OCR Text |
Show UNITED STATES iLDSliOF Secretary McAdoo Submits j Annual Report to Con-! Con-! gressy Reviewing the Financial Situation. ANOTHER BIG BOND ISSUE IS CERTAIN Belief Expressed That All State Banks Should Join Reserve System for Patriotic Pa-triotic Reasons. WASHINGTON, Dec. 5. Congress was informed by Secretary McAdoo in his annua.l report submitted today that $5,128,203,79 must be provided in addition addi-tion to funds from taxes and bond issues already authorized in order to make estimated esti-mated receipts for the fiscal year ending June 30, 1918, equal disbursements. If this deficit is met by a new issue of bonds, the total amount of securities to be issued in the next seven months is estimated at $9,909,433,850. For the next fiscal year, ending June 30, 1919, the estimated excess of disbursements dis-bursements over receipts is $7,(527,973,-9S0. $7,(527,973,-9S0. Huge war expenses and loans to America's allies at the rate of a half billion dollars a month have made these estimates many times larger than any ever presented in a secretary of the treasury's annual report. Of the. $12, 16,OUO',000 estimated ordinary expendi-j expendi-j tures for the year ending next June 30, i $11,627,000,000 is for war purposes, and j the proportion is about the same for i the fiscal year ending in 1919. j So far the nation has borne the finan- j cial burdens of the war well, says Sec-I Sec-I retavy McAdoo, owing to healthy busi- ness conditions, and the valuable aid of I the established federal reserve system, i In the future, however, increasingly greater habits of economy must be de-. veloped by individuals and business institutions," in-stitutions," the secretary declares, and (i business as usual" cannot be adopted as the guiding principle of the war. People must save and invest in government govern-ment securities to avoid postponing victory. With this admonition, Mr. McAdoo proceeds to cite the enormous figures of government receipts and expenditures which are the fruit of war times. Estimated Receipts. Total estimated receipts for the current cur-rent fiscal year are $12,5S0,733,S00, which, with a balance in the tr.easurv last June 30 of $1,066,953,361. makes a total of $13,647,716,101. 'Most of the receipts, or $8,686,000,000, are from sale of bonds and war savings certificates; ordinary receipts are $3,886,000,000, largely from war taxes; and the Panama canal income is $7,000,000. Ordinarv disbursements are estimated at $12,316,295,223; loans to allies in the ! year at $6,115,000,000; public debt dis-; dis-; bursements at -5321,000,000, and Panama canal expenses, $23,593,000; making total estimated disbursements $18,775,-919.955. $18,775,-919.955. In order to allow for a balance in the general fund of about $500,000,000 next June 30, congress must authorize raising of about $5,640,000,000 additional funds. This figure, together with the $3,666,-000,000 $3,666,-000,000 of authorized but unissued Liberty Lib-erty bonds, and $663,000,000 estimated receipts from war savings, make th? 59,969,000,000 which Mr. McAdoo believes be-lieves Americans must "loan the government govern-ment between now and June 30, 1918. For the next fiscal year, ending June 307 1919, the secretary estimated receipts re-ceipts at $5,176,000,000. and disbursements disburse-ments at $12,804,034,440, exclusive of allied loans. This makes a $7,027,000,-ooo $7,027,000,-ooo excess of disbursements. If the present rate of loans to allies continued con-tinued in the lfUS-10 fiscal year, $6.oini,000,000 ad lit ion a! would bp required. re-quired. Estimated interest on bonds to bo issued that year is .;io,0u0,ono, and estimated expanse of floating the bond issues :!S,000(0ijO. Thus if th deficit is to be met by bonds. $1 4.010, ijiiO, uuo worth must- be floated between duly 1. 191.S, and dune 30, 1910, in addition to receipts from war savings. May Be Changes. "While these figures represent the situation as it appears today," the secretary sec-retary says, ''it should lie borne in mind that "the exigencies of the future may cause c ban ires, particularly with regard to the estimates for tho war and navy departments." The estimates on which the secretary bases his figures arn made by the various Government departments. The outstanding fact apparent from these stupendous figures is that tho cost of the war to the American people including allied lours, for t he two vears ending June 30, 1919, will be at least $;-i(Ooo,ooo,ooo. To tiie grat task facing the country, yecretary McAdoo calls the people with these words: "Whit is of superlative importance in the readjustment that must take place is that our people, shall be impressed im-pressed with the necessity of economizing economiz-ing in the consumption of articles of clothing, food and fuel, and of every other thing which constitutes a drain upon the available supplies, malorials and resources of the country. Everything Every-thing wasted now is little short of criminal. ''So far as 1 have been able to observe, ob-serve, the American people are not sufficiently suf-ficiently aroused to the necessity of economy and of saving in this -really serious time, not only in the life of America, but of the nations of the world, t'p to the present there has been a. relatively small denial of pleasures, pleas-ures, comforts and conveniences on the part of the average citizen. Me is draw-nig draw-nig upon the general store of supplies in the . country with almost the same freedom as before America came into the war. This cannot continue without serious hurt to the nation and to. the world. The great financial operations of the government cannot be carried forward successfully unless the people of the United States economize in every possible direction, eavc their money and lend it to the government." Course of Dollar Saved. " Tt is easy to visualize the course of a dollar saved from waste and invested in government bonds: First it goes to the government as a loan for the war; second, it is expended by the government govern-ment for food, clothing and ammunition which go directly to a gallant soldier or sailor whose fighting strength is kept up by the food, whose body is kept warm by the clothing, and whose enemy is hit by the ammunition. It has not been expended in the purchase of needless need-less food and clothing for the man at home, and is, therefore releasel for the use of the soldier; it is saved wealth to the man at home 'and can be loaned to his government, at interest, with resulting re-sulting benefit to himself and to his government." . Secretary McAdoo denounced1 purchasers pur-chasers of Liberty bonds who sell their bonds when they do not imperatively need money. ''It is by actually lending money to the government and not by merely promising it and shifting the load to some one else," he said, '"'that the citizen citi-zen really helps in this great time." He added, however, that he did not mean to discourage legitimate trading in government securities. Mr. McAdoo expressed the hope that additional funds to be raised during- the balance of the year be by bond issues rather than by taxation, saying: "It is my earnest conviction that -the general economy of the country should be permitted to readjust itself to the new revenue laws before consideration should be given to the imposition of additional ad-ditional tax burdens." Of the possibility that interest rates on future Liberty bond issues might be raised, the secretary said: "If a situation should develop where the government could not sell convertible and partly tax exempt bonds upon a 4 per cent basis, it would, I believe, become necessary neces-sary to seriously consider further revenue reve-nue legislation. In my judgment an increase in-crease in the rate of interest of such bonds would be- extremely unwise and hurtful." Will Recommend Loans. Secretary McAdoo disclosed that lie intends in-tends to recommend to roneress later in the session constructive and regulatory laws to prevent capital from going- into public or private enterprises unnecessary for the war. "It may also become necessary," .be added, "to concert some constructive measures through which essential credits may be provided fr those industries and enterprises in the country essential to the efficient and successful conduct Of the war. The subject, requires the best thought and study. It is receiving the most earnest consideration. "The courage and resources -of the nation na-tion are so abundant that America's success suc-cess in the war is beyond question if they are properly ovga nizer and intf-lligenfly used. The economic and financial condi tion of the country was never so strong and America's spirit was never more a roused to the imports m-e and necessity of Rohur forward, resolutely and regardless regard-less of sai-rifice, to the accomplishment of the great task to - which God has called us." The feder.il reserve system received Secretary McAdoo" s enthnsia stic praise for its part in the war financing pro-grantrne. pro-grantrne. He pleaded for mrthcr strengthening strength-ening of the reserve svsiem by the entrance en-trance of suite banks and trust companies. compan-ies. "Intelligent men all over the .country," he said, "are beginning to reaiize that the financial power of the United States should be strengthened to the utmost limit if we are to meet successfully the tremendous tre-mendous strain upon our resources occasioned occa-sioned by our own part in the war and by the credits which it is essential that we should extend to the foreign governments govern-ments co-operating with us in the war and if we aTe to be equal to the demands, de-mands, in large measure, at least, of world leadership which will inevitably be thrust upon us as a result of this war. "Financial strength ran come alone from a consolidation of the financial powers pow-ers of the country under one homogeneous system. If cannot be had under the present pres-ent arrangement, involving' as it does for-tv-nine separate banking systems or hanking con r vols In the United S'tntes. In the federal system we have t he one cohesive and powerful financial organization organiza-tion in the country. In addition to the federal svstem we have forty -eight, systems, sys-tems, n uthorized and administered under the laws of each of the states of the union. This is a serious element of weakness weak-ness and will he proven so when the test of a great responsibility and. need comes. We must be prepared for a larger measure of internal ional demand upon our resources re-sources In the future than ever before in the past. Pelf-interest alone should compel com-pel every eligible state bank in the country coun-try to take membership in the federal reserve system. But in addition to that in this grave time of national peril patriotism pa-triotism should combine with self-interest to make ihem take that course. "It is my earnest hope that the state banks of the United States will see this question in its proper light. They have been joining the federal reserve system J recently in greater numhers than ever be- I fore, but progress should now be even more rapid. The federal reserve law is now so liberal to state banks that they get nothing hut advantages by joining the system, while they are, bound to suffer suf-fer serious disadvantages, ' especially tn time of test and trial if they remain outside." The. secretary disclosed that neutral countries have entered cordially upon negotiations ne-gotiations looking to stabilizing foreign exchange rates without shipping from the United P tales the gold which has been accumulated here in the last few years. At the time he prepared his report, none of the negotiations had been completed. T'nder the government's system of forbidding for-bidding gold exports except under license bv the federal reserve board, Secretary McAdoo explained, "the exportation of gold has not been permitted except in those cases in which unusual circumstances circum-stances have seemed to justify he Issue of licenses for its export. The department depart-ment has not, however, rested content with a negative policy of prohibition, but has initiated a series of negotiations having hav-ing for purpose the substitution of arrangements ar-rangements which, while holding the necessity ne-cessity for large exports of gold, would yet stabilize the exchanges between the United Staes and neutral; countries." Although the nature of these negotiations negotia-tions was not disclosed, It is understood they relate to investments in the United States by neutral capital and to restriction restric-tion of Imports from neutrals. The secretary sec-retary explained that the United States now holds more than one-third of the world's gold monetary stock. Praising the policies of the farm loan system. Secretary McAdoo said some method must be devised for disposing of farm loan bonds as soon as they are issued is-sued in order to avoid suspending the loaning operations of the banks. He recommended rec-ommended also "that the limit of $10,000 imposed by law upon loans to any one Individual In-dividual should be increased to $26,000." Up to one week ago credits extended to allied governments amounted to S3.SS3,-9o0,000. S3.SS3,-9o0,000. The latest loans- have been at 44 per cent, but Secretary McAdoo explained ex-plained that "this rate In turn will be further Increased in case there should be higher rates of interest paid by the United States during the- continuance of the war for the moneys that it may invest in-vest in the purchase of foreign obligations." obliga-tions." Both IJbertv loans this vear, one aggregating ag-gregating $2,000,000,000, and the other $3,-80S, $3,-80S, 000,000, have been facilitated, said the secretary, by Issuance of short-time certificates cer-tificates In advance of the loans. The bond financing also was aided by the designation of 1903 national and 1343 state banks to receive deposits on account of their subscriptions without the necessity of making applications and being designated desig-nated each time they subscribe to certificates certifi-cates and bonds and desire to pay for them by credit. The humanitarian benefit of the soldiers and sailors' insurance system was praised by the secretary. The internal revenue bureau, "Mr. McAdoo Mc-Adoo said, has a stupendous task to collect col-lect 33,400,000,000 during the current fiscal fis-cal year, and is accomplishing this largely with the guidance and counsel of business busi-ness men and lawyer advisors. To render the customs service more efficient ef-ficient it was suggested that a complete revision be made of customs laws, eliminating elimi-nating certain officials and combining duties. du-ties. The International high commission, Secretary Sec-retary McAdoo said, has done excellent work In arranging economic and financial I transactions between the United States and South American countries, and $2?,-000 $2?,-000 should be appropriated for Its continuance. contin-uance. The public health service and coast gua rd, brandies of the treasury department, depart-ment, have turned their attentions largely large-ly to assisting the military and naval authorities au-thorities in recent months. |