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April 15, COMMENTS ON GOLDSMITH1 S LETTER OF MAJRCH 30, 1 J 94O Goldsmith's figure on the probable amount of open-ipjarket O/r3rnment and Government guaranteed obligations that will be sold for cash during the coming year of $1,500,000,000 appears to be incorrect by about 11,000,000,000. The amount of direct obligations which he indicates will be necessary to keep the Treasury balance at 01,000,000,000 or higher is about $800,000,000. According to our figures, we m i l need no direct financing at all for this purpose. Mr. Goldsmith1s error at present seems to be mainly in his failure to include enough receipts from the various Social Security funds, including State unemployment trust funds. Also, for fiscal year 1 ^ - as a whole, he estimates 941 that expenditures other than W.PJU m i l be ^250,000,000 above the Budget estimates. TBhile it is too early in the session to say what this figure will actually be, we are tentatively carrying a figure of about 150,000,000 below Budget estimates except W.P.A* expenditures. This takes into account the probable Congressional action on the various appropriation bills now pending and a lag in military expenditures behind the figure shown in the Budget Message last January* The table below shows a comparison of Mr. Goldsmith's and our estimates. In order to put the estimates on the same basis, we have assumed that no new taxes will be levied and that increased expenditures of $250,000,000 will be authorized for W.F.A. It is interesting to note that for fiscal year I9I4I Goldsmith's figure of the excess of revenue over Budget estimates is very close to our figure, while he shows a slightly larger amount received by the Treasury from sales of Savings bonds. Comparison of Goldsmith and Independent Estimates, Fiscal Year I I 91I o £ dollars) Independent Goldsmith Treasury cash balance, June 30, I9I4.O, assuming no cash financing 1,000 1,170 Cash requirements, fiscal year 19^1 * Budget estimate of deficit, including $i|60,000,000 of new taxes and return of $700,000,000 of surplus funds of Government agencies 1,720 1,700 Adjustment in receipts: Deduct new taxes Add increased revenue +125 Add increased expenditures: W. P. A. Other +200 •500 Total deficit 27350 Deduct noncash items, net receipts in Social Security accounts, etc. Total requirements Sales of U. S# Savings bonds Net requirements Sales of direct obligations if working balance is kept at #1,000,000,000 800 Sales of obligations for return of surplus funds to Treasury 700 500 1/ Total direct and guaranteed direct financing 1,500 TJ So far as I know, there are no detailed plans on how the various corporations will raise the cash to repay capital to the Treasury. I doubt, however, that more than 1500,000,000 of the $700,000,000 will be raised by sales of guaranteed obligations or liquidation of the corporations1 holdings of Government securities.