Evening star., 1944-09-10
More Debt, Not Less,
May Be Nations S Lot
Writer Sees Danger in Idea
of Borrowed Prosperity
Bp O1Uen L. Scott.

By OUen L. Scott.
Any one who expects that an effort
will be made after this war to pay of
part Of the Nations huge national debt
is due for a rude shock. Investigation
discloses that all postwar tax plans,
both in Congress and among business
groups, contemplate no more than a
balanced budget and not one that will
yield surplus out of which debt can
be retired.
As matter of fact, tax planners out
side Of the Government are figuring on
taxes far lower than will be needed even
to balance the probable postwar budget.
They allbase their plans upon budget
OF $4,000 900 900 and a national in
come out of which taxes will be drawn
at level higher than is likely to pre-
vail. Actually on the basis OF commit
ments made and being made, plus the
cost OF an Army and Navy, a budget of
$25 900, 100000 is more probable after
the war than the one which the plan
ners hope to balance.
The result is that the United States
might go on adding to debt after the
war rather than reducing debt. That
prospect is very real one unless a
way can be found to assure a high level
Of postwar prosperity.
-
A prospect of a continued rise in post
war national debt can be serious. It is
to be no simple matter to manage a
debt of at least $26O,00 00O,o 900 in any
other period than one of real prosperity.
Interest charges alone will approach
$6,0 600 100000 a year, or one third of the
budget that the planners foresee. There
always will be the real threat that
Government might have to undertake
some unorthodox measures to deal with
the situation, If owners of the Govern
ment debt ever decided to sell that debt
all of sudden.
The American people in the midst
OF war and Of a rising national income,
due in important part to the rising debt,
have been bIssfully unaware of the
rapid growth of that debt There never
has been anything quite like it.
The British in five years of war have
seen their debt rise from about $685.
600 100000 TAT s4 to the pound in 1899
to what now is about s81 900 900 900 and
what will be ss3 900 100000 by mid-1s45.
That Is an increase Of less than three
times. The United States in that same
period will have run this Nations debt
from SAC, 900 600 900 up to s2o2, 900 900 900
at present and to about $3.50 900 900 900
by the middle of 1945.
That Is an increase for this country
OF about six times. 1t puts the United
States IN the same class with those ma
tlons whose debt is constant national
worry and one that permits relatively
little in the way Of experiment. Even
the New Dealers now advise that the
debt Is SO large that it will require
careful management to avoid danger.
War is to leave the United States in
the class of nations with a real debt
problem.
In fact, the growth of debt in this
country has been far more rapid than in
almost any other major nation, unless
it is Germany, that has participated in
the present war. There are several rea-
sons for this fact.
One is that the British from the start
Of war in 1889 taxed heavily SO that in
five years Of war financing they man
aged to get by with a debt increase Of
not much more than $4,000 600, 900.
This country in two-and-one-half years
OF war increased its debt by more than
$150, 900 100000
Another reason for the much more
rapid increase in American debt is found
IN lease-lend. This country has spent
about $50, 900 ,000,O 900 on goods and serv-
ices which it provided to other coun-
tries. 1t enabled the British. for ex-
ample, to avoid further debt increase
of at least $4,000 900 900.
The official attitude is that the debt it
self, even if it should reach $500, 900 ,0OO,-
600 for the United States, is not matter
of much worry. If a way can be found to
maintain high enough level of national
income to permit payment of interest on
that debt without strain. Almost no Of
f1cial looks forward to any important
volume Of debt retirement in the fu-
ture, with great point made Of the fact
that Great Britain has much OF her
debt in bonds that never mature
Danger comes from debt in period of
depression and Of contracting incomes.
1t Is then that greater and greater
portion of the national income must be
spent in paying interest to the owners
OF the debt. Taxpayers, who may not be
bondholders, become irritated at the tax
burden they must bear out of their lower
incomes.
The net effect Of huge debt is to
make it necessary for the Government
to take an interest In maintaining a ma
tional income large enough to permit
service on the debt and payment of
other Government expenses, without i'm
posing too great a burden on peacetime
taxpayers. Yet under New Deal theory.
the way to maintain high level of ma
tional income is to add further to ma
tfonal debt. The prevailing theory calls
Tor an unbalanced budget and more Dor.
rowing If necessary to keep income high.
More borrowing when debt is as large
as it will be after this war can become
dangerous, however, because it might
frighten holders of the Governments
securities and lead to run away from
those securities That kind of a run
could have all kinds of repercussions,
none of them pleasant This means that