Dec. 20 — World War II has left the United States with a national debt, the amount of which, for the first time in its history, exceeds the amount of the annual national income and represents a per capita burden eight times greater than after the First World War. These are points stressed in a study made public yesterday by the Committee on Public Debt Policy. The study, a review of the United States debt after five great wars, was the final work of the late General Leonard P. Ayres, noted economist and vice-president of the Cleveland Trust Co. It was completed a few days before his sudden death in Cleveland last October, and is the first of a series of studies to be issued by the committee in its effort to arrive at sound policies for management of the public debt.
The committee was formed to fulfill the purposes of a grant of $100,000 by the Laura Falk Foundation of Pittsburgh for study of the U.S. debt. The committee was formed by men prominent in industry, banking, insurance and education and is headed by W. Randolph Burgess, vice-chairman of the National City Bank of New York. Cooperating with it as consultants and research workers is a group of economists recruited from universities and various business fields.
The Ayres study finds that when we entered World War I the national debt represented about 8% of the national income total, within two years had grown to 41% and by 1930 had been pared down to about 22%. Deficit spending during the following decade and subsequently the great burst of war expenditures brought such a perpendicular rise that by February, 1946, the debt was 180% as great as the annual rate of national income reported by the Department of Commerce.
The burden of the national debt resting upon each man, woman and child in the United States after each of the country's great wars is given as follows in the Ayres study:
Revolutionary War ………. $19
War of 1812 ……………… $15
Civil War ………………… $78
World War I ……………... $240
World War II …………….. $1,981
Lower Interest Rates Factor in Inflation
Government controls applied to interest rates, according to the study, "have circumvented the normal tendency in wartime for the laws of supply and demand to operate towards higher rates. This does result in large interest savings to the Government; but it has had other results as well, for in the process of keeping interest rates low, the Reserve System has had to pump out money into the spending stream, and this has itself built the substance of inflation at the source. There is also the question whether at less lower rates the Treasury has been able to sell as many bonds to investors as it could have sold at higher rates and hence whether the amounts taken by the banks and Federal Reserve System have not been larger than necessary."
"Throughout our history," the Ayres study finds, "the greatest obstacles to national financial strength and the most acute dangers of fiscal collapse have never been the results of inadequate or failing resources, but always consequences of weak financial policies." Our past record with respect to the national debt, according to the study, "is good enough to encourage us and poor enough to put us on guard. During 154 years from 1792 through 1945, we have had 93 years of net surplus in our national budget and 61 years of net deficit."
