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837.51/583

The Representative on Special Mission in Cuba ( Crowder ) to the Secretary of State

[Extract]

My Dear Mr. Secretary: In pursuance of instructions conveyed in Department’s Urgent No. 148, August 25, 6 p.m., and suggestions made by Mr. Welles in his letter of August 29th,49 I have held several conferences with President Zayas respecting the practicability of revising the budget downward to fifty-five millions; also of a comprehensive revision upward of the internal tax laws, this latter duty to be undertaken by a Mixed Committee of Congress with my cooperation and assistance. I have discussed also with the President the further suggestion of your said Urgent No. 148 that the revision of the Cuban tariff be undertaken coincident with the revision of the internal taxes. …

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II. Internal taxes, revision of: There has already been appointed a House committee on revision of the internal taxes. The task originally set for this committee was piecemeal revision. As the Department knows, I have consistently urged upon the President, since his inauguration, comprehensive revision of the internal taxes. Having made little or no progress, I conferred last week with a Minority Member, and secured the introduction of a motion calling upon President Zayas to report to the Congress the essentials of a comprehensive internal tax revision with desirable reforms in the method of collection. This motion is attached hereto marked “A”.50 Its introduction has had a most salutary effect in stimulating the interest of the Lower House and of the local press in this much-to-be-desired work.

Yesterday I had a prolonged conference with two members of said House committee. President Zayas and his Secretary, Mr. Cortina, [Page 727]were present. In a few remarks I pointed out the Spanish origin of the present system of internal taxation, the failure of the two United States interventions to give the old Spanish system anything more than piecemeal revision, and then outlined my plan of placing each source of national revenue under analysis and review and selecting those which, with new revenues to be established, ought to carry the burden of increased taxation necessary to meet the existing crisis. The plan was discussed and was finally aceepted. The two members of the committee present at the conference stated that the work already done by the House committee would fit in admirably with such a plan. I am promised the results of the committee’s work thus far, on Saturday, and I am to meet with these same men again on Monday. I hope that we shall make rather rapid progress in completing this important work.

An interesting exchange of views took place at this conference yesterday as to the maximum of revenue a comprehensive revision could be made to produce. The two Cuban members and Zayas expressed the general view that a conservative estimate of the receipts of the national treasury (inclusive of customs) under the law as it now stands, that is, unamended, would be seventy-two millions; that amended as proposed in the Gelabert revision now pending (article 14 of the Exterior Loan statute) a fair estimate would be seventy-six millions; and that under the comprehensive revision which I had proposed, the total receipts could be made to reach, and perhaps exceed, eighty millions. As to these estimates, all of which are of course inclusive of customs, I can only say that the receipts for June, July and August of the present fiscal year indicate that they are all over-estimates, and I reach the same conclusion by consulting the receipts of the national treasury from all sources in the pre-war years. I am skeptical as to the amounts to be realized, for another reason, namely, that I do not think anyone can foreshadow what the receipts may be, under the abnormal and depressed conditions now prevailing and which will doubtless continue for the indefinite future.

III. The Budget, revision of: In all conferences I have held with the President he has stood firm for the proposition that the budget could not be revised downward below sixty-five million dollars without disorganizing the public service. Obviously I could not discuss with him profitably the various Departmental services without first making inspections which would justify the necessity or lack of it for existing personnel, which inspections it would have been inadvisable to make under present conditions. He always stopped with the bare assertion that reduction could not be carried further than the sixty-five million point, and never offered to defend [Page 728]his proposition by taking up the affairs of the several Departments and explaining the necessity for the retention of the existing personnel. I was never left in any doubt that his argument was a personnel argument and that he was not speaking with particular reference to any other items of the budget.

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If the problem of Governmental finance here were one for a Government of American Intervention its solution would not present great difficulty. By putting into effect the economies listed above and others which a closer investigation of the Government’s departments would certainly suggest, the budgetary expenses would easily [be] reduced to between 45 and 50 millions, with ample provision for an efficient administration. By a comprehensive revision of the revenue laws, (including the customs tariff) and the honest administration of such laws, the receipts could be easily made to exceed 80 millions. The budgetary surplus of more than 30 millions annually would permit the speedy liquidation of the floating indebtedness and the prosecution of extensive public works which could be made to take care of the existing contractual obligations as a part of a general scheme of internal improvement and thus be made to furnish employment for the large army of unemployed; and there would still be most ample revenues to meet the service of any additional public debt that might be incurred to dispel the industrial crisis and rehabilitate the country.

I fully appreciate that the Department is most anxious to avoid intervention and desires most earnestly to accomplish the needed reforms in Cuba through the administration of President Zayas. The recitation, therefore, of what might be easily accomplished under a Government of American Intervention can serve no useful purpose except to indicate some of the more essential reforms which may properly be exacted of President Zayas. In his present mood (created for him largely by a hungry political following) it is certain that he will continue to obstruct many of the reforms outlined above, unless coerced into a more compliant attitude by pressure from Washington. Eventually Zayas must be told in unmistakable terms that his policy of a 65 million dollar budget, with a continuation of governmental extravagance and fraud, with insufficient resources for present and possible future needs, and with liquidation of the floating and contractual indebtedness protracted over a long period of years (this method of liquidation being objectionable and of doubtful efficacy for the reasons I have already stated) imperils the kind of stable government which we are pledged by treaty stipulation to maintain in Cuba and must yield to a policy of definite and specific reforms which, of course, will be outlined by [Page 729]the Department only after the gravest deliberation and which ought, I think, under the policy of utilizing Cuban agencies to embody the minimum of essential reforms compatible with maintaining a solvent Government here. I shall not venture suggestions as to what this minimum demand upon the Zayas Administration should be until the Department has had time to consider this report in connection with my prior reports, particularly those of July 31 and August 22, 1921;51 nor until I have received the report on the conferences at Washington with the Gelabert Commission which Mr. Welles said to me in the concluding paragraph of his letter of August 29th52 would be forwarded to me quite promptly.

I am quite ready, when assured by the Department that its deliberate [judgment] is that a firmer attitude must be adopted in our dealings with the Cuban Government to present its most insistent demands whatever they may be. My effort thus far has been to accord the fullest and fairest opportunity to the Cuban Government to bring about these reforms and to make its failure so to do, under all the circumstances, a demonstration of either incapacity or unwillingness and a logical basis and justification for the firmer and more insistent attitude on our part.

The sooner a decision is reached as to our future policy the better it will be for the success of my mission. I realize that the policy to be pursued here will be profoundly influenced by our general Latin American policy and that the Department, out of deference to that policy, may find it necessary to modify the more important recommendations that I have, from time to time, made or which I may make in the future.

Very respectfully,

E. H. Crowder
  1. Not found in Department files.
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  3. Neither printed.
  4. Not found in Department files.