22 MISC. PUBLICATION 570, U. S. DEPT. OF AGRICULTURE 



be increased, but individual consumers would be left free to 

 spend their increased purchasing power for the products of their 

 choice. The allocation of private income would, as is the case now, 

 largely direct or guide the production activities of the economy. 



Whether or not action is taken in the future to expand greatly 

 any or all of these types of expenditures in order to avoid mass unem- 

 ployment, it is well to remember what the Nation had to do in the 

 last depression after millions of workers had lost their jobs. Billions 

 of dollars had to be spent for relief payments, payments to farmers, 

 subsidies to business, public works, CCC camps, and a long list of 

 other activities, the principal effect of which was to raise consumer 

 purchasing power for the goods and products of private industry. 

 It is certain that the depression would have been much less severe 

 and private employment would have remained higher if Government 

 expenditures had been planned and started much earlier. The funda- 

 mental fact that cannot be escaped is that mass purchasing power 

 must be maintained if production and employment are to be main- 

 tained. 



If deflation and unemployment should threaten in peacetime, would 

 the Government spend too little or tax too much to provide jobs not 

 otherwise available, or would it spend and tax the right amount? 

 Whether it spends and taxes enough or too little will depend upon 

 whether the people of the United States value full employment highly 

 enough to require the Federal Government to adopt the requisite 

 monetary and fiscal policies. It can be done. 



MANAGEMENT OF THE FEDERAL DEBT 



One of the important problems of Federal fiscal policy after the 

 war will be: How to manage the national debt? National income 

 and employment must be high if the Government is to be able to 

 raise enough money through taxes to pay the interest on the debt, 

 make payments on the principal or refund bond issues as they come 

 due, and at the same time provide other necessary and desirable 

 governmental services. 



In considering the possibilities for improving the timing and coor- 

 dination of public expenditures, it was assumed that it might not be 

 possible to balance the budget of Federal, State, and local Govern- 

 ments each year, but that over a period of years it would be possible 

 to balance budgets by retiring debt with budget surpluses in periods 

 of full employment and increasing the debt because of budget deficits 

 when private income is low and Government expenditures are heavy. 

 To the extent that municipal, State, and Federal budget policy could 

 be more closely coordinated than at present to plan in advance for 

 such alternate borrowing and debt-retiring periods, the burden of 

 public spending programs would not fall so heavily on the Federal 

 Government as was the case in the 1930's. But if future develop- 

 ments are such that heavy public spending over a period of years 

 becomes necessary, it is certain that the Federal Government would 

 have to assume major responsibility for obtaining the necessary 

 funds. 



If the Federal Government follows the policy of retiring debt only 

 as an anti-inflationary measure during periods of prosperity, and of 

 expanding it to counteract unemployment, there may be a gradual 



