DECEMBER 30, 1938
WASHINGTON, Thursday—I wonder how many of you read an article this morning by Mr. Walter Lippmann entitled, "The Level of Spending." In it, he takes up the different points of view expressed by Senator Byrd and Mr. Eccles, Governor of the Federal Reserve Board. I think he has stated the case of the increase of the budget in a very clear manner, but there is one point which should be emphasized. It is, I believe, entirely true that it is necessary to spend in order to bring up the general national income, but if the national income is raised, it will actually lower the necessity for government spending.
It is this point which I think the people need to understand. Mr. Lippmann is probably right, that taxes should be visible and that the only way to keep the general public in close touch with whatever Congress may do from the financial standpoint is to force them to see how it is paid, and that this can only be done if they see a direct relationship between their pockets and the government plans and expenditures. However, they should understand that raising the national income will lower this expenditure by giving more people a chance to earn their own living and removing them as a charge on the government.
One other thing seems to me vital for the general public to understand, namely, that individual saving for the future is valuable but that this saving should not be done in a way which takes money out of circulation. In other words, the public should see that its banks actually use the money they deposit.
No one should keep his money in a sock, for it is only as money creates more money that the national income can be raised. I can give you one concrete example. I know of a small city whose banks have more cash than they should hold for normal reserves. The city needs to borrow money for low-cost housing. This housing, however, cannot be built unless money can be borrowed at 3 percent. You and I receive between 1 1/2 and 2 1/2 percent on our savings bank deposits. We should probably be content with the lower figure for the sake of safety, and the bank should be willing to lend money at the rate which either the city or a private company doing such work as low-cost housing, could afford to pay.
This would keep your money in circulation, would increase business operations and would probably mean that the bank, as a result of more business, would get a higher rate of interest on future business loans. It seems to me important that people should think over these questions and bring their influence to bear in their communities if they decide that this kind of thing should be done, because it touches their future economic status.
I had a ride this morning and at 10:30 went to Sibley Hospital, where the Variety Club has just given some modern incubators which will probably mean the saving of the lives of many premature babies. This club is made up of the people in the city interested in entertainment of all kinds and they do a great deal of philanthropic work which means much to this community.