The Budget.—An important fiscal development of this period was the inauguration of an Executive Budget, under an Act of Congress of June io, 1921. A Bureau of the Budget was estab lished in the Treasury Department under the immediate direction of the President, to prepare the annual budget and such supple mental and deficiency estimates as the President might desire to recommend to Congress. The bureau was transferred to the Exec utive office of the President, effective July 1, 1939, under Re organization Plan No. 1. The bureau is authorized "to assemble, correlate, revise, reduce, or increase the estimates of the several departments or establishments." The budget is submitted annually to Congress by the President.
Loans to Foreign Governments.—During and after the World War, the United States made loans aggregating more than $10,000,000,000 to foreign governments. Over $7,000,000,000 of these loans were made to Allied Governments before the Armistice to assist them in purchasing war supplies in the United States. After the Armistice, about $2,500,000,000 of post-Armistice loans were made, and, in addition, about $740,000,000 of excess war supplies, food stuffs and other relief supplies required for needy populations were sold on credit. Funding agreements were reached with 15 of the 20 debtor countries, providing, with two exceptions, for repayment over a period of 62 years, with interest at rates between i% and 31%, and in some cases with no interest. In Dec. 1931 Congress authorized a moratorium on these debts during the fiscal year 1932. At the expiration of this moratorium, six countries resumed their payments in full and two made token payments; in 1933 Finland continued paying in full but the other seven made only token payments. After Dec. 1933 all remittances ceased except those of Finland, which continued payments in full, and Greece and Hungary which continued to make certain par tial payments.
By an act approved April 13, 1934, Congress prohibited the purchase or sale in the United States of any new issues of se curities of, or the making of any loan to, any foreign government or political subdivision (except a renewal or adjustment of ex isting indebtedness) while that government is in default in the payment of its obligations to the Government of the U.S.
Up to June 30, 1939, the U.S. had received payments on ac count of interest and principal aggregating The world-wide depression that began in the middle of 1929 produced effects upon the national finances comparable to those of a major war. The efforts of President Hoover's Administration
were largely centred on Government loans to financially em barrassed railroads, banks, insurance companies and other busi ness enterprises. By the time of President Roosevelt's inaugura tion (March 4, however, the rapid spread of State-wide banking holidays that had been declared in a number of States during the preceding month threatened the imminent collapse of the whole financial machinery of the country. President Roose velt met this situation by an immediate nation-wide suspension of banking operations, followed very shortly by the reopening of all banks that appeared to merit public confidence. In order to achieve greater monetary flexibility, and among other things to stimulate a recovery in commodity prices and an expansion of credit at low interest rates, the operation of the gold standard in the form prevailing before 1933 was suspended, and later the gold content of the dollar reduced. The pressing problems of farm debts and extremely low agricultural prices were attacked by a broad program of agricultural adjustment and an increase of credit facilities for farmers. The heavy burden of urban as well as farm debt was lightened through the establishment of new credit agen cies and the stimulation of old ones. Meanwhile, recognizing the enormous expenditures required for unemployment relief, Con gress made a greatly increased volume of Federal funds available for direct and work relief and as grants-in-aid to the States and their subdivisions for the construction of public works. The estab lishment for the first time of a nation-wide relief system was fol lowed in 1935 by the initiation of permanent measures to provide security against the hazards of unemployment and old-age on a national scale.
Taxation.—To finance as large a proportion of the increased costs of government through taxation as was compatible with eco nomic recovery, numerous steps were taken to strengthen the tax system. At the same time tax measures were adopted in con junction with the agricultural, old age security and unemployment insurance programs. Important alterations in the tax structure were made in the Revenue Acts of 1932, 1936, 1937, 1938 and 1939, in the National Industrial Recovery Act, the Liquor Taxing Act, the Agricultural Adjustment Act (held uncon stitutional in 1936), the Social Security Act, the Carriers Taxing Act, the Railroad Unemployment Insurance Act and the Public Salaries Tax Act.