"Something So Delicate"

Early this month President Roosevelt sent his budget to the Capitol telling Congress all he cared to tell about U. S. finances to the end of fiscal 1937. Last week, while the Senate Finance Committee was considering the Soldiers' Bonus (see above), some of its members, headed by North Carolina's supercilious Josiah William Bailey, decided they ought to hear what Secretary of the Treasury Morgenthau would have to say about the effect of paying the Bonus on U. S. finances.

Hence one day Secretary Morgenthau went to Capitol Hill to answer questions. Mr. Morgenthau was squirming in quiet discomfort.

Said he: "I wonder if the Committee would bear with me . . . because after all it is getting right down to the roots of the credit of the Government. That is. may I talk without a record being made?"

Senator Bailey: I would like. Mr. Chairman, very much to gratify the wishes of the Secretary, but public matters are public matters. . . .

Secretary Morgenthau: What I might say, if it became public property or was discussed on the floor of the Senate or the House, might have a very adverse effect on the Government's credit. . . . Senator: Do I understand you to say that your answer to my question would be such that if it were made public it would adversely affect and seriously injure the Government's credit? Secretary: What I am trying to say is it might be misinterpreted. . . . Senator: On that basis no statement could ever be made because all statements are liable to misinterpretation. . . . Senator Couzens put an end to the argument by announcing that he regarded him self perfectly free to repeat in public any facts which he hears in executive session. Then squirming Secretary Morgenthau made a clean breast of U. S. financial expectations as he saw them until the end of fiscal 1937. In so doing he completely rewrote the budget presented by the President a week earlier. Allowing $2,000,000,000 for the Bonus, $2,000,000,000 for new relief appropriations (which the President did not estimate in his figures) and assuming that in place of AAA there will be a new law that will spend as much as AAA would have, the Morgenthau budget for 1937 would compare as follows with the Roosevelt budget: (000,000 -- omitted) Roosevelt Morgenthau Ordinary Expenses . ..$2,586 $2,586 Veterans 790 2,790 Interest on Debt 805 805* Tax refunds 49 49 AAA or substitute 619 619 CCC 220 220 Emergency Expenses .. 1,103 3,103 6,172 10,172 Revenue 5,654 5,107 Net Deficit 518 5,065

The Public Debt would also be upped some four billions from the President's estimate: from $31,351,000,000 to $35,500,000,000. As for the problem of financing before the Treasury between now and July 1, 1937, Secretary Morgenthau totalled up as follows: Old securities coming

due $5,800,000,000

Loans to pay 1937

deficit 5,500,000,000

Total $11,300,000,000

After he had told all this, Mr. Morgenthau tried to explain about the Government's credit: "The thing I am trying to say is this: Since Monday a week ago I do not think anybody in the United States can say what the picture is going to be. So many things have happened that affect the Treasury that I certainly am not smart enough, and I haven't met anybody that is smart enough, who can say what is the future of the Government bond market. Now this whole question of Government credit is such a delicate thing. One day there is confidence and the people who buy bonds are with you, and then overnight something happens and they won't buy. ... I am talking about something which is so delicate that you cannot explain it. . . ."

Still persisting in his erudite inquiry, Senator Bailey pressed a hypothetical question: "If in the next 17 months the Treasury undertakes to raise $11,000,000,000 by way of selling bonds or short-term notes, and you should fail to sell them . . . what would be the effect on the economic structure of the Government?"

The Secretary of the Treasury was frank: "The minute I cannot raise the money required to finance the Government, that minute you will have complete chaos."

*This figure would undoubtedly be larger since new borrowings necessitated by the greater deficit would increase the Public Debt.

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