because of the inability of the institutions locally to absorb them. I personally have not run into that situation in the New York, Philadelphia, or Boston areas, but I can easily understand how, in certain parts of the country-especially rural parts, where you have limited facilities for financing GI loans-that could be a very important consideration.

I remember especially that the State of Kentucky had 127 percent volunteers over draft-an incredible thing. Some States sent more men to the armed services than others. The South is outstanding in that. It has a magnificent record on that.

Mr. BROWN. At one time we had more volunteers in my State of Georgia than you had in the State of New York.

Mr. ROOSEVELT. That is right. We believe the State of Georgia was 99 or 98 percent volunteers.

Where you have a very heavy veteran concentration, with limited banking resources, I think there certainly should be a provision for setting up this revolving fund through secondary mortgage purchases. But that does not come up all over the country. It is a special situation.

Mr. SMITH. Mr. Chairman.

The CHAIRMAN. Dr. Smith.

Mr. SMITH. Mr. Roosevelt, do you have an estimate of the population of World War II veterans and their families?

Mr. ROOSEVELT. Of World War II veterans?

Mr. SMITH. Yes, sir.

Mr. ROOSEVELT. I have seen figures on that, Dr. Smith, but I cannot give it to you quickly offhand. I do not have them with me.

Mr. SMITH. There are about 14,000,000 veterans, are there not? Mr. ROOSEVELT. Yes, sir, about 14,000,000 veterans. I do not have at my fingertips the percentage that have subsequently married and those that have subsequently had children. The 1950 census, however, I suppose, will cover that.

Mr. SMITH. Do you think that a figure of twenty or twenty-five million would be too high?

Mr. ROOSEVELT. I am trying to recall where I saw some estimates on that. No, I do not believe that would be too high. In fact, I think it would be quite conservative.

Mr. SMITH. I have seen figures as high as 30,000,000.

Mr. ROOSEVELT. Yes, sir. I believe that is somewhere in line with the estimates I saw. But, as I say, I do not have with me any specific data on that question.

Mr. SMITH. So that anything that affects the financial position of the Nation will affect seriously the veterans and their families; is that correct?

Mr. ROOSEVELT. I certainly think that that is a general statement which is correct.

Mr. SMITH. We have a Federal debt which almost approaches the $300,000,000,000 mark-not on the books of the Treasury but the Treasury does not list all of the Federal debt, by any means.

Mr. ROOSEVELT. I have not heard the figure $300,000,000,000, sir. I thought it was considerably below that now.

Mr. SMITH. I meant to say that it approaches more nearly the $300,000,000,000 figure than the $250,000,000,000 written into the Treasury statements. There are a lot of factors to be taken into

consideration. But whatever it is, even taking the $250,000,000,000figure, the veterans then are charged with a debt of, say, 30 percent of $250,000,000,000.

Mr. ROOSEVELT. Thirty percent? Taking your figure of 25,000,000veteran families

Mr. SMITH. You are correct. I took the figure of 30,000,000 population.

Mr. ROOSEVELT. Call it 30,000,000. The present population is roughly one hundred and forty-eight or one hundred and forty mil-lion. I make it around 20 percent. However, go ahead.

Mr. SMITH. Let us make it 20 percent.

Mr. ROOSEVELT. All right.

Mr. SMITH. So the veterans have a debt obligation of 20 percent of the Federal debt; is that not true?

Mr. ROOSEVELT. They have their per capita share of whatever thedebt is.

Mr. SMITH. Title VI of S. 866 adds $6,000,000,000 to the Federal debt. I want to ask you, Mr. Roosevelt, whether you believe that the Members of the Congress of the United States have a serious problem in the present debt situation.

Mr. ROOSEVELT. I have never known a period in our history when the debt situation was not considered serious. Even in surplus years,. we always consider the debt situation serious.

Mr. SMITH. Was the debt situation serious in, let us say, 1914, when we owed about $1,200,000,000? Was that as serious as the debt situation is today?

Mr. ROOSEVELT. It was certainly considered so at that time.

Mr. SMITH. By which you mean that the debt situation is no more serious today than it has ever been?

Mr. ROOSEVELT. No, sir; I did not say that. I said the debt situation is always considered serious. I have never made a comparative statement as to when it was more serious than other times. I am not qualified to say that.

Mr. SMITH. You do not know that the debt situation today is moreserious than it was in 1914?

Mr. ROOSEVELT. If I could figure out where you are going, Dr.. Smith, maybe I could answer your question. I consider $250,000,000,000 certainly a larger astronomical figure than $1,200,000,000. On the other hand, the economic resources of the country, the productive power of the country, the population of the country, have so altered that I do not think the two figures are comparable. The costs of our governments-State, local, county, and Federal-have so increased the value of the dollar is so different from what it was in 1914, that I do not see how the two are comparable. Again, we can get into a very long and interesting discussion about Government financing and the entire debt picture, but I do not think that that is going to be relevant to this.

Mr. SMITH. As I understand you, then, Mr. Roosevelt, you think that the matter of the debt is one of astronomy and not finance?

Mr. ROOSEVELT. When you take an adjective and make a noun out of it, I think you are putting a different connotation on the words. that I used than I had intended. I do not think there is any similarity, factual similarity, between our debt structure and astronomy..

75674-48- -34

Mr. SMITH. Some of us in Congress consider the debt to be a serious problem.

Mr. ROOSEVELT. Dr. Smith, I think that the Congress has already passed on that, when it reduced the tax bill by some $4,000,000,000. Did you not vote for the tax bill reduction, sir?

Mr. SMITH. I thought you were the witness.

Mr. ROOSEVELT. Yes, sir; I am sorry. Excuse me. Excuse me, sir. I did not mean to be in any way humorous about this, because this is not a humorous situation, but I think that that is a proper discussion under the consideration of the tax bill rather than under the consideration of this bill.

Mr. SMITH. Well, at any rate, we have the debt before us.

Mr. ROOSEVELT. That is right.

Mr. SMITH. It does not seem to be decreasing very much. We also have inflation. Do you agree with that?

Mr. ROOSEVELT. I most certainly do; yes, sir.

Mr. SMITH. What causes inflation? It is the debt, is it not?

Mr. ROOSEVELT. Dr. Smith, I recall that one of the reasons why the President opposed the reduction of the tax bill which he submitted to the Congress was that a tax reduction at this time would be inflationary, because more money would be available as purchasing power in the hands of the public. Inflation is due to a shortage of products and an abundance of money with which to buy them-the purchasing power.

Mr. SMITH. Very well. And our Federal debt is purchasing power, is it not?

Mr. ROOSEVELT. Well, I think we are getting into a rather involved subject.

Mr. SMITH. Not at all. We are dealing with a specific problem which confronts these 14,000,000 veterans and their families.

Mr. ROOSEVELT. A large section of the debt was purchasing power by our Government, in order to win the war, and it was used up in war supplies. It was purchasing power.

Mr. SMITH. It is not purchasing power any more?

Mr. ROOSEVELT. Well, I suppose you can consider the interest that is paid on the debt to be part of the purchasing power.

Mr. SMITH. Well, suppose you are the owner of a savings bond. Can you not convert that into cash and buy something with it?

Mr. ROOSEVELT. Yes; but I also know that take the Government bonds, for example. The Treasury Department is continually asking the holders of bonds not to convert them into purchasing power. also know that a lot of veterans, because of the increased prices, and partly due to the increased profits, have had to convert some of their War Savings bonds in order to make both ends meet today.

Mr. SMITH. Still, it is purchasing power. You have in the banks about $70,000,000,000 of monetized debt. That is purchasing power in the form of deposits, is it not?

Mr. ROOSEVELT. You are getting into terms-monetized debt. Will you define that for me?

Mr. SMITH. It is not very difficult to define. I thought you knew about it.

Mr. ROOSEVELT. I am not a banker. I am a lawyer.

Mr. SMITH. I thought everybody understood the process of, so to say, selling Government obligations to the banks. It is merely writing

upon the books a credit in favor of the Federal Government, the Government checks against that credit. That is what is meant by the term, "monetizing the debt."

Mr. ROOSEVELT. I follow you. I understand what you mean.

Mr. SMITH. All right. Now, that is all purchasing power, is it not, in the hands of the people?

Mr. ROOSEVELT. Part of it is purchasing power.

Mr. SMITH. Well, any amount that you have in the bank in the form of a deposit you can convert into goods, can you not?

Mr. ROOSEVELT. On that theory, all debt is immediate purchasing power. As I understand financing, it is not generally considered that all debt is purchasing power-is immediately available purchasing

power.

Mr. SMITH. Eventually it is all purchasing power, and it is purchasing power either potentially or actually.

Mr. ROOSEVELT. Then, if I understand you correctly, you are opposed to paying off the debt, because it would immediately become purchasing power. You want to continue the debt, maintain it stable.

Mr. SMITH. No, I do not believe that there is any reason for drawing that inference at all. Mr. Roosevelt, you have indicated to this committee that the Federal debt might not be such a big problem. Is that correct?

Mr. ROOSEVELT. Might not be such a problem?

Mr. SMITH. Might not be too great a problem.

Mr. ROOSEVELT. I do not agree with you there. I think it is a tremendous problem. It is $250,000,000,000 worth of problem. That is just what it is.

Mr. SMITH. Then, those Congressmen who feel that it is a serious problem might be justified in asking whether it is a good thing to load more upon the veterans and the people in general?

Mr. ROOSEVELT. That is the point at which you are driving, is it? That this, being additional financing, therefore, it is, per se, bad, because the Federal debt might be increased thereby.

Mr. SMITH. Not only increased, but actually put in a condition that might eventuate in actual, outright bankruptcy. Not that this in itself would do it, but that this might be a part of the program which would do it.

Mr. ROOSEVELT. Well, this bill is a 10-year bill. Assume that the $6,000,000,000 figure is accurate. That means that we would increase cur national debt-provided we do not have a tax bill that will cover our current expenses-by $6,000,000,000 a year; is that correct?

Mr. SMITH. Well, I am talking about the one particular feature only. I am discussing only title VI of S. 866, which provides for low rent housing. I am not considering any other part of the bill now. What I am getting at, Mr. Roosevelt, is this: I have seen quite a few statements which you have made publicly regarding inflation. Here you are this morning asking this committee to increase the inflation potential.

Mr. ROOSEVELT. I do not consider that this, in effect, will increase the inflation potential. I think the inflation potential is something that Congress could have and should have dealt with considerably in the past. But this is not a hearing to discuss how the Congress should have handled the entire inflation problem. If you would like to discuss that now, sir, I am perfectly willing to go ahead and discuss it.

Mr. SMITH. Mr. Roosevelt, we will have to go to the floor, as there is a quorum call. But I think, Mr. Roosevelt, that the members of this committee will decide for themselves what the purpose of these hearings shall be.

Mr. ROOSEVELT. Oh, yes, sir; I am sure of that.

The CHAIRMAN. Thank you, Mr. Roosevelt.
Mr. ROOSEVELT. Thank you, Mr. Wolcott.

The CHAIRMAN. At this time the committee will recess to reconvene tomorrow morning at 10 o'clock.

(Whereupon, at 12: 20 p. m., the committee recessed, to reconvene at 10 a. m., Thursday, May 13, 1948.)