BONDS AND TAXATION

With three Liberty Loan campaigns successfully launched and taxation assuming proportions which involve every phase of American life, the question of the better method of financing the war is one of foremost importance to the entire nation. There are economic aspects and there are political aspects; one must be tempered by the other and both must receive their due.

From a purely economic point of view taxation is the ideal method. War burdens cannot be shifted to the next generation, but hampering posterity by a bond issue can be prevented by levying the financial cost solely on present society. Moreover, taxation means a distribution of the burden according to ability to pay. It is as democratic as the conscription of an army; it will bring in exactly the desired amount; and it is certain in action. Conscription of wealth is in many respects ideal.

Turning now to the issue of bonds as a method of war-finance, we see that it possesses none of those advantages. It penalizes the willing and leaves the pocketbooks of the less patriotic untouched. It places a financial difficulty on future generations; the amount of money it will realize is indefinite; its success may not always be assured. Yet despite all this, it possesses political and psychological advantages of undoubted merit. Where the public, already crushed by the tax-collector's demands, would not stand any increase in taxation, it gladly buys bonds. There is no better stimulus than a Liberty Loan campaign for arousing patriotic spirit and putting the whole nation behind the wheel of war. Bonds have their serious limitations, but they stir the popular imagination.

In America, therefore, we still maintain our balance between taxation and bond issues. The former method will no doubt be increased, but it will never supplant the latter as the most important source of war income. The power of taxation is the power to destroy. The power of borrowing is the power to enlist the support of the entire nation in the prosecution of the war.