The Red & the Black

Treasury Secretary George Humphrey, regarded by many as the ablest businessman in Eisenhower's "business administration," has also fallen heir to the toughest problems. Last week he wrestled with the toughest one yet: how to keep the world's biggest business from going technically "broke." Congress' refusal to raise the $275 billion limit on the U.S. debt (TIME, Aug. 10) made it entirely possible that Humphrey would not have adequate means to pay the Government's bills.

Humphrey had many volunteer advisers who assured him that the problem was not really as bad as it looked. Noting that federal spending in July was $674 million less than in July a year ago, they argued that if this rate of thrift could be maintained for six months, the Government would spend only about $32.5 billion in 1953's last half, v. $37.4 billion expected to be spent, and that the $5 billion difference would not only keep the debt below the $277 billion figure Humphrey had predicted by December, but under the $275 billion ceiling, too.

Unfortunately, some of the number work seemed a bit too hasty. July's saving actually was a bookkeeping fluke brought about by several happenstance facts. No payments had been made during the month toward either the Post Office deficit or the Civil Service Commission's retirement fund. Thus the "saving" was only a paper cutback of $500 million, much of which must be paid. The fiscal crisis could not be figured out of existence. He could solve it only by 1) slashing all Government spending, including defense, until outgo meets income, or 2) getting the ceiling lifted by a special session of Congress. Humphrey's own Treasury began enforcing an "austerity" drive of strict economy, to set other bureaus an example. But Humphrey was convinced that a special session would have to be called.

Actually, the debt ceiling is almost meaningless. Congress has set a ceiling seven separate times in the past 18 years, but has never failed to raise it whenever the Government needed more money (see chart). Economy-minded Senators, well aware that in the same 18 years the ceiling has been lowered only once (at World War II's end), thought that Humphrey's dilemma would make for quicker, bigger cuts in spending. But they also knew, as did Secretary Humphrey, that the ceiling, as a symbol, meant little, that the important thing was the long-range determination of the Administration to reduce the debt itself.

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