Evening star., 1941-01-29
Defense Tax
Program TO Be
Given Congress
Treasury Is Near
Borrowing Limit,
Moreenthuu Says
BY BLAIR BOLLES.

defense-inancin will be requested
by the administration after March
Is, when the 1910 income tax re-
turns are due, Secretary of the
Treasury Morgenthau told the
House Ways and Means Committee
todav. He was unable to forecast
at this time the nature of the pro-
gram.
Appearing before the committee
to testify for his three-fold defense
financing project. Mr.. Morgenthau.
urging an increase in the Federal
debt limit to S65,000 10000, said
that ceiling would be satisfactory
until July l. 1912. However. he did
| not say the administration would
seek higher limit after that day.
The present limit is s49 900 900 900.
Mr.. Morgenthau counseled haste
in increasing the limit, because the
Treasury has borrowing authority
| sufficient only for the next four
! months, and even in that period we
would be greatly restricted in our
financing operations"
Other Features of Program.
The other features of the financing
program which the Ways and Means
Committee began to consider today,
incorporated in Bill H. R. 1868,
amending the second Liberty Loan
Act, are.
/. Elimination of the tax-exemp-
ton feature from future issues Of
Federal securities
2. The institution of a new class
of security to be called Treasury
savings certificates for sale to the
general public at small cost-similar
to the World War Liberty bonds and
savings stamps.
Mr.. Morgenthau also reiterated
the administration wish for economy
in non-defense public expenditures.
May Seek Excess Profits Change.
John S. Sullivan. Assistant Secre-
tary of the Treasury. said that when
the returns are in March Is Congress
may have some desire" to amend
the excess profits tax provisions Of
the existing revenue law. He inti-
mated the Treasury at that time
would ask for change in the sub
stance of the revenue law.
I expect that the appropriations
of the present Congress will exceed
the s65 .000000O00 debt limit" Daniel
w. Bell, Undersecretary of the
Treasury, said. But not all the ap-
preparations will be spent by the
close of the next fiscal year"
At the end Of January. Mr.. Bell
estimated, the Governments out
standing borrowing will total about
s2700,0 100000 below the present debt
limit. He thought that Congress
would be asked to appropriate
s3,5O0000lO00 supplemental to the
budget estimates for 1912 already
submitted to Congress.
Mr.. Morgenthau told the COM
mlttee he often wakes up in the
middle of the night worrying about"
the problem Of financing govern
mental undertakings. He said one
OF his principal desires at this time
OF national defense emergency Is to
encourage more popular participa-
ton IN the financing" and to de-
crease the banker participation.
current taxation. Mr. Morgenthau
SAID, can take care of non-defense
expenditures projected in the l941
budget.
Situation Changed.
Mr.. Morgenthau said of the debt
limit and tax-exempt securities fea-
lures:
When I appeared before you last
spring at the time the first revenue
Dill OF 1910 was under consideration
the national defense program then
before Congress amounted to less
than S4,00000 I pointed out
that on the basis of that program
the balance of the borrowing au-
thorlty under the general debt limi-
tation of s45,0O0,O000 900 would be
dangerously depleted early in the
calendar year 1941.
L am therefore appearing before
you today in support of H. R. 1858,
which raises the debt limit to s65.-
900, 100000 provides for the elm
lnatlon of the present partition in
the debt limit, provides greater flexi-
bility in our financing operations
and provides that the income from
all future issues of Federal securities,
both direct and indirect, be subject
to all Federal taxes.
Our contemplated national de-
fense program has now been in
creased until it aggregates ap-
proximately S28,500 100000 in ap-
propriations, contract authorize
tionS, and recommendations, &C
cording to the 1912 budget, Just
submitted. The estimated expendi-
ture programs included in this
budget will result in combined de-
f1citS for the fiscal years 1941 and
1912 of more than $4,000, 100000.
Debt Funding Postponed.
He said the Treasury had post
poned its usual December debt
funding in expectation of having
the security-taXation authority. He
said:
Il am sure this committee ap-
preciates the importance of prompt
action in this connection so that
the Treasury can take steps to re-
fund the large March 10 maturities
AL VI liIdG
The Treasury Secretary made it
PLAIN that national defense costs
provide the whole key to the urg-
ency with which he advocates the
financing reforms. He said:
AT this time our whole economy
and effort should be concentrated
on national defense. One step
which the Government should take
Is economy in Federal expenditures.
I believe, therefore, that all Federal
non-defense expenditures should be
re-eXamined with magnifying
glass to make certain that no more
funds are granted than are abso-
lutely essential in the existing cir
cumStanceS."
Chairman Doughton of the Ways
and Means Committee asked the
Secretary when he thought the non-
defense economy might begin Mr..
Morgenthau replied that the pros
pect the defense drive would SO
lower the unemployment rolls that