Freeman

ARTICLE

Government By Credit Card-The Evidence of Excesses

SEPTEMBER 01, 1962 by MAURICE H. STANS

Mr. Stans was Director of the Budget under President Eisenhower and is now President of Western Bancorporation and Vice-Chairman, United California Bank. This article is from his address before the Second General Session of the Chamber of Commerce of the United States, Washington, D. C., May 1, 1962.

I am deeply concerned about our national course of events. As a result of new doctrines that have been allowed to develop over the last 30 years, the proud philos­ophy and sturdy character of our country are fast deteriorating. We are gradually surrendering our American spirit, based on initia­tive and self-reliance, for a social and economic mess of pottage. We are fast eroding our historic per­sonal freedoms under the guise of an all-encompassing governmental benevolence. We are destroying the sovereignty of our states and handing over our locally-based in­stitutions to an all-powerful cen­tral bureaucracy. And, by our con­tinued experimentation with eco­nomic panaceas, we are risking the loss of the sinews that hold our democracy together.

If these apprehensions are right and the natural consequences fol­low, we may be in the sad posture of watching the slow destruction of democracy and the American way of life by the inept acts of its own beneficiaries….

A Sorry Record

Here is some boiled-down statis­tical evidence:

1. The entire budget of the United States was $3 billion in 1930, including interest on the debt and the cost of national de­fense. By decades it has grown to $9 billion in 1940, to $40 billion in 1950, to $80 billion in 1960, and it is headed toward another mas­sive increase by 1970. The next administrative budget will ap­proach $100 billion, and the total of spending in the budget and trust funds will be close to $125 billion next year. Government spending is compulsory spending, and the more it increases, the less is left in freedom of choice for the individual.

2.         The federal government con­tinues to grow, as new agencies, programs, and personnel are added in proliferation. Civilian employees have increased more than fourfold from 592,000 in 1930 to 2,538,000 at the end of the next budget year.

3.         The interest-bearing national debt has grown in peace and war from $16 billion in 1930 to $300 billion now, and it is certain to continue upward. Interest on this debt is now nearly $10 billion a year, more than the entire budget in 1940 and equal to 10¢ out of every dollar of taxes collected. This persistent growth in debt is a direct reversal of the philosophy of our government in the first 140 years of its existence, when the goal was to become debt-free.

4.         We have mortgaged the fu­ture to an incredible degree. If you add to the interest-bearing debt (a) our unfunded liabilities for past services of government employees and war veterans, (b) our legislated contracts and com­mitments for future spending be­yond current costs of defense, welfare, and government, and (c) the actuarial deficiency in our so­cial security system that must be collected through future tax in­creases already scheduled in the law, the total of our government’s liabilities and commitments is well over $1 trillion. This "government-by-credit card" has im­posed a present mortgage on the future of our people equal to $22,­000 per family of four.

5.         Despite new fancy theories of balancing the budget over the cycles, we have gone in the red 26 times in the last 32 years and have paid our bills without bor­rowing only six times. The poli­cies of the present administration, unless abruptly changed, are likely to produce four consecutive deficits.

6.         A large part of the increase in federal spending and debt is the result of a massive assump­tion of responsibility by the gov­ernment for cradle-to-grave wel­fare, in many cases, without a test of need and at the disdain of the virtues of personal thrift and self-reliance. This has created an ac­celerating centralization of power in Washington, a lessening of con­trol and influence back home, and a decline in personal responsibility and morality. And the course has not been run, because more and more ideas for government inter­vention in our lives sprout daily.

7.            Our gold supply has been heavily depleted in recent years and is still under threat. The cause is our unfavorable balance of pay­ments: our overseas outgo for im­ports, services, travel, invest­ments, foreign aid, and military purposes regularly run higher than our income from other coun­tries. Our gold is now down from $24 billion to $161/2 billion, of which all but $4 billion is needed to back our currency. Short-term foreign claims that can be as­serted against this $4 billion are now $18 billion. And the balance of payments continues to run ad­verse at between $21/2 and $4 bil­lion a year. As banker to the world, we are not running a good bank.

8.            National wage policies have recognized a political balance of power in favor of labor. For some years wage increases have outrun increases in productivity. Indus­try has been at fault, too; in some cases it has failed to exert the efforts needed to reduce costs and hold down prices. The result of both has been a price structure that has contributed to a cost-push inflation and to our difficulties of meeting competition in world markets.

Our cost of living has ad­vanced significantly, as inflation­ary policies in both the public and private sectors have exacted their price. It is still moving upward, slowly at the moment, and our dol­lar of 1940 is now worth 47 cents. It would be a fatal mistake to be­lieve that drastic inflation couldn’t happen here. Our fiscal policies are an open invitation to a crisis for the dollar.

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September 1962

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