FISCAL: Compensatory and Mr. Chase

Will a national debt of $300,000,000,000 bankrupt the U.S.? Where will the money to finance postwar full employment come from? How can jobs be found for 12,000,000 returning soldiers & sailors?

Last week, The Twentieth Century Fund published Stuart Chase’s brightly written answers under the title Where’s the Money Coming From? ($1). Once Author Chase was a tub thumper for a planned economy run from the top by a general staff of technicians, with U.S. industry—and consumers— regimented at the bottom (A New Deal, The Economy of Abundance). Now he raises his voice just as lustily for the widest possible free enterprise. The Federal Government would in effect underwrite a free U.S. economy, keeping the lightest of fingers on the controls.

Bugaboo. Where will the money to underwrite the peace come from? Answers Author Chase: from the same place the money to underwrite the war came from. He takes a long look at the way the “bankrupt” Axis nations built their war machines, then points out once again what they proved—that a nation’s wealth is not measured by its cash in the bank, but by its labor and production. Thus: “The idea of national bankruptcy in the modern world is a verbal bugaboo. The only way a large nation can go bankrupt today is to run out of men or materials. . . . You can buy your war … to the limit of the nation’s manpower, machine-hours and materials. . . . Except for our fears and financial traditions, the same formula can be followed in peacetime.”

Thus, he estimates, the U.S. can comfortably carry a national debt as high as $300,000,000,000 if its men, materials and dollars are kept working full blast by a compensatory economy.

Gadgets. Stripped to its bones, the Chase compensatory economy is nothing but old-fashioned pump-priming on a vast scale, through self-liquidating public works and expanded social security, with a few new gadgets on the pump. The gadgets:

>A barometer based on a disinterested monthly count of the unemployed or the rate of spending for consumer goods. Whenever the number of jobless rises above a set standard, or the rate of spending falls below, priming would start.

>A double budget for the U.S., similar to Sweden’s, to keep public-works expenditures separate from government running expenses.

>A tax on bank accounts and other “idle” money, to keep dollars working and prevent slack times. A tax on spending in booms to hedge against inflation.

Calamity. A major obstacle to this plausible plan is noted by Author Chase himself. Will it be politically possible to keep taxes sky-high in fat years, as they must be kept to lay away a cushion for the lean? Mr. Chase is not sure. Practically any politician could set his mind at rest instantly with the obvious answer: No. “Americans,” he writes, “traditionally regard taxes as a burden and a waste, if not an outrage. . . . They will have to change their ideas and begin to think about taxes the way they have been taught to think about insurance. You pay now in order to avoid calamity later.”