CHAPTER I THE BUDGET AND SOME FINANCIAL PROBLEMS NATURE AND SCOPE OF FEDERAL EXPENDITURES THE field of government finance includes three divisions, namely revenue, expenditure, and debt. Each of these divisions deserves the careful consideration of those interested in government problems, but only one, expenditure, can be discussed in the limited space available. Revenue and debt are usually treated briefly in works on economics and more fully in volumes dealing with public finance. Therefore, to appreciate fully the great problems of government finance it is necessary in connection with the ensuing chapter to consult treatises on economics and public finance.1 Financial problems are, in many respects, the most difficult of all matters involved in the administration of government. A few figures as to the growth of Federal expenditures may help to suggest the immensity of the task which confronts those in charge of government finance. The growth of expenditures of the Federal government may be illustrated by the amounts spent each tenth year since 1800: 1 See especially F. W. Taussig, Principles of Economics (The Macmillan Company, 1912), and C. C. Plehn, Introduction to Public Finance (Fourth Edition), (The Macmillan Company, 1920). Periods of extraordinary expenditure were 1862 to 1865, when the amount rose from about 470 millions to 1,295 millions, and 1916 to 1920, when expenditures were made as follows: 1916-17. 1918-19.. $1,147,898,000 8,966,532,000 17,855,609,000 2 The complex features of the financial problems of the Federal government may be better understood by analyses prepared by Dr. E. B. Rosa, Chief Physicist in the Bureau of Standards, Washington, D. C. An analysis of the appropriations for all branches of the government service for the fiscal year 1920 shows that 3 per cent of the total budget was appropriated for general governmental purposes (legislative, executive, and judicial), 3 per cent for public works, I per cent for research, education, and development, and 93 per cent for the army and navy, railroad deficit, shipping board, pensions, warrisk insurance, and interest on the public debt, all of which are either obligations arising from the war or for preparation for possible future But since the appropriations for 1920 were greatly affected by the results of war and postwar conditions, and since it is impossible to gauge expenditures by means of appropri 1 Amount appropriated by Congress for the current year. Expenditures have not yet been announced. These figures are based largely upon the tables presented by D. R. Dewey in Financial History of the United States (Longmans, Green & Co.). See also "The Growth of Federal Expenditures in the United States," by C. J. Bullock, in Selected Readings in Public Finance (Second Edition), (Ginn & Co., 1920), p. 47. 2 " Based on tables prepared by E. L. Bogart, in "Direct and Indirect Costs of the Great World War," Preliminary Economic Studies of the War, No. 24, Carnegie Endowment for International Peace (Oxford University Press, 1919). "Scientific and Engineering Work of the Government, Mechanical Engineering, February, 1921; for details of above analysis cf. by the same writer "The Economic Importance of the Scientific Work of the Government," Journal of the Washington Academy of Sciences, vol. x, no. xii, pp. 341-382. ations bills, Doctor Rosa made a study of Federal expenditures for the ten-year period from 1910 to 1919. From this study four charts were prepared which show the relative FIG. 1 AVERAGE NET EXPENDITURE OF FEDERAL GOVERNMENT, 1910 To 1919, EXCLUSIVE OF WAR COST The present situation, then, may be briefly summarized: The Federal government, as a result of participation in the Great War, has a very large debt, with other heavy annual charges caused by the war. The interest on this debt comThese charts from Mechanical Engineering, February, 1921, are used by permission of author and publishers. 1 |