Where Economy Is More Than a Gesture

J. HERBERT HODGINS March 15 1925

Where Economy Is More Than a Gesture

J. HERBERT HODGINS March 15 1925

Where Economy Is More Than a Gesture

Two Billion Dollars in Canadian Terms


CAN you imagine a more innocuous, little thing than the colored stripe on a mail bag?

Years ago, someone with a notion for color—to give him the benefit of the doubt of more ulterior motive— splashed our mail bags in Canada with a touch of red; in the United States with a stripe of blue.

Have you ever noticed these stripes and, noting them, wondered what particular purpose they might serve? In the United States that blue stripe figured in mail sacks for many years until recently an inquiring individual began asking questions. No good reason could be given for its continued use. It added one cent a yard to the cost of the canvas and reduced the value of the canvas scrap when sold. When his attention was directed to the stripe and to its cost, the Postmaster-General promptly eliminated it from the post-office specifications—and effected an annual saving to the government of $49,000!

Forty-nine thousand dollars is a mere drop in the bucket when five billion dollars is being counted out. But Calvin Coolidge, president of the United States, chief executive of the wealthiest nation in the world and head of a business organization with 110,000,000 stockholders, held fortynine thousand dollars important. Forty-nine thousand dollars became a contributing item in a nation’s saving of $5,343,000,000.

“I had rather talk of saving pennies and save them than theorize in millions and save nothing,” said President Coolidge, recently, in stressing the importance of these “little things,” whose ultimate effects have been significant in the nation-wide drive for economy of public administration in the Unitea States.

Four years ago, when the United States was at the full flush of its national spending orgy, President Harding expressed the hope that the federal outlay, exclusive of debt reduction, might be brought within three billion dollars. The careless spenders of public funds said that it simply could not be done, and that was all there was to it. At that time it was costing $5,538,000,000 annually, to run the country. It was inconceivable that $2,538,000,000, annually, could be clipped from the nation’s expense sheet.

A Definite Objective

IN INITIATING a campaign for retrenchment, President Harding sensed the importance of a definite objective. He did not live to carry through his ideal. But his objective was reaffirmed and re-established by President Coolidge, who, brought an inherent New England sense of thrift to his job. Calvin Coolidge was brought up to “watch the pennies and the dollars will look after themselves.”

“Let those who are inclined to scoff at it, those who are inclined to refer to it as cheeseparing, look at the result it has accomplished,” he said in a recent address, as he surveyed the accomplishments of the budget system, which is the responsible factor in the new era of federal thrift in the United States.

What is more, according to Coolidge: “These next four years will be years of continuing pressure for economy.”

“There must be no retreat,” reiterates the president.

What is this thing which has penetrated the national life of the people to the South of us—-this great surge of national thrift which is restoring Washington’s financial administration to saner levels and, concurrently, bringing relief to a taxburdened people?

President Coolidge, as the Columbus Ohio State Journal succinctly remarks, “differs from most men in public life, in that he is as strongly for economy after election as before."

Let us try to visualize what the $2,000,000,000, which has been saved from government spending in the United States, means. Translated into Canadian terms, it is equivalent to: It is within $41 7,000,000 of Canada’s net debt; it is within $222,000,000 of all the bank deposits in Canada ; it is one-quarter of all the agricultural wealth in Canada ; it is $500,000,000 greater than the total of Canada’s agricultural revenue last year; it is nearly five times more than the gross earnings of Canada’s railroads in 1923; it is $50,000,000 greater than Canada’s total foreign trade for 1924.

President Coolidge, "thus, was just the man to start the compelling economies of a budget system.

At the outset of his office, President Coolidge made this declaration before Congress:

“For seven years the people have borne with uncomplaining courage the tremendous burden of national and local taxation.

“These taxes must both be reduced.

“The taxes of the nation must be reduced now

as much as prudence will permit and expenditures must be reduced accordingly.

“High taxes reach everywhere and burden everybody. They bear most heavily upon the poor. They diminish industry and commerce. They make agriculture unprofitable. They increase the rates on transportation. They are a charge on every necessary of life.

“Of all the services which Congress can render to the country, I have no hesitation in declaring this one to be paramount.

“To neglect it, to postpone it, to obstruct it by unsound proposals, is to become unworthy of public confidence and untrue to public trust.

“The country wants this measure to have the right of way over all others.”

Consistent From Outset

THIS was President Coolidge’s initial stand for economy—and economy has never been popular with politicians either in this country or in the • United States. So Calvin Coolidge has been scoffed at by the critics and railed at by the pork-barrel legions. But he was obdurate where undue or unnecessary expenditure was concerned. To set a personal example, he discarded his private car and went to Chicago on an ordinary Pullman, thereby reducing the cost of his trip by $1,200.

With the director of the bureau of the budget as his “scout,” he went campaigning for “blue stripes.” Now, from the bureaux in Washington and from the governmental field agencies come reports of modest savings effected by the utilization of old wrappings and twine, the conversion of obsolete forms into serviceable scratch pads and a thousand and one savings, many of them ingenious, most of them constructive, all of them commendable. Out of these “penny economies” has grown a formidable structure of national thrift. The government has been put upon a Big Business basis.

This year will mark the close of four years of effort to reduce the cost of government in the United States; four years under a definite plan with a concrete objective.

How successful has the effort been?

Interviewing the President

SEEKING information about governmental economy—actual retrenchment not hoped-for, retrenchment—I went to Washington to see President Coolidge.

The quiet manner of this man who is president of the United States, and the simplicity of his reception of a stranger, put me immediately at ease. There were no trappings to awe one, no ceremonies—a wholesome unpretentiousness.

For a few moments we talked as you would talk with a newcomer whom you might want to impress with the welcoming spirit of Canada. He harked back to his trip of three years ago, on the Canadian Pacific railway, through British Columbia’s lovely Fraser Valley and a smile, awakened by some pleasant recollection, played upon the corners of a thin-lipped, firm-set mouth.

Tuesday noon, I sat in on the conference which the president holds with the daily newspapermen. Here a few words may crystallize into history. The announcements which a president may make may easily be of immediate and vital concern to everyone of 110,000,000 persons throughout the nation. They may be of international import.

Before a broad, mahogany, ilat-top desk, at one corner of which stood an unfurled silken stars and stripes, a quietly dressed and Continued on page 1,0

Copyrighted. 1925, by the New York Tribune. Inc.

Where Economy Is More Than a Gesture

Continued from page 26

plain-looking man awaited us. He was the centre of the picture as, promptly at twelve o’clock, with some sixty other writers, I entered that round, green room in the executive end of the White House, which is the president’s daily “workshop.”

As president of the United States, Calvin Coolidge believes in setting an example for all Americans to follow. As he has eliminated frills at the White House so, too, he is bringing national life in the United States to a saner economic level. He has reduced the United States tax bill by $2,000,000,000 yearly—an amount almost equal to Canada’s entire national debt.

How has he done it? That is what we shall try and find out.

During the century the United States spent more than seventy billion dollars. No one can say now how much waste and loss resulted.

Then came the world war, which cost the United States forty billion dollars. Taxes mounted and were levied upon every available source. But the vast amount of cash required could not come wholly from taxation, so the government borrowed heavily from the people.

The United States emerged from the world war with a debt of wenty-five and a half billion dollars which, by August, 1919, had increased to twentysix and a half billion dollars.

Introducing the Budget

FORTUNATELY, at this juncture, Congress provided a budget system for the government, in a Budget and Accounting Act, which was approved by the late President Harding, June 10, 1921.

Now this matter of a budget rings familiarly. We have a budget at Ottawa. Somebody said the other day we have had this budget since Confederation. But what does it actually signify?

Hon. James A. Robb, acting minister of finance, tabled the preliminary estimates for the 1926 budget, in the House of Commons, last month. His figures indicated a decrease of nearly seven million dollars in the government’s contemplated spending. Mr. Robb is to be congratulated for courageous intentions. It is an instance of a business man’s instinct asserting itself.

But just watch and see what the politicians will do to Mr. Robb’s balanced estimates! When the budget is brought down these seven million dollars which he hoped to save will be all gobbled up by the pork barrel provisions—if we may judge by precedent.

Take last year for example: In the

supplementary estimates, the Hon. Mr. Robb had to add another $6,604,809 to his main estimates. And last year the vote for the railways was $55,000,000, whereas this year the vote for the railways is $60,000,000. Indeed, it will surprise few if Ottawa’s total expenditures this year are twenty million dollars greater than last year.

One pork barrel item, alone—the

contemplated South Shore bridge, across the river St. Lawrence from the lower part of Montreal—requires immediately six million dollars.

The fact, therefore, remains that Canada has not yet evolved a budget system such as the United States now has: There is all the difference between steel and elastic. The vital difference in the two budgets lies in the fact that the United States places squarely upon the president as head of the government’s business organization the responsibility of living within the nation’s income.

A Director for the Budget

REALIZING that the president with his multitudinous responsibilities would be unable to give the needed time to the budget’s details, the Budget and Accounting Act gave him an agency to perform this work. This agency is styled the Bureau of the Budget, with a director at its head. This agency in addition to its work of preparing the estimates is utilized by the president to bring about economy in operation and co-ordination of the various government activities.

How did the Bureau of the Budget proceed to carry out its appointed tasks?

At the start a man of driving force was induced to take temporary charge— General Dawes, of international repute as head of the Dawes Commission on German Reparations. In all his early work with the budget, General Dawes consulted freely with the man who later succeeded him, General H. M. Lord.

General Lord is singularly fitted for the trying duties of smoothing out a budget system. With a vast fund of practical information relating to the fiscal problems of the government, gained from the legislative end through early associations with Congress, and from the expending end through years of service in the United States Army, from which he retired after organizing the finance department and serving as its first head General Lord brought to the budget position a complete picture of the problems confronting him. *

The Budget Accomplishment

FROM the dollars and cents viewpoint what has happened?

The federal expenditure of the United States in 1921, the last pre-budget year was $5,115,927,689 (exclusive of the* amount applied to reduce public debt). In 1922, the first year of budget control' (again excluding debt reduction) the United States spent $3,372,607,899.

Thus, in one year of budget control, the nation’s spending was pruned $1,743,000,000. Here is an amount greater by one hundred and sixty-nine million dollars than the Dominion of Canada’s entire net debt as of March 31, 1919.

But this saving was still 372 million dollars short of the mark which the president had aimed at as the more reasonable amount which the nation should spend for one year's administration. So, in 1923 the Director of the Continued on page ¿2

Budget tried again. The result was a further reduction of $77,980,000.

In 1924 the expenditure got down to $3,048,000,000—another notable reduction.

As between the amount spent in 1921 and the federal expenditure for 1924, Washington has clipped its spendings at the rate of forty per cent., under budget control.

What is Ottawa doing?

Canada’s finance minister announces that for 1926 he will spend three hundred and forty-two million dollars instead of three hundred and forty-nine million dollars as for the past year. In other words he proposes to reduce the national expenditure in the coming year by seven million dollars, or two per cent.

As of March 31, 1919 1920 1924 1925*

Total debt ....... $2,676,635,700 $3,041,529,500 $2,819,610,400 $2,941,901,100

Net debt ......... 1,574,531,000 2,248,868,624 2,417,783,200 2,417,745,900

*As of Jan. 1, 1925.

To the director of the Bureau of the Budget, the president’s wishes, as he himself says, are something more than a gesture. They constitute a mandate that must be reflected in actual performance. General Lord made this clear when I talked with him, in his offices in the United States Treasury at Washington.

“The past three years,” he told me, “have been years of earnest striving to achieve what is regarded by many as impossible—to bring our annual spending below $3,000,000,000. Sleeping and waking that $3,000,000,000 goal has been constantly before us.

“While we have not yet attained our objective we have made progress. We have approached tantalizingly near the goal.”

Not satisfied!

Well, certainly it is an enviable record. It is a record for taxpayers in Canada to envy. It is a record to inspire Ottawa.

The total reduction brought about in the United States debt since the high point of $26,594,000,000 amounted to $5,343,000,000 at the close of the last fiscal year—a sum more than twice the

amount of Canada’s entire net debt. This remarkable reduction has effected a saving in interest amounting to approximately $225,000,000 annually, a saving which equals nearly one-third of the total annual pre-war expenditures of the United States Government.

“In the same period,” to quote President Coolidge, “the people have benefited by a material reduction of taxes of about $2,000,000,000 yearly.”

What Has Canada Done?

WHAT has been happening in Canada, while the United States has been so thoroughly housecleaning?

Survey the comparative figures of our debt position:—

If Canada had pursued a policy of thrift as the United States and had compelled similar ratio of economies—in other words a forty per cent, reduction in all governmental expenditures—approximately $500,000,000 would have been clipped off the Dominion’s debt in three years.

If, on April 1, 1923, when Canada’s net debt stood at $2,453,776,800 Ottawa had set about putting its house in order as Washington has done, the country’s net debt would now be under $2,000,000,000, and the country would be required to pay out $20,000,000 less in annual interest charges.

Canada would be prospering as the United States is prospering under the stimulus of taxation reduction, and the national situation would be healthier, cheerier from whichever angle you might wish to view it.

(The second,, and concluding article in this series will illustrate how the policy of “snatching the pennies” was carried into effect at Washington under Director of the Bureau of the Budget.)