HJ2051.A596''" ""'""'•* '■"'"'^ V.1 *'!')' esses of the President of the United 3 1924 014 533 594 ADDRESSES OF THE PRESIDENT OF THE UNITED STATES AND THE DIRECTOR OF THE BUREAU OF THE BUDGET AT THE ELEVENTH REGULAR MEEJINa OF THE -, BUSINESS ORGANI^^ION 'dF U '• '';^' THE GOVERN* i AT 1 MEMORIAL CONTINEN^ALfHALL . ^ / JUNE 21, 1926 WASHINGTON GOVERNMENT PRINTING OFFICE 1926 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924014533594 ADDRESSES OF THE PRESIDENT OF THE UNITED STATES AND THE DIRECTOR OF THE BUREAU OF THE BUDGET AT THE ELEVENTH REGUI^:^ MEETING OF THE BUSINESS OkOANIZATION OF THE ;GQVERNMENT AT ,'";J' MEMORIAL eOIfTINENTAL HALL JUNE 21, 1926 WASHIMGTON GOVERNMENT PRINTING OFFICE 1926 ADDRESS OF THE PRESIDENT At the Budget meeting of the United States Government held at Washington June 21, 1926, at 8 o'clock p. m.. President Coolidge spdke as follows: MSfnbers of the Governmenfs Btisiness Organizdtion: The more these business meetings of the United States Govern- iheht increase in number the more I am impressed with their sur- passing importance. They are held for the purpose of discussing the financial affairs of one of the greatest business institutions in the world. Primarily, we consider the corporate welfare of the Federal Government, but that is not the ultimate object. ^ The real purpose for which we a,re assembled is to discuss plans and adopt policies which will affect in thieir actual daily life the welfare, prog- ress, and prosperity of 11T,000,000 people. What we do here reaches into every home in the l^nd. It determines whether the taxgatherer is going to require more money from the head of the household to meet the cost of maintaining the Grovernment, or whether the taxgatherer is ^oiing to leave more money with the head of the household to meet the cost of maintaining the family. Our efforts here are translated into benefits for the head of the household and his family. This does not mean that the Government should refuse to make outlays which are for the development of the country and the benefit of the people, but taking all these elements into considera- tion, it does mean a strict adherence to the principle of constructive economy. It is not, then, for the purpose of discontinuing any of those public functions which are really for the benefit of the people that we have been working under a budget system for the past five years. It is rather to secure a wiser use of our national resources and a more satisfactory result at less cost. More work and better work for a smaller outlay of the money of the taxpayer is the real test of a progressive administration. In the pisrfprmance of your daily work you are naturally con- cerned with the immediate task which confronts you. You know the immediate result of your labor. You may not know its effect on the operations of the entire Federal Government. But it is the sum total of these daily tasks that measures our public efficiency. 103717 — 26 1 (1)' No task is so small that the effort of its performer loses its influence on the product of the whole. Individual effort brings collective results. The effort has been to improve the public service by elimination of waste and lost motion and by^coiistrujCjtiye pon^pryatiqn, of our re- sources. The effbrt has not been 'to 'reduce the 6xpbnses of the Gov- ernment at the expense of the public_ welfare. It has been to reduce expenses for the benefit of the public welfare. It has been an effort fijir bonstructive economy. So long ds the Governihefat remains tfiis w^k'will riot end. " That you nlay lAoW the' result df youf collective effort it has been our custom to hold these meetings twice each yektt It was Ifut nine years ago t|iat the Federal Government was obliged, to draft not oi^ly ^the persons .but the property of ,the people to laeet the reqiiiremients of the World War. It, was less than eight year^. ago that this Nation faced the host of problems arising from_ military . deitnbbilization of persons and indus^ryr The intervening per^o^ hja^l been one of. restoration and rehabilitation, It is to these ends th,at > ojir effpi^ts have been dii;ected. , Much, h^ been accomplished, but; mtich remains to be accomlplished. ,The orderly management of our afeirs is' a perpetual test of our ability. Tou have demonstrate!^, wh^t can be, done, and I am confifient will continue unabated the etfort for even greater accomplishihjent. i We can. not anticipate further fippreciabie r^dijctipn in tlje total ahpual expenditure for the business of the, Governmpln^. Qui^ ^fl-^- ciiance comes iii.debt reduction. It was estimated iin tbe last Bjid- get that we would spend this year $89,000,000 more ;fjiap we spent' last year. , That estimate, as shown ty .the. returns to (^ate, wiljl proy^; to be stlbstantially correct. But this effort po. perfect : our gover^r nijental business, to round put the accomplishment pf the t^gk op, wHich' such a notable beginnin,g has been; inade, offers ijnlimited opportunity for econoniical admini.stration. Your best efforts and the continued support and cooperation of Congress wilt be required to hold pur expenditures for Govermnept buginpss at approximately tfieir present level. We are not striving to save the dollar simply to save it. We are npf striving to sa-^^e the dollar at tlie expense of the public service^; Sather dp we approach it from the other side and save the dollar for the good that it will bring to the people -jvhom we serve. We can make the dollar purch&,se more by purchasing mpre^ wisely. We can eventually save money by a jiistified expenditure to-day which will reduce future annual unprpdnptive, expenditures. Tbls is construc- tive economy. Congress has most wisely provid,e4; a program of con-; structive economy in the two public building laws, one fpr dpmestic, . use and one for our foreign legations.. These me^isures will eliminate annual cost for rentals wbicb bring us no future returns. '*'''The receht a'ct prbvidirig' for coiistructidn at military posts 'aii|i stations is also a measure of consfeiiitivfe feconbiny. ' The fimdirig'bf ; As a natural sequence to the law adjusj;ing the compensation pf civilian officers , and employees of the Government the Congress hip recently enacted a law adjji§ting their trayel allowances. This law provides adequate rates of reimbursement for expenses ' of travel. It does justice to both the traveler and the Government. The new law takes effect July 1, 1926. I wish, to direct your attention par- ticularly to the provision that any increases deemed necessary to be made in tlie rates of actua! expenses or per diem allowance undey the authority of the new law shall not be authorized by the heads of departments and establishments to the extent of incurring a deficiency in appropriations during the :^scal year 1927. At this eleventh naeeting of tbe busi;ie§s organizatipn of the Gov- ernment, it is proper to recoun,t briefly tbe accpuiplishments o:!^ th^se last five years in which your efforts have played such a material part. It is for this purpose and to define plans for the immediate future that we hold these conferences. On June 30, 1921, the public debt amounted to $23,977,000,000, carrying an annual interest charge of $1,018,000,000. At the close of this year the debt will stand at approximately $19,680,000,OOg, with an interest charge of $806,000,000. This shows since 1921 a reduction of nearly four and one-quarter billions of dollars in tlie principal of the debt and nearly $212,000,000 in annual interest. Our expenditure, which for the fiscal year 1921 amounted to $5,538j- 000,000, will approximate for the current year $3,620,000,000, a re- duction of nearly two billions of dollars. Taxation has been re- duced from $54.14 per capita to $27.28. This does not take into consideration the revenue act of last March. While these figures speak for themselves their real import lies in the influence which these reductions have had on the welfare aii'd prosperity of the people. This influence goes far beyond the material reductions I have mentioned. It reaches into every phase of the daily lives of the people. There are more of the necessaries, con- veniences, and luxuries in the homes of the people, in the city and W the open country, because the Government has let the people have more of the money they earn for themselves instead of taking sp much from them in taxes. Since the commencement of the fiscal year 1921 there have been three substantial reductions in taxes. The benefit of this joint executive and legislative effort to reduce Federal expenditure has therefore gone directly to the people. At our meeting one year ago it was my privilege to state that the financial condition of the Government war- ranted further tax reduction. That forecast has been realized in the revenue act of 1926. The large tax receipts of March 15 last show clearly that the country' anticipated a reduction in tax rates. Indi- viduals who had undistributed profits in securities and investment^ took their profit under the expected reduction of the surtax rate. 'Ji was this same anticipation of tax reduction that prompted invest- ment in productive business of capital which would otherwise have gone into tax-exempt securities. The great increase in revenue was due in large measure to the unusual prosperity in the year 1925, but the confident expectation of a reduction in rates was an important factor in this revenue increase. The 1926 act relieved some 2,000,000 people from paying any direct t^x and reduced the tax burden of all other taxpayers. Gen- eral prosperity is the aggregate of the individual prosperity of our citizens. To permit the people to retain more of their own earnings is to increase their savings and purchasing capacity, which assures pros- perity. In 1921 the income tax of a married person with no depend- ents and a tptal net income of $3jp00 from salary was $60; in 1928 it was $7,50; in 1926 it is nothing* ;For a single person with an income of $3,000 from salary in 1921 the income tax was $120; in 1923 it was $22.50; while in 1926 it is only $16.88. Miscellaneous war taxes were also materially reduced. These taxes were levied under more than 50 categories, which are now reduced to five. This removes in large measure the so-called iiuisance taxes which have been found so irritating to everyone. The revenue from these taxes is reduced by about $275,000,000, and there, are no, com- pensating 'increa,^s as in the case pf the income and -profits, taxes, Incdrporated, business' has been benefited directly as well as indi- rectly by the repeal of that tax based upon the value of the capital stock of the corporation. Many concerns with not one dollar of profit were obliged to pay a large tax. This was unfair, as the ability of a corporation to pay depends upon its profits. Fully 40 per cent of the corporations making income-tax returns have iio profits or taxable incomes, but under the old law they were obliged to pay. What the complete result of the 1926 tax law wiU be is still a matter of estimate. The correctness of the theory that reduction of tax rates economically applied will stimulate business, and thereby increase taxable revenue, is being demonstrated. To what pgint further reduction may be carried can not be stated until the new tax law has had sufficient opportimity to becoxne fully effective, and experience has shown what revenue it will produce. The question is on the lips of many as to whether there is prospect of another tax reduction in the near future. I think the answer to •this question should be delayed until we know definitely the revenue- producing ability of the present reveniie act. The estimate to-day is that we will close the current fisca,l year with a surplus of about $390,000,000. This can jiot be safely considered as an indication of what revenue the present law will give. Our revenue this year from income and profits tax includes about $350,000,000 of back taxes, most of which accrued in years prior to 1920. We do not anticipate such accrual of back taxes in the future. Eather will they materially diminish and reach an estimated total of only about $100,000,000 in 1928. It would be unfortunate to raisq hopes of further tax relief until we are sure that the state of our finances justifies it. There is, no such surety to-day. Business was quick to anticipate the last tax reduction. It was justified in so doing. To raise such hopes at this time might be to encoui;age business to anticipate again, as it did in 1925, further tax reduction. This might have a detrimental effect upon the stabilization of the country under the preseiit tax law. You have ^ur k^jprdprfatioris' for 'the liexl; 'fiscal year. I have previously stated oiir" effort nriist be riot'to increase expenditures over what they will 'be for the current yfear. Eather do the latest estimates for next year indicaie that it may be possibfe to spend less than in 1926. The surVey which has been made of our require- ments rndicatfes the possibility of rfeachilig a minimum of $3,60&,- (1)0,000 in biir expenditures next jfear.' This will be o'ur objective. For the coming fiscstl year the estimates indicate that we will have a margin of $1:85,000,000 of revenues over expenditures if the lattel- do; tot exceed the flgute I hkve stated. A surplus of only $135,- ^6,000 ill a business involving an aniluai expenditure in excess of three and one-half billions of dollars is far from being a safe margin. ^his margin cduldr'be easily dissipated b^ a failiilg off of opr anticipated income. The revenue estiihate is necessarily based on the^^efeent prosperous condition of the country. Any change im- favorable to this condition would' be reflected in lessened income. But I look to you to see that the margin is not threatened by any increase in our estimated expenditures. Further expansion of the business of {jOverninent which would "add to our costs should awaii a better estimate of our future income. ' ' ' We are approaching the time for consideration of the estimates of appropriations for the fiscal year 1928. I have' expressed to the Director of the Bureau of the Budget the hope that these estimates can be kept within a limit of $3,200,000,000 exclusive of the Postal Service? and tax refunds. It may become im|)ferative before the Budget is finally completed substantially tb reduce that figure. This will depend entirely upon otir revenue oiitlook for 1928, con- cerning which we wiU have better information a few months hence. I say to you franldy that the outlook to-dd,y is not encouraging. We know our public debt and other fixed charges for that year. A preliminary but very exhaustive estimate of our other require- ments compared with an estimate of the expected revenue for that year indicates a surplus of only $20,000,000, which is negligible and may easily be converted into a deficit. This is the dark side of the picture, but it lends weight to the views I have previously expressed with regard to further tax reduction. It also emphasizes the need for the utmost care in the scrutiny of your 1928 requirements. If I have occasionally had to give warning as to the possibility of a deficit, it has served to our advantage. When we face the future too sanguine as to available funds, we court disaster if the prophecy be erroneous. We face no such disaster if we err on the other side and view with conservative eye our finatncial outlook. I have spoken to you often on the subject of personnel. Our salary and wage expenditure is the most costly single item of the Budget. While the Post Office Department has necessarily had to increase its perscMiiiel with its growth of business we have been decreasing personnel elsewhere. It is very easy to have too many people on the pay roll. Hhe redactions which have been made in personnel; show no detrimenta;l etfeot upofi our results. Rather has ii seemed to improv? the efficiency ©f the service. I am encouraged in the thought that we can have f urtheP reduction of personnel witJhout discharging a single person, by the simple device of not filMg all the vacancies that occur. This would not operate in the summary separation of anyone from the Federal service. Ge&erai Lord will outline to you a plan to carry this into effect, which has my approval. •'No doubt what has been accomplished by the Federal Goverimient has serfved as an inspiration to some local political units in reducing their governmental costs, but it is not disclosed by the aggregate for all of them. From 1921 to 1925 the Federal Government reduced expenditures more than two biilioris of dollars. The same period showed an increase of more than four billions of dollars in State, ebunty^ municipal, and other ' governnaental expenditures. In 1921 when the cost of all government iii this country was approximately nine and one-half billions of dollars. Federal expenditure constituted nearly 60 per cent of the total. I^ 1925 the cost of all government increased to more than eleven and a half billions, of which only 27 per cent is represented by Federal expenditure. The answer to this reduction of 33 per cent in the Federal share of all governmental costs is not that we are performing less service for the people or neglecting our physical plant. The real answer is that we have so far put our house in order as to decrease our demands upon the people and to give them more efficient govern- ment at less cost. The local governments, like the Federal Gov- ernment, have no moneys which they^ do not take from the people. To meet an increase of more than one billion dollars a year for four years in the expenditures by the States and their political subdivisions there must have been a corresponding increase in levies upon the people or in bonded indebtedness. There is cause for concern in this situation. It is fraught with grate consequences to the public Tvelf are. The Federal Government has decreased its costs by practicing- the homely virtue of thrift. This has not been an easy task. It has required cooperative effort and sacrifice in every direction. If the interests of the people de- manded this action on the part of the Federal Government, surely they would seem to demand similar action with regard to the increase in these other local governmental costs. This suggestion is not meant as a criticism of the officers of our local governments. It is rather a statement of fact. It shows how hiatd itds in these times to reduce the co^ts, taxes, and debts of gov- 103717—26 2 8 eminents. But it can be done if the people will cooperate. Unless th^y do, however, special interests will continue to overwhelm the legislative bodies for more expenses and more taxes. The limit is close at hand when further expansion in the costs of government will bring the danger of stagnation and financial depressdon. We are testing out in this country the. success of self-government. We require no property .qualification for voters. Students of his- tory have claimed that under such a system it has too often been found that democratic institjutionS tend . to confiscate property to such an extent that economic progress becomes impossibte. That has not been our experience, in part because the Constitution pro- tects us from legislation of that nature. But this is the test wMch America must meet, and meet constantly, and miless.it is met suc- cessfully the strength, prqgress, and prosperity of our country will cease. You will r^dily see, therefbre, the vast and far-reachii^ importance of your effOTts and cooperation in the ftolicy of con- structive ecqnomyi j - _ : I ; All of this effort would not be worth while unless it had an ulti- mate purpose, above and beyond the mere saving of money. We ought to use money as we use any other utility — ^to advance the wel- fare of the human race. Money ds not endowed with any sacred quality. Man was not made for money, but money was made for man. It has become absolutely necessary in these daysjof dense pop- ulation, and under an advancing system of cooperation by society, for what was once a purely private function to take on more and more the character, of a public function. It must, then, be carried on out of the public treasury. For that purpose money must be provided. Its expenditure is required. But we must have a wise expenditure, well balanced and within the means of the people, That is constructive economy. It does not partake of a mean and sordid nature ; it is not narrow and selfish, but rather broad, gener- ous, and ennobling, undertaking to deal justly with the whole situa- tion by raising such revenues as the people can fairly bear to meet such expenditures as are fairly required. The results are systems to provide transportation and communication, improved sanitation, public order, the administration of justice, necessary legislation, advancing educational facilities, and the development of the artistic and spiritual side of life. These provide an evenly balanced basis for the support of an enlightened civilization. The result is America. Into the making of that result and its continued success your patriotic service and devotion is a contributing factor of enormous importance. The office of Director of the Budget has been established in order to provide an advisory staff to the President, the Congress, and the various departments in their efforts to meet these requirements. 9 At its head is General Lord. The law has clothed him with some authority, but far greater authority is derived from the character of the man. His ability and integrity inspire confidence. He has laid out plans for constructive economy. When I say that his plans have not only been carried out but actually improved upon in the Congress under the leadership of Rep- resentative Madden and Senator Warren, I mean to extend very high praise to those two seasoned legislators. These three men are representative of the spirit which has made our budget system a success. In order that we may further profit by his counsel and encouragement, I present to you again the Director of the Bureau of the Budget, General Lord. ADDRESS OF GENERAL H. M. LORD, DIRECTOR OF THE BUREAU OF THE BUDGET Mk. PBESlDlilNT AND MbMBEES 6p THE BcTI^INESS. ORGANIZATION OF THE Government: Witihi June 30 next the present Director of the Bureau of the Budget completes four years at the head of what has been called by a Melribei' of Congress the " Bureau of Subtraction." I never qiiite taiew whether that appellation was intended as a coin- pliment or a criticism. If reduction of departmental estimates by $l,456,OdO,0OOy if elimination' of opposing and wasted effort in Fed- eral business operations to make way for effective team work, if substitution of thrift for extravagance, if replacing inefficiency with efficiency be subtraction! then the title is no misnomer. To carry out the President's policy it has been necessary to make drastic reductions of departmental estimates. This is an activity, even though we admit its necessity, that does not tend to inake friends for the Budget Director. He^ should be the most disliked man in Washington. He may yet be put in the position of the employer who was very unpopular with his employees. One day one of the men asked for the boss and was informed that he was home. " What's' the matter with him ? " he asked. " He's sick," was the reply. " I hope there's nothing trivial about^ it,'' responded the employee feelingly. The Director of tlie Budget has always tried to be fair and just. Never,, in making recommendation' to the Chief Executive,, does he act without conviction that the recommendation is warranted by the governing facts.. The,Se(iret£|ry of the Navy said not long ago that he was waiting opportunity to introduce the Budget Director to an audience so that he might inake application, to him, of the following story : Years Ago sin important naval activity in Washington had at its head an admiral of the flint and granite variety, whio delighted in denying requests of subordinates. Of a riioi-niiig when the admiral got squared away at his desk ahilbuncement \v existing tax rates, ,of $3,88d,7;i6,942. Pro^j^ble expenditure ,to,tal^d $3,Q18,^7^„i8Q. This gave an indicated surplus o^ ,$3P2,04:1,7§^. Cpngre§s ^as ,bysy revising ta^ rates dowinward. We were also jtl^reatened with mp.terial losses in revenue in iQtl^er directions. T,hpse factors made tiie situa- tion delightfully uncertain. lo meet whatevrer cpntjingency might arise we appealed to you as v^uajL. At l|he last b^siness meeting the President said : " The penalty for achievejcn^e^t is always a demand for even greater achievement." So in tha,t hour off ^uncertainty you were asked to reduce your ;1926 spending program by approximately ,$36,000,000, or 1 per cent of your program of expenditure. Our Two Per Cent Club of 1925 with its actual ?a^ing ,in excess of .$6|0,OOO,G0O was so ^uceessfpl that we o^g3^i2jad for 1)^26 a One Per Cent Club. The response from the service, from Jiere, thejre, and everywhere, was general apd eflthusja^tic, ,apd a idejjernfiinfid effort has been made and is being made fo jelfeet the required ^ per cent saving in the interest of ^a .balanced budget and a satisrfaqtory surplus. JJpJxaqtly how iWWih saving has -been lefl^cj^ed l^y this effoj^t, can not be determined at this tiine. I ani confident, hp^sfever, we won out as usual. . The latest estimate for 19^16 .indicates a surplns _of ,$390,OOQ,000 for the year. It carries in its geneijo.us tptaj(th|e ijesult of your loyal effort to ired^ce lexpepdituije. DEFICIT vs. STJRP^JJS For some months we were sorely and surely troubled about 1927. The first estinjiates after enactment of the new tax law showed a deficit. The President immediately applied the rule of " absolute necessity " to all estimates for 1927 expenditure. Calls for funds for projects and purposes that could not meet that test — " absolute neces- sity " — ^met one answer, and one answer only : " They shall not pass." And they didn't. Income tax returns, however, despite tax reduc- tion, continued so to grow, and showed so little regard for estimates, that the Treasury's dependable and resourceful estimators sat up and said : " How come ! " As months passed the financial prospect brightened. Fear of a deficit faded away before hope of a surplus. To-day we see possibility of a surplus of not less than $185,000^000 for 1927. Our hope is based on uninterrupted continuance of present pros- perous business conditions and on tigid and uncompromising adher- ence to the President's expenditure program. The former condition we can not control; the latter we can and must control. The Chief Executive, in his insistence upon a balanced budget and a surplus,. 15 has liiiaited experiditiares in' I92f to $3,600,pOO;6o6V incliiding tax re:£ui4 department w;ere relieved of such illegitimate 'c6htcri£'s as i)aper and envelopes, copies of old periodi- cals, soiled hand towels, i'agged sleeve ^protectors, obsolete Calendars, discarded vanity cases, disreputable rubbers, shabby relics of wbisk brooms, abandoned' pipes, battered dating stamps,' forgotten milk bottlfes, riisty,- dusty, musty mousetraps, and other* nondescript arti-' cleS, which if they had legitimate place were not occupying it. With tjiese rescued file .ca^fes* and the construction of cheap shelving our constructive ecbnomisli ill the Treasury Department satisfactorily answered that $35,1)00 call w'ith a $3,9Y4 expenditure. A constructive acconipiishm^nt by the Bureau of Foreign atnd Domestic Commerce ih the Department of Commerce is a saving of $15,000 by radical curtailment of free distribution of its" ptiblica-,' tions. For several j/ears you haive been urged io revise your mailing lists downward and to reduce your free issues to the smallest num- ber possible. We are spending too much of the taxpayer's money in helping fill the wastebaskets of the Nation. Government prints can always be bought at a nominal p^rice of the Superintendent ^of Documents. If people desiring public' documents do not need thfem enoiigh to pay the, ridiculously small amount charged, they should not have them. Curtailmejnt of your free lists will also help in- crease the amount which goes into the Treasury from sale of Gov- ernment publications. We received last year $487,922:63 from that' sour(;e. By reducipg your free list's /it will be possible to determine, w;hat. issues have sufficient merit to create a real demand. We can give away many things we can't sell. 20 The Richnlond, Va., postmaster, who is also custodian of the post- office 'buiMing; iiiaugarated a; little^ ecohbmy ' campaigli' of his own. He began with lighting — electric current. He succeeded in interest- ing his associates. By turning off lights when not needed and intro- ducing other light economies they reduced the cost of lighting in the post-office building from $6,435.35 in 1923 to $1,819.70 in 1925— a reduction of 71.7 per cent. These examples, a few from many, may be insignificant considered in the light of the Government's vast business. A vagrant straw, sport of the zephyrs, type of inconsequential insignificance, points the way the great winds blow. TEAMWORK TRIUMPHANT Teamwork in the Federal service is fait accompli, which is French for "We've got it," thanks to our brilliant Chief Coordinator, thanks to-his faithful- coordinating' agencies^pnd thanks to the cooperative attitude of service people. Evidences multiply of the growth of cooperation, and the development of healthy and helpful considera- tion of Government agencies for each other. Departments owning trucks loan them to the Post Office Department during the congested Christmas seasons. This friendly policy has already saved $282,859, Interdepartmental transfers of property for Government use have totaled $136,416,223. Area coordinators and Federal business associations, by their coordination of local activities, have effected economies amounting to $934,555. In the District of Columbia $63,759 has been con- served by coordination of motor transportation. Traffic coordina- tion throughout the service has yielded a grand saving total of $968,884. Lack of time only prevents an almost indefinite continu- ance of these concrete proofs that team work in 'the Federal service has arrived. This hoped-for and worked-for consummation is occasion for congratulation, jubilation, felicitation, exultation, grati- fication, celebration, and any and all other nouns expressive of unlimited satisfaction. SUPPORT BY CONGRESS While at these meetings, we necessarily speak of our own tasks and efforts, one glance at the accomplishments of these last five years will show the contribution; made by Congress to make such accoDjiplishments possible. The purse strings of the Government are controlled by Congress. It is for Congress to prescribe the things for which public moneys ^hall be spent and the manner of raising the funds required. If our task has been difficult— if it has required untiring effort and devotion — consider what has been the work of Congress. Without the support of Congress, without 21 the courageous and patriotic backing of the great legislators who fill key positions initSjOrfeanization and on itscoiiimitteefej-'the re- sults of the President's crusade' for constructive economy in the Government would have fallen far short of the great measure of success which has been attained. Mr. President : For five consecutive meetings of the business organi- zation of the Government the Director of the Bureau of the Budget has paid tribute to the courage, ability, and wisdom that have characterized your administration of the business operations of this great Government. With each recurring meeting that tribute has grown more fervid and more appreciative. It was never perfunc- tory. It has been always an honest expression of conviction, grow- ing out of personal contact with you, of intimate knowledge of your policies, and of the lofty and unselfish purpose that animated them. In these years of closest association, and I speak from the record,' I -havie ri^'ver'kftown a decision asflfecting the Budget; that was not based on what you honestly considered the welfare of the people. A great national organization has as its motto: "The welfare of the people is our first consideration." If that has not been your motto you nevertheless have exemplified it. To-day the Federal service reflects that thought, that high conception of duty, as never before. To you the credit. What you have accomplished in reducing Federal expenditure is proclaimed to the people in lower taxes and reduction of the national debt. The greater achievement, however, is the revolution in the attitude of Federal officials and Federal employees toward the Government. To them to-day as never before the national Government is a virile, splendid creation in which they have honorable place, and which has first lien on their time, phy- sique, intelligence, and loyalty. j Service for the Government has supplanted service for depart- ment and bureau through realization that the best service for department and bureau is service for the Government. The achieve- ments of to-day are important, but the spirit of serving and saving tha.t permeates the entire Government establishment is of greater importance. Growing constantly in intensity and volume, it has come to stay, and will continue to prove, throughout the years, a great and enduring asset to the Nation. This is your achievement. Had your administration nothing more to its credit, this willing commitment of the great Federal army of workers to a policy of loyal, saving service would give it place of honor among noteworthy administrations. I can not close without a personal word. No one ever followed a more considerate leader. My shortcomings you have generously con- ^2 tjpneci. My attempts, tp serve, you haye , J?eeji plje^sed to commend. My admiration for you carries ■y^ith jt a la^ge 'n^easure of'affectiqn, , jMr. President: A new, y^ar cjojvqS P'^t^® heels of its predecessor, I^s problems, \Yhatever they may be, its victpries, inany and glorious we hope, we can not foreknow, but under your leadership, with the np^Ty spirit pf service, we go forwardj the welfare ,of the people, our 4j;^t and our only consideration. ADDRESSES OF THE PRESIDENT OF THE UNITED STATES AND THE DIRECTOR OF THE BUREAU OF THE BUDGET AT THE THIRTEENTH REGULAR MEETING OF THE BUSINESS ORGANIZATION OF THE GOVERNMENT AT MEMORIAL CONTINENTAL HALL JUNE 10, 1927 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON 1927 ADDRESS OF THE PRESIDENT At the Budget hieetihg of the United States Government held in Washington, June 10, 1927, at 8 o'clock p. m., President Coolidge spoke as follows: , Members of the Government's Business Organization : We have been writing a new page in the history of governments these last six years. No less urgent than had been the call to arms was the call for relief from the gigantic burden which the World War imposed upon the people. They had made their sacrifices to en- able the Federal Government to meet the great emergency. It was for that Government to take the lead in the effort to restore their financial and economic structure. This task it willingly assumed. The plan to accomplish it, the Budget system, was prepared by the Congress. That act gave the Chief Jlxecutive the opportunity of assuming his full responsibility as the head of the business organiza- tion of the Government. It pledged the support of the Congress to Budget principles of operation. That pledge has been faithfully kept. It is only necessary to point to our prosperity to show the influence which better business in government has had on the welfare of the people. The progress achieved by this coordinated effort of the executive and legislative branches of this Government is beyond all expectation. If we hold the ground we h'ave gained, and we must hold it, success will be complete. This will be just as difficult as the task of reaching our present milestone. Elimination of nonessentials and direct savings have about reached their limit. To hold our position will therefore require even more care and attention. It will be a perpetual challenge to the ability and resourcefulness of those in charge of the public expenditures. It is essential that we take periodic counsel together. For this purpose we gather in open meeting twice each year. These meetings were a new departure in the conduct of the business of nations. We have found them necessary to coordinated action. Here we meet on a common footing, with one objective — the welfare of the people. These meetings are therefore of national importance. It is here we report to the people on our stewa,rdship and plan our policies for future operations. A business without a policy is a poor business. (1) We are conducting the greatest business in the world, and it is necessary that we have defined policies of operation. The achieve- ments of these last years can be attributed to the fact that we have adopted such policies. We have reconstructed our finances. We are rapidly rehabilitating our physical plant, AJl of this has been accomplished not alone because we have been more favored than other governments in the matter of income, but by soand scientific business management— by the practice of economy. ,, This has made possible the. material reductions in our tax rates. , 1)1; has enabled us to pay as we go and at the same time vastly reduce our public debt and interest charges. I do not hesitate to s&j .that one of the greatest saf egytards of this Nation, financially, socially, and morally, lies in constructive economy in government. It will do much to defeat attempts to undermine our traditions and disrupt, our institutions. Econolpiy does not mean thie neglect of essentials. Rathpr does it mean adequafte provision for them by the elimination of all waste. It gives the added protection \vhich comes from the means to meet a time of emergency. The Federal Government has set an example not alone to the other gov- ei'nments in this country but to other nations in the practice of economy. Extravagance may bring momentary pleasure and appar- ent benefit, but it creates a condition whicb is bound to affject the future adversely. In our operations we are building for more than the present. The foundation is being well laid with a support of the people in which we find encouragement to continue our efforts in their behalf. ■ ' At these meetings we have for consideration our operations for three fiscal years. First is the current year, fast drawing to a close. With less than three weeks remaining, we are pr'actic?illy assured of a surplus of about $599,000,000. Our expenditures will be less than • last year. We have not only held our position but have made an advance. There is cause for enormous satisfaction. I realize the tremendous contribution you of the Federal service have made toward bringing about such a successful' result. This meeting is the sixth milestone, marlting increasing progress.' Our main consideration to-night, however, is next year's business and planning for the year to follow — the fiscal year 1929. We are about to start a new year, for which ybu have your appro- priations. They Represent the people's money collected by the Con- gress to run the Government. It is your di^ty to see that these moneys are wisely spent. Those responsible for any waste of these moneys, those who by lax administration fall to conserve them, are failing in their duty. We are not operating for profit in the commercial sense of the Word, but we are operating for the' profit bf the people. The success of our operations is measured by the contentment, the pros- peri ty, the enlarged opportunity of the people. Because of this our responsibilities assume a higher and more sacred character. In carrying on the business for which you have your appropria- tions you are not directly concerned with Federal income. Your operations, however, have a direct influence on the subject of income. To the extent that you conserve your appropriations and wisely plan your operations we shall require less money from the people. This is no time to advocate expansion in expenditures. The normal growth of the Nation will require additional outlays, and our efforts should and must be to absorb these by more economical administra- tion. This means scientific business management, and it has been demonstrated that the Budget system makes this kind of manage- ment possible. To perfect our business organization and have it yield more and better service for each dollar spent must be our aim. The object back of all this is to take a minimum of the people's money cjonsistent with giving the service to which they are entitled. We have already made stupendous progress in this direction. The indications to-day are that our income for 1928 will be more than sufficient to cover our estimated expenditures. The forecast is that it will leave us with a substantial surplus estimated at aroimd $338^000,000, as against about $599,000,000 anticipated for this year.- The fact that this surplus of about $599,000,000 is in excess of the amount estimated in the Budget transmitted to the Congress December 6, 1926, might well, in the absence of explanation, lead to the belief that our revenues have greatly exceeded our expecta- tions. Such is not the case. The estimated aggregate receipts on account of customs and internal revenue as set forth in that Budget were $3,426,485,000. The latest estimates indicate that these receipts will be $3^442,000,000, an increase of but $15,515,000. In other words, in estimating revenues from a large variety of sources, amounting to almost three and one-half billion dollars, the Treasury, based on present estimates, erred by less than one-half of 1 per cent. The reasons for the gratifying size of the surplus must be sought else- where. On the side of receipts there is a moderate increase in credits from the sale of capital assets, such as railroad securities. On the other side, of the ledger ordinary expenditures will be ap- proximately $100,000,000 less than expected. This includes about $20,000,000 postponed to next year because of the failure of the second deficiency bill. The tax refunds will fall $25,000,000 short of the esti- mate, due to a change in the revenue law. Then, again, the fact that the French debt settlement has not been ratified has necessitated a revision of the amount chargeable under the head of debt retirement. As a guide to the future, this year's surplus is of doubtful value. It includes a number of extraordinary receipts that can not be counted on for more than a limited period. Back income taxes and the capital-stock- tax will yield- $287,000,600. Deducting from this $125,000,000 of. internal-revenue Befundsj leaves a net income of $A62,000,000 from a source which will rapidly grow smaller. Col- lections from farm-loan bonds and. other miscellaneous securities will make a nonrecurring item of $63,000,000. Railroad receipts which can not be looked to for any substantial amount after 1929 will account for $90,000,000. These items alone aggregate $315,000,000 of our 1927 surplus. We are sure of a sui-plus of $599,000/300 for this year, but the $338,000,000 for next year, 1928, is necessarily an estimate. But here it is important to point out that no leas than $133,000,0001 of our expected receipts for next year will be dbrived from the sale of capital assets. This resource is well-nigh exhausted. The proceeds thereof, because of their nonrecurring character^ can more appro- priately be devoted to debt rather than tax reduction. Moreover, in 1928, back-tax collections will continue to exceed refunds, adding to that year a revenue which we can not safely count upon for future years. In considering the possibility of tax reduction, we must keep in mind that our revenue laws can not be written from the standpoint of a single year, but must be expected to yield adequate revenue over a period of years. It is essential therefore to discount temporary suid nonrecurring items and to base the estimated revenue on those resources which can be looked upon as essentially permanent in character. We have no fear our present revenue laws will not produce ample income to carry on the business of the Government. But this does not justify an enlargement of our expenditure program. Rather does it dictate and demand that we make renewed effort to keep within our present expenditures. On^ thing is certain. Unless we succeed in holding expenditures at about their present level, hope of further tax reduction will be gone. In the face of each of the three reductions in taxes since the fiscal year 1921 we have continued to accumulate surpluses at the end of each year. We should not overlook, however, the great influence these surpluses have had in making tax reduction possible. Their application to the further reduction of the public debt has perma- nently reduced our interest charges. It has been an investment for the people of their own money. In the business of government, as in private business, the time to liquidate indebtedness is in the time of prosperity. The reduction of fixed charges serves a twofold purpose. It materially assists in maintaining prosperity and would be particularly helpful in adversity. '■ There could be no more striking illustratioii of the benefit accruing from this policy than is furnished by a comparison of the interest charges of the years 1927 and 1928. Due to debt reduction and the refunding operations conducted by the Treasury, interest payments next year will be $63,000,000 less than for the current year. This is a most remarkable showing. It is a permanent annual saving. The mere recital of the figures brings out more clearly than any words the great burden of interest charges. From April 6, 1917, to June 30, 1927, the Government will have paid the stupendous sum of $8,318,571,388 in interest alone. Another task now facing you is the preparation of your estimates for the fiscal year 1929. We are striving as always to pave the way for further reduction of debt and of taxes. This in itself necessi- tates unremitting effort to hold the level of our expenditure program. After a careful study of our probable financial condition in 1929, it is my desire that the estimates of appropriations for that year be held within a total of $3,300,000,000. This is exclusive of reduction of the debt, the Postal Service, and tax refunds. This maximum has not been fixed arbitrarily. It is the result of careful study of probable financial conditions in 1929. Fixed charges have been balanced against the best possible estimate of receipts. In establish- ing this maximum for estimates for 1929 I expect the Budget Direc- tor to limit the calls of the various departments within that amount. His task will be simplified by the full cooperation which he will have from you. ■ If you view it absolutely necessary to ask for more funds for cer- tain activities for 1929 than you have for the current year, every effort should be made to effect a corresponding saving in your other activities. I am sure your estimates for 1929 will indicate your con- tinued loyal support of the well-established and definitely understood policies we have been following. We have learned that constructive economy has not impaired efficient administration, but rather, has improved it. We have placed our house in order and have pledged ourselves to keep it in order. Each year has shown a marked improvement in the conduct of our business.' I know that your esti- mates for 1929 will show a continuation of this improvement. In connection with your plans for 1928, I reiterate the principle established during these Budget years, that the amount made avail- able by the Congress constitutes the maximum of expenditure and not the minimum'. You must divest your minds of thought of possible accessions to the amounts given and administer your activities with the purpose of effecting every proper saving. You must consider the grant of budgetary funds made by the Congress as final for the year for the purposes appropriated. Except to meet the requirements of new legislation the submission for executive consideration of estimates for additional funds should be restricted to cases of absolute urgency arising from conditions which could not have been anticipated in the annual Budget. In recent years actual deficits have been few, and ia most cases unpreventable. There feave l!>eeatt cases, however, -wheire administrators have so oWigated their- f lands in the first mojiths &f a year that unless Congress afforded relief necessary activities would have beeia stopped. I am deteraaiBed theare shaJl be an end to pro- eedures oi this sort. Good administrators will plan their operating campaigns to coaforHi with the aippropriations made by the Con- gress. There is no place in the Federal service for other than good adminisfcratoirsi. •'■ . ' The vast^- fertile, and productive reaches boirdering the Mississippi aad its tributaries have beesn sixbjeeted to great disaster. The loss of life and property is appalling. All that poesiMy can be don& to alleviate: distress; and sitiffering is being done. As it develops ttiat additianaJi funds are required for this pra-pt^e, I am confident thep will be pfffflivided. Control measures that were eoBsidered by all as aaaple to- full prateetion have proven inadequate. Such a disaster must never happen again. A srarvey is now being made to determine what is neede<£ That survey will be laid before the Congress. From a husine^ standpoint we must anticipate from this disaster a reduc- ticsi in our prospective revenue and an increase in our prospeefive expendituresv I am confident this will be an added incentive to effect savings elsewhere: • . > Before turning this meeting over to General Lord, I waKt you to Isjmw I appreciate what you have done. I am sure tlie people also realize aoid value your efforts. They are giving closer and closer attention to the operations of their Fedepal Government. Their in- terest is essential to its perpetuaticwa. They know what has been done and what is being done in their behalf. There must be no reslaxation of effort. Wiser from the lessons of the year just closing, we should, the more intelligently aittads the problems f aeingi; us the coming year and more scientifically appraise our needs for the year following. To do more work and better work with a siMallesr. outlay of the taxpayers' money is the supreme test of successful administration. • I now turn this bnamess m.eeting over to the Direetoar of the Busreau of the Budget. If fidelity and ability, untiring" industry, and consistent purpose ever entitled any man to the considerate a,ppreciation of his fellow countrymen, such appreciatjOH is due to. General Lord. Because of his effective leadership, supported alike by the Congress and the administrative forces of the different depart' ments, the burdens of the people of this. Nation are markedly less, their prosperity is infinitely greater, their whole life is richer and more abimdant. He not only preaches the word, but he lives by the word. It is a. pleasure to Msten. to him and an honor to serve with him. General Lrf)rd. ADDRESS OF GEN. H. M. LORD, DIRECTOR OF THE BUREAU OF THE BUDGET Mr. President and Members of the Business Organization oP the Government : In preparing the first Budgets we were obsessed by fear of a deficit. The year 1921 yielded a surplus of only $86,723,771.61, while the outcome for 1922, a year of tax reduction, could not be forecast with any degree of accuracy. So you were urged to reduce your estimates, to cut down your expenditures, and to make sacrifices all along the line in the interest of a balanced budget, to prevent the possibility of that repugnant and distasteful thing, a national deficit. To that appeal you made loyal response. When, however, the year 1922 ended with a surplus of $313,801,651.10, and when 1923 sur- prised us with a surplus of $309,657,460.30, the appeal for sacri- fices in order to balance the Budget lost about 101 per cent of its force and effectiveness. It must have seemed to people in the service that we had been crying " Wolf ! wolf ! " when there was no wolf, not even a rabbit. The appeal, however, was made in good faith. Extraordinary transactions, in unusual and unheard of amounts, so confused the situation that no estimate was safe, and no one could guarantee a balanced budget. It was evident, however, that a new kind of appeal was necessary. We were still spending too much money. The fight for reduced outlay must go on. Careful study of Federal activities pointed to an objective — difficult but not impossible of attainment — to bring annual Federal expenditure, exclusive of debt reduction and postal expenses, down to or below $3,000,000,000. It meant a desperate fight, but not a hopeless one. In June, 1923, we inaugurated the three-billion-dollar campaign in the inferest of progressive national retrenchment. In 1923 the expenditure figures totaled $3,294,627,529.16— $294,000,000 above our self-imposed limit. We were out to get that $294,000,000, and at the same time be prepared to meet and absorb additional burdens of millions and hundreds of millions resulting from new legislation and from other causes outside of administrative control. • Beginning with 1920 there had been reductions in expenditure, many of them in large amounts, made possible in large measure by discontinuance of war activities. When this hew campaign began, 49681°— 27 2 (7) 8 Federal business had settled down to a degree that rendered further material reduction a matter of careful scrutiny, calling for a very high standard of administration and real sacrifice and courage. At the end of 1924 — first year of the new campaign — we found an expenditure of $3,048,677,965.34, a reduction of $245,949,563.82 below the preceding year. This saving was reflected in what was at tliat time a record-breaking surplus of $505,366,986.31. This 1924 expend- iture was $2,067,249,723.96 less than we took from the Treasury in 1921. The year 1921 is used for comparison because it was the last year free from Budget control and was a year marked by two differ- ing political administrations. In 1925 we had an apparent setback, expenditures running up to $3,063,105,332.26 — an increase of $14,427,366.92 over 1924. In spite of that we provided a surplus of $250,505,238.33, and that following another reduction in tax rates, wliich wasn't so bad. And 1926 was another year of grievous disr appointment, rewarding our desperate efforts at retrenchment with an expenditure of $3,097,611,822.81, or $48,933,857.47 over and above what we spent in 1924 — at that time our low-water mark of expendi- ture. Were we discouraged ? Were we disposed to abandon the fight and acknowledge humiliating defeat? At that time and whenever since I have recalled the dishearten- ing results of those two hard-fought years, there has flashed through my mind the story of a famous fight between a Scotchman and an Irishman. They were to fight until one of the two indicated he had had enough by saying " sufficient ! " Eight royally they fought — backward and forward — ^up and down — in and out — blow upon blow — fistwork and footwork — ^f or 5 minutes, 10 minutes, 15 minutes, 20 minutes, 25 minutes, and then the Scotchman faintly but distinctly gasped " sufficient ! " Said the Irishman, " I have been thrying for the lasht tin minutes to think of that blamed word." In our $3,000,000,000 contest we had fought gloriously, groggy at times, and at times perplexed, worried, and wearied, but we never could think of the word " sufficient," so we carried on the fight into 1927 — the current year. In 1925 and 1926 we spent more than was expended in 1924. It is absurd, however, to point to these increases in annual expenditures as indicating that claims for economies in the Federal service are not justified. I seem in my illustrations to be drawn inevitably to the period of my rather uneventful youth. One day a party of boys, including the speaker,, embarked in a small boat on a fishing trip off the coast of Maine. A heavy wind stirred up such a rough and choppy sea that the speaker, the youngisst of the crowd, was ordered to bail out the boat while the rest of the crew desperately bent to the oars trying to make harbor, before the wind, which was increasingi p < a. UI a. o 8 tH 1 « O f, •H n ? -d (U IH o m -p w JQ 0) h M u -o f (D tJ ■*2 c8 f) rt d ■H 0) 4= -a CO n (U v n !> 0) •H ti H M § -p fl rC! pi o Q o •H 1 ti Jlj f 1 ^ i J'T* r-H 9 « b iH 45 SI 5if •H rH s t^ ■H ft 1 9 » o tH « •A ca 03 W 1 s S) ■s P. o « -CJ I •H f-l •• ^ (D fi n rH •0 xa p • ■tf o « ^ h. ^5 o H »4 1 0) ^J . 4 o cS d _r%J ■♦" > •p 8 ■<< O M * 2 o pi ^ 1) Lad tor orlc tare i^ s o -p - H * ^' » -?;i 1 u •H £8 Pi • •H 5 M S (1) CD O •H ■¥> CU CD S t 53 tu ■p M ■H -p 03 -p ■s ■p 03 03 P o 03 pq CTl o 03 O P 03 03 > O Ci! 03 -P o PI o •H +■' c6 N c3 u o CO m 03 •H 01 pi o -P h 03 p •H • ra 03 •H • rd o 03 u o o en to a giale, reached its height. With a battered tin the bailing was prosecuted feverishly and diligently. It was impossible to keep the boat entirely clear of water, as each oncoming wave deposited a fre^ installment inside the gunwales of the craft, while several threat- ening leaks added to the difficulty and danger. The boys struggling at the oars, with their feet in the water, accused the almosft exhausted bailer of slacking on the job. He indignantly denied the accusation and showed conclusively that had he not kept busy with his bailing the boat would have filled and sunk. He was so exasperated at their lack of appreciation of his strenuous and successful efforts he almost wished it had filled and sunk. Waves of new expenditure as a result of new legislation, and con- tinued legitimate growth and development of Federal business have swept over the economy boat and threatened to sink it, biit steady, constant throwing over of waste and continual stopping of leaks have kept it afloat' notwithstanding accumulating expenditures at tiimes have gained slightly. And we are stiU baiding and plugging leaks. In 1925 additional new financial burdens were thrown on the exec- utive departments totaling $120i,D00,000, which we absorbed, some- way, somehow, with the exception of something less than $15,000,000. Additional demands for 1926 as against 1924 made the alarming total of $224j000,000 and tested our economy machinery to the breakr ing point, almost. We absorbed all but $49,000,000 of that great amount. In the face of these facts, readily ascertainable, it is difficult to account for statements that we are effecting no economies. Such statements are made, and presumably made in all sincerity. The man whose attention was called to an enormous stuffed tarpon in a glass case was doubtless sincere when he said : " The man who caught that fish is a prevaricator." The last estimate for the current year — made witliin a few days — promises a surplus of $598,974,254, to which you have made generous contribution with an expenditure brought down and held down to $2,9t5,235,050, which is $73,000,000. less than we spent in 1924^ and ^5,000,000 less than our $3,000,0p0,000 limit. This has been effected, not only by curtailment of expenditures, but by stubbornly holding the line and preventing increases. And this year we have had to provide additional millions for new needs arising from conditioBBi not susceptible of administrative control. After these years of struggle, after these weary months of sacrifice and striving, after weeks of deferred hope and doleful days of defeated aspirations, we have the coveted goal within reach, we haVe^ the prize fairly won. And copying the declaration of the young man whose pride of accomplishment was hot fetteted by rules of grammar, 10 we can proudly blazon in glowing words on the flaunting folds of our triumphant banner the inspiring legend "We seen our duty and done it." I can conceive no possible contingency that can rob us of our $3,000,000,000 victory this year, but we have been so often repulsed, so frequently disappointed of our expected and well-earned triumph that at this time we will content ourselves with just a feeble cheer, reserving the rockets, red fire, and Roman candles to the day when we can look back and say: "There it is! Look at it! They said we couldn't do it. We have done it." The failure of the second deficiency bill of lamented memory aided us to the extent of less than $20,000,000. We would have won had that bill bepome law. SAVING OF PERSONNEL An important factor in this promised victory is the Two Per Cent Personnel Club which contributes a saving in excess of $18,000,000 to the inspiring result. With an average annual turnover of about 9 per cent of the personnel in the Federal executive civil service you were asked to make a saving of not less than 2 per cent by letting 2 per cent or more of these vacancies remain unfilled. Your response demonstrated the practicability of this device for reducing^ personnel costs, and furnished further evidence of your earnest desire to take advantage of every opportunity for economy. While the final record of this effective effort can not be given at this time, you can take pride in knowing that indicated savings are well in excess of $18,000,000, and that, with few exceptions, all the departments and establishments qualified for club membership. Shall this effective organization, with a record of $18,000,000 saved in one year, be disbanded ? Those in favor say "Aye 1 " ; opposed "No! " The "noes" have it and the Two Per Cent Personnel Club will continue its splendid work through the next fiscal year for a twofold purpose— to effect needed savings and to afford our ambi- tious administrators opportunity for real constructive administration. Those who won in 1927 will, of course, pridefully strive' to repeat their successes the coming year. Those who for various reasons failed to make the grade will have another chance, which I assume they dehiand, to redeem themselves in the year to come. PROMPT PAYMENTS AND DISCOUNTS Another helpful factor this year, and by no means a negligible one, has been the prompt settlement of our bills for supplies, with result- ing discount savings.! When we last discussed this subject a number of the Federal agenties had failed to join the prompt settlement and '11 discount procession. To-day nearly all the Federal estobl'ishments iLave enilisted. There ia a. very gratifying effort thi'oughotit the service ta pay bills promptly and win discounts. The first 10 montKs of. this year yielded discount earnings of $8'?G',8S7.Y0. At this rate the discounts for the year will ejceed $1,000,000, which is approxi- mately 1 per cent cf the amoimt spent in making direct purchases of s^tpplie&. Actual' discount savings of record from- the beginiiing of our discount drive up to and including April of this year total $#^98,473.99. This is a direct and substantial saving, but of greater value to the Government is the indirect benefit not determinable in dollars and cents resulting from prompt payment of our bills. We are wiping out the reputation for slow payment honestly earned through the jenrs. THE DISAPPEARING OEBT <'ir :i-- ;■ ■ _ ■ ■ ■ - y ■ ,;Ponyin,cing and unanswerable proof of the; steady advance w« are making along the highway of efficient operation,, wise adminis- tration, and watchful conservation of the Qoveinment's' resources is found in the progressive apd striking reduction of the public -ddat. Our national debt touched the clouds August 31, 19^19, wheai. it reached up to what to you should be familiar figures — $26,596,701,- 648.01. December 31, last, you will remember, it had trained down to $19,074,666,337.35— a decrease in seven years of $7,522,036,310.66. June 30, next, it will be down to about $18,600,009,000, a reduction of $8,000,000,000 approximately in a little less than eight years — an achievement too wonderful 'for words. ' THE APPROACHING YEAR The, coming year promispS another real ai^d worth-while fight jia ■whjch the T/ord "sufficient" wiU play, no part. The operating agencies think to-day they will spend next year $3,020,000,000, which is ^45,000,000 in excess of our expected expenditure tliis year, and that is $46,000,000 too much. We nau^t put, the inspected and con- demned mark on that $45,000,000. Inis will mean a reduction, in. your estimates of approximately 1^ per cent. We need something to fight for, and that is just about big enough to furnish a reasonable amount of exercise for the brilliant administrative talent that so richly abounds in the Federal service. It can be done. It shoul^ be done. With your loyal cooperatipn it will be done. Done. . FORESTALLING TRQUBLE In addition to the Two Per Cent Personnel Club, which should help our 1&28 campaign tafce extent'Ol at least $18,000,000— for what we have done once we can surely do again — we have in the general 12 reserve an old and valued friend which came to our assistance in the first year of the Budget. It is simple, scientific, and successful. Administrators put aside at the beginning of the year a certain percentage of appropriated funds to meet contingencies that can not be foreseen. This wise policy has justified itself repeatedly, when in the hour of trouble, and with no helpful Congress available, emergencies have been met and great inconvenience and loss averted. The primary purpose of the general reserve is to provide funds for such emergencies, while saving is a secondary consideration. If the emergency does not arise the money will be saved. This secondary consideration, however, yielded a saving of $291,411,533.98 in the five years ending with June 30, 1926. The balance in the reserve for the current year is $52,318,135.67, of which we will save the larger part. The general reserve savings for the six -years ending June 30, next, will be in excess of $320,000,000. Executives who fail to set up proper reserves, and then in time of trouble submit estimates for additional funds to meet alleged emergencies, are liable to face the story of Eufus and Narcissa. " Eufus, whut does I git on my birfday ? " " Shet yo' eyes, honey." « Dey's shet." " Whut does yo' see, honey ? " " I sees nothin'." " Dat's whut youse gwine to git." ANOTHER CLUB We have 546,000 people on the Government's active pay roll. I wonder how many of these, or how many of you gathered here, can look back on the year just closing and point to a definite economy, a concrete saving, a constructive thing performed during that period in the Government's interest, in addition to or outside the regular routine service which we may assume has been rendered. A speaker was lecturing on forestry. " I don't suppose," said he, " that a single person here has ever done anything to conserve our valuable timber." A moment of silence, and then a meek-looking little man in the rear of the hall arose and said: "I once shot a woodpecker." We need a woodpecker club in the interest of a 100 per cent commitment of the people in the service to a crusade foi; small savings — a sort of shrapnel attack on that $45,000,000 for which we will be gunning next year. The Budget Director herewith challenges the people in Federal employ to solemnly pledge themselves to themselves to make some definite saving in the fiscal year 1928. It may be conservation of 13 Government time, it may be more economical use Ijf Federal supplies, it may be actual saving in money. It m'ay be big, it may be little, but, big or little, it will be voluntary and will constitute a free-will offering to our ecoftomy and efficiency campaign. In;the interest of those who may have no opportunity to do big things but who, like thei m_an who killed the woodpecker, are desirous of malting some sort of a showing, of making some sort of a contribution to the cause, the Loyal Order of Woodpeckers is hei-ewith inauglirated. It will embrace in its membership all those who definitely determine to do something more than perfunctorily to perform their usual and rou- tine duties. , An; average annual saving of . $1 on the part of the 546,0,00 actiye Federal employees will mean more than a half million dollars saved. Tho^e who enlist in this worthy cause will;fi,nd recog- nition in the satisfaction thati;conies Svo^ faithful,. honest effort, and can wear, in their own .qpnsqiousness the insignia of patriotic intent and the service medal of 4^ij,j well performed. All hail to the Loyal Order of Woodpeclcers, whose, persistent tap- ping away ?it waste, will; m^ke cheerful inusicin Government offices and workshops the coming year. No reports. will be required and only such records kept as .the agencies themselves think necessary or desirable. Thei only requirement , is that Federal executives see to it , that this patriotic opportunity be brought to . the attention of every person on the active Federal pay roll. It is requested, however, thiat if any department, establishment, bureau, offifce, or other organi- zation achieve a 100 per,, cent enrollment the Budget Director be notified. I am confident if these things be done, the humble wood- pecker will be given. place in history as symbol of a great national thrift crusade. PKEPARING THE SEVENTH Bt7DGET One year ago the President fixed the maxinium for 1928 estimates at $3,20,0,000,000. Tills was exclusive of debt reduction, tax refunds, and certain other excepted items. Estimates to Congress exceeded that amount by $56,000,000, due entirely to legislation enacted sub- sequent to determination of the limiting amount. Ttie maximum for 1929 is $3,300,000,000, a further increase due to later legislation affecting several of the larger departments. To the Budget Director is assigned the duty of fitting estimates within the controlling maximum established by the President. With your loyal and intelli- gent Cooperaition this can readily be done. Without your help it will be a difficult task. It will be done. ' ^ ' CtJKTAItlNG COafeESPOiSTDENCE Our Correspondence Club, inaugurated last January, is proceeding quietly but effectively. . As a result of the mere announcement of 14 the need and the proposed effort, helpful remedies were applied here and there throughout the service, in advance of specific recommenda- tions. These scattering efforts have already yielded encouraging results. The Federal Board on Simplified Office Procedure, one of our active and constructive coordinating agencies,, has the matter in hand, and will have something of value to report. I believe Govern- ment correspondence can be reduced 30 or more per cent without interference with necessary functions. WORKING TOGETHER Edward Everett Hale said : " Together — one of the most inspiring words in the English language. Coming together is a beginning; keeping together is progress ; working together is success." Here is the story of coordination in the Federal service. Getting the various agencies together,- keeping them together, and encouraging and assisting them in working together is the particular province of the chief coordinator and his capable assistants. Centering in the various coordinating agencies in Washington, reaching into the field' through the 7 area coordinators and the 238 active Federal business a,ssociations, the Government's unique coordinating organi- zation carries the gospel of helpful, friendly cooperation to all of the Nation's manifold and widespread activities. By means of this effective organization we are getting larger returns from Government supplies, money, and time. A new and remarkable esprit has de- veloped throughout the Federal organization. Helpful, brotherly cooperation has given adde^ value to Government resources, new zest to Federal operation, and has heightened the interest and increased the efficiency of our faithful workers. People unfamiliar with pre-Budget conditions can not comprehend the revolution that has taken place in the attitude of Federal per- sonnel and Federal agencies toward each other. While the speaker was visiting a Government agency in a distant city the official in charge was asked by the local postmaster for loan of Government trucks to meet an emergency, and thus obviate the expense of hiring transportation. Government trucks were idle, and were promptly made available — ^trucks controlled by one Federal agency doing service for another Federal agency. A prominent local business man^ who was present, was greatly impressed by this evidence of real cooperation, and asked how much money was saved thereby. When informed that the loaning of Government transportation to post- masters during the congested Christmas season alone had saved $465,000, and that this was but one of many cases of similar savings 15 due to cooperation, he said it was wonderful. Aiid yet, he did not know and could not understand that the wonderful thing about the traiMiSaetion wa& the initiative of one set of officials in applying to . officials of other departments for help. He did not Imow and could not ^understand that the r-eady compliance ^of these other officials in granting the aid requested was another and greater wonder. Hia could not possibly know and -he could not possably comprehend the revolution tliat has taken place in the Fiadefal service with regard to the cooperative utilization of Government resources, A colored preacher who reveled in polysyllabic words was asked by one of his flock the meaning of the word "phenomenon," which the pastor was using with great frequency and' evident relish. Said the preacher, "I takes pleasure in elucidating the meanin' of that useful word. If you sees growin' in the outskirts of our fair village a thistle bush laden with interestin' if not invitin' thistles, that's no phenomenon. You sees thistle bushes an,4 thistles almost too fre- quent. If you hears a mockin' bird floodin' the air with sweet song, that's no phenomenon. Mockin' birds is not uncommon.. If while listenin' to thgi song of the mockin' bird you sees a kangaroo hoppin' effectively if not graceful along the roadside, that's not in itself a phenomenon, There may be a circus, in town with a menagerie attached thereto. But, iiiy hearers, ,i|; you sees that kangaroo settin' on that thistle bush, singin' l;^:e a mockin' bird, that'g a phenomenon." . Tjhe confident caiU for help, the ready response, is the Federal rule to-day. This, my hearers, is the pl^encimenon.. ( .,[i MAKING EVERYTHING COUNT There has been no let-up, and no let-up is contemplated, in the effort to make everything count for true economy. Word comes, not only from department and bureau heads but from those holding more modest positions in the service, of earnest desire and honest endeavor to maintain a high state of efficiency and at the same time make a record for economy — efficiency and economy, the one impos- sible without the other. An employee of the Treasury Department; who has made a record for utilizing what theretofore had: been re- gairded as waste material, was recently asked by the Budget Director how his salvage work was progressing. ''Fine!" was the answer j "we're saving the dust off spiders' legs." For many years Govern- ment agencies and Government people have been accused of gross waste and extravagance. If that indictment were ever warranted, that day is forever past. Anepic could be written of the earnest and courageous efforts of Federal organizations and Federal personnel to 16 banish waste and inaugurate thrift. Some day I hope to write that epic. It will be replete with stirring and intriguing anecdotes of earnest effort, fertile resource, ingenious contrivance, careful plan- ning, and courageous, intelligent administration. It has called for hard work, self-denial, and sacrifice. As one official put it : " We've been obliged to scratch gravel." A religiously inclined young man -had a friend who had never attended church. He finally prevailed upon the friend to accompany him to the place of worship on a Sunday morning. As the beauti- ful service proceeded, the restful, mellow light smiling through the stained-glass windows, the rich harmonies of the sweet-toned organ, the fresh and appealing voices of the choir,' the inspiring words of the preacher, the subdued responses of the people, and the atmos- phere of devotion that characterized the service apparently made a great impression on the visitor. "What do you think of it?" asked the young man. Said the visitor, "It beats the devil." Said the other, " That's what it's intended for." If Budget policy has been responsible for close saving, has com- pelled utilization of accumulated material and Use of waste stuff, has so restricted available funds that resort must be had to all sorts of plans and devices to do the job, if Federal people have been obliged to scratch gravel, if they have been di-iven even to save the dust off spiders' legs, we are content. That's what it is intended for. Mr. President, in the Army we say a regiment is as good as its colonel. The most eloquent tribute I can pay you and your leader- ship is to point to this splendid organization which marches and fights under the honored title of the Federal service, and which in its various engagements in the interest of thrift and efficiency has been inspired and made effective by your wise policies and masterly direc- tion. With the signing of the armistice the war ended for those serving with the colors. For the Federal service the war continued. Vexatious questions and difficult situations called for solution. With the years came new and important and trying problems, but the fight continued, and to-day we can justly claim victory. The debt is going down, expenditures are held in check, the country's great interests are conserved, its important activities well administered, and peace and contentment prevail. But, as you have stated, this happy condition is no warrant for discontinuance of the war against waste, ho reason for relaxing our effort for better administration, no excuse for failure to preserve and hold what we have gained. We, in the Federal service, are still in the field — not with beat of drum, or volleying musketry, or rattle of machine gun, but battling loyally day by day, faithful and true to the day's modest tasks, to 17 the routine work that must be done — consecrated to the country's necessary service. Who loves his country will not rest Content with vow and pledge alone, But flies her banner in his breast And counts her destiny his own — Not only when the bugle plays Stands forth to give his life for her, But on the field of common days Is strong to live his life for her. He is not satisfied to claim As heritage, her power and fame. But striving, gains the right to wear The shining honor of her name. — Nancy Bjfrd Turner. ^ ADDRESSES OF THE PRESIDENT OF THE UNITED STATES AND THE DIRECTOR OF THE BUREAU OF THE BUDGET « AT THE FIFTEENTH REGULAR MEETING OF THE BUSINESS ORGANIZATION OF THE GOVERNMENT MEMORIAL CONTINENTAL HALL v.. s? June U, 1928^:^. ^-<^ UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON [928 "t'Tnar':'':,; , ' : ■; " " "'^'- ftrSBgg^gEF'r^ JS: ADDRESSES OF THE PRESIDENT OF THE UNITED STATES AND THE DIRECTOR OF THE BUREAU OF THE BUDGET FIFTEENTH REGULAR MEETING OF THE BUSINESS ORGANIZATION OF THE GOVERNMENT # AT i^^, MEMORIAL CONTINENTAL HALL June 11, 1928 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON 1928 ADDRESS OF THE PRESIDENT At the meeting of the business organization of the United States Government, in Washington, June 11, 1928, at 6.45 p. m.. President Coolidge spoke as follows : MemBEES of the GoyEENMENT'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 po^ible to place upon it altogether top 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 ^pport 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. The Government of the Uiiited States must always be sup- ported for its own sake. It. has been my endeavor, however, so to manage the national finances as to secure the greatest laenefit to the . people. I have rejoiced in keeping dpwil 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 ineant that the people not only have greater resources with which to provide themselves with food and clothing and shelter, bij,t also for the enjoyment of what was but lately considered the luxuries of the rich, We call these results prosperity. They . have coijie because the people , have been willing to do their duty. They have refrained from waste, they have shunned extrayagance. , They have paid their debts, they have improved their credit. If, out of all these efforts, the reward of pros- perity 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 Govern- ment 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 fujcnish it for themselves. Neither should it b^ supposed that prosperity is something! to b6;Wprshiped. 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 108194—28 1 (1) Nation may be just as good in time of adversity as in time of pros- perity. 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 sup- ports 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 Confess to bring appropriations within our resources, and a Comptroller General's Ofiice was established to bring expenditures within appropriations. It is seven years now since this plan went into effect. The results are far beyond anything which could have been foreseeh. 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 re- stricted. There were many cancellatiojis 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 unemployed while in transit irom one posi- tion 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^hird higher than in 1921. Iron and steel pro- duction 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 angfe 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 opera- tive, will reduce taxes by approxinaatelytwo 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 ha3 been freed of many hampering and uneconomic restrictions. In-i stead of a complicated and burdensome system of wartime 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 meas- ure to the lessening of the burden of Federal taxes. The reduction which has-been made in the national debt since July 1, 1921, has contributedfmuch to the ability of the Government to lessen taxes. That reduction at the end of this fiscal year will amount to approximately $6,327,000,000. The total debt will then be! $17,660,000,000. 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 thi^ 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, to- gether with refunding operations which converted securities bearing high rates of interest into securities having lower rates, represent a perpetual saving in interest of $274,000,000 per year. The tangible results of constructive economy in the business of government are clearly indicated by the reductions in taxes and public debt. We have been favored with a long-continued era of prosperity. Year after year the tide of good fortune has steadily risen. It seems not yet to have reached its flood.; Measures and policies that con- tribute to a continuance of good times should be encouraged. What- ever threatens to interfere therewith should be discouraged. Stu- dents of business trends, experts in economic conditions, view with alarm the continued advance in the cost of government. The cost of government in the United States, Federal, State, and municipal, in 1921, was $9,500,000,000. In 1925 it had increased to $11,124^- 000,000. During that period the National Government had reduced its expenditure by $2,000,000,000. In that period States, coimties, municipalities, and other taxing agencies increased their cost by $3,600,000,000. The year 1926, recorded another advance in cost to $11,607,000,000. This steady iPQi'ease in governmental cost on the part of the States and municipalities is a. menace to prosperity. It can not be ignored. It can not longer continue without, disaster. ' It wiU not correct itself. I can conceive no more dependable guar- anty of genuine prosperity than a nation-wide effort in behalf of less and wiser spending by State and local governments. Already the adverse effects of the great increase in such expendi- tures, with the corresponding rise in their taxes, are being felt. With much capital in the country, new investments are showing a tendency to be insufficient to furnish as good a market as we could wish for labor. While no serious unemployment exists, and the trend of wages is still advancing, if all the money that can be made in emplpying labor is going to be taken away in local taxes, old and established industries will attempt to struggle along, but new enterprise is not going to be undeitaken. About the worst enemy of the wage earner is Government extravagance. Another adverse tendency is for people to take their money and use it in speculation, which contributes nothing to the sum of our national wealth. In conducting the business of the Federal Goverjunent we must necessarily look to the welfare of the future as well as the require- ments of to-day. We are embarked upon a program of perfecting the physical plant of the Government. This involves a large outlay of funds and years for its completion. The means to accomphsh this have been derived from the policy of economy in the expenses of Government. I am not noyf concerqe4 ■fffith the current fiscal ye9.r which doses ■vjrithin a few Wfieks. We will Ijaye for that year a substantial surplus in excess. of $400,000,000. I am,, however, concerned with the outlppk for 1929, for which appropriations have been made, and with 1930, for which detailed estimates will be prepared within the next few months. ^ Taking into consideration the legislation enacted during the last session of the Congress, we find that for 1929 our receipts will be about $3,Y07,000,000 and our estimated expenditures $3,801,000,000. These estimates might seem to forecast a deficit. We must not have a deficit. I am acquainting you with what the estimates show so as to impress upon you the need for the utmost care in arranging your expenditure programs for the coming fiscal year. I am counting on the prosperity of business for an increase in receipts. I am counting on you for a reduction in the amount of your estimated expenditures. I' do not face the coming year with any thought that we will not balance the Budget. This Nation is committed irrevocably to balancing the Budget. Nothing short of a national emergency can trespass upon that com- mitment. We are facing a situation where the full utilization of the funds authorized by the Congress may exceed our estimated receipts. The duty is upon us to see that our outgo does not exceed our income. One of the main principles of a Budget is the estimat- ing of receipts and expenditures in advance of the period to which' they relate. The business of our Government is a real business and it must be conducted as such. It immediately affects 120,000,000 of people. If there is anything worth while, it is the welfare of these 120,000,000 of people. In less than six months the Budget for 1930 must be laid before the Congress. I intend that the estimate of appropriations Contained therein shall reflect expenditures -vvell within our estimated receipts. With th.s in view I have tentatively fixed upon $3,700,000,000 as the amount available for estimates for 1930. This figure covers tax refunds, permanent and indefinite appropriations, the postal deficit, and funds for extraordinary new projects, amoimting in all to $460,000,000, which were not included in the maximum for 1929. The amount contemplated in the 1930 restrictive figure for the ordi- nary routine operations of government is really less by $60,000,000 than the availability for these purposes in 1929. The necessity of keeping expenditures within receipts, the importance of continuing our pay-as-we-go policy, can not be overemphasi^ied. This primary limitation on ^timates is the first step toward the continuation of that policy in 1^30. It mea'ils that there will be no latitude for ex- pansion where expansion is iibt made compulsory by new law or by conditions that leave no choice. In preparing your preliininary esti- mates for 1930, which you will gtlbmit to the Budget Bureau by July 15 next, you must keep this in mind. Each succeeding year gives added evidence of the concern we have for the veterans of our various wars. There will be available for this purpose next year $743,000,000. • This is for the veterans of all wars. And this is not a gratuity. It has been earned. During my term of office the pensions of all wars have been increased. We take pride in our great resources, our unparalleled prosperity, our phenomenal growth, but we should take equal if not greater pride in the generous and just treatment accorded those who fought our battles. The annual rates of compensation of Federal personnel constitute an item which is not automatically; affected by prosperous conditions which have raised the wage scale in private industry. The fixing of these rates is controlled, as it should be, by the Congress. That duty, however, has not been disregarded. The classification act of 1923 and the application by law of its principles to the field service have done much to improve the Federal service. The arbitrary fixing of salary without specific regard to the particular kind of work being performed has been discatded. Compensation is now determined by the importance, difficulty, re- sponsibility, and value of the work performed. That is right. All employees have been benefited by the change in the manner of deter- mining compensation. The average compensation of these employees has been increased^ under the act from $1,674 to $1,886, an increase of $212, The cost of tliis increase for the 150,000 employees is nearly $32,000,000. The question of cost, however, has not been the con- trolling factor in fixing increased rates of pay. Proper compensation has been the objective. We are concerned with the efficiency of our personnel. We can not hope to have the desired degree of efficiency with inadequate compensation. The two are incompatible. In a going business con- cern the most important requisite to maintain efficiency is an ade- quately compensated personnel. That is a business asset. I am just as much in favor of adequate compensation as I am opposed to over- compensation. What we are seeking is justice to the employee and justice to the taxpayer. The right principle for fixing compensation has been established. Readjustments may be necessary from time to time to correct inequalities in the salary schedules, but these should not interrupt the present principle nor destroy the uniformity assured by that principle. Within the last month the Congress has enacted a measure which readjusts the salary schedules for certain classes of our employees. This readjustment will advance the average salary Jrom $1,886 to $2,072 per year. While the pecuniary benefits of this act apply to both the departmental and the field services, the Congress has wisely provided for a study of the salaries of positions in the field services as compared with the compensation of like positions in private busi- ness and for the submission of recommendation with respect to the proper compensation for such positions. Now that salaries have been increased, it is the duty of all supervising officers to see that they are earned. One of the most valid criticisms against the Gov- ernment service is its inefficiency, wherever it exists. Those persons on the pay roll who are not able to earn these high rates of salaries should be replaced by those who are more competent. While credit must be given to the Congress for general modera- tion in the making of appropriations, and especially to the great abilities of Senator Warren and the late Representative Madden, the Senate and House chairmen of those important appropriation committees, and to the various departments for their wise recom- mendations and careful expenditures, nevertheless, the Director of the Bureau of the Budget has a great restraining influence upon us all and is the originating agency of Government economy. General Lord has so conducted this important office as to gain the respect of the Government and the country. If he is ever tempted to feel that his efforts are not appreciated, I trust ho can find consolation in the reverence in which the memory of Representative Madden is universally held. General Lord will now address you, 108194° -28 2 ADDRESS OF GEN.H.M. LORD, DIRECTOR OF THE RUREAU OF THE RUDGET Me. President and Members of the Business Organization of the Government : November 11 next will mark the intervention of 10 full years since the nations of the world ended the struggle for physical mastery and entered upon the no less real and bitter fight for recovery from the devastating effects of war. The struggle for recovery in this coun- try — ^the fight for return to normal conditions of business — is a glorious record of patriotic effort, of wise administration, and reveals a faith in our Government and its ideals that is reassuring of the stability and soundness of the Republic. Figures are not in them- selves interesting, but nothing so eloquently and convincingly tells the wonderful story of our country's remarkable transformation from the destructive ways of war to the constructive pursuits of peace as the silent march of its expenditure and surplus figures across the pages of history. THE MARCH OF BILLIONS In 1917, the year of our entry into the World War, we spent $1,977,681,750.52, of which $885,000,000 were for foreign loans. And then how the expenditure climbed, as we threw the full weight of our resources of men and munitions into the conflict and marshaled the Nation's billions to make the world safe for democracy. In 1918, the first full year of war, expenditure jumped by $10,000,- 000,000, up to $12,697,836,705.62. The next year— 1919— we called out more of our reserves and made an offering to the cause of $18,522,894,705.03. That was the year we were paying for the war, settling our debts, and closing out our war contracts. The task was herculean, but we accomplished it. We raised the money, we paid the bills. BIG DEBT AND BIG DEFICIT In certain localities it is the custom to refer to the year of the big snow or the year of the great flood or to a year marked by some other unusual happening. I think our Treasury will always refer to 1919 as the year of the big debt and big deficit. We ended that year with a deficit of $13,370,637,568.60, while on August 31 of that year the public debt totaled $26,596,701,648.01. As these tremendous (9) 10 totals of deficit and debt, almost incomprehensible in their mag- nitude, parade their astounding figures before us we revert with interest and profit to the dark days following the American Revolu- tion when the infant Republic contemplated with dismay an ex- traordinary debt .of $§4,000,000. But the courageous, hopeful, fighting spirit that animsited the founding fathers was not lacking in 1919. In the attack on that colossal debt Congress fired the first gun with the cumulative sinking fund act, which said to the country and to the world : " No matter what happens^ no matter what the demand for expenditure, no matter what the need, each year we will make an increasing contribution to debt reduction." Since its enactment in 1919, up to and including 1927, that wise law has cut $2,074,080,950 from the debt. And out of the grim shadow of that crushing debt and discouraging deficit came a gleam of light with a surplus in 1920 of $212,475,197.67, which warranted relief to ^he people in the form of tax reduction. The year 1921 gave us a surplus of $86,723,771,61, and gave us the Budget system. From. August 31, 1919, date of its peak, to June 30, 1921,, the debt had been reduced by $2,619,251-,Q95.47. There still remained, however, when the Budget entered the field, a portentous balance of $24,000,000,000, demanding annual tribute in interest of $960,000,000. Sonje one remarked to Mr. Winston Churchill : , " You've got an immovable mass of debt." " I know," replied the Chancellor. " We've got to budget." That's what we had to do wi^th our great inert debt — we had to budget, and we budged it. ENTER THE BUDGET SYSTEM And thus we cpme by easy gradations to the Budget and the policy of constructive economy of which it was the forerunner. There is no. intention in this discussion of operations under Budget control to convey the thought that economy, was unknown in the Federal Government prior to the advent of the Budget system. Before thaf time no agency was existent, equipped, and available for carrying out a policy, of Federal retrenchment — to attack the problem of waste as a whole, and apply an effective remedy. When the Budget made its appearance in June, 1921, appropria- tions had all been made for 1922. The operating program care- fully prepared by Government' agencies contemplated an expendi- ture of $4,5,50,,000,pop7-7;an an^ount that must have made the Treas- ury weep.Treith apprehension..' The money was available. We had it. It could have been spent. Without interference it would have been spent. Enter the Pudget and the. budget idea — a principle almost as old as the eternal hills, but a revolutionary venture for , pur great Goveynment. That $4,550,000,000 was put through'a reducing process. It was poked and, piinclied and pushed about and 11 pared and pruned, and $755,000,000 squeezed out :of it. And the work of controlling Federal spending was on, We ended that year with a surplus of $313,801,661,10 in place of the deficit that would have been insured by that spending program of $4,550,000,000, The next year we nearly equaled that record with a net balance over expenditure of $309,657,460:^0. In ,1924 prior years were overshadowed with a surplus in excess of a half billion dollars— in. the interest of accuracy $505,366,986.31. Another, tax, reduction was rewarded with a surplus in 1925- of a quarter of a billion— again, in the interest of exactitude, $250,505,238,33. We, by this time, had acquired the habit of demonstrating surpluses so we ended 1926 with a generous surplus of $377,767,816.64, which was the prelude for another tax reduction. Last year, 1927, we fairly outdid ourselves with a surplus big enough to be given its full proportion of $635,809,921.70. Of this splendid total $612^754,539 was applied to the public debt, thereby saving in interest $24,QOQ,000 a year. While most of the war-involved nations are struggling with defi- cits, we have been favored for eight consecutive years with an :annual surplus. From 1920 to 1927 the surplus total amounted to $2,692,- 000,000. Of this $2,392,000,000' accrued during the I?udg§t period. June 30 next we expect this surplus total will reach $3,000,000,000. Without firm control of spending and unrcnaitting c^re and watch- fulness that fabulous saving would have been diverted from debt reduction and tax relief and . used for purposes not so urgent or important. DOWN WITH THE DEBT With the aid of these surpluses and balances .saved for the purpose, with the assistance of the sinking fund, supplemented by the bril- liant refunding operations of the Treasury, the, public debt June ,30 last was coaxed down to a total of $18,511,906,931.85. . , This meant a reduction in a little less than' eight. years of i $8,084,794,716.16— an average saving in excess of $l,Q0P,OO0iOOO a year. June,30 we" expect to see it down to $17,650,000,000. It has been said that not until the debt is down to $15,000,000,000 will it be of manageable propor- tions, so that it can be administered in a normal way, without resort to extraordinary measures. ,- , For the p§jSt several years we have had the objective of a $3,00u,- 000,000 annual expenditure exclusive of debt reduction. Last year we reached ttiat objective^ We bettered it by $25,000,000. It was a great fightland a notahle victory. But the winning of that fight did not end the war on waste, or cause a halt iii the struggle for greater efijciency. , We said: From compromise and things half doue Keep us, with stern and stubborn pride ; And when at last the fight is won, Keep us still unsatisfied. — Louis TJnternwyer (Alt.). 12 And so, " still unsatisfied," we made attempt to reduce expenditure for the current year to $3,000,000,000. This meant a reduction of $85,000,000 in the program of expenditure of January 1 last. Cut- ting out expenditures due to new laws and changed conditions, we find a prospective saving of— not $85,000,000 but $15,000,000. You should all be familiar with that ancient story of the boy, the apothecary, and the prescription. The apothecary compounded the prescription. He gave it to the boy. The charge was $1. The boy gave the apothecary a nickel. The nickel was all the money the boy had. The boy left the drug store. He took the prescription with him. The apothecary took the nickel. He looked wistfully after the boy. He then dropped the nickel in the till, remarking philo- sophically : " Well, I made 4 cents anyhow." We will save $15,000,000 anyhow. To be frank about it, that $15,000,000 is more than we had reason to expect under conditions that developed. A farmer was asked how his crops turned out, and he said: " Well, I didn't get quite so good a yield as I expected, but I didn't expect I would." We have been so favored with savings in large amounts that we find ourselves discussing rather apologetically a saving of only $16,000,000. A NEW OBJECTIVE It is with regretful resignation to the inevitable that admission is made of the improbability of again getting down to that $3,000,000,000 mark. And so I offer a new objective : " The national debt down to $15,000,000,000 in three years." It is an objective worthy of our best effort. Every dollar applied to the debt means permanent reduction iii expenditure, another step toward adequate tax relief, a coritHbutibh to national defense. And this, of course, means another long drive for economy — three years more of constructive effort, But it is fine exercise. You need it. You probably will liken me to the doctor to whom a man applied for advice as to his physical condition. The doctor gave him a careful examination and said : " Take more exercise ! Find something to do that will really test your muscles, something that requires real bodily effort. By the way, what do you do for a living? " " I'm a piano mover," said the man. "Move two pianos at a time, then," said the doctor. Whatever effort you have made along retrenchment lines just double it. Move two pianos. 13 FIGHT rOE A BALANCED BUDGET We are closing a busy year. We are facing a busier one. In view of what awaits us, people in the service who are not prepared for a fight should get in training immediately, for a fight is sure brew- ing in the interest of a balanced Budget. Those of you. who saw that great picture " Old Ironsides" will recall the freckled-faced water boy with a countenance like a cartoon who, in the very height of the conflict, with the dead and wounded covering the shattered deck, shouted exultingly to one of his mates : "Ain't fightin' fun ! " In the conflict for 1929 — ^the fight to keep outgo within income — ^I hope you may carry with you into the fray something of the fighting spirit of the water boy of " Old Ironsides." Fighting for the wel- fare of the taxpayer, for the credit of the Federal service, and to carry out the orders of our Commander in Chief should be fun. The reason for all this fighting talk is our latest estimates of receipts and expenditures for 1929 — ^just completed. It was origi- nally estimated we would have a comfortable surplus in 1929 of $252,540,283. That is the amount carried in the 1929 Budget. Then as the weeks and months raced by we saw that nice little surplus melt away like a belated icicle under the pitiless barrage of a summer's sun. To-day as a result of new laws increasing expendi- ture combined with a new tax law that reduces revenue we find in place of our prospective surplus a threatened deficit of $94,279,000. Are we disturbed at this radical change in the picture? Disturbed perhaps, but not discouraged. Down, but not out ! To the Federal service threat of a deficit is but a challenge, and we accept it. If I mistake not the purpose and policy of the Chief Executive, a deficit will not be tolerated. Expenditure will be kept inside reve- nue, no matter what the decrease in revenue may be. To, save pos- sible embarrassment you should wofk out your 1929 spending pro- gram carefully in advance. Provide first for the things that mus|t be done. Go slow with your obligations, so that if, as the year develops, the President finds it necessary to impound some of your funds in order to avert a deficit, it will not interfere with your priorities. Make no expenditure that can be avoided. The Bureau of the Budget receives complaints from taxpayer^ of unnecessary Federal buying. Investigation has shown most of these complaints to have no more foundation than the woman's criticism of her husband's purchases. It seems the husband, who was balancing the household budget, indulged in a little self-congratulation. Said he : "I don't believe I've made one extravagant expenditure, so far, dear." 'Eetorted the wife witheringly : "What about that fire extinguisher you bought six months ago ? We've never used it once ! " Exercise the most careful discrimination in your spending. If there is any doubt about an expenditure, kill it. The conditions we 14 must meet next year have been plainly set out. The administrator who, Imowing these conditions, sends a Federal dollar on a doubtful mission lacks something of the loyal fighting spirit for which we plead and which we will sorely need the coming year. CUTTING OUT TWO BILLIONS The President has referred to an historic two billions of dollars — the amount of reduction in national expenditure during the Budget season. In 1927, the last complete fiscal year, we spent $2,044,000^000 less than was expended in 1921, the last year free from Budget inter- ference. To adequately tell the story of that campaign would require a book, and a large one. The few . illustrations thait follow utterly fail to give a true picture of the successful efforts of service people to cut out needless expense and, make the taxpayer's dollar work overtime. Hundreds and thousands of contributions, big and little, make up that $2,000,000,000. Here is one of the little ones! The Bureau of Plant Industry, Agricultural Department, needed an electrical heating apparatus. It built one and saved $12. This is a fair type of many hundreds of constructive efforts that helped out on the grand total. A survey of the Government's telephone facilities by experts from the Bureau of Standards saves us $75,000 a year. Another small saving. But notice, please, it is a saving of $75,000 a year, and has been going on for seven years. TBANSFOKTATION COSTS EEDUCED Transporting people and things is a big annual expense;— approxi- mately $200,000,000 a year. We revolutionized our traffic methods, with a continuing annual saving in excess of $1,000,000. In connec- tion with Texas air activities the Quartermaster General of the Army recently effected switching agreements that will save $375,000 the first year,: He also saved $1,612,793 from, 1925 to 1927 in handling gasoline, fuel, lubricating oils, and helium. Every Christmas season Federal agenpies possessing trucks help Santa Glaus. Trucks are loaned the Post Office Department, with a saving to date of $574,111.81. • Please credit these sizable amounts to our $2,000,000,000 shrinkage. t - , COMMUNICATION SEKVICE ..-;£. In 1924 we established a Federal message center. Under this arrangement Government, agencies in Washington have their official messages sent free to any part of the world where the Army and Navy have radio stations. Last year it saved us $1,711,923.25, while the record for nine months promises a saving this year of $2,183^000. This latter saving will cover the expense of the new Federal building 15 proposed for Seattle. And this is one of the savings that goes on from year to year. Nearly $4,000,000 saved in two years by a simple piece of coordination! Here's another shaving whittled off that $2,000,000,000. DISCOUKT DEDUCTIONS The Budget organization found the Government as a whole bliss- fully oblivious of the value "of prompt settlement of its bills. Few Federal agencies had given consideration to the advantages derived from prompt settlement of obligations^advantages consisting not only of the saving of cash discounts, but in the better prices, better goods, and better service a prompt-paying customer gets. To-day the entire Federal organization is alive to the necessity of prompt payment. Discoimt is a very interesting subject. It is said of Mark Twain that' on one occa'sion he visited a bookshop'^ chose a book, and said to the yoimg man in charge : ' '-^ j ' "Now, as a publisher I am entitled 'to a discount' of 50 per cent, As an author I am also entitled to 50 per cent. As a friend of , the proprietor i should get' 25 per' cent. 'Now, what's the price of the book, and what do I have to pay for it? " The clerk did some rapid figuring, and handing over the book said : " I guess we owe you 75 cents. Here you are. I hope we may have your, further patronage."' We haven't fared quite as generously as that in our Government discount operations, but up, to and including June 30, 1927, our dis- count earnings totaled $4,507,907.44 So really it's worth the doing. PERSONNEL VACANCIES. DISCOUNTED . The Federal Two Per Cent Personnel Club is finishing its second profitable year. Last year by permitting vacancies to remain unfilled we saved $21,573,436. This- year the saving will AJiproximate $20,000,000. This popular organization will continue its money- saving career through 1929. ; SURPLUS PROPERTY We came out of the World War with an accumulation of war sup- plies valued at $4,000,000,000. Government warehouses were filled to the bursting point while large quantities found shelter in rented space. It was little short of. crime to go into the market and use the taxpayer's money for the purchase; of supplies of the same kind and quality that were rotting- in expensive rented storage;' That's what we were doing. The War Department had 47,000,000 yards of duck suit^-ble for makirig mail; sacks. The Post Ofl&ce Department was buying in the market duck' for mail sacks. The Post Office D^pa^tment had no m^ns of knowing of the War Department's supply, ^he War Department was notinfojittied of the Post Office 16 Department need. We brought the 'supply and the need together, and the Post Office Department saved $2,354,000. "With our splen- did coordinating service under the lead of the able Chief Coordina- tor we took the problem in hand. We coordinated chaos and suc- cessfully engineered the most stupendous selling effort in history. We sold goods to the value of $3,539,679,861.32, and saved for the Government $143,981,115.36. RESERVING AND PRESERVING MILLIONS With the first year of the Budget the policy was adopted of putting aside a reserve to meet unexpected needs. What was left after caring for emergencies was saved. June 30 next the balance in the general reserve will be in excess of $384,000,000 — saved — raither an important contribution to the $2,000,000,000 cut. I think it may be wise to stop right here in this listing of savings. I do not wish to make it seem too good, or I may find myself in the quandary of the man who took the civil-service examination and told an inquiring friend that his rating was 101 per cent. "How could that be?" was the natural query. "I answered one question they didn't ask," was the reply. A WIDE RANGE We started with $12 and ended with $384,000,000. This will give some idea of the character of the economy fight we have made and are making. The effective work 6f our great coordinating agencies, the profitable labors of our wide-awake Federal business associa- tions — ^267 in number — scattered all over our country, better business methods that are saving millions of dollars annually, the improved motale of the service, of inestimable value, and the development of teainwork, potent for efficiency — all these have been barely men- tioned in this discussion. They contributed the lion's share to the $2,000,000,000 reduction. CRITICIZING THE BUDGET Criticism seems the lot of the Budget Bureau. I suppose it is to be expected. Criticism will not hurt the bureau or its director. We are not infallible. We are thankful that others do not know our limitations as well as we know them., ^e may deserve criticism. I am sure, however, the Budget system has justified itself, and that the thinking, well-informed people of the country realize they are better off with it than they would be without it. Two Irishmen were Watching an airplane flying overhead. Said one : " I wouldn't like to be way up there wid that machine." Said the other : " I wouldn't like to be wlay up there widout it." I hope this stoi"y correctly typifies the attitude of the people of this country toward their Budget system. 17 OTJE SPLENDID SERVICE I am proud to belong to the Federal service, and I am sure I am voicing the opinion of all in its ranks. I would we could have its initials " F. S." copyrighted so we might pridefully wear them. They would properly stand for " Faithful service " and " Fighting service," as well as for "Federal service." It is a great thing to have part in the stately operations of the biggest and best business in the world. There is an attraction to and a satisfaction in the national service that nothing else quite possesses. And no matter how humble the role we play, it is not so much what we do, as how we do what we do. People in the Federal service should be given an honest day's pay for an honest day's work, and should have opportunity for advancement to the positions the quality of their service merits. Of all employers in the world the United States Government should be the last to fail to properly pay for service rendered and the last to fail to recognize diligence, loyalty, and ability. Assured of that recognition we can look for greater triumphs in the field of Federal efficiency, for we are workers all in the interest of our dear country, proud of the privilege of service, and alive to the dignity and joy of work. Mr. President, preparation for this meeting has been brightened by a sense of gratitude and of elation that I have been privileged to serve during these stirring days of national rehabilitation. It has been a great opportunity to labor under your farsighted leadership, with the loyal, faithful people in the service. Shoulder to shoulder we of the Federal service have fought to carry out the wise policies you have defined. There have been trials, but there have been com- pensations; there have been mistakes, but there has been real achieve- ment. I think we have all found joy in service. And I know these years of united effort have given us a more profound devotion to — OUK COUNTRY ■•'■ !■ Tried as by furnace-fires, and yet By God's grace only stronger made, In fiitnre tasks before thee set Tlauu sbalt not lack the old-time aid. The fathers sleep, but men remain As wise,, as true, and brave as they ; Why count the loss and not the gain? Thie best is that we haVe to-day.' Yet if, on daily scandals fed, We seem at times to doubt thy worth. We know thee still, when all is said. The best and dearest spot on earth. 18 Great without seeking to be great By fraud or conquest, rich in gold, But richer in the large estate Of virtue which thy children hold; With peace that comes of purity And strength to simple justice due, So runs our loyal dream of thee; God of our fathers! make it true. O Land of lands ! to thee we give Our prayers, our hopes, our service free ; For thee thy sons shall nobly live. And at thy need shall die for thee! —John Gi'ecnleaf Whiitier. o >--^:'^V