Evening star., 1946-12-29
Debt Study Has
Hopeful Note
High National Income,
Low Interest Rate
Are Reasons
By William d. Horgan

NEW YORK.-The Committee on
Public Debt Policy has sounded
note of optimism in the face OF wide
spread gloomy comment on the huge I,
national debt total.
The amount of the interest
charges on the debt, in relation to
the size of the debt, is in some ways
"the first encouraging evidence we
have found in our examination OF
the national debt" the committee
said.
The committee, headed by w. Ran
dolph Burgess, vice chairman of the
National City Bank. reached this
conclusion in the first of series Of
studies on various phases of the
debt.
| In a survey written by the late
Leonard P. Ayres, economist and at
his death vice president OF the
Cleveland Trust Co., the following
argument was offered:
I'm spite of having debt 100
times the size of the Civil War debt
and 10 times the size of the debt OF
World War I, interest paymens, in
terms of the national income, are
today only about 81 per cent larger
than those after the Civil War.
National Income High.
There are two reasons. First, the
national income is very high, part
of it rejecting price imitation, but
part also because of the great in
crease in the production and distri-
button of goods. The national in
come today is over 100 billions
year, as compared with 81 billions
Just after World War I.
THE second reason why the in
terest burden is no larger is that
interest rates are loW-the lowest, in
fact, ever experienced in this or any
other country"
President Truman has said that
in the current fiscal year the Gov
ernment will pay ,00o,oo0.0OO in
debt charges.
The survey charted the fall in in
terest rates on Federal debt from
the 6 per cent paid at the time OF
the Civil War to the 2.25 per cent or
so prevailing at the start OF World
War I. After the first war the rate
climbed above per cent in 1920,
then started the long slide to the
record per cent or less now current.
The report, terming it "extraordi-
nary" that at the time of its great
est need for money, the Government
was able to borrow at record low,
found one reason in monetary man
agement but noted that:
In the process of keeping the
rates low, the FederaD Reserve
System has had to pump out money
into the spending stream, and thus
has itself built the substance of in
fation at the source.
Fifth Debt for War.
There is also the question wheth-
er at these lower rates the Treasury
has been able to sell as many bonds
to investors as it could have at
higher rates and hence whether the
amounts taken by the banks and
Federal Reserve System have not
been larger than necessary"
Summarizing its observations, the
report said:
Five times in this Nations history
we have incurred great national
debts-all of them to france wars.
Each time Government war spend
| ing and borrowing have given us
price imitation, followed in each case
up to the present by painful defla-
ton.
The inflationary forces in World
War II have been greater than ever
before as the war spending and the
increase in the Government debt
has been on a wholly unprecedented
scale, both in dollars and in relation
to our population and its income.
So far the actual price imitation
has been less than it WAS after World
War I, but prices are still rising;
Imitation is still under way.
Throughout our history the great
lest obstacles to national financial
strength, and the most acute
dangers of fiscal collapse, have never
been the results of inadequate or
failing resources, but always conse-
quences of weak financial policies.
Increasing national wealth has ale
ways enabled us to pay down the
public debt resulting from war
expenditures.
distributed by the Associated PressJ