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BOARD OF GOVERNORS FEDERAL RESERVE SYSTEM 2£ c e C o r r e s p o n d e n c e Vice Chairman Eooles Pram Thomas L« S m i t h _ D a t e A P m 22, 191$ Subject; Recent r e v i s i o n s i n estimated budget surplus and change i n Treasury 1 s cash % balance. I n connection w i t h your recent testimony, you were f u r n i s h e d w i t h an estimate o f a budgetary d e f i c i t o f 3#2 b i l l i o n d o l l a r s f o r the nine months, April-December The estimate used a t the meeting of the Executive Comm i t t e e on A p r i l 20 shows a budgetary d e f i c i t i n t h i s p e r i o d of 2.3 " b i l l i o n . Xhe d i f f e r e n c e o f 900 m i l l i o n i s accounted f o r by a decreased budget d e f i c i t i n the c u r r e n t A p r i l - J u n e q u a r t e r amounting t o 300 m i l l i o n and an e s t i mated delay u n t i l the calendar year 1949 o f i n t e r n a t i o n a l expenditures amounting t o 600 m i l l i o n d o l l a r s p r e v i o u s l y shown i n the July-December I9I4S estimates. The decrease of 300 m i l l i o n i n the budget d e f i c i t i n the c u r r e n t q u a r t e r r e s u l t s from s u b s t i t u t i o n o f the Treasury estimate o f r e c e i p t s under the c a t e gory "Miscellaneous R e c e i p t s . n These are a composite of r e c e i p t s from many small sources about w h i c h we have l i t t l e d e t a i l e d i n f o r m a t i o n , so we used the Treasury f i g u r e even though t h i s i m p l i e s some increase above the q u a r t e r l y average thus f a r i n the f i s c a l year. ( i n a d d i t i o n , b o t h r e c e i p t s and expenditures are i n creased 200 m i l l i o n w i t h o u t a f f e c t i n g the cash balance or the estimated budget surplus. Einal c o l l e c t i o n figures f o r l a r c h , not available u n t i l a f t e r midA p r i l , i n d i c a t e d t h a t i n r e c o n c i l i n g w i t h the known cash balance o f 5*0 M l l i o n a t the end of l a r c h , we had p r e v i o u s l y estimated b o t h income t a x r e c e i p t s and miscellaneous expenditures 200 m i l l i o n too l o w . ) The s h i f t i n t o the calendar year 1949 o f 600 m i l l i o n of i n t e r n a t i o n a l e x p e n d i t u r e s , p r i m a r i l y under the European R e l i e f Program, was made a f t e r cons u l t a t i o n w i t h Budget Bureau o f f i c i a l s i n d i c a t e d t h a t our o r i g i n a l estimate f o r I9I4.8 was probably too h i g h . However, b o t h estimates f o r 19^4-8 i n c l u d e 1 b i l l i o n o f expenditures under the P r e s i d e n t s expanded program which i s n o t covered by the January Budget message. The estimated cash balance a t the end o f December 19ij8* 2 . 6 b i l l i o n , i s 1.0 b i l l i o n higher than p r e v i o u s l y estimated because o f the 900 m i l l i o n smaller budget d e f i c i t and a n e g l i g i b l e d i f f e r e n c e i n the estimated change of nonmarketable d e b t . The estimated cash balance a t the end of June 1949* 4#2 b i l l i o n , i s &bout the same as p r e v i o u s l y estimated, 4 * 4 b i l l i o n . As compared w i t h our p r e vious e s t i m a t e , we have assumed a d d i t i o n a l expenditures o f 700 m i l l i o n under the P r e s i d e n t ' s program f o r the f i s c a l year 1949 (3*6 b i l l i o n a d d i t i o n a l vs. 2 . 9 f o r m e r l y ) b u t t h i s d r a i n on the cash balance i s o f f s e t by the 300 m i l l i o n increase i n our estimated budget surplus i n the l a s t q u a r t e r o f f i s c a l 1948 and by a 200 m i l l i o n , g r e a t e r increase i n nonmarketable debt i n f i s c a l 1949 and the l a s t q u a r t e r o f f i s c a l 1948* The r e v i s i o n s i n the estimates are n o t s u f f i c i e n t t o a f f e c t e i t h e r our recommendations t o the Treasury or the p o i n t s made i n your testimony. The margin i s t h i n and the estimates are n o t t h a t good, p a r t i c u l a r l y f o r expendi t u r e s w h i c h are i n a s t a t e o f f l u x w h i l e the n a t i o n a l defense program i s being worked o u t . fl \J
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