these reports and comparisons of the classification of expenditures as set forth therein have been made by the commission to the end that, so far as practicable, uniformity of classification of objects of expenditure may be recommended and identical terminology adopted.

RECOMMENDATIONS AND MODIFICATIONS.

In due time I shall transmit to the Congress such recommendations for changes in the present laws relating to these annual reports as appear to be pertinent and necessary.

Special consideration has been given by the commission to the annual reports relating to the financial transactions of the Government as a whole. In this connection the forms of the financial statements of the Government from early days to the present time have been examined. Further, in order that full information should be available, an investigation has been made of the forms of annual reports and budget statements, of the results of accounting, and of the terminology used by twenty or more foreign nations.

One of the consequences of this work is apparent in a modification of the form in which the gross receipts and disbursements of the Government have been exhibited heretofore by the Secretary of the Treasury in his annual reports to the Congress.

These modifications are important-as illustrations of what may be expected in improvement in the annual statements of the Government as a whole when final recommendations are made, based upon these extended studies. Further results of this work will be apparent when standard forms for financial reports of departments and establishments, which are now in preparation through cooperation with the responsible officials of various departments, are completed and published. It will then be evident how far short of realizable ideals have been our annual statements and reports of the past.

THE BUDGET.

The United States is the only great nation whose Government is operated without a budget. This fact seems to be more striking when it is considered that budgets and budget procedures are the outgrowth of democratic doctrines and have had an important part in the development of modern constitutional rights. The American Commonwealth has suffered much from irresponsibility on the part of its governing agencies. The constitutional purpose of a budget is to make government responsive to public opinion and responsible for its acts.

THE BUDGET AS AN ANNUAL PROGRAM.

A budget should be the means for getting before the legislative branch, before the press, and before the people a definite annual program of business to be financed; it should be in the nature of a prospectus both of revenues and expenditures; it should comprehend every relation of the Government to the people, whether with reference to the raising of revenues or the rendering of service.

In many foreign countries the annual budget program is discussed with special reference to the revenue to be raised, the thought being

that the raising of revenue bears more direct relation to welfare than does Government expenditure. Around questions of source of revenue political parties have been organized, and on such questions voters in the United States have taken sides since the first revenue law was proposed.

CITIZEN INTEREST IN EXPENDITURES.

In political controversy it has been assumed generally that the individual citizen has little interest in what the Government spends. In my opinion this has been a serious mistake, one which is becoming more serious each year. Now that population has become more dense, that large cities have developed, that people are required to live in congested centers, that the national resources frequently are the subject of private ownership and private control, and that transportation and other public-service facilities are held and operated by large corporations, what the Government does with nearly $1,000,000,000 each year is of as much concern to the average citizen as is the manner of obtaining this amount of money for public use. In the present inquiry special attention has been given to the expenditure side of the budget.

In prosecuting this inquiry, however, it has not been thought that arbitrary reductions should be made. The popular demand for economy has been to obtain the best service the largest possible results for a given cost.

We want economy and efficiency; we want saving, and saving for a purpose. We want to save money to enable the Government to go into some of the beneficial projects which we are debarred from taking up now because we can not increase our expenditures. Projects affecting the public health, new public works, and other beneficial activities of government can be furthered if we are able to get a dollar of value for every dollar of the Government's money which we expend.

PUBLIC-WELFARE QUESTIONS.

The principal governmental objects in which the people of the United States are interested include:

The national defense; the protection of persons and property; the promotion of friendly relations and the protection of American interests abroad; the regulation of commerce and industry; the promotion of agriculture, fisheries, forestry, and mining; the promotion of manufacturing, commerce, and banking; the promotion of transportation and communication; the postal service, including postal savings and parcels post; the care for and utilization of the public. domain; the promotion of education, art, science, and recreation; the promotion of the public health; the care and education of the Indians and other wards of the Nation.

These are public-welfare questions in which I assume every citizen has a vital interest. I believe that every Member of Congress, as an official representative of the people, each editor, as a nonofficial representative of public opinion, each citizen, as a beneficiary of the trust imposed on officers of the Government, should be able readily to ascertain how much has been spent for each of these purposes; how

much has been appropriated for the current year; how much the administration is asking for each of these purposes for the next fiscal

year.

Furthermore, each person interested should have laid before him a clear, well-digested statement showing in detail whether moneys appropriated have been economically spent and whether each division or office has been efficiently run. This is the information which should be available each year in the form of a budget and in detail accounts and reports supporting the budget.

CONTINUANCE OF THE COMMISSION.

I ask the continuance of this Commission on Economy and Efficiency because of the excellent beginning which has been made toward the reorganization of the machinery of this Government on business principles. I ask it because its work is entirely nonpartisan in character and ought to appeal to every citizen who wishes to give effectiveness to popular government, in which we feel a just pride. This work further commends itself for the reason that the cost of organization and work has been carefully considered at every point. Three months were taken in consideration of plans before the inquiry was begun; six months were then spent in preliminary investigations before the commission was organized; before March 3, 1911, when I asked for a continuation of the original appropriation for the current year, only $12,000 had been spent.

In organizing the commission my purpose was to obtain men eminently qualified for this character of work, and it may be said that it was found to be extremely difficult to find persons having such qualifications who would undertake the task. Several of the members of the commission were induced to take up the work at a personal sacrifice; in fact, considering the temporary character of the inquiry, it may be said that no member of the commission was moved by salary considerations. Only the public character of the work has made it possible for the Government to carry on such an inquiry except at a very much larger cost than has been incurred.

It is a matter of public record that the three largest insurance companies in New York, when under legislative investigation, spent more than $500,000 for expert services to assist the administration to put the business on a modern basis; but the economies the first year were more than tenfold the cost. I am informed that New York, Chicago, Boston, St. Louis, Cincinnati, Milwaukee, and other cities are prosecuting inquiries, the cost of which is largely disproportionate to the cost incurred by the Federal Government. Furthermore, these inquiries have the vigorous support and direct cooperation of citizen agencies, which alone are spending not less than $200,000 per annum, and in several instances these combined agencies have been working not less than five years to put the cities on a businesslike basis: vet there is still much to be done.

The reason for bringing these facts to your attention is to suggest the magnitude of the task, the time necessary to its accomplishment, the professional skill which is essential to the successful handling of the work, the impossibility of carrying on such a work entirely with men who are at the same time engaged in the ordinary routine of administration. While in the nature of things the readjustment

of organization and methods should continue indefinitely in order to adapt a great institution to the business in hand, ultimately this should be provided for as a part of the regular activities of some permanently organized agency. It is only after such a thorough inquiry has been made by experts who are not charged with the grinding details of official responsibility, however, that conclusions can be reached as to how this best can be done.

I sincerely hope that Congress will not, in its anxiety to reduce expenditures, economize by cutting off an appropriation which is likely to offer greater opportunity for real economy in the future than any other estimated for.

VIGOROUS PROSECUTION OF THE INQUIRY.

Economies actually realized have more than justified the total expenditure of the inquiry to date, and the economies which will soon be made by Executive action, based upon the information now in hand, will be many times greater than those already realized. Furthermore, the inquiry is in process of establishing a sound basis for recommendations relating to changes in law which will be necessary in order to make effective the economies which can not be provided by Executive action alone. Still further, it should be realized that the progress made by the inquiry has been notable when measured against the magnitude of the task undertaken. The principal function of the inquiry has been that of coordination. The commission has acted and should continue to act as a central clearing house for the committees in the various departments and establishments. By no other means can the cooperation which is essential be developed and continued throughout the Government service.

Helpful as legislative investigations may be in obtaining information as a basis for legislative action, changes which affect technical operations and which have to do with the details of method and procedure, necessarily followed in effectively directing and controlling the activities of the various services, can be successfully accomplished only by highly trained experts, whose whole time shall be given to the work, acting in cooperation with those who are charged with the handling of administrative details. The upbuilding of efficient service must necessarily be an educational process. With each advance made there will remain to those who conduct the details of the business an additional incentive to increase the efficiency and to realize true economy in all branches of the Government service.

As has been said, the changes which have already been made are resulting in economies greater than the cost of the inquiry; reports in my hands, with recommendations, estimate approximately $2,000,000 of possible annual economies; other subjects under investigation indicate much larger results. These represent only a few of the many services which should be subjected to a like painstaking inquiry. If this is done, it is beyond question that many millions of savings may be realized. Over and above the economy and increased efficiency which may be said to result from the work of the commission as such is an indirect result that can not well be measured. I refer to the influence which a vigorous, thoroughgoing executive inquiry has on each of the administrative units responsible to the Executive. The purpose being constructive, as soon as any subject is

inquired into each of the services affected becomes at once alert to opportunities for improvement. So real is this that eagerness in many instances must be restrained. For example, when reports were requested on the subject of handling and filing correspondence, so many changes were begun that it became necessary to issue a letter to heads of departments requesting them not to permit further changes until the results had been reported and uniform plans of action had been agreed upon. To have permitted each of the hundreds of offices to undertake changes on their own initiative would merely have added to the confusion.

Much time and expense are necessary to get an inquiry of this kind started, to lay the foundation for sound judgment, and to develop the momentum required to accomplish definite results. This initial work has been done. The inquiry with its constructive measures is well under way. The work should now be prosecuted with vigor and receive the financial support necessary to make it most effective during the next fiscal year.

In this relation it may be said that the expenditure for the inquiry during the present fiscal year is at the rate of $130,000. The mass of information which must be collected, digested, and summarized pertaining to each subject of inquiry is enormous. From the results obtained it is evident that every dollar which is spent in the prosecution of the inquiry in the future will result in manifold savings. Every economy which has been or will be effected through changes in organization or method will inure to the benefit of the Government and of the people in increasing measure through the years which follow. It is clearly the part of wisdom to provide for the coming year means at least equal to those available during the current year, and in my opinion the appropriation should be increased to $200,000, and an additional amount of $50,000 should be provided for the publication of those results, which will be of continuing value to officers of the Government and to the people.

THE WHITE HOUSE, January 17, 1912.

WM. H. TAFT.