The Republican. [volume] (Oakland, Md.) 1877-current, 1938-02-03

covery and give aid to the unemployed
but prove a wise investment for the
Government.
There are only two reasons why Mr..
Lewis suggestion cannot be carried
out. One is that the law prohibits
the investment of these funds in any
thing except Government securities;
the other, because the Government is
spending this money for current ex-
penses almost as fast as it comes in
and has nothing remotely resembling
five billions in cash in the RESERVOIR
ever will have, if its present policy
continues. Of course, a way might be
found to obviate the first reason by
printing more Government securities
and taking the cash out-but the cash
isn't there
The fact is, Mr.. Morgenthau, the
Secretary of the Treasury, has been
doing exactly that for a considerable
time now-taking the cash out and
putting the Treasury l 0 US in, until,
as Mr.. Paul Mallon recently pointed
out, the Social Security cupboard is
bare of everything except 'unem-
ployed trust fund certificates" which
is what the Treasury prefers to call
these particular notes. With the pres
ent depression has come demand up
on the Federal Treasury from a good
many States for their share of the
unemployment insurance money, and
Mr.. Morgenthau has had to dig it up
out of the general funds because there
isn't anything in the reserve but
notes. ***
What is happening is simple. When
the money from the payroll taxes
comes in, the Secretary of the Treas
ury does not put it in the Social Sc
curity reserve. 1t never goes there at
all. 1t goes directly into the general
Treasury cash drawer and it is the I 0
US which go into the reserve. The
cash is spent on current expenses for
relief, governmental agencies of one
kind and another. 1t is true the law
compels the Treasury to invest these
Social Security funds, which pour in
now in a steady and increasing flood
from employees and employers, in Gov !
eminent securities at 21a per cent |
interest-but it does not compel it to
spend the money. The defense of the
Treasury is if it did not meet it's run
ming expenses with this money it
would have to borrow money on Gov
eminent securities, thus increasing |
the national debt and paying the
interest to the banks or individuals
subscribing to the securities.
Actually, what the Treasury is do
ing is spending the money intrusted to
it for one purpose for quite different
purposes, substituting for the cash it's
promissory notes. This undoubtedly
is legal under the act. And it isn't
fair to blame Mr.. Morgepthau, who
probably knows the risks of what he is
doing as well as anyone and wishes he
did not have to. Actually, the act
practically compels the Treasury to do
what is being done. There is no ques-
ton that the slick gentlemen who
drafted this law thought they had
done singularly clever thing, which
would enable the New Deal to con-
tinue its expenditures indefinitely and
ultimately pay off the whole national
debt. And so it might if the money
were used to buy up outstanding Gov
eminent securities and corral them in
the reserve fund. Even then, eventual
ly there would arise fantastic fiscal
problem. But that isn't being done
at all. 1t isn't the existing promises
to pay which are being put in place of
cash, but new ones issued for the
special purpose.
1t is legal, all right, but if it were !
i q 4'