National Affairs: H. R. 17054

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If Mr. Bacharach was the veterans' hero, Secretary of the Treasury Mellon logically became their villain last week when he wrote a strong public letter objecting to this bonus legislation. The gist of his argument was that the Treasury could not stand the financial strain. Predicting a $500,000,000 deficit next July (last estimate: $350,000,000), he declared the measure created "a potential liability of $1,720,000,000"—that is, if all veterans borrowed to the limit. The Treasury, he explained, had some $772,000,000 securities in a sinking fund reserve to pay off the bonus in 1945 which would have to be sold to raise cash in addition to floating a $1,000,000,000 bond issue. Heavy refunding of Liberty Loan obligations in the near future complicated the outlook still more. Declared Secretary Mellon: "the revenues of the Government are steadily falling behind. . . . The Treasury is already in a difficult position. . . . I regret I cannot approve of the Treasury assuming the obligations imposed by this bill. I cannot too urgently recommend that this measure should have reconsideration in order that it should be on a basis which will not damage our whole financial position."

The Mellon letter clearly foreshadowed a Hoover veto. But upon Congress it acted as no deterrent. Speaker Longworth pronounced the Bacharach bill "sane, sensible and conservative" and "one guess as good as another" on its cost. Secretary Mellon was loudly flayed for painting too gloomy a picture, was reminded that his dire prediction about the effects of the original Bonus act in 1924 had never materialized. The Ways & Means Committee in its report on H. R. 17054 argued that "there is no way to determine accurately just what the cost 'will be." Against Secretary Mellon's "potential liability" of $1,720,000,000 it set the fact that only about 48% of veterans had borrowed on their certificates in a "period of distress'' and the assumption that this figure would not be exceeded as times improved. The Committee claimed the cost would "range from $375,000,000 upwards," depending on the amount of borrowing, pointed to the $772,000,000 Bonus reserve fund as the logical source of cash.