ABSTRACT
Government expenditures will be considered under the headings of defence, Federal civil purchases, state and local government purchases, transfers and foreign aid. Purchases of goods and services for national defence reached their postwar trough in mid-1947. 1 The 1947 defence budget (for fiscal 1948) was dominated by motives of economy, and appropriations were kept at low levels. There was however some provision for the re-equipment of the services—particularly the air force—and expenditures started to rise in the final quarter of 1947. The effect of this re-equipment on business was felt at the same time when military aircraft production started to rise from its very low levels. 2 The increase in expenditures continued in early 1948, and during the course of fiscal ‘48 the rise in defence purchases was substantial, there being an increase of about $1.7 billion (or 20 per cent) between 1947 III and 1948 II. 3 The 1948 budget accelerated this growth and purchases from 1948 II to 1949 II rose by $3.0 billion or 29 per cent. The bulk of the increase went to the armed forces, but increased expenditure on military assistance, atomic energy and other defence activities was significant. This rearmament reached its peak in the third quarter of 1949, the rise in defence equipment production having tapered off to a steady level at the end of 1948. In the 1949 defence budget the Administration deliberately sought to avoid increases for economy reasons—this policy had been announced as early as October 1948. In the controversy over the size of the Air Force in 1949 Congress eventually voted increased appropriations which President Truman said he would not spend. The curtailment of rearmament was effective, and expenditures dropped substantially in 1949 IV and 1950 I. By 1950 II defence purchases were some 6 per cent below the levels of a year previously.
