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Home -> Merlin Harold Hunter -> Outlines of public finance -> Chapter 3 continue

Outlines of public finance - Chapter 3 continue

1. Preface

2. Chapter 1

3. Chapter 1 continue

4. Chapter 2

5. Chapter 2 continue

6. Chapter 3

7. Chapter 3 continue

8. Chapter 3 continue

9. Chapter 4

10. Chapter 4 continue

11. Chapter 4 continue

12. Chapter 5

13. Chapter 5 continue

14. Chapter 5 continue

15. Chapter 6

16. Chapter 6 continue

17. Chapter 7

18. Chapter 7 continue

19. Chapter 7

20. Chapter 7 continue

21. Chapter 9

22. Chapter 9 continue

23. Chapter 10

24. Chapter 10 continue

25. Chapter 10 continue

26. Chapter 11

27. Chapter 11 continue

28. Chapter 11 continue

29. Chapter 12

30. Chapter 12 continue

31. Chapter 13

32. Chapter 13 continue

33. Chapter 13 continue

34. Chapter 14

35. Chapter 14 continue

36. Chapter 14 continue

37. Chapter 15

38. Chapter 15 continue

39. Chapter 15 continue

40. Chapter 16

41. Chapter 16 continue

42. Chapter 17

43. Chapter 17 continue

44. Chapter 17 continue

45. Chapter 18

46. Chapter 18 continue

47. Chapter 18 continue

48. Chapter 19

49. Chapter 19 continue

50. Chapter 19 continue

51. Chapter 19 continue

52. Chapter 20

53. Chapter 20 continue

54. Chapter 20 continue

55. Chapter 20 continue

The Federal government, at times, is called upon
to give assistance in supplying this class of protection.
Reference to the table on page 51 will show the relative
importance of protective expenditure by states, counties,
and incorporated places. The tables in Chapter II, pages
31 and 32, will show the relative importance of this class
of expenditure to other expenditures of the different po-
litical units. The cost of protection in cities and incor-
porated places is much greater, both in Mo and per capita,
than in the states or counties. This is due to the main-
tenance of police and fire protection. This expenditure is
also greater as a state item than for the counties. As an
item of state expenditure it ranks comparatively low,
coming about fourth in importance. In cities it is rela-
tively high, coming about second. As cities increase in
size the cost of protection increases more rapidly than the
population. Reference to the table on page 34 shows the
per capita expenditure of the smaller cities for protection
to be considerably less than that of the larger ones. As
in the case of the Federal government, this protection
cannot be put on a cost and value of service basis. There
is no way of knowing what the citizenship would be willing
to give up rather than to do without the protective
services. The direct economic returns may appear small,
yet the immaterial returns are immeasurable.

36. Expenditures for the General Government Are for
the Common Benefit. While expenditure for the general
government is, as a whole, not one of the largest, it is,
nevertheless, important. It occurs in all political divisions
and occupies a position of about the same relative im-
portance. Reference to the preceding tables will show
that in the Federal government this item stands about
third or fourth in comparison to other expenditures; in the
states and in the cities it is the item third in importance.
The chief items included under general government ex-
penses are for the executive and legislative functions, some
judicial costs, and costs of public buildings. Perhaps the


expenses incident to securing revenues should also be
included here.

Administrative Expenditures. The largest executive
expenditures come in the administration of laws. The
officers concerned with executing law are not the same in
different countries, but vary with the form of government.
In monarchical countries there is usually a considerable
expenditure for the maintenance of the chief ruler and his
court. No corresponding expenditure is found in demo-
cratic countries. The salaries and positions of chief ex-
ecutives in the latter correspond somewhat to the various
ministerial officers in the former. The heads of monar-
chical states formerly had a private income from lands
which subsequently became a part of the public domain.
At present, then, the expense must be met from the com-
mon treasury. It is usually much greater than the cost
of the chief ruler of democratic states. The royal family
of England, for example, is an annual expense of about
$2,500,000 as compared with the $100,000 given to the
President of the United States.

The chief ruler in constitutional monarchies, such as
England, has very little part in the actual affairs of gov-
ernment. The functions of his position are largely social
and involve expenses for maintenance and entertainment.
On economic grounds such expenditure cannot be justified
beyond the point of acquiring greater efficiency. It may,
however, increase the pride of the citizenship in the state,
or increase their reverence through a feeling of awe at
the splendor of the government. It is a question, however,
if more respect would not be secured if the expenditure
were made in such a way as to be felt by the citizenship
in a more tangible and material form.

Democracies, moreover, are not entirely free from this
class of expenditure. Public buildings are often con-
structed of expensive design and materials far beyond the
call of pure economic need and efficiency. A number of
county court houses, city halls, and state capitols testify


to this. While there is no direct economic justification for
such expenditure, hi most cases the majority of the citi-
zenship agree as to its wisdom. The psychic value in
appeal to civic pride and cultural development frequently
offsets any deficit on the economic side.

Executive officials are, of course, found in the minor
political divisions. Frequently the cost for these is greater
in democracies than in other forms of government. In
England and other constitutional monarchies such posi-
tions are made of long tenure and are clothed with con-
siderable honor. Because of this honor, people of means
can be found to fill the position for little or no remunera-
tion. This situation is seldom, if ever, found in the
United States. In estimating whether it is in reality a
saving, the efficiency of the service must be considered in
each case. The objections to gratuitous services, which
are discussed on page 75, are of course applicable here.
It would be impossible to get the exact executive costs of
the minor civil divisions of the United States, because the
officials must often handle other duties than those of an
executive nature.

Federal Legislative Expenditures. The expenditures con-
nected directly or indirectly with making laws form an
important place in the costs of the general government.
In some cases many items go to make up the total expend-
iture, while in others the items are few and little is ex-
pended. Much depends upon the law and custom of the
various states. In England the expenses of Parliament
are comparatively low. Few salaries are paid to members,
while public documents are not printed for free distribu-
tion. The cost seems smaller than it really is, since some
of the administrative officers exercise legislative functions
and a part of their expense should be considered as

In the United States many more items enter into the
costs of Congress. While each member receives an annual
salary of $7,500, this by no means forms the entire cost.


Those who have been present at sessions of Congress have
been impressed with the number of pages in constant
attendance. These, together with the provision for nu-
merous clerks, traveling expenses, and stationery, help to
swell costs. The expense of getting information through
investigations and public hearings is large. One of the
largest single items is the expense of printing. Reports
and speeches of all kinds are printed at public expense,
and in such quantities that they can have a wide distribu-
tion. The franking privilege, which has been granted to
our Congressmen, no doubt has an influence on our print-
ing cost, since thousands of speeches are printed and sent
to constituents which would remain unsent if postage had
to be paid. An easy and wide dissemination of knowledge
is desirable, but it would be difficult to justify the print-
ing and distributing, at public expense, of much of the
partisan and campaign literature for which the postal
system is gratuitously used.

Other Legislative Expenditures. Legislative costs are
also found in the various minor civil divisions states,
counties, cities, and villages. Counties perform very few
legislative functions, while municipal councils are seldom
purely of this type, hence such costs for these bodies
cannot be accurately determined. The lawmaking bodies
of the states, however, are purely legislative. The costs
are salaries, clerk hire, and similar items. Usually the
members of the legislature are paid by the day, plus'
mileage, with permission to appropriate funds for inciden-
tal expenses, such as lodging, stationery, and stenographic
work. Such abuse has been made of this privilege, and
funds have been squandered to such an extent, that some
states have put limitations upon the length of legislative
sessions and upon the amount of appropriations that may
be made for the personal use of the legislators. Some
judicial costs, such as those of the Supreme Court, are
largely met from the common treasury. Such a large
part of the judicial system is now on the basis of part


payment by the recipient of the service, however, that a
discussion of this service more properly belongs with that
class of expenditure.

Public Buildings. Public buildings are a necessary part
of the machinery for carrying on the functions of the gen-
eral government. Aside from the continual cost of care
and upkeep, they represent an investment of the taxpayers
which, had it been left with them, would be a source of
income. In the construction and maintenance of public
buildings this fact should be kept in mind, so that no
more will be spent than is necessary to accomplish the
economic, political, and cultural ends in view.

Collection of Revenue. The machinery for collecting and
handling revenues in the various political divisions is
maintained as a part of the general government. Com-
parisons as to the percentage of cost for collecting the
total revenues for different countries, or divisions of the
same country, are valueless. This is because of the variety
of sources of revenue. Some countries or divisions may
own and operate one or more public enterprises at little,
if at all, above cost. In such cases the cost of collection
would be near 100 per cent. If the United States were to
consider the postal returns as a part of its revenue, the
cost of collecting this part would be more than 100 per
cent for more years than it would be less than this, because
a deficit has so often appeared. When total revenues and
expenses of collection are considered, those divisions
operating a number of public enterprises will show a rela-
tively high cost of collection. The only satisfactory com-
parison would be for particular classes of revenue, such as
the cost of collecting the customs duties, income tax, or
internal revenues.

37. Consular and Diplomatic Services Have Been Ex-
pensive. The services given by consuls and diplomats
represent a governmental activity which has been more
expensive in many countries than the economic returns
will warrant. Countries which maintain lavish courts at


home have the notion that their prestige can be estab-
lished abroad by maintaining similar establishments in
foreign countries. The real service which these represent-
atives might give is often overshadowed by the ostenta-
tious display of the establishments. Countries with a
democratic government have not emphasized this feature
to a large extent. This fact has made it difficult, at times,
to get competent men to fill diplomatic posts. The repret-
sentatives of democratic governments feel that they must
follow the standards which have been established by other
countries, while the salaries will not permit them to do
so without individual loss. The consular service has been
important in aiding the development of commerce, but
this becomes less necessary as market conditions become
a matter of universal knowledge. Much might still be
done, however, in overcoming national prejudices and in
seeking methods for obtaining a market for goods in for-
eign countries.

38. Expenditures for Education Have Been Large.
The expenditure for education has been an important item
in all countries, and in the different political divisions of
the United States. At present the actual expenditures of
the Federal government for this item is only sixth hi
importance, excluding interest and outlay charges. This
may be seen by referring to the table on page 31, showing
the expenditures of the Federal government. This does
not represent, however, the importance of what this
branch of the government has done. Public lands, whose
value would run into millions of dollars, have been given
to develop and maintain educational institutions. These
do not show on the expenditure account from year to

Education in States and Cities. The expenses of educa-
tion take a much more important place in the annual ac-
counts of our states and cities. In both units it is the
item of greatest importance. It has been a rapidly in-
creasing expense because of the extension of the service


and the elimination of any individual cost. The public
school services are considered of such importance that
children are compelled to avail themselves of them. To
make it easier for the poor classes, moreover, books and
supplies are often furnished to the pupils, while in a num-
ber of places noon luncheons are served. Although the
high school service is usually not compulsory, it is being
made more and more attractive by free tuition, and free
textbooks and equipment. This compelling and inducing
more individuals to take advantage of a service has been
reflected in the huge sums spent in giving the service.
The demand is growing that the state provide forms of
technical education, since the old apprenticeship methods
of learning trades are no longer available. Many Euro-
pean political units are emphasizing this part of the edu-
cational program, and its influence is being seen here in
the development of manual training departments in our
public and high schools. We can expect a much greater
expenditure along this line of development in the future.

Importance of Leadership. Trained leadership is essen-
tial in every line of activity, and this can best be obtained
through educational institutions giving advanced instruc-
tion. Many of our commonwealths have established such
institutions in the form of state universities. It has not
been the practice, however, to treat this form of education
on the basis of common benefit, as some charge is made
to the student. The charge is usually so small, however,
that practically the whole expense is borne by the public.
The annual fees paid by students in state universities are
usually not more than $50 per year, while the per capita
student cost to the state runs between $500 and $700.
The cost of the service, then, is largely met from common
funds. The returns to the public have been largely in the
increased agricultural, industrial, commercial, and general
business productiveness which has come from this citizen-
ship with higher educational training.

It has been suggested that the state has not gone for.


enough in supplying this service that it should undertake
it entirely as a common benefit, not only give the service,
but grant to each student a scholarship fund of sufficient
size to meet incidental expenses. If, among the added
thousands who could then avail themselves of this higher
training, there should be developed an Edison, Marconi,
or Pasteur, it is contended the expenditure would be well
worth while. Such a broad educational expenditure for
the common benefit may never be reached, yet there are
indications of it in the numerous scholarships and fellow-
ships which are given to induce advanced work in various

Expenditures of Individuals. The enormous expendi-
tures of Federal, state, and local governments for educa-
tion do not tell the whole story. To get the real impor-
tance which is attached to education, the expenditures of
individuals and organizations must be added. Public
education is supplemented to a large extent by religious
and private schools, while many of our larger universities
and colleges are privately endowed and receive no public
funds. The private cost of education added to the public
cost the item of first importance in the public expense
account will show to how great an extent education is
considered the need of first importance to the citizenship
of a state.

Experiment Stations. An item closely connected with
education is the maintenance of experiment stations and
laboratories, and advisory bureaus of various sorts by the
different political units. Everyone is familiar with the
extent to which this is carried in agriculture. Similar
services are given in many other lines, as in mining and
forestry. The meeting of the cost from the common fund
has been more than justified by the increased production
at lower cost in these various industries.

39. Highways Are an Important Cause of Public Ex-
penditure. The expenditure for highways is one of grow-
ing importance, The development of motor transport^


tion has caused an increased demand for good roads.
This item occupies a more important place in city and
state expenditure than in that of the Federal government,
although the expenditure here is not inconsiderable. The
per capita expenditure for highways is much larger in
cities than in the other divisions. In the future, however,
we may expect this item to occupy a position of greater
importance in the Federal and state expenditure accounts
because of the number of roads to be built with the aid
of these governments.

The importance of good roads cannot be minimized in
commercial and industrial development. The public
should be on the alert, however, and see that funds are
not wasted in road construction. Contracts have some-
times been let, through which the construction company
received a certain per cent of the cost as compensation
for services. Such contracts do not command efficient
services, nor the purchase of materials in the best markets,
and the payment from the public purse is likely to be
much greater than the service given in return warrants.

40. The Regulation of Private Industry Is an Item of
Increasing Importance. The reaction from the laissez-
faire policy is becoming more and more marked. This in-
creased government interference means an increasing ex-
pense. It is found in the different political units, but is
perhaps more marked in the Federal and state govern-
ments. The expenses of the Interstate Commerce Com-
mission, with its numerous hearings and investigations in
regulating interstate traffic, are not inconsiderable. The
activities of the Federal Trade Commission, and of the
continued increase in the amount of government inspec-
tion of privately produced goods, are other examples of
the growing importance of this service by the Federal

This service of regulation is augmented and extended by
the state governments. In the majority of states public
utility commissions seek to secure for the public a satisfactory service at a reasonable rate from the various
public service enterprises. Here again numerous costly
hearings and investigations are necessary.

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