Evening star., 1924-03-16
CHAPTER XXI.
Can the Debt Charges Re Cuss

CHAPTER XXI.
Can the Debt Charges BE Cuss
When the great war came to an end
in November, 1918. the government OF
the United States owed approximately
twenty-five billions Of dollars Of inter-
est-bearing obligations. We had also
increased the volume of our money
our bank note circuiation--frorn 72s mil
lions Of dollars at tho end of 1919 to
3,S08 millions Of dollars at the end Of
1919. The value Of the dollar, based on
purchasing power, had been cut in two.
Imitation had done it. We saw in the
last chapter that it was necessary to
distinguish between goods and credit in
order to understand the difference be-
tween actual war losses and the So
called war costs
The war losses are in goods or serv-
ices, while the war costs are expressed
in terms Of money. Losses include
goods and people that were destroyed
or maimed. Costs include ID . ma
vate asset OF the citizens of the ma
tion; 60 paper currency, which was
issued to buy. goods and pay for serv-
ices; and go taxes. which represent q
part Of the private surplus surrendered
to make possible an increase OF public
consumption.
This distinction is vital to any real
understanding of the problem of war
finance. You see goods are primary.
while credit and money, the measure
Of goods, are secondary. Goods may be
destroyed, but the money or the credit
paid for them remains. That is where
most of our confused thinking comes in.
So the wastes Of war consist OF tho
destruction Of surplus goods. Bank
notes and liberty bonds and paper
nations wealth. Nor do great debts
end q war. As the surplus OF produc-
tion over consumption is reduced Q
nation Is weakened. And when the sur
plus Of production over consumption ts
wiped out, then the war must end. So
and that Of decreased consumption
figure in the final outcome-for physical
victory or defeat.
Debt Charges Increase Ferty Times.
So say again that from the stand
point Of IS per cent Of all the people in
America we would have been immeas-
urably better OF today in every way
if every dollar spent for war purposes
had been raised by taxation. But il
was not done. The question then is as
to what our policy will be with regard
to the public debt charges, which are
by far the largest single item in our
national expenses.
For the fiscal year ending June 30,
1894, the bureau OF the budget esti-
mates that 4161 cents out of every dot
Lar collected for federal purposes viii
go to pay public debt charges, as
against lass than 1 per cent in 1916.
This item for 1924 is more than is being
spent during the same period for tho
Army, Navy, Interior. Agriculture.
Labor, Treasury. Justice, State and
Commerce departments combined. and
pensions. In word. II We leave out
reau for 1924, public debt charges are
more than all the rest OF the expenses
OF the government combined. Public
debt charges are costing the people Of
America for this year at the rate of
10000 a minute. 1t is first lien on
the production of the nation.
Three suggestions for meeting this
huge debt have been advanced since the
war.
The first is that a capital levy should
be adopted by the national govern
ment, so as to pay of both the princi-
pal and the interest at one time. The
wealth of the nation is estimated at $50
billions of dollars. 1t is said that levy
of per cent on all the wealth OF the
nation would pay of this huge debt and
SO make tne purU6n LOT ~tUt average
man much easier to bear. In this way
the war tax burden could not be shifted
through indirect taxation by those best
able to bear it.
Shall Holders Relinquixh.
1t is claimed that the defiation period
caused nearly all the small holders Of
government obligations to sell or dis
pose Of their bonds. a great many SELL
ing at a large discount. Today it is
claimed that the vast majority of all
the liberty bonds are owned by the
tary of the Treasury for the year end
ing June 80, 1928, seems to confirm this
view.
We may assume that the vast major
ity of the bonds OK the smaller denomi-
nations ($50, 500 and 5000 are held by
small investors, while those of larger
denominations such as $1,000. 5000.
by the large investors.
On June 50, 1919, the total holdings
OF the small investor class amounted to
S. 4ss, ,e00, 600, while the large investors
held $l2 2,6s6. .000, 900. Three years later,
after tho period of violent def1ation had
been pretty we'll spent-to be exact on
August 81, l923-the small investor class
held lust s., ,167, ,000, 900 of bonds, while
those owning the large denominations
had increased their holdings to s12,-
S54. .000, ,000.
But the big argument advanced by
the advocates Of the capital levy is that
It viii shut OF the hardships OF de-
{lation In paying the public debt before
the costs become unbeArable. They say
that II the capital levy is not adopted
the government will be paying back to
its creditors dollars worth very much
more In purchasing power than 1t re-
ceived. The government borrowed dol
lars worth fifty cents and is now paying
back dollars worth sixty-five cents.
without q capital levy this dollar being
paid back will likely increase in value
as the years go on, and by such a proc
ess the bondholder is benefited at the
expense OF the taxpayer.
There is much truth in this conten-