Norwich bulletin., 1922-03-13


pupLcans was attacked tonight by Sec
retary Mellon as involving "a dangerous
abuse of government credit"
Replying to request for the treas
urys comment on the new bonus bill,
Mr.. Mellon in letter to Chairman
Fordney OF the house ways and means
rcommittee, made public tonight by the
treasury, sharply criticised features Of
the proposed measure providing for
loans by banks upon adjusted service
certificates as indirect and forced"
borrowing by the government He sug-
gssted that the direct and regular
way" to providN for a paid-up endow-
ment insurance feature would be to au-
| thorize insurance certificates with pro
visio nfor direct policy loans to be f.
nanced by the government Mr. Mellon
contended that ''it is both dangerous
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 can avoid the
burden. and If a bonus is to be imposed
1t is far better for all concerned that It
be placed upon direct and definite
basis and paid for each year out of cur
rent revenues. To do this at this time
will necessarily mean the imposition Of
additional taxes for the purpose
Cost Under the BILL
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 eco by
January 1, 1926 What form the bo-
nus measure might take, he asserted,
would mean cost to the government OF
from $300b00,000 to S4O0.oo0.Oo0 for
the next (tree or four years and posi-
bic continuing liabilities thereafter OF
more than s2oo,O0O,COo a year until
1913
Accompanying his letter. Mr.. Mellon
transmitted statistical tables prepared
by treasury experts showing the vary
ing cost of a bonus according to what
percentage OF veterans might choose the
different plans OF payment offered
Mr.. Mellon called attention to the facl
that the bill makes no provision fol
) raising additional revenue to meet tbs
cost Of the l1nus ana recalled to Mr.
Fordney President Harding's letter .
February is in which Il was suggested
that a general sales tax be enacted Il
$ provide the necessary funds or the co
= nus legislation be postponed. Secre
= tary Melons letter, in part. follows:
No Provision For Sinking Fund.
The bill makes no provision what
ever for sinking fund, amortization o.
other reserves against either the Eabil
= fty that would be thrown upon the gov
ernment in 1925. or against the liabil
ity on the certificates at the end OF p
, years. nor does II make any provision
! for the payments which would sccru'
in ordinary course from year TO year oI
/ account of the death OF veterTns.
1.-THE direct cost to the government o
a bill carrying these provisions 70
about 4.590. 600 ex-service men is almos
, impossible to estimate because Of tn
: uncertainty as to which Of the plan
: will be chosen, and in what proper
tions. But the government act
uary has prepared tables Of estimate
h cost on the assumption that seventy pc
= cent will chose the certificate plan, 2
: per cent. the farm an6 home aid p'a-
Q five per cent, the vocational tralnin
> | plan and two per cent. the land settle
ment plan. In the calculations as 10 III
cost OF the certificate plan. It IS assume
C that half Of the veterans will borrow o.
4 their certificates from banks and defaul
= on their loans. in view OF the attractiv
/. provisions for cash redemption In cas-
Il Of default. ..
Figures of Interest.
"It appears from these tables that o
q the basis assumed by the actuary th
y total direct cost to the government !
the fiscal year 1928 would be S2ss.s54
600; IN the fiscal year 1924 S216,440
0oo in the fiscal year 1925 s12s,o13
600; and in the fiscal year 1925, for tn
most part by ctober IS, 1925. when tn
: adjusted service certificates used as 81
: curity for bank loans would have to +
: redeemed, s615,S22. 900. This woul
; mean total payments With nabout 3 l.
years of. over 81 200, 900. 600. These est
mates take no account Of sTnortizatio
or other reserves against certificates
n remain outstanding after the fiscal yea
y 1926, which would add at least $4,000
|" 600 a year to the current charges, or c
possible additional costs under the Ian
!" settlement plan II the reclamation PR
jects therein authorized should be car
ried through. It Is estimated that abot
% 800. .0oO. 900 per annum would be rt
:, quired after 1923 II these reclanatio
- projects should be pressed ..
'1f all the veterans should choose III
q" certificate plan the total face value {
the certificates would amount to ovf
4,5o0. 900. .o0o distributed over 20 year
:, and that If all the veterans shoul
choose the farm and home aid plan tn
y total cost would amount to S2.os3. 900
n 600 within the next two or three year
Al Bank Loans Provision Serious.
apart from the direct cost Of IN
bill, a most serious feature Is the pre-
,e vision for bank loans upon adjusted sci
K, vice certificates during the period b
of tween its passage and September 3
I, 1925. The effect Of this provision IS s;
l. transfer the cost Of policy loans fro
the government 20 the banks. and
place in the banks. and to the exteI
d that the ex-service men are able to Oh
D. tain loans from them, a mass Of uni
n, quid. non-negotiable paper upon whic
ie the banks will be unable to realize VI
t, til 1925. The result would be froz5
ID bank loans and imitation Of currency an
credit. To the extent that the banks Al
obliged to make loans on adjusted Sc
le vice certificates, their ability TO ta1
er care of the demands Of business and Il
G. dustry will be correspondingly reduce
Il and even though the paper accrued /
4 the certificates may not be eligible q
to rediscount at the federal reserve bank
the indirect result is certain to be &
creased borrowings by member bsnl
ld from the federal reserve banks.
e. From the point Of view Of the trea
n ury, the most serious aspect of the
IL loans on adjusted service certificates
or the fact that the loans would be hos
K ed at the banks on the credit Of Il
in United States. The plan Is substanc
therefore. involves dangerous abuse
the governments credit, for Il confer
en- plates the issue OF a vast amount
IN government obligations which are no
negotiable and have no present reailz