Evening star., 1953-04-18
New PubIic-Debt Policy

Secretary of the Treasury Humphrey has
made thoroughly effective reply to the nine
senators who expressed such alarmiSt criticism
of the Treasury's new billion-dollar higher
interest bond issue.
In the opinion of this group, which included
eight Democrats and Senator Morse, the 3O-year
borrowing at 3H per cent interest-the longest
term issue since 1945 and the highest rate
offered by the Government in 20 years-is
forerunner of economic catastrophe. Such a
fiscal policy, they proclaimed In unrestrained
fashion, is "draSticaly dedationary" and "smacks
of the Mellon-Hoover era" They urged public
debate of such drastic change in fiscal
policy" with assurances that these funda-
mental decisions on Government financing are
not being made "by few self-interested men
in privacy" Senator Morse, not content with
the joint statement, added his own postscript
by terming the new policy shocking, uncon-
scionable" and "the kind of reactionary pro-
gram we can expect from the Eisenhower
administration"
There is little doubt that there is a de-
hationary quality in long-term Government
financing at this interest rate as opposed to the
Short-term easy-money policies of recent ad-
miniStrationS. Other interest rates may harden.
In fact, there had been signs this was happen
ing anyway, To conclude, however, that this
automatically and Immediately guarantees a
climate for depression and all the other awe
some potentialitieS foreseen by the critics is
highly questionable.
While there has been dollar prosperity in
recent years, there has also been an imitation
that materially reduced the true values in this
prosperity. Past policies of concentrating Gov
ernment Short-term low-intereSt debt in the
hands of the banks contributed much to that
inflationary spiral by making cheap money"
easily available. If balance could be struck,
it very likely would be found that the Saving"
to the taxpayer through this low-cost Govern
ment borrowing has been much more than
offset by the chain of inflationary effects which
have accompanied such practice. Secretary
Humphrey estimates that it has cost the Anneri-
can people-as distinct from the Treasury De-
partment- billions of dollars. His concern now,
and it is proper first concern, is to lessen this
real cost and to check the disorganizing impact
of imitation. With $264-billion debt of varying
maturities and interest rates outstanding, it is
indeed premature to consider $1-billion re-
funding operation on longer term and at
higher rates as "draStically defiationary"
Actually, there have been no solid signs
yet of deflation or of business recession. Mr..
Humphrey points out that cost Of living is still
near its postwar peak despite few recent
price declines, and that employment Is higher
than ever before. Professor Burns, economic
adviser to the President estimates that ma
tional output and income for the first three
months of this year hit a new all-time high.
The threats" of peace in Korea and of economy
in Government have introduced some uncer-
tainty in industrial planning and some nervous
nous in the securities markets. No national
economy follows an unbroken course upward,
or dow1ward. 1t would be mark Of little