The Washington herald., 1917-05-19
HOLLAND LETTER
The Biggest Daily
Financial News Feature
Of the County's Best Newspapers.

1t was not curiosity. but factor in
the problem OF preparation which led
some Of the foremost authorities In
finance In New York to ask an actuary
of great ability scne questions reIat-
ing to the -. 200. .nsG. 900 loan ana the
extra revenue taxStIou which II ia pre-
sumed will asgres&ts S1.sr 100000.
For IT Is essential that the men of
finance. and especially those who are
undertaking now to make the loan
which Secretary McAdoo has Just Of
fered conspicuously successful, should
! also look into the future so that they
may begin preparations for a subse-
quent loan or loans.
After careful computation, the
actuary reported that on the present
basis of financing, II the European war
should last another year, then the
American people will within two years
have paid the entire cost which is to be
the share of the United States, in addi-
tion to financial assistance to the al
| lies.
point was at once made that this
might prove too heavy a drain upon
American business life, although were
we able to do this the achievement
would fully meet the suggestion made
by President Wilson that as much as
possible OF the expense incurred by the
United states as a belIlgerent should
be met by the present generation.
There are various views held by
those who have given deep considera-
tion to the subject, notably some of
those who. since early September, 1914,
have brought the United States into a
position OF pre-eminence so far as
world financing Is concerned For in
stance, in the financial district there
seems to prevail, II not a general, at
least considerable. sentiment that the
true economic principle for Congress
to consider and adopt. when providing
extra taxes, is the raising OF q sufi-
cient amount of money to pay the in
terest on the war debt and also a sub
stantial amount in addition with which
to pay OF the debt within a reasonable
period. 1t may be that some knowledge
of the policy adopted by England and
France as we'll as some study of the
work Of Salmon P. Chase when he was
Secretary of the Treasury in Lincoln's
administration, caused this principle to
be adopted with a good deal of favor
by leaders OF the financial district.
Since the visit OF Lord Cunliffe, there
have been frequent comments upon the
manner in which England provided
the funds at home with which to meet
current expenses OF the war. There
it was deemed advisable to secure
much the larger part OF the money
needed by borrowing. and today the
proportion of extra taxation to loans
in England is as twenty for taxation
to eighty for loans
How 1t In in France.
France. until recently at least, adopted
exclusively the principle of securing
needed funds by loans at home and
abroad. The theory upon which both
England and France based their financ-
ing was that taxation should be so limit
ed as not to impair. but greatly to in
crease, business prosperity.
When Gov. Chase was Secretary OF the
Trea asury in Llncoln's administration, he
at first favored the policy OF securing
needed funds as far as possible by bor-
rowing. and limiting extra taxes to an
amount sufficient to pay the interest upon
the bonds, and to provide a satisfactory
sinking fund Chase, however, had diff
fculty at FIRST in placing loans. and he
was constantly at odds with Congress
II was not until the close of his admin
istration of the Treasury Department that
government bonds found their ready mar
ket. perhaps because the rate OF interest
was high. Chase. however, was aston
ished at the results OF the extra taxes
imposed by Congress. for instead of i'm
pairing business these seemed to stimu-
late IT, and a period of very great pros
perity set in, followed by such imitation
as produced the collapse OF 1913. John
Sherman always attributed this develop
ment OF great prosperity to the issue Of
legal tender notes commonly called green
backs.
RepPeHentatiye HIIps View
No news that came from Washington
early this week caused more general
comment in the financial district than
the statement made by z. J. Hill, repre-
sentative from the Fourth Connecticut
district, and a very high authority upon
tariff and financial questions. Mr.. Hill
is quoted as having said that we must
increase taxation and then again Increase
il. II the war lasts. but he insists that
the taxes must be so levied as to stimu-
late business, apparently believing as
Secretary MCAdOo is reported to believe
that imitation OF business will be of value
provided it does not exceed bounds
The FIfty-hfty Proposition.
We hear much discussion in the
financial district respecting the ex-
pediency of what is called the nifty
fifty proposition, to which Congress at
present seems to be committed. This
means that one half of the needed
funds shall be secured by borrowing
from the American people and the
other half secured by extra taxes.
While it is admitted that this may
prove satisfactory. yet it is also as
serted that subsequent loans upon this
basis must. in order to secure sue
cess, be secured at a higher rate of
interest than 3h per cent. The ques-
tion was asked this morning of sew
eral of the men of finance what in
their opinion. would be the rate of in
terest necessary for the Secretary of
the Treasury to adopt in, case there be
future loans. The opinion commonly
expressed was that the next loan,
which may be offered next winter.
will, II the proposed rate of taxation
be maintained, have to be floated at
per cent, and subsequent loans may
require as much as s per cent. 1t was
astonishing to hear so many men of
finance say that If higher rates of in
terest are necessary in order to float
future loans. at least a per cent
rate, then Congress should tax, by a
reasonable amount, these issues of
bonds. While Congress cannot tax
State or municipal bonds-or at least
the authority to do that is very doubt
full it has the right to tax govern
ment bonds. The belief prevails in the
financial district that Congress will
ultimate IA Whirb