Debt

On Aug. 31, 1919, the people of the U. S. owed more money than ever before or since in their history--$26,596,701,648.01. On Dec. 31, 1927, they owed less than at any time since 1919--$18,036,352,451.81. This reduction of eight and one-half billions may be credited about proportionately to Secretary Andrew Mellon and his immediate predecessors, Carter Glass and David F. Houston. Each in his time brought the burden down at the rate of a billion per year.

Last week's announcement by the Treasury showed that the reduction in 1927 was $1,038,312,886.54. Interest on this retired sum was at about 4%. Hence in 1928 all the people of the U. S. will pay some of the people of the U. S.* about 40 millions less than in 1927. When they see figures like this, taxpayers cease yearning for immediate tax reduction. Debt reduction is permanent tax reduction. Last year, 51-c- of the U. S. taxpayer's dollar went to retire or pay interest on the public debt.

In a country with 120 million people, interest at 4% on an 18-billion dollar public debt is $6 per citizen per year. With interest at 4%, billion-per-annum reduction of the debt means easing the public burden 34 cents per capita per annum. In practice, the annual burden per capita is being reduced more swiftly than that because when an astute Secretary runs the Treasury, he refunds the debt at lower rates as he goes along. Therein lies the banker's art, to buy in 4 1/4% Second Liberty Loan with $400,000,000 of borrowed money for which you only pay 3 1/8%, as Secretary Mellon did last year. This year, the 4 1/4% Third Liberty Loan will occupy Secretary Mellon's attention. It matures on Sept. 15. Last week, Secretary Mellon offered 3 1/2% Treasury Notes in exchange for the $2,147,000,000 Third Liberties outstanding.

Shrewd though modern debt and interest reductions have been, no Secretary of the Treasury will soon surpass the feats of little-remembered Secretary Benjamin Helm Bristow who, despite the panic of 1873 and with 5% and 7% Civil War loans outstanding, negotiated fresh loans in 1874 at 3% and refunded part of the debt at 4%.

*U. S. securities are mostly held by U. S. banks, businesses, citizens.