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EXECUTIVE OFFICE OF THE PRESIDENT
NATIONAL RESOURCES PLANNING BOARD
WASHINGTON. D. C.

APR 1 71943
Mr. Marriner S. Eccles
Chairman, Board of Governors
Federal Reserve System
Room 2046, Federal Reserve Building
Washington, D. C.
Dear Mr. Secies:
At the request of the National Resources Planning
Board, Mr. David McCord Wright of the University of
Virginia, prepared a brief statement concerning the
burden of the national debt. It was the Board's thought
that this document might be a useful publication in the
pamphlet series, "After the War". The Board also felt
that it might lend some further understanding to the
problem of war finance. I should appreciate your judgment
on two questions: (l) Is this the type of document which
the Board should publish and (2) do you have any general
or specific suggestions in regard to the document, if it
should be decided that such a pamphlet should be issued?
Sincerely yours,

Thomas C. Blaisdell, Jr.
Assistant Director

Enclosure




EXECUTIVE OFFICE OF THE PRESIDENT
NATIONAL RESOURCES PLANNING BOARD
WASHINGTON. D. C.

Mr. Marriner S. Fccles
Chairman, Board of Governors
Federal Reserve System
Room 2046, Federal Reserve Building
Washington, D. C,

»DD
A r n

Dear Mr. Eccles:
I have just reread my previous note to you
regarding Dr. Wright's manuscript entitled, "What
About the National Debt?11 I regret that I did not
make sufficiently clear the fact that the document
in its present form is little more than a first
draft. In fairness to Dr. Wright, this should " e
b
taken into account when giving me your judgment.
Sincerely yours,

Thomas C. Blaisdell, Jr.
Assistant Director

APR 15 1343
CONFIDENTIAL

c

WHAT ABOUT TEE NATIONAL DEBT?

"Can we pay our present and prospective National De"bt or even the interest
on it?

Can wo "bear, without impoverishment as a people, the burden of our

present or future necessary taxation?

These are questions which the continuance

of the war and the exigencies of the time continually call UTD in the hearts ,..
of multitudes of our people."

Not from yesterday's news"oaper "but from a

T»arohlet written in 1864 come these sentences.

Yet everyone must feel how they

echo the misgivings of many Americans today.
Eighteen hundred and sixty-four WP.B a far gloomier year for the government
of the

TT

nited States than any the present crisis has yet "brought to us.

military victory was still in doubt.

The public debt was soaring.

widespread distrust of the solvency of the Federal Government.
spirit was rampant.

Final

There was

A defeatist

Under these circumstances a young New Englander, David

A. Wells, later a member of Lincoln's and Grant's administrations, set himself
the task of reassuring his fellow countrymen concerning the National Debt,
'•/ells- did not make much resort to the flowery rhetoric of his day.

He appealed,

instead, to but two facts! The productive wealth of the United States, and
the burden which other countries had successfully borne.

From a statistical
,

study of these he was able to make encoura.ging predictions which, though
considered optimistic at the tire, later generations have seen amply fulfilled.
It is from his work that the opening sentences are taken.

. \ •

Today although public credit is unshaken, and although sacrifices called
for go far have-been relatively small compared to, those demanded by the
North and South, we still find, as in earlier times., a widespread fear of the
consequences of the National Debt.




Of all the problems raised by the war

that of debt has probably most captured the attention of the majority of
people.
It is of course a good thins;, and & sign of the vitality of our democratic
institutions, that the issue should "be discussed so widely.

But the problem

is too important to he dealt with hastily, or with partisan "bias.

It must "be

faced not merely for its own sake, "but also "because there are other problems,
more difficult and perhaps more important, which ought also to " e receiving
b
their share of attention.

Let us, therefore, set ourselves soberly and

seriously, and in as non-controvcrsia.l a manner as possible, to examine the
,
question of the National Debt,
We may begin our task by summarizing the basic principles regarding debt
in. general vrhich a,re admitted by practically all writers.

The special problems

of the national Debt are only a part of a larger problem, the problem of debt
as a whole.
.

They must be viewed together and in relation to national wealth

and income.

Having obtained some background concerning the general problem

of debt we may then discuss the National Debt.
What has it been in the past?

- T a exactly is its burden?
'ht

What are the reasonable prospect-s for the future?

How does it compare with the debts of other countries?

o

Debt, Credit and Production
Though we seldom stop to think of it that way, practically all students of
modern society are agreed that the production of wealth and the production of
debt a.re so closely interconnected today as to be practically inseparable.
Hew concerns, of any size, are almost always commenced on borrowed money.
Sometimes the necessa.ry funds are obtained by selling stock a.nd sometimes by




o

c

-3selling bonds, still more often "by a combination of "both methods.

But while

there are many important d.iffercnces between the two methods, one common
point remains:

The creation of a money 61aim against wealth is ?n almost

inevitable part of new investment.

?Ven though money "be not borrowed, accountant/ <
,

in setting up the "books of a new venture, must make a debit charge against its
assets.
Where, then, d.oes the money come from to make these loans and investments?
The primary source is found in the savings of "business units a.nd of the people.
Each year, each month, each day, a certain amount of money is set aside to be
invested, either directly or through the banks and other corporations.

To the

extent that this process is successful, it inevitably leads to more debt
crea.tion.

A bank deposit is a debt owed by the bank to its depositors.

bond is a debt owed by a corporation to the "bondholder.

A

A share of stock is a

claim of the stockholder against the a.ssets and ea.rnings of a corpora.tion.
One thing will be a.dmitted by practically all economists: Unless the flow
of money currently put aside for saving is lent out again or matched by an
equivalent amount of investment -.debt, deflation and unemployment are inevitable
Money cannot be drained out of the economy without causing disturbance.

This is

no more than common sense.
There is another point.

As our enormously productive machine civilization

constantly increases its output, the amount of purchasing power in existence
must increase or prices will fall.

Because of the difficulty of adjusting

profits .and wages to such a price decline, many, if not most, economists
,
feel that as output expands the money supply must also be permitted to grow.
For this rea.son they advocate increases in bank credit.




It was, indeed, to

help keen the amount of credit and the amount of production in approximate
balance that the Federal Reserve System was first founded.' Yet, after all,
what is an increase in bank credit?

It is an increase in bank lending -

in other words an increase in debt.
Increased production, then, almost inevitably reflects itself in increased
debt.

Nine—tenths of the monetary purchasing power of the country is held

in the form of ba.nk deposits which are debts.

Und.er our system monetary
to

purchasing power can receive no irportant increase! except through more bank
lending - more debt.

The history of increased production and increased wealth

in the United Sta.tes is largely the history of increased debt.
the two a.re opposite sides of the same shield.

In most cases

As Professor Graham of Princeton

writes, "If instead of asserting that credit is the life of trade we should
assert that debt is, the one statement would be § § true as the other though
__
the latter does not sound, quite so convincing."

To sum up; Unless purchasing

power currently nut aside is re-invested, that is to say, used, to create more
debt, the industrial machine will break down in its tracks.

Unless the

quantity of credit is increased as real wealth rises, that is, unless debt

is increased, disturbing price reductions must occur.
and debt go hand in hand.

A
r
istuJ?
Investment, wealth,

One seldom exists without the other.

A
Liquidating Debt
. "hat-ha.s just been said may seem paradoxical to many peo-ole.

"If," they

ask:; "you say that nearly all wealth is created in the form of d.ebt, ho^ can
this debt ever be repaid?"

Such a question is perfectly natural, but to answer

•it one hr.s to make another statement, which,, though it must be concurred in




c

by all economists, however conservative or radical, will probably appear even
more striking than what has gone "before.

The total of debts as a whole can

never be repaid without causing a collapse.
But it may well be objected, "Debt cannot be repaid?

What nonsense!

If

I borrow.from my bank I have to repay, and my repayment doesn't cause a
collapse."

Very true - but before giving up in disgust, let us try to see

what is meant by the repayment of debt as a whole.

It is indeed correct that

you and I, Bill Smith and Joe Brown, the X Corporation and the Y Corporation,
may repay our debts without causing a collapse.
,

But all the Smiths and Browns,

all the people and corporations in the United States cannot repay their debts,
at the same time, without blowing up the whole economic system.
example millions of people tried to draw out their bank deposits.
. say they tried to collect debts owed them by the banks.

In 1933 for
That is to

To meet these obliga-

tions the bajiks in turn ha.d to cash in on their assets - the debts owed them
by borrowers.

The result was an attenrot to make a general debt collection.

A ruinous scramble ensued in which all banks and businesses were engulfed and
a banking holiday became essential,
In ordinary times when Bill Smith pays back his loan, Joe Brown takes
out another.

While some borrowers are repaying their loan?, others are

borrowing still more,
each other out.

For the system as a whole the two must roughly cancel
.

IF THEY DO HOT. THERE

TT

ILL B" A DEPRESSION.

As Dr. Charles

0. Hardy of the Brookings Institute puts it, "Ho major fraction of the underlying
transactions which are represented by short-term credit operations of all types
could be liquidated except at the cost of a breakdown of the whole industrial
order.

In the field of 'commercial' lending just as in the capital market




-6a general liquidation is impossible."
Thus we come to a principle fundamental to the understanding of modern
society.

Not only is it true that wealth can hardly ever grow without an

accompanying increase in the total of debt, "but any attempt to repay debt in
genera.1 is "bound to fail or else to cause a collapse.

If one corporation manages

to pay off its debts to the banks a.nother corporation will have to 'borrow an
equivalent amount.
welfare.

Net shrinkage is impossible without danger to the general

Similarly if the national debt is paid off at a time in which private

debt is not increasing, or if it is paid off so fast that the funds collected
cannot easily be
ensue.

absorbed by the capital markets, great maladjustment may

Repayment under these circumstances may cause on the one hand a.

depression or dm the other a speculative boom.
.

There are not lacking writers

who feel that the rapid repayment of a large pa.rt of the national debt after
the first world war contributed measurably to the speculative frenzy of the
nineteen twenties.
To sum U P : The total of debt can never be reduced without causing a
collapse.

Government debt may be repaid with safety only if an equivalent

a.mount of private debt stands ready to be created.

If private debt cannot

be created a s fast as government debt is reduced, deflation and general
:insolvency are likely.

On the other hand., if private debt is created too

rapidly and carelessly, as government debt is repaid, a speculative bubble
.
may ensue.

The question thus arises - why should we pay off the National Debt?

The answer usually given, of course, is that we pay off the National Debt
in order to avoid the burden it entail?..
does it compare with other burdens?




Yet just what is this burden?

Before we .ca,n e o any further w e must
;

How

-7understand these problems.

Disadvantages of De"bt
As we studTr the disadvantages of private and public det>ts we will find
that they have many points in common.

For example, unwise private deb^-invest-

ment may result in a waste of resources.

c

While it is true that production

practically always entails debt, it is not true that debt always entails

production.

The distrust of public debt is in large part inherited from the

days of despotic pnd extravagant kings and emperors.

In the seventeenth

and eighteenth centuries, for instance, huge sums were diverted by the
reigning monarchs from productive uses into the prosecution of vainglorious
wars, the erection of costly palaces, and the pensioning in luxury of a horde
of courtiers.

This is the kind of National Debt with which Adam Smith was

familiar.
is
But it/quite unwarranted to put the debts of the modern democracies
incurred during the Great Depression in the same class -°S those royal
debts.

The difference lies first in the source from which the labor was drawn,

and second, in the type of project u^on which the money was spent.

c

'//hen Louis XlVth built the great palace of Versailles and kept all Europe

in p turmoil of war he took labor and resources away from productive use and
vested them.

There was no unemployment in his time.

But when the United States

government, after 1930, incurred debt to put idle men to work, no resources
were taken from private industry.

Had the men not been paid by the government,

they would not have been paid at all.
busy and -nut them to work on palaces.
from starving to death.

came
http://fraser.stlouisfed.org/before
Federal Reserve Bank of St. Louis

King Louis took men who were already
Tr

'e took men already idle and kept them

It must not be forgotten that the private collapse

the public debt.

Private debt-investment was not "being created? therefore public debtinvestment had to " e "brought in to help fill the gap.
b

*'e have seen that if

anywhere in the system a large block of purchasing power, is withdrawn without
offsetting .expansion, then idleness rnd deflation will spread, from the depressed
industry through the entire economy.

An offsetting volume of public spending

may be thought of as the disinfectant which prevents this deflationary disease
from ravaging the whole body politic.
It follows that even if none of the money spent by the Federal government
during the depression had been used for productive purposes, it would still
have served a useful purpose.

It would have prevented further deflation, it

would have protected private homes, private banks, private investments.

It

would have kept mortgages from being foreclosed, prices from collapsing, private
business from insolvency. King Louis' debt represented money used to destroy
national production.

Our debt, even had none of it creptcd new wealth, would

represent money used, to protect and preserve national production.
But of course money spent by the Federal government during the depression
was not poured out on the ground.

We built no Versailles,

Instead, v/e created

a mass of productive wealth which, as will be shown shortly, will be an aid
to national production for generations to come.

Then we may conclude that

the creation of public debt during the depression, even had it all been spent
unproductively, was overwhelmingly and undeniably necessary to protect private
debt and private industry.

T

' e see further that this deb^ was not all mere
'

waste like Versailles but on the contrary that it a,dded greatly to the national
wealth.

There is therefore no parallel between the wasteful debts of the

monarchies and those incurred by the democracies in times of unemployment.




—9—

Another disadvantage sometimes involved in private p.nd public debt is
the danger of inflation.

If the banks lend excessively to private "borrowers,

or to the government, inflation sometimes results.

But there is no more

reason to connect the public debt, by itself, with inflation than there would
be to call all private bank loans inflationary.

c

Both are only inflationary

if they cause an increase in the total volume of spending.
sufficient to bring on inflation.

Nor is that

It is only under the conditions existing

toward the end of a boom, or during a war, when people are trying to spend
faster than goods are being produced, that private and public borrowing from
b.anks may cause inflation.
On the other hand both private and Dublic debt do entail disadvantages.
These center around the question of interest.

In the last few decades there

has been a trend in private corporate finance toward financing through bonds
rather than stocks.

In so far as this has resulted in the creation of a

number of fixed money claims it imposes a rigidity on the economy.

Even in the

case of stocks, however, profits and losses are to some extent computed with
rr-ference to capital values so that the difference is one of degree.

Public

debt interest acts in somewhat the same way as private interest though some
writers feel that the rigidity imposed is less.

But public debt does not

appreciably alter the fact, which would be true even without it, tha.t a modern
society cannot safely permit violent swings in prices in either direction
because of the effect on private debts and production.
There still remains the question of interest payments and taxes.

It is

sometimes argued that, since the taxes for interest on an internally held
public debt are mere transfer payments, they therefore impose no burden on




I
-10-

o

society.

The money is taken from one pocket, as it were, and put back into

another.

¥hile this principle will serve as a fair first approximation, it

is not wholly correct.

The two pockets may not belong to the'same person.

The man who pays taxes cannot be sure that he will get back from the government
an equal amount of interest on his bonds.

The more widely it is possible to

diffuse the holding of bonds the less the redistribution of wealth involved.
Generally speaking, however, it would seem that the existence of a large
amount of government debt tends to favor the wealthy and business classes since
it tends to redistribute income in their favor.
saving.

Hence it tends to encourage

It is certainly not true that the existence of government debt would

cut down on the amount of money available for investment.

For the money taken

in by taxes must find its way back to the bondholder almost at once.
Leaving aside the question of income redistribution, it is true that the
manner in which the taxes themselves are levied can present a grea.ter or less
friction.

Thus if at some time conditions are such that it is desirable to

increase consumption, taxes falling too heavily on consumption goods may have
a bad effect.

Vice versa, if it is desirable to stimulate saving and investment,

unwise taxation of profits may be adverse to expansion.
carefully levied this friction may be greatly minimized.

But if taxes are"
Only if a government
.

sets itself to destroy the private economy would the taxes act as a serious' ' ' •
discouragement.
One final problem should be mentioned.

Both with private and public debt

a return of prosperity accompanied by rising interest rates may at times induce
changes in the market value of investments.




The government will therefore have

—11—
to " e prepared to take steps from time to time to maintain the value of its
b
"bonds.

This task, of course, is " y no merme impossible "but it does present a
b

problem for the treasury authorities in time of "boom.

Since, however, it is

precisely in tine of "boom that the treasury is strongest the problem must not
be overstressed.

c

Summing up the disadvantages of the public debt we find that it is primarily
a matter of tax-interest friction.

Taxation does involve some redistribution

of income and badly levied taxes can be a brake on expansion.

But while it would

be foolish to maintain tha,t these frictions do not constitute a "burden,11 it is
clear that the extent of this burden is nearly always enormously exaggerated.
The burden of the debt is not 130 billion dollars but two and one-ha,lf percent
of 130 billion.

l T r is it even that much.
\o

Only that fraction of the two and

one-half percent which does genuinely cause a friction is to be counted as a
burden and since these payments are transfer payments this fraction need not be
very high.

To offset this friction, public debt-investment has created a mass

of productive wealth whose contributions to the national income will continue
for many years.

Of course if, in addition to paying interest, we seek to

retire the principal of the debt, tax friction is accentuated.

We then come

once more to question: When should the National Debt be reprid?
From what has been written it follows that it is by no means alwpys a good
thing to repay the Rational Debt nor is it always a bad thing to increase it.
The desirability of reducing or increasing the National Debt must be determined
with reference to the activity of private industry.

If priva.te debt-investment

cannot absorb the flow of current saving, income maintenance "oy the government
is p.bsolutely essential to the stability of a capitalist economy.




In consequence,

if there is large scale unemployment and private industry is not active it would
"be the height of folly to impose heavy taxes in an attempt to repay the National
Debt.

The "burden" avoided "by reducing the debt would be so smpll compared

with the burden axLded by doing so, that it would be foolish to force deliberate
ruin and deflation upon our people.
In time of boom on the other hand the debt may be reduced, if one wishes
to do so, but even here debt repayment as we have already seen is not always
a good thing.

Repaying the debt too rapidly may add to speculative excesses

and lead to over-expansion.

The burden of the public debt is nearly always

tremendously over—exaggerated.

What is the Limit of the Debt?
As soon, however, as one admits the existence of any burden, no matter
how slight, the question of a limit arises.

Logically, it must be admitted

that if enough pebbles are placed on the back of an elephant the back will
eventually break.

Many people therefore ask "Granted that the burden now

is light, is there not some point at which it will become too heavy?

If so

when will we reach that point?"
This

question is natural enough but it contains a suggestion which should

be answered before coming to the main point.

People who put the matter in this

way are apt to feel that deficit financing necessarily implies an indefinite
piling up of debt.

This is by no means the case.

In time of peace, deficit

financing will only be resorted to when private-debt investment has ceased to
occur on a sufficient scale.

Until recently, when such a dron of private

activity occurred, a panic deflation was likely whose end no man could see.
Indeed, it is almost impossible to prove theoretically that a deflation will




-13ever come to an end.

Extreme pessimism therefore is likely to carry the economy

down to very low levels.

Bat if it were well understood to "be the definite

policy of the government not to let the national income fall very appreciably,
that fact, in itself, would "be sufficient to prevent extreme swings of
"business.

A relatively small amount spent "before the slump got out of hand

would save "billions later on.

Extreme financial conservatism is likely to

result in that policy of "too little and too late* whose.disastrous effects in
"battle have so hampered the democracies.

If we guarantee the "business ma,n a

reasonably stable market for his goods, that guarantee, in course of time,
will "be needed less and less.

There is a natural tendency for a properly
.

administered deficit policy to stabilize itself relative to the national wealth.
But speaking entirely seriously, and with no desire to appear paradoxical, it
remains tree that a fea,r of debt which keeps us from spending enough, in time,
may be the very thing which makes a large debt necessary later on.
,

The crash

of 1929 is a case in point.
..

Assuming., however, for purposes of argument that the debt should keep

rising, when will it reach a limit?
given to this question.

lTo ma.thema.tica.lly precise a.nswer can be

One cannot say that the "limit" is five hundred

billion, or six, or three, or any other exact sum.

The reason is tha.t the

friction of the debt largely depends on what is done with the money and wha.t
taxes are levied to VP-.J interest.

Furthermore the friction must always be

looked at relatively to the national income.

As income rises debt may rise.

The matter cannot be mechanically estimated.
If we had an ideally perfect, frictionless, automatically adjustable tax
system, an interna/Lly held debt would entail no burden at all.




On the other

hand an unwise tax policy could engender a very great amount of friction.
,
we are likely to get is something in "between.

What

It must "be granted that

theoretically this friction might someday become intolerable*
point cannot "be estimated exactly. . It will help us

But the precise

greatly, however, to see

how large a source, of friction the United States and other countries have
"borne in the past and to compare these
to have.

figures with the de"bt we are likely

After all, the practical question is not whether there could "be a

limit "but whether in fact we are in danger of reaching it.
cannot "be answered " y mere argument.
b

This question

We must go to the facts and to them

we may now turn our attention.

The Past and Future of the Debt
If a man sets out to determine what the financial position of a corporation
is, he must consider its assets as well as its liabilities.

In a sense, the

enormous national wealth of the United States is its asset.

But looking at

the matter more specifically, we find that the Federal government in the last
fifteen yea,rs ha.s financed a very large number of permanent productive improvements whose contributions to national production will continue for generations.
We must consider these before we come to estimate the net friction of the debt.
Table I shows Federal expenditures for construction from 1921 to 1943.

It will

be seen that between 1931 and 1943 some 40 billion dollars was expended in this
way.

Subtracting expenditures for National defense of twelve billion, we still

have about twenty-seven billion left.

There are some people, of course, who

consider that every dolla.r spent by the government must be wasted.

The : mere

fact that permanent construction is undertaken means nothing to them.

But,

for most of us, it is hard to believe that Grand Coulee or Boulder Dam, for




-15-

example, are so much useless waste.

Suppose, however, that we make an un-

necessarily large concession and say that the capital invested "by the government
is worth tut half its cost.

That still leaves about thirteen and one-half

"billion dollars whose annual contribution to production may "be conservatively
estimated at two hundred and seventy millions a year.

c

Hot all of this value

may "be easily measured in money terms "but it is real enough nevertheless.
Against the military expenditures made we may set as an asset our national
freedom.

Is there anyone who will say that this has "been overvalued?

Prom a discussion of the assets created "by the de"bt we may turn to the
friction which it creates.

It is difficult to find an appropriate index

of the ""burden" of the national debt "but it is submitted that most people would
agree that a comparison of the annual payments for interest with the national
income will serve as a fair a.pproximation.

"How much money do I get in on the

first of the month and how much does the debt require me to hand over to the
government?"

That is the question which interests most of us.

The ratio-of

taxes for interest, to the money we receive is the important thing.
Accordingly in Table II the ratio of income to interest is shown from 1799
to 1941.

Unfortunately the term "national income" is capable of many definitions

nor do any of the estimates available correspond exactly to the figures we would
like to have.

The decision was taken, however, to use the National Industrial

Conference Board estimates of "Realized National Income" since this is the only
series which goes back very far.
facts emerge.

Looking a t these figures some very interesting
.

The national debt in 1941 was, for example, the largest in

absolute size in American history but when we consider it in proportion to the
national income it is seen " o be by no means the heaviest we have borne.
t




The

-16interest income ratio WRS heavier proportionately both after the Civil War
and after the Firs-t Wo-rid War V

When we consider how much a man can borrow

we ask how large his income is.

The same thing is true of a country.

country can "bear a great deal more than a poor one.

A rich

Looked at in this way

the present National De"bt is seen to "be well within Our capacity as proved
"by debts which we have previously "borne.
The National Debt, moreover, is not the whole story.

While the National

Debt has risen, total net debt in terms of the national income has declined
and total long term interest - plus interest in the National Debt - has even
declined in absolute amount.

Charts I and II show net long term debt and

interest payable on long term and public debt in the United States from 1929
to 1941.

The decline in interest payments is clearly visible.

Table III

shows debt and interest as percentages of the national income and the decline
in the size of the rrtio is very clear.

To sum up,the present National Debt,

in terms of the relationship of interest and income, is not the heaviest
we have born.

Furthermore, when we consider total debt and interest, we

have not been piling up more and more net debt relative to our income but
rather reducing it.

For the economy as a whole we have not been becoming

less "solvent" but-more so.
It is obvious, however, that as the war continues debt must pile up.

It

is, moreover, likely that the expense of converting from a war to a peace-time
basis will result in some addition to the total debt.
therefore to consider what the debt was in 1941.
what it will be in the future.

It is not sufficient

We must try to estimate

Of course such estimates are largely problematical

since a great deal depends upon how soon the war is over.' Let us, however,
estimate the debt in 1950 - taking that as the probable end of the conversion



-17period - at "between three hundred and three hundred and fifty billion dollars
depending on the length of the war.

Let us further take the National Resources

Planning Board estimate of the national income for that year, in terms of 1942
prices, at 133 billion dollars.

Both the debt estimate and that of income

are so taken as to make the "burden" as heavy as seems at all likely.

Assuming

now an interest rate of 2 percent, the interest bill of a three hundred and
fifty billion dollar debt will be senen billion a year, or five and three-tenths
percent of the national income.

This would be, admittedly, a much greater source

of friction than any we have previously borne,

But is it overwhelming? - A

negative answer seems furnished by British experience.
Table IV gives estimates of the r.atio of interest to income of the British
national debt.

It will be seen that after the First World War the British

national debt took a significantly la.rger fraction of their national income
than ours will, under our assumptions, in 1950.

Also, while ea.rlier estimates

are unreliable, there is evidence to show that nearly a hundred and fifty years
ago the British Empire bore without fatal results a ratio of interest to income
much higher than our own is likely to be at the end of this war.
Some may object that the rate of interest used in making our forecasts is
too low.

In view of the very strict controls now exercised by the Federal

Reserve System, this objection seems scarcely v/ell taken.

Moreover, even

if the interest rate should be forced up, in spite of the Reserve System, this
could only occur as the result of a tremendous boom.

In the event of such a

boom the repayment of a part of the debt would be both desirable and easy.
Finally, even if we assume a four percent interest rate and no retirement of
debt, the ratio of interest to income would be ten and one-half percent, or
something less than the ratio in France at the end of the First World War a s
.




-18shown in Table V.

.
.

Conclusion
From our survey we may state the following!
I.

The debt of the United States prior to 1940 was, in terms
of the relation of interest to income, not the heaviest we
have ever "borne arid easily within our capacity. It was
moreover accompanied by the creation of a considera'ble
amount of permanent wealth.
*±

II.

III.

The estimated Debt in 1950, judged by the same measure,
is li v ely to be significantly less than that of England after
the Napoleonic wars, and the First World War.
TTsing the. worst available assumptions - the debt friction
would probably be something less, in terms of our measure,
than that of France after the First World War.

None .of these ratios indicate any insuperable frictions likely to induce
national bankruptcy.:

They do mean (a) that we must not repeat the English

mistake of the twenties and over-value our currency in terms of world prices,
(b) that we must levy our taxes more carefully, (c) that we must not do as
France did and attempt a program of severe deflation.
.
would be true if there were no National Debt.

But all of these things

For private debt in a modern

society has become so important that violent swings in prices and incomes are
intolerable.

Furthermore., there is no reason why we should submit to them.

A major degression is as obsolete today as a whale oil lamp.

If, in spite of our

tremendous potential production end national wealth, we permit another collapse
of the order of 1929, it will be our own fault. We will have destroyed ourselves
needlessly - the unwitting prisoners of our own imaginations.
The problems we face today are not all new problems.

Many of them have

been raised before.

There is nothing new in a defeatist spirit and a despondent

view of the future.

For those who thus despair we may close with the words,




o

c

written more than1 a'hiin'clred years ago, of one--of the greatest English advocates
of laissez faire - 'Lord' Macaulayr

c

"We canno.t* absolutely Drove that those ?re in error who tell us
that society has reached a turning-"ooint, that we have seen our "best days.
But so said all who 'came before us, and with just as much apparent reason.
'A million a year will beggar us, 1 said the patriots of 1640. "Two millions
a year will grind the!'country to powder,1 vraa the cry in 1660. 'Six millions
a year and a debt. o f fifty millions'1 exclaimed Swift; 'the high a],li,es
;
have been the ruin of us,.'' 'A hundred and forty millions of debt!1 s . i t
a,d
Juniusr 'well may we sa:~ that we owe Lord Chatham more than we shall ever pay,
if we owe him such a load as this.1
,
'Two hundred, and forty millions of debt 1 '
cried all the statesmen of 1783 in chrous; 'what abilities, or what economy on
the part of a minister, can save a country so burdened?' Tre knqw that if,
,
since 1783, no fresh debt had been incurred, the increased resources of the
country would, have enabled us to defray that d_ebt at which Pitt, Fox, and Burke
stood aghast ~ nay, to defray it over.and over again, and that with much lighter
ta.xation than what we have actually borne. On what principle is it that, when
we see nothing but improvement behind usv'we are to expect nothing but deterioratio
before us?"

David MeCord Wright
>
Univeraity of Virginia.




Table I

Year
1921
1922
1923
1924
1925
1926
1927
1928.
1929
1930
1931
1932
1933
1934
1935
1936
1937
1932
1939
1940
1941
1942

Federal Expenditures, Grants, Loans and Guaranties of Loans for Construction
Classified According to Farpose, Fiscal Years 1921-1943
(All figures in thousands) ":
NOTE: Figures prior to fiscal year 1942 are actual. Figures for
fiscal years 19*42 and 19^3 are estimates as of Jan. 7, 1942.

:Land De- l
: Power
:
:
: Water : Govern- :
:MiscelNational ivelopment: Promotion: Generation:Weifare:
: Supply &:ment ad- :' .
Defense :and Pro- : of Trans-:& Distri- : and :Education:Sewerage:ministra-:- Housing ;laneous
Total
:tection : portation:"bution
:Health :
• : Systems: tion
:
;
149,004:
% 285:
47:
.$ . 238*308
10,025:
863:$ 12,584:
11,245:
153,044:
12,054:
5,379:
528:
27, 023:
209,273
12,143:
1,294:
3,628:
10,291:
135,657:
24:
185,274
22, 237:
14,604:
2,636:
244:
214,151
172,417:
12, 636:
3:
16,966:
221,465
8, 331:
1*7,5?4:
5,091:
47:
3,193:
253:
i6,nii
196,156
150:
10, 25?:
5,981:
l6o,S32:
2,013:
311:
35,636:
202,180
12, 711:
5,976
137,267:
8,797:
233:
1,560:
37,937:
210,231
11, 173:
6,609
144,193:
7,224:
149:
2,941:
52,913:
272,345
21, 236:
4,60S
31,019:
146,251:
9:
16,309:
47,691:
49,200-.
121:
19, 935:
12,817:
139,186:
7,637:
7^,653:
4^2,981
727:
39, 778:
15,369
226,513:
77,531:
10,410:
76,973:
524,051
801
43, 879:
19,237
264,208:
106,078:
12,^75:
80,460;
5H,736
$ 10,638: 119,213:
.. 26, 422:
633
245,933:
19,356:
3,576:
47,612
50, 076:
12,391 50,508; 211,503: & 7,689: 41,06l: 1,445,287
3J
715,793:
35,15S
53, 895:
32,066: 14,221: 1,516,011
108,581: 123,123:
57;840 138,690
164,819:
742,049:
33, 331:
195,933: 131,635: 233,^01: 21,244: 2,289,074
264,486:
133,495
905,213: 111,376 253,455
59, 083:
289,^66: 1,106,993:
:28b,^36 132,271 197,634: 173.O9S: 505,149: 13,498: 2,881,776
6o, 910:
840,263: 105,4o6 191,618
215,721:
111,199 165,706: 159,635: 510,622;
9,042: 2,370,122
144, 463:
157,266. 262,539: 195,611 227,481; 158,207: 744,111: 36,685: 3,40^,442
269,422: 1,212,657:
881,235: 198,612 172,882
141,236 153,346; 149,073: 910,015; 65,340: 3,127,159
272.97S:
175,
181,376 140,243
1,677, 5*5:
797,213:
283,330:
74,000 126,400;
95,860: 1,165,077: 42,754: 4,583,833
139,400; 100,226: 1,744,796: 32,483: 8,433,193
4,864, 109:
261,096:
811,943: 275,550 132,495
71,100
483,656: 223,022
5,146, 880:
287,697:
97,576
59,323 126,766:
56,486: 1,498,485: 21,827: 8,001,718




- 1 9 A-

o

-20Purposes of Federal Participation
(Table I)

The accompanying table shows the purposes for which Federal expenditures,
grants, loans and guaranties of loans for construction have "been made during
the last two decades.

The "broad purpose classifications which are shown in the

table cover the following detailed purposes:
1.

National Defense. - Includes military camps and cantonments, Army

air b-^ses, armories and barracks', naval bases, air stations, navy yards and
docks; and defense industrial plants covering Army and Naval Ordnance and

1/
Maritime Commission shipyards.
2.

Land Development and Protection. - Includes flood control, irrigation,

reclamation, forests, national parks, soil conservation, wilfi-life, and range
land conservation.
3.

Promotion of Transportation. - Includes highways, roads and streets,

river and harbor development, canals, aids and assistance to navigation, airports a.nd airways, railroads, docks, terminals, bridges, and other similar
structures.
4.

Power G-eneration and Distribution. - Includes hydro-electric develop-

ments, steam a.nd Diesel plants, transmission lines, and rural electrification

c

development.
JL/Obviously, other purpose classifications in the table cover expenditures
and financing which are made to add in the national defense. Flood protectionworks, power plants and transmission lines, highways, Government office buildings
for employees of defense a.gencies, housing for families of military and naval
personnel and defense industrial workers - all of these aid and expedite the
national defense. So also do those projects which protect the health and safety
of the people. However, for the purposes of the classification used in the table,
a strict interpretation was placed on the term "national defense" and the only
expenditures included within that term are the direct military, naval a.nd defenseindustrial plant construction expenditures and financing.




-21-

5.

Welfare and Fealth. - Includes eleemosynary institutions, hospitals,

•prisons, rnd community recreational facilities.
6.

T r

" ater Sup-ply and Sewerage. - Includes TVblic wfi.ter supply and -nublie

sewerage and sewage treatment facilities.
7.

Education. - Includes school, college, and university "building and

plant.
8.

Government Administration. - Includes G-overnment office "buildings,

post offices, State, county, and city halls! law enforcement buildings,, such p s
.
"border patrol stations; experiment strtions, research station?, laboratories;
and construction necessary for surveys rrnd investigations.
9.
10).

Housing. - Includes public housing and Government-insured private housing.
Miscellaneous. - Includes types of works and structures not classified

above or not classifiable because of the way in which the source data .are corn-oiled.




o

Table II
Interest on the Public Debt and Realized National Income
United States'of America, 1799-19U-'
*

>
i

Interest
Ratio of'
:
on the .
\ Interest on
',' Public Debtf/ : Public Debt
; Incomei/
(Millions
'• (Millions
i to Realized
of dollars)
of dollars)
National Income
(Percent)
Income
National,

Year

1799

677

3.2

915

2.9

0.3

1819

876

5.2

0.6

1829

975

2.5

Average
Annual
Interest
' Rate on the
Public Debt
(Percent)

0.5

1809

:
!

0.3

1839

•

0.02

1,631
2,1420

I8u9
1859

;

1866

3.7

0.2

li,311

2.9

0.1

5.0

•

138

1867

6,827

130

1.9

5.1

7,227

101

l.li

I4.i1

10,701

39

o.U

3.1

1899 '

15,36U

1900

16,158

UO
36

0.3
0.2

2.8
2.9

31
29

0.2
0.2
0.1
0.1
0.1

2.5
2.U
2.3
2.2
2.2

1869
1879

•
•

1889

c

'•
•
•

1901 '
1902
1903 •
1901* •
1905'

17,170

1 8 , Uui-i^9,^
20,090
21,U28

27
25
2*
1

(CONTINUED)
1/

2/
~

Source: National Industrial Conference Bocrd, "National Income in the
United States, 1799-1938," pp. 6-7. Revised data for 193p-19Ul from
Marvin Hoffenberg, "Estimates of National Output, Distributed Income,
Consumer Spending,Saving, and Capital Formation", preliminary draft, p. 36,
Source: "Annual Report of the Secretary of the Treasury on the State of
the Finances," for fiscal year ended June 30, 19^2, pp : "'39u-399'




-22A-

CONTINUED

Table II
Interest on the Public Debt and Realized National Income
United States of America, 1799-19U1
•

>
Year

Income
National
IncomeV
(Millions
i of dollars)

:

Interest
on the
: Public Debt£/
: (Millions
; of dollars)
1

l$06
1907
1908
1909
1910

23,165
2U,uO3

2li

23,1*58

22
22
21

1911
1912
1913
19ll|
1915

28,OlU
29,1|22
31,1450
31,213
32,533

1916
1917
1918
1919
1920

23

26,li56
28,166

-

38,739
1+6,376
56,956
62,91*5
68,U3U

22

23
23
23
23

2k
107
lOu

•

820

1,010

1921
1922
1923
192k
1925

56,689
57,171
65,662
• 67,003
70,051

995
•1,023
998

1926
1927
1928
1929
1930

73,523
73,966

1931
1932
1933
193U
1935

60,203
1*6,708
1*1*, 713
51,560
56,500

1936
1937
193^
1939
19hO
191*1


65,300
69,000
62,800
68,1*00.
71;, 800
89,600



:

Ratio of
Interest on
; Public Debt
to Realized
1 National Income
>
(Percent)

Average A
Annual
Interest
; Rate en the
Public Debt
: (Percent)
i

2.1
2.0

0.1
0.1
0.1
0.1
0.1

1.8
1.9
1.9

0.1
0.1
0.1
0.1
0.1

1-9
1.9
1.9
1.9

1.9

0.1
0.2

1.9

3*6
3.3
3.2
U.2

0.7
1.3
1.5

I4.2
1*.5
li.5

1.8

911

857

79,u98
72,398
•
•

1.2

J*.2

809
759
705
669
635

75,9OJi

1.8
1.5
IJ4
1.1
1.0
0.9
0.8
0.9

U.i
U.i

605
6UI4

1.0
1.1*
1.6

3.6
3.3

• 723
789
785
808
896
933
991

1,076
1,185

U.3

U.o
li.o
3.9

3.2
2.9
2.7

1.5
l.U
1 . 2

1.3
1.5
l.l*
l.U
1.3

•

2<h
2.5
2.5
2.U
2.5
2.U

TABLE III
Comparison cf Interest, Debt and National Income in the United fctates, 1929—19^1

Year
1929
1/50

National
Income
(Millions
of
Dollars)

68,858

1931
39,5^3
1933

1935
1936
1937
1938
1939
1940
191+1

42,322

49,455
55,ri9
64,924
71,513
64,2X9
70,829
77.8C9
95,618

Net Public
and Net lengTerrn Private
Interest
(Millitns of
Dollars')

Foderal
Interest
Paymentc
(Millifn:
of
Dollars'
2/

669
635
605
644
723
739
735
80

J33
991

IC76

173,181
166,031
156,581+
150,61*1
15O87
151,653
155,696
155,552
158,289
162,195
l67,O4l
185,231

Federal Interest Paymerits as a
Percentage
of National
Income

6,488
6,475
6,31^
6,034
5,665
5,391
5,288
5,055
5,048
5,121

,80
.92
,11
.61
71
41
1.24

1..3S
1.24

[Fetal Net
Public and
Private Debt
as a Percentage of National Income

207.0
251.5
304. g
391.8
355.9
3C3.7
272.2
239. g
223.1
24'). 6
229.O

Net Put l i e and
Net Long-Term
Private Interest
Payment as a Percentage of Nat i o n a l Income
9-4

11.9
15.8
IU.3
11.5
9*7
-»

-1

ni ±

7-4
8.1
7.2

193,7

1/

Source: Suovey of Current Business, March 1533> P* 22*

2_/

Source: Annual Report 01 the Secretary of the Treasury on the State of the Finances for fiscal year ended
June 30, 1942. Derived by taking a moving average of amounts for fiscal years.

2./

Source:

U. S. Department of Commerce, Indebtedness in the United States, 1929-1941, p» lb.

_4/

Source;

Ibid., p. 69.




C
M

-24-

Table IV

A
British National Income and Interest on the Public Debt
Before i860
r
Millions of Pounds)

Year

National
Income

1800

217.51/

Interest

Total
National
Income

Interest as a
Percentage of
National [income

23U.9

1812

25. 53/

.5

18U7

28. iV

398 . 1

28. oV

7.U

671; • 0

1851

6I16I/

7.1

1/

From Colin Clark, The Conditions of Economic Progress,

2/

From The State Debt and the National Capital, London, 1920. j

3/

Tables of the Revenue,, population, Commerce, of "the United Kingdom,
1^33, P» l.! (Interest 'includes management expense).

k/

Statistical Abstract for the United Kingdom, l81|6-l860, p. 6;
(Interest includes management expense).
:

1




-25Table IV
B
British-National Income and Interest on the Public Debt
. 1860-1913

Period

c

1860-69

National
inconie-y "
Millions', of
Dollars
• • . .899

1870-76

••

1,177

1877-85

• -

Interest
Payments
3/

National
Income

2 + h

Interest to
National Income
Percent

26.5

925.5

2.9
,

2.2

. 2.6.9

"1,203 .-9 -

1,2U2 ^

28.3

1,270.3

2.2

1886-93

i,Uio

2U.5

1A3U.5

1.7

18911-1903

1,666

23.1

1,689.1

i.U

190U-1910

I,9U0

22.2

1,962.2

1.1

••

19.9

2,260.9

.9

•

'20.2

2,230.2

.9

19.6

2,358.6

.8

1911-13

• -2*21*1

1911
1913

c

2,2io£/
2,339'

1/

Colin Clark - National Income and Outlay, 1937, p . 232.

2/

I b i d . , p. 9k.

3/ From Statistical Abstracts for the United Kingdom. Interest
payments 1860-1875 include management expense. Financial
years shifted to calendar years.

^




o
TA3LI IV
C

1/
Calculation of British National Income at Market Prices
(h i; ill ions)
v

Year

1925
1926
1927
1928
1929

4,047
3.863
4,046
4,024
4,069

1930

4,043
3,689
3,669
3.772
4,033

1935
1936
1937
1938
1939

4,315




Interest
National
to
Income
National
(l)4-(2)ip (3) Income
(Percent)
i/

I^et
Interest
on Public
Debt

Ratio of Interest to
National Income
National
Including Interest
:.
:
Income
payments to the
United States
(l)t (2)f-(7)

4/
3428/
327
323
.
310
308

342i
327
323
288
278

5,942
4,227
3*323
4,088
4,313

310
310
313
315
315
275
200
175
190
: 205

279286
285
283
279
268
272
264
224
212

4,636
4,459
4,644
4,622
4,663

6.0
6.4
6.1
6.1
6.0

308
314
313
311
306

4,586
4,l6l

5.3
6.5
6.4
5.4
4.8

215
4,4261/
4,8041/

211
210
214
217
221
214
234

4,721
4,636
5,018
5,458
5,818

3
4.0
3.8
3-2
3.0

5,24lf//
5,59i
6,509!/,

1942

.y.titio o f

•

5,600l/
3,9001/
3.500I/
3,8OOl/
2gO

1920
1921
1922
1923
1924

1931
1932
1933
1934

1/

; 1/

Net
Internal
Intere s.t oh
Public
Debt,
2/

-p-

. Eome
.Produced
. Income

Income
from
Overseas

1920-1942
__
'

7.58(5/
8,452a/

4,186
4,450

6

2

,Z 3
7,814

5.8

7.7
8.4
7.0
6.4

5,9^2
4,227
3.S23
4,110
;^ 3

5.8
7.7
8.4
7-5
7.1

4,665
4,487
4,672
4,650
4,690

6.6
7-0
6-7
6.7
6.5

295
289
282
231
212

4,613
4,178
4,126
4,193
4,450

6.4
6-9
6.8

211 "
210
214
217
221
214
234

4.741
4,636
5,018

CM

4

5.5
4.3

5,818

4.5
4.5
4.3
4.0
3.8

6,72,5
7,814

3.2
3.0

5,45s

NOTE:
Footnotes on
page 26A.

-26A-

Footnotes to Table IV-C
_l/

Source: Colin Clark: National Income and Outlay, p . 3k,

2/

Source: Table I ; excludes sinking fund, payments to U. S« Government,
management and expenses.

2Y

Sum of columns (1), (2), 'and ( 3 ) . Amounts to inclusion of i n d i r e c t
business- t a x e s , and exclusion of depreciation and depletion.

_4/

See Table I; calculations same as preceding columns except for
inclusion of i n t e r e s t paid to U. S. Government*

5./

Estimated to be same level as 1913*

£/

J. C, Stamp, "Current Problems in Finance and Government, 1924",
p. 332.

]_/

Layton'a estimate of t o t a l National Income. See p . 3^0 of U. K. Hicks,
"The Finance of B r i t i s h Government, 1920-1936."

gy

I n t e r e s t for f i s c a l year 1920-21

9./

Source: Division of Research, 0. P. A.

c




4"

-27Table V
National Income and Interest on the public Debt of France
(Billions of Francs)

Year

1789.
1800-1812
I830
l81;O-l8Li9
1850-1859
1860-1869
1870-1879
I88O-I889
1890-1899
1900-1909
.1911

•:
•
:

National Income
Including Indirect Taxation
2/
1/

: Total
; Debt
: Service
: 3/

: Total :
: Interest as a
: Debt
: Total : Percentage of
: Service :
: National Income

:

h/

:

:

2.8

.2

3.0

6.U

.1

" 6.5

9.2

.3

10.3
16.6
21. h
26.9
28.0

.1*
.5
.6

1.1
1.3
1.2

29.5
35.5
38.5

1.2
1.3

1920
1921
1922
1923
192U

122
129
13U

9.$
10.7
.17.1
.22.0
28.0
29.3
30.7
36.7
39.8

6.7
1.5
3.2

3.7
2.9
2.7

3.9

U-U
• 3.9
• 3.3

3.3

150 .
173

18,2
19,1 .
20.2

137.1
lldi.9
152.2
169.1
193.2

11.0
11.0
12.0
11.3
10.5

1925
1926
1927
1928
"1929
1930

191

19.5

210.5

9.3

2314

23.7
23.1
22.9
22.3
22.7

257.7

9.2

1931
1932
1933
193J4

267
231
22U
203

1937

202

238

257
275
276

15.1

15.9

261.1

279.9
297.3
298.7

8.8
8.2

7.5
7.6

23.7
25.1
27-3

290.0
25U-7
21,9.1
230.3

7.9
9.3
10.1
11.9

30.9

232.9

13.3

23.0

1/

Colin Cla rk, The C o n d i t i o n s o f Economic p r o g r e s s , 191+0, p. 101*.

2/

Ibid, p. 99.

3/

Annuaire Statestique, 1938 , p. 201; 1928, p. 161-2.

h/

F. C. Sudre, Les Finances de la France Au XIX Siecle, pp . k, hO, 7U.

16659




April
C. Biais«leXi# Jr.*
FtMMtif Board,

r«M tfci dwewafcxii* entities "what about th« liaticaiai

^t

to

Xa r ^ - 1 / | l yaur f i r s t HUftsisian. i taiiruc that t*iia ^robl«& i t
pubiie i

9a U*m t#t#irf H f > t i » ^ I « a »i»rr>- u» «a^ that i d« aoi; think
y
X thlikk i t i s too yX^m^atm^y Mr tfci prai«i«sioiit&X riiadiir Md too
I t my>a4
n

A» ©or

«x* prid«s *xXX faXX.M

i

llier© ^a>- be t r u t h i n t h i s
ior

MUMI

i t i s not 4i«au«««<i» tout ju*t s t a t e d »«s a do ; ^*a X think t h i s «ntir© p*ra~
fpPl^b K b i M joisifihi ti vi*u «audii ia^wririiinii ! • slii { M I Mc si ^o^iey* #^»
M MM
p M& f J
aXX 4U»w t h a t a &r«at i t i l Mil befc£3M&jdi*u*&1^ b e t t e r u t i i i i a t i o u of aa
mtl»j ti^i^lj,
pkr%J9*l*r\$ nyi#^f IUI Hit present* l i i« iaa©li i&rg«r
i l l itao## t o our gri#f» t ^ a t a
1A

X tidnk throughou'c this f i r s t »«otioa . r . bright*s iasist«ac« OE
uiiat o*'ot is til* «>ta&r #id« • ! ««tilin is so£Mi«hat r«p«txtious aacl
not «t&t*4 in a oomvinaiB^ n»yt although psrsojmiij I agr«# «dth his idea.
f Us gXti4Sds QVGT t<ie faofc tha^ a^uitiss are aot




jar. Thorns §« Blaltdril,

Oa p&g© 3 he i« trying *° Ulu»tr&t<& what ba4 results would
follow U debt* were repaid Iftd ua$£ g a* f &r illustration people withdraw!^ thsir deposits ia tho early ^0 a. I t is not a pM4 iiluatr^tioa,
becayte those witedrawals did not HfpNMMflfl an a t t e s t by debtors to
t&eir iiMltj but a» attofxat l*y « sueeial elass of <sr»dit©ra to
*

0 pft^e S# th« pura^rmpli abotat the f*ct that G«T«rn«»nt
M
wa«ld **&v« b®ec desir&bl« in Ifci »30f« 0V^, if i t h^d a l l been
noil-productive, unnscosB&rily wtak#ns hie argument* I r believe there ia
truth ia iU* p # i l t l i l j i>uv * l l ...ot HlNMMMfy *^ ^h&t fct
w
i t wmalcl
&

last Aeiitoiioe in HM first par&gr&pfc on page 9# I thisk i«
too du.^ia&tio a,
•tlttwtwt aa jpift* 10* b«£laala£ a» Una 7# •flNWt 1&i effect
©f elebx on UMI rii1it|i%trtllM of inooste ma;* or ?sa^ not be right, but i t
certainly .U •*! proved* the last «©ntenoe in the next paragraph is to
extras* that It sounds rather fu»ay#
Xki* i« tiie kiact tfl t/iiag £ havs li? £i»d» The a r t i o l e
f i > | eorefui editijs^, I *iatt« ftNM j&xr l^at nota taut i t l i onlv a f i r e t
draft* f&ta oareful r«iYislajs I liquid think ttlttl i t ooald be p*% into
far




(8i«med) S. A.

• A*
,
ft EatW»h mid St&tis

April 28, 19U3-

Mr. Thomas C. Blaisdell, Jr.,
Assistant Director,
National Resources Planning Board,
Washington, D. C.
Dear Tom:
This is in reply to your letters of April 17 and
22 in regard to Dr. David MoCord Wright's first draft of a
pamphlet entitled "What About the Rational Debt?1*.
Dr. Goldenweiser's letter to you of April 2 4
I.
pretty well expresses my own personal views on the questions
you presented. I certainly see no reason why the National
Resources Board should not put out a discussion of this sort,
though it is of course a question which your Board has to
determine for itself. I agree with Dr. Goldenweiser that
the pamphlet in its present form is too elementary for the
professionals and too technical for general readers. However, I will not venture detailed suggestions at this time.
I appreciate your letting me see the document and
hope that it oan be put into shape to be an effective contribution to enlightenment on this important subject.




Sincerely yours,

M. S. Eccles,
Chairman.