Bonus-Burst

Almost overnight last week a little, suppressed idea burst upon the nation as a full-fledged legislative movement. The little idea: that the U. S. pay its World War Veterans their adjusted-compensation certificates (commonly called "The Bonus") in cash, and NOW.

The little idea had flashed across some veteran's brain last summer. He passed it on; presently it was advocated by a large minority of the American Legion, on these counts: 1) the Government did not issue almost unnegotiable certificates to the railroads and contractors for their War losses; 2) it would put new, Depression-raising cash into circulation. Investigation disclosed these facts: certificates of $3,400,000,000 face value have been issued to 3,680,704 veterans since 1925. Today they are worth 52% of their face value. Veterans can borrow 22% of that value from banks or the U. S. In the Federal sinking fund for their retirement is only some $625,000,000. To pay them off at this time would necessitate a bond issue of about $2,775,000,000 (TIME, Dec. 8). For these or other reasons the American Legion did not, at its autumn meeting, vote to support the idea.

But bills legislating it had been presented in Congress meanwhile. A bill drawn by Representative Wright Patman of Texas went into the House Ways & Means Committee, gathered dust there. Under the rules, no method of getting it out was possible except: 1) to have the committee formally report it out, or 2) to have the 218 Representatives sign a petition forcing it to the House floor. Mr. Patman circulated such a petition, failed by some 75 signatures to obtain his end. Many a Congressman who disapproved of the bill, afraid of the veterans' vote if he had to oppose it, was glad the committeemen had held it inactive. Chief grounds for committee's inaction: lack of American Legion support.

Then, fortnight ago, the American Legion reversed its stand and came plumping out for the bill (TIME, Feb. 2). Forthwith Mr. Patman got some more signatures. Also a storm of counter and compromise proposals burst in both House and Senate. Three proposals stood out: 1) to pay the present value; 2) to pay the present value plus 25%; 3) to increase the present loan or collateral value up to 50% of the face value.

The Administration quite obviously was frightened. Secretary Mellon was "glad" to appear before the Senate Finance Committee. He declared: "Without qualification . . . the Treasury Department could not sell $3,400,000,000 of bonds at the present time except on terms which it would be very hard to justify." He warned that such sale would "disorganize the Government and other security markets."

Bankers and businessmen swarmed to support Secretary Mellon. They contended that the proposal to put extra cash in circulation was unsound economics inasmuch as it was unknown if and how the money would be spent. They also warned that the extra burden of the payment in taxes and depressed prices, particularly with the Government facing a deficit, would fall hardest of all on Veteran Jim Jobless. While the argument went on, domestic bond-prices dropped about $12 and Government 4 1/2s dropped $27 per $1,000 bond. Agitators for the cash Bonus cried: "Manipulation!" Bankers, really worried, looked glum.

Puzzled Congressmen were therefore in a dilemma--between the veterans and the financiers. They seemed most likely last week to take the compromise measure, that of increasing the loan value of the certificates.

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