Byrd to Eccles

A month before Franklin Roosevelt's $8,995,000,000 1940 budget appeared, conservative Democrat Harry Flood Byrd of Virginia issued an anticipatory blast at continued deficit financing. Federal Reserve Chairman Marriner Stoddard Eccles replied to him in a letter that filled three newspaper columns (TIME, Jan. 2). Last week as Congress took a savage nibble at the President's special Relief budget (see p. 77), Senator Byrd replied to Mr. Eccles in six newspaper columns. Juiciest points of Byrd answers:

> To the Eccles claim that the total amount of debt (public and private) is no greater than in 1929: "As you know, our national income is only 60 billion dollars, whereas for 1929 it was 80 billion dollars. The income out of which these debts must be paid has shrunken 20 billion dollars. . . . Our burden is the same. Our strength is much less."

> To the Eccles claim that while Federal spending makes taxes higher, it makes it easier for taxpayers to pay them: a table of relative per capita income and taxes:

1929 1937 1938

Income................$668 $540 $500

Taxes......................80 95 103

Pct.Taxes..............12% 17.6% 20.6%

"For the additional $20,000,000,000 income we now have for 1938 as compared to 1932, the increase in Federal taxes equals 172% of the increase in income."

> To the doctrine that increased Government spending cures depressions: "The national income fell from $73,000,000,000 in 1920 to $53,000,000,000 in 1921. Severe recession. The Federal expenditures were reduced from $5,000,000,000 in 1921 to $3,000,000,000 in 1922 with the corresponding reduction in taxation. The national income then rose to $60,000,000,000 in 1922, an increase of $7,000,000,000 over the level of 1921."

> Quoted from Thomas Jefferson: "To preserve our independence, we must not let our rulers load us with perpetual debt. ... As the doctrine is that a public debt is a public blessing, so they think a perpetual one is a perpetual blessing, and therefore wish to make it so large that we can never pay it off."

> "With respect to your general doctrine that a deficit will bring about business recovery, I call your attention to the fact that Mr. Hoover did very well in this matter. He had a deficit of $3,153,000,000 in 1932 preceded by a deficit of nearly a billion in 1931."

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