Dear Frank: Thank you very much for your note.1 You did not describe the gripes of the people you classed as "upstart" Republicans, but later in your letter you talked about taxation, so I assume that this subject was at least one that you had in mind as curdling the blood of this particular group.2
There are, of course, millions of Republicans that agree with your hotel man that we simply must cut taxes or have the Republican Congress thrown out on its ear.3
How about the people that voted the vast sums that made these taxes necessary? The Administration that entered last January has the job of providing the money to meet 81 billion dollars of obligations over and above whatever costs of government we ourselves incur or authorize. By this I mean that over and beyond all the amounts of money that have been collected in taxes, the Congress has authorized buying on an installment basis 81 billion dollars worth of materials still unpaid for.
This year revenues were several billion dollars less than were officially estimated by the outgoing Administration. Consequently, the Federal deficit was raised by that much. So that instead of having 5.9 billions to secure by deficit spending (which means printing money in the final analysis) it was something on the order of 9 billions. It will take several years to get this installment buying within manageable proportions and to pay up the great sums that are coming due each year.
Suppose we reduce taxes and so increase the deficit, what is going to be the value then of your retired pay? There are millions of people living on pensions or on income from investments, or payments from insurance companies, or on interest. Every one of these individuals will be ruined if we do not stop the deflation in the value of the dollar. Indeed this means that there is no such thing as tax reduction as long as your dollar is deflated because you cannot bring to the individual enough benefit in reducing taxes in order to compensate for the constant lowering of the purchasing power of the dollar.
Of course, the budgetary deficit is only one of the items that goes into inflation, but it is an important one and when it is present all the others work with particular emphasis. Beginning in June, 1952, when I first started talking specifically about political matters, but going back also to some of the public talks I made when I was President of Columbia University, I have always maintained one thing--that the federal deficit must be eliminated in order that tax reduction can begin. Reverse this order and you will never have tax reduction.4
All this seems so simple that no one ever quarrels with me when I lay it out in front of them face to face. But I get letters such as yours daily. People apparently think that they can reduce taxes regardless of how much is owed by the Federal government. So I spend my life trying to cut expenditures, balance the budget, and then get at the popular business of lowering taxes.
Give my love to Louise.5 Cordially
