Evening star., 1932-11-29

pay that 1t ought not to default.
It Is also said that because citizens OF
the debtor nation regard these debts
as representing expenditures in COM
mon war, which should be shared, they
will rebel against the heavy taxes and
overthrow their governments. Our peo-
pie, too, ares suffering from onerous
taxes, and as between high taxes upon
their citizens to pay these Just debts
and even higher taxes on our people to
pay debt they never did contract, the
danger Of resentment would seem to lie
here rather than there.
Certainly the occasion for resentment
Is greater here. This argument over
looks the fact that we have already
granted 40 per cent forgiveness, and the
present agreements represent their con-
clusions as to what they ought to pay
on the debt they contracted, not ours
They had originally promised to pay a
much larger sum, and we accepted with
reluctance the present figures of debt
because that is what they solemnly
said they could and would pay.
Fear Bond Impairment.
OF course, the real reason for the very
limited sentiment in the United States
for cancellation is the fear that the
fiscal difficulties of these debtors may
impair the value of foreign bonds and
other debts privately owned in this
country. Reduced to its bare ribs, this
argument Is that the average taxpayer
here who did not risk his money for
gain in foreign investments is to make
good default to protect his fellow
citizen who did SO risk his money.
There Is no equity in this argument
It has been worked overtime during the
past year. If 1t is to continue, it may
mark the beginning of a policy Of pro-
tecting all private investments at the
expense OF Government-wfich is to
say the general taxpayer. We cannot
countenance this. 1t may lead to de-
struction. It is an unfortunate inter
lection into this discussion, because it
gives the whole argument an air Of
special pleading and blurs whatever
justification there may be for govern
mental forbearance on purely public
grounds.
It is also said that we should forgive
these debts in the interest of export
trade. This is re-echo Of the doctrine
of 1928, when we were lending $2,00O,-
100000 a year abroad in the hope of
promoting commerce. Only a part of
the money loaned produced export trade
That is gone, and we now run the risk
of losing the loans also. If we had
$500 600, 900 q year to promote trade,
which we have not, we would do better
to use 1t to tighten the burden of debt
on our own almost ruined agriculture
instead Of wasting it on the more pros
porous farmers of Europe
Assumes Huge Increases.
The mere fact Of international bar
riers and trade restrictions, which is
now used as an argument for modifica-
ton, would make it doubtful whether
we shall ever reap much benefit from
export trade by the expedient of debt
forgiveness. Overlooking these facts.
this argument assumes enormous in
creases in export trade and minimizes
the effect Of additional tax burden of
S280,000,000 Obviously, the most that
would be directly added to foreign buy
ing power by mere forgiveness would
be S280,000,000, but that increase in
trade-even if 1t came-cannot offset
the depressing domestic effect of $780,
000,000 increase in taxes. 1t would take
many times $3.50 ,000, 900 in trade to do
that, and no such increase can be
anticipated.
I would be the first to admit that
these debts are burden on commerce,
but it is not wise to exaggerate that
The total gross debt of the United
States, Great Britain, France and Italy
Is about $4,000, 100000, and the debt
due the United States S11 300 600, ,OOO
Complete cancellation would scale the
total by 1872 per cent. A 10 per cent
scale-down would reduce the intergov-
ernmental debt only little more than
per cent.
This argument even goes the length
of saying that modification would so far
expand the profits of industry and agri-
culture that tax revenues would in
crease and the burden of taxation be
thus much reduced If we tax cor
porations 13 per cent of income, their
profits would have to- increase by
50 ,000, ,oo0, 900 to offset the increased
tax burden. Their business, as distin-
guished from their profits. would have
to increase by from $4,000, 900 900 to
$4,000, ,000, 900. That is, of course, an
absurd assumption.
It has recently been ardently urged
that unless the British burden Is lifted
it will further decrease the relative