XXXI CONSTRUCTIVE ECONOMY
It is not through selfishness or wastefulness or
arrogance, but through self-denial, conservation,
and service, that we shall build up the American
spirit. This is the true constructive economy,
the true faith on which our institutions rest.
As would be the practice in any well-managed concern,
the executive heads of the various departments and bureaus
of the United States Government meet twice a year for
receiving a report of the results of their efforts to make
the business of the Government more successful. This is
primarily a meeting to consider the Federal financial opera-
tions. But it approaches that problem not from the side
of the finding and the raising of revenue but from the oppo-
site side of the conservation and the expenditure of revenue.
It is an eternal challenge to which we respond, of how to
secure a more efficient government with a smaller expendi-
ture of money. It is a great test of engineering skill in
the constant elimination of waste, in the making of every
dollar count, and in the conserving of national energy. On
the success with which we meet these requirements depends
the welfare of the Government and the prosperity and
happiness of the American people.
It is for these reasons that the greatest emphasis should
be placed on constructive economy. Merely to reduce the
expenses of the Government might not in itself be bene-
ficial. Such action might be only the discontinuance of a
wholly necessary activity. No civilized community would
close its schools, abolish its courts, disband its police force,
or discontinue its fire department. Such action could not
be counted as gain, but as irreparable loss. The underlying
spirit of economy is to secure better education, wider ad-
miniistration of justice, more public order, and greater se-
At the Tenth Regular Meeting of the Business Organization of the Gov-
ernment, Memorial Continental Hall, January 30, 1926.
356 FOUNDATIONS OF THE REPUBLIC
curity from conflagration, all through a superior organization
which will decrease the unit of cost. It is all reducible to
a question of national efficiency.
Each one of you may sometimes feel that you are per-
forming a small and ineffective part and that the expendi-
tures in your department will make so little difference that
it is not worth while to put forth much effort. Pausing
long enough to remind you that in the first place the char-
acter of the manhood and womanhood which you develop
will depend entirely on the amount of effort that you put
forth, I pass over that consideration to the fact that though
each of you may contribute a comparatively small share
to the general result, yet in a concern so vast as the Govern-
ment of the United States the aggregate is very large. I
want to see the public service of my country make a large
contribution to the character of those who are employed in
it and become the most efficient instrument of organized
government in the world. Before you admit that your own
part is small and ineffective you should remember that
the whole is equal to the sum of all the parts and take a
survey of the broad plan which is gradually being framed
in accordance with the system of constructive economy for
the conduct of the Federal business.
It happens that this is the tenth Budget meeting. If
you will look back at the situation which existed in June,
1921, only four and one-half years ago, when your first
meeting was held, you will be able better to understand
the tremendous results of a policy of constructive economy.
At that time 5,000,000 of our people were without employ-
ment, trade and commerce were despondent, transportation
was unable to finance itself, the loss of buying power on
the part of the wage earner depressed the price of all agri-
cultural products, our foreign relations were in an uncertain
state, we were threatened with an inundation of alien goods
and alien peoples, about $7,000,000,000 of unfunded public
CONSTRUCTIVE ECONOMY 357
debt was shortly to mature. It was almost impossible to
secure private credit. The burden of taxation was over-
whelming.
The action of the Government was prompt and effective.
It is for us to see that it remains sustained. The flood of
immigration and importations was checked by legislation.
Our own people began to find work. Our own goods began
to find a market. Taxes were enormously reduced. Federal
expenditures, which then amounted to $5,538,000,000 for
that fiscal year, it is now estimated will be cut down to
$3,619,000,000 for this fiscal year. That is a saving of
$1,919,000,000. Our short-term obligations were so skill-
fully funded that instead of embarrassing business the
operation actually stimulated it. The public debt then
was $23,997,000,000. At the end of this fiscal year it is
estimated it will be less than $20,000,000,000. This is a
payment of about $4,000,000,000 and represents a yearly
saving in interest of $179,000,000. Credit was extended to
agriculture and transportation through the War Finance
Corporation.
With the return of employment and high wages the con-
sumption of agricultural products increased 18 per cent.
Our foreign relations were adjusted in a manner which
added to the peace and stability of the world. The enor-
mous debts due to us from abroad have been steadily ad-
justed until but one of large importance remains. The
system of foreign loans has increased foreign purchasing
powers. Economies in production have decreased our do-
mestic costs. Our exports and imports for the last year
were about $9,000,000,000, the highest mark ever reached in
time of peace. With our assistance the economic condition
°f the whole world has been very greatly improved.
To eliminate competition in armaments and prevent the
friction and suspicion which inevitably arises from that
Practice, the Washington Conference provided treaties
Practice, the Washington Conference provided treaties
358 FOUNDATIONS OF THE REPUBLIC
which not only afford great financial relief but are very
effective in the promotion of international good will and
confidence. Before us is the prospect of another conference
which holds the promise of further advance in this most
attractive field. These accomplishments mean interna-
tional peace, economic prosperity, and financial stability.
In your own peculiar field the most impressive action was
the adoption of the Budget system. With the cooperation
of the Congress, with your loyal support, and under the
forceful leadership of General Dawes, it was put into opera-
tion. In a little over two years it became apparent that
largely because of its efficient continuance under General
Lord it was possible again to reduce taxes. Such a bill was
enacted by the Congress which convened in December,
1923. Due to the same moving factors, we have been en-
abled to propose another reduction in taxes, which is now
pending before the Congress and promises to be speedily
enacted. This is your record. It is due to your individual
action. Measured in its entirety, it is not small or inconse-
quential, but tremendous in its results and of overwhelming
significance in its implications. It has been a large con-
tributing factor to prosperity at home, and to peace, repara-
tion, and restoration abroad.
It is my belief that we should supplement these achieve-
ments, round out these accomplishments and reinforce this
same general policy of constructive economy, enlarged pros-
perity, and peace, by adhering to the Permanent Court of
International Justice. When accompanied with proper res-
ervations I can see in such action no diminution of our
sovereignty, no increase in our national peril, but rather an
instrument which will add more securities to human rights
and more guaranties to international tranquility. We
have not reached these domestic results without struggle
and sacrifice and the encountering of opposition. We shall
not be able to do much good to ourselves or make much
CONSTRUCTIVE ECONOMY 359
contribution to the welfare of the world, unless we continue
the same struggle and make increasing sacrifices.
To me, all these proposals for conservation and economy
do not seem either selfish or provincial, but rather they
reveal a spirit dedicated to the service of humanity. If
these things are not important, then there are no earthly
considerations that are important.
Although these accomplishments are past history and
ought to be known of all men, yet it is well that they be
recalled and reiterated, in order that we may better under-
stand the general plan which not only all the people in the
Government but all the people in the country are engaged
in putting into effect. The penalty for achievement is al-
ways a demand for even greater achievement. In this
effort for retrenchment you have not disappointed the peo-
ple or the President, and it is my firm conviction that you
never will. If you at times grow weary of the constant
stress put on economy, you will see that something more is
involved than can be measured in dollars and cents. The
spirit of real constructive economy is something higher and
nobler. It does not imply so much a limitation as an at-
tempt to be free from limitation. It does not contemplate
curtailing ample supplies for worthy purposes and real
needs, but it is the enemy of waste and the ally of orderly
procedure. It is an attempt to increase and enlarge the
scope of the individual and the life of the nation.
How great a need exists to emphasize the homely funda-
mental virtue of government economy is seen when we
contemplate the mounting tide of expenditure and indebted-
ness of municipal and State governments. This tendency
is one of great concern. The very fact that the Federal
Government has been able to cut down its expenditures,
decrease its indebtedness, and reduce its taxes indicates
how great is the accomplishment which you have made in
of the people of the Nation. These results are all
360 FOUNDATIONS OF THE REPUBLIC
monuments to you and to the Congress. It has been your
work and your cooperation that has brought forth these
fortunate conclusions.
Heretofore I have expressed the opinion that we can not
look for further reductions in the cost of the actual trans-
acting of the business of the Government. It is only natu-
ral that the normal growth of the Nation would produce
some expansion. But constant scrutiny is necessary to pre-
vent fossilization and decay. Careful oversight of person-
nel is always required. The pay roll represents the largest
single item in the business of the Government. During the
past calendar year this has been reduced locally by more
than 5,000 names—an annual saving of $8,000,000—al-
though when persons are dropped from one department
they are always taken care of in another wherever possible.
Past experience has shown that a reduction of taxes has
been followed by increased prosperity. As the volume of
business increases the Federal revenue increases. If we
are moderate in our expenditures, the natural increase in
profits ought within the next few years to furnish us again
with a surplus revenue which will permit a further tax
reduction.
We were the first nation in recent years to adopt a plan
to reduce our debt and put the plan into operation. We
are maintaining our sinking fund and applying the pay-
ments made on our foreign loans to the retirement of our
debt. As a result this Nation has to-day the best credit
in the world. We have lowered our interest costs not only
by reducing our debt, but by so improving our credit that
we can borrow at lower rates. Since interest is 22^ per
cent of our total Federal expenditures, a reduction in inter-
est is a most fruitful field for permanent saving. If we
continued this plan during the post-war depression, there
is certainly little reason for changing it in these day* of
prosperity.
CONSTRUCTIVE ECONOMY 361
Very soon you will have your appropriations for the next
fiscal year. It would be wise early to lay out a carefully
prepared program in making the apportionment over the
several periods of the year, as is required by the law. If
all our expenditures are wisely planned and wisely made,
retrenchment will take care of itself. You should not for-
get to lay aside an emergency fund. Something unexpected
usually happens, but if it does not a real saving is made.
The reserve set up in this way for the last fiscal year has
an unexpended balance of $24,000,000. It is of the utmost
importance to remember that constructive economy means
preparation for the future. Our country is in need of in-
ternal improvements and developments. A new building
bill is under way, and our great interior should be pro-
vided with river and waterway facilities. These two proj-
ects represent a capital investment on which the returns
will undoubtedly justify the costs. But we should beware
of increased permanent commitments.
When the Government rents privately owned buildings
it pays a high rate of interest, all the taxes, and some profit.
When it occupies its own buildings the interest represented
is very low, and taxes and profits are eliminated. The open-
ing up of waterways means the development of commerce,
less cost for freight on raw materials, and a large saving
to our agricultural regions. The extent to which these
projects can be undertaken in the immediate future awaits
the outcome of the pending tax bill.
What all these efforts mean would be greatly underesti-
mated if it be thought that they begin and end with the
saving of money. Considered hi their entirety, they play
an important part in the wonderful American experiment
for the advancement of human welfare. It is not only the
Method by which we have built railroads, developed agri-
culture, created commerce, and established industry, not
the method by which we have made nearly 18,000,000
362 FOUNDATIONS OF THE REPUBLIC
automobiles and put a telephone and a radio in so large a
proportion of our homes, but it is also the method by which
we have founded schools, endowed hospitals, and erected
places of religious worship. It is the material groundwork on
which the whole fabric of society rests. It has given to the
average American a breadth of outlook, a variety of experi-
ence, and a richness of life that in former generations was
entirely beyond the reach of even the most powerful princes.
All of this effort represents not merely the keeping of
our money but the keeping of our faith. One of the chief
dangers to the success of popular government is that it will
throw away self-restraint and self-control and adopt laws
which, being without sound economic foundation, bring on
such a financial distress as to result in want, misery, dis-
order, and the dissolution of society. America has demon-
strated that self-government can be so administered as
fairly to protect each individual in all his rights, whether
they affect his person or his property. Under constitutional
authority we tax everything, but we confiscate nothing. It
is not through selfishness or wastefulness or arrogance, but
through self-denial, conservation, and service, that we shall
build up the American spirit. This is the true constructive
economy, the true faith on which our institutions rest.
Our chief of staff in the direction of all this work is
General Lord. It is because of his continuing efforts and
your constant cooperation that our Government service
to-day is a greatly improved service. It is more efficient
and better able to function. The day of administration
without coordination has passed. Our country has adopted
a system of ordered finance. While much of the inspiration
for this great achievement is furnished by the words of
General Lord, the action has been furnished by yourselves.
I present him to you not as your opponent or your critic,
but as your most loyal friend and your most sympathetic
defender.
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