Detroit evening times., 1945-07-28
Low INTEREST RATE

Low INTEREST RATE
The statistician concluded that
IN diseouraging savings through
advocating low interest rates and
in suggesting monetary manipula-
tion, connected with government
deficit spending. as an alternative
10 bona fide savings, the Keynes
doctrine was softening up Amerl-
cans. and, if long continued, would
threaten our leadership resulting
from superior tools.
In the circumstances. the audit
OF the theory of deficit spending
IN the learned review of economic
statistics, Harvard product, is
especially significant. 1t comes at
time when Senator Byrd of Vir-
ginia. as chairman of the Joint
committee on noneSSential federal
expenditures. has been urging
President Truman 10 reduce fed
eral deficits through economy. in
administration. In some details,
Mr.. Truman has already accepted
this advice.
COMMON SENSE
For at least generation. this
fiscal problem will be with US as
the treasury manages the largest
federal debt in history. The debt
can be reduced only through re-
versing policy and converting defi-
cts into surpluses. This common
sense procedure will be opposed If
mems minds are confused by the
seductive theory that deficit
spending is greatly TO be desired.
In carefully examining the sta
tistics of federal budgets during
The years Of deficits. Clark War
burton. in the Harvard publica-
ton. concludes that the Keynes
Hansen deficit spending theory
has proven a dud.
Warburton's finding is that
there has resulted merely shift
Of purchasing power from indlvid-
ual citizens TO government.
There is, however" he de-
clares. mo evidence that gov
ernment deficit spending has
accelerated the rate of use Of
money as result Of taking IL
out of idle boards and activat-
ing IT,"
REPRESENTS MONEY
Continuing, he adds:
stated In another way, defi-
cit spending by government and
business met by borrowing from
nonbanking sources, together
with business financing by
equity capital. represents money
drawn from the pre-existing in
come stream. Such financing,
like taxation, transfers the use
~ money for expenditures on
final products. from individuals
90 business or to government.
and cannot alter the sire OF
the income stream except ss the
process Of transfer may retsrd
or activate the rate of use OF
money"
IN relating his findings 10
pohCy-maklng in the coming tran
Sitional period especially after
the economies which victory over
Japan can unloose, Warburton
sums up:
Maintenance Of high ma
tional income, and with IL
high level of employment, IL not
dependent upon government
spending-either pump priming,
compensatory. or permanent
nor upon continuance OF gov
eminent deficit nor compen-
satory deficit.
"On the contrary, the govern
ment debt can he retired at a
rapid rate without detriment 10
prosperity, provided that such
retirement - not accompanied
nv monetary contraction or
some other form OF monetary
Encouragement"
Warburton's findings expressed
IN terms Of personalities sup
ports the position Of Senator
Byrd, and refutes not only the
argument Qf Mariner 8. EccleS,
chairman oi the Federal Reserve
Board, who advocates compenSa-
tory government spending. but
also that % the Keynes. Hansen
school Of, theorists. When poll
ifcians> put the pageantry Of gov
ernment behind mere theories
such theories become practice
factors in the advancement or
retsrdsUon. ~ the case may he
~ fho material WclIbf frc ~ the