The times-news. [volume] (Hendersonville, N.C.) 1927-current, 1937-06-28
SECURITY ACT
UNDER FIRE OF
ECONOMISTS
Alexander Hamilton Inst.
Sees No Protection For
Funds Paid in
FAILURE TO BALANCE
BUDGET IS SCORED
BY M. L. BROWN
Copyright, 1897, United Press)


The fact that the nation faces its
eighth consecutive year on an un-
balanced budget, combined with
unhealthy aspects Of possible
government borrowings from So
cial Security funds" drew fire
from economists last night.
The Alexander Hamilton Insti-
tute saw indications that the fed
eral debt for the fiscal year end
ing June 80 will be more than
000,000,0O0 above the budget
estimates.
an other words" it said, at is
! apparent that the government is
not really expecting that the bud
get will be balanced in 1898
despite expressed intentions of
bending its efforts in that direc-
ton.
The government has borrowed
$500,000,000 Of new money this
month, having decided to increase
the treasury balance instead of re-
ducing it as originally planned.
The implication Of this is that the
government is looking froward to
continued deficits in the next fis-
cal year and is consequently accu-
mulating funds to help meet them.
an addition to the $500,000,-
900 which the government has
borrowed this month, the treas
ury, under the bonus act of 1886,
must place $500, 100000 of spe-
cial bonds to the account of the
government life insurance fund.
The prospect is, therefore, that
the total debt on June 80 will be
in excess Of S36,200,000,000 as
compared with the $35,335,0 00,-
900 indicated in the budget"
The Guaranty Survey, publica-
ton of the Guaranty Trust COM
pany Of New York, noted with APP
prchension that treasury officials
have announced that the govern
ment may be able to avoid resort
ing to the money market for new
funds largely because the payroll
taxes under the Social Security
Act will permit the treasury to
borrow about $70O,000,000.
"Under the act as it now
stands. similar loan will be made
each year, increasing steadily in
magnitude until 1880" the survey
said. within 30 years the aggre-
gate sum of these loans will be
sufficient to absorb the entire
present sum of the direct and con-
tingent public debt; and by 1880
the debt will have to be increased
about $4,000, 100000 whether the
government needs the money or
not. if the provisions of the law
are to be carried out. 1t is proba-
bic that comparatively few citi-
zens realize the possibilities in
herent in this prospect.
The "self-supporting' basis of
the old age benefit plan, whereby
a vast fund Of government obliga-
tons is to be built up as a ere
serve" against future demands, is
the most unsound feature of the
entire act. the survey commended.
Receipts from payroll taxes, it
was pointed out, are to be paid
into the treasury as internal reve-
nue. collections and become part
of the general income Of the gov
eminent. They are not set aside
by law for the old age reserve &C
count, although there seems to be
popular belief that they are. The
final determination of the amount
to be appropriated to the account
each year rests with congress.
Funds credited to the account,
however. are not to be held in
cash. They are to be invested in
direct and contingent obligations
of the government. In case spe-
cial obligations are issued to the
account, the amounts paid for
those obligatinos go back into the
general fund of the treasury.
"When the plan is viewed IN
this light, it becomes obvious that
the idea of the old age reserve &C
count as an accumulated fund
constituting a reserve against fu-
ture needs is a delusion. The &C
count is merely bookkeeping de-
vice the obligations held in the
account are nothing more than the
unsecured promises of the govern
ment to pay; and the government
might equally well undertake di-
rectly to pay future old age bene-
fits without any reserve account
whatever"