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April 15,
COMMENTS ON GOLDSMITH1 S LETTER OF MAJRCH 30, 19J4-O
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 19^4-1 as a whole, he estimates
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 I9I1-I
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.