A Weekly Dose of Hazlitt: Schizophrenic Budget

Schizophrenic Budget” is the title of Henry Hazlitt’s Newsweek column from February 2, 1959. Here, Hazlitt provides an example of the federal budget game that is still played today. In this game, politicians call for either a balanced budget or reduction in the budget deficit and provide bogus projections of increased tax revenue and reduced spending. The result is red ink as far as the eye can see.

Because the Democratic majority in Congress seems
bent on reckless inflationary spending, and is criticizing
only the economies and not the extravagances in the
President’s budget, there is a temptation to defend that
budget as it stands and to praise it as at least an effort
toward a balance. But the budget cannot be defended
as it stands and it is hard to believe in the “balance” it
depicts.

This balance is precarious on its face. To get his estimated
budget receipts up to $77.1 billion, the President
had to assume an increase in tax revenues of $9 billion
for the fiscal year 1960 over 1959, with practically
no increase in tax rates or levies. To get his estimated
expenditures down to $77 billion, he had to assume
a drop of $3.9 billion compared with 1959 in spite of
proposed increases in many spending programs and
his own failure in the last calendar year to veto huge
Congressional appropriations that he had not asked
for. Most of the “decline” in 1960 expenditures, moreover,
is achieved by charging the $1.4 billion proposed
increased subscription to the International Monetary
Fund against expenditures for the current year instead
of against 1960.

Past Miscalculations

Nor does the record of the past two years increase confidence
in the accuracy of Mr. Eisenhower’s present
estimates. For the fiscal year 1958 he projected a budget
surplus of $1.8 billion; we emerged with a deficit of
$2.8 billion. For 1959 he predicted a surplus of half a
billion; we now face a deficit of $12.9 billion. Receipts
of the present fiscal year will be $6.4 billion less than
his estimate a year ago; expenditures will be $7 billion
more.

Even if we take the new budget at face value,
we must remember that it is the biggest budget Mr.
Eisenhower has ever proposed. Nor can this be blamed
on defense necessities. For it contains the highest nondefense
expenditures ever recommended. These total
$31.2 billion, compared with $28.1 billion recommended
for 1959 (though increased in actuality), and
with nondefense expenditures of $27.8 billion in 1958,
$25 billion in 1957, and $21.2 billion in 1954. In brief,
nondefense expenditures alone are $10 billion greater
than in 1954.

Nor does even this tell the full truth about the
overall budget. In recent years, the cost of government
activities such as social security and highways has
been hidden in special segregated budgets. When we
put them in a “consolidated” budget, we find that Mr.
Eisenhower is really planning to spend in 1960 a total
of $92.9 billion.

The Item Vet o

And Mr. Eisenhower’s latest budget suffers from the
very “schizophrenia” toward economy and spending of
which he accuses its critics. On the one hand, he insists
that we must “keep our financial house in order” and
“examine new programs and proposals with a critical eye.
Desirability alone is not a sound criterion for adding to
Federal responsibilities.” We must “restrain the forces
that would drive prices higher, and thereby cheapen
our money and erode our personal savings. The first
step is to avoid a deficit by having the government live
within its means, especially during prosperous, peacetime
periods.” But then he recommends continuation of
and increases in so many welfare programs that there
is not space to list them here. He even declares proudly
that we must “carry forward current public-works programs—
now larger than ever before.”

But there is one recommendation in the President’s
message that can be endorsed with the sole reservation
that it does not go far enough. This is that the
President should be given the constitutional power not
only to veto individual items in appropriations bills, but
to reduce the amount of any appropriation. This power
would not in itself, of course, insure a responsible budget.
But we can never have a responsible budget, or
anything approaching a responsible budget, until this
power exists. At present the so-called executive budget
is merely a speech which Congress is free to ignore.
The President cannot fairly be held responsible for the
budget until he has the power to carry out that responsibility.
Congress is in no position to blame him for a
result that he lacks the power to control.

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