Micawber's Masquerade

What the U.S. Government could afford to spend would depend, finally, upon what the U.S. earned. If good times were ahead, taxes would roll in and even the present high cost of government would be bearable. Before his budget went to Congress, Harry Truman sent up his economic report (required by the Employment Act of 1946) as background material.

The President was emphatic on one point: allowing for "minor detours and bumps in the road ahead . . . economic collapse and stagnation such as started in 1929 ... need not happen again, and must not happen again." The best way to avoid them, everybody agreed, is to keep purchasing power up. The President said, significantly, that this should be done only rarely by raising wages, mostly by cutting prices. He set no precise figure for maximum employment, hoped to maintain the current peak of 58 million. Then, with the nation's productive plant going full blast, the U.S. national output should top 1946's $194 billion by 5%.

Billions on Parade. The President's budget was based on confidence that this goal could be attained. (All budgets are based on some such assumption; a skeptic last week defined a budget as "Mr. Micawber masquerading as a certified public accountant.") The budget was a whopper for peacetime, calling for the expenditure of $37.5 billion.* But it had one great virtue: clarity. The President had broken the figures down into ten categories, clearly labeled according to where the money goes:

P: Interest on national debt: $5 billion. P: Tax refunds to individuals and corporations: $2.1 billion. P: Army & Navy: $11.2 billion (by far the largest single item). P:International affairs: $3.5 billion--including $1.2 billion for the loan to Britain and $14.8 million for U.N. P: Veterans' services: $7.3 billion. P: Transport, communications and natural resources: $2.6 billion (including $443 million for atomic energy). P: Agriculture: $1.4 billion (onefourth of it for support of crop prices). P: Social welfare, health and security: $1.7 billion.

P: Federal housing program: $539 million. P: Miscellaneous: $2.1 billion--almost a third of it for war liquidation.

Tears over Taxes. The President figured that he could count on Congress to raise postal rates so as to wipe out a $352 million Post Office deficit. Then, he declared proudly, the budget would be balanced--for the first time since 1930 (see.PRESS). It would also show a $202 million surplus if revenues reached $37.7 billion on the basis of present taxes.

By Harry Truman's standards, he had been ruthless; this was a tight budget. (The Army & Navy had at first wanted $22 billion, formally requested $15.6 billion, lost a quarter of that under Truman's surgery.) But it was not tight enough for many Congressmen of both parties.. The loudest outcry was over the fact that Truman wanted to go right on collecting taxes at present rates. Republicans were determined to cut them. But first they had to cut the budget. Ohio's Robert Taft thought between $3 and billion could be squeezed out, without touching Army & Navy. Ambitious Harold Stassen was sure he could get out $5 billion.

Perhaps, as some critics suggested, the budget had been deliberately padded to let the Republicans make some cuts for the record and still let a Democratic administration operate comfortably. But there was a hard-rock basis to many items. Few thought that national defense could be had more cheaply, except by merging the armed forces. The $5 billion for debt service was sacrosanct; so was the loan commitment to Britain; so were nearly all veterans' benefits, tax refunds and pensions.

These added up to more than $27 billion of hard rock. Thus most of the promised cuts would have to come out of the ordinary operations of government. Some could be made, thus justifying tax cuts. But many a citizen thought it might be better to leave taxes alone and reduce the debt--$260 billion--instead.

* The budget for the current fiscal year (ending June 30) was only $35.1 billion, but expenditures actually will top $42 billion.

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