THE UNITED STATES BUDGET.

New Zealand Herald, Volume LXVIII, Issue 21029, 13 November 1931, Page 8

THE UNITED STATES BUDGET.

The. prospect of a huge deficit in (he United States Budget has been evident for some time and discussion of the subject has been devoted to speculation regarding (lie amount, and controversy regarding the, propriety of supplying the deficiency by additional borrowing instead of immediately increasing taxation. The estimate by a convention of bankers, reported to-day, that the deficit will be £400,000,000 appears extravagant, for it is equivalent to just half the total appropriations proposed i'j President Hoover's Budget presented to Congress last December, in which he, forecast a small surplus. However, similar figures have been proposed by other commentators. They do not necessarily mean that revenue will be only half the, estimates. It has already shown a rapid shrinkage, but the position has been aggravated by expansion of the programme of expenditure, in spite of the presidential warning against further commitments. In 1918-10 the American Budget closed with a deficit, During the succeeding decade, the Government was able to make successive reductions in taxation and still have an annual surplus that was automatically applied to redemption of debt. But since 1027 there has been a constantly increasing total of expenditure, and the collapse of the "new era" of prosperity in 1920 undermined the Budget, of 1930-31, with the result; that a, deficit of about £180,000,000 was disclosed. The new financial

year has been marked by ft continued rise in expenditure and a rapid fall in revenue. Although the national Government did not have authority to levy an income tax until 1913, it quickly developed the use of that instrument during the war, and in recent yearn more than half the national revenue has been drawn from incomes of corporations and individuals. In 1929-30 income taxes contributed 58 per cent, of the total receipts, customs duties 14 per cent, and other revenue 28 per cent. By the system of quarterly collections, taxes are paid a year after receipt of the income, so that receipts in the second half of the last financial year were based ori income during the early stages of the depression. Even then taxes paid by corporations declined by 38 per cent, and those hy individuals -ID per cent. The current Budget will receive' taxes on incomes derived during the second half of 1930 and the first half of this year —a period of restricted business, omission of dividends and other factors contributing to severe reduction of taxable incomes. Thus the United States'has to face the question that has perplexed so many other countries: whether drastic remedies will be adopted to balance the national Budget or the national credit be strained, by drawing upon shrunken national resources, to maintain a volume of expenditure that has been enormously inflated in recent years.