War Costs, Debts, Etc.

THE present administration has made sincere and effective efforts to reduce the expense of the Federal Government, but it has reached a point beyond which it seems impossible, or anyway extraordi-narily difficult, to go. This is ascribable to the large part of the budget that is represented as war expense. There is no doubt that this spells high taxation for many years to come. Nevertheless, although a large part of the taxation will be attributable to the war, the paying out of the proceeds of that taxation by the government will not be war expense, except in minor part, as will be hereinafter made clear. It will be useful to explain the economic meaning of this situation, for it has bear-ings upon several open questions, such as a bonus to the ex-soldiers, the foreign debt accounts, etc. The expense of the war on the part of the American people was in the main paid concurrently with its prose-cution. This was necessary. Warfare is not conducted with money, but with materials and labor. Except for such previous production as was represented by stocks of goods, the requirements had to be supplied by coincident production. With the end of 1918 our war expense ceased, save for such production, e.g., of ships, that was allowed to run on unchecked, and the indemnities that had to be paid for cancelled contracts. When those matters have been settled we shall be done, barring one important thing. Of course, our war expense began to contract right after the armistice and shrunk rapidly with the demobilization of the troops in 1919. If we had not been able to obtain all needful material from our own sources and had been constrained to borrow it from foreign countries, incurring a foreign debt, we should have been in the quite different posi-tion of having to repay that material, or its equivalent, during subsequent years. The European countries had to come to us for such supplies. This outlines the fundamental difference between their present situations and ours. We were therefore compelled not only to furnish materials and man-power for our own warfare but also much for the Allies.