"Real Alarm"

When President Hoover sent his budget message to Congress last December, he made everybody at the Capitol feel snugly comfortable with the declaration: "Our finances are in sound condition." He envisaged a surplus of 225 millions for this fiscal year (ending June 30, 1930) and 122 millions for that of 1931 (ending June 30, 1931). Two months later, when Congress was in full swing considering new legislation for new expenditures, President Hoover grew alarmed, warned Congress and the country to slow down on spending (TIME, March 10). Last month when March income tax payments showed a shrinkage, the President again pleaded for economy, predicted for this fiscal year "a very moderate surplus" (Treasury estimate: $40,000,000). Last week he returned forcefully to the subject of Federal finances by raising his first definite cry of a deficit of 20 or 30 million dollars for 1931 instead of a surplus of 122 million.

From the White House went identic letters to Washington's Senator Jones, chairman of the Senate Appropriations Committee, and Indiana's Congressman Wood, chairman of the House Appropriations Committee. Excerpts:

". . . A re-examination of our fiscal situation for the next year by the Director of the Budget shows . . . we are faced with a deficit of some 20 or 30 millions of dollars.

"This, of course, is not as yet a very material sum. . . .

"Something over 125 acts have been passed by either the Senate or the House or favorably reported by different committees, which would authorize an additional expenditure of 300 or 350 million dollars next year. . . .

". . . There is cause for real alarm in the situation, as we cannot contemplate any such deficit. . . .

Yours faithfully, HERBERT HOOVER

Psychologically President Hoover took the edge off his economy warning in February by having immediately thereafter to request an extra 100 million for the Federal Farm Board. Likewise last week he appeared to blunt his "real alarm" over a 1931 deficit by asking Congress on the same day for 28 million dollars more-- just the size of the deficit--for new public buildings.

In the House of Representatives where the President is supposed to have his strongest legislative backing, the Hoover warning fell on deaf ears. Not so his request for public buildings. This is a campaign year. All Congressmen are up for reelection. As candidates, they must vote for everything that will give them talking points on the stump, deficit or no deficit. Therefore last week the House's response to President Hoover's "alarm" was passage of legislation to skyrocket the cost of Government.

First the House dealt with a bill by South Dakota's Representative Johnson to liberalize government aid and compensation to veterans. Its prime provision was that a veteran taken ill before Jan. 1, 1925, should be presumed to have contracted his disability as a result of the War and should thus be entitled to compensation. Not satisfied with this 90 million dollar per year liberality by the U. S., Mississippi's Congressman Rankin proposed that the presumption date be advanced to Jan. 1, 1930, whipped the House into a lather of sentimental excitement about War veterans, got his proposal adopted by a vote of 324-49 after Mr. Johnson, outraged, asked that his name be removed from the measure. Congressman Wood pointed out that under this bill a veteran, hale and hearty, could contract gout on Dec. 31, 1929, blame it on the War eleven years before, collect, under the broad presumption clause, $225 per month as compensation. His prediction was that the House measure would add from 500 million to a billion dollars per year to the U. S. cost of veteran aid.

Still lusting for political expenditures, the House next took up and passed a $110,000,000 River and Harbor improvement bill. Chief contest: acquisition by the U. S. from New York State of the Erie Canal, a money-loser. Western members, pledged to the St. Lawrence waterway, flayed this transfer as a New York plot to kill off the seaway through Canada.

With the House on a spending spree in the face of President Hoover's warnings, long-range Treasury economists privately predicted that the 1% income tax cut allowed this year would not be renewed for 1931.

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