The Washington herald., 1921-08-25

investment, no added liability, no
added tax burden. and no added APP
propriation.' It involves only the
risk of loss in waiting ten years for
the remainder. namely, s263.000, 900,
| when the security may not be good,
but the risk the Esch- Cummins bill
has already fastened on the tax
payers and II cannot be avoided. =
sHarding Clearly Miktaken.s
But the President proposes a
new plan, namely. to defer for ten
years at per cent interest the en-
tire $763, 000, 600. due by the carriers
to the United States, and to pay TO
the carriers, In cash. $500, zoo, 900 for
alleged under-maintenance claims,
IL that be the amount finally de-
termined. The President assures US
that this involves U) no added in
vestment,' (2) no added liability. (s)
no added tax burden Clearly he is
mistaken.
"Q) There is an added invest
metn' Of the taxpayers money
amounting to s5oo.ooo,ooo, because.
instead of offsetting or canceling
$500. 200, 900 with an equal amount
of the debt the railroads owe the
United States, the Treasury will
have to pay the railroads 100000
600 of new money.
"(2) There Is an added liability
of $500, 0O0, 900 because the Treasury
must continue to lend that sum to
the railroads. some with good and
some with poor credit, and a large
loss may finally result. Thus, IL the
United States now cancels 100000
900 with a part of the debt the rail-
A.
Of $500 200. 900. the chance Of loss or
liability will be removed.
"(3) There will be an added tax
BURDEN unless the advances and all
interest thereon are finally repaid
by tho railroads. because there is
no way for the United States to get
$500. 000. 900 for tie railroads except
by taxation, unless It borrows on
Treasury certificates of indebted
ness-the same thing. because these
must be paid ultimately out Of tax
alton.
But the President says let the
authority of the War Finance Cor
poration be extended so that 1t may
purchase these railway funding Sc
curities' and thereby avoid the ne
cessity Of added appropriation
Falls on Taxpayer.
This does not alter the situation,
because the War Finance Corpora
ton is merely an agency or bureau
of the Treasury. The War Finance
Corporation will have to get the
money from the Treasury or issue
its own bonds, partially tax exempt,
and sell them to the public in COM
petition with Treasury financing.
In order to do this authority must
be had from the Congress. and that
is the purpose of the pending bill.
The $400.000,000 credit which the
War Finance Corporation has on the
books of the Treasury is not money.
1t is merely a credit and was given
for specific purposes which do not
permit its use for the railroads any
more than an appropriation for the
navy can be used for the railroads.
To carry out this plan. whether
through the War Finance Corpora
ton or through the Treasury direct.
involves a new appropriation.
However the play may be con-
summated, whether through the
War Finance Corporation or
through the Treasury direct. it re-
mains clear that a new credit OF
$500, 900. 900 Is to be extended to the
railroads for a period of ten years.
Whatever may be said. il is certain
that the railroads should be re-
CURED, before any further advances
are made, to abandon the Ineffi-
cheney OF labor claims which the
director general declares are TOO
highly indefinite, speculative and
contingent to warrant considera-
ton" The railroads should not be
allowed to get $500. 900. 900 more and
remain at liberty to keep the gov
eminent in litigation over such i'm
proper claims for an indefinite time
Nor should the government be
forced to buy the obligations OF the
railroads at higher price than
their market value at the time. The
bill as drawn obliges the President,
in the exercise of the authority
given him. to purchase such rail-
road securities on a basis that will
return not to exceed 6 per cent of
the investment. subject to such dis
count as may represent the GUS
tomary and reasonable expense OF
marketing such securities. The bill
also authorizes the War Finance
Corporation to purchase the securi-
ties from the President at the same
prices. etc. and then prohibits said
corporation from selling the securi-
ties at less than the original cost.
II the War Finance Corporation is
TO be thus used as the marketing
agency, then clearly the securities
should bear such rate OF interest as
will permit them to be sold without
loss. If railroad securities cannot
now be sold on a per cent basis
land I think It will be conceded
that they cannot be), then the obli-
cations purchased by the govern
ment should bear a higher rate or
should be purchased at a price that
will yield a high enough rate to at
tract investors. Otherwise the
United States must either continue
to hold them until a market. which
will absorb them at c per cent. can
be found "a very uncertain contin-
gency) or dispose of them at
loss-a loss which on final analysis
must be borne by the taxpayer.
What II All Means.
suppose you realize that, in ad-
dition to the $1.144.0o0,000 the rail-
roads owe the government for 'addi-
lions and betterments,' they have
received additional loans under the
Esch- Cummins bill, of about $500
100000. making a total of s1.444.-
600 900.
stripped of confusing nonessen-
tials. what is now proposed is that
the government shall waiSten years
for s763. 5000, 900 the railroads owe II
for betterments and Improvements
and pay Immediately $500, 900. 600 to
the railroads on account OF claims
for alleged under maintenance, etc,
taking from the $50 or more rail-
roads involved. with their varying