H. R. 17054

Soldier Bonus legislation began moving rapidly through Congress last week toward what was generally expected to be a presidential veto. Reported from the Ways & Means Committee H. R. 17054 to up veterans' loans on adjusted service certificates was snapped (363-to-37) through the House in 40 minutes. The Senate was primed for action no less quick to avert what all Bonus advocates dreaded--a pocket veto.

If President Hoover gets the measure before the last ten days of the session, he must either disapprove it and thereby allow Congress a chance to repass it over his veto or permit it to become a law automatically. If the measure reaches the White House after the last ten days period, the President can kill it by doing nothing to it (i.e a pocket veto) and thus deprive Congress of a second vote before final adjournment. With the ten-day period beginning Feb. 21, the Bonus fight became chiefly a race against time to the White House.

From the veterans' viewpoint the particular hero of last week's Bonus activities was New Jersey's Republican Representative Isaac ("Ike") Bacharach. In 1915 Mr. Bacharach went to Congress from Atlantic City. With his father he had prospered in the retail clothing trade, gone into real estate, lumber and banking when Atlantic City began booming as a resort, became a local tycoon. Seniority of service advanced him to the No. 3 majority place on the House Ways & Means Committee. There his dexterous management of politics and finance won him a reputation as the committee's "brain." A mixer and a fixer, sporty in attire, facially ferocious but personally pleasant, grey-bristly-haired Representative Bacharach is one of Speaker Longworth's closest friends and, as such, a power in House affairs.

Democrat Owen D. Young's testimony on the Bonus fortnight ago convinced Congressman Bacharach that it was politically necessary for the Republicans to act. Adopting the "Young Plan" of increased loans but rejecting the proposal to limit them only to needy veterans, he drafted H. R. 17054, got it by the Ways & Means Committee (17-to-4) to the House floor where Speaker Longworth helped him to pass it by a suspension of the Rules.

The Bacharach bill provided for: 1) upping the loan value of bonus certificates from 22 1/2% t0,50%; 2) reducing the interest rates from 6% to 4 1/2%. A veteran who had already borrowed 2 1/2% of the face value of his certificate could raise another 27 1/2% on it. Veterans' Bureau actuaries estimated that this measure would cost $700,000,000.

If Mr. Bacharach was the veterans' hero, Secretary of the Treasury Mellon logically became their villain last week when he wrote a strong public letter objecting to this bonus legislation. The gist of his argument was that the Treasury could not stand the financial strain. Predicting a $500,000,000 deficit next July (last estimate: $350,000,000), he declared the measure created "a potential liability of $1,720,000,000"--that is, if all veterans borrowed to the limit. The Treasury, he explained, had some $772,000,000 securities in a sinking fund reserve to pay off the bonus in 1945 which would have to be sold to raise cash in addition to floating a $1,000,000,000 bond issue. Heavy refunding of Liberty Loan obligations in the near future complicated the outlook still more. Declared Secretary Mellon: "the revenues of the Government are steadily falling behind. . . . The Treasury is already in a difficult position. . . . I regret I cannot approve of the Treasury assuming the obligations imposed by this bill. I cannot too urgently recommend that this measure should have reconsideration in order that it should be on a basis which will not damage our whole financial position."

The Mellon letter clearly foreshadowed a Hoover veto. But upon Congress it acted as no deterrent. Speaker Longworth pronounced the Bacharach bill "sane, sensible and conservative" and "one guess as good as another" on its cost. Secretary Mellon was loudly flayed for painting too gloomy a picture, was reminded that his dire prediction about the effects of the original Bonus act in 1924 had never materialized. The Ways & Means Committee in its report on H. R. 17054 argued that "there is no way to determine accurately just what the cost 'will be." Against Secretary Mellon's "potential liability" of $1,720,000,000 it set the fact that only about 48% of veterans had borrowed on their certificates in a "period of distress'' and the assumption that this figure would not be exceeded as times improved. The Committee claimed the cost would "range from $375,000,000 upwards," depending on the amount of borrowing, pointed to the $772,000,000 Bonus reserve fund as the logical source of cash.

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