Evening star., 1936-11-28

ally dS NOHgIcoS &$##& al
in the last three -,,,
years has set
aside the pledges made by previous
Congresses with respect to the gold
content of the dollar or the promise
to redeem currency in gold.
How can Congress be compelled to
keep the social security money from
being eaten up in current expenses?
That's practical problem the answer
to which nobody around here really
knows as it deals with the intangible
whims and peculiarities of future
Congresses.
Goes Into Expenses.
For instance, the Federal Govern
ment beginning next January will
collect from payroll taxes cash fund
which will amount to about So, 3,900,-
600 900 by 1912, but each year as the
cash comes in. this cash will not be
set aside actually but will be used to
pay current expenses of the Govern
ment.
What happens is that the present
Law requires the Treasury to invest
the money in 3 per cent bonds. This
means the Treasury has to create
bonds or 60 out and buy such existing
3 per cent bonds as have been issued
for the public debt. Having bought
in the bonds, the public debt goes
down by that amount or else the bonds
are kept on the books as liability.
In the case of the new reserve to
be accumulated from the old-age pen
sion payments, about $4,000, 100000
will have to be invested before 1912
in old bonds or new bonds. Since the
Federal Government will not want to
increase its borrowings simply to pro-
vide an investment for the old-age
pension fund, it is assumed that the
$4,000, 900 900 will in effect be used to
cut down the public debt. This in
turn improves the credit position OF
the Government in the sense that It's
debt is reduced. But no actual cash
Is set aside from which the Govern
ment can overnight draw down the
money to pay off the requirements of
the fund.
Must Buy Public Debt.
1t so happens that outgoing pay
ments on old-age pensions will not
begin until 1912 anyway, and the
Government will not even then be
obliged to pay out very much each
year. In other words, the reserve
fund will have a five-year start, and
because the law says the reserve can
be invested in Government bonds
only, the Treasury will find that the
only thing it really can do is to buy
In the public debt.
What has been developed is means
of financing the annual deficits OF the
Government without going to the
banks or the public with new bond
issues. Ultimately, if the present old
age pension plan goes on unamended.
about S47,000 000, 900 of reserve funds
will have accumulated some day,
which will have to be invested in the
public debt at a per cent interest
rate.
But there is not available at pres
ent a public debt Of more than S34,-
600, 900 900, SO Congress will either
have to find ultimately some new
reasons for increasing the issues of
bonds or the Government will have to
keep a cash reserve and pay out the
q per cent interest just the same.
May Prove Temptation.
The sight OF such colossal fund
that simply has to be gotten rid Of
CONGRESS in the future to spend on
many public projects. 1t has been
suggested that the Federal Govern
ment might want to buy in the public
utilities or other projects now pri-.
vately owned. This course has been
objected to as creating State socialism
on a wide scale, but irrespective Of
the merits of such policy the funds
will be available for it II the present
plan goes on during the next 40 years
or more as contemplated.
When Mr.. Green tries to bind
future Congresses, he will find that
there is no way except by q consti-
tutional amendment. This is the way
various States have found to keep
their Legislatures from incurring more
debt To safeguard the fund against
abuse by overspending, constitutional
restrictions may have to be restored
to, though If amending the Federal
Constitution becomes as easy as has
recently been suggested, even this
4. barrier will not suffice to keep the
reserve fund intact.
Higher Pensions Asked.
The spectacle of the Federal Gov
ernment taking in $4,000, 100000 in
' the next five years and issuing bonds
TO itself for that amount and using
the cash to pay current operating ex-
penses will be hailed by some as a
way of avoiding any more cash bor-
rowing, but this will depend on what
Congress has to say about spending
money that comes in as easily as it
will through deductions in the pay
envelopes of 26 1000 900 persons and
through assessments on the employers
OF the country.
Already Green thinks the Federal
contribution should be increased fol
old-age assistance and future Con-
crosses will have to deal with public
sentiment arising out of that set oi
circumstances in American politics
The Townsend plan developed many
adherents because Of its $500 pension
D month. The Green plan would in
crease the total from the Federal ant
State treasures from $50 to $5(
month and there is no reason why
other groups will not insist on raising
this in future sessions of Congress
tcopyright. 1850