196

WAR  BORROWING

by  loans.  For  the  fiscal  year  ending  June  30,  1919,
the  Secretary  of  the  Treasury  had  asked  that  provision ­
  be  made  for  an  expenditure  of  $24,000,000,-000,
  of  which  $16,000,000,000  should  be  secured  by
loans.  The  deficiency  appropriation  bill  of  October
1918  added  some  $6,300,000,000  to  the  amounts  before ­
  estimated  as  necessary  to  the  conduct  of  the
government  during  1918-19.  With  a  little  less
than  $7,000,000,000  available  in  nominal  aggregate
from  the  Fourth  Liberty  Loan,  and  with  $9,000,-000,000
  as  the  assumed  yield  of  the  new  war  revenue
bill,  there  would  have  remained  to  be  provided  before ­
  July  1,  1919  —  had  the  original  program  of
expenditure  been  carried  out  —  approximately  $15,-000,000,000.
 1
In  so  far  as  the  earlier  termination  of  the  war
has  permitted  scaling  down  of  budgetary  estimates  it
is  likely  that  substantial  reduction  will  be  made  in
taxation  as  well  as  in  borrowing.  Definite  announcement ­
  has  already  been  made  of  a  Fifth  Liberty ­
  Loan  exceeding  in  nominal  amount  any  one  of
the  first  three  Loans,  and  it  is  not  unlikely  that  the
future  may  require  even  further  commitments  of
this  kind.
How  are  these  huge  sums  to  be  provided?  Shall
the  Treasury  continue  as  its  chief  reliance  the  same
borrowing  procedure  used  in  the  first  phase  of  the
war  —  short-term  loans  from  the  banks  by  the  issue ­
  of  certificates  of  indebtedness  fundable  into  or
liquidated  out  of  the  proceeds  of  long-term  bond
issues  absorbed  by  popular  subscription?  Or  shall
some  alternative  device  be  employed  which  will  en-1
  Federal  Reserve  Bulletin,  November,  1918,  p.  1045.