126
The President’s News Conference of
April 15, 1932

THE PRESIDENT. I have had a number of questions and certain discussions with members of the press, in which I have been asked if I would discuss with you, purely for background, something of the economic situation and something of the fiscal policies and generally discuss a number of things merely for your information, as I see them. And so I determined to try it out and see whether I could be of any help to you on clearing up some current questions. This is wholly for background purposes. In an unedited statement of this kind I hesitate to be quoted, because I am dealing with some very difficult questions.

As you know, the economic situation in the country is largely one of public confidence. It has reached that stage where the great economic forces of liquidation have more or less spent themselves, and liquidation has gone, in fact, entirely too far. In the middle of February, we had had a very distinct reestablishment of confidence and courage throughout the country. We have had during the last 3 weeks a considerable setback. It has arisen from a number of apprehensions which I feel are overexaggerated and to a great extent unwarranted. But these are times, of course, when sentiment is easily influenced, and it is time when we peculiarly need the courage and confidence of the business world, that is, the banking world and the production world-everybody right down to the smallest merchant and the smallest manufacturer. That is the group that must have the leadership in recovery. It is their activities that bring back employment. And there are a good many causes which have discouraged them. As I stated, I think they are overexaggerated.

The tax bill, of course, contains items which are discouraging, and its passage was a good deal delayed and the debate has had some badeffects. Any tax bill of course—or this tax bill at least—contains a number of sales taxes on special commodities. It contains also tariffs. The tendency of any action by the Congress on commodities, irrespective of what the nature of the action may be, tends to slow up business in those particular lines of activity. That is one thing that bears on the present situation. The essential thing is to get the tax bill through at the earliest possible moment, and I am confident that the sentiment in the Senate and in the House is one for an immediate straightening out of the rough edges of the tax bill and for the most expeditious passing of it. I do not believe there is going to be any more than just the normal and necessary delay. In fact, I am confident that Congress is going to put forward unusual exertion to close the matter up. That is the encouraging phase of that situation.

Another one of the contributions to the setback in confidence has been the agitation of the bonus, of course, but any canvass of the Senate will show that it is impossible for the bill to become taw. A possible canvass of the House would indicate the same thing at the present stage, and so the public alarm on that is entirely ill-placed.

And another apprehension which we should have got by, and in fact are by if the public only realized it, and that is with regard to the banking situation. The results attained by the Reconstruction Corporation have reached a stage that pretty clearly indicate that the major banking crisis of the country is now past. That is indicated by the fact that in the 9 weeks prior to the time when the Corporation came into action we had a net number of 655 banks closed. That is net after deducting the number that were reopened in the same period. And the net amount of deposits in those banks that were closed were $478 million. Now, taking the average size of deposits in the United States, that means that something over 1,200,000 people were deprived of their immediate resources in that period of 9 weeks, which is a very considerable number of families if you apply it in that direction. Inthe 9 weeks since the Corporation has been operating, after we deduct banks reopened, there were only 77 banks closed, and total deposits of $25 million. In other words, there has been a reversal of the situation by 95 percent. Another indication of the passage of the banking crisis is the fact that in the 9 weeks before the anti-hoarding campaign, which coincided with the Reconstruction Corporation, we had about $400 million of currency withdrawn from the banks, whereas in the 9 weeks since we not only have had no withdrawals of balance, but have gained $250 million of returned currency. Both of these facts should indicate that we are by the major banking crisis and that it is behind us.

And, of course, another fundamental contribution to the stability of the situation is the obvious acceptance by everybody that the budget must be balanced. In the discussion over the form of taxes and the form of reduction of expenses, we sometimes lose sight of the fundamental thing and that is the enormous importance of the general acceptance that the budget is and will be balanced. What is more, the sentiment has grown definitely in the last 2 weeks for the acceptance of a drastic and I think an omnibus economy bill which will attack that quarter of expenditure which cannot be reached except by amendment and alteration of the existing laws. In other words, outside of the field that can be reached by appropriations, either through executive action or the appropriations committees. The economies that can be reached in that direction are apparently close to $200 million, and that added to the $369 million already cut from the budget before it was sent to Congress, and then again to add cuts in progress by the appropriations committees which look like somewhere in the neighborhood of $100 million, even if we accept the postponements we have an aggregate from all of over $650 million—somewhere between $650 million and $700 million reduction in Federal expenses.

If you consider the fact that nearly 60 percent of the expenditures of the Federal Government are fixed commitments of the Government in the shape of debts and obligations for pensions and subsidies to the States, outstanding contracts, et cetera, et cetera, you will see that wehave only 40 percent of the Federal expenditure to attack, and that out of that area of 40 percent we are securing a reduction of nearly 40 percent of the 442). That is the most drastic reduction of governmental expenses that I think has been undertaken by any government in any time in any one year.

Q. Mr. President, isn’t that 40 percent of 30 percent ?

THE PRESIDENT. Fixed expenditures about 60 percent. As a matter of fact, the fixed amount is somewhere between $2,500 million and $2,600 million out of the $4,300 million of budget.

The fact that the Government is facing the reduction of expenditures, that Congress is facing it, and that the administration is facing it, ought to contribute to the restoration of confidence in the country as a whole.

Incidentally, I might mention one or two things of the plan proposed by the administration, which may or may not be accepted by the Congress, but which have a bearing on the economic situation. The plan as we propose it, and which has been accepted by some members of the Economy Committee, establishes the principle of the 5-hour day, which is going to be a public necessity in the recovery from this depression to a large extent. I mean the 5-day week, or some similar working period. So, using the 5-day week as a slogan really is not an accurate way of approaching the subject. It is really shortening of working hours and a larger distribution of labor. In the plan which we put forward we gain rather more actual economy, but of equal importance, if the appropriation bills go through as they are now cut by the Congress and by the administration, we are going to be compelled to discharge anything from 5,000 to 10,000 Government employees in the midst of unemployment, and if this plan were accepted, we would hold all of those people. But even beyond that, and of rather more importance from the point of view of employment, in order to work that plan we will have to take on somewhere from 30,000 to 35,000 more Government employees. In other words, we will have to take on a list of substitutes in all of the Government departments because the Government must continue to function. The Government does not go on a 5-day week. In many of its brancheswe could not give a 30-day holiday or 5-day week in that someone has to take his place in a great many of the branches of the Government. But in the balance between the amounts which we have for retaining employees that would otherwise be discharged and by taking on further employees, as against the saving that we make by going on the 5-day week and the comparable staggering of salaries, we wash out somewhere between $75 million and $80 million of savings. That is rather a side issue to mention, but I thought I might make that clear as I go along.

There is another phase of the general situation which I find considerably overlooked in public discussion which bears on the whole subject of Government economy. I am not entering on a partisan debate. But the general impression of the public is that the Government has been extravagantly run and that the cause of our difficulties is that. It may be that we are subject to that charge. We have been running in a period when all the world wanted to spend something and all the world has been down to persuade Congress to do it within the last 10 years. But disregarding that altogether, the financial difficulties of the Government are due to the drop in income receipts. Only one figure illustrates that, in that the income tax has averaged in a normal year somewhere about $2,400 million, and we are budgeting only for $860 million for next year. In other words, we are anticipating a drop in all our calculations of approximately $1,400 million in Government income in one category of tax receipts alone. In fact, the total drop in Government income that we are basing our budget on is about $1,500 million. So the necessity of increase in taxes to reduce expenses does not arise from our extravagances. It arises from our loss of income—another practical fact. There is one phase of that—the proposed increase of tax is somewhere about $1,200 million. I gave you the wrong figure a moment ago. The total drop of income is about $2 billion. We are proposing to increase taxes to bring in a revenue of $1,200 million. So that we are not asking the taxpayer to make up the whole of this deficit—we are meeting the deficit caused by the fall in income to a very considerable degree by cutting expenses and adjustments of one character and another.

And finally, there is one other reason for renewed encouragement and that is one of the greatest undertakings made in support of the situation in the Government taken by the Federal Reserve System during this week in the policy of concerted, organized credit expansion. That is, through the expansion of open market operations and the drive for expansion of credit through the banks to business and industry.

In a large sense, therefore, I feel that the wave of pessimism over the past 2 or 3 weeks has been overdone in the face of the actual situation that exists, which contains many fundamentally favorable aspects. That is all I have to say.

Q. Mr. President, may we refer to that 5-day week ? When you speak of washing out at $75 million to $80 million of possible saving, does that mean an increase over the net budget (?) 1 to that extent ?

THE PRESIDENT. No, there will be a decrease in our expenses for salaries of about $75 million to $80 million. We take on the additional employees within that. They will be part-time employees.

¹ The question mark appears in the transcript.

Q. Mr. President, does the 5-day week operate throughout the Federal service ?

THE PRESIDENT. We have to make some exceptions. Generally speaking it does, but in order to work it you understand that it can only apply directly to the per diem employees, and it is applied there by doing away with the equivalent of the Saturday forenoon work. At the end of a year it would mean about one-half of 52 weeks, which would amount to 26 days of holiday without pay. Then we make the equivalent in the salary basis by making a calendar month of holiday without pay, which amounts to almost exactly the same thing as the 5-day week although we would not apply it in one single stretch of 30 days in most positions.

Q. Mr. President, your remarks regarding the necessity of staggering work as essential to pull us out—is that intended to apply only to the Government establishment or to industry ?

THE PRESIDENT. The manufacturing industries of the country are today running anywhere from a 2- to 4-day week, and as we recover from this depression, which we are going to someday, the normal course would be for them to put on more days work per week for their employees, and the normal course would be to stop at the point when they have gotten to the 5-day week, or its equivalent in hours, until such a time as we have taken up the slack of all the unemployment. And I think the feeling is that if the Government entered into the same field of thought it might help in establishing that entire situation.

NOTE: President Hoover’s two hundred and forty-fourth news conference was held in the White House at 4 p.m. on Friday, April 15, 1932.