One of the pleasant duties of a superintendent in a city where the convention of the National Education Association meets is to welcome various groups of delegates in attendance upon the several departments of that convention. It is always a pleasant duty, I am sure, for any superintendent to extend greetings and welcome to the National Education Association. It is a peculiar privilege for the Superintendent at Washington to extend such greetings, because he can do so somewhat differently from the usual formal greetings that are extended.

Washington belongs to the people of Washington, not merely, but it belongs to the people of the Nation, because it is the Nation's capital. It belongs not to us who live here, but to you and the people of the Nation, who may or may not, from time to time, visit it and participate in its delights that are open to you all.

I shall not do more than remind you that we here do welcome you, not as coming to our city, but as coming to your city. We would like to have you feel that you are at home. It has been our purpose in arranging for various sections of this great convention, to make provision which will make you fell that are at home.

Washington is peculiar in that it is governed by Congress. The people of the District of Columbia have, really, no direct participation in any local affairs whatsoever. The District of Columbia is governed by a Board of Commissioners appointed by the President and approved by the Senate. The Board of Education is appointed by the Courts of the District. Other bodies in the District represent National affairs, and are in no way responsible directly to the people of the District. Moreover, the financial support of the District of Columbia is met in part out of the National Treasury. Forty per cent of the expenses of the District Government are so met, and sixty per cent of that support is raised by local taxation.

In a real sense, therefore, the city of Washington belongs to the Nation. We in the District of Columbia look to your Representatives and your Senators as our councilmen. They are the persons upon whom we must rely for making provisions for keeping this city as beautiful as it is, and extending its beauty and its facilities until it shall become in every respect what it is now in many respects, the most beautiful capital in the world. Local people are proud of the capital, just as proud as you are, perhaps more so, and we are happy to place all of its facilities, in so far as they are controlled by us, at your disposal when you visit your capital.

I welcome you, therefore, cordially and heartily into your own home, with the hope that you will find everything homelike. I feel sure the various committees in charge of preparations for taking care of you will be glad to place themselves at your disposal, in order make your stay here pleasant as well as profitable.

We Americans are a proud people, conscious in a high degree of our many strong material traits; but none of us by the broadest possible conceit could think of ourselves as a thrifty people. However immodest we might be in our claims, none would be so reckless as to compare us in frugality with the Scotch or the French or some other people. True there are thrifty individuals, groups and even races among our population, but as a Nation we are extravagant, wasteful and careless of our resources as compared with the older nations of the world.

A wasteful people—The reason for our prodigality as a people is easily explainable and altogether natural, but this does not excuse or justify it. God has dowered our continent with an abundance of natural resources which, coupled with our vast area of fertile soil lying entirely in a temperate climate, gives to us products unrivaled in any other portion of the earth's crust. When we compare our density of population with old world countries, we find that our people are relatively as sparse as our natural products are abundant. Compare England, for example, with the State of Kentucky. About the same in area as Kentucky, England has more than thirty millions of population while Kentucky has slightly more than two millions. Or compare France with Texas; slightly smaller than texas in geographical extent, France has a population about ten times as great as the Lone-Star State. We have never been compelled to be a careful or thrifty people. We have found it possible to waste much of our wealth and still maintain a higher standard of living and enjoy more luxury than most other peoples.

Forest folly—In collecting raw materials for industry it is common for us actually to destroy, ruin, or throw away more of a product than we secure. After this fashion much of the timber of America was cut. We have destroyed more timber by wasteful methods of cutting, by forest fires, by carelessness and in other ways than we have ever used. We have denuded our forest but scarcely thought of the future or reforestation. Many forests in other countries are handled so that the timber cut makes possible a greater growth all the while and the potential supply is not diminished by the cutting. Timber cutting is typical of many other things that we do in this country. With magnificient profligacy and measureless bounty, we have pursued our National growth, apparently oblivious that the future will bring a day of reckoning for posterity.

Today, the American people actually spend more money on luxuries than upon the essentials of life. Nearly thirty per cent of the annual expenditures of the American people goes for things which are not only unnecessary, but some of which are known to be positively harmful and injurious. Only about twenty-five per cent of our expenditures are for food, clothing, shelter, and other necessities of living.

An end in sight—In spite of all, we have made a material progress that is miracle of the centuries. Common sense, common reason, and common prudence must compel us to recognize that our present wasteful methods 03636cannot be indefinitely prolonged. Our rapidly diminishing natural resources and our constantly increasing population must inevitably bring us to a more rational, careful, and economic development, or to National tragedy on a scale more vast than any yet which has visited the many unfortunate peoples of history.

Fortunately our people are becoming aware of the calamity which the future holds for a profligate Nation. Accordingly, conferences, such as we are now engaged in, are being called to discuss thrift; organizations have been formed to combat waste; campaigns are being waged to educate the people in the ways of economy; books are being published and plans put forward to teach ways and means of saving. these movements are timely and vital to our continued prosperity and National welfare.

Citizenship—The Nation cannot be otherwise than those who compose its citizenship. If our citizens are wasteful and careless, our National life will eventually disintegrate. If our citizens are industrious, prudent, and frugal, our Nation will grow stronger and continue its remarkable prosperity. The future of the Nation will rest upon the character of the average citizen. The thrift of the Nation is the thrift of its individual citizens; the extravagance of its citizenship will destroy the National wealth, however great it may be and regardless of the soundness of policies of taxation, expenditure, or administration of the government.

Thrift in the citizen involves a number of virtues. In some degree, great or small, it involves industry, patience, vision, prudence, self-denial, and ambition. Secretary Mellon has said: “Every boy and girl and every man and woman must have certain assets to achieve success—not material assets alone, but assets of character, and among the most important of these are ambition, industry, personality, and thrift.”

The desire to work—Industry and the desire to work, or, at least, a willingness to work, is a primary and fundamental characteristic of a thrifty person. No matter how high our ideals may be, unless we are willing to work and struggle to acquire the things of this world, we shall fail. Without patience and endurance to toil with our hands and brains, there can be no accumulation of economic values. Booker T. Washington's exhortation to his race applies to all our people:—‘We shall prosper in proportion as we dignify and glorify labor and put skill and intelligence into the common occupations of life.”

The origin of thrift and National wealth is found in daily application of the citizens to the production of commodities that will satisfy the needs of society. The school should inculcate and inspire the willingness to work and struggle. Every child, regardless of actual or possible inheritance or favored opportunity, should learn the lesson of industry. James J. Davis, the Secretary of Labor, complains that our schools are literally turning out millions of “armless children.” Their hands are skilled in writing, but not in practical arts. This defect in our educational program is rapidly being overcome by the progressive and continuous development of trade and industrial schools. We have maintained an artificial distinction in the past between fine and industrial arts. We have somehow allowed the stigma of inferiority to attach itself to manual art and labor. This false 03737conception has greatly retarded thrift. The Yankee, or Northerner, is often particularized as “thrifty.” This has been due largely to the fact that “the Yankee” feels no compunction about doing any kind of work with his hands. The South suffered from the institution of slavery. The English system of a landed aristocracy transferred to our Southern States placed labor and industry upon the slave. To work was a mark of inferiority. Thus slavery cursed the white man of the South as much as it did the Negro. Nothing can so retard progress among a people as habitual leisure or idleness.

Wise use of leisure—Protracted inactivity deadens the ambition and shackles the will. To train boys and girls to apply themselves in the face of difficulties is the greatest benefit that the school can bestow. The divine injunction, “In the sweat of thy face shalt thou eat bread till thou return unto the ground,” must be applied to all.

It is not to be supposed that our people must labor all the time. Certainly, there must be time for recreation, amusement, social intercourse, and intellectual as well as spiritual improvement; and yet most of the people must toil much of the time and all of the people except those physically and mentally deficient should learn to do so. No one should oppose the proper restriction of working hours. No one will interpose objection to employing more of the time for improvement as machinery and labor-saving devices are introduced for the economy of man's effort. And yet a “machine-made millennium” in which no one would be required to work would be a dire calamity that would wreck society by stifling ambition and deadening effort. Henry Ford dreams of an age when the farmers will be able to plant, cultivate, and reap their harvests in a few weeks of the year and thus able to give nearly all their time to leisure, recreation, and intellectual improvement. It is a serious question just how far this process of labor-saving can be carried, even if Ford's ideas prove practical, without undermining character and ambition.

Drones and parasites—There will always be some shirkers and some parasites on the back of society, but a nation's wealth can only be increased as the majority of citizens produce with brain and brawn more goods than are needed to satisfy wants. Collective or National accumulation of wealth rests essentially upon the fact that the sum total of commodities produced or exchanged by all the citizens must exceed the sum total of commodities consumed.

Steady toil and persistent industry are the origin of wealth, but thrift implies likewise a wise husbandry and a prudent conservation of the results of labor.

Coolidge speaks—President Coolidge recently said, “only through sacrifice and hard work can we attain the cherished things of life. This means we must work and save.” Daily work and careful saving are the elements of thrift. Carlyle expressed the same thought as President Coolidge when he said: “There are but two ways of paying debt‐increase of industry in raising income, increase of thrift in laying out.”

Saving is often more difficult than acquiring. The old adage “Easy comes, easy goes” expresses the obvious failing of many who receive through 03838inheritance, gaming or unearned increment without dint of arduous endeavor. Such persons often dissipate in extravagance or squander over night the accumulations of years of struggle. Reckless spending is the deadliest foe to thrift and character. Theodore Roosevelt said: “Extravagance rots character; train youth away from it. The habit of saving money stiffens the will and brightens the energies.”

Everywhere today our schools are teaching the children the lesson of saving. Banks operated by school children are numerous and few schools fail to utilize the hoarding instinct in children for the development of habits of saving. Some people succeed in getting one hundred per cent of the pupils to deposit and nowhere have there been failures where proper methods have been employed.

The budget—A proper economy of resources can only be accomplished through some kind of budgetary system which carefully anticipates income and checks the outgo. Expenditures must be laid out in a proper proportion. No other known device promotes economy and regulates expenditures as does the budget.

The effort to carry budgeting into the home is an essential element in daily thrift. It is well known that the women of the Nation spend most of its money. The late President Harding said: “The American woman must shoulder a heavy responsibility, as she also wields a great authority in this matter of thrift and saving. American women, perhaps, to a greater extent than those of any other nationality, have control of the greater part of the household spending, which involves inevitably the possibility of either thrift or extravagance.”

Women's clubs and thrift—The General Federation of Women's Clubs and other similar organizations are doing much to promote thrift in the home. The campaign among adult women is a valuable supplement to the work being done in the schools. It reaches thousands who did not attend schools where thrift and saving were taught; it reaches those who were without opportunity of schooling or who perhaps have come to us from other countries; and, in many instances, it reinforces and builds upon the foundation of thrift laid in the school.

Upon the womanhood of the Nation will rest largely the future shaping of our National destiny in both domestic and public life. Men may be the chief money makers—though women are becoming their own breadwinners in ever increasing numbers—but careful spending and therefore prudent saving will rest more with our women. Let them heed the words of The Angel in the House:Ah, wasteful women! she who mayOn her sweet self set her own priceKnowing man cannot choose but pay,How has she cheapened Paradise!How given for nought her priceless gift,How spoil'd the bread and spill'd the wine,Which, spent with due respective thrift,Had made brutes men and men divine.

The amount of money that is lost in the United States today in one channel of waste, namely, worthless stock, is a billion dollars, a sum of money the significance of which no one can grasp. This is just about equal to the amount of our savings bank deposits, so that what the thrifty Americans are doing on one hand, saving a billion dollars in savings banks, is lost on the other hand through unwise investments. Therefore, it is necessary in this thrift educational work to stress not only wise saving but wise investment, which is virtually the same thing.

It should be kept in mind be everyone who is in any way engaged in developing the school savings bank, that thrift, the function of saving, is only part of the work, and that the school savings bank should go hand in hand with instructions that are given the child along broad constructive thrift lines.

Lack of coördination—While making a survey of school savings bank systems I found that there has been a considerable lack of standardization, lack of coördination. There are many schools throughout the country that are conducting a system of some kind of their own; they are reporting to no one, so that the survey that I have prepared is possibly not completed. I wish, however, to acknowledge my gratitude to the Savings Bank Division of the American Bankers Association for the help that they have given me in making this survey. I would also urge that all persons engaged in educational work should coöperate with the Savings Bank Division of the American Banker Association. They are developing plans for standardizing the work, and I feel that it all should be centralized through them. I believe the greatest good can be accomplished in the long run if it is centralized in that way.

The remarkable success that is attending our school-savings bank work in many parts of the country and the enthusiasm which is being displayed by millions of little depositors adds a new source of inspiration this year to the whole thrift movement.

Astounding development—As we review the astonishing development of the system and contemplate the possibilities for the very near future, there is probably only one warning note to which we might now give serious attention. Saving money is not all there is to thrift. If we would accomplish the greatest good, the school bank must go hand in hand with the teachings of thrift. The school bank furnishes us with an excellent working medium to show many of the values of thrift, but it must be remembered that a vast amount of actual harm could be done the child if we went no further than to teach it to save money. Neither society nor the Nation would be grateful to us if we thus developed a spirit of miserliness and greed in the hearts and impressionable minds of these millions of children.

No matter to how great an extent the school bank system may spread or what volume of money may be saved by our school children annually, the school bank should always be considered merely a part of thrift 04040education and employed only as a practical means of demonstrating the great lesson of personal thrift.

As you probably know, the subject of school savings banks was not even discussed in the United States prior to 1876 and for nearly a decade following no effort was made actually to establish a school bank in this country. In 1885, J. H. Thiry, a native of France, who was then a school commissioner in Long Island, N. Y., installed a school bank in that city. Between the beginning and the opening of the war, the movement had many ups and downs, accompanied by numerous failures. During the war the school children devoted their savings largely to war stamps. However, these war-time practices were helpful in the establishment of the school-bank work throughout a large number of States.

Since the War— Since the war the greatest strides have been made, particularly in New York, New Jersey, Pennsylvania, in New England the Central West, and in California. All that has been learned in these States must be utilized in the extension of the system throughout the entire country. There are still many sections into which the light of school thrift has not penetrated. There is still much to be done in the vast South, of which General Robert E. Lee said: “When to the intelligence of Southern men we have added the wholesome instinct of saving, no race will equal us.”

In the States of Mississippi, Texas, Arizona, Idaho, Montana, Utah, and North and South Dakota not a single city reported a school bank in operation on the first of January this year. There may be a few scattered banks in some of these States, but they were not reported to the American Bankers Association. In each of the States of Tennessee, Arkansas, New Mexico, Florida, Alabama and Nevada, only one city reported any school banks in operation on the first of the year. In Delaware, Oregon, and South Carolina, only two cities in each State reported school banks. In the great States of Maine there were only five cities reporting banks this year and in many other progressive States the school bank has not spread to any considerable extent.

The task, however, of extending the system to these and other backward States should not be burdensome it we take advantage of all that has been learned, and coördinate our efforts. We do not actually know the size or extent of our school-bank system. Up to the present time it has been very difficult to obtain statistics on school-bank progress. The Savings Bank Division of the American Bankers Association, has been able to collect reports from savings banks used as depositors for school funds in a sufficient volume to convince us that the savings-bank development is one of the most important of the practical departments of our educational work. These figures also show us plainly that we have merely scratched the surface and that there is a tremendous amount of work ahead for both educators and bankers.

Latent possibilities—We have in the United States today well in excess of 25,000,000 school children. There are probably somewhere between 7000 and 8000 school banks successfully operating throughout the country. Reports recently received from the depositories of about 7000 school banks, 04141distributed in approximately 500 cities and towns, which do not by any means represent the total number of school banks in the country, show a total enrolment of something over 3,000,000 children with about 2,000,000 participating in the school banks.

I imagine that if we had a complete report of all children who are depositors in school banks it will reach approximately 3,999,000. This shows that while approximately two thirds of the children attending schools where banks are operated are depositors, we still have probably not less than 20,000,000 public-school children to whom the benefits of the school bank we have not been extended.

In the 7000 schools from which reports have been received the bank balance is approximately $15,000,000. We knows that 2,000,000 school children alone are saving more than $12,000,000 a year, but of course a large percentage of this is withdrawn for vacational purposes, clothing, and to some extent for investment. It is estimated that during the past year the children have increased their savings more than twenty-five per cent. If we assume that each child could save $5 a year, which is below the average saving per child among those now participating in school banks, the annual savings of all public children in America would be greatly in excess of $100,000,000.

These figures are interesting in that they reveal the financial possibilities of the school savings banks of the country, yet the fact remains that it is not so important to teach children to save large amounts as it is to teach them to save regularly and to acquire the thrift habit. The amount of money saved by the children of our country in school banks is of less consequence than are the motives and methods involved in the process.

New York City— In the City of New York, where school savings bank movement extends back over a full decade, we have some interesting statistics of what can be accomplished in a large city and it is important to note that the 400 school banks in Greater New York have been developed since 1914 without any attempt on the part of the Board of Education to force the children to save.

The school savings bank division of the New York Board of Education has been developed under the very capable guidance of Amzi N. Clark, supervisor. In 1914, Mr. Clark reported an even score of school savings banks scattered through the principal schools of the city, with a total of 10,000 open accounts and receipts totaling $25,000. Today there are 403 school banks operating under the direction of the Board of Education, with 300,000 open accounts and receipts estimated this year at $1,200,000.

During the year ended last February, the receipts from all sources in the New York school banks were $973,000, an increase over the precious year of fifty per cent. Since 1916 the gross receipts of all the school banks of the city has been in excess of $3,000,000. The cash balance on hand during the past year was an increase of sixty-one per cent over the previous year. During the past year about 29,000 new accounts were opened by the New York school children in the designated depository 04242savings banks for school funds, while during the same period about 160,00 new accounts were opened in the school banks.

The children clerks in the school banks of New York are now handling about a million and a half individual deposits, each year, in addition to making hundreds of thousands of payments on withdrawals. The gross value of all the items handled by the children in the school banks of the city is in excess of $2,000,000 a year.

A National record—As an example of what one bank can do to promote the school savings bank throughout the schools of its neighborhood, I would like to mention the accomplishment of the East New York Savings Bank, the largest depository of the New York Board of Education and probably the largest school savings bank depository in the United States. This bank is located in a densely populated section of Brooklyn, where on some blocks there is actually one child to very front foot of property. Judge Edward A. Richards, president of the bank, went intensively into school-bank-savings work in 1921, placing Guy L. Terhune at the head of a special industrial and school savings department. At that time only three schools in the districts were depositing in the bank and only 1400 of the pupils in these three schools were saving regularly at the rate of about $4000 a year. In one year Mr. Terhune increased the number of schools depositing in the bank to twenty-two, the number of children saving to more than 23,000 and the annual deposits to more than $95,000. The next year the number of schools depositing was increased to twenty-seven, the number of pupils saving to more than 35,000 and the deposits to more than $200,000. This year there are more than thirty schools depositing in the bank, more than 45,000 pupils saving and the deposits will exceed half a million dollars.

At the time the expansion of the school savings department was started by this bank, its total deposits were approximately $4,000,000. Today they are in excess of $16,000,000. This fact is cited as tending to show that while school deposits may not yield any great amount of actual profit to depository banks in themselves, the children depositors have an important influence upon the general business of the bank. As proof of this let me state that the institution referred to keeps a careful check upon all new deposits, and its records reveal that while the greatest number of new depositors comes from the recommendation of old depositors, the second greatest number comes through the children depositors who recommend the bank to their parents and adult relatives.

Swamping the bank—It may be argued that in a congested district like East New York, it is comparatively easy to organize and operate a school savings bank, but, on the contrary, it is more difficult to conduct a bank successfully in a congested section of a large city than in a district with a normal population. The rush of the enthusiastic young depositors in a congested district tends to swamp the school bank the moment it is opened and creates complications which cannot be handled by the school authorities or the young clerks. Mr. Terhune has found that it is impossible to operate a new school bank successfully if all of the pupils in the school are permitted to deposit before the tellers are thoroughly 04343broken in. Only one of the highest grades is first permitted to make deposits. When the bank tellers, who are selected from the older scholars, learn to handle one grade, other grades are gradually added until every scholar in the school is admitted to the bank.

American school bank system—The American-School-bank system has assumed an importance which demands the best thought and greatest energy of our school and savings bank officials. As the annual savings and bank balances of our millions of little depositors increase in volume the greatest care must be exercised to safeguard every dollar. Fortunately, nothing serious has occured so far to shake the implicit confidence of the children or their parents. Nine or ten States have already enacted laws to regulate school banks. In many cases the new laws are more restrictive than permissive, but banks are still being organized extensively in States where there is no law on the subject. In States which prohibit savings banks from establishing “branches,” and where no exceptions are made by statute legalizing school banks, care must be taken that no method is adopted for collecting the school savings which is in violation of law. Some bankers and school officials who are deeply interested in school-bank work believe that in every State there should be special legislation to bring the regulation of school banks under the State banking authorities. Others think further legislation is not important. They contend that the school bank automatically comes under the protection of the State when it becomes a part of the activity of the savings bank.

Thus it becomes a debated question as to whether or not new legislation should be sought. If in any State there is any danger of restrictive legislation being enacted which might place obstacles in the way of school bank development, it might be wise for those interested in the work to now seek permissive legislation in order to forestall possible harmful and ill-advised legal restrictions.

Handling the money saved by school children has become a part of the business of the savings bank and it is vital that these funds be amply safeguarded at all times. If the faith of the child in the safety and stability of its school bank or school bank depository is ever disturbed or shaken in the slightest degree, much of the value and purpose of teaching thrift will be lost.

Regular methods best—It is generally agreed that the school bank should be organized and conducted as far as possible along the lines of a regular savings bank. The processes of depositing and withdrawing money must be simplified for the child, but it is necessary always to remember that little folk like to imitate their elders. When a child explains to its parents that it is depositing its savings in the school bank and is informed by them that the school bank is exactly like the one used by father and mother, a greater interest is immediately created for the child in its school bank. This interest is increased still further when the child learns that as soon as it has deposited a given amount in its school bank, its savings will be transferred to the same bank, possibly, which is used by father and mother. In this way also we make the step from the school bank to the savings bank an easy one.

The question of whether or not the school bank should be organized and conducted entirely by the school authorities is still a mooted one. This seems to be a question which must be settled locally in each community in which banks are organized. It so happens that in some communities, where the school authorities are backward in taking the initiative, it is necessary for the bankers to step in and make the first move. In other communities it is necessary for the school authorities to awaken the initial interest among the bankers and practically to carry on all of the details of the school bank, leaving the depository bank nothing more than the guardianship of the funds collected in the school bank.

School authorities control—The banker appears as a general rule to be perfectly willing that all organization and control come under the direction of the school authorities. At the same time we find many bankers who are willing not only to take the initiative in the organization of a school bank, but to relieve the school authorities of every possible burden and detail.

It is of vital importance to the success of the school bank that all savings banks acting as depositories for school funds be required to make a detailed, annual report to the Savings Bank Division of the American Bankers Association in New York; otherwise it will be utterly impossible to tabulate accurate statistics and keep in touch with the school-bank system on a National scope.

Attention should be called to the fact that young depositors should not be led into anything resembling a contest to save money. We ar or should be teaching children that regular and systematic saving is more important than the amount saved. We are also teaching them that it is better to save money earned than money which falls into their hands without effort on their part. If the school savings bank should be the means of fostering personal, school, or regional contests in saving money, there would arise among the children a spirit of rivalry and contest that would be highly undesirable and out of keeping with the fundamental principles of thrift.

A National system—I believe our savings bank and school officials are coöperating whole-heartedly in the development of a National school bank system, which will be of inestimable value to our Nation. It is most evident that much remains to be done in removing from the minds of teachers the fear that a new burden is about to be placed on their shoulders. The higher school authorities must see to it that the teacher is given ample time in which to handle the organization work and then properly conduct the school bank. When this is done the school bank will run itself almost automatically. The older children relish the work of cashiers, tellers, etc. The savings banks are willing to handle practically all of the details of the bookkeeping and to do the organization work if necessary. The school bank need not in reality be a burden upon the teacher. But even should it require a little extra effort, the reward far outweighs the cost to the teacher. It is probably safe to say that there is not a teacher in the country who has witnessed the great benefits of the school bank who would not fight vigorously against any attempt to abandon the bank in her school.

Building and loan associations—The building and loan associations have been working along similar lines with the schools, while for certain legal reasons they have not been conducting or developing school savings banks. In the State of New York, some 30,000 school children are members of building and loan associations. I am indebted to the United States League of Savings and Loan Associations for the following brief statement outlining their views:

“Briefly, a savings and loan association (often called building and loan association is a coöperative financial institution which, by offering excellent security and an attractive rate of earnings to its members, accumulates funds to be loaned on easy terms to home builders. First, it is a savings society aimed to promote home ownership. The savings feature comes first because someone must save before anyone can lend.

“It is a matter worthy of note that few types of savings or banking institutions adopt the same attitude toward their future progress that is done by all religious denominations. Admitting that the most receptive mind is that of a child and that commendable habits are more easily formed in children than in grown-ups, the wonder of the age is that this fact has not been seized upon by banking institutions to instil and cultivate in children the habits of thrift. True, it has been done in some isolated instances, but the practice is far from general.

“Rosy pictures—Paint to the child a rosy picture of the future with a garden to cultivate; financial independence such as is dreamed of by the admired daddy. Depict the joys of achievement and the acclaim of his future flow men over his achievements, and then in logical sequence show how this can be done by starting his saving with a few pennies, then to the coins of larger denominations, and, finally, when he has begun to fight his own battles and earn his own living, to the accumulation in larger amounts of his endowment for future success. You have then intelligibly impressed upon his mind a picture which is constantly before him. The proper medium to encourage this is the savings and loan association. First, because it is essentially an institution which from its nature will welcome the small account and secondly because having secured it, it will return a larger earning on the savings than will any other form of banking institutions.

Juvenile savings clubs—Carry all this one step further by suggesting the formation of juvenile savings clubs in the schools. Secure the assistance of the Savings and Loan Associations in the issuance of attractive little passbooks which, placed in the hands of the children, show the progress made. Offer the child the opportunity of carrying his little book and his pennies himself to the Savings and Loan Association and then the Army of spendthrifts and idlers will gradually dwindle from the shrivelling of its source. In its place the nation will experience the addition of an army of same, stable, and frugal citizens. With this picture before us, who can refuse his enthusiastic support in the building of such a ‘system’?

“While the school bank in America is rounding into a great National benefit, greater progress can be made in the future if we can standardize the whole system and unify our efforts. What is needed more than anything else is some strong organization to take up the work with the view of standardizing both the system and the method of making annual reports. The standardized system must thoroughly safeguard the children's funds and be applicable to all classes of schools. At the same time we must keep in mind the fact previously stated, that children, while being taught to save, must also be taught the relationship between the mere function of saving and true, progressive thrift”

The place to be assigned any organization or group relative to its part in thrift education must necessarily be a speculative one at this time. It cannot be a realized position but only a hope of achievement based upon certain factors which, in the case of the banks doing savings business in the United States, I shall attempt to analyze in this address. The appreciation of the need for thrift education is simply in the dawning. It has been discussed academically for some years but not until recently has there been a conscious urge for a definite program in thrift education among either children or grown-ups.

Thrift, in practice, too often has been regarded as something austere; as something to be associated with shadows; as opposed to the idea of freedom. Even yet, in large measure, appeals for saving, which is one phase of thrift, are made on the basis of having funds for one's old age and for other supposed necessities later in life, which, to the person under middle age, exert little influence.

Our true relative position—Even the present relative position of our country in savings is not generally known. We have been disposed to accept as true, statements made by publicists as to the place of the United States in the scale of saving nations, which shows the United States bringing up the foot of the list with one saver to every eight persons in our population. We have rolled as a sweet morsel under our tongue the statement carelessly made and believed without scrutiny that a French family can live on what an American family throws away. If thrift education does nothing more than present a true picture of thrift in America it will have accomplished a worthwhile object. From these silly statements the student turns to facts. A careful examination will show, that considering the age of our country, and the adventurous spirit necessarily accompanying pioneers, our people are thrifty to a remarkable degree.

Savings which are a product of thrift education have grown to a tremendous total. Records compiled by the Savings Bank Division, American Bankers Association, show that as of June 30, 1923, there were deposited in the banks of the United States over eighteen billion dollars in savings by over thirty million savers, thus indicating that at least one in every four persons in the United States has a savings account. To speak plainly, if the savings deposits in the banks of the United States were divided equally among all the 112 million of men, women, and children of this country, each man, woman, and child would receive not less than $166.

What thrift means—Thrift should be associated with Mathew Arnold's beloved “sweetness and light.” If it has a lugubrious connotation it is because by association we have made it so. It is not inherent in the word. Thrift, says Daniel Webster, is economical management, prosperity, success, good fortune.

On this basis, where do the savings banks have a part?—and by savings banks I mean all those banks within the borders of the United States, 04747whether their charters be National or State, which accept savings deposits. The place which the savings banks will win through their activity as thrift educators must necessarily depend upon their influence consciously exerted upon the agencies affecting thrift.

Taking all the communities of the United States, there is scarcely any business institution which stands higher in the minds of all people than the banks. The officials of banks are highly regarded; their opinions are quoted; their judgment in most cases is respected. Scattering down from the officials of the banks are the employees, greater in number and less difficult of approach. Back of the physical bank and the active personnel is the board of directors or the board of trustees. Usually this board is composed of the more substantial men in the town, men who not only are regarded well in a financial sense but also to whom are ascribed attributes of civic virtue. These are the persons who, through vision, diplomacy, and statesmanship will make a high place for banks in thrift education.

Interest of bankers—They, however, if ever so vigorous, have slight contact with children in school, where thrift contact should first be made. Their contribution here must be through other agencies. Savings bankers have sponsored school savings in hundreds of districts, and in practically every case it is done by the banks at a present financial sacrifice. Yet, of the almost twenty million of the potential public-school population of today, not more than three million children attend schools where school savings systems have been installed.

This phase of thrift is important in the work of the bank. It will become increasingly important as educators realize the basic significance of thrift as a builder of good citizenship and rally to coöperate with the banks. Great as is the potentiality in this situation yet the most significant thrift work of the bank is with those millions beyond school age. They are now taking their places in the game of life. They meet the full shock of the play of economic forces. Of these they frequently understand little.

Economic factors—Economic factors usually play important parts in any program of change. The interplay of economic factors is seen about us constantly, yet there are those who view changing conditions in our life with dismay. To them, all progress is disturbing. However, life is dynamic, not static. The rapid and low cost of transportation of goods by steam lessened greatly the river-borne traffic of the country. Increased building and maintenance charges, and consequent higher freight rates have brought the rivers their share of this commerce again. The delicate machinery in modern industry and the widespread use of the intricate automobile and the airplane demanded clear brains and steady nerves for safe and successful operation. The result was the eighteenth amendment.

The home as the unit—The factors affecting thrift have been no less varied than those mentioned. In the early days in America the home was the economic unit. If the home was the spiritual center of the family it was so by reason of the fact that it was no less the industrial center. The housewife was not only, in the modern sense, the keeper of 04848the home, but she was one of the sustainers also, in that the garments for the family were woven on the loom by her deft fingers. The production of practically all the elements entering into family consumption came directly from the labors of the members of the family. Each home financed its own needs. The interest of one was the interest of all. Undue production pressure was unknown. The urge to thriftiness came through the desire to purchase more modern equipment.

With the development of power machinery, one by one the household industries passed over to commercial manufacture. The young men went away from home to work. Industry soon called the girls of the family, and this morning eight million of them answered the call. The division of labor had come. With the growth of power machinery came the business corporation. The employee having no part in the ownership or in the management had little urge to save his money and to acquaint himself with the business principles which had been necessary for success in the home industries

The extended growth of the factory system has not changed the basis of business and economic principles. It has simply made them more complex in operation and less easy to understand.

The corporation—With the development of the corporation, it was necessary to have large sums of money for financing its operation. In the old days banks loaned simply from their capital stock; depositors were few. With the growth of the demand for money in industry, banks more and more came to accept deposits. Savings banks, which had been inaugurated as a means to enable employees to save their earnings in prosperous times against the inevitable slack periods, found their money was needful to sustain industry and to assist in municipal improvements, which became necessary because of the crowding of the people into the factories.

There is no doubt that in the time of the household industries, thrift education had a prominent place in the family councils. Those industries are now commercialized beyond recall. As I have noted, the family as an economic unit has gone. Where, then, must the major teaching of thrift occur?

The school as an effective agent—It is claimed that the school is the place for teaching those things which are necessary and which can be taught better in the school than in the home. Therefore, it seems to me that since the family as a teacher of thrift has passes, and since material prosperity now, more than ever before is one of the factors in making life richer and more abundant, thrift should have a place in the curriculum of the modern school.

To send out from our schools each year an enormous army of young men and girls with knowledge of history, of the languages, of mathematics—youths equipped to wage successful warfare in every field except that involving elementary knowledge of economic and business principles—is a wholly mistaken policy. I do not refer to skill in the arts of handicraft or to so-called commercial courses or to technical business training. I refer only to the elementary business principles which are as pertinent 04949in operating the family budget as in the conduct of the affairs of great corporations.

Lack of information—Economic and financial procedure of common practice by men of affairs are entirely unknown to the ordinary individual. The current issue of the Hand Clasp—a monthly paper issued by a bankers organization—contains a prize story which secured for Allen D. Russell, assistant treasurer, Plymouth Savings Bank, Massachusetts, a check for $5:A depositor desiring to withdraw $400 from his savings account was told that he would forfeit the July dividend amounting to about $10, but that, by using his book as collateral, he could save about one half of this amount. He guessed he wouldn't bother, didn't care about the $5, never did it before, and so on through the usual excuses in spite of our explanation. He insisted on his course, and after making out the check, I handed it to him saying (reading the checks), “Now you have four hundred dollars and no cents.” To which he replied, “You needn't take it that way, I just didn't want to bother with it.”

The real point of the story, in my opinion, was not in the misinterpretation of the word “cents” by the depositor but in the pitiful lack of understanding on his part of how to handle the most simple financial machinery. You and I through experience and practice have learned to finance our short-time needs by borrowing money, thus not disturbing our seasoned securities of future maturities for temporary use. The ordinary person because of lack of thrift education is likely to withdraw considerable sums of money or withhold deposits or a period of months because a part of the sum may be needed for a short time.

This part of thrift education is affected by the banks only in so far as they are able to impress educators with its necessity. The greatest opportunity at present before the banks for direct action is that of reaching not only the millions of savers but also the other part of our population to whom thrift is unknown. They have passed the portals of the schools. Most of them have contracts with banks.

Attempting the novel—It is said that Americans love nothing so much as to try a new plan. You will recall that when Paul was visiting Athens in one of his missionary journeys he records the fact that the Athenians “spent their time in nothing else but either to tell or to hear some new thing.” Americans then are running true to historic precedent. In the teaching of thrift so that our people may know economical management, that they shall have prosperity, success, and good fortune, no new machinery is necessary.

In the days of intense commercial rivalry in the eighteenth century, between England and the nations of the Continent, England found that vessels were greatly hindered because there were then use no chronometers of sufficient accuracy to enable the shipmaster to bring his vessel with assurance safely into port after a long voyage. The Parliament of Great Britain offered prizes aggregating $80,000 for the person who would produce a chronometer of accuracy. John Harrison, after several years of experimentation produced a time piece of such reliability that a shipmaster sailed from England to the West Indies and returned to the 05050home port—a journey requiring months—with a variation in the chronometer scarcely noticeable. Harrison won the prize not be building a chronometer along new lines but by refining the machinery then in use. In thrift education new methods are not so much necessary as the adaptation and refinement of those already organized.

Savings clubs—Specifically, then, banks have organized savings clubs adapted to the needs of the various types of employment. Corporations and other employers have encouraged various plans for industrial savings; banks have assisted in sustaining better business bureaus; have favored proper blue-sky legislation. But greater than all, the banks are daily, week after week, year after year sending out literature to their depositors advising them of the many pitfalls before unwary feet. Bank officials are daily discussing with their depositors problems involving the thrift expenditure of money. There is no lack of constant attention on the part of the banks to serve the basic interest of the bank;s customers. In the success of the bank's customers lies the success of the bank. By the coöperation of the bank and other thrift agencies each working in its own sphere, it should ot be too much to hope that we can develop a generation of people in the United States who, by their common intelligence and knowledge of the basic principles of thrift, may make our country more prosperous, more peaceful and more vigorous in leadership toward higher standards of living among our people generally.

Some one has said that the post Longfellow, in The Village Blacksmith typified the ideal thrifty citizen, in that he worked each day, he owed no man, he maintained normal family life and his children participated in the activities of the community of which he was a part. The final values in life, as Dean Brown of Yale so well says, are spiritual values. Insofar as our activities as bankers and educators in thrift education tend to quicken and make real these values in the lives of those who look to us for guidance, we are succesful.

I am interested in the question of thrift. Before the week is out you are going to find that I am interested in it from more points of view than teaching only, or than what we do with the children, or merely putting money into savings banks. I believe in thrift for the National Education Association as much as I do for the children or for us individually in our spending.

The subject I have chosen today is “Wise Spending as a Teacher Sees It,” and I have had a special reason for selecting that subject. I thought that if I spoke from that point of view I might call to the attention of those of you who are not in the actual classroom work of schools some of the difficulties confronting teachers in regard to this subject; and maybe some of you would learn the reason that occasionally teachers do not welcome the introduction of thrift education, as possibly it would seem that they ought to.

Thrift not hoarding—The fact is that there is just as much thrift required for wise spending as for saving money. There is just as much thrift involved in teaching people how to use the money they save as in teaching them to put it into banks; more thrift, really, than there is in inculcating the idea that saving is hoarding. Therein was one of the first difficulties among the teachers. They objected to teaching the individual to hoard, and the first introduction of thrift education that come to us as teachers was the idea of saving or hoarding money. We objected to it very strenuously because we felt that was not the main question in which the children needed instruction.

The saturation point—It was note until Mr. MacDowell, of the National Association of Mutual Saving Banks, gave a talk to the boys in my school about two years ago that I took any interest in the subject of thrift education. There were several reasons. In the first place, we teachers have reached the saturation point in the inclusion in the curriculum of things to teach. Unless something is dropped from the course of study, so that the teacher is relieved, or unless the school day and the school year are lengthened, and the objections to that are just as strong from the point of view of the parent and the child as from the point of view of the teacher, we can consider no further additions. I want to have that point understood clearly. And unless much greater compensation and consideration are given to the worker who must prepare for and teach this rapidly increasing number of subjects of instruction, the end must come to the business of asking teachers to take just twenty or thirty minutes a week for this or that valuable matter of instruction. The pot in regard to that matter has boiled over. These special things must be included in the regular school subjects by which her children are promoted and her own success is judged.

A teacher said to me recently—and this is illuminating from the point of view of the teachers—“Look at my plan of work. I have taught fire prevention, sanitation, street cleaning, thrift, safety, humaneness, memorial funds, patriotic celebrations,”—there were more of them but I have forgotten the rest that she had i her list. She turned on me with this question, “Are you going to examine my class for promotion in these things or in arithmetic and grammar?” And the teacher voiced one of the difficulties that I am today calling to your attention.

Over-emphasis on saving—A second reason why at first I was not interested in thrift, was the over-emphasis on mere saving, and the competition which existed in regard to amounts saved. My teaching life has been spent among a people whose racial inheritance and conditions of living imposed upon them by people in other lands, has brought them to a place where they don't need any great urging to get money. What they need is rather understanding in the wise use of money. Consequently when our school savings banks were introduced with the idea of competition among the children as to the amount that they had saved, we teachers of children of the type of which I am speaking, objected very strongly. We did not want them to feel that competition. Besides that, we had only just begun to see the evil in that kind of competition in athletics, 05252and now, after we had resolved to get our of the field of athletics, we were introducing competition into the field of thrift education.

Delinquent boys—Nineteen of the years that I am speaking of have been spent in work among delinquent boys. The most common fault among boys who come under that category probably is stealing. Consequently again we hesitated, because here we were introducing something that was going to make those children desire to get money, and money would provide a temptation toward additional stealing, beyond that which they had.

I am reminded, as I speak of those boys, of an incident that happened among them one day, which indicates that they needed very little urging in the matter of getting money, or of appreciation of the value of money. The superintendent came in one day, and desiring to be very local in the problem that he gave to them in arithmetic, he said to the class that he was examining: “Two push cart dealers bought brooms at twenty-five cents a dozen. One sold them at two for a quarter, and one sold them at twenty-five cents apiece. Which dealer made the more money and how much?” Before he had the question out, the boys had their hands up to give him the answer. He was startled. “You can take your pencils and paper to work out that problem. You can't do it in your minds,” he said. The boys shook their heads and kept their hands up; so he called on one boy for the answer, which was, “The man that sold them two for a quarter; the other fellow didn't sell any.” Boys of this kind don't have to be taught the value of money and how much they can do with it, and how far it will go.

Saving to use money—But on the day that I am speaking of, Mr. MacDowell came in and talked to those boys, and the very same boys about whom I have just told the story were in the group. He said very little indeed to them about putting money in the bank. He did talk to them about using their money so that it would produce the greatest amount of good for themselves now and in the future, and for those who might be dependent upon them. It was a clear exposition of the difference between saving to get money and saving to use money. And that sentence contains the point of view of the teacher—to teach children to save money, not with the aim of getting but with the aim of using, as the wise point of view of thrift for us to give to the children that come under our care.

The attitude of the teachers in the school changed immediately. Up to that time they had worked upon the school bank and other parts of thrift education only under compulsion of orders from the superintendent's department, and the teachers here will understand with me about how far that kind of teaching goes. The teacher must have her heart in what she teaches, every bit as much as she has got to have the superintendent's orders behind it. But their attitude changed immediately, and they were willing to make it part of their morning talk with the children; they were willing to stay after or use part of their lunch time to assist the boys in connection with their savings; so that in a very short time the great majority of the boys had begun contributing at least into the school bank, if they had not taken out their own bank accounts elsewhere.

A changed viewpoint—I referred a moment ago to the question of stealing and now I want to speak of the difference in the effect upon that question that this changed point of view about saving and thrift education brought about. Of the 200 boys that come to our school, probably 40 of them are thieves, usually pickpockets. They have a point of view in regard to it that the majority of us do not understand. To the average boy who picks pockets it is a legitimate business. He needs money; he knows where there is money to get, and he makes a business of going out to get it. That is the whole story as those boys see it, and when you get their confidence so that they are willing to talk to you, they will tell it to you in almost the same words that I have told it to you now.

It is the most common thing to have a boy who has got into trouble by picking pockets say to his teachers, “Well, I had to have the money.” He believes there is a legitimate connection between the need and the act.

Just as soon as the saving in the school bank and the thrift education was undertaken by the teachers from the new point of view, the boys began to see the relationship between stealing and property rights. That was an unexpected result, but it happened, and consequently we encouraged those boys that we knew had the temptation to seal, to become immediately contributors to the school bank. We didn't always know and were not always quite sure whether or not the money that they put into the school bank was honestly obtained in the beginning, but sooner or later we found with everyone of them that the mere fact that he had a certain amount of money that he was saving for a definite purpose, as soon as he became conscious of the fact that he had that, and realized that it was his property, he learned a respect for the rights of property in everybody else. Many a boy has been induced to give up the practice of stealing just for this one reason. We may say that is not a very high motive, probably, but at the same time any motive that makes a thief voluntarily give up the process of stealing, is a good way to begin with that child and to work out into the higher morals of the issue afterwards.

So we welcome the work because of the results on the moral character of this particular type of child; the desire to protect their own property rights providing the basis for making them respect the property rights of others.

Character improvement—The average teacher is interested at once in anything that you tell her will make for the improvement in character of the children that she has in her class. There is no surer way of getting the average teacher interested than through the introduction of something that is outside of the regular course of study, outside the regular subjects in the academic curriculum. She is interested if she can see how it is going to make for good in the future lives of the children that she has in her class. Consequently, if thrift and wise saving are put to the teacher from the point of view of wise spending, so that she sees the relationship to character building and the future careers of the children in their classes, she will undertake the instruction enthusiastically.

May I illustrate from my own observation, the manner in which the 05454teachers handle this question and the problems that come to them from the children themselves. The illustration shows how thrift education can be made a part of character development, and how it can remove the whole thing from the appearance of selfishness and self-interest, which will too often accompany it if is just mere saving.

New York slums—The section of the city where we are located is an exceedingly poor one. It is the slum district of New York, and the people who are there terribly poor; and naturally the children that we get represent the poorest of the poor. The most constant problem with them is rent, and that drove us into a consideration of this whole question of thrift education, wise saving and wise spending in relation to the rent. We have talked with the children about it, and have gotten them to bring their parents to school, and we have talked it over with the parents. It is shocking to realize the relationship that actually exists between the rent that people pay and the whole amount of their income. It is absolutely disproportionate—absolutely. They pay rent according to the kind of place that they make up their minds to want to live in, the number of rooms that they feel they must have, and numerous other questions that come up for consideration. They fail absolutely to consider it in relation to food or to health or to possible emergencies and accidents that may arise. Therefore, in the instruction about thrift and in relation to the saving of the children, we have used the question of rent as one of the ways of reaching these children, and one of the ways of teaching real thrift to the parents. Incidentally I might say that a good many of us had to take the lesson to heart ourselves, because when we made an investigation into the subject and got together some statistics and inquired as to the budget making of family incomes, we found that many of us were far exceeding the proportion of income that should go to rent. So there was a question of wise that has brought about a great deal of help among the immediate families of the very children who are putting these little sums of money into their school bank.

Definite objectives of saving—The second question was that of having children save their money for a definite purpose, instead of spending immediately, satisfy some desire, whatever money they could get. To give a concrete illustration, one boy in the school made up his mind that he wanted an auto harp, and he was not satisfied with the ordinary kind that the average child would buy in a small shop; he wanted a more expensive kind that he had seen used in an orchestra. He didn't know how to play it; he didn't have any money to take lessons on the use of it; neither did he have any occasion to use it or any place where he could use it without being nuisance to the whole community. At the same time he had money enough to buy it.

The teacher said to him, “Instead of buying it right away, let's put this money into the school bank. You might find by the end of the term that you need the money for something else; or if you wait till the end of the term you can buy the auto harp and take it away when you go to the country.” The teacher was considering the community as well as the boy. The boy yielded. When the end of the term came he no 05555longer wanted the auto harp. He had come to the conclusion that he very much more needed a pair of new shoes. Consequently, saving with a definite purpose in view, even though the purpose itself may prove to be undesirable and unwanted by the time the saving accomplished, is a means of teaching wise spending and is one of the ways the teacher can do it right in the school itself. And two things have been accomplished in the meantime: In the first place, the money has been saved, and hence it is available for greater necessities; and in the second place, the habit has been acquired of waiting to give temporary desires the acid test of time. Here again is the problem of character building met.

Character building—Then the third point in wise spending that the teacher can use a means of character development is to remove the selfishness which is so apt to be the ruling with young children until they are guided out of it. It both income and saving are considered from the point of view of relative value and ultimate value, the habit of self-control results, and with that habit of self-control comes a decrease in selfishness. It is inevitable. One thing follows the other, and consequently we feel that we have given to the children a great service when we have made them use their savings and their spending as a means of developing self-control among them. My appeal to you who are interested in thrift education is that you will place your emphasis not on saving money for the purpose of getting or having money, but on wise spending from the point of view of character development.

It is good old American habit to brag. I sometimes feel like getting a little vainglorious about what we have done with our budget; and get when I recall the England, where the Chancellor of the Exchequer dates his powers back to the time of William and Mary, has had an adequate budget system since 1713, it gives me occasion to pause, and some little reason for restraint, inasmuch as we celebrated our third birthday the tenth of this month.

I am to speak upon the subject of the Nation's business, with particular reference to the subject of thrift in the National Government.

Twenty-six billions—We went into the World War with a debt of a billion and a quarter dollars. We came out of the World War on November 11, 1918, with a debt of nineteen and a half billion dollars, which in less than a year, August 31, 1919, had increased to twenty-six and a half billion dollars. To be accurate, $26,564,267,878.25.

We try in the budget to be accurate. My office force, my estimating branch, my accounting branch, is largely made up of people drawn from the Treasury Department, men have served for years in that splendid institution of our country where they are taught to be accurate. While preparing these figures, which will be presented at the annual meeting 05656of the Government, next Monday evening, which meeting will be addressed by the President of the United States and the Director of the Bureau of the Budget, one of my assistants came to me much concerned and said, “Your figures for the debt on August 31, 1919, are not correct.” I said, “Not correct? Why?” He replied, “You have got $26,594,267,878.26; that is wrong.” “Well,” I said, “what should it be?” He said, “It is $26,594,267,878.25. You have got it one cent too much.” I thanked him. It was a narrow escape, because our gross debt at that date was sufficiently big without any arbitrary or accidental augmentation.

Extravagant spending—We cannot only came out of the World War with that extraordinary public debt, but which was worse, we came out with the habit of thinking and spending in billions. And that habit of thinking, and that extravagant habit of spending, unfortunately was not confined to the Federal Government, but affected all of the lesser divisions of the Government in this country, and we entered upon a saturnalia of extravagant expenditures. It was necessary that someone should set an example, and I am going to show you that the Federal Government has set an example. We faced a host of urgent problems that clamored for solution, and one of the chief of these was the cost of government. On the one hand we had acquired a greatly expanded public service; on the other we faced the necessity for immediate National economy. It was imperative that we curb at once the rising cost of government in its peace-time activities. At this junction, fortunately, Congress in its wisdom gave us a budget system.

A budget systemThere is nothing mysterious or extraordinary about a budget system. You probably all budget in a measure. I have kept a budget ever since I graduated from college. If I am entitled to any credit in this world it is because I have had the persistence through these years to maintain a budget, poor as it is, because I am the poorest bookkeeper in the world. Sometimes I think I have more trouble with my own personal budget than I do with the Federal budget.

Probably you all budget. If you, like myself, are dependent on a fixed monthly salary for your maintenance and living you do budget. At the beginning of a month you probably take account of stocks, as to what money you have, what your income is going to be for the month, and then run over the amount that you know you must pay; your board; your house rent, your travel. And if there is anything extraordinary in that month that you did not have in the other month, you figure that you must cut out a little something here, provide for the unusual expense, and even if you do not put one figure on paper you are budgeting. Th United States Government never did that until three years ago, not even that.

Now, what is this budget? It is simply the common sense of good business applied to the biggest business in the world, the business of the United States.

The budget law—What did that budget law provide? It provided that the President, whom it recognized as the head of this great business organization, should, before the beginning of each year, send to Congress an itemized statement of what he would require to run this Government 05757for the year. It required, very naturally, that he should submit with that estimate of what he thinks the Government should spend in the twelve months, an estimate of what money would be available under existing taxation to pay those operating expenses. It required that if his estimate of expenditures exceeded his estimate of receipts, he should recommend to Congress the measures that should be taken to raise the additional revenue that would be needed. It also required that if his estimated receipts showed an excess over proposed expenditures, he should recommend to Congress what disposition should be made of the surplus.

The Budget Bureau in submitting its estimates for the coming year, 1925, showed a prospective surplus at the end of this coming year of $395,000,000. Based on that, the President of the United States, in compliance with this law, recommended to Congress a program of reduction in taxation which is known as the “Mellon Plan,” and which was submitted officially in the budget that was transmitted to Congress the first week in last December.

Congress realized that the President with his multitude of duties and demands upon his time would be unable to obtain the required data and to prepare this extraordinary budget which carries more than 1000 pages of statistical tables. In consequence they gave the President an agency styled “The Bureau of the Budget,” with a director at its head, who is the President's executive, his financial manager on all things that pertain to the Government's routine business. It is the business of this agency to prepare the budget. The President utilized this agency immediately, not only for imposing his control over estimates, but for enforcing his plan for the unified conduct of the Government's routine business, and for instituting and prosecuting a scientific reduction in the cost of Government in expenditures.

A household budget—What we are doing here has attracted a great deal of attention, and there have been many interesting and profitable by-products. One of the most valuable of these has been the development of budget interest throughout the country, with particular reference to family budgeting. Many of the women's organizations, realizing the importance of this as a good thrift measure, have been devoting special attention to family budgeting. The thrift-budget representative of one of these organizations is in constant touch with my office, and I know she is doing very fine work, and she brings me this story which may be of interest and may prove profitable. It seems that a certain lady came to her husband the last week in December and said, “Our next-door neighbor, Mrs. So and So, keeps a family budget. Her husband gives her so much money at the beginning of each month, and she is supposed with that money to maintain the household, and what she can save out of it at the end of the month she has for her own use. Now, I am as smart and capable as Mrs. So and So, and I want exactly the same opportunity.” Her husband agreed; he was glad to have her do it. He would help her. So he got a little simple book and she started out the first of January with this first entry on the left-hand page, “January 1, received from my husband for household expenses, $300.” He explained to her that on 05858the opposite page she should list the articles purchased, with the date and cost. At the end of each week he would total the amount and carry it over and deduct it from the $300, thus to give the new balance, and so on through the month. She said she understood, and went gaily on her way, and the last week in January the husband happened to think of the wife's budget and said to her, “My dear, how are you coming along with your budget?” “Fine,” she replied. “Have you got your balance?” She said she had and he seemed surprised.

The book was brought and there was the balance indicated. He counted the cash, which was correct to a penny. Again he was surprised. Still doubtful, he studied the items of expenditure, and down under date of January 5 he found an entry “G O K; $7.03,” Down a few lines under a later gate again he saw “G O K, $2.25.” “My dear,” he said, “what are all these ‘G O K's’?” “God only knows,” she replied.

God only knows—I call your attention to this absolute fact, that for 138 years that kind of finance procedure characterized the operations of this Government, involving an expenditure of more than $70,000,000,000. Such condition is tragic. We conducted this great business in the most casual way in the world. We took in what we thought we wanted, and spent what we wanted to spend. The idea of leveling the two, the necessity of striking a balance to see that our expenditures did not run away from our receipts, seems never to have been given constructive thought. Fortunately we were the richest nation in all the world. Our resources were the greatest. We were singularly blessed. Our tax rates were among the lowest, and a few points increase in taxes here and there, and mostly in indirect taxes, attracted little attention as long as we had such an overflowing bounty with which to replenish the treasury as it was depleted, and as long as our tax demands were as modest as they were fifteen and ten and eight years ago.

Then came the World War, and you know what happened to taxes. In the span of years less than the fingers on one hand our featherweight tax burden became heavy as lead, and this Government, for the first time in two generations, faced the necessity of doing something and doing it quick to shrink the cost of government. Under the budget laws we are shrinking the cost of government. Today the entire program of taking money from the people and getting it into the Treasury and taking it out and spending it, is based on the sane and simple realization that if we are to keep out of debt, we can't spend what we haven't got. In the interest of the taxpayer we must ask for the smallest amount that will suffice; and in the interest of economy not only must we not spend more than that amount, but we must follow through on the taxing problem operation and see that what is spent is wisely spent and spent according to a scientific system of distribution.

A balanced budget—Today the policy of the United States Government is the policy of a balanced budget; and the duty of the Bureau of the Budget, as the President's executive agency, is to cut down expenditures and keep them cut down, so that we may reduce taxation and at the same time balance the budget.

With the preliminary, let me tell you something about how we do that thing. What is the budget and how do we operate it?

We have only 40 people in the Bureau of the Budget. That is enough. So long as I am Director of the Bureau of the Budget we will have no more. Its danger lies in getting so big, with its overhead so extraordinary, that it will become unwieldy and useless. I have six assistants. We have 43 departments and independent establishments in the Government. Those 43 agencies of the Government are divided among these six assistants. For example, Mr. Stephens, one of my assistants, has the War Department, the Navy Department, and the District of Columbia. Each one of those three has an investigator. The investigator for the Navy Department, for example, lives practically in the Navy Department, and studies it all the time. All the records of the Navy Department are open to his inspection, because he acts for the Director of the Budget, who speaks always in the name of the President of the United States.

Sources and destinations—We find that it is necessary to know not only where the money has been spent, but we want to know where they plan to spend it, where it is going, because we may want to change its designation.

With these six assistants having under their control these investigators, there is available for the Director of the Bureau of the Budget at all times the most intimate information as to what all these agencies of the Government are doing, what they have done, what they plan to do, where the money is going, how much they have got left—not only what they have done, but what they plan to do.

This organization was not sufficient to secure the results that we needed. We found that we must have certain “coördinating agencies,” as we call them, to bring about a community of interest, to develop team work in the Federal service. So there were created various coördinating boards. To enable you to understand just how we operate those boards, I shall take up the problems that we faced for this current year that ends with next Monday, June 30.

The annual meeting—In June we have what we call our annual meeting, called by the Director of the Bureau of the Budget in the name of the President. Here we get together as in town meeting, all the representatives of the Government who have an authoritative relation to the preparation of estimates, the obligation of public funds and their expenditures. There is the President, who presides and addresses the meeting. He is followed by the Director of the Bureau of the Budget. The members of the cabinet are there and the heads of all the departments and independent establishments and bureaus—a very large assembly. Here is where we build up our budget, exactly the way you plan each month for your own home budget, only we plan for a year. On June 18, 1923, we held that meeting. President Harding presided. The Director of the Bureau of the Budget prior to that meeting called upon all the 43 departments and establishments for their best estimate of what they would spend in this year that closes next Monday, the year that was to come. Appropriations had been made, the money was available. That estimate 06060came to the Director of the Bureau of the Budget, and the total they planned to spend this year, 1924, was $3,668,000,000. Then he called upon the same agencies to estimate the amount of money they expected to receive next year. Most of these agencies control sources of revenue. He called upon the Treasury Department for an estimate of how much they expected to receive in customs and how much from internal revenue, and on the War Department for the amount they expected to receive from the sale of war munitions and reclamation, and all these sources. When the total came in we brought it together. They estimated that they would receive only$3,638,000,000. That showed a deficit of $30,000,000. That is, they came in very cheerfully and said, “We are going to spend $30,000,000 more than we expect to receive.”

Poor business—That is not good business, so the Director of the Bureau of the Budget put this problem before President Harding prior to this meeting that was coming, where the policies are outlined for the coming year, and recommended that these people be required to spend $156,000,000 less than that $3,668,000,000. That is, he was satisfied, after going over their estimated expenditure lists, that they could be cut down $156,000,000 without any loss in efficiency to the Government. This had President Harding's approval. So we went into that annual meeting and he said to these people, “You want to spend $3,668,000,000. I will now tell you what you will spend. After you set aside what we are going to apply to the reduction of the public debt this coming year, which is $512,000,000, all your other expenditures must be kept within $3,000,000,000,” so as to have even figures to remember. There we started. That was his policy, and his direction was to the Director of the Bureau of the Budget to put that policy into effect.

Instructions mean performance—I think the people in the Federal service have learned by this time that as far as the Director of the Budget is concerned, the President's instructions will be reflected in actual performance. There was the task. How do we go to work to cut down that program of expenditure by $156,000,000? There is the total, $3,668,000,000 that they plan to spend, and it would seem that in that very generous amount it would be comparatively easy to cut out $156,000,000. That is the way the taxpayer looks at it.

Let us examine that $3,668,000,000. What is in there? First, $940,000,000 for interest on the public debt. We cannot save that. We sadly put that aside, because there is no saving in it. We don't control it.

Again we look, and find $512,000,000 for the reduction of the public debt, the most of it required by the provisions of the cumulative sinking fund. The sinking fund is a law that requires that every year we will apply so much on the debt, and that climbs up more and more. Each year as the interest reduces, the sinking fund increases, so that in a little more than twenty years we will wipe out automatically all of the debt except that portion of the debt owed us by foreign governments. We can't cut that.

Funds beyond control—We now have $940,000,000 that we can't save on, and $512,000,000 that is out of the equation, and we look again and 06161find $688,000,000 for the veterans of three wars and the dependents of four. We would not touch that if we could. That is for the veterans. So we can't save on that, and we push that aside. We study the more than 1000 pages of the budget and find other millions here and there scattered throughout those pages that are absolutely without our control. We are in the position of the colored man who applied for credit at the country grocery, and the grocery man said, “How come? You had a nice crop of cotton. Why do you want credit?” The colored man replied, “De ducks got all that cotton.” “What do you mean,” queried the grocery man, “the ducks got it?” “Well,” said the colored man, “I shipped the cotton to Memphis. They deduck so much for freight, they deduct so much for storage, they deduck so much for commission, deduck so much for taxes, and deducks got most of that cotton.” So “deducts” get most of this money.

Now that we have taken out these extraordinary amounts which we cannot control, which are constant, fixed charges, we have less than a billion and a half to which we can apply the principles economy. How are we applying the principles of economy to that billion and a half on which we have got to save the $156,000,000 this year?

Waste of decentralization—The principal source of waste in the Federal Government was its decentralization. We had 43 departments and establishments, and as far as any community of interest was concerned, any thought of working together, collaboration, coordination, cooperation, it seems that those words had been left cut out of departmental lexicons. There was no thought of anything of the sort. So the first task that we had was to develop something in the way of team work, to bring these activities together. The first thing that pointed to the necessity of something of that sort was the case of our extraordinary accumulation of war munitions, amounting to billions, a vast accumulation, the most of them held by the War Department, the Navy Department, and the Shipping Board. Each of these departments established, set up and operated a most expert selling agency, but there was no purpose, there was no uniform principle of selling, no community of interest between them. What happened was that the Navy would sell at a sheriff's sale price, goods today that tomorrow the War Department would buy at the top market price. And so back and forth, just a waste of supplies and materials.

What coördination means—There was appointed a chief coördinator, operating under the Director of the Bureau of the Budget. He was given first the Federal Liquidation Board, to liquidate this extraordinary accumulation of munitions. The Federal Liquidation Board has nearly worked itself out of a job. We have liquidated supplies costing $3,764,000,000, for which the Treasury has received $1,295,000,000. We have transferred between Departments, where it was manifestly for the best interests of the Government, supplies valued at $371,000,000. And I am happy to say that Uncle Sam will soon conclude his bargain sales, although we still have quite a nice little assortment of drydocks and marine railways and some buildings and miscellaneous supplies which I will be glad to sell to any of you for $25,000,000 down and close it all out.

Neither the Bureau of the Budget nor the Director of the Bureau is so popular with everybody in the service as might be. I received a letter the other day from the Public Health Service stating that there was a surplus of one hundred coffins down at Perryville, which in the terms of the letter, “could possibly be used to advantage by the Bureau of the Budget.” The Director of the Bureau of the Budget refused to read any sinister meaning into that communication. He prefers to construe it as an instance of good coördination, as we found a real need for this surplus supply.

Having coördinated the sale of supplies so that the Departments were working along established lines and we were under way with good business methods, the field of Government printing was clamoring for help. We are wasting a great deal of money there, and so we establish a permanent conference on printing. They have been operating now for three years, and we have made notable savings. For example, in 1921—that is the last pre-budget year, the last year free from budget control—the Government printing cost $12,876,00. This year it will cost us not quite $10,000,000. Inasmuch as the Congressional printing this year—and Congressional printing is included in both figures—will be considerably more than for 1921, the credit for all that saving and a little more belongs to the executive departments.

Requisition review board—These facts I am giving show how we are saving this $156,000,000. For example, we have organized in the Government Printing Office, in connection with his Federal Printing Board, what we call a “Requisition Review Board.” It is made up of expert printers, and they review all these requests that come from the executive departments for printing, to see if they can suggest modifications that will mean a saving. Since they were created and installed in their work. July 25, 1921, they have saved in excess of $195,000. Most of these savings have been effected by substitution of cheaper stock, simpler styles of binding, and correction of errors in requests for printing.

Needles in the soup—An instance in question came across mu desk in January. A report from this board reaches me every month, and I study it with interest. In this January report one of the great departments of the Government submitted a request for 2000 copies of a very expensive print. A study of the character of the print would indicate a more limited circulation than 2000, so in accordance with procedure they queried back to the department and said, “Do you need 2000? Don't you need 200?” The department replied, “We don't need 2000. We don't need 200; we only need twenty.” The explanation was that some typewriter stenographer had added two ciphers to twenty and made it 2000. I don't know what we would do for scapegoats in the Federal service if it was not for the defenseless stenographer and typist. This excuse was on a par with the explanation that was given the patron of the restaurant who found needles in his soup. The head waiter laboriously explained that it was due to a typographical error, it should have been “noodles” and not “needles.”

We are trying desperately to correct this needle-noodle method of doing 06363the Government business, and with a measure of success. Cases of this sort, this kind of carelessness, thanks to the attention of the Bureau of the Budget, are appreciably less than was the case formerly. The Government is entitled to the intelligence as well as to the time of its employees, and it insists upon having both.

Specifications Board—We have the Specifications Board, giving us standard specifications, making it incumbent upon all the Government departments to use that as the basis of our contracts, and we have a Federal Contract Board which is working out uniform contracts for the Government. Already they have given us a uniform lease that is now applied to the Government's entire business. We will spend this year $72,000,000 for rent, and I venture to say that when we have this uniform lease, which is an up-to-date, modern lease, in complete application throughout the Government, we will save at least ten per cent on that $72,000,000.

We have in addition to that a Federal Purchasing Board which applies modern principles to purchases, and we are getting consolidated contracts for the general group of Federal agencies. We are saving through the largest purchases in that way many thousands of dollars.

Real-estate Board—Then there is the Federal Hospitalization Board, and the Federal Real Estate Board. Under old conditions if one agency of the Government in Chicago or elsewhere, it might be a representative of the Treasury Department, for example, wanted additional space, they went out into the market and bought it, regardless of the fact another agency of the Government right across the street might have just as good or better space unoccupied. We established the Federal Real Estate Board to correct that situation, and today no agency of the Government can go into the market and acquire property or space without clearing the request through the Federal Real Estate Board, to see whether or not there is Government space available that can be used. Under the operations of that Federal Real Estate Board we brought Government agencies under Government roofs in Chicago and canceled leases costing us more than $200,000 annually.

Area coördinators—We have as one feature of our organization what we call “Area Coördinators.” The country is divided into seven districts. New England is the first district. Commander Wadsworth of the Navy is our area coördinator for New England, with headquarters in Boston. All these coördinating agencies add not one additional person to the Federal payroll. They are people who are in the service, doing this work in addition to their other work.

Here is an illustration of what we do. The Internal Revenue unit in Boston needed 4000 feet of additional space. In former time they would have gone out and hired it. They can't do that now. They applied to the area coördinator, who has there a list of all the Government-controlled space. He checked up his list and found that the prohibition unit in Boston had 4000 additional feet of space that they were not using. He looked at it and found it would satisfy the requirements, though there were no partitions, and partitions were necessary. He inquired in Boston Harbor and found that out at Fort Strong the Army had some material 06464that had been salvaged, that was admirably adapted to the construction of partitions, and they were welcome to it. He secured his space and his material, but he had no workmen to put it up. He then went to see the Veterans Bureau School, and found that they had a school of carpentry with an instructor. The commandant of the school was delighted to send the instructor with some pupils in carpentry to put up the partitions. If you go to Boston you will find the Internal Revenue Bureau in these excellent offices, the space provided through the courtesy of the Prohibition Unit, made habitable through material contributed by the Army, and put up by the representatives of the Veterans Bureau. That is what we mean by “team work.” That is how we are saving your money.

Team work—I could go on indefinitely through a long list and give illustration after illustration to show how we are bringing this thing about. It is all an effort to develop team work. We are preaching all the time to the people in the departments at Washington that they must think in terms of the United States and not in terms of departments and bureaus.

At Maryland University a short time ago I found written on a door in lead pencil the following statement as a definition of coöperation: “Coöperation means to so conduct yourself that others can work with you.” The development of that kind of conduct in the Federal service is one of the primary policies of the Bureau of the Budget. You know we have a scriptural example for this policy of coöperation. Seven hundred years before Christ, Isaiah recorded that “The carpenter encouraged the goldsmith and he that smoothed with the hammer, him that smote the anvil, they helped everyone his neighbor, and everyone said to his brother, ‘Be of good courage’.” That is what we are preaching in the Federal service in season and out of season; and I say to you that that spirit, the spirit of that scriptural example is becoming more and more evident from day to day in the Federal service. The aloofness, at times actual hostility, that formerly characterized the relations between department and department, bureau and bureau, is being supplanted by friendly coöperation under the impulse of the spirit of service for the Federal Government alone, rather than narrow restricted service for one of its subordinate parts.

Congress.—We hear Congress criticized. The papers seem to think that Congress is unfriendly to the budget. The budget has come through the deep waters during this spring and summer. It is its first experience with a Congress prior to an election, and yet I want to pay tribute to a much-criticized Congress. When the budget and the Accounting Act went on the statute books, Congress immediately revolutionized its entire appropriating methods and centralized all appropriating authority in the Appropriations Committee of the Senate and the Appropriations Committee of the House of Representatives. These two committees, and Congress generally in their treatment and consideration of executive estimates, have followed approved budget practices and have given to the new system that powerful support that was essential to its success. Individual cases of people trying to get appropriations for their immediate localities do not in any way interfere with the general situation. Let me 06565prove that by saying that in the total appropriations passed by this last Congress, amounting to$3,662,000,000, ten million dollars less than the budget estimated, seven and a half million of that ten million were in pensions, an arbitrary reduction which Congress could well make. Instructions were given the pension people that “if in December the cut was found too deep and more money was needed, to come and get it.” Congress can do that very properly; the budget cannot do it. We cannot make appropriations with the promise that more money will be forthcoming if the amounts are insufficient. The real difference between Congress and the budget in the estimates for the coming fiscal year that begins with next Tuesday, is really only two and a half million dollars. So extraordinary is it that it is too good, in fact, because I fear we will never come so near it again. I am glad to have this opportunity to say a word for Congress.

The President's policy—The Bureau of the Budget has no policy. It simply carries out the executive policy. It finds out what the President's wishes are in these matters. It is his budget when prepared, and we submit it and carry out as nearly as possible his instructions. It is none of the Budget's business what Congress does. If Congress wants to enact legislation or throws additional burdens on the Treasury, it is one of the Budget's business; it is its business to finance the problem after Congress has acted.

We faced this year with an original estimate of receipts for the coming year of $3,692,000,000. We submitted an estimate of expenditures for next year of $3,298,000,000, which would show a surplus of $395,000,000. Congress enacted quite a number of measures. The Bureau pension bill added $58,000,000 to the burden next year. The President vetoed that.

New burdens—Then there was the postal service bill which would have added $62,000,000 or $70,000,000 annually to the problem beginning with next year. The President vetoed that.

The soldiers’ adjusted compensation act which he vetoed was passed over his veto. This adds $132,000,000 to the burden next year.

The reduction of taxation of course affected the other side of the problem and reduced our revenues for next year. It looks now as though we should do remarkably well next year if we come out with $25,000,000 surplus.

Bears and buffaloes—Let me illustrate the position of the budget as far as the Departments and Congress are concerned. Two men were travelling over the western plains and were overtaken by a stampede of buffaloes. One climbed a tree, the other went into a hole in the ground. The man in the tree was surprised to see the man on the ground come out of the hole in the track of the buffaloes, roll over and over and go back into the hole and come out and repeat that performance a number of times until the buffaloes had passed. Then he came out of the hole in a very frazzled and disheveled condition, much bruised and battered up. The man in the tree inquired as to why he didn't stay in the hole. The reply came that there was a bear in the hole. I merely remark to you as people outside of the service, that the Director of the Bureau of the Budget, 06666acting for the President, will take care of the departments if you people outside will take care of the department buffaloes, and look out for the Congressional Bears.

I was never a candidate for my position. I was drafted for it and I am not so infatuated with it that any of you can't have it any time you want it, so far as I am concerned, if you think you can do it any better. When I first took this job I made the announcement that when the Director of the Bureau of the Budget became popular he should be dismissed. My experience of two years in that position has confirmed the wisdom of that conclusion.

It is not a simple job; it is not an easy job; it is not a pleasant thing to face your friends across the estimate table and deny them the money that they are convinced they should have to carry on what they think an important project for the Government; men whom I know intimately, who are committed to the Government service, men of high character and equipment, whom it is necessary to deny at times to carry out the executive program. At times when pressure becomes exceedingly heavy and the demands excessive, the Director of the Bureau of the Budget feels like saying with John Addington Simon, “Happy the man who has hodsman's work in some plain place of the world.” And then he feels that there is here really a call to service, and he carries on.

I thank you very much for your kind and considerate attention to this somewhat disjointed talk on the budget. I wish I had time for a questionnaire. I would be glad to attempt to answer any questions that any of you might wish to ask.

Thirty million persons—more than a quarter of our total population—owe their livelihood to America's aptitude for manufacturer! The number of manufacturers exceed 250,000, and their 10,000,000 employees receive over $13,000,000,000 a year in wages. The estimate value of American-made goods in 1923 attained the colossal figure of $58,500,000,000.

American ideals demand high standards of living for American workers. To a great extent, the present standards have been made possible by the adoption of labor-saving machinery, and of scientific methods of production. Manufacturers are constantly applying new inventions, and new methods to the great task of supplying not only the wants of our own 112,000,000 people but also to a large part of the world's population.

High cost of business—Nevertheless our industrial leaders find their problem steadily growing more complex. On the one hand, materials, labor, taxes, freight rates, and other important factors in the cost of production, are all relatively higher than before the war. On the other hand there is a very definite resistance on the part of the consumer to any further increase in the prices he must pay for the goods he needs. Manufacturers 06767have therefore been forced to look into their business more intensively than ever before, for changes to save money. Many of them are finding new sources of profit in the elimination of waste. When we think of waste, we usually picture some avoidable loss. for example, the annual fire loss in the United States runs to over $500,000,000. This tremendous sum is but a small fraction of the annual loss, or waste, in industry.

When Secretary Hoover was president of the American Engineering Council, he organized a Survey of Waste in industry, covering six of our major industries. The eighteen prominent industrial engineers who made this survey reported that the preventable wastes ranged from 28 per cent in the mental trades (supposedly the most efficient of all our industries) to 64 per cent in the manufacture of men's ready-made clothing, an industry notably affected by the style problem, seasonal influences, and such matters. Applying the average waste of approximately 50 per cent to the $60,000,000,000 worth of goods turned our each year, we have an annual waste of $30,000,000,000. This loss is sixty times greater than our annual fire losses.

Waste of resources—In commenting on this tremendous waste of our material and our human resources, Secretary Hoover said: “We have probably the highest ingenuity and efficiency, in the operation of our industries of any nation. Yet our industrial machine is far from perfect. The wastes of unemployment during depressions; from speculation and over-production in booms; from turnover; from labor conflicts; from intermittent failure in transportation of supplies, of fuel, and power; from excessive seasonal operation; from lack of standardization; from losses in our processes and materials; all of these combine to make a huge deduction from the goods and services that we might all enjoy—if we could do a better job of it.”

Savings through standardization—The engineers have conservatively estimated that $10,000,000,000 of this great waste can be saved through simplification and standardization. This sum is more than enough to pay all our taxes—Federal, State, and municipal; also to pay for all the homes built last year; buy all the automobiles we make each year and pay for the gasoline they use; a quantity that would keep Niagara Falls running at normal flow for over half an hour.

The purpose of our Division in the Department of Commerce is to cooperate with industry in saving as much of this $10,000,000,000 as possible, by applying simplification and standardization.

Usually when people hear that work, they picture a world of identical houses, fronting on reticulated sidewalks, ornamented by rigidly uniform shade trees; a world wherein the major difference between the Rolls-Royce and the flivver is that of dimensions only; a world wherein the smoke shall rise from every chimney in standard querlicues, only to condense in standard clouds, moving at invariable speed.

Obviously standardization—or simplified commercial practice, to use a more expressive term—does not mean anything so absurd, or extreme.

What simplified practice means—Simplified practice means the reduction of variety in sizes, dimensions, and immaterial difference in everyday 06868commodities as a means of eliminating wastes, decreasing costs, and increasing values, in production, distribution, and consumption.

Leading men in widely different fields agree that simplified practice decreases stocks, production costs, selling expenses, misunderstandings, and all costs to the purchaser. At the same time, it increases turnover, insures promptness of delivery, improved quality, broader markets, and greater profit to all concerned.

So much for the theory of simplified practice. Now for a practical demonstration of its values in terms of its effect on the major items in the cost of living, viz: food, clothing, fuel, shelter, and sundries.

When the Joint Commission of Agricultural Inquiry made its recent study of the agricultural crisis and its causes, the Commission pointed out that the wholesalers of food products were barely breaking even. The costs of merchandise plus the costs of doing business, in many cases, completely wiped out the margin of profit.

Concentration on staple lines—Retailers were but little better off. As a consequence, the National trade associations representing these groups found, through their research bureaus, that large inventories of slowly moving goods were absorbing too much capital. So they started an educational campaign to show the grocerymen the folly of carrying too many varieties of goods. They pointed out that too many kinds of goods resulted in left-over stocks, spoilage, waste, and other profit-absorbing troubles, while concentration on a staple line of goods resulted in quicker turn-over, a cleaner store, better business, and a larger income.

A certain food-products manufacturer has long been a champion of simplification. He cut out 89 per cent of the varieties he was making, with consequent reduction in his selling expenses. Yet this concentration on staple lines, aided by efficient advertising, increased his volume of sales 600 per cent. Other manufacturers in this field are now working out similar programs. Greater coöperation in simplification between manufacturers, wholesalers, and retailers will help reduce food prices.

Felt hats—A manufacturer of men's felt hats analyzed his sales and found that 90 per cent of the business on the 3684 styles and colors he was then making, was done in seven styles and ten colors. He called all of his agents and salesmen together and said, “Whether manufacturer or retailer is responsible for present costly detail, let's get together for simplification resulting in the best styles only, made in the best colors, to be purchased and manufactured in the largest units consistent with good business.” They accepted his plan and agreed to coöperate with him. As a result, his raw-material inventory was reduced from $500,000 to $1786,000. Inventory time was cut from four days to one and one-half days. Turnover was increased from three times to twenty-two times per year. His business grew from $1,600,000 to $4;000,000 annually.

Running on a full load—This simplification helped to stabilize employment, by making it possible to run the plant on an almost “full load” basis the year round. Instead of running at one-third capacity during the “off-season” periods, the plant now runs at 75 per cent of normal capacity in those periods.

A manufacturer of men's ready-made clothing concentrated his manufacturing and selling efforts on blue serge suits, thus eliminating 97 per cent of the varieties he formerly made. Overhead per garment cut went down 50 per cent; the factory ran steadily the year round, sales doubled, manufacturing costs decreased 25 per cent and selling cost 35 per cent. A certain manufacturer of underwear reduced varieties of his products 87 per cent, cut his raw material inventory 80 per cent, finished goods inventory 17 per cent; increased production 50 per cent, reduced defective work, or “seconds” 91 per cent, and reduced production costs 12 per cent.

Shoes—A prominent manufacturer of shoes formerly made three grades and 2500 styles of each. He simplified his line to one grade and one hundred styles. This 99 per cent elimination of variety reduced production cost 31 per cent, overhead 28 per cent, inventories 26 pre cent and costs to the consumer 27 per cent. Turnover was increased 50 per cent; sales of women's shoes 22 per cent, and of men's shoes per cent.

Coal—The cost of coal is another important item in the family budget, but when you think of what the price of a ton of coal must cover, you cannot help but sigh for some way to get better results for each ton burned. Railroads and utility companies are continually coaching their firemen to become more efficient, and the query of our young friend, prompted by his father's boasts about the number of miles per gallon he gets from his “Big Six” is not joke, but a serious matter, in railroad operating costs. The manufacturers of warm air furnaces, steam and hot water heating boilers, gas water heaters, gas stoves, and coal ranges, are all working, ot only on simplification programs, but also on research problems, the solution of which will mean more efficient combustion, and consequently greater economy to the consumer. The “Coal Age” recommends a reduction in the variety of sizes in which anthracite coal is marketed as a greater convenience and economy to the wholesaler, the retailer, and the consumer. The editor points out that too many sizes involves a multiplicity of bins, loading tracks, and other troubles, besides making it difficult for the dealer to dispose of the odd sizes.

Housing—For the past two years, no topic has been of greater interest than the housing situation. Houses and apartments have been scarce; rents have been high; building costs have been, and still are, quite high. Nevertheless more building has been done in the past three years than was previously done in any ten before the war.

Recently the lumber industry, the third largest of all our industries, developed a program of simplification and standardization which, it is estimated, will save a large part of the present $250,000,000 annual waste in lumber production. Other simplifications achieved in building materials, through the coöperative series of the Department of Commerce, and the Chamber of Commerce of the United States, are:

Metal lath125 varieties to 24

Similarity, in miscellaneous construction materials, simplification of paving brick, asphalt, woven-wire fence, forged tools, files and rasps, range boilers, and hot water storage tanks, has resulted in an average elimination of 80 per cent of former varieties.

Consequently the 20 per cent retained as “standard” are now being made by quantity production methods, which mean lower manufacturing costs, lower selling expenses, and eventually lower prices to the consumer.

Retail drug stores—In the line of sundries, a chain of retail drug stores decided to reduce its stock to the items in most common demand. The average number of items carried now is 10,000 instead of 22,000. This concentration of selling effort increased turnover 70 per cent, volume of business 43 per cent, wage-rates 100 per cent, and decreased investment 14 per cent, inventory cost 56 per cent, and so on.

In the sporting goods field, one manufacturer eliminated 79 per cent of the items in his catalog in smaller stocks, quicker turnover, faster service, better quality, and lower production costs.

Sound economics—Another manufacturer in this same line says, “Simplification is founded on the bed-rock of sound economics. Unnecessary merchandise is an economic waste. To give the consumer better goods at lower prices, apply simplification.”

The automobile industry has long believed in, and applied, simplification. It is now a well-established fact that motorists prefer to buy standardized cars—they cost less to buy and less to run. Nevertheless there is still greater opportunity for further simplification in sizes and dimensions of spark plugs, tires, brake linings, ball and roller bearings, and other parts commonly used in all cars.

Automobile models—The president of one of the automobile companies sums up the situation in these few words: “Too many models tax manufacturing resources and make economics in operation impossible. Strong companies have become so by concentrating on a few models and educating dealers in the sale.”

Last year there were nearly 19,000 business failures in the United States. The total liabilities were over $540,000,000. Relatively few of the failures occured among manufacturers; the majority were among wholesalers, and retailers. The chief cause was excessive inventories, resulting in slow turnover, and consequent lack of sufficient liquid capital to permit meeting credit obligations as they came due.

Freak goods—More and more of our merchants are learning that goods on the shelves gather dust, not dollars! The way to keep the dollars coming in is to keep the goods moving out. That means better quality at lower price, better service, greater concentration on staple commodities, and carrying smaller stocks of novelties, freak styles, and highly perishable, or quickly obsolescent goods.

“Too many varieties” is recognized as the mother of excessive investment, slow turnover, rapid obsolescence, decreased profits, and economic waste. Many of our business executives and industrial engineers are seeking ways and means to check these losses at their source. For, in the long run, it isn't always the other fellow who foots the bill. Waste and wages07171are paid from the same pocket-book—the pocket-book of the ultimate consumer, or purchaser, of the goods. The losses on the goods thrown on the bargain counter are made up, in many cases, in the prices charged for the other goods which you seldom find on bargain counters.

Insidious waste—Wastes are a much larger part of your cost of living than appears on the surface. Therefore you have it in your power as consumers to control your own living costs to the extent that you coöperate in eliminating waste in production and distribution.

You can begin by encouraging merchants and manufacturers to simplify their lines, and eliminate the superfluous and unnecessary varieties. In that way, you can make your splendid program of thrift education even more effective. In the last analysis, thrift is mainly a matter of eliminating waste. The more effectively we utilize the great material and human resources of American industry, the more certain we may be that our commercial supremacy, our National prosperity, and our American standards of living will be maintained.