How Many Dimes?

Since the defense program started last June, one of the biggest problems has been how to foot the bill. All told, the U. S. will spend some $35 billion (including the $7 billion appropriated this week) for Britain and defense in the next two years. In the form of $1 bills laid end to end, $35 billion would stretch 900 times the distance from the White House to No. 10 Downing Street. Where is the money coming from?

U. S. Treasury hirelings have been hard at work on defense financing schemes for months. Last week a few details of what will be the biggest money drive in history leaked out. With one hand, the Treasury will hike taxes again (see p. 16). With the other, it will sell bonds. Bonds have long been the Treasury's chief method of deficit financing. But it figures that corporations, which used to buy Government bonds, now need their excess funds for defense expansion. Treasury issues which used to be oversubscribed 10-14 times now are oversubscribed only 2-4 times. So the Treasury will now raise its money from the general public. Slower and more costly than selling in large chunks, peddling bonds to citizens has one big advantage: it will hold down price inflation by draining off consumers' funds.

Model for the new bond campaign is the Liberty Bond drives of World War I, when the U. S. raised a spectacular $21,439,000,000 in 24 months. But some tricks of World War I's drives will be pointedly omitted. This time no church bells will toll as a "dirge for slackers"; no "four-minute men" will yell at pedestrians through megaphones; no persistent Boy Scouts will push doorbells; no grisly posters will scare moppets. This time the Treasury will avoid high-pressure salesmanship, lure savings by a simple but fast-moving patriotic appeal. Some details:

> Bonds will be plugged by radio, newspapers, magazines, a staff of trained speakers, posters (first year's promotion cost: $1,500,000). Already submitted is a poster designed from Sculptor Daniel Chester French's statue "Minute Men."

> By purchasing 10-c- "Buy for Defense" stamps, even school children can help. These stamps will be sold in 55,000 post offices, 200,000 banks, drugstores, schools and churches. When the buyer has saved $18.75 in stamps, he can exchange them for a baby bond worth $25 in ten years.

> More prosperous investors will be offered other types of bonds. One suggestion: income bonds running from $100 to $10,000 face value, bearing semi-annual interest coupons. A novel sliding-scale redemption scheme would discourage selling before maturity. Another possibility is appreciation bonds to be sold on a discount basis (like baby bonds), to yield 2.4% if held for twelve years (baby bonds yield 2.9% in ten years).

> The Treasury will set no maximum on the amount of stamps and bonds to be sold. But at least $6 billion will be offered soon, probably by May 1. Sale of this amount seems assured: deposits in all banks (on which little or no interest is now earned) are over $60 billion.

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