THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, SEPTEMBER 4, 1931. MORE DEFICIT PROBLEMS.

New Zealand Herald, Volume LXVIII, Issue 20969, 4 September 1931, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, SEPTEMBER 4, 1931. MORE DEFICIT PROBLEMS.

With only two months of the current financial year past, the President of the United States finds himself compelled to consider measures of economy "in order to avoid sharp increases of taxation." The deficit for the first two months is quoted. It is substantial, but such circumstances do not ordinarily cause great alarm. It is generally assumed that later stages of the year will afford opportunities of recovery. In the United States, as in other countries, much taxation revenue comes to hand toward the end of the year. In this instance there are special reasons why Mr. Hoover is early in the field with plans to readjust the conditions. The two chief of these, which are inter-dependent, are the Budget method and the political situation. Until 1921 there was no Budget system in Federal finance., Since that year the President has been required to present a financial statement at tho beginning of the December session of Congress. The fiscal year in the United States closes on June 30. In December, therefore, the President is required to submit estimates of revenue and expenditure for 12 months beginning.on July 1 following. He is also expected to give a review of the current year, which is not half completed, and to forecast the course of its subsequent financial fortunes. It is easy to realise, therefore, that Mr. Hoover, mindful of the account of his stewardship he must give before the end of the year, will not be content to see even an early deficit accumulating. Further than that, he will be particularly anxious to avoid having to propose "sharp Increases in national, taxation." This must be regarded as the Budget of an election year, since before next December the struggle for the Republican nomination,»and the Presidential election must be faced. He will not wish to present the nation with a large deficit or tax increases in those circumstances.

The problem of a deficit is not of sudden incidence in the United States. The financial year 1929-30 closed with a substantial surplus, though it was not so large as had been forecasted. Quoting the amount; in the more familiar terms of sterling instead of dollars, it was £37,000,000 in round figures. In December, 1929, the President presented estimates for 1930-31, which forecasted a surplus of about £22,000,000. This was expected to be decreased to about £9,000,000 in consequence of certain tax concessions recommended by the Budget, but not allowed for in the accounts. However, by December last, Mr. Hoover reported that other and important factors had entered. Owing largely, he said, to general depression, revenue had fallen ho much, and expenditure had been increased for unemployment relief to such an extent that, in place of the surplus, he anticipated a deficit of almost the figure of the preceding year's surplus. As the year wore on, estimates of the looming deficit were increased. In May, summoning certain of his colleagues and departmental officers, the President launched an "economy drive" in the endeavour to reduce the size of the adverse balance. At that time a deficit so huge as £300,000,000 was mentioned as being possible. Mr. Hoover later said it would be between £180,000,000 and £190,000,000. When the official figures appeared in July, they showed that 1930-31 closed with an adverse balance a little short of £181,000,000. The revenue- had fallen by £172,000,000 compared with the previous year, while the expenditure was up by more than £45,000,000. The increased outgoings were stated by the Treasury to have been incurred principally on account of the needs of war veterans and farmers, and for public works, an accelerated programme having laeen instituted to provide employment. For the year which has aroused his anxiety so early in its course, Mr. Hoover produced what was immediately described as the largest peace-time Budget in the history of the nation. The actual expenditure was estimated at some £953,000,000, but deducting the anticipated postal revenue left just under £800,000,000 to be provided for by the Treasury. This was some £42,000,000 more than had been asked for in the previous Budget. In making his statement to Congress, the President emphasised the need for economy, declaring that with its exercise the Budget could be balanced and the national finances kept sound. He estimated a modest surplus of £6,000,000 next July. .Now he seems tc fear that his calculations will be badly astray. Therefore, he seeks further economies. The difficulties of the position seem to be accentuated . by the long-distance estimating required by the introduction of the Budget almost eight months before the financial year opens. That is inherent? in the system pursued. The personal difficulties of the President will be increased by the fact that Congress is largely hostile to his party, its members will be as conscious as he of the election looming in the future, and they will not be anxious to see him reap too much credit for restoring the national finances. Congress, too, has a power of originating appropriation measures not asked for by the Executive th%t does not *exist under the. British system. Mr. Hoover will struggle to avoid increased taxation, but the economies he will recommend may prove little more popular. Any decrease in the provision for farm relief will certainly Ibe vigorously resisted by all rural members of Congress 5 in both Houses, Under the American system the President stands peculiarly alone in his responsibility for the national finances. In present circumstances Mr. Hoover's difficulties regarding the deficit he fears are likely to be increased by this state of isolation, in, which he must struggle with the problems involved.