Evening star., 1935-01-27
More Borrowing.

More Borrowing.
Without much furry of trumpets
the House ON Friday passed a bill
amending the second Liberty loan act
so as to fix at s45 900 900 900 the limit
of Treasury borrowing on long-term
and short-term securities. The bill
provides that the maximum of out
standing bonds which the Government
may issue shall be SOS, 900, 100000. The
limit set for short-term obligations Of
the Government is 100000, 900. In
simple language, it is proposed to
make it possible, under the new legiS-
lation, for the Government to borrow
up to s45, 600, GOO COO The Govern
ment at present is limited to the issu-
ance of about $2,500,o0O,OOO more
bonds, and its authority to issue notes
has been exhausted except for about
$4OO,0 100000.
Two reasons are advanced for the
new legislation regarding the issuance
of Government securities. The first is
that it will make possible the refinanc-
ing of outstanding securities at lower
interest rates, thereby saving the pay
ment of large carrying charges. The
second, and an impel!ing reason, is
that there will be a need for addi-
tional sums for the Government" and
for the payment of short-dated obli-
cations. Obviously, if there is to be
no great increase in the Federal taxes
and the administration is steering
away from that uncomfortable pit
fall-and there is to be an estimated
deficit for the next fiscal year of some
$4,000, 1000, some provision must be
made for taking care of the situation.
The House on Thursday passed the
$4,000, 100000 work-relief bill The
pending bill will make it possible for
the Government to finance these new
obligations and, if necessary, to go
further.
BY the terms of the second Liberty
loan act the Government may issue
bonds in the aggregate of s26 0O0,-
100000. There have been issued $685.
450,487,115 of such bonds. 1t hap
pens that S11,975, ,539, ,463 of these
Jonds have been retired. The rub
comes from the fact that there is no
authority in law to replace these re-
tired bonds. There are now outstand-
ing 13,474, ,947, $50 of bonds under the
second Liberty bond act, but the limit
Of further issue is $2,549, ,512, ,885. The
pending bill, which has still to pass
the Senate, would increase the addi-
tional amount of bonds that may be
issued to $11,525, ,052,350. This would
give the Government considerable lat
itude in the matter of more borrowing
on long-term securities. Furthermore,
the provision In the bill which au-
thorizes the Government to have out
standing at any one time 5,O0O,O ,OOO,-
600 will make it possible to make new
issues of bonds without further legis-
lation when old ones are retired.
The existing law authorizes the
Government to issue up to S2O,00O,-
100000 of notes, certificates and
Treasury bills, and have that amount
outstanding at any one time. The
new bill does not change the total, but
1t does make interchangeable the
amount of notes, certificates and
Treasury bills.
The administration at present is
committed to policy of Government
borrowing to meet Government obh-
cations and to carry on its recovery
and unemployment programs. Its
hope is that with an improvement in
business, revenues under existing tax
laws will materially increase and SO
bring an end to further borrowing
and make possible plan for the re-
tirement of Government obligations.
1t is gamble in which the Govern
ment can only win to the extent that
business RECEIVERS. It would do well
to remember this fact in its dealings
with business. Sooner or later, unless
there is big increase in revenue from
the existing tax laws, the day will come
when the taxes will be heavily increased
on all the people to meet these obliga-
tions. An alternative, under which
the people would suffer still more,
would be currency imitation and repu-
diation. The pending bill does not
enunciate new policy. 1t merely
makes it practical to carry the estab-
Ished policy forward.
To the real estate minded the map
of Europe may slightly resemble a
splendid tract Of land that has been