Evening star., 1940-01-07
Discusses Arguments
for Debt Increase
By Oauen L. Scott.

Va tIIc IldIAOIAd1 ucUG IIldt IldS kOIle OIL
each year since he has been in the
White House.
The Presidents spending estimates for
the Governments next accounting year
assure record Of II consecutive budgets
of income and outgo that will be weight
ed on the side of outgo. OF those II
budgets, Mr.. Roosevelt has submitted 8.
All present signs are that this record
will continue, with the end not now In
sight.
In another year, this Government will
have spent $4,000, 900 900 Of borrowed
money without once having been able
even for one year-to stop borrowing.
New pressure for national defense spend
ing OF greatly increased volume makes it
highly improbable that the Government
can stop borrowing under any type Of
administration.
Raised is the question Of how long this
sort of thing can go on. Isn't there
limit to the amount of borrowing that
the Federal Government can do? What
would happen if, by any chance, it be-
came necessary to finance war with a
debt of the present size to start with?
Those officials who handle debt policy
have an answer to these and other
questions. They do not share the worry
that is so widespread elsewhere.
In fact, these officials are of the opin-
ion that Government debt must grow
much greater unless private industry in
this country borrows and spends the saw
ings of the people. Debt is just partial
measure Of investment, and somebody
must invest the funds that are saved
and taken from the national income
stream, or else there is depression.
Debt really is viewed as the path to
recovery-whether created by Govern
ment through investment. or by private
enterprise through investment.
Points made by those who shape debt
policy are four:
First A debt many times as large as
that now borne by the Federal Govern
ment can be supported, provided only
that the productive plant of the Nation
is not fully active and that the country
gets sound asset at a reasonable price
In return.
1t is from this conclusion that the
answer is derived to the question of how
war might be financed. Much of war
spending is not productive of sound ma
tional assets. To the extent that this Is
true, the men who guide debt policy be-
lieve that war should be paid for by taxes
and not by borrowing. Borrowing should
be permitted only to the extent that
productive assets are improved.
This does not, however. answer the
question of the possible limit to national
debt. That answer depends in part upon
the second point made by those who
guide debt policy.
Second Debt of the Nation is differ
ent from debt contracted by State or
local government or by an industry or
individual
The reason is that industries and indi-
viduals and local government must OBJ
tain dollars through profits from sale of
goods or wages or taxes to meet their
debt obligations. They have an ex-
change problem. Their position would
be comparable to that of the National
Government if that Government owed
money to a foreign nation and had to
obtain currency of that nation to use in
meeting its debt obligation
But the United States Government
owes no money abroad. At home it has
the power to coin money and to deter
mine the value of that money. Also it
possesses unlimited power to tax and
possesses powers that enable 1t to deter
mine interest rates.
If banks and insurance companies and
individuals who hold Government bonds
should be getting an interest return that
burdened the National Government, the
Government might simply impose taxes
that would draw back to it the money
that 1t pays out in interest. Or the Gov
to point where they were not burden
some, or it might invest its money in
ways that would produce enough income
to meet the debt charges.
The assertion is made that no national
government that is without foreign debt
need ever have a wild imitation, such as
that in Germany or France after the last
war.
But there is third point involved.
Third When the Government does
create debt that represents sound as
set-such as a road system or power
development or housing program
there is wider socialization.
The debt policy formers admit that
debt tends to become measure of Gov
ernment enterprise, and, as debt rises,
the Government is extending the field
Of activity Of enterprise on social basis
rather than on a profit basis.
For this season, these officials think it
is very necessary for Government and
industry to map out fields of activity
that should be reserved for each.
This, again, raises another point.
Four. If Government is to have a
field in which it is free to invest, then
the money used in doing this investing
notwithstanding to the view of the pol
icy formers-be kept in budget that is
separate from the operating budget.
X \ 4 X
The view is that there should be an
operating budget that always should be
kept in balance by taxation. This budget
would cover the cost Of the Army and
Navy and the administrative agencies Of
Government. It even would include
varjo,1s serial ServiceS sIIch as w p