To Be Forewarned
PERSONALLY I can see nothing in sight that is likely to stop our drift in the inflation current. The politicians will not stop the present heavy expenditures because these expenditures have votes and it is with votes they are most concerned. For the same reason they will not provide the revenue for meeting these expenditures through increasing taxation. Under such conditions, the public will not buy government bonds at rates of interest that are politically possible and pay for those bonds out of their savings. If these assumptions are true, and unless we have a powerful recovery which is not likely while the business public are scared over what is happening and is likely to happen in Washington, the only course that is left is a continuation of our present extravagant financing policy under which funds are obtained by forcing government obligations down the throats of the banks and having the banks pay for them by credit secured by these obligations. That is inflation pure and simple and there can be only one end of such a policy.
—From a letter by Professor Edwin Walter Kemmerer, Princeton University, to Henry T. Bodman, January 28, 1936.
MOST of the states are at the end of the road financially. The same thing is true of the cities. Yet when the war is over the demands upon these local government agencies will be beyond their power. How will the states and cities meet the enormous costs of education? The answer is simple. The government is already laying plans to become their banker and financial fortress—the banker of the states and cities and school districts and counties. Governors, county commissioners, mayors, and school-board members will stand in line at the federal treasury for their handouts. They will stand in line not before Congress but before a federal bureaucrat with almost absolute powers in his hands. Will it be necessary to amend the Constitution to give that bureaucratic spendthrift power over the object of his philanthropy? He will have no constitutional power to require either a state or a city or a school district or an industrial corporation or a building company or a local utility to do anything. But he will have the power to give or not to give, to open the treasury door or not to open it to the suppliant governor, mayor, or corporation executive. The pass admitting them to the vaults of the treasury will be a certificate of compliance with the conditions which the bureaucrat makes for the federal gift.
John T. Flynn, As We Go Marching (1944)