Evening star., 1946-06-09
Urges Special Fund
For Foreign Loans
Writer Frowns on Using Taxes
In Aid of Borrowers
By Raymond Molev.

VIlteI TToWnS Oh Using axes
In Aid of Borrowers
By Raymond Moley.
Favorable prospects for balanced
Federal budget are still obscured by .
great cloud of present and potential
loans to needy countries abroad This
unprecedented financial situation should
call for unprecedented budgetary ar
rangements. For a most unrealistic
picture will be created, If we try to take
such loans out of our current income.
AS early as October, 1s45. it became
evident to any one who looked below
the surface that prospects for a bal
anced budget were bright. The Tru-
man message in January justified these
hopes. In two or three months of this
year there was practically no deficit
spending. In fact, large cash reserves
have made it possible to reduce the
national debt by something over $780,
100000.
1t is not impossible to suggest that
in year the national debt may be as
low as $3.50, 900, 100000, if surplus goods
and other assets are handled with rea-
sonable efficiency. 1t might be possible
to envisage even less total Indebtedness
if various double accountings are taken
into consideration. And If we should
deduct United States Bonds held by
United States agencies, our net debt
might be reckoned at not much over
S200,00 100000
Our potential obligations for loans
abroad are still large and not very clear.
In January of this year, the total
estimated needs for the International
Bank, the International Fund, the Ex-
port-Import Bank and other payments,
including the United Nations Relief and
Rehabilitation Administration, were es-
timated at SIT ,o0o, ,000, 900 to be spread
over five or six years. Since then, it has
become clear that this estimate was too
low. The fact is that if we make due
allowance for loans already under
negotiation or in prospect, the amount
needed in five years will be nearer
$4,000 100000.
Some of these payments will be out
right gifts. This is true Of UNRRk
payments, advances for the needs OF
Germany and Japan and similar relief
Another class of payments will be
normal loans, with good prospects OF
interest. third type of payment will
be for loans with interest payments
contingent upon trade balances. These
are waiver" loans, such as those to
Britain and France.
1t is Washington's budgetary practice
to consider all foreign payments as
expenditures. In the first budget es-
Inmates this year, such payments were
listed as international finance" and
were reckoned at 50 500 900 ,00o In future
years, foreign payments will be higher
Senator Alben Barkley has said that in
l8 months something like $4,000, 900, 900
will be necessary
1t is serious and debatable question
whether such payments should be
treated as current expenditures, to be
paid out Of current revenues from taxa
tion. These amounts are, in reality. used
/ to buy future claims. Businessmen would
not reckon such loans as current spend
ing. They do not normally take them
out of business income. Then why should
we tax our citizens for loans to poten-
TALLY wealthy countries like Holland?
II we follow our present practice, are We
not likely to regard these payments as
water over the dam and relax our efforts
TO collect interest and principal7
The administration and Congress
might we'll consider the creation OF q
special account, set apart in the annual
budget, for real foreign loans The
money necessary to meet these items
might be borrowed through special bond
issues from the banks. The money now
issued from current income to meet
these needs could be applied to reduc-
ton of the national debt. The interest
at which the loan money could be
borrowed might we'll be good yardstick
for Congress to use as means Of judging
how American financial institutions
regarded such loans.
This idea of a special account differs
from the Roosevelt idea of setting up .
separate account of money invested in
public works as assets. The trouble
with that idea, long advocated by New
Dealers, was that most of what they
wanted to call assets were really liabil-
tiles. A nonproductive public road or
a park is not on a par with loan to
a responsible foreign nation, even though
in the latter case there is an undeniable
risk.
In any event, taxes should cover only
regular Government expenses, interest
and debt retirement They should not