New-York tribune., 1918-03-22
Finance Economics
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material things which are being con-
sumed steadily as the war goes on
food, uniforms. munitions, arms and
the like.
An Unsound Policy
For the government to issue bonds
for moneys 10 be loaned to the Allies
and for moneys to be used in the pur-
chase and construction Of things Of
permanent or quasi-permanent value,
such as merchant ships, buildings and
the like, is, Of course, sound practice;
and while issuance of such bonds would
naturally result IN some expansion Of
credits if the volume were great, it
would be wholesome expansion which
could not properly be defined as infla-
ton. But for the government to issue
bonds Tor current expenses is unseen
tific, unsound and certain to be fol-
lowed by disaster.
The common argument offered for
the issuance of such bonds is twofold:
First. that the only other alternative,
to wit raising the money by taxa
ton, would stultify business; and.
second, that such issues shift part Of
the burden Of paying for the war onto
the shoulders OF future generations.
Neither of these arguments bears
close examination. AS this country
cannot borrow from any other coun-
try, the amount OF money which must
be raised to meet war expense among
the people of this country is the same
whether raised by taxation or by bond
issue SO. if raising this amount of
money by taxation would stultify
business, so also would it do so
to raise it by selling bonds. The
amount 10 be raised is the same in
either case. the time in which it must
be raised is the same in either case,
and the people. speaking now of the
people Of the country as whole, from
whom it must be raised are the same
in either case.
The situation of the country is an
alogous to that Of an individual obliged
to make large payment but unable
to borrow from any one else. An lndl~
vidual so situated would hardly go to
the trouble Of writing himself prom
issory notes payable to himself at the
expiration OF a period Of years: he
would make the payment, charge it to
profit and loss, and so have done
with it.
Self-Deception
ue SHCOuO GISttIIcilt 10 tQUdlly iti-
lacious. Issuing bonds does not shift
the burdea of paying for the war upon
future generations even to the extent
Of single dollar. 1t does affect the
distribution Of the burden of war
slightly at the present time, and the
distribution of the burden OF living
slightly in the future. And in exactly
the extent to which it relieves any
given group now it burdens the same
group hereafter. What we do, speak
ing again of the people as a whole
when we issue bonds is merely to
give ourselves our own promises to pay
ourselves something in the future;
then we proceed to tax ourselves for
the purpose Of meeting this payment
to ourselves. 1t is camoufiage, pure
and simple; it is deception. and
it spells imitation. Self deception re-
tards war work and gums the machin-
cry Of business; imitation carries evils
of the most destructive character.
When the government is able to as
certain with some degree of accuracy
what part Of its expenditures is to go
into loans to Allies and property of
quasi-permaneNt value and what pro
portion is to 90 to meet current oX-
pensc, it should immedia oily outline
policy under which bonds VIII be
issued only for the former purposes.
and taxes be laid to cover all Of
the latter expenditures. Only in this
way can we avoid unthinkable in
ternal disorder while the war goes or
and an impossible REIMBURSEMENT period
after the war which will last for from
a quarter to half century.
AS to the war finance corporation
BILL this, if the government is to issue
bonds to meet current expense. is in
my opinion an absolute necessity; but
if the government is to follow the
more scientific method Of raising funds
for current expenditures by taxation
alone. the need for it is debatablc
Possibly something Of the kind might
be desirable in any case, for a great
deal of expansion will take place what
ever policy the government follows,
and the savings banks in She Eastern
and New England States and the So
called country banks in many other
districts will hardly be able to keep
up with the expanding movement, un-
less they are permitted to some extent
to use their kind of assets as basis
for new credits, as the national and
other member banks use their kind
through the Federal Reserve system.
The governments price-tixing policy
ID ClOScly lSIdteu 10 llS financing pol
icy, and no discussion of bond issues
alone can be clear and comprehensive
without reference to that relationship.
am Just rs strongly opposed to price
fixing as I am to the issuance of bonds
to meet current expense The two
things go together and arc in Ger
tain. perhaps remote. sense interde-
pendent. Together they slow down
war wark, impede business, cause un-
speakable fusion and carry the max
lngs of cataclysmc national disaster.
A. L. ADAMS,
President, First National Bank.
Youngstown, Ohio. March 20. 1913.
(Note: An article by Mr.. Adams
discussing price fixing will be pre-
sented on the financial feature page
on Sunday Financial Editor)