prevent the enormous waste of inflation (price controls by themselves cannot), 2) hold down the national debt and its burden of interest, 3) help win the war by encouraging the men and machines of war industry. A bad policy can play hell.

The Man Who Does It. Some hyperbolic economists, who see fiscal policy as the beginning and end-all of Government planning, say that it is more important in wartime to have a great Treasury Secretary than a great President. Nobody yet has called Henry Morgenthau a great Treasury Secretary. When he took the office in 1934, one of his sisters wrote to her son: "I can't understand why the President appointed your Uncle Henry. . . . He knows that Henry knows nothing about finance."

Morgenthau got the Treasury job by an accident of geography. He grew up in New York City, the only son of famed Henry Morgenthau Sr., a distinguished Jewish lawyer and philanthropist who made a fortune in Bronx real estate, became Woodrow Wilson's Ambassador to Turkey. Young Henry was restless in school, never took a college degree, had a few unhappy tries at finding a career. Not until he was sent to a Texas ranch to recuperate from typhoid fever did he find himself.

Then, at 22, he bought a $55,000 farm in New York's Dutchess County. Half the money was put up by his father; the other half was his own, from a $500 Bronx lot his father gave him years before. (The lot was worth $10,000 by the time he sold it, and he invested the $10,000 prudently.) The location, recommended by Agriculture Department experts, was doubly fortunate. Gentleman Farmer Morgenthau made a go of his property from the start. He also met another gentleman farmer who dwelt only 25 miles away: Franklin Roosevelt.

The two squires had much in common: love of the land, local pride, an altruistic social philosophy. They became fast friends: Elinor Morgenthau, the Secretary's wife, has a picture of the two in an automobile, inscribed by the President: To Elinor, from one of two of a kind. When Franklin Roosevelt ran for Governor in 1928, Morgenthau planned his upstate tour, arranged the dates, hired the bands, drove 7,500 miles with him in an old Buick. The tour was a success and Morgenthau drove on into public life. He went to Albany with Governor Roosevelt (as a farm official), to Washington with President Roosevelt. His selection as Treasury Secretary, to succeed the late William Hartman Woodin, seemed only a little more strange than the run-of-the-mill appointment in the early years of the New Deal.

How He Does It. Henry Morgenthau is no coward: it has taken a brave man to hold his job for nine years. In that time he has been subjected to enough criticism, needling and downright insults to drive an ordinary man to distraction. He cannot get along with Congress. Most of the men he brought in to help him at the Treasury have refused to go along with his policies. He is disliked by most New Dealers (who regard him as a budget-balancer at heart) and practically all conservatives (who think his tax policies are shot through with social theory).

Morgenthau has an unhappy facility for making enemies. He looks easy to like: he is tall, lanky, stooped, diffident, his expensive ties are always badly knotted.

His eyes light up behind his pince-nez when he shakes a stranger's hand. But his shyness is so painful that he can never relax. Only a few men like Franklin Roosevelt have known the human warmth that lies behind Morgenthau's deaconish mien. Most others have decided, after a time, that he is suspicious, autocratic, a real cold fish.

At the Treasury, Morgenthau got off to a bad start: he ordered guards to shine their shoes and stand at attention to "show respect for official superiors," clamped a strict censorship on Treasury underlings, relations with the press. His relations with Treasury higher-ups have been equally unfortunate: there are enough former Under Secretaries of the Treasury to start a lodge.

Trouble on the Hill. Morgenthau's most ignominious tussles have taken place on Capitol Hill. Like any gentleman farmer turned Treasury Secretary, he shuddered to face Congressional committees alone, hesitated to express positive opinions. With him, on his visits to Capitol Hill, went a half-dozen Treasury experts, not always enough to keep him out of hot water.

Few public officials have been beaten down harder or oftener by Congress. Last year Morgenthau presented a dozen major tax recommendations; not one was adopted. In the final bill, written by Senate and House Committees with as little regard for Treasury feelings as was humanly decent, Congress inserted a clause which authorized it to short-circuit the Secretary in seeking advice and statistics from Treasury experts. Faithful Majority Leader Alben W. Barkley pleaded with his colleagues not "to slap the Secretary of the Treasury in the face," but the clause was adopted by a Senate vote of 74-to-10.

To many observers, this seemed a vote of no confidence. In the interest of wartime unity, it might have been prudent for Franklin Roosevelt to fire his old friend. But the President does not work that way. And Henry Morgenthau, whose greatest attributes are loyalty and the personal courage of an unflinchingly honest man, would never resign without word from the White House.

Trouble Everywhere. This week Henry Morgenthau, sincere and determined to do his best, a high-minded public official who likes to call himself a "hired man of the people," stuck stubbornly to his course. But the road ahead was rocky. No previous Treasury Secretary had ever had to cope with such gigantic figures as appeared in the World War II budget. None had ever had to operate from so deep in the doghouse.

The Civil War cost $3,348,369,000 (only 3% of next year's war budget): the U.S., which did not then know better, financed it through inflation. Secretary Salmon P. Chase sold bonds to banks, issued $450,000,000 in greenbacks (which dropped to 35-c-), finally called in Financier Jay Cooke to save the day--at a handsome commission.

World War I cost the U.S. $35,413,000,000 (35% of next year's war budget). This time the nation was committed to paying a third of the cost out of taxes, but Secretary William G. McAdoo had advantages that make his problem seem child's play in retrospect. (It was not so easy at the time.) To raise his $11,280,000,000, all McAdoo had to do was 1) lower exemptions for income taxes to $1,000 instead of $3,000, 2) raise the normal tax rate from 2 to 4%, 3) start the mild surtaxes at $5,000 instead of $20,000, 4) raise the normal corporation tax from 2 to 6%, 5) tack on an excess-profits tax which seems beneficent by 1943 standards.

Now comes Henry Morgenthau, to heap additional taxes on top of taxes that have been rising steadily, to close an inflationary gap that indecision has already let almost out of hand.

Calendar Trouble. Time is running out. Franklin Roosevelt and Henry Morgenthau were slow to realize the role of fiscal policy in wartime. Administration policy first held that preparation for war and a prosperity boom could go hand in hand. When the boom got out of hand, the expedient was to create a "controlled inflation" by clamping down price controls, no matter how complicated they got or how dangerously they defied laws of supply & demand.

Now the great tax revision program will have to be engineered quickly: Congress needs all the advice and help it can get. The great question is whether Morgenthau can provide them.

The Treasury Secretary's ideas have not changed much since his last unsuccessful brush on Capitol Hill. He and his top adviser, Treasury Counsel Randolph Paul, have abandoned opposition to compulsory savings. But the Secretary still opposes a sales tax. He counts strongly on three proposals Congress turned down last year: taxation of State and municipal bonds, compulsory joint returns for husband & wife, elimination of the depletion allowance for oil wells and mines. On the famed pay-as-you-go income tax plan, suggested by Chairman Beardsley Ruml of the New York Federal Reserve Bank, his position is ambiguous: he likes the idea if he can collect two years' taxes in one but is against the Ruml principle of forgiving one year's tax in order to let taxpayers as well as the Government get up to date.

Nor was there any sign last week that Morgenthau planned to do anything about his views. Sensitive of his bad relations on Capitol Hill, he was determined to wait until Congress sought his counsel--a day that may not come until long after the apple trees on Fishkill Farms have budded, blossomed and borne their fruit.

Last week three bills patterned after the Ruml plan were introduced in Congress, without waiting for a nod from Morgenthau. There were reports that Economic Czar James F. Byrnes would become Administration tax spokesman. Urbane Senator Walter F. George, chairman of the Senate Finance Committee, had his own ideas about 1943 taxes. So did stubborn Robert L. Doughton, chairman of the House Ways & Means Committee.

If Morgenthau planned to remain Treasury Secretary in anything but name, he would have to cope quickly with his burdens of figures and men. Else his tax program would be written by Senator George, Congressman Doughton, Beardsley Ruml and perhaps Jimmy Byrnes--and Henry Morgenthau would become taxation's forgotten man.

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