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Neither the President nor his Secretary of the Treasury seems to have been aware that this single cloud on the horizon portended a storm of long duration. Yet within a year it became necessary to delay further reductions in the naval establishment and to impose new taxes to meet the very contingency which the peace-loving President declared most remote.
For the remaining battalions were short of their proper strength, and it took all the recruits set free by the so-called reductions to bring the 148 some of which were badly short of officers and men alike to the proper establishment required for the six new divisions of the Expeditionary Force.
"The rivalry of the capitalists among themselves," replied the lad, "to tempt the buyers' custom certainly prompted them to undersell one another by nominal reductions of prices, but it was rarely that these nominal reductions, though often in appearance very large, really represented in the long run any economic benefit to the people at large, for they were generally effected by means which nullified their practical value."
Even the purblind people of that day recognized the vanity of the pretended reductions in price by the epithet 'cheap and nasty, with which they characterized cheapened goods. All this class of reductions, it is plain, cost the consumer two dollars for every one it professed to save him.
"No, gentlemen," the dreamer replies at last, "your reductions and your constructions are too easy-going, too conjectural, too much dominated by prepossessions and the 'will to interpret. The alleged sources or determinants for this dream may or may not have played the parts you assign to them; the mystery of the matter must remain inscrutable.
A year ago the nation was experiencing a decline in employment and output. Today that recession is fading into history, and this without gigantic, hastily-improvised public works projects or untimely tax reductions. A healthy and vigorous recovery has been under way since last May. New homes are being built at the highest rate in several years. Retail sales are at peak levels.
To achieve this reduction within the limits of a manageable budgetary deficit, I urge: first, that these cuts be phased over 3 calendar years, beginning in 1963 with a cut of some $6 billion at annual rates; second, that these reductions be coupled with selected structural changes, beginning in 1964, which will broaden the tax base, end unfair or unnecessary preferences, remove or lighten certain hardships, and in the net offset some $3.5 billion of the revenue loss; and third, that budgetary receipts at the outset be increased by $1.5 billion a year, without any change in tax liabilities, by gradually shifting the tax payments of large corporations to a more current time schedule.
It is essential, to prevent inflation, that we ask both labor and business to exercise price and wage restraint, and I do so again tonight. I believe it desirable, because of increased military expenditures, that you temporarily restore the automobile and certain telephone excise tax reductions made effective only 12 days ago.
In a large sense these undertakings have been adhered to and we have not witnessed the usual reductions of wages which have always heretofore marked depressions. The index of union wage scales shows them to be today fully up to the level of any of the previous three years. In consequence the buying power of the country has been much larger than would otherwise have been the case.
In case these taxes shall be abolished the revenues that will still remain to the Government will, in my opinion, not only suffice to meet its reasonable expenditures, but will afford a surplus large enough to permit such tariff reduction as may seem to be advisable when the results of recent revenue laws and commercial treaties shall have shown in what quarters those reductions can be most judiciously effected.
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