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Chapter 6 Financial Reform in Austria After more than a century of chronic budget deficits, about twenty years ago Austria succeeded in reestablishing a balance in its public finances. From 1889 to 1909 the national accounts generally showed a surplus. The situation changed again in 1908, and the estimate for 1909 predicted a deficit, which could be converted into an apparent surplus of 60,000 crowns only by the introduction of a fictitious entry of 29 million crowns. The budget for 1910 already openly admits to a deficit. It cannot be determined exactly how much the deficit amounts to in the ordinary budget, and which has to be covered by new increases in taxes. On this point differences of opinion will always exist, ideas being divided on the question of what should be understood by investment and what must be considered as current expenditures. One fact is certain: this deficit is very large. The minister of finance evaluates at about 17 million crowns the increase of revenue that the state will have to obtain annually from a tax increase or by the creation of new taxes. To this must be added a deficit of about 40 million crowns, which has come about in the budgets of the various Austrian provinces. Since the provinces are not able to cover it with their own resources, it too must be made up for by the state. Thus there is, at this moment, an assured budget deficit of 110 million crowns; and this figure will increase significantly in future years if new resources are not found in time. In fact, enormous expenses will have to be met soon. The army and the fleet have been completely neglected for many years. Their allocation has not been raised for twenty years, while at the same time all the other European states have considerably increased their defense forces. Moreover, the weaponry of the army leaves much to be desired, and 1. [This article originally appeared in French in the Revue Économique Internationale, vol. 7, no. 4 (October 1910).—Ed.] 118  selected writings of ludwig von mises the reduction of service time from three years to two, which cannot be postponed much longer, will entail enormous costs. The navy, too, will be the object of more serious attention in the future. In the presence of the enormous naval armaments of Italy, aimed directly against Austria, our navy too will be forced to construct some “ dreadnoughts.” The obligations of social insurance will likewise impose heavy expenses on the state. According to the calculations in the government’s plan, the contribution of the state to social insurance will in the end amount to 100 million crowns per year. How are the needed resources to be obtained? Neither the government nor Parliament has so far said a word about it. One can already perceive here an essential difference between the causes for the financial embarrassment of Austria and those of the other states (Germany, France, and England) that are presently struggling with financial difficulties. In these latter countries, it is mainly military and social burdens that have swollen the budget; in Austria, on the other hand, the deficit already exists even though the state has up to now only insufficiently fulfilled its military and social obligations. Nevertheless, for the last ten years governmental expenditures in Austria have gone from 1.5 billion to 2.3 billion crowns. If we investigate the causes of this huge increase, we shall immediately discover that during the same period interest and amortization payments on the national debt rose from 345 million to 411 million crowns (of which 356 million were for the payment of interest and only 55 million for amortization ). Direct taxes and the excise on beer together produced just enough to provide this amount. Excluding the increase of payments related to the national debt and national defense, the increase in expenditures comes mainly from the rise of those relating to domestic administration. These expenditures have increased considerably in the last few years: for the Finance Ministry they have gone from 61.2 million to 105.9 million crowns; for postal employees, from 48.9 million to 92.1 million; for the Ministry of Justice, from 58.4 million to 92.5 million; for pensions, from 48.6 million to 91.6 million crowns. Up to 1908 the state has paid out for the acquisition of the railway network about 4 billion crowns, which it obtained on the basis of credit. The interest on...

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