ÆäÀÌÁö À̹ÌÁö
PDF
ePub

the expenditures of everybody else. It must know what every great corporation and every little one is going to spend; what each drug store, grocer, and butcher is going to spend; what the 48 State governments and thousands of city, town, and county governments are going to spend; what 30,000,000 families are going to spend even though they don't yet know themselves. Yet this omniscience is expected to be found in a little group of Government superstatisticians.

Assuming that these three estimates are made, then the Murray bill at last gives the President's statisticians a simple problem:

[ocr errors]

* *

"The extent, if any, by which the estimated aggregate volume of prospective investment and expenditure for any fiscal year or other period is less than the estimated aggregate volume of investment and expenditure required to assure a full employment volume of production shall be regarded as a prospective deficiency in the National Budget."

* *

It is very easy to deduct one figure from another and get a result and give it a name. But if the two original figures are themselves hopelessly wide of the mark, the result of deducting one from the other will be equally worthless. However, it is this third figure which is to serve, as we have seen, as the annual basis for the new Government spending program.

It is obvious that the possible margin of error in the figures that the President is asked to gather is so great that there is likely to be not only a substantial error in the final result, but that the result may be wrong even in diretcion. It may call, for example, for a huge spending program in an inflationary period, when the only sound policy for the Government would be to retrench expenditures and retire part of the national debt. The opposite result is also theoretically possible. That is, it is possible for the Government to plan ahead for severe retrenchment in a period that would in any case have been one of depression. But political pressures being what they are, the probabilities are very high that the estimates will almost always be loaded to seem to require heavy Government spending.

Another crude assumption in the Murray bill may be noted at this point. Even if we assume that the labor force is ascertainable, that the expenditures “necessary to provide full employment" are ascertainable, and that the actual future "non-Federal" expenditures are ascertainable, the Murray bill is still wrong in assuming that the Government can get full employment by spending the difference. For both the prospect and the actuality of the Government's own expenditures will change all the plans of private business and private individuals regarding their own expenditures. Private expenditures will be in large part determined by what people expect the Government to do. Those who expect to be direct beneficiaries of the Government spending may advance or increase their own plans to spend. Others may be frightened by the prospect of Government intervention, Government competition, or waste and contrast their expenditure plans.

If the Government forecasts were taken seriously, moreover, either a predicted boom or a predicted slump would begin to come right away, because people would immediately begin to buy or sell securities, or expand or contract their business operations, to take full advantage of the expected boom or avoid the worst results of the expected slump. Thus the predicted condition would come before the time for which it was predicted. Hence we have the paradox that the only Government forecast that would not be falsified would be one that was not believed when it was made. The Murray bill ignores all these psychological complexities and all these "compensatory reactions to compensatory spending." This points to the serious political dangers of the Murray bill. As a general rule, both the administration officials in power and many Congressmen will be tempted to press the Government statisticians (whose own jobs and influence will depend upon the favor of these groups) for estimates which show that it is necessary for the Government to spend more rather than to retrench. The politicians in power will be inclined to favor estimates which lead to the conclusion that a continued Budget deficit is necessary. It is the primrose political path to tax lightly while making all sorts of expenditures for the benefit of this or that pressure group.

If the Murray bill should become law it is easy to see how a future unscrupulous administration, once it gained power, could make the lowest plausible estimates of the amount of private expenditure that was likely to be made and the highest plausible estimates of the Government expenditures necessary to provide "full employment." These estimates might then be used as a means of building up a huge patronage machine for obtaining votes and permanent power. Even with

the utmost honesty and good intentions the estimates called for in the Murray bill are likely to be bad. But when the temptations of political spending are added to this the bill could be an extremely dangerous weapon in the hands of a future President who lacked complete integrity.

Compared with the complications, unknown quantities and pitfalls that would surround the estimates which the President is asked to make under the Murray bill, the problem of the Government in estimating merely its own expenditures, within its own control ought to be ridiculously simple. Yet on this problem the Government in the last dozen years has piled up a singularly unimpressive record. The following table shows the actual record of the President's estimates of expenditures, revenues, and deficits, for the following fiscal year as presented in his annual budget messages from 1934 to 1943. The figures are in millions of dollars. Expenditure figures exclude debt retirement: "

[blocks in formation]

Some very instructive results emerge from this table. In the 7 fiscal years from 1935 to 1941, inclusive, there was an average error in the estimate of receipts of about 10 percent. In the same 7 years there was an average error in estimating expenditures of 23 percent. It is obvious that errors of this size, or even much smaller, would render the forecasts required by the Murray bill not only useless but potentially very dangerous. The worst unemployment year of all was 1933. In that year the National Industrial Conference Board estimates an average unemployment of 11,842,000 out of an estimated total working force of $50,669,000. This meant that 23 percent of the working force was then unemployed. It is an instructive coincidence that this is almost precisely the average percentage of error in Federal expenditure estimates in the 7 years before our entrance into the war.

If a 23-percent margin of error in prospective national (not merely Federal) expenditures would make, as the Murray bill itself assumes, a 23-percent difference in the volume of employment, it is evident that the forecast of expenditures

The figures for the peacetime years are based on a table published by Editorial Research Reports, Washington, D. C. For the wartime years I have taken the figures directly from the President's annual budget messages.

this process must be reversed, his troubles begin. For he is then raise taxes or to cut off the pressure groups and the patronage gi benefits to which they have become accustomed. He is asked to vote that will either increase the irritation of the taxpayers or enrage recipients of Federal money, or both. Only the most courageous si be willing to take this course unless the indications point overw an inflationary boom.

The

For evidence on this point we need not look beyond the present tle. country already has an unparalleled national debt of $262,000,000,000. It is still, in spite of the end of the war, estimated to be running a Budget deficit for the current fiscal year of the dimensions of $30,000,000,000. All signs point to a highly dangerous inflation. Yet it is precisely at this moment that unnumbered bills in Congress and unnumbered plans in the States and cities call for more gigantic governmental expenditures than ever. So far from trying to "compensate" for the actual and prospective inflation brought about in large part by its own previous spending, the Federal Government is chiefly concerned with putting forward still more spending plans. The very fact that the Murray bill itself is being pressed so vigorously at this time, when it is most essential to get the Federal Budget into balance, shows how little meaning there would be in section 3 (d).

It is true that the Government is responsible for establishing conditions under which maximum production and full employment are possible. The Murray bill will not establish such conditions. Congress might do more to achieve them at the present time, in fact, by modifying or repealing many laws already on the books than by the mere addition of new laws. The proper measures to prevent | unemployment in the long run are simply the proper measures for creating a sound, stable, and progressive economy.

It

The elaboration of any detailed positive program to achieve this result is obviously beyond the scope of the present analysis. But if, for example, the President wishes to submit to Congress the kind of forecasts and estimates called for in the Murray bill, there is no reason why he cannot do so without a Murray bill. might, indeed, be instructive to have the President submit such estimates for, say, the next 5 years. The country could then get some notion of their probable accuracy before being asked to base dubious policies upon them.

SUMMARY

The Murray bill, in sum, is a rhetorical measure which attempts to enact ambiguous and undefined terms and promises. It assumes that high-sounding phrases are an adequate substitute for facts and that an ill-considered group of academic theories are indisputable truths. It pays elaborate lip service to the private enterprise system at the same time as it rests on a fundamental distrust of that system and proposes measures that would in fact undermine and eventually destroy the system. It rests, also, on a crude form of the "purchasing power theory of economics. This assumes a one-way causation under which a given volume of production or employment is supposed inevitably to follow a given volume of spending. If the economic system worked in this simple way, we could solve all our problems by printing hundred-dollar bills and passing them around. Government spending, deficit financing, increased doses of inflation, are in fact the heart of the Murray bill as it at present stands. It would base its spending policies on an elaborate set of estimates that would be in fact a series of guesses subject to a wide margin of error. The publication of these official guesses wou'd itself set off widespread psychological forces that would falsify them. The bill assumes that Government spending would be the net addition to private spending. It completely overlooks the effect of Government spending in frightening private capital away. The passage of this bill would only multiply existing fears of inflation. The only "substitute" for the bill would he to take precisely the opposite course of the one it proposes. This course would be an announcement by Congress of its determination to bring the Federal Budget into balance at the earliest practicable moment.

« ÀÌÀü°è¼Ó »