Deficit No. 2

The gold supply of the U. S. last week stood at $4,998,000,000. an all-time record. It represented almost one-half of the entire world's gold stock ($11,262,000,000). Yet the U. S. Treasury, poor amid riches, had to go out into the money market again as a borrower on a scale larger than at any one time since the War. Secretary Mellon called for offers on an $800,000,000 bond issue to mature in 24 years, and $300,000,000 worth of one-year Treasury certificates. The bonds paid 3%. lowest rate since the War. The certificates went for 1 1/8%, another post-War low. Despite the low interest rates the certificate issue was oversubscribed (four times) in 48 hours, the bond issue in 72 hours.

The Treasury had to borrow because it was living far beyond its means. Last year it piled up a $903,000,000 deficit. On July i it started over again with a clean fiscal slate. Last week the 1932 deficit rolled up during the first two months of the fiscal year amounted to $396,000,000 compared to $240,000,000 for the same period last year. If the July- August rate of spending was maintained, it meant that the Treasury would be more than $2,000,000,000 in the red next June 30. But Treasury actuaries explained that the July-August period was an inaccurate gauge for a full year, "guessed" that the 1932 deficit would approximate $1,500,000,000. Chief items of increased expense: postal service, public construction to absorb unemployment.

This state of fiscal affairs caused President Hoover concern. He pondered it carefully with his Cabinet. Obviously the Government could not be allowed to run deeper & deeper into debt during the Depression. After newsmen had had a press conference with the President, there began to appear identical newsstories with an authoritative White House background to the effect that the President had not "closed his mind" to tax upping at the coming session of Congress, that Europe's condition "dominated" U. S. economic recovery, that he hoped for a revival of foreign trade soon. Much was made of the fact that the treasury had some $3,500,000,000 in "accumulated fat" on its bones--that is, reductions in the public debt during the last prosperous decade in excess of the annual amounts specified by Congress.

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