The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1922-01-26
AFRAID BONUS
Will INCREASE
INTEREST RATE
Republicans Foresee Effect
on Market of Borrowing
Millions Must Care for
Short Term Notes.
NO CASH FROM EUROPE
ny MARK SULLIVAN


TO be demanding it.
IL was readily apparent that the
one episode that had most to do with
causing Harding and the other Repub-
iican leaders to change front was an
election held in Ohio last fall That
election was on the specific issue of
bonus to be paid by the state locally
10 its own soldiers. The project car
ried by vote of something like 900
900 to 100000, and the state was di-
rected by the clear mandate of the
people to make an initial appropria-
tion of some $25,000,000.
That was interpretated as an un-
mistakable indication of public feeling
such as no party in power can ignore
1t might be said that if the thing is
not right the party ought to be willing
to resist and go out of power. But
that is the sort of counsel of perfec-
ton which no party lives up to.
Partially Correct.
Moreover. the Republicans are more
or less in the right when they say that
they are granting the bonus not be-
cause they say that they are granting
The bonus not because they fear for
reelection, but because it is the duty
try to obey an unmistakable mandate
of public opinion.
The subject is Enthusiastically diff
cult, and 1t is causing the leaders more
worry than any other thing in the
present political situation. They I'M
derstand Secretary Melons opposi-
tion, and admit it is sound. Incident
ally Mr.. Mellon in his letter, did not
make clear the largest single financial
objection to passing the bonus bill at
this time.
The objection rests on interest
rates. The interest rate on money
for both public and private borrowers
has been going down steadily. The
chief reason is that the government
by gradual process, has been spend
ing less and less money for over two
years past. 1t was on the first OF
september, 1919, that the peak of gov
ernment expenditures was passed
May Reverse Process
This gradual reduction of govern.
ment expenditures and of interest
rates might be expected to continue
10 go on, but ii the government mus
borrow something like billion more
during the present year, in order tc
meet the bonus, the process will be
reversed.
From Mr. MELONS point of view. tn,
heart of the situation lies in the fac
that the government already has
among it's debts six and a half bil
lion dollars of short-term notes which
will come due and must be paid with
in the next sixteen months. In The
normal course Mr.. Mellon would pa,
off these notes by borrowing an equiv
alent sum from the public on refundin,
bonds, which would run for man!
years.
Fear Interest Rates
Normally, Mr.. Mellon could expec
to make this new borrowing at a rea
sonably low rate of interest. But
he must. in addition, raise anothe
billion dollars to meet the bonus, tn
interest rates will go up. Not onl
will the interest rate of the billio
involved in the bonus be high but
will also be high on the other six an
d half billions.
Whatever rate is fixed will eXten
over many years, as a result of this
it has been said that to pay the bonu
now would amount to paying it twice
once in the shape of the present cas-
payment and once in the shape of tn
unnecessarily added interest burder
To put in another way. the govern
ment could better afford to pay tn
soldiers two billion dollars three year
from now than one billion dollars nov
The best informed persons tell m
that the project of paying the bonu
out of receipts from our Europea
debtors is sheer nonsense. There
not the faintest prospect of gettin
any cash payment that amounts t
anything out of these European coul
tries in the near future.
Get Better Security
In the operation of refunding thes
European debts, We shall be able I
get a different and better form of s.
curity, and otherwise manage thing
10 our advantage, but no we'll inform
ed person believes we will get an
measurable amount of immediat
cash.
Anyhow this whole suggestion is
mere bookkeeping operation. Al
money we get from Europe will go il
to the treasury, and will be availab1
TO meet the ordinary treasury obi
cations. To attempt to earmark
for the soldiers bonus is camouflag
II is merely the sort of, device tn;
worried politicians use to max
things seem what they are not@
President Harding does not shal
this disposition to camouflage. @
the contrary. he is understood to d
nlore it, and To insist firmly tn;
whatever bonus bill is passed sha
be in good faith with the soldie
and shall carry as part of the b
some definite means of raising mono
There isn't any means of raising T.
money, except by new and addition
forms of taxation.
Bill Will Go Through.
The bill will undoubtedly go throus
somehow or other. Secretary Nj
Ions opposition will not defeat
, When the same bonus bill was pen
!. ing last July Mr.. Mellon wrote L
ter similar to the present one, b
that did not head it off. Thereaft
the Republican leaders in the sena
appealed to President Harding, and
Continued on Page Fourteen)