Forced Loans

The first serious proposal for compulsory saving--a cross between taxation and borrowing as means of financing a war--was dumped last week into the lap of a Congress already laboring with a seven-billion-dollar tax program. Senator Prentiss M. Brown of Michigan introduced the first deferred-pay bill designed to take money away from war workers now and give it back to them in the post-war slump.

Brown proposed simply that all employes of the Government and all workers in war industries be given their overtime pay (and 5% of their regular pay if they earn over $400 a month) in the form of defense bonds and savings stamps.

Although the Brown bill has considerable sentiment behind it, it has to run a gantlet of committees and perhaps face Administration opposition. Secretary Morgenthau has said he does not want to resort to compulsory savings until he has had time to see whether non-compulsory (sale of defense bonds) will supply the Government's needs. But he may come around. Defense-bond sales were $1,075,000,000 in January, $711,000,000 in February, dropped to a monthly rate of $580,000,000 in the first 23 days of March.

For months experts and pundits in Washington have argued compulsory saving pro & con. Eleanor Roosevelt trial-ballooned a scheme for deferred overtime pay, coupled with deferred corporation profits in excess of 3%. Among other proposals are plans to give a certain amount of compensating income-tax deductions to those who buy defense bonds, and simply to impose heavier social-security taxes. All have the same general object: to hold down wartime inflation--and to pump the spending power back when a post-war depression starts.

Two men get the principal credit for spotlighting forced saving: 1) Leon Henderson, OPA price fixer, talked ominously last February about the "inflationary gap." This year, said Henderson, in round figures, our spendable national income will amount to $80 billions. Only $65 billions of consumable goods (1941 prices) will be available. 2) England's urbane, puckish, innovating economist, J. M. Keynes, originally detonated the deferred-pay bombshell in November 1939. The Exchequer pooh-poohed Keynes in 1940, but put a part of his idea into the 1941-42 budget.

In lieu of cash, British wage earners subject to a withholding tax get credit up to -L-65 ($260) a year, payable after the war.

Most U.S. politicians and fiscal experts approached the forced-savings scheme with all the caution of a man sprinkling an incendiary bomb. Opinions before a Congressional committee late last summer:

>Marriner S. Eccles: "Deferred pay may be desirable [but] . . . if you are going to choose between the social security and enforced-savings plan . . . I would prefer the social security."

>Edward A. O'Neal, president, American Farm Bureau Federation: "We recommend the consideration of a plan of enforced savings."

>Noel Sargent, secretary, National Association of Manufacturers: "I do not favor the plan of forced savings, because the English plan provides that it shall be paid back from, as Mr. Keynes proposes, a capital levy after the war is over."

>Irving Fisher, Yale economist: "I do not recommend this plan, not at present at least."

>On Feb. 10 the Gallup Poll indicated that 66% of full-time employes in all occupations would welcome a 10% pay deduction to buy defense bonds and stamps.

This file is automatically generated by a robot program, so reader's discretion is required.