The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1922-03-13
Sharply Criticizes Features of
the Measure Providing for
Loans by Banks.
ONLY POSTPONES COST
TO PEOPLE OF COUNTRY
He Suggests to Provide for Paid
Up Endowment Insurance
Feature by Government.
tsy rhe Assoelatsa Prss.l


WASHINGTON, aarch 12.-Tns
new soldiers bonus bn as drawn by
house republicans was attacked to-
night by Secretary Mellon as invoIv-
ing dangerous abuse Of government
credit"
Replying to a request for the treas
ury's comment on the new bonus bin,
Mr.. Mellon. IN a letter to Chairman
Fordney Of the house ways and means
committee, made public tonight by the
treasury, sharply criticized the fea-
lures Of the proposed measure provid-
ing for loans by banks upon adjusted
service certificates, as indirect and
forced" borrowing by the government.
He suggested that the "dtrect and reg
ular way" to provide for a paid-up en-
dowlnent Insurance feature would be
to authorize insurance certificates with
provisions for direct policy loans to
be financed by the government. AIr.
Mellon contended that at is both dan
gerous and unwise,' to attempt to
avoid the cost OF the bonus for the
time being.
There is no way he said ''by
which the American taxpayer car
avoid the burden. and If bonus is {.
be imposed 81 So Tar better for all con-
cerned that it be placed upon a direct
and definite basis and paid for each
year out of current revenues. To do
this at this time will necessarily mean
the imposition Of additional taxes for
the purpose"
The secretary estimated the cost Of
the bonus under the bill, considering
each of the possible choices offered to
veterans, at more than $1,000, 900, 900
by Jan. l. 1925 Whatever form the
bonus measure might take, he assert
ed, would mean a cost TO the govern
ment of from $500, 900 900 to $500 0.0o0,-
900 for the next three or four years
and possible continuing liabilities
thereafter OF more than $500, ,0e0, 600 a
year until 1943.
Mr. Mellon called attention to the
fact that the bill makes no provision
for raising additional revenue to meet
the cost Of the bonus and recalled TO
Mr. Fordney President Hardins's let
ter of Feb. IS, in which IL was sug-
gested that a general sales tax be
enacted. to provide the necessary funds
or the bonus legislation be postponed.
Secretary MELONS letter said In part.
'tThe bill makes no provision what
ever for sinking funds amortization
or other reserves against either the
liability that would be thrown upon
the goveSament in 1925, or against the
liability on the certificates at the end
OF 20 years, nor does it make any pro-
vision for the payments which would
accrue in ordinary course from year
to year on account of the death of
veterans.
"The direct cost to the government
of bill carrying these provisions for
about 4,500,000 ex-servace men Is al
most impossible to estimate because
Of the uncertainty as TO which Of the
plans win be chosen, and In what pro-
portions. But the government ao-
tuary has prepared tables of estimated
cost on the assumption that 10 per
cent win choose the certificate plan.
% the farm and home aid plan, per
cent the vocational training plan, and
2 per cent the land settlement plan.
In the calculations as to the cost Of
the certificate plan, It is assumed that
half of the veterans viii borrow on
their certificates from the banks and
default on their loans, in view Of the
attractive provisions for cash redemp-
ton IN case of default. It appears
from these tables that on the basis
assumed by the actuary the total d.
rect cost to the government in the
fiscal year 1923 would be s289,954,0oo;
in the fiscal year 1924, s2Is,44o, 900; in
the fiscal year 1925, s12s,013.oo0. and
IN the fiscal year 1926. for the most
part By Oct. IS, 1925, when the adjust
ed service certificates used as security
for bank loans would have to be re-
deemed. sgI5. &c., .00 This would near
total payments within about three and
one-half years CT over 81 zoo, ,09o, ,oe0,
These estimates take mo account o1
amortization Or other reserves against
certificates TO remain outstanding
after the fiscal year 1925. which would
add at least s4o,o0o.900 a year to this
current charges. or Of possible add.
tional costs under the land settlement
plan IL the reclamation projects there
in authorized should be carried
through II IS estimated that about
500. .0eo eo0 pei annum would be re-
Continued On Fags Two5