—Wide World Photo
Senator Harry Flood Byrd. Virginia Democrat, is calling the signals for the Eisenhower
administration in the legislative struggles
over taxes and trade.
Bul the direel debts I have mentioned
are nol all our obligations. In addition.
we have contingent liabilities totaling
8250 billion which the federal govern-
Wenl has guaranteed, insured and otherwise- assumed on a contingenl basis. \"
"tie eem predict lo what extent this con-
Qngenl liability will result in losses
Which must be paid by the federal gov-
For example, sill billion of ibis con-
trngenl liability is in some forty federal
''"using programs, and from recent disclosures "I grafl anil windfall profits in
[he various public housing programs, ii
ls evident thai a substantial percentage
"f these contingent liabilities eventual!;
"i;u become ei draft mi the Treasury.
In addition lo the $280 billion in direct Federal debt, ami llu- $2.~,n billion in
Contingent liabilities, wc have ein our
hands ei Se»-i;il Securit) svsie-m guaran-
feed b) the federal governmenl involving man) millions "I out- citizens, which
is no longer actuarially sound.
lhe ultimate cost of this s\slem to
reasur, is slill unestimated, bul
''"I remains lhal when lhe income from
Premiums imposed upon those who are
Covered in tin- system is no longer -ul
"i'-ni or ;e\eiileililc tn pa) lhe benefits,
'"'ii regular tax revenue collected from
"'"-. in .unl .mi of the system will be
IK,,'I I" finance iln- deficienc)
pACTS FORUM NEWS, September, 1955
Here are some of ihe evils of deficit
The debt today is the debl incurred
by this generation, but tomorrow it will
be debt on our children and grandchildren, and il will be for them lo pay,
both the interest and the principal.
ll is possible' and in facl probable lhal
before this astronomical debt is paid "11.
if it ever is, the interest charge will
exceed (he principal.
Protracted deficit spending means
cheapening of the dollar. Secretary
Humphrey testified before tin- Finance
Committee that lhe greatest single factor
in cheapening the American dollar ha-
I n deficit spending.
Since I have been in the Senate, interest alone on the federal debt has cosl
the taxpayers of this country more lliau
875 billion. Al present rales, on the federal di-lil eii ils presenl level, interest
on it in the nexl twenty years will cosl
taxpayers upwards of $150 billion.
Since 1940 the federal governmenl
heis borrowed and spenl a quarter ol a
trillion dollars more than we hei\c collected in taxes.
i- eeir by year, nearh in direct ratio
tn deficit spending, the purchasing value
of the dollar has declined. Beginning
with a 100 cenl elolleir in 1940, lhe value
of the dollar has declined lo o'l cents
As proof of the facl that deficit spending is directly responsible l.n cheapening the dollar. Iel mi' mention that in
I') 12. w Inn we spenl $19 billion in excess
.el revenue, lhe dollar in that one year
declined 10 cents in value.
In 1943, another big deficit year, the
dollar lost .") cents more in value, and another 9 cents in 1946. From 1910 through
1952. an era of heavy deficit spending,
iln' dollar losi 48cents in value, or nearl)
! cents each year, and il is slill slipping
bul in a much lesser degree.
Some men regard these fails and figure"- lightly, bul the loss of hall the- purchasing power nf its iiiinii'i in thirteen
years should be ei serious warning to
Cheapened mone) is inflation. I Dilation is a dangerous game. It robs creditors, il steals pensions, wages anil fixed
income. Once started, it is exceeding!)
difficult lo control. This inflation has
been partially checked, but the value ol
the dollar dropped slighlly ageiin in lhe
past year. It would nol take much to
starl up ihis dangerous inflation again.
Puhlie ili-lii is nol like private debt.
If private debt is not paid off. it can be
ended by liquidation, but if public debt
is not paid off with taxes, liquidation
lakes the form of disastrous inflation or
national repudiation. Cither is destruc*
tive of our form ol government.
Todav lhe interest on the federal .h-bl
takes e c than lo per cenl ol our total
federal tax revenue. Without the tre-
mendous cost of this debt our annual
lax bill could be reduced 10 per cent
across llie- board.
The interest charge would be greater
if much of lhe debt was not short-termed
wilh lower interest rates. Should this
debt be long termed at the .Si \ per cent
paid mi recent 30-year bonds, the interest would be nearh 15 per cent of the
federal income. No business enterprise
could survive such heavy interest out of
ii- gin-- income.
FEDERAL GRANTS TO STATES
Since 1934 federal grants to stati -
have expanded enormously in both cost
ami functions. Thev slip in like mice'
and siiein grow io the- size' of elephants.
Ever) federal grant elevates the control
nl ihe Federal governmenl and subordinate's the control and authority of the
Nothing is more true than the rule
that power bellows the purse. When tic
Federal government makes a grant it
directs exactl) the manner in which the
Funds an- expended, even though the
stales parlialh contribute to the project.
rime' eunl time again I have seen the iron
hand of the federal bureaucracy with
grants compel lhe states to do things
the) .li.l not weint lo do.
(.rowlb in Federal gretnls is indicated
b) the fail lhal in 1934, twenty-one years
ago. the total of such greints was S126
million covering eighteen programs.
\e.w Federal grants total Si billion for
fifty programs. This is an increase of
ill!) per cent in programs and 2H00 per
cenl in cost.
These are the figures to dale. As to
additional grants for lln- fulure. President Eisenhower, in his eulelress I'll the
Slate of the I nion. proposed I" open
up three- Pandora's boxes of new federal
"handouts" lo the stale--.
lhe- proposals by the President, if
adopted b) Congress, would be the
greatest increase in granls lee slate-.- vet
undertaken ami the- longest step vet to
I iider the administration's road proposal a dumm) corporation, without ei--
sels and without income, would issue-
I els l.n $2] billion, and Washington
would lake- control of 10,000 miles ..i the
bi'st roads in the 111 states.
B\ legerdemain this $21 billion in federal agency bunds would be declared as
not federal debl and would be excluded
from the .l.-bi limitation fixed l>\ Congress.
The interest would be $11 .."i billion, oi
.">."> per cenl nl the Funds borrowed.
It weis proposed lo pav the priui'ipiil
..I these bonds and the interest on them
with permanent indefinite appropriations, which would remove the corpora