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HE pre-war level of expenditures will never again be reached by the United States Treasury. The Government was on a billion dollar basis in 1916. The Government spent about nineteen billions in 1919. The question now is whether "normalcy" will mean four billion dollars a year or a little more than two billion dollars.

By 1913 the American people had hardly recovered from the shock at the realization that the nation was a billion dollar concern. With a billion seeming large to them, they could not have sensed what was involved in the President's war-message statement that the nation would pledge all its resources. Our past was paltry in comparison with what we were soon to be called upon to do. Things moved so rapidly and massively, that the public did not have time to comprehend them. It was startling even to those who were conscious and observant. The War Congress did two amazing things. It passed the Draft Act almost without debate and authorized an expenditure of more than twenty-one billion dollars. The items themselves were astounding in their magnitude:

for ships, an authorization of a billion nine hundred million, nearly double our former Federal budget; for aviation, 640 million; for torpedoboat destroyers, 350 million; for army subsistence and regular quartermaster's supplies, 860 million; for clothing and camp and garrison equipment, 581 million; for transportation, 597 million; for medicine, 100 million; for mobile artillery, 158 million; for ordnance stores and supplies, 717 million; for heavy guns, 850 million; and for ammunition for the same, one billion eight hundred and seven million. No wonder Hindenburg remarked that the Americans knew how to make war. He knew, as the Americans realized, that the struggle was one of resources. No wonder that Mr. Balfour, when he arrived here a few weeks after our entry into the war, was incredulous. I was sitting near him one evening at dinner. Suddenly he turned to me and said, "Am I dreaming?" I replied, "What is troubling you?" He answered, "Am I dreaming, or is it true that you have already passed a draft act and registered more than nine million men, and that Congress has authorized the expenditure of more than

twenty-one billions of dollars." I replied that unless I, too, were dreaming, it was correct. He immediately answered, . "Of course, I must accept what you say, but I do not believe it."

The twenty-one-billion-dollar authorization was only a beginning. Congress continued to make lavish appropriations. It evidenced its determination to make good the President's pledge. Accordingly, in 1917, there were expended approximately $2,100,000,000; in 1918, $13,750,000,000; in 1919, nearly $19,000,000,000; and in 1920, a little more than $6,000,000,000 or the huge sum of forty-one billion dollars in four years. This was fourteen billion more than the nation had expended in all the 127 preceding years of its existence.

TH

AS COMPARED WITH OTHER WARS

HIS is an amazing performance; but doubtless, it is scarcely more remarkable or more astounding to us, than that in the periods of the wars of 1812 and 1861 must have appeared to thoughtful people of those times. I do not know whether any one in 1816 made the calculation or not, but if he did he pointed out that while the nation, in the twenty-two years of its existence before the outbreak of the war, had spent only $174,000,000, it disbursed in the five years from 1812 to 1816, $151,000,000. And the Civil War statistician might have noted that, while in the seventy-two years preceding the outbreak of the war, the nation had spent approximately $1,000,750,000, it spent in the five years from 1862 to 1866 about $4,200,000,000, or more than twice as much as it had disbursed in its entire pre-war existence. It is probable that the ratio of expenditure in the latter period was approximately the same as that during the last war. The chief difference between the financial experience in this war and that of its predecessors is that in the War of 1812 and in the Civil War almost the first financial move was the suspension of specie payment and a plunge into the financial abyss, while the war, from which we have just emerged, was financed upon a sound basis. For the first time in its history, the nation during the late war pursued an intelligent and heroic fiscal policy, and for the first time, indeed, it had banking and financial machinery and practices which were adequate to meet the strain.

We emerged from the recent struggle with a debt which reached its peak, $26,600,000,000, on August 31, 1919, and which on June 30, 1921, stood at $23,977,000,000, with expendi

tures for 1921 $5,116,000,000; for 1922 estimated at more than four billion and with the prospect of a level for several years of not far from four billion. What the appropriations for 1922 will be, it is impossible now to indicate. The outlook for even larger expenditures is threatening. If the Soldiers' Bonus Bill should become law, which according to the Treasury will actually involve an expenditure of $2,300,000,000, and if many proposed raids on the Treasury succeed, we shall have budgets in the future greatly in excess of the estimates for 1922. This, of course, will mean additional taxes or new credit issues, with probable resulting inflation, banking embarrassments, and rising cost of living, to the detriment not only of the nation but also of the soldiers themselves.

WHO IS TO BLAME?

NDOUBTEDLY, there will be further

the whole people wake up, take notice, and resist them. There is one thing which seems to be difficult to get into the heads of people. It is this. The American people are responsible for the expanding activities of the Federal Government and for mounting expenditures. They and they alone, broadly speaking, are responsible. They are responsible both affirmatively and negatively, by aggression and by neglect. There is a general blatant view to the contrary. It is the accepted opinion that agencies in Washington, Congressmen or Executive Departments or both, are to blame. This is sheer nonsense. Congress reflects what appears to be the wishes of the people, and in no small measure is resistent to pressure brought to bear upon it. Heads of departments, as a rule, are constantly in the position of opposing requests for assistance in securing funds, coming from groups of interested outsiders. I know that in two departments, I spent much more time in opposing demands for money than I spent in attempting to secure money for the services. There are not enough people in Washington to commit the American people to the enormous and rapid increase in governmental activities, and to consequent large expenditures. The actual outcome is partly the result of the growth of the nation in population and industry, with increasing economic complexities. We gain a nation of about twenty-five million people every twenty years; but the expansion in spending is greater than it should otherwise be,

because of the prodigious energy of interested groups. Very many of the most vigorous critics of government extravagance are themselves members of groups and associations, or are interested in movements to extend the functions of the Federal Government and to increase its cost. This man or group demands a new Department of Public Health or Welfare; that one, a Department of Education; another, a Department of Aviation; another, of Public Works. This group fights fiercely for the soldiers' bonus; that one, for additional aid for highways; that one, for an appropriation for maternity work; and another, for special aid to this or that class in society, particularly for the farmers. One association advocates a special appropriation for engineering research in the agricultural colleges, similar to those granted for agriculture; another one agitates for agricultural-settlement appropriations or for larger military preparedness. Very few emergency situations of consequence arise in any part of the Union which do not result in offensives against the Treasury. Plant and animal disease outbreaks, floods, droughts, earthquakes, and sudden drastic economic changes, all lead to hurry-up calls for action from the Federal Government, and the appearance in Washington of groups of lobbyists. Let a bug, which is supposed to be destructive, appear in some state, and in a short time, state commissioners of agriculture, accompanied by interested citizens and senators and representatives are likely to put in their appearance, demanding Federal funds; and not infrequently they get them, even though the head of the department concerned makes an adverse report. Some time ago the corn borer made its début in Massachusetts. The Department of Agriculture was promptly advised. Its experts began a survey; they reported that the pest was likely to spread, but as I recall it, that it was doubtful whether it would be particularly destructive, and that, in any event, it could not be exterminated without such wholesale destruction of vegetation of all sorts as to make the undertaking impractical. They suggested that it might be worth while to secure funds with which to do some experimental work. In the meantime, the state commissioners got active. A general meeting was called, and the commissioners were about to go on record demanding a Federal appropriation of many millions of dollars, when the Federal experts interposed with the result that the

demands were greatly modified. The pressure for relief from various classes of farmers who are in trouble on account of reduced farm prices, and for flood sufferers, is too fresh in the public mind to need more than passing mention. During the war the President made available from his special fund, five millions of dollars, to be loaned to farmers in certain states of the West where drought conditions had prevailed for three successive years. Many farmers there were in a critical situation and it was desirable, for obvious reasons, that they be aided to save themselves and their homes. The relief was accorded as a war measure and was a substitute for proposals in Congress involving appropriations of from twenty-five to fifty millions of dollars. Last spring, more than two years after the Armistice, pressure was exerted to secure a special fund from Congress. It was successful and two millions of dollars were made available for loans to farmers in the Northwest.

GOVERNMENT IN BUSINESS

PARTLY

ARTLY as a result of the war the railroads of the country found themselves in a difficult financial situation. As a measure of relief the Congress in 1920 passed the Transportation Act. As a result of this, and of the payment of claims of the railroads against the Director-General, it is now estimated that the Treasury will have to pay to the roads in the fiscal year 1921 more than 800 millions of dollars, and will pay, in 1922, about 540 millions, if no further action is taken; but, as a matter of fact, the outlook for additional payments is promising. The roads claim, it is stated, that the Director-General owes them more than a billion dollars, while they owe the Director-General a possible seven hundred million. It is now proposed that the Government immediately let the roads have in cash five hundred millions of dollars, while they give the Government bonds. for their indebtedness. Much pressure is being exerted on the Government by the roads and many of the banks to effect this. It would be an excellent operation for the roads, but it is difficult to see where the Government and the tax-payers benefit. This would simply be a loan to the roads of all or a greater part of the amount they owe the Government, and the operation would take place before the accounting is completed or claims are adjusted. The Government would

continue in the banking business, and the roads would benefit through the use of Government credit, instead of going out into the market for their funds. Such an operation may be necessary in the circumstances, but it is full of menace. There ought to be a limit to the use of the Government's credit for special interests, whether they be the roads, the farmers, or any other agency or class in the nation. Many other interests or classes are embarrassed. Why not finance them all? Why discriminate? This method of putting the Government into business is the easy road to financial ruin and to the substitution of group government for democracy. If it is persisted in, it will mean Government in business with a vengeance. If a business cannot operate without utilizing the Government, the people will soon demand that the Government run the business. They will not need many more lessons. It is astounding that the people who have been crying loudest against governmental interference, and who most dread government ownership, should be the very ones to urge courses which inevitably lead to either or both.

ΤΗ

THE RESPONSIBILITY OF THE PUBLIC

HE people, even state officials, have come to look to the Federal Government for funds; in part, because of the difficulty of securing state support; at times, because the state legislature may not be in session and may not meet for several years; and in part, because it is normally more difficult to get money from nearby and financially hard-pressed local bodies. I am not now trying to pass judgment on the merit of such appeals, I am merely concerned with the processes by which the people themselves stand back of movements which cause increased Federal expenditures. Doubtless,

this will continue. Groups will persist in their activities. The public, generally, will exhaust itself with criticism and with complaints of high taxes. The remedy lies with the public. The first thing for it to realize and accept is that it is responsible; that it can have what it wants. If it persists in its attitude of indifference while groups continue to be aggressive, it will continue to be victimitized. The people can, if they wish, keep the groups under control. They can make it plain that the groups are not the American people, and that they usually make a noise out of all proportion to their numbers.

Let us see now what the prospects are in the matter of expenditure. Let us take the leading items of actual disbursements for 1914 and the estimates for the fiscal year just closed and the ensuing fiscal year. In the absence of any knowledge of what Congress will actually do, we must take the estimates of the Treasury, based on requests of the departments, approved by the President. These are represented in the tables on the following page.

ESTIMATES OF GOVERNMENT EXPENDITURES

IT is obvious from an inspection of Section I,

that except for three items, those for the Treasury, Interior, and Agriculture, the ordinary civil expenditures are not likely to decline greatly. As the burden of tax collection is lessened, the Treasury appropriations may and doubtless will fall. If the Public Health Service and the Prohibition Enforcement Division are removed from the Treasury, as they should be, the decrease will be marked, but the amount needed for these services will appear elsewhere. Much of the increase for the Interior Department and the greater part of that for Agriculture will stand; that for the latter because of the great expansion of the activities of the Department of Agriculture since 1913, involved in the creation of the Bureau of Markets and the enactment of such laws as the Coöperative Agricultural Extension, the Grain Grades, the Cotton Futures, and the Federal Aid Road Acts. Other Government agencies that have been created since 1913, such as the Tariff and the Trade commissions, and their expenditures, are not likely to decline. It will be surprising if the disbursements for the legislative and executive departments ever again fall much below three hundred millions. The nation is growing. Reductions, if any, will probably be temporary and will not materially affect taxes. Much of this civil disbursement cannot be reduced either materially or wisely. And yet much of the recent discussion has apparently been aimed toward making much, if not most of the saving in this civil disburse

The reorganization of regular executive departments has been much heralded as a principal means of lowering the cost of government. Any reorganization of executive departments, so much talked about and in such futile fashion by laymen and those newly arrived in Washington, will effect a relatively small saving. The truth of the matter is that the ten regular executive departments