FISCAL: Red Year's End

(See front cover)

From the Treasury basement, where gold is stored, to the east wing of the White House runs a dark little tunnel under East Executive Avenue. Many times through this tunnel last week passed a thickset, youngish man with a big nose and eyes of clearest blue. He wore a linen suit. His teeth bit hard into a Benson & Hedges cigar. He walked fast. Out of the tunnel he skirted the rear portico of the White House (where the presidential kennels are), paced down the west colonnade, marched unannounced by a back door into the offices of the President of the U. S. Nobody barred his way because he was Ogden ("Oggie") Livingston Mills, the rich and high-born Undersecretary of the Treasury, now acting as the Department's chief in the absence of Secretary Andrew William Mellon. The President, many a time last week, wanted to see him in a hurry.

Mr. Mills was one of Washington's three busiest and most publicized men. The other two—President Hoover and Acting Secretary of State William Richards Castle Jr.—awaited him inside the air-cooled White House office. What engaged their joint attention there were the international negotiations incident to Mr. Hoover's proposed debt holiday (see p. 16). Undersecretary Mills was the President's statistical expert in whose head were all the facts and figures needed to deal with France. Two, three, sometimes four times a day President Hoover would summon him for conferences from his great oblong office on the second floor of the Treasury overlooking statues of Alexander Hamilton and William Tecumseh Sherman, with the Potomac beyond. So preoccupied was the Treasury's Undersecretary with the debt negotiations that he cancelled his usual Friday-to-Monday holiday at his summer home in Westbury, L. I. Miss Beatrice Todd, Mr. Mills's admiring secretary, has rarely worked harder or later at the Treasury than she did last week.

In the midst of this exciting activity over international affairs Undersecretary Mills paused briefly last week to wind up the fiscal year of 1931, balance the Treasury's books. And a red year it was for the Government. For the first time since the War, expenditures had, as everyone well knew they would, exceeded receipts, thereby producing a thumping big deficit. Perhaps it was just as well that Secretary Mellon, who had piled up ten annual surpluses in a row, .was away in Paris when the Treasury had to make its dismal accounting to the country. A depression far beyond his darkest estimates had hit the Government's pocketbook and now to his chief assistant fell the unpleasant task of making explanations.

Undersecretary Mills gathered together his fiscal statistics, added, subtracted, arrived at his totals. He found that the 1931 deficit was $903,000,000. The Government had had to go out and borrow $616,000,000 to keep functioning during the year and this sum was therefore added to the public debt. Every source of revenue had been affected by the drying-up process of hard times whereas expenditures had climbed to a new peacetime record. Mr. Mills's figures produced the following tables:

Revenue (in millions of dollars)

Source 1931 Decrease from 1930

Income tax 1,860 551

Customs 378 209

Internal Revenue (Tobacco, stamp and estate taxes, etc.. etc.) 569 59

Other Receipts (Foreign debt payments, Panama Canal tolls, property sales, etc.. etc.) 510 42

Total 3,317 861

Expenditures (in millions of dollars)

1931 Increase over 1930

Total 4,220 226

Increases over 1930

River & Harbor and Flood Control 25

Drought relief and road construction 119

Farm Board 41

Commerce Department 7

Postal Deficit 54

Bonus loans 112

Total 358

Decreases under 1930

Navy 20

Interest on public debt 48

Tax Refunds 64

Total 132

Increased expenditures ($358.000,000) less the Government's economies ($132,000,000) gave Mr. Mills his net increase in 1931 outlay ($226,000.000). Said he: "The increase was largely due to agricultural aid and relief, additional benefits to War veterans and the accelerated governmental construction activities which more than offset other reductions."

Deficit (in millions of dollars)

Increase of Expenditures 226

Decrease in Receipts 861

Total 1,087

Less surplus carried over from 1930 184

Net 1931 Deficit 903

Public Debt (in millions of dollars)

June 30. 1930 16,185

Retirements 440

Total 15,745

Borrowings 1,056

June 30, 1931 16,801

Net increase 616

What Undersecretary Mills had the most difficulty in explaining was the differences between Secretary Mellon's estimates of the Treasury condition and the actual figures. Last December Mr. Mellon set the deficit at $180,000,000, an error of $723,000.000. He missed his guess on receipts by $518,000,000, on expenditures by $205,000.000. Frankly declared Undersecretary Mills: "The discrepancy was due to the difficulty [last autumn] of measuring the severity and duration of the business depression. . . . The Treasury underestimated the effects which the fall in prices and the reduction in volume of business operations would have on taxable incomes.... At the time the estimates were made in the autumn it seemed not unlikely that the turn of the year would witness some business improvement."

A notable change has come over "Oggie" Mills since he entered the Treasury four years ago as the dictatorial, rather supercilious scion of a wealthy old family. Born 46 years ago at Newport, R. I. at the height of the social season, he inherited a background and outlook by no means favorable for a political career. His grandfather was Darius Ogden Mills who left a Buffalo bank for the 1849 gold rush, not as a prospector but as a hardheaded merchant and trader. Grandfather's first year's profit in California was $40,000. The Comstock Lode in Nevada made him rich. He doubled his money in railroad stock and timber land, returned to New York 30 years later to take his place near the top of Society. When he died in 1910 he left an estate of $41.000,000 in New York Central, Atchison, Topeka & Santa Fe, International Paper. Shredded Wheat, Tidewater Oil, Black Diamond Coal, Seaboard Air Line, et al. His daughter became the late great Mrs. Whitelaw Reid. His son Ogden collected works of art, married Ruth Livingston, great-great-great-granddaughter of Robert Livingston whose statue New York put into the U. S. Capitol as one of its two most illustrious citizens.*