The Waterbury Democrat., 1942-06-04

THlSe Lile ulOuSys The only question is how?
 One theory is that this whole sum might be financed by taxation. That is, if the national income reaches $ll7 billion a year, it wouldn't be too much of thing to absorb $77 billion, or 65 per cent of 1t in taxes. This would have the advantage of holding down the na- tional debt, which is plenty big enough already. The trouble with this idea is that it might ruin g lot of businesses not considered es- sential to the war, and 1t would make the war terribly unpopular. It is therefore crossed of as politi- cal impossibility.
 The decision has apparently been made to raise only $2 4billion of the $77 billion by taxation. This years tax bill was intended to raise about $20 billion. To boost the tax revenues to $24 billion means that another $4 billion must be raised, and that's what the House Ways and Means Committee which writes the tax bills is seeing and saving about now. A guess is that $l0 bil- lion of the $24 billion total will come from direct taxes, and $l4 billion from indirect taxes.
 Subtract that $24 billion of taxes from the $77 billion to be spent and you get $53 billion, which is the amount of additional money to be begged, borrowed or stolen if the munitions makers are not to be paid off in printing press IOU's. Of this $53 billion, about $l0 billion can be accounted for. An increase in So- cial security deductions is planned, to raise an additional g billion or a total of s5 billion year. Then about $5 billion more, to make the $l0 billion, can be raised by sales of government securities to insurance companies and savings banks.
 LOOK OUT
 That leaves $43 billion still to be raised. If all that $43 billion IS raised by borrowing from the banks, look out for imitation. That means simply putting lot more money in circulation. It would mean price controls would have to be expanded, overall rationing might have to be applied, the avoidance of an exten- sive bootleg or black market would be practically impossible and ra- tioning and price fixing would have to be continued after the war is over.
 The only solution. therefore, would seem to be some plan of borrowing this $43 billion directly from the people, taking 1t out of their in- come and so reducing their sperld- ing power.
 Take a look at the picture from the income side of the ledger. The generally accepted figure on na- tional income for the next fiscal year is $li7 billion. Subtract from that the $iO billion of direct taxes to be levied, and you get net in- come figure of $107 billion.
 It is estimated that the amount of civilian goods available for pur- chase this next year-food. clothing. shelter. furniture, ainusements and so on--will be around $70 billion. Subtract that from your $lO7 bil- lion and you have g remainder of $37 billion. This is excess spending power. or the so-called inflationary gap. If this $37 billion could be ap- piled to financing the war. it would be necessary to borrow only $6 bile lion more from the banks.
 TRICK
 Getting this $37 billion out of cir- culation by enforced saving is the trick that has to be performed. somehow. Sales of war bonds and stamps are running at only about $5 billion year. Multiplying that seven and a half times by voluntary subscriptions seems out of the ques- ton.
 If this s37 billion can be saved by individuals the danger of imitation might disappear and the need for price controls might go with 1t. To do this, 1t would be necessary to re- strict the redemption provisions on the bonds so they could not be turned in for cash during the war. After the war, it is figured the bonds might be paid of by refunding the public debt. the idea being that the debt could be retired by maintaing war taxes on 8 postwar basis. This analysis, worked out by a high-ranklng government economist, is presented here as the simplest possible explanation of the govern | Am-. Al A.