"Fraud"

Politics is a fluid science and so is bookkeeping. Mixed together in unknown quantities the two will generate various reactions, sometimes quiet and invisible, sometimes violently explosive. The final solution usually defies exact analysis.

Andrew Mellon's bookkeeping has been widely and highly praised for seven and three-quarters years. It has also had its detractors. The Mellon estimates of Treasury surplus have been wrong often and far enough to cause some people to suggest that the Secretary of the Treasury's calculations are not purely arithmetic, that they are sometimes tinctured with policy if not politics. In his own party, Mr. Mellon has been frequently flayed by Michigan's Senator Couzens. Democrats in the House have kept up an intermittent fire. Last week, Democrat John Nance Garner of Texas, minority leader of the House Ways & Means (revenues) Committee, renewed the attack.

Last June, President Coolidge announced that he was advised there might be a Treasury deficit of 94 millions in fiscal 1929. When Congress met this month, President Coolidge announced he was now advised there might be a Treasury surplus of 37 millions in fiscal 1929. Six days later, President Coolidge announced he had been re-advised, that the Treasury had underestimated by 75 millions the amount it would have to pay in tax refunds. The Treasury was thus seen facing a deficit again.

During the six days between prospective surplus and prospective deficit, the House had voted various appropriations, including a loan of 12 millions to Greece.

Upon the revised list of tax refunds submitted to Congress for approval was an item of 15 millions for the U. S. Steel Corporation.

It was upon these two items--Greek loan and Steel refund--that Democrat Garner pounced in a speech designed to embarrass Mr. Mellon thoroughly. Said Mr. Garner: "In order to induce you to pass it [Greek loan], he [Mr. Mellon] made a misleading--and the facts show, it seems to me--a deliberately false statement as to . . . the prospects of our Treasury.

". . . If I were President and he deliberately fixed it so that I would have to reverse myself in such a way, I would ask for his resignation.

"Gentlemen, this is a fraud. Any time you give me information in order to pass or defeat legislation and that information is incorrect, that is fraud. . . .

"Immediately after the election and after permitting the President to misrepresent the situation to Congress, you come in and ask for refunds on claims that have been pending eleven years. Is there nothing which indicates that there must be some kind of manipulation about this?"

The Steel Corp.'s claims, and claims similar, for taxes dating back to 1917, were not made until 1923 or later because the claimants had not known there was any chance of recovery. The claims have not yet been paid because of the intricacy of opposing contentions, the delays of tax appeal. Democrat Garner wanted to know why Mr. Mellon could not have delayed such refunds a little longer.

"Why didn't he do it? I do not know, but . . . after the fourth of March he might not have the chance."

The Garner attack was fortified by his contention that the 15 millions now asked for the Steel Corp. would grow to 28 or 30 millions if all the Steel Corp.'s claims were settled now on the basis of the 15-million refund.

"The most remarkable thing about the whole situation is that in 1925 the largest refund ever made in the history of the country was made immediately after the election."

House-Senate conferees had declined to approve the 15-million Steel refund before Mr. Garner made his speech. They had referred it back to Mr. Mellon, as is often done, leaving him free to make the refund on his own responsibility if he chose. By way of conclusion, Mr. Garner predicted that Mr. Mellon would assume the responsibility, make the refund and court a deficit in order to make the corporation income tax more unpopular than ever and so speed its repeal.

The Significance. It all sounded very plausible of Mr. Garner and very scheming of Mr. Mellon. The facts remained, however, that politics and bookkeeping are fluid sciences and that Democrat Garner of the Ways & Means Committee has, in a quiet, behind-the-scenes sort of way, quite as great a reputation as Mr. Mellon in both those sciences. It was Mr. Garner who, by clever maneuvers and legislative trading, virtually wrote the last two revisions of the revenue law. Without going so far as to suspect Mr. Garner of insincerity in his latest attack on Mr. Mellon, colleagues familiar with his tactics could not help wondering if he might not be recruiting strength for some legislative campaign far removed from Greek loans and Steel refunds, a campaign for some sidelong objective such as a schedule in the tariff when it is revised next session. Or, politics and bookkeeping being what they are, Mr. Garner, Democrat, might merely have sought to cause Mr. Mellon, Republican, the embarrassment of an involved explanation about U. S. fiscal machinery.

Reply. Mr. Mellon's reply was brief and patient. Tax refunds, he explained, cannot be figured in advance of their allowance by the Board of Tax Appeal. Their payment should not be delayed because the U. S. must pay 6% interest on all taxes improperly collected, from the date of collection. As to a prospective deficit, no such thing threatened, now that reports on U. S. business in the last half of 1928 were becoming available. It now appeared that the Treasury had underestimated revenues as well as refunds, especially the taxes payable on corporation incomes for 1928.

Mr. Mellon permitted himself one return thrust at Mr. Garner.

"The Treasury," he said, "makes a statement and has to be responsible for it, but Garner [or any Congressman] can make a statement and has no responsibility."