Debt & Economy

Last week came the turn of Henry Morgenthau, gentleman farmer, now Secretary of the Treasury, to go up Capitol Hill to explain to an inquisitive if not skeptical Congress the Administration's money plans. Having already announced that the Administration seeks no new taxes (except on Government salaries and securities), Mr. Morgenthau had to get Congress:

1) To extend the President's power to fix the value of the dollar anywhere between 50-c- and 60-c- oldstyle (present value 59-06-c-.

2) To extend the life of the $2,000,000,000 Exchange Stabilization Fund, created from the paper profit of the original devaluation in 1934.

3) To raise the legal limit of the U. S. debt from $45,000,000,000, which it is to reach in 16 months, to $50,000,000,000. (The debt on March i: $39,915,000.000).

First before a House committee, then before Senators, Mr. Morgenthau was on the defensive from the outset. The reason for renewing both the President's power of dollar devaluation and the life of the Stabilization Fund is to protect U. S. business if European currencies go to pot, but Mr. Morgenthau had solemnly to assure the House that the Administration had, at this time, no idea of further devaluation; that the Fund had not and never would be used to finance foreign purchases of arms in the U. S.

House members were fairly polite to the Secretary. Crusty old Democrat Carter Glass produced a bluish bundle wrapped in rubber bands. "That bundle," he warned, "is German marks which once were worth $46,000 and they are not worth wiping your nose on now."

Mr. Morgenthau said: "If I was sure all the principal trading nations of the world could get together to stabilize currency, I would not ask this extension."

Senator Glass: "What emergency would require further degradation of the dollar?"

Mr. Morgenthau: "I don't understand you. You say 'degradation.' "

Senator Glass: "You know perfectly well what I mean."

All this was painful enough to Mr. Morgenthau, but doubtless less painful than the discussion of raising the debt limit. Loyal as he is to Franklin Roosevelt, Henry Morgenthau would like by this time to see the end of the Government's perennial deficit and mounting debt. Before the House committee he declared his belief that a $50,000,000,000 debt would be perfectly safe. Before the Senate committee he cited the continued demand for U. S. bonds as proof that the Federal credit has not been undermined. Senator Glass rasped, "You have maneuvered the damn thing to where they have to take your securities to protect the ones they have already!"

Baiting an Administration's chief fiscal officer is no new pastime for hard-shelled, money-wise old Senator Glass. Neither is it for Mississippi's long-legged, long-nosed Pat Harrison. Together they were the most painful and damaging Democratic snipers on the flanks of the Harding, Coolidge and Hoover Administrations. Then their victims were shy old Andrew Mellon and Utah's mournful Reed Smoot, chairman of the Senate Finance Committee. Four years of responsibility as Senate Finance Chairman during the first New Deal and a lifetime habit of party loyalty changed Pat Harrison from a sniper to an Administration supporter until Franklin Roosevelt's legislative vagaries and New Deal economic policies estranged him.

Last week, still Finance Chairman but never more strongly with the Opposition, Pat Harrison saluted Secretary Morgenthau's presence on Capitol Hill by issuing to the press a statement which met the Administration's monetary program headon. Said he:

"The Government's fiscal picture must be carefully scanned, and that doesn't mean next year, but now--and . . . not through a colored lens. . . . I am opposed, unless exceptional circumstances arise, to increasing by law the present limit of the national debt. The only way . . . is to begin immediately a radical and substantial cut in Government expenditures."

To questioners Pat Harrison specified a 10% overall slash in this year's Federal expenses. Knowing well that fixed charges of some $2,300,000,000 (for debt interest, Social Security, tax refunds, revolving funds and the like) could not be touched to effect such a saving, Pat Harrison snorted: "I know that a lot of this emergency stuff could be cut to hell."

In an honest showdown, not only Vice President Garner and influential Senators like South Carolina's Byrnes would be found at Pat Harrison's side, but perhaps even loyal Chairman Bob Doughton of the House Ways & Means Committee. At week's end Bob Doughton joined Pat Harrison in a joint letter to Mr. Morgenthau which could be construed either as a goodwill gesture or as another, specific challenge. In tones of warmest welcome they invited the Secretary of the Treasury to make good, after reviewing the income tax returns that will come in March 15, on his promise to ask for reduction of taxes which retard Business (TIME, March 6).

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