The first condition is that we continue the policy of not permitting any needy American who can and is willing to work to starve because the Federal Government does not provide the work.

The second is that the Congress and the Executive join hands in eliminating or curtailing any Federal activity which can be eliminated or curtailed or even postponed without harming necessary government functions or the safety of the Nation from a national point of view.

The third is to raise the purchasing power of the Nation to the point that the taxes on this purchasing power—­or, in other words, on the Nation’s income—­will be sufficient to meet the necessary expenditures of the national government.

I have hitherto stated that, in my judgment, the expenditures of the national government cannot be cut much below seven billion dollars a year without destroying essential functions or letting people starve.  That sum can be raised and will be cheerfully provided by the American people, if we can increase the Nation’s income to a point well beyond the present level.

This does not mean that as the Nation’s income goes up the Federal expenditures should rise in proportion.  On the contrary, the Congress and the Executive should use every effort to hold the normal Federal expenditures to approximately the present level, thus making it possible, with an increase in the Nation’s income and the resulting increase in tax receipts, not only to balance future budgets but to reduce the debt.

In line with this policy fall my former recommendations for the reorganization and improvement of the administrative structure of the government, both for immediate Executive needs and for the planning of future national needs.  I renew those recommendations.

In relation to tax changes, three things should be kept in mind.  First, the total sum to be derived by the Federal Treasury must not be decreased as a result of any changes in schedules.  Second, abuses by individuals or corporations designed to escape tax-paying by using various methods of doing business, corporate and otherwise—­abuses which we have sought, with great success, to end—­must not be restored.  Third, we should rightly change certain provisions where they are proven to work definite hardship, especially on the small business men of the Nation.  But, speculative income should not be favored over earned income.

It is human nature to argue that this or that tax is responsible for every ill.  It is human nature on the part of those who pay graduated taxes to attack all taxes based on the principle of ability to pay.  These are the same complainants who for a generation blocked the imposition of a graduated income tax.  They are the same complainants who would impose the type of flat sales tax which places the burden of government more on those least able to pay and less on those most able to pay.

Our conclusion must be that while proven hardships should be corrected, they should not be corrected in such a way as to restore abuses already terminated or to shift a greater burden to the less fortunate.