New-York tribune., 1922-01-25
Tells Fordney Extra Taxes
Musl Be Levied if Con.
gress Decides to Give
Veterans Help at Once
Puts Liberty Bond
Obligations First
$50 Millions Needed i'm ?
first Years Under Plan
Proposed by McC,,,nbcr

WASHINGTON, Jan. e. Treasury
Opposition to soldier h"Nus remains
unchanged. hut if there Is TO he =
bonus 1t must he provided tllroucl,
taxation in addition TO taxes imposed
oy existing law. Secretary Mellon de-
clarcd tonight in letter to Chairman
Fordncy of the House Ways and Means
committee. Any attempt to provide
for the bonus through tho use of the
principal and interest of the foreign
debt to this country. he contcnded
would be futile as we'll as unwise."
Mr. Melons letter was in response
TO request from Mr.. Fordney for an
expression of the views Of the Sccrc-
tary.
Mr.. Mellon declared no allowance
mas been made FOR any extraordinary
expenditures for soldiers bonus,
which would cost, on the most con.
serVatlve estimates, he said, probably
not less than $s5o,0o0ooo in the first
two years.
THE figures" he said, "show that
thefc viii be no available surplus, but
more probably Il deficit and that with
me enormous rcfundne operations
which the Treasury has to conduct it
would be dangerous in the extreme to
attempt to finance the expenditures in
volved in the bonds through new bor-
roWngs."
Can't Evadc Burdens
no indirect means of financing the
bonus would make it any less an cx-
pensc to be borne in the loug run bv
1t is impossible, he maintained. in
advance Of funding arrangements to
estimate what may be collected on the
foreign debt in the near future by way
OF principal or interest. The ohliga-
tions, which arc in the form Of de-
mand obligations arc not, he asserts,
in shape to sell to the public, while to
offer them with the guaranty of this
government would interfere with the
Treasury's refundins operations and
prove more expensive than the sale Of
direct obligations of the government.
AT the same time he added "it
would enormously complicatc the inter
national situation and certainly embar-
rass the funding negotiations"
1t would accomplish nothing, Mr.
Mellon argued to set aside the foreign
debt for the payment of the bonus,
even if enough could be realized in
time.
Puts Liberty Bonds First
"As the law stands" he said, "and in
justice to the millions of Liberty bond
holders, the government is bound to
apply any principal payments by for
clcn governme as we'll as any pro-
cccds Of sale, to the retirement of out
standing Liberty bonds. about s1O.OOO.-
600 Of which were issued in the first in
stance to provide for advances to for
clgn govcrnments.'
Interest collected, he declared, should
also go to provide interest on Libert
bonds, SO that if the proceeds of the
foreign debt were applied to the bonus
the government would, to that extent
have to provide for the principal and
interest of Liberty bonds from other
sources. This means, he asserted, taxes
otherwise unnecessary.
The plan to use the foreign obliga-
tons to pay a soldiers bonus, there
fore,' Mr.. Mellon continued, would
still leave the burden on the shoulders
Of the American taxpayer"
Discussing the financial outlook of
the government MIR. Mellon presented
detailed figures covering budget esti-
mates which, he said, indicated deficit
Of more than $24,O0O,0o0 for 1922 and
d deficit of more than $1S7 ,000,0 for
1923, not allowing for $5O,OoO,oo0 re
qucsted by the Shipping Board for the
payment Of claims, $7,o0O,0OO to be
spent for Russian relief by the United
States Grain Corporation and s5,O0O,00o
to be laid as the 1928 nstallments
under the treaty with Colombia, total
Of $62,000,000.
Cites Business Depression
To overcome these deficits, he cx-
planned, expenditures must be reduced
in the aggregate by about 100000
in the next two years, while at the
same time the government faces
heavy shrinkagc Of receipts. In view
of the depression in business, he added,
there is grave doubt whether the esti-
mates of receipts which appear in the
budget can be realized.
The overshadowing problem Of the
Treasury, Mr. Mellon declared, was in
CONTINUED on page four)