Evening star., 1942-01-25
Heovy Toxution
Versus Sterilization
BIZ ODen L. Scott

All planning in Washington now is on
the basis of war that will last at least
three years. BY that time the Govern
ment's debt will approach $200, 900 100000
and win be rising rapidly.
A debt figure Of that size is beyond
comprehension. even after the rising debt
Of New Deal years. It leads naturally to
the question Of whether the Nation Is not
on the road to bankruptcy. The Amer
ican people for q number Of years have
expected that the Germans or italians
or japanese would 60 bankrupt, thereby
making unnecessary their defeat on
battlefield.
The trouble is that these enemy ma
tions apparently refuse to blow up finan-
cially. It Is highly doubtful that, the
United States, with all Of its slack, will be
less able to stand the strain Of debt
that reaches astronomical proportions.
It too. viii refuse to 60 broke.
That raises the question Of how nations
avoid bankruptcy In financing the prepa-
ration for and then the fighting Of these
highly expensive modern wars.
An answer is found In the Government
controls that now 60 along with prepa-
ration for war and waging Of war. Gov
ernment takes control over the labor
supply and the raw material supply and
directs that labor and material into pro-
duction. 1t controls prices and output
and trade and investment, using its SOW
ereign authority to get results. Money
tends to become little more than
mechanism for carrying out the wishes
Of the Government itself.
An example of what happens can be
seen In the United States itself.
The people Of the Nation are at work
producing goods and services. That pro-
duction will yield an income In 1912 that
is being estimated at about 500, 900 .O00,-
600. This is referred to as the national
income. Normally it would be available,
in large part, for spending on things
that people want and use But this year,
with war. the Government is trying to
devote at least half of the Nations pro-
ductive effort to arms making. 1t seeks
$4,000 100000 worth of armament.
spend that income on the arms they
produce, because the arms are not for
sale. The result is that there will be
produced only $50, ,OOO, ,OOO.OO worth of
civilian goods and there will be 100000
100000. minus taxes. to spend People
will have pockets bulging with dollars
and yet will find fewer and fewer things
on which to spend their dollars. This
normally would be highly inf1ationary
situation.
But here the Federal Government steps
in again. It now is taking away $4,000
100000 in taxes. President Roosevelt Is
asking that Congress provide another
5000 900 900 In taxes to bring the total
to $25, 900 900 900. State and local govern
ments take another $4,000, ,000, 900. This
means that $35 .000, 900 900 is extracted
from the 100000, 100000 of income pro-
duced. leaving s65 600 900 900 to spend on
$4,000 900 900 worth of goods.
Sale of Defense savings bonds will take
other billions Others may be absorbed
in checking accounts that are allowed to
grow larger or in other ways. Some will
react on prices, forcing a measure of
imitation.
Essentially. however, Government is
going to limit severely the volume of the
goods that the public can buy, both by
taxing away income and by directing the
flow of raw materials, and labor into
weapons which the public cannot buy.
This limitation will mean that the stand
ard of living is going to fall back grad
ually to about the 1882 level.
In reality, it is this decline in living
standards that will represent the means
Of paying for the war
The issue then becomes: Should the
Government tax away the bulk of income
over and above that which can be spent
on available goods. or should the Govern
ment borrow a big slice of that income,
through one means or another, and then
go on paying interest on that borrowing
once the war ends? This Government is
striving to find happy medium in
answering that question.
The most conservative approach-the
one that will assure the greatest prospect
Of returning to the normal process of
capitalism after the warts to place
every emphasis on taxation. Reason is
that the alternative Is an immense debt,
and debt is going to impose very heavy
burden of interest that will force the
Government to intervene after the war
to maintain high enough rate Of oper-
alton of the economic system to permit
the servicing of the debt.
A debt of 100000, 900, 900, already
within gunshot, would cost at least
$4,000. 900, 600 annually to carry. just for
interest alone.
To manage a debt as huge as that
which apparently is going to grow out
of the present war may force the Gov
ernment to maintain many socialistic
controls that are used in wartime. Those
controls over prices and investment and
production and foreign trade will all be
in effect when the war ends and 1t will
be very easy for Government officials to
gear them to peacetime use.
As a result, the danger is not so much
that war may cause the Government to
60 bankrupt as it is that war may cause
the Government to embark, of necessity.
upon program of control over indus
try and finance and trade that will be
retained permanently. The larger the
debt, and the bigger the problem of
handling that debt, the greater the pros
pect that Government controls will be
enlarged and maintained.
In war, the problem is to center effort
on the production of weapons. The