Over the Top

Two figures of a BILLION DOLLARS

made big black headlines in the news last week. One was the size of the Treasury deficit. The other was the amount of soldier Bonus loans. Though their connection was indirect, they went over the top into ten figures within a few hours of each other.

Under the new 50% loan law, Bonus payments reached $1,090,137,402 and more by Memorial Day. Out of every two soldiers in the Wartime army (1,959,000) one and a fraction had borrowed on their certificates. According to a survey made for President Hoover, 60%, of the loans had been used to pay off overdue bills for rent, groceries and things bought on the instalment plan. Another 15%, had gone into second-hand automobiles. What was described as a "small percentage" had been squandered on fun. President Hoover could not see where the loans had stimulated business as Bonus advocates in Congress predicted they would. Payment of old debts, he reasoned, does not create a demand for new goods. Secondhand car sales do not accelerate new motor production.

At the end of April, Bonus loan application slacked off to 12,000 per week. Veterans' Administrator Hines then announced: "The job's about done." He estimated the total outlay at $1,050,000,-ooo. During May, however, there was a new and sudden spurt of loan applications. Last week they were pouring in again, at the rate of 35,000 per week. Best explanation for the new spurt was that, whereas needy veterans constituted the first big rush for loans, those employed and not in need were now coming forward to borrow while the Government's offer still stood. Last week's revised estimate of the final Bonus cost: $1,500,000,000. Loan payments have now exceeded the Bonus reserve fund which since 1925 Congress has been building up in the Treasury at an average rate of $112,000,000 per year. This fund totalled $934,000,000, including a $112,000,000 appropriation which Congress advanced from next year to this. The part which Bonus loans play in the deficit is limited to this $112,000,000 out of current receipts plus the excess of the outlay over the reserve fund--about $156,000,000. The Treasury deficit last week reached $1,000,792,430. Before the end of the fiscal year (June 30) it was expected to rise to about $1,400,000,000. Tax receipts and foreign debt payments due June 15, according to Treasury estimates, will cut it back by about $370,000,000, still leaving the total above the billion-dollar mark, a peacetime record. One Government outlay that did not go over the top was that for Drought relief. Of the $67,000,000 appropriated by Congress, some 400,000 individual farmers had received $47,064,319 up to last week. Arkansas led with $9,292,000. The Department of Agriculture appealed to the Department of Justice for legal help because in some cases a farmer's creditor has tried to seize his seed loan while it lay on deposit in his bank. Last week the Treasury was astir with plans and proposals for handling a deficit which threatened to repeat itself next year. Secretary Mellon announced an $800,000,000 18-year bond issue at 3 1/8%. Its size was the largest, its interest rate the lowest since the War. The purpose of this long-term issue was less to give the Government more operating cash than it was to pay off $589,314,000 in short-term debts due June 15. By pumping its present obligations into the future, the Treasury was in a better position to finance the Deficit with more brief borrowings. About Washington also buzzed talk of new and heavier taxation to be imposed at the next session of Congress. Secretary Mellon was supposed to be considering a 1-c- per gal. Federal gasoline tax which would net the Treasury $400,000,000. Automobile associations, and State tax authorities who now have a monopoly on this levy, protested loudly. Suggestions from Chairman Will Wood of the House Appropriations Committee that a general sales tax be inaugurated sent department store owners into a frenzy of apprehension. Other proposals included an increase in the inheritance tax, and revival of the old gift and automobile sales taxes. Opposed as ever to tax legislation at the next session was President Hoover who was politician enough to know that any such increase would be a back-breaking handicap for him in his 1932 campaign for reelection. He continued to hope, half out loud, for Better Times as the surest form of fiscal relief.

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