The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1922-07-01
TOPEKA STATE JOURNAL
Information Bureau
THE PROBLEMS OF THE BONUS
FREDERIC J. HASKIN, Director,
washington, D. O

against the measure has arisen anew.
The soldier and his supporters are
sometimes at a loss to understand
why the payment of a soldier bonus
is opposed when it is considered that
the United States is the richest coun-
try 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
the German aggression which threat
ened democratic institutions. The OBJ
jectiOnS from the financial world are
based on the present expediency OF
the move and the manner in which it
is proposed to pay the men the ad-
juSted compenSati ton.
Finance is a science of endless in
tricacies and great movements of large
sums have an interacting effect on
the entire business of the country. The
opposition to the bonus arises from
reluctonce of business men and ftnan-
ciers to disturb the money market.
Proponents of the bonus either ignore
the disturbance or say that it is OF
less national Importance than the ad-
justment of the soldiers monetary re-
ward for their services.
An examination of the effects of
the payment of a soldier bonus, who'll
ly aside from the merits of the case
in its human aspect, is of special in
terest at a time when nearly all Amer
lean citizens are gaining an increasing
realization of how great financial af-
fairs affect every day life.
Primarily, a nation has certain lin
its to its wealth and income. These
limits can be enlarged by special exer-
ton, 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 $4,000, -
he ct hax ny
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 para
dox. The fact is, the $26, 100000
lent the government was not advanced
out of current earnings but was bor-
rowed 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 one of the reasons why lib
erty loan bonds fell below par and
why some still are slightly below par.
The people and the government mort
gagged the future. The nation stead
lily is catching up. Every rise in the
market price of liberty bonds on the
stock exchange represents an ap-
proach toward the point where the
with the money advanced to the treas
ury during the war. The task will be
within a year or two in
all probability, provided things re-
main substantially the same.
The fundamental objection of finan-
cierS to payment of the bonus now is
that to take from $4,000,O00,000 to
$4,000, 100000 out of national Golfers
the whole people will be plunged back
into debt by just that much and that
the time when we shall catch I'D with
the war obligations will ha just that
much longer postponed.
PresiG t 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
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 departm ent
would be preferable to a government
loan, inasmuch as the borrowing
would be widely scattered and private
ly conducted and Therefore would not
cause sudden and concentrated
strain on the money market.
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 back several years in its eff
fort to catch up on the war debt. To
issue bonds to be bought by the pub
lie would mean that the whole coun-
try would understand the treasury's
position had been weakened by the
market prices of liberty bonds of
all the war issues would drop to
lower levels. Suppose the list of bonds
on an average dropped five points.
u, 4 -
own these bonds would sustain a ma
per loss of $1,00O,0O0,0OO or more.
This loss would not become actual
unless the holders had to sell their
bonds but many would encounter
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-
cry one who had to borrow money for
the next two or three years would
have to pay from 1 to 2 per cent high
would amount to several billions.
the opponents of the bo-
nus say that to borrow money and
pay it now would cost not the amount
of the bonus itself, 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
demand, in pursuance of the natural
law of supply and demand, would
produce q condition of cOmpetifiOu
the general bank interest
rate would be increased. The supply
of lendable funds would be pressed
upon so heavily that people, other