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WAR BORROWING

loan borrowing repeats the important advantages
and avoids the conspicuous disadvantages of cer-
tificate borrowing.

But there is a further advantage in favor of the
installment loan as contrasted with certificate bor-
rowing— the check upon popular non-essential ex-
penditure. A glaring fact in the war experience of
the United States, as of every belligerent state, has
been the imperfect appreciation of the doctrine
that national effectiveness means spending less,
quite as much as producing more, and that every
unit of productive force required in supplying dis-
pensable needs — every ounce of raw material,
fuel, convertible machinery engaged in making
things and services without which we can subsist
is just so much reduction1 of the nation’s war
power.

Much has been said and written of the usefulness
of heavy taxation in war finance in correcting this
tendency, and such is undoubtedly the case if
taxation be widely distributed. That part of the
national income surrendered to the state in tax-
ation which would otherwise have been needlessly
consumed effects a corresponding release of pro-
ductive energy for the national defense. But it is
equally certain that the same result can attend
borrowing and that the largest part of that which
the Treasury receives from loans can come from
the income rather than from the credit of those
who subscribe to bonds. This is the distinction
between “ credit loans ” and “ savings loans.” If
bonds are paid for out of current income that
would otherwise have been spent upon non-essen-