Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-02-14
Text of Mellon Statement
Disruption of Governments Financial Plans Seen
If Bonus to Veterans of $7OO,OOO,OOO Must
Be Raised by Treasury.

The full text. Of Secretary Melons
letter to Chairman HaWley Of the House
Ways and Means Committee follows:
In response to your request that the
Treasury comment on H. r. 17054, with
particular reference to the financial re-
quirements which it creates and the
probable effects on the Government
finances and public debt operations,
submit the following:
The bill amends the war adjusted
compensation act by. increasing the loan
value of certificates up to SO per cent
of their face value. AS the face value
of these certificates is $3.440, 100000 in
round numbers, this proposal establishes
potential liability of $1,720,000, 900
What proportion of these loans will be
demanded by the veterans cannot be
determined, It will depend upon the
circumstances.
The estimates run all the way from
$550,00Q 900 to $1,0o0,000.000 of loans
beyond those already made. The sug-
geSted use of the adjusted service certifi-
cate fund does not alter the situation,
as these reserves are in Treasury obliga-
tons which will need 70 be converted
into cash by means of sales of securities
to the public in order to pay cash to
the veterans.
May Need $1,000, OOO,O 900.
In this connection I think should
call attention to the fact that the only
funds made available for meeting this
liability of 81, 720,000,000 are those in
the adjusted service certificate fund
amounting to $772,000, 900 less $21,-
100000 which must be reserved for the
payment of death claims this year. This
would indicate that unless Congress is
prepared to incur an obligation without
providing means of meeting it, an ap-
preparation of approximately 81 ZOO, 000,-
900 is necessary.
Aside from the merit or demerit of
the proposal, the important considera-
ton is the amount of cash that can be
obtained by the Treasury through bor-
rowing without disorganizing the fl
nanceS of the Government and adversely
affecting the security market to which
the Government must resort to cover
its obligations.
This question cannot be disassociated
from the present financial situation of
the Treasury. That position Is at best
a trying one at this time and the diff
Guilty of obtaining these additional
great sums cannot be fairly appraised
if considered alone or as if times were
normal, but only if this consideration is
made part of the general picture and
NIeWeQ against IIle background OF the
great financial problems already facing
the Treasury.
alf-BilIion Deficit Seen.
We are confronted with probable
deficit of not less than a half billion
dollars for this fiscal year, which must
also be made good by borrowing The
revenues of the Government are
steadily falling behind not only the
figures of last year, but below what
we reasonably expected to receive at
the beginning of this year. In addition
to the normal expenditures of the Gov
eminent, we have been called upon to
find funds for emergency purposes of
various kinds, including relief measures
and an increase in public works and
construction activities of the Govern
ment for purposes of increasing employ
ment. For construction work alone we
will spend this year over $500, 900, 900,
as compared with $275, 100000 in 1928.
If the bill in its present form becomes
law, the funds to be provided must be
raised either in the first instance or at
a comparatively early date by long-term
bond issues. The Treasury, even with
out this burden, is already in a difficult
position. A statement of the public
debt situation will make this entirely