The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
°*m " ^ ^ ^ ck?" BOARD OF GOVERNORS ^S FEDERAL RESERVE SYSTEM Office Correspondence Xo Chairman E<?oles From Date j^ary 17, i9ho . Subject: The* Pftrifsral Net C o n t r i b u t i o n Hflnyy 1?,rhrn <;t.nr> t n Buying The possible deflationary effects of the program proposed in the Presidents Budget Message should not cause serious concern for the next six months at least* The Governments net contribution to buying power, which is currently running at the rate of around 1300*000*000 a month, is expected to continue at about this level during the first half of 19l|£U A possible decline in business activity in the next few months will, therefore, not be intensified by an abrupt curtailment of Government net expenditures as was the case in 1937• The following table gives my best judgment of the probable course of the net contribution figures quarterly through I9I4-O as compared with the recent past* The estimates for the first two quarters of 191+0 are considerably more reliable than those for the last two, because the latter depend upon Congress adhering rather closely to the expenditure recommendations for the fiscal year submitted in the Budget Message. STJlffl&RY TABLE OF NET CONTRIBUTION FIGURES SINCE 1936, WITH ESTIMATES THROUGH 191*0 (Monthly averates in millions of dollars) Adjusted receipts let contribution 701 350 727 351 372 659 355 556 608 528 80 676 797 550 527 811 796 509 1+97 126 270 312 299 859 837 772 553 565 272 550 222 825 5U7 278 Adjusted outlays Actual 1936-January-June*•«•••••*••» July-December* • *** 1937"" January- June • •••••• July-December••••*•••••* 1938-January*-June •. •***•*•••* July-December*•**••••*•• 1959"January-June•*••*••••••» July-December*•••••*•••• 103 Estimated 19i|.O-January-March* »*••*••**• April-June•••••••««••••• J u l y September • ••••••••• October-December*••••••• 306 - 2 - Comments 1« First half of I9I+O. During the first half of 1 l - the 9|0 Federal net contribution is expected to continue close to the recent high level• Outlays are expected to be above 1939 and, in fact, at a higher level than in any previous six-month period in post-war years, but this gain over 1939 should be offset by increased receipts reflecting chiefly the larger income tax collections from 1939 incomes. In this connection, it should be noted that these figures for the net contribution are lower than would be indicated from the estimates in the Budget Message• I believe that the Treasury estimates of receipts, particularly income taxes and customs, are decidedly too low and the budget estimates of expenditures are slightly high* 2• Last half of I I . U The anticipated decline in the net con91C tribution from the second to the third quarter of I I . is largely due to 94O the seasonal drop in agricultural benefit payments and in the Works Projects Administration expenditures• The final quarter recovery reflects mainly the seasonal increase in agricultural benefits and the continued growth in national defense outlays• 3« First half of 19lil« Although the Budget Message indicates that the Federal net contribution may be considerably reduced during the first half of ISUl, any precise figures presented at this time would have little value because of the many uncertainties in regard to Congressional action on the Presidents recommendations on expenditures suad taxes and the large margin of error in any revenue estiinates that far in the future.
