(6 of 7)
But all of these jobs are minor compared with the real job of restoring the Treasury to effective leadership. John Snyder had a preoccupation with borrowing money at low interest rates. To his credit as a banker, he kept the cost of servicing the debt low, but the policy itself contributed to a postwar inflation.
Humphrey is eloquent on the perils of inflation, but he senses another peril in slamming the U.S. economy against the dashboard if he puts on the brakes too fast. He has a businessman's horror of running a government by deficit, and is a devout believer in the balanced budget (even to the point of personal conviction that defense spending should be cut if necessary, to balance the budget). But Humphrey knows that Harry Truman's $78.6 billion budget, with its $9.9 billion deficit, is another factor which makes quick economic change impossible. "You can't set a hen in the morning," he says "and have chicken salad for lunch."
The Magic Sound. As soon as he sits down in his office, problems are ready to pop out at him like clay pigeons at a skeet shoot. For example, some $69 billion of the $267 billion public debt will come due during 1953-Since the $69 billion obviously can't be paid off, it will have to be refinanced.
Another imminent problem is the tax with the most popular name and the most unpopular results: the excess-profits tax. The Government in one way or another has to advance billions to industry to make up for the new capital that is dried up by a tax that falls on an efficient expandable business. Humphrey, like most businessmen, is violently opposed to E.P.T., and would—on principle—love to drop it when it expires June 30. But the New Deal era has given "excess profits" such a magic sound that Humphrey will have to make the real meaning of E.P.T. clear to the Congress and the country.'
At a still higher level of policy, Humphrey's Treasury will have to wield the Government's influence over international trade. Some U.S. economists are suggesting that the U.S. would find itself with some $35 billion in extra cash if the Treasury would raise the price of gold i.e., devalue the dollar. Then, as the theory goes, the U.S. could use the $35 billion to set up a stabilization fund to let European countries sweep away currency restrictions. This plan has been vigorously attacked as adding to U.S. and world inflationary trends. It finds little or no favor among Ike's advisers. But they are deeply concerned about how to lower barriers to world trade, and nonconvertible currencies are a serious barrier. (The tariff is another.) For months there have been rumors of a new British effort to make the pound convertible. Humphrey may soon find himself involved in negotiations for essential U.S. help on this problem.