FINANCING THE WAR
Statistics of financial operations usually make dull and dreary reading
for all who are not professional financiers. But every figure in the
financing of our share in the great war glows with interest. For it is
illumined by the high flame of patriotism and the eager wish to serve
the needs and the ideals of the nation that animated the whole people.
The story of the financing of the war is the story of the enthusiastic
giving by young and old, rich and poor, high and lowly, all over the
country, of all that their government asked in such overflowing measure
as far exceeded its requests. Willingly they took up the heavy burden
of increased taxes and gladly they carried to triumphant success four
huge loans of government bonds, thus providing an enormous reservoir
of credit that enabled the government to pay its mountainous bills, to
give a helping hand to other nations, to bend all its energies to the
prosecution of the war, and to carry the country over from a peace to a
war basis without shock or financial disturbance.
The total cost of the war to the United States, down to the signing of
the armistice, was, in round numbers, something over $21,000,000,000.
The unavoidable continuation for a period of the expenses of the war
establishment will have added $10,205,000,000 to that sum by the end
of June, 1919, and the complete return of the country to a peace basis
will somewhat increase that sum. However, a considerable portion,
probably more than one-quarter, will be reclaimed from values gained
or salvaged from the properties in which it was invested. Loans to the
nations associated with us in the war, of which ten asked for credits,
amounted, at the cessation of hostilities, to $8,000,000,000, and were
increased by $2,000,000,000 more during the next six months. That sum
will in time be removed from the country’s net war expenditure. But
$21,000,000,000 in excess of the nation’s usual outlay for the carrying
on of its governmental affairs had to be raised quickly and, for the
most part, expended as soon as collected. The plan of the Government
for financing the war provided for the raising of approximately
one-third of this sum by taxation and from customs duties and other
usual sources and the remainder by bonds and certificates maturing in
from five to thirty years. Therefore the entire cost of the war will be
borne practically by those now living who as mature persons have been a
part of it or who as children have witnessed or aided the work for it
of their elders.
Accustomed hardly at all to direct taxation, the people nevertheless
took up readily a war burden of income and excess profits taxes far
heavier than anything they had ever dreamed of before. For the first
time in their lives millions of people were called upon to make direct
contributions to the support of the Federal Government. The sum of
$3,694,000,000 raised by direct taxation was the largest tax ever paid
by any country and represented a larger proportion of the nation’s war
budget than any other belligerent engaged in the great war had been
able to defray from tax revenues. About seven-eighths of this sum came
from taxes on income and excess profits and the remainder from taxes on
liquors and tobacco. Only about $22,000,000 of the revenue from incomes
was paid by those having incomes of $3,000 or less, the bulk of it
coming from large fortunes and excess profits.
The story of the four great Liberty Loans that preceded the signing of
the armistice can never be adequately written. It is regrettable that
it cannot be told in all its richness of enthusiasm and desire to be
of service, its hard and willing work, and its lavish outpouring of
money from men, women and children of every economic class and social
condition who thus proved their determination to support the men in
khaki who had gone overseas to maintain the integrity and uphold the
ideals of the American Union. For if it could be told in all that
fullness it would be one of those great stories of humanity that for
centuries retain their vital spark and their power to thrill and
inspire. A flame of passionate purpose swept the country and caught
into its burning ardor almost every home in the land, whether on
isolated farms, in remote mountain valleys, in thriving towns, on poor
city streets, or on mansion-lined avenues. The nation asked the people
to buy, in the four loans, a total of $14,000,000,000 worth of bonds,
and they over-subscribed even this vast amount by $4,800,000,000. It
was by far the greatest financial achievement ever carried through by
any nation in response to appeals to its people.
The First Liberty Loan took place in May and June, 1917, when
subscriptions were asked for bonds to the value of $2,000,000,000.
There was an oversubscription of more than fifty per cent, amounting,
in round numbers, to $1,035,000,000. But as the issue was limited to
the amount offered none of the oversubscriptions could be taken. There
were over 4,000,000 individual subscriptions, of which ninety-nine per
cent were for amounts ranging from $50 to $10,000. There were only
twenty-one subscriptions for amounts of $5,000,000 and over, and they
aggregated somewhat less than $190,000,000.
The Second Liberty Loan occurred in October, 1917, the amount asked
for being $3,000,000,000. The final returns showed an oversubscription
of fifty-four per cent, or somewhat more than $1,617,000,000, half
of which the Treasury Department was authorized to accept. The loan
was taken by 9,400,000 men and women, of whom ninety-nine per cent,
subscribing in amounts ranging from $50 to $50,000, took nearly two and
a half billion dollars.
The Third Liberty Loan took place in April, 1918, opening on the
anniversary of our entrance into the war, when bonds were offered
to the amount of $3,000,000,000. These were over-subscribed by more
than $1,158,000,000, the full amount being allotted by the Treasury
Department. The number of subscribers was 18,300,000, of whom
18,285,000 subscribed for amounts ranging from $50 to $10,000.
The Fourth Liberty Loan followed in October, 1918, the request being
for $6,000,000,000. The amount asked for equaled the combined requests
of the Second and the Third Loans, all three occurring within one
year. It was the largest single loan any nation, at that time, had
ever asked of its people and was described by the Secretary of the
Treasury as “the greatest financial achievement of all history.” No
American can fail to feel that it was a privilege and a milestone in
his life to witness and be a part of the patriotic fervor that carried
it to a triumphant conclusion. The influenza epidemic that swept the
country during the period of the loan kept many hundreds of thousands
of people in sick-beds or sent them to their graves, disorganized
business for many weeks, closed schools, churches, theaters, and all
public assemblies in many places and everywhere interfered seriously
with the progress of the campaign. Nevertheless, it was over-subscribed
by almost $1,000,000,000. More than 21,000,000 people subscribed for
bonds, thus making, if five persons be counted to the family, an
average of a bond for every family in the country.
The rising tide of the nation’s spirit was marked by the increase of
subscribers from loan to loan. The number subscribing to the second
loan doubled those to the first, and the third almost doubled those
to the second, while the fourth made a huge leap forward of 3,000,000
subscribers beyond the third. The over-subscription to the Fourth
Liberty Loan, all of which was allotted, was sixteen and a half per
cent. As in the previous loans, the great bulk of the securities taken
was in the smaller amounts, thus proving the almost unlimited extent to
which the mass of the people, of small fortune, were willing to stand
behind the government with their savings.
Their spirit was all the more notable because of the fact that the
American people have never been accustomed to purchase government bonds
and have never sought, in any considerable number, bond investments
of any kind. Each bond sale, with cumulative energy and enthusiasm
that found their climax in the fourth, was made the medium of a great
informative and patriotic campaign that sought to bring the meaning of
the war, the aims and ideals of America and the imperative necessity
of the winning of the conflict as soon as possible straight home to
the heart of every American. Hundreds of thousands of workers talked
and sang to assemblages and to crowds on the streets, carried on house
to house canvasses, received contributions at booths in hotels, banks,
public places of every sort. Cities and towns were gay with posters,
banners and parades and the flags of America and the Allies floated
from poles and house-tops and windows. Soldiers returning from the
front told the American people in hundreds of addresses why their money
was needed for the men on the fighting lines. Trophies of war, captured
from the enemy, taken over the country everywhere aroused enthusiasm.
Artists gave their talent and skill in the making of posters that had
nation-wide display. Men and women of prominence organized meetings and
made addresses, and societies, newspapers and press associations aided
in many ways. During the third and fourth campaigns it is estimated
that not less than 2,000,000 men and women devoted themselves to
helping the sale of the bonds.
The work done by the National Woman’s Liberty Loan Committee, of
which more detailed description is given in the chapter dealing with
“The Work of Women for the War,” deserves mention here because of the
importance of its contribution to the success of the loans. When the
committee was appointed by the Secretary of the Treasury in May, 1917,
it was made independent of all other loan organizations and given the
status of a Bureau of the United States Treasury. It was a unique
pioneer, for it was the first executive committee of women in the
Government of the United States. When it was established the campaign
for the First Liberty Loan was already in full swing, but it made a
beginning, produced some good results and then bent its energies to
thorough organization. It had a county chairman in practically every
one of the thirty-two hundred counties in the United States, with
49,500 associate chairmen organizing subordinate units, and in cities,
towns, villages, farming regions, mountain and desert districts, its
members canvassed for subscriptions from house to house, by carriage,
by motor, by horseback and on foot, in rain or shine, in mud or dust.
In the Fourth Liberty Loan campaign there were nearly 1,000,000
working members of the Woman’s Committee, every one of whom was busy
as organizer, or canvasser, or both. In the Second Liberty Loan the
organization was officially credited with the raising of $1,000,000,000
and in the Third Loan with a similar sum, while in the Fourth the
Woman’s Committee sold bonds to the amount of $1,500,000,000. The total
contribution of the Committee to the three loans for which it worked
was, therefore, one-fourth of the total asked for these three loans and
only a slightly smaller proportion of the total subscriptions.
One of the most significant factors in the financing of the war was
the contribution of the War Savings Societies. For what they gave was
the result of small economies and of a thrift for which the American
people have never been notable. Wasteful and prodigal beyond any other
nation, America, asked to economize for the sake of her soldiers, began
saving pennies and nickels and quarters as nobody had ever dreamed
she could, or would. The National War Savings Committee was appointed
by the Secretary of the Treasury in December, 1917, and under it
state, county, city and town committees were soon organized. All their
members began preaching and practicing the gospel of thrift and asking
men, women and children to save in every possible way and invest the
results of their small savings and economies in thrift stamps costing
twenty-five cents each. Sixteen of these stamps were exchangeable, with
a cash payment of a few cents, for a war savings certificate redeemable
in five years at a value of five dollars.
A nation-wide campaign of education for thrift and economy and of
organization for practical result enlisted the services of many men
prominent in business affairs. During the first three months of the
campaign more than 18,000 incorporated banks and trust companies agreed
to become authorized agents for the sale of war savings securities. The
work spread all over the country, from Alaska to Panama and from Hawaii
to Porto Rico. By the first of November, 1918, 150,000 War Savings
Societies had been organized and hundreds of thousands of workers
were selling stamps and aiding in the distribution of literature and
the work of organization. More than a thousand periodicals gave free
space to the advertising of the campaign, affording, approximately, a
circulation of 55,000,000. Labor organizations and women’s societies,
schools, churches, clubs of many kinds, young people’s organizations,
the Boy Scouts being especially efficient, coöperated with important
results. Thrift literature was placed in practically every school
in the United States. The monthly cash receipts from the sale of
thrift and war-savings stamps began with $19,236,000 in December,
1917, and increased with every month, reaching their highest point
in the following July with $211,417,000. During the last ten days,
of that month the receipts were at the rate of over $7,000,000 for
every banking day--enough to have financed the entire United States
Government in the years before the war.
Up to November 1, 1918, the cash receipts from the sales of these
stamps totaled $834,253,000, representing a maturity value of over
$1,000,000,000. The achievements and influence of these societies were
so remarkable and so beneficial that probably they will be continued
and become a permanent factor in the finances of the nation.
Through the Bureau of War Risk Insurance of the Department of the
Treasury the nation made generous provision for its fighting forces and
their dependents. No other government had ever provided for them so
liberally, nor had any other, not even excepting our own in previous
wars, gone about the business in so just and so scientific a manner.
Established at the beginning of the world war to insure the hulls and
cargoes of American vessels against the risks of war, the scope of the
Bureau was enlarged after our entrance into the conflict to include
the personnel of the merchant marine and the officers, enlisted men
and nurses of the Army and the Navy. It had also in its charge the
compensation awards for death or disability to be paid to the men of
these services or their dependents and the payment of allotments to
their families. So enormous was the work of the Bureau that it soon
became one of the greatest of business enterprises and beyond question
the largest life insurance concern in the world. It had written, at the
end of hostilities, 4,000,000 policies totaling over $37,000,000,000
and equaling in amount the total life insurance in force at that time
in all American companies, ordinary, industrial and fraternal, both at
home and abroad. The maximum policy that could be taken out was for
$10,000 and the average taken was for about $8,750. Premiums to the end
of the year amounted to $630,000,000. At the signing of the armistice
the Bureau was issuing checks for compensation awards, allotments and
insurance averaging a million per month in number and calling for the
payment of a million dollars a day. It then had on file 30,000,000
individual insurance records of various kinds and, in addition, there
were afterwards brought from France twenty-six tons of such records of
insurance issued after the men had gone overseas.
The enormous amount of work done by this Bureau was only one factor
in the wartime expansion of the duties of the Treasury Department
that brought about grave problems of administration. Thousands of new
employees were needed for the vastly increased work of the Internal
Revenue Bureau, with its new phases due to the inauguration of direct
personal taxation, and thousands more for the work of the War Risk
Insurance Bureau, the new tasks of each Bureau calling for special
skill. The Insurance Bureau had 13,000 employees, recruited and trained
in a year. Other expansions made necessary still more thousands of
workers. Office space for them and for the records that must be kept
had to be provided, the employees had to be found and the greater
part of them had to be trained for their special tasks. The problem of
training was met by establishing schools within the Treasury Department
in which intensive work prepared applicants for their duties in a short
time.