837.51/652: Telegram
The Representative on Special Mission in Cuba (Crowder) to the Secretary of State
143. To the Department’s request in your telegram 180, November 23 [22], 5 p.m., that President Zayas send a message to Congress or advise me in writing of the further reductions in the budget for the current fiscal year, indicating the branches of the Government in which such economies are to be effected and their probable extent, as condition precedent to obtaining sanction for the $5,000,000 temporary advance, President Zayas has replied as follows:80
“Esteemed General: In accordance with our conversation of yesterday, I wish to inform you that I propose to obtain greater economies in the readjusted budget in applying it during these eight months of the fiscal year, and advise Congress that I shall indicate reforms to bring about further economies.
If I have reduced the budget to $64,422,000 it is evident that the sum of $5,368,500 corresponds to each month and $42,948,000 to the eight months period, but in the four months already transpired the budget of 1918–1919 has been applied, of $64,460,000 reduced to $62,629,326.25 by deduction of $1,830,673.75 no longer applicable. Adding to it $12,405,995.10 resulting from special laws and decrees, a total of $75,035,321.35 is obtained, and there corresponds to each month $6,252,943.46 and to the four months of July, August, September and October $25,011,773.84. Further there became due in this fiscal year to the public employees, as gratifications, the sum of $5,333,371.32 which makes a total of $35,345,107.16 as expenses already incurred in the fiscal year, leaving $34,076,858.84 as the balance of the total amount of the budget to be disbursed in eight months.
It is to be noted that these figures are not completely accurate because the Government made economies during the four preceding months in the judiciary, in the offices of public works, in the wages of agricultural interests, and also several appropriations of the budget were not spent in the proportion corresponding to said months. Sincerely yours, Alfredo Zayas”.
It is not feasible in telegram to comment exhaustively on this letter but on examining the same the following facts stand forth:
- (a)
- The letter is ambiguous. In one place it declared the amount to be disbursed in the next eight months at approximately $43,000,000 and in another at $34,000,000 but there is no undertaking to limit the disbursements to the latter sum.
- (b)
- It is not in accord with figures heretofore furnished and statements made to me. Among these figures were those comprised in the report of the Senate Budget Committee which showed the current expenses to be: Under annual and fixed budgets $63,730,773.85, under special laws and decrees $13,781,632.60, total $76,500,406.45 not including the employees’ bonus. In commenting on these figures Zayas has repeatedly stated that the Committee failed to take into consideration additional special laws involving over $4,000,000. Thus the Republic has really been incurring obligations at the rate of nearly $81,000,000 per annum without counting the bonus. The amount spent during the first four months must therefore have been about $27,000,000. Adding Zayas’s own figure of bonuses for public employees during these four months, namely, $5,333,333.32 the total would exceed $32,000,000 for expenses already incurred in the fiscal year or $2,000,000 more than estimated by Zayas.
- (c)
- The amount designated as due under the bonus law is also not in accord with previous figures and statements. President Zayas has repeatedly referred to the bonus law as creating obligations at the rate of $32,000,000 per annum and this is the amount estimated in the Senate Budget Committee’s report. At this rate the amount which fell due from July 1st to September 16th when the law ceased to be effective would be $6,666,666.00 and not $5,333,333.00 as now estimated by Zayas. Moreover, he does not consider the portion which fell due before July 1st and amounts to over $1,000,000. The estimate of the floating debt should therefore be correspondingly increased.
- (d)
- The letter is not in accord with Zayas’s statements as to amounts required during the balance of the fiscal year. In my interview with him on November 24th, referred to in my 139, November 24, 4 p.m.,81 he distinctly indicated that in calculating the maximum disbursements for the balance of the fiscal year he must limit himself to eight twelfths of $64,422,000 and that he need not consider the expenses incurred during the first four months of the year. The latter portion of the letter would suggest a different conclusion but as pointed out under (a) the suggestion is uncertain and involves no specific commitment.
- (e)
- The letter does not comply with the requirements of the Department’s request to Zayas referred to in the beginning of this telegram for it contains no clear promise to make substantial reductions and it fails to indicate the branches of the Government where reductions are to be effected and the probable amounts thereof.
- (f)
- The letter ignores the oft-repeated demands of the Department that the total budget expenditures for the current fiscal year be limited to $50,000,000 and that the necessity for an increase must be conclusively shown.
- (g)
- Although the recent congressional budget act gives Zayas ample power to frame a budget not exceeding $65,000,000 but with no minimum limitation he now, after preparing a budget of practically the maximum authorized, proposes, for the reasons which to [Page 766] me appear wholly insufficient to shift the burden of the more drastic reductions back to Congress.
- (h)
- The ambiguity and vagueness of the letter and its disregard of previous statements and negotiations are an illustration of the passive resistance referred to in my despatch of August 22nd, paragraph one.82
The facts which in my judgment should be controlling in determining whether a new loan shall be sanctioned include the following:
- 1st.
- The five prior loans of Cuba have been made almost exclusively applicable to purposes arising outside of current administration and of a character for which goverments usually issue bonds, whereas the projected loan of $50,000,000 is to be made mainly applicable to pay outstanding floating indebtedness incurred in connection with current administration.
- 2d.
- The revenues of the Cuban Government continue to exhibit a downward tendency and it is probable that the receipts for November will fall below those of October, the lowest month thus far in the current fiscal year. Zayas himself appears to recognize that the total for the current fiscal year under existing revenue laws may not exceed $50,000,000 (see your 180, November 22, 5 p.m.). No revision of the tax laws which it is possible to make will be effective materially to increase receipts during the current fiscal year nor greatly to increase receipts during the lean years which are certain to follow.
- 3d.
- The outstanding floating indebtedness on May 20th last was fixed by Secretary Gelabert at $46,000,000. This amount was materially increased during the remainder of the last fiscal year by bonuses accruing under the law of July 20, 1920, but not paid, and by expenditures in excess of receipts. It will be further increased during the current fiscal year by bonuses accruing up to September 16th last, the date upon which the bonus law ceased to operate, and represented by outstanding vouchers and also by expenses in excess of receipts under the readjusted budget recently promulgated by Zayas and which I have estimated in my 138 at between 10 and 20 million. No action which Zayas or the Congress can be relied on to take under paragraphs 5th, 6th and 9th of the letter of October 16th can be effective to obviate a large floating indebtedness at the end of the current fiscal year even though the entire $50,000,000 loan be applied to the liquidation of such indebtedness. It should be remembered also that these figures ignore the increase in the fixed budget incident to the service of any new loan or loans which may be authorized.
- 4th.
- The disposition of President Zayas already in connection with the budget for the current fiscal year, to liquidate one promise with another of uncertain fulfillment at a remote date, is now too plain to be ignored.
Under all the conditions herein set forth, I cannot see my way clear to recommend to [the?] sanction of either loan. I have reached this conclusion reluctantly as I desired very much that [Page 767] Cuba should be financially aided in this great crisis. I am convinced that Zayas fails even yet to appreciate the gravity of the situation, and that the appreciation by Congress is much less than his own.
The consequences of refusal to sanction the advance loan will in my judgment include the following:
- 1st.
- An attempt to pledge the bonds offered as security for that loan as an independent Treasury transaction not requiring the sanction of our Government. This attempt ought to be unsuccessful.
- 2d.
- Failing this first method, an attempt to turn over money for the immediate urgent necessities by farming out of the revenues, beginning with the lottery. Already there is talk of organizing a private corporation to take over the management of the lottery with the obligation to pay to the National Treasury considerable amounts immediately available for the purposes of government.
- 3d.
- Failing both these methods, I should expect at any moment to be forced to the rigid economy that we have been urging so long as the only means of avoiding a fiscal intervention and that as a first step Zayas would promulgate a revision of the readjusted budget ordering reductions in salaries extending from 25 percent of the higher salaries to 5 percent for the lower salaries, leaving untouched salaries less than $100.