In disapproving H. R. 7483 entitled "An Act to Provide Minimum Pay for Postal Substitutes," the President wants it made perfectly clear that the disapproval is based not so much on the consideration of the additional expense involved should the bill become a law as on the broad consideration of public policy and the management of the postal service, the largest of the governmental functions.
Last year postal revenues had fallen of[ to such an extent and the volume of business transacted had reached such a low ebb, that the Postmaster General found it necessary in the interest of the taxpayers to curtail expenditures in every way possible. The reduced volume so affected the situation that it was obviously in the public interest to reduce deliveries in cities, to curtail some transportation services and to furlough regular employees for the reason that such employees could not be fully occupied. It necessarily followed that the thousands of substitute or emergency employees were not needed for actual duty. Therefore, allowances for the employment of substitutes were drastically curtailed.
However, within the past few weeks, as has been publicly announced by the Postmaster General, the revenues of the postal service have shown a marked increase and the volume of business has improved to such an extent that the Post Office Department has found it proper to restore much of the service that was curtailed, to eliminate the furloughs of regular employees and again to make it possible for such employees to enjoy their annual vacations with pay during the remainder of this fiscal year. The service increases and the restoration of the vacations have resulted in additional expenditures of approximately $6,000,000 over and above what had been previously authorized for the months of April, May and June. Allowances have been granted which will enable postmasters throughout the country to expend in excess of $3,500,000 additional for the employment of substitutes. There is no doubt that substitute employees in all of the larger cities, and indeed, in practically all of the first class offices, will be employed for more than a hundred hours a month as a result of the service restorations. This provides definite relief for this group of employees and there is every indication that their employment, as above indicated, will be continued.
This bill contains so many provisions that would hamper the administration of the postal service in determining its personnel needs, that as a matter of public policy and in the interest of good business management of the postal service of the United States, the President is impelled to disapprove the bill as presented.
May 1, 1934. Message to Congress on the Budget.
To the Congress:
In my budget message to the Congress of January 3, 1934, I said to you:
"It is evident to me, as I am sure it is evident to you, that powerful forces for recovery exist. It is by laying a foundation of confidence in the present and faith in the future that the upturn which we have so far seen will become cumulative. The cornerstone of this foundation is the good credit of the Government.
"It is, therefore, not strange nor is it academic that this credit has a profound effect upon the confidence so necessary to permit the new recovery to develop into maturity.
"If we maintain the course I have outlined, we can confidently look forward to cumulative beneficial forces represented by increased volume of business, more general profit, greater employment, a diminution of relief expenditures, larger governmental receipts and repayments, and greater human happiness."
The budget which I submitted to the Congress proposed expenditures for the balance of this fiscal year and for the coming fiscal year which, in the light of expected revenues, called for a definite deficiency on June 30, 1935, but, at the same time, held out the hope that annual deficits would terminate during the following fiscal year.
It is true that actual expenditures since January have proceeded at a slower rate than estimated; nevertheless, it must be borne in mind that, even though the actual deficit for the year ending June 30, 1934, will be below my estimate, appropriations are still in' force and the amounts actually to be expended during the following fiscal year will, therefore, be increased over and above my estimate for that fiscal year. In this connection it is relevant to point out that during the fiscal year 1935 it is estimated that there will be actually expended on public works $1,500,000,000 out of appropriations heretofore made.
In my budget message of January 3, 1934, it was pointed out that there could be no abrupt termination of emergency expenditures for recovery purposes, that the necessity for relief would continue, and that appropriations amounting to $3,166,000,000, in addition to the appropriations contained in the budget itself, would be requested for the two fiscal years ending June 30, 1935.
The present Congress has already made appropriations out of which, for the two fiscal years in question, it is estimated there will be expended the following sums:
Crop Loans 40,000,000
Farm Mortgages 40,000,000
Reconstruction Finance Corp 500,000,000
Veterans' Benefits 22,000,000
Army Air Corps 5,000,000
Flood Control, Mississippi River, etc 19,000,000
Independent Offices Act 228,000,000
Miscellaneous Supplemental Estimates ........................ 30,000,000
This leaves a balance of $1,322,000,000 to be appropriated.
Out of this balance it is necessary first to take the specific items to be appropriated for:
Federal Land Banks—
Subscription to paid-in surplus $75,000,000
Reduction in interest payments 7,950,000
Emergency Bank Act and Gold Transfer 3,000,000
Internal Revenue Service 10,000,000
Salaries, Office of the Secretary of the Treasury 100,000
Secret Service 45,000
This leaves $1,225,905,000 available for the following purposes:
Civilian Conservation Corps Camps, Public Works, and Relief Work, in addition to amounts already appropriated, and including aid to the dairy and beef cattle industries.
It is estimated that the minimum requirements for the Civilian Conservation Corps will be $285,000,000 and that the amount available, therefore, for public works and relief will be $940,905,000. A very simple checkup of these figures shows that they total $3,166,000,000, to which reference was made in my budget message of January 3, 1934.
It was my thought in January, and is my thought now, that this sum should be appropriated to me under fairly broad powers because of the fact that no one could then, or can now, determine the exact needs under hard and fixed appropriation headings. In furtherance of this thought it seems appropriate to provide that any savings which can be effected out of certain appropriations made for emergency purposes shall be available for emergency relief purposes.
In my judgment an appropriation in excess of the above amount would make more difficult if not impossible an actual balance of the budget in the fiscal year 1936, unless greatly increased taxes are provided. The present estimates should be sufficient as a whole to take care of the emergencies of relief and of orderly re-employment at least until the early part of the calendar year 1935. If at that time conditions have not improved as much as we today hope, the next Congress will be in session and will have full opportunity to act.
December 27, 1934. Letter to American Legion Commander Garland R. Farmer on the Soldiers' Bonus Issue.
Dear Commander Farmer:
I appreciate your letter of recent date, and it is particularly interesting in that it confirms an impression that I have had for some time; that is, that the bonus question is not well understood even among the veterans themselves.
I am also particularly impressed with one paragraph of your letter which confirms another conviction I have that the service men generally have the interests of their country and Government at heart. I have had prepared for me a memorandum which outlines in detail exactly what the Congress did in 1924 when they authorized the issuing of the Adjusted Service Certificates known generally as the "bonus." This memorandum I am inclosing herewith. I am sure that you will find in this memorandum sufficient information to enable you to decide for yourself the stand you should take on this issue as well as to be in a position, as I feel you should be, to advise legionnaires who come to you seeking information in regard to the immediate payment of the balance due on the Adjusted Service Certificates.
It is quite apparent from your letter in which you advise me of the reasons why the service men are demanding immediate payment of the bonus, that there is a general misunderstanding in regard to the Government's obligation in this matter. When, in 1924, the Congress decided to issue the Adjusted Service Certificates, they actually authorized a bonus of $1,400,000,000, but because of the stand taken at that time by those advocating the measure who felt that it would be in the interest of the service men themselves, this cash outlay was not made immediately, but was deferred for twenty years. Because of this deferment the initial bonus was increased 25 percent so that the $1,400,000,000 invested for the service men at 4 percent compounded annually, would mature in twenty years at $3,500,000,000. Or putting it another way, suppose that a veteran's original grant by the Congress in 1924 was $400 and that the veteran did not borrow on his certificate, permitting the interest to accumulate to maturity. The $400 would grow so that it would pay the veteran $1,000 when due in 1945. In other words, the amount which is printed upon the face of every Adjusted Service Certificate is not the amount of the basic or original bonus voted by the Congress, but is an amount plus 25 percent added for deferred payment which, with interest at 4 percent compounded annually over a twenty-year period, will produce the face or maturity value. This would seem to dispose of the question as to whether the obligation is immediately due.
There is another feature in connection with this matter that impresses me, and that is the fact that out of 3,500,000 certificates outstanding, 3,038,500 veterans have borrowed thereon approximately $1,690,000,000. In other words, some have borrowed more than the present worth of their bonus certificates. This is brought about by the action of the Congress permitting a veteran to borrow up to 50 percent of the face or maturity value of his certificate, even though that certificate may have been issued only a few days before the loan is made. Of course, all the certificates were not issued at the same time in 1925, but have been issued from that date up to the present time, so their present value or earned value, as we may put it, is not the same in all cases, but taking the aggregate of all the certificates issued they have a present value of $2,100,000,000, whereas their face value is $3,500,000,000. Then, too, I believe it has been suggested that the interest paid or now accumulated be canceled or remitted. If this plan were carried out the total amount would increase to $3,720,000,000; or putting it another way making the cost $1,620,000,000 over and above the present value and $2,320,000,000 above the amount which the Congress fixed as the original basic adjustment.
I feel sure that many of the veterans have not given the question sufficient study to realize the vast sums required to meet the demands suggested.
Your statement advising me that those who favor the immediate payment of the bonus feel that a good reason for doing so is because the Government has spent millions of dollars on the recovery program, and that much of these funds will not be repaid, while by the payment of the bonus the Government will be discharging an obligation, and by so discharging this obligation the money spent by the veterans will do much in a practical way of stimulating recovery, is interesting.
I know that you appreciate that all expenditures for relief have been made in the interest of recovery and for all our citizens, non-veterans as well as for veterans. All citizens in need have shared in the direct distribution for relief, and in employment, as you no doubt are aware, a very definite and distinct preference is given to veterans. I am advised that at the time the issue of paying the balance of the bonus was up and a compromise was made by increasing the loan value to 50 percent of the face value, there resulted a distribution of approximately a billion dollars, and at that time the same argument was advanced that the expenditure of such a large amount of money by the veterans would greatly stimulate business and aid recovery. A survey of the results showed otherwise. This large payment resulted in little stimulation of business, and in many of the larger cities no material change was indicated at all. It was found that indebtedness created by the veterans prior to the payment was liquidated, and the money advanced to veterans went to clear that indebtedness rather than to create new business. No doubt the same results would obtain if the balance were now paid. However, in this connection what to me is very important, having in mind that the bonus certificate is a paid-up endowment policy payable either to the veteran upon its maturity or to his beneficiary, generally the wife and children in the event of his death, is the fact that of the veterans who die, approximately 85 percent of them leave no other asset to their family but the Adjusted Service Certificate or the balance due on the certificate. I feel, therefore, that those who advocate the payment of these certificates at this time for the purpose of stimulating business certainly cannot have given the interests of the veterans much thought.
I appreciate your truly patriotic interest in desiring to obtain full information on an issue so vital to the service men and our country. I am giving you this information with the hope that it will be useful in enabling you to reach a conclusion in your own mind regarding the matter as well as helping others to determine the fair thing to do.
December 27, 1934. Memorandum Accompanying the Foregoing Letter.
The Congress, by the passage of the Act of May 19, 1924, provided for the granting of additional compensation to each veteran, with certain specified exceptions, of $1 per day for services in the United States and $1.25 per day for services over seas, in excess of the first sixty days of services. The amount thus determined was increased by 25 percent because of deferment of payment. Using the aggregate as a net single premium according to the American Experience Table of Mortality with interest at 4 percent per annum, entitlement was granted to the veterans to payment, twenty years after 1925 or date of application, of a sum approximately two and one-half times that of the basic adjustment. The 150 percent increase represents the additional amount granted because of deferment of payment and the compounded interest. Thus an original grant of $400 in 1925 would enlarge itself to $1000 in 1945. If in 1925 the $1 and $1.25 per day adjustment had been paid in cash the veterans would have received a total of $1,400,000,000, but by deferring the payment twenty years the sum became $3,500,000,000.
Under the original law, veterans were permitted to borrow on their certificates according to the reserve value thereof, but in February 1931 an amendment increased, without regard to actuarial value, the amount which could be borrowed to 50 percent of the maturity value. This amendment also fixed the maximum interest which could be charged on loans at 4 1/2 percent, which rate was subsequently reduced to 3 1/2 percent by the Act of July 21, 1932. The amount, including interest charges now outstanding because of loans made to veterans, is slightly less than $1,690,000,000. Of this amount, $1,470,000,000 is represented by actual payments disbursed by the Veterans' Administration. The difference between the maturity value and the present liens on certificates is $1,810,000,000. However, the difference between the present value of the certificates, actuarially computed, and the amount outstanding as liens is only $410,000,000. As the major portion of this difference is represented by the value of the onehalf million certificates which have not been borrowed upon, only $130,000,000 would be payable on the present value basis to the three million men who have borrowed on their certificates, representing an average equity of about $43 on the average certificate in contrast to the $500 which is now sought to be paid by the resolution of the American Legion.
In substance, this resolution seeks the remitting of interest in an amount in excess of $220,000,000 charged to the veterans' accounts, but would require the immediate payment by the Government of interest that will not have been earned until 1945, which together with the amount granted on account of deferred payments totals $2,100,000,000 more than the $1 and $1.25 a day adjustment provided by the original Act. The present value of the certificates in force is $2,100,000,000, whereas it is sought to have now paid $3,720,000,000 (the maturity or face value plus remittance of interest), or an additional amount of $1,620,000,000 over and above the present value and $2,320,000,000 more than the original basic adjustment.