Address at the Fifteenth Regular Meeting of the Business Organization of the Government (excerpt)

June 11, 1928 | Washington, D.C.

Full speech available here.

Members of the Government’s Business Organization:

It has always seemed natural at these business conferences to discuss the finances of the Government in their relation to national prosperity. While that relation, I believe, is exceedingly intimate, it is nevertheless possible to place upon it altogether too much emphasis. It is true that our Government has been established and is conducted for the people. Its finances should be so administered as to promote their welfare. Yet the reciprocal duties of the people should by no means be forgotten. The obligation is equally on them to support the Government with their services and with their money. This has to be done not only when times are good but when times are bad. This Government of the United States must always be supported for its own sake.

It has been my endeavor, however, so to manage the national finances as to secure the greatest benefit to the people. I have rejoiced in keeping down the annual Budget, in reducing taxes, and paying off the national debt, because the influence of such action is felt in every home in the land. It has meant that the people not only have greater resources with which to provide themselves with food and clothing and shelter, but also for the enjoyment of what was but lately considered the luxuries of the rich. We call these results prosperity. They have come because the people have been willing to do their duty. They have refrained from waste, they have shunned extravagance. They have paid their debts, they have improved their credit. If, out of all these efforts, the reward of prosperity has come, there is reason for national thanksgiving.

It would be unfortunate, however, if out of these discussions the impression should be gained that it is the obligation of the Government to furnish the people with prosperity. They are entitled to such an administration of their affairs as will give them every fair opportunity, but it should always be remembered that if there is to be prosperity they must furnish it for themselves. Neither should it be supposed that prosperity is something to be worshiped. The moral power of the people may be just as great, the standard of character may be just as high, the entire spiritual condition of the Nation may be just as good in time of adversity as in time of prosperity. It all depends upon what use is made of the rewards of success. It is always possible to use them extravagantly and in disreputable ways. It is also possible to use them as the main supports of the real progress of enlightened civilization. Prosperity is only an instrument to be used, not a deity to be worshiped.

It is my firm belief that for the most part the people of the United States are making a proper use of their prosperity. When we emerged from the war with its great burden of debt and high taxes, it soon became evident that, although the country appeared prosperous, in reality it was consuming its capital. It was necessary to bring it back to a condition where it would live on its income and out of its surplus restore its exhausted capital. The first step in that direction was National Government economy. To secure this, a Budget Bureau was established by the Congress to bring appropriations within our resources, and a Comptroller General’s office was established to bring expenditure within appropriations. It is seven years now since this plan went into effect. The results are far beyond anything which could have been foreseen.

The industry and trade of the United States in 1921 were suffering from grave depression. They had been severely affected by the inevitable reaction from the war period. Our foreign trade was experiencing a great decline. Production had been sharply restricted. There were many cancellations of orders. Business failures were numerous. Railway traffic, commodity prices, and the value of securities declined by June, 1921, to the lowest point in a decade. Unemployment had reached a most disquieting state. The prevailing feeling in the commercial world was one of pessimism and profound uncertainty. Commercially speaking, we were at that time at the bottom of the pit.

There is a striking contrast between those dark days of 1921 and the remarkably favorable position of our trade industry to-day. It is the human element in the situation that deserves to be stressed first, and here the question of unemployment comes strongly to the front. In July, 1921, more than 5,700,000 people were without work in the United States. At the present time, according to the most careful computation by the Department of Labor, the number is not much more than 1,800,000, nearly half of whom are normally to be expected as temporarily unemployment while in transit from one position to another. Forces are in operation which promise to take care of many of those who still find themselves without remunerative employment.

Manufacturing output during the first quarter of 1928 was at a rate nearly one-third higher than in 1921. Iron and steel production was more than twice as large as in the earlier year, and the automobile industry has shown a much more rapid growth. Various manufacturing industries have achieved an extraordinary increase in efficiency, and the average output per worker is therefore substantially greater.

The mining industries were in a particularly depressed condition in 1921, whereas several of them have been very active thus far in the present year. Check payments, electric-power production, and contract awards for new building have had, in the early months of 1928, a monthly average about twice as large as in the year 1921. Railway traffic is about one-fourth greater. Agricultural prices have been more favorable during the current year, whereas the reverse was the case in 1921.

Stabilization and a feeling of security have been the primary factors in the great “upward swing” of American industry and commerce since 1921.

The one and only interest of our Government is the interest of our people. The two are inseparable. We have approached the tax question from the angle of requiring no more from the people than necessary efficiently to operate the Government. The effort has been to reduce the cost of Government so as to make room for tax reduction. That effort has been singularly successful. Since the commencement of the fiscal year, July 1, 1921, we have had four reductions in taxes.

The revenue acts of 1921, 1924, 1926, and 1928, when fully operative, will reduce taxes by approximately two billions of dollars a year as compared with what would have been collected if the act of 1918 had remained in force. It is inconceivable that in such a short space of time the Government could cut its tax rates to that extent. Yet that has been done. Millions of individuals in the lower brackets have been entirely stricken from the tax rolls. Personal exemptions for individuals and heads of families have been greatly increased. Preferential treatment has been given to earned income. War taxes and nuisance taxes have been repealed. Business has been freed of many hampering and uneconomic restrictions. Instead of a complicated and burdensome system of war-time taxation, there has been evolved a system of few and relatively light taxes, balanced in such a way as to give benefits to all classes of taxpayers. The prosperity of to-day can be directly attributed in a large measure to the lessening of the burden of Federal taxes.

The reduction which has been made in the national debt since July 1, 1921, has contributed much to the ability of the Government to lessen taxes. That reduction at the end of this fiscal will amount to approximately $6,327,000,000. The total debt will then be $17,650,000,000. It is one-third paid. The total saving in interest over all that period will amount approximately to $950,000,000. The reductions in the debt required by law for the same period total $3,296,000,000. By the end of this fiscal year we will actually have applied to debt reduction $3,031,000,000 more than required by law. That represents what was saved from national revenue. These, together with refunding operations which converted securities bearing high rates of interest into securities having lower rates, represent perpetual saving in interest of $274,000,00 per year. The tangible results of constructive economy in the business of government are clearly indicated by the reductions in taxes and public debt.