Evening star., 1939-12-17
A Plan for Wartime
Financing
By Frederic J. Haskin,

dlscomforts Of war-imposed living con-
ditions, but there also is a numerous
group which must devote attention to
the question Of financing. Taxation and
borrowing have been the systems resort
ed to In modern warfare, but, as the first
World War proved, both entail serious
economic arrangements Moreover the
effects which are felt when the war ends
and the bill must be paid are such that
paralyzing depression usually ensues.
Economists in all principal countries
now are closely engaged upon these
problems and, while the United States is
not belligerent, nor likely to become
one If the present temper and deterni-
nation Of the people persist. even being
a neutral under modern conditions brings
added expense. So American statesmen
and economists are studying these mat
tiers with keenness scarcely secondary
to that of the responsible persons of the .
countries engaged in the present struggle.
A plan which contains several novel
features is receiving particular atten-
ton. In part, at least, it was devised by
John Maynard Keynes, the British econ
omist who startled the world back in
1919 with his book called "The Economic
Consequences of the Peace" He had
been working as an expert attached to
the British delegation at the Versailles
Peace Conference, but resigned his post
in something akin to disgust when he
saw the trend Of the treaty provisions.
With a precision which, by hindsight
seemed uncanny he predicted the long
train of evils, political and economic,
which would arise from imposition Of the
terms proposed and, finally adopted. It
was his book which was, to a consider
able degree, responsible for the refusal
OF the United States Senate to ratify
he instrument.
The chief feature of the plan which
Prof. Keynes is supporting to meet the
needs OF modern countries at war is a
system of compulsory saving in conjunc-
ton with the taxation which also is
necessary. OF course. his plan was de-
signed with Great Britain in mind, but.
there being such a similarity between
the two great English-speaking nations,
it would prove equally applicable to
American conditions.
Outside the totalitarian' countries
where every branch of economy is in
the hands of dictators it has been
the invariable experience for prices to
rise rapidly. Britain has price-f1xing or
price-control measures and, even here,
the authorities have taken steps to pre-
vent profiteering and, presumably, will
take more. Nevertheless, where there is
any substantial measure of individual
freedom, prices do rise For example, in
England, prices rose 61a per cent In the
first month of the war.
An accompanying phenomenon Is for
wages to rise, too. In Britain, with the
war not yet three months old, wages
have risen from 5 to 10 per cent. At
the present rate, it is estimated that
the total income of workers of the
United Kingdom will have been in
creased by the colossal sum Of $780,
100000 in the first year OF the war;
Should the same thing happen In the
United States, the increase would amount
to $500 900 900 because the population
IS larger in that proportion. Many mil
lions of people remember what happened
here in the period of the first World
War. Wage increases in the aggregate
far exceeded even that huge sum.
Wage increases obviously mean
greater purchase power in the hands of
the workers. Although tax laws already
are so stiff in both countries that very
large part OF income is taken by the gov
ernment from persons in a fairly large
way OF business or already making good
incomes from investments previously
made. American income tax rates have
fallen lightly, in proportion on workers
of both the manual and white collar
classes. The rich have been soaked In
both countries. but tremendous differ
ence exists in England in that there even
the small salaried worker pays heavy
income tax. Here exemptions are high
in comparison, but, across the Atlantic,
a person getting no more than a fresh
man stenographer, must pay to the ex-
chequer $40 out Of every s10o of pay.
No proposal made provides for the SUBJ
stitution OF any new plan for either taxa
ton or borrowing, but Prof Keynes, as
well as others here in England and in
France are seriously impressed by the
scheme which partakes of both systems.
Briefly the scheme would work as fol-
lows: There would be established by law
a scale of incomes from wages, salaries.
profits. unearned increment or other
source. Each recipient of income would
be required to turn over to the govern
ment fixed percentage of what he re-
ceived. 1t has been suggested that en-
ployers or other disbursers of money
would deduct proper percentage and
pay it into the treasury in much the
same manner as the labor union check
off system or the social security tax
plan works In the United States.
A certain fixed proportion of such a
payment would be regarded as straight
tax to be used in any such manner as
the governing authorities should elect.
But balance of the money withheld~
would be regarded as borrowed from the
individual. A small total tax-savipg de-
duction would be taken from the person
earning only, say SIS or $25 q week, but
the percentage would rise rapidly.
The compulsory saving part Of the
deduction would go into O government
banking system, such as the American