THE BUDGET TEST

Evening Post, Volume CXV, Issue 148, 26 June 1933, Page 8

THE BUDGET TEST

In one of its London Conference resolutions the American delegation advocates "serious encouragement of private enterprise through Government expenditure," including expenditure out of borrowed money, "projvided the debt service is covered by balanced Budgets." The proviso is important because it affirms that American policy, somewhat elusive in certain respects, is at any rate definite on Budget-balancing; and Budget-balancing in the United States could not continue if currency debasement were allowed to get the upper hand.' Owing to differing revenue systems in different countries, and to other causes, some Budgets suffer more quickly than other Budgets by depreciation of money. At the time of the depreciation of the franc, it was observed that the French Budget suffered relatively less from the 'falling franc because the proportion of revenue derived from indirect taxes and fiscal monopolies was high, and the proportion from direct taxation was relatively low. the French Budget was further helped by the fact that the French debt is mostly internal, with interest payable in francs. ~

In the United States Budget, however, direct taxation is in higher proportion. In "The .Chase Economic Bulletin," Dr. Anderson states that "the element of debt service, fixed in dollars,' is a minor percentage of the whole, and is decidedly smaller than the revenue elements fixed in last year's dollars." This is a reference to the system, well enough known in New Zealand, of income taxes on the earnings of individuals and companies, based oh the figures of the year preceding the collection. "If the expenses of the Government; should mount rapidly through a falling value of the dollar," the Budget would never catch up with it. The expenses of the Government would mount much faster than its revenues, and the surest sufferer by the falling dollar' would be the Budget (and consequently the .credit) of. the United States.. Taxation based largely on income taxes i; is "predicated on sound nioney." Either the American delegation's presumption of sound budgeting is unsubstantial, or else the United States Government is determined to check currency depreciation and other forms of inflation at a point.consistent with such budgeting—without which, indeed, it seems to be useless to talk of Government borrowing to encourage private enterprise. The American delegation suggests that "theNissuing banks of various nations" should confer on a "synchronised" work programme. An international scheme of borrowing and lending for work purposes should imply not only sound budgeting but a continuance of it.