WHAT PEACE CAN MEAN TO AMERICAN FARMERS 23 



decline in the debt over a long period but there is no positive assur- 

 ance that this will be true. Indeed, despite all other possible aids 

 from Government, the ability of private enterprise to maintain con- 

 tinuous full employment for long periods could conceivably be such 

 that necessary Government spending programs would result in a 

 gradual expansion of the Federal debt. Appropriate measures are 

 required for dealing with this contingency. The very fact that Gov- 

 ernment spending programs to supplement private expenditures 

 could result in expanding the Federal debt in the post-war years may 

 appear to some as evidence that full employment is not a desirable 

 national goal or that some method other than public spending should 

 be followed to achieve it. 



Under certain conditions a high Federal debt could play havoc 

 with the ordinary ways of living and carrying on business activities. 

 But it can be controlled and managed. Moreover, a debt much larger 

 than that which the Federal Government will have at the end of this 

 war can be managed successfully if a high level of production and 

 employment can be maintained or expanded. 



If the war ends within the next 2 years, the Federal debt may be 

 about 300 billion dollars. Most of this will have been accumulated 

 during the war and the money will have been spent for the purchase 

 of military supplies and equipment. The Treasury will have paid 

 for the battleships, tanks, planes, guns, shells, and similar material 

 used in the war. The business firms that supply this war equipment 

 receive their pay for it as it is delivered. The laborers who make it 

 receive their wages currently. Thus the producers of the war equip- 

 ment and supplies receive their money from the Government as they 

 turn out the products. But the question remains, How will the final 

 dollar cost be divided up among the people of the country? This is 

 the problem of who pays the taxes to pay the interest on the bonds, 

 and who receives the interest. 



Even though the Treasury will have paid the producers of war 

 materials, the members of the armed services, and the thousands of 

 civilians who are directly participating in the war, it will have bor- 

 rowed a part of the money with which it made these payments. It 

 borrowed this money from individuals, from business firms, and 

 particularly from banks, within this country. It must meet the 

 interest payments on these loans when they come due. These pay- 

 ments will be made from taxes which, in turn, will be collected partly 

 from the very same people and business firms that own the bonds and 

 partly from others. Hence, taxing to pay the interest on the debt 

 results in shifting funds from one pocket to another, or from one 

 group of citizens to another. Such taxation is not a drain on every- 

 one in the country. Indeed, bond interest paid from Federal taxes 

 is a source of income to thousands of banks and business firms and 

 millions of individuals. But there are some real problems in design- 

 ing a tax system which will equitably shift the necessary funds from 

 one group to another in a manner that will be conducive to the 

 maintenance of full employment. 



Will a high, and perhaps expanding. Federal debt lead to infla- 

 tion? Even if the tax problem of shifting funds from some people 

 to others in order to pay interest on the debt is entirely manageable, 

 will there not still be a danger of the debt bringing about inflation ? 



