Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1922-07-01

Washington, D. c.. June 28.-With
the reporting of the bonus bill to the
senate. the flare of argument for and
against the measure has arisen anew.
The soldier and his supporters are
sometimes at q loss to understand why
the payment Of q soldier bonus is
opposed when it is considered that the
United States is the richest country
in the world and why financiers are
slow to approve of the plan.
Nowhere can anyone be found who
opposes the idea of rewarding the SOL
diers for the part they took in win
ming the war and bringing to an end
the German aggression which threat
ened democratic institutions. The OBJ
j~ections from the financial world are
based on the present expediency Of the
move and the manner in which it is
proposed to pay ne men the adjusted
compensation.
Finance is q science of endless in
tricacies and great movements of large
sums have an inter-acting effect on
the entire business Of the country.
The opposition to the bonus arises
from reluctance Of business men and
financiers to disturb the money mar
ket. Proponents of the bonus either
ignore the disturbance or say that it
is OF less national Importance than the
adjustment Of the soldiers monetary
reward for their services.
An examination Of the effects of
the payment Of a soldier bonus. wholly
aside from the merits of the ease in
It's human aspect, is of special interest
at a time when nearly all American
citizens are gaining an increasing real
lzation OF how great financial affairs
affect every day life.
Primarily, a nation has certain linn
its to its wealth and income. These
limits can be enlarged by special ex-
ertlon' as they were during the war.
but there are limits beyond which no
amount of initiation or squeezing can
push the national income. During the
war. the United States borrowed from
the American people some SOC. OO0. OOO.-
W.. The people did not have any
such great sum to lend to the govern
ment out OF current income within the
PERIOD the funds were required. That
the money was raised seems a paradox.
The fact is, the SIC, 0OO. OOO. 900 lent
the government was not advanced out
of current earnings but was borrowed
from future earning power. What the
treasury borrowed from the people
was not only all they could spare from
current earnings, but what they could
spare for some years to come.
Why Bonds Deprecated
This is n of the reasons why Lib
erty loan bonds fell below par and WHY
some still are slightly below PAR. The
people and the government m~ortgaged
the future. The nation steadily is
catching up. Every rise in the market
price of Liberty bonds on the stock
exchange represents an approach TO-
ward the point where the national in
come will have caught up with the
money advanced to the treasury during
the war. The task will be accom-
pushed within a year or two in all
probability, provided things remain
substantially the same.
The fundamental objection of finan-
clers to payment Of the bonus now ia
that to take from $4,000. OOO, 900 to
$4,000. 100000 out Of the national cof-
fers for a bonus this year will mean
that the whole people will be rlunged
back into debt by just that much and
that the time when we shall catch up
with the war o~bligations will be lust
that much longer postponed.
President Harding has urged that
the bonus be paid By increased taxa
ton. In this way. the bonus would be
paid. in large part, out of current
earnings. But It would not be paid
wholly out Of such earnings. for an
Increase in taxes would force irany
taxpayers to borrow money with which
to meet the imposts. This would mean
the mortgaging of the future, but in
the opinion Of the president and the
treasury department would be prefer
able to a government loan. inasmuch
as the borrowing would be widely
scattered and privately conducted and
therefore would not cause a sudden and
concentrated strain on the money mar
ket.
The president and the treasury Stand
firmly against a national bond issue TO
pay the bonus because such a move
would at one stroke set the country
catch up on the war debt. To issue
bonds to be bought by the public
would mean that the whole country
would understand the treasury's posi-
ton had been weakened by the amount
of the bond issue and the market
prices of Liberty bonds of all the war
issues would drop to lower levels.
Suppose the list Of bonds on an aver
age dropped five points. This would
mean the people who now own these
bonds would sustain a paper loss of
81 ,OOD.oDO,VbD or more. This loss
would not become actual uSless the
holders had to sell their bonds but
many would encounter emergencies
which necessitated their sale.
Higher Interest Rates
A further effect Of a bonus bond is
sue would be that the general level OF
interest rates would increase because
of the increased competition from the
government. The demand for money
would be increased by the amount of
the bonus. This would mean that ev-
eryone who had to borrow money for
the next two or three years would have
to pay from one to two per cent higher
interest. In the aggregate this would
mount to several billions. Therefore,
the opponents of the bonus say that
to borrow none and pay it now would
cost not the amount of the bonus it.
self. but two or three times that
amount.
The opposition to the plan of giving
the veterans certificates upon which
they could borrow at the banks has
been even more spirited than that TO
other schemes. The reason for this
is that the veterans would make a sud |
den demand on the banks for so large
a sum of money that this increased de-
mand, in pursuance Of the natural law
of supply and demand. would produce