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Volume 661, September 1 – September 3, 1943
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Volume 661, September 1 – September 3, 1943
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 661
September 1-3, 1943
Regraded Unclassified
- A -
Book Page
Africa, French
See Occupied Territories
Arthurdale, West Virginia
See Procurement Division
- C -
Churchill, Winston
See Financing, Government: War Savings Bonds
(3rd War Loan Drive)
Correspondence
Mrs. Forbush's mail report - 9/3/43
661
217
- D - -
Drug, Cosmetic, and Allied Industries Committee
See Financing, Government: War Savings Bonds
(3rd War Loan Drive)
- E -
Elliott. Harriet
See Financing, Government: War Savings Bonds
Engraving and Printing, Bureau of
Cafeteria investigation requested of Thompson or Bell -
9/3/43
237
a) Report by Thompson - 9/6/43: See Book 662. page 81
- F -
Financing, Government
War Savings Bonds:
3rd War Loan Drive:
Churchill purchase of $25 bond discussed by HMJr and
Gamble - 9/1/43
51
a) HMJr's letter to Churchill - 9/2/43
130
b) Churchill and HMJr's statements at time of
purchase - - 9/3/43
211
Publicity expense discussed in Congressman Taber-HMJr
correspondence - 9/1/43
79
a) For non-delivery of bonds to service men
correspondence see Book 662, page 150
FDR's launching of drive described in Treasury press
release - 9/2/43
180
Miss Elliott's suggestions for HMJr's speeches - 9/2/43
187
Drug. Cosmetic, and Allied Industries Committee thanked
for book showing record on advertising support -
9/3/43
212
Regraded Unclassified
- 1- (Continued)
Book Page
Foreign Funds Control
McDaniel, Charles B., Jr.: London funds - release of
Discussed in
McDaniel-Navy-State-Treasury correspondence 9/3/43... 661
238
Jesse Jones-Treasury correspondence: See Book 666, page 176
State Department-Jesse Jones-Navy-Treasury correspondence -
10/14/43: Book 670, page 210
French Africa
See Occupied Territories
- J -
Joint Committee on Taxation
See Revenue Revision
- L -
Lend-Lease
United Kingdom: Federal Reserve Bank of New York statement
showing dollar disbursements, week ending August 25, 1943 -
9/3/43
250
- M -
McConnell, R. E.
See Post-War Planning
McDaniel, Charles B., Jr.
See Foreign Funds Control
- N -
National Youth Administration
For surplus property disposal see Procurement Division
- o -
Occupied Territories
French Africa: "Recent developments of Treasury interest" -
White memorandum - 9/1/43
93
- P -
Post-War Planning
"Government V-Day Problems":
McConnell's preliminary outline of - 9/2/43
203
#
second preliminary outline "Post-Armistice
Interdepartmental Council" - 9/27/43: See Book 667,
page 118
a) Chart: Book 667, page 119
McConnell-O'Connell-Rosenman conference described in McConnell
memorandum - 9/28/43: Book 668, page 21
Byrnes' reaction to plan reported by Bell - 11/1/43: Book 672. page 5
Regraded Unclassified
- P - - (Continued)
Book Page
Procurement Division
Arthurdale, West Virginia: Surplus National Youth
Administration property discussed in Arthurdale-White House-
Treasury correspondence - 9/2/43
661
198
- R -
Revenue Revision
Joint Committee on Taxation
See also Book 655
Transmission of material through Office of Under Secretary
of Treasury discussed in Treasury-Stam correspondence -
9/2/43
172
a) Procedure explained to Helvering and Wenchel, of
Internal Revenue
177
b) Discussion of letter to Stam by HMJr, Paul, Gaston,
Sullivan, and Brodsky - 9/7/43: See Book 662,
page 120
1) Revised draft of letter: Book 662, page 126
c) Sullivan's letter to Senator George: Book 662,
pages 131 and 289
d) HMJr's letter to Senator George: Book 662.
pages 133 and 294
e) Summary of discussions and exchange of information
to date: Book 662, page 135
f) Revised letter (page 206) discussed by HMJr, Paul,
Gaston, and Sullivan - 9/8/43: Book 662, page 204
g) Stam reply reiterating all that has gone before -
9/10/43: Book 663, page 103
Withholding Tax Gallup Poll on taxpayers' reaction after
two months - - 9/1/43
77
- S -
Stam, Colin
See Revenue Revision: Joint Committee on Taxation
- T -
Taber. John (Congressman, New York)
See Financing, Government: War Savings Bonds
(3rd War Loan Drive)
- W -
War Savings Bonde
See Financing, Government
Withholding Tax
See Revenue Revision
Worms Bank
PM article concerning - 9/3/43
206
Regraded Unclassified
1
September 1, 1943
9:20 a.m.
TAXES
Present: Mr. Paul
Mr. Gaston
Mr. White
Mr. Sullivan
Mr. Smith
Mr. Blough
Mr. Haas
Mr. Surrey
Mrs. Klotz
H.M.JR: Let's get down to business.
MR. PAUL: Roy has a set of tables and charts, but
it seems to me one has to consider the basic questions
here rather than get into those details. We don't have
very much time. I think we ought to recanvass what we
discussed yesterday and see just what are the implications.
We have had prepared a short memorandum which shows
four alternatives. I think we might go over that.
(Memorandum handed to the Secretary, copy attached.)
MR. PAUL: It seems to me that we have here four
alternative courses of action, and we ought to have very
sharply and thoroughly in mind what they are. We prepared
this after a great deal of conversation after our meeting
yesterday.
The first one is the one toward which you seemed, to
me, but not to Roy after we canvassed it, to lean yesterday
morning. (Reading) "The Administration recommends that
a Social Security program be considered first, with the
Regraded Unclassified
2
- 2 -
remaining part of the fiscal program, i.e., the purely
tax matters, to be considered second. This involves
the probability that the individual income tax and the
corporation tax will not be increased at all, since
Social Security hearings and discussions may carry on
into 1944 and make it difficult to enact tax increases
for political and technical reasons. This course of
action therefore recognizes that our main goal - perhaps
our only goal - is a Social Security program, and that the
burden of presenting the bill falls largely on other
shoulders.
H.M.JR: No.
MR. WHITE: That was not my impression at all.
MR. PAUL: Then that shows we have to canvass it,
because our minds haven't been meeting.
H.M.JR: I don't see how you could get anything like
that.
MR. WHITE: My impression was--
MR. BLOUGH: Get all four and then see.
MR. PAUL: "The Administration recommends that the
purely tax part of the fiscal program be considered first,
and that the Social Security part be considered immediately
thereafter. As respects individual income taxes, we
recommend a schedule which raises an amount of money ob-
tained by subtracting contemplated Social Security collec-
tions from the total amount we suggested be obtained from
individuals. This will produce 8. lop-sided income tax
schedule, since the bottom is being left open for Social
Security." That is another possibility.
MR. BLOUGH: That is the one I thought the Secretary
was talking about.
MR. WHITE: It is closer to it.
Regraded Unclassified
3
- 3 -
MR. PAUL: The third one is, "The Administration
recommends a purely tax program. However, the individual
income tax would contain a post-war credit roughly equal
in amount to the sum which would be collected through an
increased Social Security program. The post-war credit
would contain a proviso that it could be used currently
if a Social Security program were enacted next year or
later by allowing individuals a credit for increased
Social Security contributions."
That is somewhat similar to what we called the
second line of defense yesterday.
"The Administration recommends 8. purely tax program.
It may or may not contain & post-war credit. It would be
stated that of course if in the future a new Social Security
program were to be enacted, the individual income tax rates
would have to be reexamined and probably readjusted in the
light of the additional burden under the new Social Security
program."
H.M.JR: Are these alternatives what you people thought
I said?
MR. PAUL: No. These are alternatives that we
really have to face if we are dealing with the Social
Security emphasis in the program.
H.M.JR: Let me ask Harry what his impression was
when he left here yesterday of where I stood.
MR. WHITE: It was closer to two than to any of the
others.
I gather that the difference of opinion is between
one and two, and possibly two on page two. But I thought
Regraded Unclassified
4
- 4 -
what might be more clearly your thought, as I understood
it, is that you would go before Congress to say that you
are going to raise so much. I have forgotten whether
it was a total of eight billion - eight to nine billion
dollars - and that of that there was to be, I think,
three and a half billion coming from excise, corporations,
and income - maybe four billion dollars; it doesn't
matter - and that you were to have a definite schedule
prepared to raise that amount, but that that schedule
would be drawn up with the understanding or with the
recommendation that the remainder be obtained by a
Social Security program.
The emphasis, 80 far as your personal appearance,
would be on the tax part of the program, which was to
come first, but that you were to make it clear that both
were equal parts of your recommendation, although the
burden of carrying out the discussions and the hearings
on the Social Security part would - the main responsibil-
ity presumably would be Social Security with the Treasury
going along supporting them because of its inter-relationship
with the tax program.
But you would put your emphasis on the hearings in
the tax part of the program - your emphasis in the general
program - both - and this was to be part of 8 general pro-
gram, and taxes was to be part of that general program.
(The Secretary held a telephone conversation with
Judge Rosenman.)
MR. WHITE: I can give you some information about
Currie.
Currie had been doing some work for Byrnes and
others, and Crowley is finding the relationship between
OEW and the various other departments becoming more complex
Regraded Unclassified
September 1, 1943
5
9:30 a.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Operator:
Mr. Secretary, Judge Rosenman, sir.
Judge
Rosenman: Hello.
Operator:
Secretary Morgenthau.
HMJr:
Hello.
R:
Henry?
HMJr:
How's your back?
R:
My back is all right. I think you have a filthy
mind.
HMJr:
I don't know what you mean.
R:
(Laughs) Well, you're cracked if you wouldn't ask
me what's the matter while Dorothy isn't around.
HMJr:
Oh, oh!
R:
Henry, may I make a discreet inquiry as to whether
you are going up this week-end?
HMJr:
Uh
R:
And if 80, when?
(Portion of conversation not recorded.)
9:32 a.m.
R:
I think I'll be coming down about the end of the
month.
HMJr:
Oh, you would? You're going - you're going to
resign?
Regraded Unclassified
6
- 2 -
R:
Yes, sure.
HMJr:
I Bee.
R:
I don't know what I'm going to live on but....
HMJr:
Well, I'll be glad to have you here.
R:
oh, thanks very much.
HMJr:
Tell me what's the significance of this move of
Currie's?
R:
Of whose?
HMJr:
Lauch Currie.
R:
I haven't heard of any move. What is it?
HMJr:
Well, I just read in the paper that he's Executive
Secretary of the Office of Economic Warfare.
R:
Oh, he's - he's left the....
HMJr:
reah. Don't you read the papers?
R:
What 1s 1t? Today's?
HMJr:
Yeah.
R:
I haven't read it yet. You mean he's resigned as
an Executive Assistant?
HMJr:
No, I don't think 80.
R:
I don't know. I'd have to find out.
HMJr:
Yeah.
R:
I'll go to work on that.
HMJr:
Do that. Okay.
R:
All right, Henry. In case - I'll get in touch with
you....
HMJr:
All right.
R:
....as early as I can.
HMJr:
Thank you.
Regraded Unclassified
7
- 5 -
as he gets closer to it, and Byrnes likewise is having
considerable difficulty in attempting to decide what the
appropriate lines of demarcation of each agency should be.
So they have decided to ask the President to borrow
Currie for a couple of months to examine the whole situa-
tion and see what recommendations he might make with
respect to clarifying the problem.
H.M.JR: Those things which come under Crowley - did
he confine it to that field?
MR. WHITE: It is OEW, but Crowley's outfit touches
Lend-Lease, Lehman's outfit, the State Department, and
Foreign Funds to some extent. He said that he didn't
intend to go into that at all.
H.M.JR: Leave Jones' outfit alone?
MR. WHITE: No, Foreign Funds.
H.M.JR: Certainly the publicity doesn't say that.
Let me, so that other people don't put ideas or words
into my mouth - and I think I am in accord with practically
everybody with the exception of you (Paul)--
MR. BLOUGH: On the understanding of what you said
yesterday - is that what you mean?
H.M.JR: Yes. You people have woven all kinds of
things into this.
MR. BLOUGH: These four are not intended to be what
you were interpreted as saying yesterday, only the two
on the first page.
H.M.JR: If you don't mind, I don't like any of it.
I haven't changed one bit from where I was yesterday.
That is this, I would like to go to the President of the
Regraded Unclassified
8
- 6 -
United States with a Treasury recommendation that the
next bill that Ways and Means takes up is 8. bill which
will add to the present income tax schedule the present
victory tax - abolish the victory tax - and then on top
of that would come something approaching the Wagner Bill
on Social Security. Then on top of that would come the
excise taxes, increased corporation taxes, and the
increased income taxes.
Now, the income taxes - we are going to say somewhere
between eight, seven on the high and a lower level, depend-
ing on how it looks. This would be an Administration
program. Certainly some kind of introduction should be
given to it to the Congress by the President.
Then what I thought the discussion was - I thought
We had agreement on that thing. The discussion was,
should we have a second line of defense? And if so,
what should it be?
Now, Herbert, you are a pretty good reporter. Am
I saying anything different this morning than I said
yesterday?
MR. GASTON: As to the desirable objective, we were
all agreed that we would like to have the President come
out strongly for a Social Security program. We would
like to have tax schedules enacted which would finance
Social Security. The increases in the lower income
brackets would be primarily for the purpose of financing
Social Security.
Of course, that does raise questions of strategy
that we hadn't fully met. Congress may decline to consider
a Social Security tax scheme until action has been taken
on a Social Security law.
What Randolph is pointing out here is that if we are
to consider a Social Security tax as an integral part of
a general tax scheme, they may either divert their whole
inquiry into the question of Social Security taxes, or
they may want to throw the Social Security tax out and
Regraded Unclassified
9
- 7 -
discuss a tax scheme without regard to Social Security.
H.M.JR: Yes, but that is in the realm of surmise,
and also I know what the President would say. If he
agrees on this thing, he would say, "Now, Randolph is
worrying whether they will take up Social Security first
or taxes first. Well, that is something for Congress
to decide, and I don't see why we should--
MR. PAUL: They won't want to take them up together.
They will want to have separate hearings, whichever is
first.
MR. BLOUGH: They don't consider them in the same
category at all.
MR. GASTON: Of course they are part of the tax
scheme.
H.M.JR: What I am trying to do is formulate and
present a program to the President which will take care
of the present situation, anti-inflation and a social
standpoint, and this doesn't.
Now, the way I feel today is, I am not going to go
any further than that. I am not going to try to look
upon all the arguments they can give against it. I want
to get it to the President. I want to get it to this
crowd and see if they like it.
The way I feel this morning, I don't want to weaken
my position by immediately saying, "If this doesn't go
I have another one up my sleeve. There is time enough
to give them an alternative when the President turns us
down.
I would like to go to the President - the President
is a pretty good strategist - and have him say, "All right,
we will go down the line on this.
MR. GASTON: I think we have to remember this, if they
decide on Social Security, sooner or later it will upset
Regraded Unclassified
10
- 8 -
any tax scheme that you have evolved and you will have to
go over the whole tax schedule again in order to work a
Social Security tax scheme into the general tax scheme.
Anything that you will have done in advance on taxes is
thrown out the window - has got to be thrown out the window
if you adopt the Social Security plan. I think it is
vital to face that Social Security issue first.
MR. WHITE: Why is that so, Herbert?
MR. GASTON: We can't draft a tax scheme which will
have the necessary counter-inflationary effect in the low
levels whether it is forced lending or a tax scheme, or
whatever it is. You can't adopt such a scheme and then
superimpose heavy Social Security taxes on top of that.
MR. WHITE: Nobody is suggesting that. You are
suggesting the very opposite of that, as I understand it.
What you are suggesting doing is by making a recommendation -
the President making a recommendation that both things be
adopted. Your portion of the responsibility of drafting
the tax proposal is drawn with the assumption - with the
understanding that it is a part of the program, and hence
you draft the tax part in the knowledge that the Social
Security part follows & certain pattern. You are able to
get that pattern either from the Social Security people
or from your own ideas.
That doesn't mean that Congress will end up by
accepting either the pattern which you give as taxes or
the pattern they give as Social Security; but as far as
the thing you present is concerned, you present an inte-
grated plan.
MR. GASTON: That is exactly my position, Harry.
H.M.JR: That is my position.
MR. GASTON: We are exactly in agreement.
H.M.JR: That is mine, and we could sit here from
now until the first of the year and say which should go
first, this, or that. The President gets these two fellows
Regraded Unclassified
11
- 9 -
together, and the thing moves like chain lightning, and
all the plans we make go overboard, but that doesn't
mean that we haven't presented an integrated plan to the
President.
Once we get Doughton and George in the room, or
Vinson and Byrnes, all I am going to attempt to do is
to have an integrated plan which is based on sound
economics.
MR. PAUL: I think - I am sorry . I agree that we
should have a sound plan based on integrated economics,
but I think we have to be prepared for a lot of eventual-
ities. The President may call George and Doughton in
and they may say, "Mr. President, we don't want to take
up Social Security, or they may say, "All right, if you
request us we will take up Social Security, but then we
will have to put off the tax, or they may say, "We would
like to take the tax first.
H.M.JR: But Randolph, neither you nor I are going
to have a chance to pass on those things.
MR. PAUL: But I don't want to be caught off base
and be completely unprepared.
H.M.JR: The first time we go we will see the President
ithout these people, see. We will go and see him without
them. Then he will raise these various questions and we
will go over the whole thing. I have no objection to
raising them with him.
MR. PAUL: Of course I want to raise them with you
first, because I want you to see where all these--
H.M.JR: You pointed out to me - and you did last
night over the phone - I think that is possibly what got
you wrong. I realize perfectly - let's say that this
may mean - All right," they will say, "we will show them.
We will stall this whole thing and just do Social Security
for six months and no taxes. Or they may say, "We will
do taxes, promise to get that through and then promise
Regraded Unclassified
12
- 10 -
to take up Social Security." All of those things are
within the realms of possibility over which nobody in
this room will have any control.
Now, all I feel is this - this is the way I feel,
that it is up to the Treasury to give the President an
integrated plan which he can look at by himself and say,
"I like it, or "I don't like this part. I want this in."
Then he will say, "All right, it suits me." And if you
want to point out the hurdles - if you feel that is part
of your responsibility to point them out to the President
the way you have to me, I certainly won't object. But
if you don't mind my saying it, I think it is a futile
effort on my part - I mean, I don't feel as though I
were going into 8. court and was going to have the District
Attorney there raising all kinds of objections for my
evidence and all the rest of the stuff.
All I have to do to fulfill my responsibility is to
give the President 8 complete plan.
MR. GASTON: I think this question of alternatives
is in the very highest levels. In other words, I think
that the President needs to canvass the situation and
get some agreement with leaders that they will or will
not take up an integrated plan.
Then if they won't - if there is absolute resistance
against it - I think that is in his hands. And if there
is absolute resistance and they won't consider it, we
will need to be prepared with some alternatives.
MR. PAUL: That is right. Things may move very fast.
I agree exactly with what you say, Herbert. These questions
are not subsidiary questions. They are on the very highest
level.
I don't think the President should consider - first
the Secretary should consider going ahead on this plan,
which I would like to see if it could be put through
generally without considering what may happen about it
in the practical world up there on the Hill.
Regraded Unclassified
13
- 11 -
MR. WHITE: I don't understand the force of that
position. There are two approaches; one is what you
and your technical staff do. Obviously, they must be
prepared for contingencies. You can't do in a week or
two what should take a month to prepare.
I presume your staff already has, or is in the
process of - I am sure they already have or are in the
process of preparing what you regard as a second and
possibly 8 third alternative. The research staff - the
technical staff has got to be prepared for contingencies
because you cannot prepare that in & brief time. That
is an aspect no one disagrees with.
There is quite another aspect of that, and that is
what decision will be made on political grounds, and I
assure you that the decision will be made wholly on
political considerations. You prepare & program for the
President; the President says, This looks good to me,"
and he calls the leaders. The leaders say they don't
like it for this, that, and the other reason. The
President either changes his mind, or he doesn't change
his mind. He says, "This is what I want. You fellows
go ahead and do what you want." He goes to the public
on it, in which case you also go ahead in the way you
originally intended.
Now, if on the other hand, the President, after
talking with them, says, "I guess we can't get them to go
along; we will have to adopt other tactics. What shall
we do?" you come to him with another plan. It doesn't
take more than a day to talk over what that shall be.
You will at least have & day. It has nothing to do
with your technical preparation. I don't understand
your (Paul's) concern about being ready.
MR. PAUL: It is not my concern about being ready;
it is my concern that the Secretary make up his mind on
the basis of what may actually happen, and not completely
be--
H.M.JR: May I answer you 88 to why I can't? If it
were my sole responsibility, then it would be right to
Regraded Unclassified
14
- 12 -
press me on this. It isn't, and I don't envisage my
responsibility beyond giving the President a plan.
Then it is his responsibility to decide what he is
going to do with it.
I agree it is our responsibility to be ready if he
says, "I want this or that,' to have the answers. But
I am not going to make up my mind beyond that I like the
plan.
MR. PAUL: That is just my point, that I don't think
you can intelligently make up your mind without considering
all the alternatives.
H.M.JR: That is where I differ with you.
MR. GASTON: Can't this be done, Randolph, the
Secretary presents this integrated plan and says,
"Now, Mr. President, if you find on canvassing the
leaders and 80 on that it is impractical - that we can't
do that - of course we will have alternatives to give
you later"?
MR. WHITE: You don't have to say that. The President
knows always that there are alternatives. He has always
had to resort to them.
H.M.JR: Look, Herbert, you come in with me - I don't
care what it is - on any complicated front and you have
taken six months to study the thing - now before I even
get to read it you say, "O.K., if you don't like it, I
have another one." It distracts me.
My whole argument is, all the time these people give
me alternative memoranda. I say, "Tell me what you want;
don't give me alternative memoranda."
The President would have a perfect right to say to
me, "Henry, do you or don't you like this?"
I hate personally - maybe that is the trouble - I
hate these alternative memoranda. I like my staff to come
Regraded Unclassified
15
- 13 -
in and say, "Here is a thing, and here is a letter of
transmittal. Now, this is what we recommend.
MR. WHITE: The only time alternative memoranda are
justified is when we don't want something you want, 80
we give you what you want and say, "We don't like it; we
have something we want." (Laughter)
MR. GASTON: That is exactly what I was suggesting
the Secretary say to the President. Of course he won't
need to say it. The President will know that if he can't
get away with this he will have to call for alternatives.
MR. WHITE: He doesn't have to say that because the
Secretary is recommending that. When Randolph says he
can't make an intelligent decision - Randolph said this
was a complete plan. Apparently he has made a decision.
MR. PAUL: That is in an ideal world. You have to
decide when you present this integrated plan if you are
considering - you have got to consider the alternative;
that may mean no tax program at all.
MR. WHITE: It seems to me you are arguing against
the recommendation. I don't see how you can stand on
two positions. Either you think it is the best tactics,
to present this program, taking whatever other alternatives
you have in your mind, or up your sleeve; but either you
believe it is the best tactics to recommend this plan, in
which case you stop talking about alternatives, or you
don't believe it is the best program, and introduce the
question of alternatives through the back door.
MR. PAUL: I did not say that I considered it the best
tactics. I said that I would consider it the best plan if
it could be adopted.
MR. WHITE: That is a weasel; you know that. It is a
weasel because we are always up against a position - we
all have a million good plans that are not practical. I
hold that a plan that is not practical is not & good plan.
Regraded Unclassified
16
- 14 -
MR. BLOUGH: It is ten to one that this one isn't
practical.
MR. WHITE: Then if you feel - it is not a question
as to whether it is practicable in the sense of being
worked out.
MR. BLOUGH: I don't mean that. It is practical in
that sense entirely. I mean, politically.
MR. WHITE: There is one simple decision, whether
the Administration ought to come out in the first instance
with & program of this kind. If you believe that it
should, that is the alpha and omega of the practicability
of it. It is not 8 question of what happens after that.
Now, if you believe that this is 8. desirable program
for the President to come out with, you stop there. You
will make that recommendation. If there are doubts in
your mind that the President ought not to come out with
it - mind you, not because he may not be successful -
that is not for your concern, that is his concern--
MR. BLOUGH: You have always taken the other position.
MR. WHITE: No, I don't think I have.
MR. BLOUGH: Your position has always been we should
assess the possibilities of success.
MR. WHITE: Sometimes, but there are other factors
which you are considering here. One of the very important
factors you are considering here which you can't leave out,
except by distorting the whole thing, is the political
value of coming out with a plan of this character.
H.M.JR: Harry likes my plan; after all, he can change
his basis. (Laughter)
MR. WHITE: Why should I be consistent? (Laughter)
H.M.JR: The other times he didn't like it. (Laughter)
This time he likes it.
Regraded Unclassified
17
- 15 -
MR. HAAS: Let's discuss one of the main worries,
that Social Security may be taken up first. If you are
to go over this program as outlined and pick out that phase
most effective on inflation, you would pick out the
Social Security tax part. What if that did come first and
was enacted? From a political consideration then they
would feel bound to go in and put some more taxes on.
They wouldn't leave them just on the low side - Social
Security, or otherwise. So it seems to me if it takes
its natural course-
H.M.JR: ... Social Security comes first.
MR. SURREY: I am not sure you would ever get to the
second part.
MR. HAAS: I am not a politician.
H.M.JR: Well, look, gentlemen, you might just as
well stop arguing, because I have listened to this thing.
I have had plenty of time to think about it, and I would
like to present this to the people coming in at ten as
a Treasury plan unless you don't want me to do that.
MR. PAUL: Not at all. We have the plan ready.
H.M.JR: All right, we will present it as an integrated
Treasury plan and we will hear their objections. And
tomorrow afternoon again at four o'clock we will present
it as a Treasury plan and we will hear their objections.
Next week I will ask for an appointment at the earliest
possible time that the President can see us to present it
to him.
Now, we have a number of hurdles to cross. We have
to see Senator Wagner, and we have this one at ten, and
another one - as we go along I would like to go on the
basis - I am perfectly willing to be accused of being a
star-gazer, and 80 forth, and so on. You talk about
Congress not wanting it; Congress, after all, in the final
analysis listens to people. They are much more sensitive
Regraded Unclassified
18
- 16 -
to it than some people are, like Drew Pearson's column,
if that is possible. If they hear that a number of
their constituents want it, then they get interested.
I don't know whether we can make North Carolina inter-
ested, or Georgia.
MR. PAUL: Or George, not Georgia.
H.M.JR: I mean Caorgia.
But I would like to go through this thing in all
sincerity up to the point of presenting it to the President.
Then let's hear what he has to say.
MR. PAUL: If you want to present it, I think you
should, and I am all for presenting it. I simply don't
want you to make any decisions on things without seeing
what you are going up against.
H.M.JR: That is all right. I am perfectly conscious
of what we are going up against. I said there might not
be a chance for nine years, and Sullivan said I was taking
a defeatist attitude, and he was perfectly within his rights
to say that.
MR. WHITE: I am not so charitable to Randolph. I
can't understand Randolph's view; and because he is in
charge of taxes, I think it needs to be further clarified.
MR. SULLIVAN: I can get it, his view. Here is the
situation, Harry: Here we have a plan which we think is
the best thing in sight and the best thing for the country.
There are two obstacles that Randolph recognizes, and
which I appreciate, although I think that one at least
is artificial. It 80 happens that Social Security is not
administered by the Treasury Department. It also happens
that there is a traditional dislike for increases in
Social Security in the tax committees.
From now on, with the rates we have, you just can't
treat Social Security and taxes separately. They have a
tremendous effect on each other.
Regraded Unclassified
19
- 17 -
Now, what I say is this, that with the situation the
country is in now and with the tremendous need for 8. pro-
gram of the kind the Secretary has proposed, it is time
to do away with this distinction between the Treasury
and Social Security and work together on it. It is time
for some real heat to be put on the Congress to get over
this idea that they can always put Social Security ahead
another eighteen months. And if there is enough drive, I
think it can be done.
MR. WHITE: I agree with you wholly, but I think it
is quite irrelevant to what Randolph's position is.
H.M.JR: Let White get it off his chest.
MR. WHITE: What I am saying is this, it seems to
me, Randolph, you are for this plan, you are for this
recommendation to the President, but you say you want
the Secretary to thoroughly understand the alternatives
because of the excellent chance - if not almost a certainty -
that you will be confronted with the necessity for making
alternatives.
Now, why are you so insistent on having the Secretary
understand the alternatives at this stage of the game
unless there is in the back of your mind the feeling that
because of the alternatives that is not the best plan to
recommend; and if that is in the back of your mind, why
not say you don't agree this is the best plan to recom-
mend - if I am interpreting what is going on in your
mind correctly.
MR. SURREY: I wouldn't say that was Randolph's
position. I think I know--
MR. WHITE: If I can interpret his mind, he is entitled
to it. (Laughter)
MR. PAUL: I think I need a lawyer. (Laughter)
MR. SURREY: I think the confusion of alternatives -
what Randolph wants to know, to use the Secretary's
metaphor, is just exactly what star the Secretary is gazing
at. Randolph wants to indicate, as I see it, that this
program involves with it the implication that you may
have no taxes at all.
Regraded Unclassified
20
- 18 -
Now, as long as you realize that, you still may be
for the program - and that is the first thing to be decided,
is what Randolph is saying--
MR. SULLIVAN: I am voting on that right now. If it
is a question between trying for what the Secretary wants
and losing it, or getting an extra three billion dollars
in taxes, I will go with the Secretary and not get anything
at all.
MR. SURREY: That is all right. That is what Randolph
is trying to get across.
H.M.JR: I don't know whether it was 8. poet or who it
was, but somebody said, "Hitch your chariot to a star."
See, that is me. (Laughter)
MR. WHITE: Somebody else said, "Don't have your head
in the clouds." (Laughter)
MR. GASTON: What we are talking about is purely a
question of strategy. It is perfectly clear in my mind that
what should be presented to the President now is this inte-
grated plan. Of course it needs to be made clear to the
President - or I don't know whether it needs to be or
not, that this is a movement that has to be taken on all
fronts, an Administration movement in which we are demand-
ing Social Security legislation and integrating a tax plan
with it.
MR. WHITE: Right. But unless Randolph believes
this implicitly - if he doesn't believe it, now is the time
for him to say SO. If he does, he should have no reser-
vations.
MR. PAUL: I will give you & memorandum on what I
believe.
MR. WHITE: You mean you don't think you made it
clear? (Laughter)
MR. GASTON: Of course in the shop we will have
alternatives ready for presentation if the President
Regraded Unclassified
21
- 19 -
tells us we can't get to first base - that it can't be
done.
H.M.JR: What White should 80 is give Paul a question-
naire. (Laughter)
MR. PAUL: I will give you a memorandum later in the
day on what I believe, and I will--
MR. WHITE: No swear words in it. (Laughter)
MR. PAUL: I will quote from a French poet, using
the star metaphor. (Laughter) I will give it to you
later. I don't want to conceal anything.
H.M.JR: Again using sort of a metaphor example, I
don't think we want to lose sight of the tree on account
of the forest. I think you (Paul) are seeing so many
possible objections through your highly technical training
that possibly you lose sight of the tree.
MR. SMITH: Aren't those objections all going to be
taken care of abruptly when the President calls in Mr.
Byrnes?
H.M.JR: Of course.
MR. SMITH: Mr. Byrnes is going to say, "That is a
fine schedule, only we ought to have compulsory savings
instead of this." Then the President makes up his mind
one way or the other, and everybody is together. (Laughter)
H.M.JR: As long as Harry has been so frank - I can't
be as frank as Harry, or as forceful-- (Laughter)
MR. WHITE: Randolph wouldn't recognize me if I
weren't frank. (Laughter)
H.M.JR: I like your frankness. You have helped me
out a lot this morning.
The point that I am making - I come in and say this
thing, "Here is my second line of defense," and then Mr.
Byrnes has his second line of defense, and Mr. Vinson has
Regraded Unclassified
22
- 20 -
his second line of defense, and we have half 8 dozen
alibis, why we shouldn't have this.
MR. SMITH: Your second line is going to be awfully
close to Byrnes'.
MR. SULLIVAN: You mean the one that was suggested
yesterday? I don't know as that is the Secretary's yet.
MR. SMITH: I mean any--
H.M.JR: My own feeling is, I don't think that is
necessary. The thing is going to move 80 fast. I am
repeating myself, but I think Paul and his staff should
have all the answers to whatever the President may raise.
MR. WHITE: Did you get that - "all?" (Laughter)
MR. BLOUGH: "All" the answers. (Laughter)
H.M.JR: Well, I haven't seen those schedules. We
might as well show them when McNutt comes in.
MR. BLOUGH: As you wish. I have got them.
H.M.JR: Now, who ought to stay? Paul, how much
of this staff do you want?
MR. PAUL: Roy should stay, because he has all the
schedules. That is all I think we need.
Regraded Unclassified
23
Four alternative courses of action appear under consider-
ation (For the rest of this memorandum it is unimportant
what is the overall figure for individual collections -
it is merely assumed that the same overall amount is used
in each case):
A. The Social Security and purely tax aspects
integrated and prompt action presupposed on
Social Security:
(1) The Administration recommends that a
Social Security program be considered
first, with the remaining part of the
fiscal program, i.e., the purely tax
matters, to be considered second. This
involves the probability that the in-
dividual income tax and the corporation
tax will not be increased at all, since
Social Security hearings and discussions
may carry on into 1944 and make it diffi-
cult to enact tax increases for political
and technical reasons. This course of
action therefore recognizes that our main
goal - perhaps our only goal - is a Social
Security program, and that the burden of
presenting the bill falls largely on
other shoulders.
(2) The Administration recommends that the
purely tax part of the fiscal program
be considered first, and that the Social
Security part be considered immediately
thereafter. As respects individual in-
come taxes, we recommend a schedule which
raises an amount of money obtained by sub-
tracting contemplated Social Security col-
lections from the total amount we suggest
be obtained from individuals. This will
produce a lop-sided income tax schedule,
since the bottom is being left open for
Social Security.
Regraded Unclassified
24
- 2 -
B. Tax program with future consideration of
Social Security indefinite;
(1) The Administration recommends a purely
tax program. However, the individual
income tax would contain a post-war
credit roughly equal in amount to the
sum which would be collected through
an increased Social Security program.
The post-war credit would contain a
proviso that it could be used currently
if a Social Security program were enacted
next year or later by allowing individuals
a credit for increased Social Security
contributions.
(2) The Administration recommends a purely
tax program. It may or may not contain
a post-war credit. It would be stated
that of course if in the future a new
Social Security program were to be
enacted, the individual income tax rates
would have to be reexamined and probably
readjusted in the light of the additional
burden under the new Social Security
program.
Regraded Unclassified
25
September 1, 1943
10:05 a.m.
TAXES
Present: Mr. Gaston
Mr. Paul
Mr. Blough
Mr. McNutt
Mr. Altmeyer
Mr. Maggs
H.M.JR: The reason I asked you to come over was
this. As you may know, we have been trying to prepare
an anti-inflation, social program for the President;
and we think we have one now which we would like to tell
you about. I very briefly outlined it for the President
over the week end, and he liked it.
Very briefly - and you can ask these people ques-
tions - we are talking about taking out present tax
structure, consolidating into that the Victory tax; then
for the lower income group, the three thousand or under,
we want to build into this Administration program some-
thing like the Wagner bill on Social Security. Then we
would start our income tax increases at levels from three
thousand dollars up. Social Security will take the place
of that at three thousand and below.
Then we are talking about an increase of about a
billion dollars in corporation taxes and about two billim
dollars in excise taxes.
Now, I might as well say here what we feel, that it
is a good anti-inflation measure, it is good on the social
front, it is good politically, and it is good postwar.
MR. McNUTT: I will take the last three. I think
the first you had better not put the emphasis on.
Regraded Unclassified
26
- 2 -
H.M.JR: Anti-inflation?
MR. McNUTT: Yes.
H.M.JR: Well, our people around here differ because
they feel that it will take a little time to get the thing
started; that if they went to the six percent in the
Wagner bill it would be somewhere around seven billion
dollars and take about a year and a half to two years
before it could be effective, before the money would be-
gin to flow out again.
MR. McNUTT: The point I am getting at is, place
the emphasis on the benefits for these people.
H.M.JR: Rather than--
MR. McNUTT: That is the proper sales program.
H.M.JR: What we are trying to do is this, to build
a complete program which I hope the President will take
the leadership on, you see, because it includes Social
Security, and he might say this is what he wants.
Now, in talking with him he said to me that he had
been groping for something and this seemed to fit him
like a glove for what he wanted. Of course he would
have to support the thing because immediately - and he
would have to do the talking with George and Doughton
because Doughton just doesn't want to take up Social
Security.
MR. McNUTT: I know he doesn't.
H.M.JR: And I can't tell all the angles it will
take once it gets to the President. I mean, you know
he will have his own ideas, but I didn't want to move
on this thing and present this tomorrow afternoon at
four o'clock without first talking with you people
alone and find out what - you might say, "Well, look,
under no circumstances do we want you to do this." Then
that would be something else.
Regraded Unclassified
27
- 3 -
MR. McNUTT: I think I can state our position very
briefly. We believe in the Social Security program, the
thing that has been worked out, both for present and post-
war purposes.
I think it should be sold on its merits and that
there should be no attempt to sell it as an anti-infla-
tionary measure. In other words, you will get a better
return from the public itself if you show them that this
thing is sound fundamentally, and it is.
Of course they haven't wanted to touch it up there,
and it has been on account of pressures from the other
side. But it is sound, and I think we can make a very
good case. But I do believe we should leave off the
part that it is an anti-inflation measure - and I am
against inflation.
MR. GASTON: Governor, we are bound to consider the
possibility of Social Security levies in connection with
anything we do on taxation because the impact of any
scheme of pay-roll taxes and other taxes on Social
Security is going to be so heavy, 'especially in the low
levels, that if we attempt to consider a general tax
measure without considering the question of whether a
Social Security plan is going to be enacted we are
working in a vacuum. We will have all of our work to
do over again.
MR. McNUTT: I quite agree.
MR. GASTON: If Social Security is not to be
enacted, we are going to have to supply anti-inflationary
taxes in the low level to form a part of a general tax
scheme.
It is perfectly useless for us to go up before
Congress and propose a tax bill in which we ignore
Social Security prospects because you are talking about
raising funds in the quantities of six billions of
dollars. It would be absurd to talk about overlaying
them onto something we had planned for revenue purposes
Regraded Unclassified
28
- 4 -
and for counter-inflationary purposes and then overlaying
that, with its immense impact on the low levels, on top of
that scheme. So we have got to mnsider it 88 one problem.
MR. McNUTT: I agree you should.
MR. GASTON: Of course in presenting it we will have
to say that if they don't have these Social Security
levies we will have to have corresponding counter-
inflationary taxes in that level.
MR. McNUTT: All right, I agree that you should con-
sider it as a part of your over-all problem, but I am
talking about what the effect is going to be on these
people themselves. I am talking about the long-range
Social Security program, in which I believe wholeheartedly.
H.M.JR: He thinks there is more advantage in
stressing the benefits rather than the anti-inflation.
MR. McNUTT: Certainly you should take all of these
things into consideration.
MR. GASTON: I understand. I am inclined to think
that the people who benefit pretty well understand that.
We get the reactions from the labor union people, and
they tell us - they have told Mr. Paul, "We don't think
there ought to be heavier taxes just as taxes in the
levels below three thousand dollars, but Social Security,
yes. We are willing to accept heavy pay-roll taxes in
that area." They are already sold on that.
MR. McNUTT: All well and good, but I still go
back to the point, which is & very practical one - and
I have had some experience in it--
H.M.JR: Well, we don't have to argue. I mean,
the whole purpose of this meeting was to get the benefit
of your advice and see how you feel.
MR. McNUTT: We are for the program.
Regraded Unclassified
29
- 5 -
H.M.JR: If you have any objections to our moving
forward on this front--
MR. McNUTT: Not at all. We are for the program
but feel the emphasis, as far as Social Security is
concerned, should be placed on the benefits to accrue
therefrom.
I for one feel very deeply that we are going to
need to do now several things that we couldn't do after
this war is over and that the demands after the war will
be such that we should have a base which will enable us
to meet it without going through all of the terrors that
we went through in 1932 and '33.
H.M.JR: All I can say on that point is I will
certainly give it very careful consideration - I mean
what you said. I would like to talk it over with my
people.
MR. McNUTT: Arthur, do you agree with me?
MR. MAGGS: I was--
MR. ALTMEYER: Go ahead.
MR. MAGGS: I am afraid I may be taking it a bit
afield. I was going to ask, could you give us some
notion of the comparative impact on people whose incomes
are under three thousand dollars of the two things.
H.M.JR: Mr. Blough has that.
MR. MAGGS: Would the Social Security, say, take
twice as much money from them as the increases that you
would put in the income tax for people below three
thousand if you didn't have Social Security? Would it
be twice as much, or three times, or seventy-five
percent more?
MR. PAUL: It would be more.
Regraded Unclassified
30
- 6 -
H.M.JR: Roy Blough has that. What have you got,
Roy?
MR. BLOUGH: It depends on the level. The income
tax exemption at present for a married couple with two
dependents, for example, amounts to nineteen hundred
dollars of net income. If you had an increase beyond
the scheduled two-percent rate on employees next year,
of four percent, you would of course have that four
percent right down to the bottom. For the family with
nineteen hundred dollars of ne t income you would have
an increase in Social Security taxes of approximately
eighty dollars, with no increase in income taxes unless
the exemptions are lowered.
MR. MAGGS: What I was driving at - I wondered if
it would be a possible tactic to present alternative
plans to Congress and the country, saying that we must
pick up some of this money. Say, "One way to do it is
income tax. The workers have nothing - they get no
benefit out of it at the end. They have paid their
income tax just as everyone else has paid it. It is
absolutely essential from the point of view of infla-
tion that the excess purchasing power be picked up."
"Now, an alternative way to do it is by going into
the Social Security program, in which case the workers
would not be called upon to add more to the income tax,
but they would while paying more get these tremendous
benefits, you could say.
H.M.JR: Well, Mr. Maggs, what I am hoping for -
and some of the people in the Treasury accuse me of
being too idealistic on this thing - what I hope we will
do is the President might take this as a package and
call it his package. Then if he does he should be
confident of that and not have alternatives. As soon
as he has alternatives, everybody has alternatives.
MR. MAGGS: A variant of my suggestion would be
not to have alternatives but say, "This is what we
are doing. The reason we haven't done that is" -- and
then give the reasons.
Regraded Unclassified
31
- 7 -
Perhaps that comes too close to alternatives for
you.
MR. McNUTT: As far as Social Security is concerned,
sell it on its merits. Of course it works into your
plan the other way. I understand that perfectly, and I
agree that it should.
But I think you can sell it better as insurance
for the worker than you can sell it to them as one of
our hedges against inflation.
H.M.JR: On your side of the argument, when I made
a statement here a year ago that we wanted to mop up
the excess spending I got a terrific critical mail.
They objected to my talking about mopping up their money.
MR. ALTMEYER: That is what I was going to say,
that standing back of Governor McNutt's approach I think
we have to be very careful in presenting Social Security
to present it as Social Security on its merits.
When it comes from the Treasury, as it did a year
and a half ago, as you say, they said, "What is the
nigger in the woodpile?" They said, Is this just a
device to go and get some more money out of the tax-
payers, for anti-inflation, or for paying the current
expenses, or what-not, or is this really Social Security?"
Most of them said, "It isn't really Social Security
that the Treasury is interested in."
I think we have to be very careful not to get that
reaction again,
H.M.JR: That is all right. What I am trying to
get - all of this is in the room here - the President,
I thought, did a master stroke when he talked about what
he was going to do for the returning soldiers. He got
there first. And this would approach the same thing on
the home front.
Regraded Unclassified
32
- 8 -
MR. McNUTT: That is right, but put it on that
basis and not the anti-inflation.
H.M.JR: I think you are right. But, mind you, I
am saying this because I am hoping that the President
is going to do this. I think he should do it. I think
he should do it rather than anybody else.
MR. ALTMEYER: I think there is another angle that
you want to keep in mind and that the President will
want to keep in mind; and that is the strategy of it 80
that the boys on the Hill don't do either, dn't give
you the increased taxes or the Social Security, because
they are just - they don't care to do either. We know
that.
H.M.JR: That is what Paul is worrying about.
MR. ALTMEYER: If it isn't presented just right,
they will say, "You really don't care for taxes. You
say you will take Social Security instead. We will
take that up as soon as we get around to it."
MR. GASTON: What the Secretary is proposing is
this: He is interested in Social Security, and he wants
to have it presented at this session of Congress under
the circumstances that are the most favorable for its
adoption.
He doesn't want to go up before the committees of
Congress and propose a tax measure that has no relation
to Social Security so that we have two wings of the
Administration going off on tangents.
He would like to see a concerted Administration
drive to get Social Security, and in doing so, to
integrate it with our tax plans to show that the
Administration is completely united for getting this
improved Social Security plan enacted.
Regraded Unclassified
33
- 9 -
MR. McNUTT: Theoretically you would be right, with
the Congress in its present frame of mind, and, as I
judge, the frame of mind of the people. I think you may
be in trouble if you make it as a part of an integrated
program as far as the Hill is concerned. Certainly in
your own thinking, too, we go along with you 8. thousand
percent.
MR. GASTON: I am afraid if we went up there and
got a tax program - presented it and got it through the
committees and then before the Congress, disregarding
the Social Security thing, that Social Security is just
as dead as the deadest mackerel for this session.
MR. McNUTT: All right, but the point I am making
is that that should be handled by the leaders of these
committees - for the President to do that - show them
this whole picture - but I am talking about public
relations on this thing and the support that we are
going to get, and which will be reflected in an election-
conscious Congress.
H.M.JR: That is the language I can understand.
Altmeyer doesn't like that language. He thinks--
MR. ALTMEYER: No, no, this is 8. political question,
whether you like it or not, and, in fact, it should be
because it affects the welfare of the people.
H.M.JR: Look, the only way - I am not a very good
politician, but the only chance that this thing has got
to get through is because they think it is good politics
to do it now. If they think the alternative is an equal
amount of taxes on the same people--
MR. McNUTT: And, frankly, it is good politics -
if they will take a look at it - to do this, which will
reflect the benefits of the workers, and do what you
want done at the same time, when it should be done, and
it will provide a backlog when we are going to need &
backlog.
H.M.JR: And this is the only group the President
can really rely on.
Regraded Unclassified
34
- 10 -
MR. PAUL: I am & little un-clear about how you
think it should be presented on the Hill. You said
something about our thinking, and the Secretary said,
"Well, it would have to be presented" - do you mean
that they go to the same committees and if these commit-
tees take up one, they won't take up the other?
MR. McNUTT: I think it is a matter of getting
Bob Doughton and the leaders of the House Committee to
agree that they are going to consider these two things
simultaneously, because they mean drawing off money.
Now, he had said before, "We will not take up any
Social Security program until we have finished with the
tax bill." He said that to me a dozen times. Of course
that wasn't the answer. We knew it then. Now, if--
H.M.JR: And he has also said to me, "Which do you
want first?"
MR. McNUTT: There is no reason in the world why
they shouldn't consider those two things simultaneously.
MR. PAUL: I agree.
MR. GASTON: If you get into taxes first without
Social Security, you are in a vacuum, and then Social
Security is dead.
MR. McNUTT: I am talking about reactions in the
country - the reactions that there are going to be - they
will be responded to by the Congress.
H.M.JR: Well, look, gentlemen, all I want to get
this morning from you is enough encouragement to present
at four o' 'clock tomorrow afternoon to this big group that
comes in - who are all either Presidential appointees or
their representatives - there will be nobody here except
Presidential appointees or their representatives - I
didn't want to go forward unless I thought you were sympa-
thetic, and I gather that you people are sympathetic.
Regraded Unclassified
35
- 11 -
MR. McNUTT: Great Scott, we have urged it. The
program is sound. Now is the time to do it - even from
your standpoint, now is the time to do it. But from
the long-range Social Security standpoint, now is the
time to do it. Now is the time to get the money for the
backlog to meet the demands we are certain will come
after this war is over. I don't care what the postwar
world is - how much production we have - we are still
going to have a tremendous problem which can only be met
by a sound Social Security program large enough and strong
enough to meet the needs. Otherwise, we go right through
what we went through before. Ian convinced of that.
MR. ALTMEYER: Here is the way it stacks up in my
mind as I listened in on the conferences you have already
had on your tax program and the relationship with Social
Security, which I agree you can't ignore. In order to
protect yourself you might - the President might submit
a double-barreled program - & tax program and a Social
Security program - both on their merits, and then say, "To
the extent that you enact Social Security along the lines
that I have recommended, to that extent you will need to
take that into account in the development of your tax
bill." But present a completely integrated tax program
50 that you are protected in the event that the Congress
shunts off Social Security.
H.M.JR: You can't do that. Do you mind - if we
are going to give a straight tax program, then we have
to have a tax, which we have, which will tax the people
from eight hundred dollars up to three thousand dollars
through taxes.
MR. ALTMEYER: Then they would see the alternative.
It seems to me they might - that you stand a better chance
of getting one or the other if they saw what the alterna-
tive was.
MR. McNUTT: If it weren't for the personnel considered
especially on the House side, I would say that - why not
be frank about it? But you can't. My own advice would
be to see, first of all, if you can secure anything like
an agreement from the leaders on the House side - that is,
as far as the committees are concerned.
Regraded Unclassified
36
- 12 -
H.M.JR: I tell you, all of these things - Paul is
prepared, with his staff, to give the President or anybody
else who wants them, all kinds of alternative plans. He
has 8 drawer full - and schedules, and so forth and so on.
But I don't see how I can go any further than doing it
first with this group and getting the benefit of their
advice, and then the President, and see how he reacts.
And then from then on, I hope - and from what he said over
the week end, I think he will - that he would like to
talk personally with the leaders and come to an agree-
ment, which would be ideal, both from yours and my stand-
point.
MR. McNUTT: That is right.
H.M.JR: I mean, if he would take this thing to his
own bosom and say, "All right, I will see this through.
Now, when we get together things move so fast - that is
why I am not going to pass on all the alternatives.
MR. McNUTT: It is a matter of political judgment.
H.M.JR: Somebody on my staff said it was more
political than anything else.
MR. McNUTT: I am really in accord. I do want to
say that we are sincere in our urging B. Social Security
program. You are, too.
H.M.JR: Don't misunderstand me. This thing would
not interest me at all if the basic economics of it
weren't sound. For a by-product, once, have something
economically sound and also good politics, three cheers.
MR. McNUTT: That is right. I am still going to
stand up and say I want a Social Security program to
be able to stand on its own feet.
H.M.JR: That is all right. I have no objections.
I think you are right.
MR. PAUL: Of course you will sell some people on
that, and you will sell some people on the other argument.
Regraded Unclassified
37
- 13 -
MR. McNUTT: But I am telling you where the most
powerful argument is. I am talking about the masses of
the people, and I am talking about the kind of Congress
we are dealing with right now.
MR. PAUL: That is right, but there are certain
people whose support you may be able to get with the anti-
inflationary argument.
MR. McNUTT: Let someone from the outside make that -
someone who is friendly. Let them point that out.
MR. PAUL: That is right. I agree.
MR. McNUTT: Here is a program that is sound in
itself, but it is not only sound, it is necessary right
now as a part of the general picture.
Now, if that can be done, if we could get B. voice
that would be listened to on the outside who would say
that - you have the President's support on it - then I
think we would have & chance. But there is no need to
tell any of you gentlemen how tough the Ways and Means
Committee of the House is.
MR PAUL: Not me, anyway. (Laughter)
H.M.JR: If it is all right, could you gentlemen come
back at four o'clock tomorrow and help me with this thing?
MR. PAUL: I would like to make & suggestion.
MR. McNUTT: Certainly.
MR. PAUL: In the meantime, Mr. Altmeyer could look
over some of these schedules so as to be prepared more
than otherwise he would be.
MR. ALTMEYER: What schedules?
Regraded Unclassified
38
- 14 -
MR. PAUL: The actual schedules we have constructed.
They are still tentative, and 80 on, but still, you would
get some of the concrete details of the idea in mind
better.
H.M.JR: You can do it any time.
MR. ALTMEYER: You plan on raising eight billion
dollars extra on individual income tax, and this would
raise about seven billion dollars extra?
MR PAUL: Yes, we have a supplementary income tax
above the Social Security level.
H.M.JR: It will take you fifteen minutes if you
want to stay with Blough now.
MR. ALTMEYER: You mean you have a dovetailed
arrangement?
H.M.JR: Yes we have dovetailed. We have built the
two things together without lowering the exemptions. I
think it is a nice package.
MR. McNUTT: Then we will meet here at four o'clock?
MR. GASTON: That is tomorrow.
MR. McNUTT: Yes, tomorrow afternoon.
H.M.JR: All right.
Regraded Unclassified
39
Mr. Paul's conversation with Mr. Maggs of the Labor Department,
at 4:45 p.m., September 1, 1943
M: I talked to Miss Perkins and discovered she feels very
vehemently that it would be a great mistake to adopt the
program that was outlined this morning. Her words were
almost exactly like those of Mr. McNutt, that social
security ought to stand on its own feet; that it should
not be dragged into an anti-inflationary thing. She
thought it would be bad policy from this possibility of
getting social security over at all. She feels very
strongly that the tax thing should be got without saying
anything about social security.
P: Is it your understanding from the conference this morning
that McNutt and you attended that McNutt was as much
against this as Miss Perkins is? I didn't get that.
I thought McNutt thought it was worth having a conference
with Congressional leaders, that he felt well of the
scheme provided emphasis was put on social security
and it was clearly indicated that it was on its own
merits.
M: I think you are probably right. Miss Perkins had thought
it would be better if social security were not mentioned
at the present time. I agree that McNutt certainly did
not go that far. Let me make the two things separate -
McNutt was vehement about social security, and she went
even further.
P: And she's objecting to any mention to social security
at this time.
M: Seems to be. I put in & call to you and when I couldn't
get you felt I better get the thing to Mr. Morgenthau
and got word that he would call me back. Do you want to
get this to him?
P: I will send word that you have talked to me.
Regraded Unclassified
40
September 1, 1943
10:40 a.m.
LAZARD FRERES
Present: Mr. Paul
Mr. Pehle
Mrs. Klotz
H.M.JR: I have read this thing on Lazard Freres
(referring to Memorandum to the Secretary from Mr. Paul,
copy attached), and I want to ask a couple of questions
which, after reading it, aren't quite clear to me. That
is this: This million nine hundred and fifty, which is
more now than it was first--
MR. PEHLE: That is right. Part of that was trans-
ferred up from Argentina just previously through the
United States.
H.M.JR: What was the sum first?
MR. PEHLE: The first sum was a million, two.
H.M.JR: Now it is a million nine hundred and fifty?
MR. PEHLE: Yes.
H.M.JR: And they claim that all of that was sent out
to Lazard Freres in Unoccupied France to pay their debts?
MR. PEHLE: That is right.
H.M.JR: And the man in this country was David-Weill?
MR. PAUL: Andre Meyer.
H.M.JR: Andre Meyer sending it to David-Weill.
Now let me ask you this - I am not familiar with it:
You said he did nothing to get his father's citizenship back?
Regraded Unclassified
-41
- 2 -
MR. PEHLE: His father's citizenship was revoked by
the Vichy Government and stayed revoked for fifty-three
days and it was restored. Originally we were worried
lest the timing of the sending of the money would make it
appear that the money might have had something to do
with getting the citizenship back.
H.M.JR: Was it during those fifty-three days?
MR. PEHLE: No, it wasn't.
H.M.JR: When?
MR. PEHLE: The citizenship was restored before the
money was sent. The citizenship was restored before any
of the money was sent and the dates didn't coincide -
that wasn't intelligible.
H.M.JR: You raised it, then you raised a doubt in
my mind. The citizenship was restored before the money
was transferred?
MR. PEHLE: That is correct.
H.M.JR: That isn't in here.
MR. PEHLE: I can see it wasn't clear.
H.M.JR: That takes care of that point. Now, as to
whether they used it for bribery or not, you don't know.
MR. PEHLE: We don't know, but we are inclined to
believe their story. Maybe we are naive, but it is a
very plausible story.
H.M.JR: Now you also raise the sort of guarantee
fund from two million dollars to a half a million.
MR. PEHLE: That is because the amount is up to a
million nine hundred and fifty that was transferred.
H.M.JR: Have they got that?
Regraded Unclassified
42
- 3 -
MR. PEHLE: They have got it. They will put it up.
In other words, it won't force them out of business.
H.M.JR: They have the money? Is Altschul going
to leave his money in as a special partner?
MR. PEHLE: I don't know. It won't be his money
that will be put up; it will be the money of the two
French partners.
H.M.JR: And they have the money?
MR. PEHLE: They have the money.
H.M.JR: Who is the fellow James A. Jackson?
MR. PEHLE: I can't tell you much about him except
that he has been & partner all along - an American. We
have checked them and we didn't have any adverse infor-
mation.
H.M.JR: But you give them your approval - both
Jackson and Hettinger? You don't know very much about it.
MR. PEHLE: Hettinger had a long line of references
in Washington. The only one I talked to was Dr. Goldenweiser
at the Federal Reserve Board. He said he knew Hettinger
very well and that he was an entirely reliable man.
We didn't find anything adverse on Jackson. de has
been there all the time.
H.M.JR: I thought in a previous memorandum we had
already referred this to the Attorney General once.
MR. PEHLE: We had recommended referring it - we
hadn't until we decided what we were going to do with it.
H.M.JR: Are you satisfied?
MR. PAUL: Yes. I think that they are willing to do
that and we have got to send it to the Attorney General.
H.M.JR: Whose is this (referring to memorandum)?
Regraded Unclassified
43
- 4 -
MR. PEHLE: Randolph E. Paul.
H.M.JR: Where is Pehle?
MR. PEHLE: He is on the initialed carbon.
(Memorandum initialed by Mr. Pehle.)
H.M.JR: All right, here goes Morgenthau. (Memo-
randum initialed by the Secretary.)
Do we get a photostat of this?
MRS. KLOTZ: We will do it.
MR. PEHLE: They have a new - they brought new
counsel in, in addition to the old counsel, to deal with
this matter. The new counsel is much more intelligent
than the old.
H.M.JR: Who is the new?
MR. PEHLE: Dempsey and Koplovitz.
MR. PAUL: Dempsey is the son of the former New
Mexico Congressman. He used to be--
MR. PEHLE: He is local, here in Washington. They
handle themselves very well.
MR. PAUL: Dempsey used to be a great friend of
Jerome Frank.
H.M.JR: Cook is certainly riding on a reputation of
a good many years ago.
MR. PAUL: The partners in Cook's firm are very
worried about Cook, generally. They think the whole firm
is going to go to pieces as soon as Cook gets out - the
effect of his reputation.
H.M.JR: This closes this, I hope. Maybe we will all
get a free subscription out of Harper's magazine. Is
that what it is?
Regraded Unclassified
44
- 5 -
MR. PEHLE: That is what they are dickering with.
H.M.JR: That is all I have got. Have you got
anything else you want to clear?
MR. PEHLE: I just want to say you were right on
this case from the beginning. You thought there was
something wrong and there was. I don't know what it
was, but it was there, all right.
H.M.JR: Well, we know now; they admitted it.
MR. PEHLE: Sure.
H.M.JR: They admitted it.
MR. PEHLE: I don't know what it was that gave you
that feeling there was something wrong.
H.M.JR: Oh, well, the best way I can say it is the
old elbow tingles. (Laughter)
One other thing - I want to get this thing straight.
Who was the man at this end who sent the money? Who did
all that?
MR. PEHLE: Andre Meyer.
H.M.JR: And on the receiving end?
MR. PEHLE: Pierre David-Weill. He is very ill.
H.M.JR: And he did the manipulating?
MR. PEHLE: Yes.
H.M.JR: And he was the fellow who did not teil the
truth? Is that right?
MRS. KLOTZ: And he is the man who is Dr. Weizmann's
friend, and not until Weizmann made him - discovered - I
Regraded Unclassified
45
- 6 -
don't know how he discovered the story, but I told you
when he saw me up in New York he said that not until he
entered into it and said, "This thing is going on; you
have got to tell the truth. Have you been telling the
truth?" did they break down. Then they wrote the letter.
But it was Weizmann who made them do it.
H.M.JR: Do you think 80Y
MRS. KLOTZ: I think 80.
MR. PEHLE: I think various people claim the same
thing. Schubart claims it.
H.M.JR: But in the first instance it was my saying
to these people, "Interview them and try to get them to
tell the truth." Isn't that right?
MR. PEHLE: Yes. We did something else, too. We
took the Swiss Bank, through whom they had transferred
these funds, and blocked their funds here and said, "If
you want them unblocked you tell us what happened to the
money." And they very well may have been worried that
the Swiss would come back - and the Swiss did come back
in a cable we picked up through censorship saying, "Ask
David-Weill; he knows.
MRS. KLOTZ: That is the answer.
MR. PEHLE: I am afraid that is why--
MR. PAUL: They made & virtue out of necessity, all
right.
H.M.JR: So there were a number of people. I mean,
the point was, they were blocked both mechanically and
every other way, and it looked as though something was
going to happen. So he said the less of two evils was
to tell the truth.
MRS. KLOTZ: They would have been much better off
originally if they had told the truth, but they had told
a couple of lies and it was very hard to turn back.
Regraded Unclassified
46
- 7 -
H.M.JR: This just didn't smell right. It was a
long hard job. I think you people did a good job.
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE SEP 1 1943
cretary Morgenthau
andolph Paul
Lazard Freres & Company has filed its new
ication to reorganize. As indicated in a previous
randum, Frank Altschul is not to be a partner in the
firm. The application names Pierre David-Weill, Andre
I and the French Lazard partnership as the capital con-
outing partners and James A. Jackson, Forrest Lattner
Albert J. Hettinger as additional partners. Jeckson
Lattner are now Lazard partners. Hettinger is a former
ber of the faculty of the Harvard Business School and is
-president, secretary and a director of General American
stors, Inc. According to Poor's Directory, Frank
chul is president of the latter company, Raymond D.
th is its executive vice-president and its board
des, among others, Robert Lehman, Monroe C. Gutman and
am J. Hammerslough of Lehman Brothers, Arthur Ballantine
ot, Clark & Ballantine. Paul Baerwald, James Bruce,
d P. Farley and Lester W. Perrin.
The application states that another American partner
admitted, and although his name is not given, we have
informally advised that the individual in mind is
am H. Schubart of the Bank of Manhattan. We are further
med that Mr. Schubart's name was not specified because
been in the hospital and has been unable to have the
reations with his present associates and the Treasury
he feels to be necessary before he can permit his name
submitted formally.
We now believe that we are as informed of all the
and circumstances surrounding the remittances made by
Meyer in September and October 1940, as we can be until
iberation of France makes the books and records of
d Freres & Cie. (Paris) available for inspection.
has, as you know, recanted his testimony that these
tances were made to Les Fils Dreyfus (Basle) in
dation of their interest in Ulitex, a Panamanian
ration, and in payment of a debt owed to them by Meyer.
Regraded Unclassified
48
- 2 -
now purports to confess, and his confession is
rted by the sworn statement of Pierre David-Weill, that
1,950,000 involved in these transactions were remitted
In to David-Weill at Chatel-Guyon. in what was then un-
bied France, and that Les Fils Dreyfus acted only as
rmediaries in the transactions.
David-Weill has testified under oath that after the
fáll of France and Laval's rise to power, Lazard Freres & Cie.
(Paris), then located in Chatel-Guyon, was faced with heavy
withdrawals of deposits because many of its customers feared.
under existing circumstances, to continue to do business
with a Jewish banking firm. David-Weill also testified that
although Lazard was solvent, its liquidity was impaired by
its inability to discount paper normally discountable at the
Bank of France and the unavailability of certain assets in
the occupied zone. David-Weill further testified that the
precariousness of his firm's position was greatly increased
by Laval's personal hostility to its partners by reason of
the part they played in causing the downfall of one of his
governments in the years prior to the war. Fearing that the
failure of his institution would create a scandal that would
have unfortunate repercussions on both the banking and Jewish
communities, Pierre David-Weill testified that he called on
Andre Meyer, both directly and through Les Fils Dreyfus, for
assistance. Contemporary correspondence between Meyer and
Day id-Weill and cables between Les Fils Dreyfus and Meyer
tends to corroborate the foregoing.
Both David-Weill and Meyer have testified that the
er's remittances of September and October 1940 were in
onse to David-Weill's pleas for assistance, and David-
I has testified that the funds were used by him solely
iquidate legitimate obligations of Lazard Freres & Cie.
is). David-Weill has further testified under oath that
one cent of Meyer's remittances, or indeed one cent of
other funds, was used to secure the restoration of his
er's French citizenship, or as ransom for himself or
ody else.
i
- 3 -
Altschul testified that he did not know of the
ttances in question. He stated that Meyer requested him
ermit Lazard Freres, New York, to remit funds to David-
in 1940 but that he, Altschul, had refused to do so on
ground that such remittances would be in violation of
ernment regulations. Meyer, thinking that Altschul was
weing this pretext in order to avoid risking his funds, became
angry at Altschul and arranged the remittances without
Altschul's further participation. Meyer's testimony
roborates this.
We have been unable to examine Alfred A. Cook,
attorney for Lazard Freres & Cie. (New York) to ascertain
the extent to which he knew that Andre Meyer and David-Weill
were not telling the truth to the Department in their earlier
lanations of these remittances. Mr. Cook has been in
fornia for some weeks visiting his daughter whose death,
after a long illness, is expected at any moment. Andre Meyer
add
two of Mr. Cook's partners, however, have been examined
this subject. It would appear that Meyer believes that
Code
has been at all times since prior to the filing of the
arading application fully aware of what is now said to be
truth about the remittances, while his law partners
Leve otherwise. We intend to interrogate Cook at the
lest possible opportunity, but feel that delaying action
the pending application would not be warranted.
After careful consideration we recommend that
rd Freres & Co. (New York) be permitted promptly to
Meyer, David-Weill and Hettinger as partners and to
nue in business upon condition that:
(1) A sum of not less than $2,000,000 is
deposited in a contingent vesting
account as a. guarantee of future
compliance with the Order by the firm
and subject to vesting in whole or in
part should the current explanation
of the remittances prove to be untrue
or if further violations should occur,
and
Regraded Unclassified
50
- 4 -
(2) No transaction subject to the Executive
Order will be effected by the reorganized
firm without the prior approval of a
previously designated partner of the
firm who is a. United States citizen
and acceptable to the Department for
the assumption of such function. In
the application currently pending,
Lazard Freres has designated James A.
Jackson to fulfill this function with
Albert J. Hettinger as alternate. We
see no objection to the choice of
these individuals.
We further propose that the violations of the
Executive Order and the false testimony given by Andre
Meyer be formally referred to the Attorney General for such
action as he may deem appropriate.
If you approve, please initial.
Art
Pshle
I
rove: H.M.
Sept1*1943
Regraded Unclassified
51
September 1, 1943
11:33 a.m.
HMJr:
Hello.
Operator:
Mr. Gamble.
HMJr:
Ted. Ted.
Ted
Gamble:
Good morning, sir.
HMJr:
Hello, Ted. I've got an idea and I just talked to
Steve Early about it. He likes it.
G:
Yes.
HMJr:
And that is to try to ask for Churchill to make us
a newsreel letting me sell him a $25 bond
G:
Be wonderful.
HMJr:
down at the gun factory here at the Navy where
they are making a 16" gun as a background, you see?
G:
Be wonderful.
HMJr:
Now, his suggestion was that you get in touch with
Aubrey Morgan, who 1s head of the British Press and
Information Service here.
G:
Yes.
HMJr:
He said try him either at the Embassy here or down
in New York
G:
Yes.
HMJr:
and let it come through them.
G:
Yes, sir.
HMJr:
See?
G:
Yes, sir.
HMJr:
And his name is Aubrey Morgan.
G:
I have it.
HMJr:
And - well, for whatever it's worth, there it 18.
Regraded Unclassified
- 2 -
52
G:
I think it's a wonderful idea.
HMJr:
He said it would be good for us and it would be
good for Churchill.
G:
Be wonderful for Churchill.
HMJr:
Yeah.
G:
And....
HMJr:
Now, they'd have to do it tomorrow.
G:
Well, we can do it - we can move - he's here
tomorrow, I take it?
HMJr:
He'll be here late today.
G:
Wonderful. Well, we'll get right on it and I'll
give you a report on it just the second I get word
back from them.
HMJr:
Okay.
G:
I understand you were just asking about Detroit.
HMJr:
Yeah.
G:
I won't be able to give you that in full until
tomorrow. I talked to Detroit last night - to
Mr. Quinn and I talked to Mr. Murray this morning.
HMJr:
Yeah.
G:
I wanted to get from them the information - I didn't
want them to feel we were moving in and taking over
their program.
HMJr:
Yeah.
G:
on this radio.
HMJr:
Yeah.
G:
I've made the request for a half-hour's broadcasting
time
HMJr:
Yeah.
Regraded Unclassified
- 3 -
53
G:
....and worked out Murray's participation with him.
HMJr:
Yeah.
G:
There are several details that I want your approval
on
HMJr:
Okay.
G:
but it will be tomorrow before I can give you
much on that.
HMJr:
Thank you.
G:
All right, sir.
Regraded Unclassified
54
September 1, 1943
12:40 p.m.
Cordell
Hull:
Can you connect that up any better? Hello, Henry?
HMJr:
Cordell?
H:
Yes, sir.
HMJr:
Can you hear me?
H:
Barely.
HMJr:
Cordell, I wrote you a letter which I don't know
reached you or not about this proposed loan to the
Netherlands.
H:
Yes, I got it this morning. The fact 18 that I
have said several times, that while I'm always glad
to get in on anything, I - I've said several times
that this is almost in every essential respect B.
matter for the Treasury and the President
HMJr:
Yeah.
H:
with especially you two.
HMJr:
Well, I'm
H:
It's a question of monetary policy there more than
anything else.
HMJr:
Well, I'm willing to assume the responsibility but
I thought that in this case
H:
Yeah.
HMJr:
if we settled this one that we're not going to
make any loans without, at least informing Congress
H:
Yeah.
HMJr:
that that would take the heat off both you and me
because they've been around to see your fellows and
they've been around to see Jesse
H:
Yeah.
HMJr:
and they've been - and even the President saw
them.
Regraded Unclassified
- 2 -
56
H:
Oh, did he?
HMJr:
Yeah.
H:
Well, anyhow, I haven't encouraged anybody to
support this.
HMJr:
Well, I
H:
I have said to the - I've said to the Netherlands
HMJr:
Yeah.
H:
....
that this was a question of brand new policy
HMJr:
Well
H:
and that it relates to the monetary side and the
loan side which the Treasury and the President handle
and I just dumped them off in that fashion
HMJr:
Well
H:
and I did Mr. Jones the same way.
HMJr:
Well, the trouble is, I think Jesse has kind of made
them a half of a promise, which he shouldn't have
done.
H:
No, of course not.
HMJr:
And I don't know whether you agree with me but I think
for the President or anybody connected with it, to
even make a helf a promise on a loan, would embarrass
us very much on anything that we want to do in the
foreign field.
H:
Well, I think everybody over here
HMJr:
Yeah.
H:
off the record, feels the same way.
HMJr:
Yeah.
H:
That's the first thing I said when it first came up.
HMJr:
Yeah. And somebody in Congress is going to find out
about it
Regraded Unclassified
55
- 3 -
H:
reah.
HMJr:
and you may want some post-war and I may want a
stabilization program and they - the first thing they
are going to ask me is, "Have you made any promises
on any loans?"
H:
Well, I'm 100%, you know, personally
HMJr:
reah.
H:
of that view.
HMJr:
Well, if you would scribble something on a piece of
paper and send it back to me, I'd appreciate it.
H:
Yes, Well, un - - I just wanted you to know that,
while I don't think it's my function
HMJr:
Yes.
H:
except to a nominal extent, that 1e my individual
views.
HMJr:
Well, I - I'm more than willing to assume the respon-
sibility but what I was trying to do was delay this
thing
H:
Yeah.
HMJr:
and it - and what I'd like to feel that I -- when
I go in these things, while I'm willing to take the
final responsibility, when it's something new like
this
H:
Yeah.
HMJr:
I'd like to feel that you and I are shoulder to
shoulder.
H:
Yes.
HMJr:
You see?
H:
Yes. Well, that's the way we are on this.
HMJr:
Well, that's all I wanted to find out.
H:
Yeah. All right, Henry.
HMJr:
Thank you.
Regraded Unclassified
57
September 1, 1943
2:30 p.m.
TAXES
Present: Mr. Paul
Mr. Surrey
Mr. Smith
Mr. Blough
Mr. White
H.M.JR: This is an interesting refinement which I
think has good public relations in it, that Altmeyer
suggested. I thought you could just state it again.
MR. BLOUGH: Here is Altmeyer's suggestion: He
says the particular plan that we have been talking about
is what he calls neutral with respect to Social Security.
We propose income tax and Social Security, but there is
nothing in the plan which puts any premium on passing the
Social Security.
Now he said, "Why don't you do this: Since you
deducted the Social Security in arriving at your income
tax schedule, anyway, why don't you take your income
tax schedule before you deduct it as Social Security and
say, 'That is the income tax proposal, but we propose
that you pass Social Security also and that you allow
the increase in Social Security pay roll tax on the em-
ployee as a tax credit against his income tax?'"
Now, he said that that has this advantage: In the
first place it isn't neutral to Social Security. If
Congress passes that income tax there will be great pres-
sure on them to pass the Social Security increase also so
that the workers will be able to get this credit and
others will be able to get the credit. If they say,
"Nothing doing; we are not interested in Social Security;
now what do you suggest, Mr. Secretary?" - we will have
an income schedule there that will stand on its own feet
without Social Security.
Regraded Unclassified
58
- 2 -
H.M.JR: Let me explain it to you the way I under-
stand it. That is a little bit complicated. We took
this eight billion seven schedule and we said Social
Security - let's say, for argument - will add three billion
onto the pay roll of the people.
MR. BLOUGH: Three and a half.
H.M.JR: I said that we don't want to have tax and
the Social Security, SO we deducted the three billion
dollars from the tax schedule and then put the tax schedule
on top of the Social Security. You see? That is the way
they have arrived at these figures.
What Altmeyer says - he didn't say it to me - "Let's
leave the eight, seven, put on the Social Security, and let
the fellow have the fun, himself, of deducting it and think
he is getting something for his money."
Blough doesn't put it that way, but that is what it
amounts to, doesn't it?
MR. BLOUGH: He puts the emphasis not on the fellow
having the fun of deducting it--
H.M.JR: That is what you are suggesting?
MR. BLOUGH: That is what would happen. A man would
be allowed a deduction against his income tax.
MR. PAUL: In the meantime--
MR. BLOUGH: If they don't pass the Social Security
in the meantime, they pass the income tax schedule you
propose.
MR. SMITH: Including the Social Security?
MR. BLOUGH: Only including--
MR. SMITH: He would pay the same amount of money only
not get Social Security.
Regraded Unclassified
59
- 3 -
MR. BLOUGH: Above the exemptions that is substan-
tially correct. Below the exemptions he wouldn't pay
any increase at all because we wouldn't increase his in-
come tax and if they didn't increase his pay-roll tax
of course he would have no increase.
MR. PAUL: What this means is that--
(The Secretary left the conference temporarily.)
MR. SMITH: The only rub I see is that you are
passing a tax bill now - if I understand you correctly,
you are submitting a tax bill; then you are suggesting that
a tax credit be made - be given for Social Security, which
you are--
MR. BLOUGH: Which you are, urging at the same time.
MR. SMITH: Which you are urging at the same time.
Now, the compulsory savings boys will jump up and say,
"Why go into all the trouble with the Social Security?
Why not just take that same amount of money and allow
a tax credit for compulsory savings and then you get it
right after the war is over?"
MR. BLOUGH: The same if you do it the other way.
MR SMITH: But you have set it up so beautifully
for them because you haven't said that your tax presenta-
tion is Social Security and taxes. They have got to split
it apart before they can insert compulsory savings in
place of Social Security.
MR. PAUL: This is the same as our second line of
defense except it is a substitution of Social Security
credit for--
MR. BLOUGH: We have no postwar credit.
H.M.JR: Let's forget it.
MR. BLOUGH: It is the only thing you will get.
Regraded Unclassified
60
- 4 -
MR. PAUL: Let me give you one other objection to
it, though.
H.M.JR: Look, I am getting impatient, Roy. Why
keep trying to do this thing the back way? Let's go down
the line. I mean, there is always some suggestion of
doing it some other way, which will open the door for the
thing that I don't want.
MR. BLOUGH: I don't think it will. I don't think
Mr. Smith is right.
MR. SMITH: I do, because it seems to me that there
is & perfectly logical way to present this and that is
in order to raise revenue for the Government and in order
to combat inflation, whatever Altmeyer and McNutt - I
read that thing this morning - what they are looking for
are those two things; raising revenue and combatting
inflation. Now, in order to do that you are presenting
a schedule to raise eight point seven, or whatever it is,
and you are suggesting that that be raised by excise
taxes, increased income taxes, and Social Security, and
that is a Social Security tax. Those are the three things
that make it up - if those are the three things. You
present that as a unit and it is going to be harder than
hell for somebody to blast your Social Security out, and
having gotten it out, put something else in.
I would like to be Byrnes - I would rather be Byrnes
and Vinson under this new arrangement than I would under
the old one. And besides, I can't get through my head -
when Mr. Roosevelt calls Byrnes, Vinson, George, and
Doughton and lays this thing out to them, right then
and there Vinson and Byrnes are going to say it is very
silly to try to put Social Security through because it
is a big fight. "Now there are six billion dollars - just
what we want in compulsory savings." You can take the
Social Security out and put compulsory savings in and
this will slip through without 8. question, then it is
up to the President to say, The hell with that. If he
says, "The hell with that," we are clear; if he doesn't,
then that is something else again.
Regraded Unclassified
61
- 5 -
MR. BLOUGH: He can very readily say that, anyway.
MR. SMITH: I know it, but it is going to be easier
if he just is going to substitute one alternative for
another.
H.M.JR: Can I interrupt you? Why does it have to
take Altmeyer to come along and suggest a thing like
this? You were perfectly happy the way it was.
MR. BLOUGH: I never said I was perfectly happy.
You asked me yesterday if I would go along with this and
I said I would, and I will.
H.M.JR: Look, my patience with all of you is begin-
ning to run out. I mean, it gets to a point that I say
I want something and I don't want to sit here all day
long being pulled down. I can't do it any more. I am
getting too tired. I am getting to the point where I
can't take it any more.
MR. BLOUGH: O.K., I presented it. If you don't like
it, O.K. I thought it was the same thing only better.
H.M.JR: You started to get angry.
MR. BLOUGH: I am not angry with you, I--
H.M.JR: But it is this thing of not wanting to do
it this way and always getting back - that is something
which is going to open the door to something else.
MR. BLOUGH: All you have to do is look at this chart,
I think.
MR. PAUL: I haven't been trying to do that. I would
consider myself very remiss in my duty here in this office
if I didn't call your attention to some angles which I
didn't think were completely clear in your mind.
H.M.JR: I think they are clearer than you give me
credit for.
Regraded Unclassified
62
- 6 -
MR. PAUL: That may be, but I have to be sure of
that.
H.M.JR: I think they are clearer than you give me
credit for.
MR. PAUL: I am ready to admit that, but I can't
sit here silent and let you do something that I don't
think may be wise, orwouldnt open to you the full vision
of the consequences.
H.M.JR: I understand all the implications. I
understand everything that you have said. I also under-
stand what I think you really want.
MR. PAUL: I am not trying to slip anything over on
you.
H.M.JR: No, no, you keep just trying to wear me
down.
MR. PAUL: No, I am not trying to wear you down.
These are hard things; they are hard for us. We have been
wearing our brains out on them, and in the first place
we are interested in your picture here - we want you to
do the right thing. And in the second place, from our
own point of view we don't want to be told later that we
didn't point these things out.
H.M.JR: They have been pointed out. I mean, over
and over again - I mean, we have travelled a long way
since we started with the eight billion seven and the
corporate tax, and all the rest of this thing. We have
gone from one end of the pendulum to the other.
After all, I got over this hurdle this morning. I
didn't know what they would say. I don't know whether I
can get over the hurdle tomorrow afternoon - I mean, I
can stumble on the one tomorrow afternoon, but the final
one is the President. All I am saying is that I like this.
I don't know whether I can get the President to take it.
If he can take it, then I expect him to do the battling.
Regraded Unclassified
63
- 7 -
That takes certain things you brought out at the house,
which I don't want to repeat now. Then he can do it.
Now, pointing out all the troubles with anything new
or revolutionary like this - of course there will be
plenty of people to point out the troubles, but at least
I want to get - if I do it with my dying breath, I would
like to run and deliver it in his lap. If he doesn't
want to accept it, he doesn't have to.
MR. SMITH: I think that is the big problem.
MR. PAUL: Never for one moment have we wanted to
prevent you from doing it.
H.M.JR: Well, you can help me a little bit. Why
can't you help me? Why can't you both, through your
sense of duty, point out both the pitfalls and the
advantages?
MR. PAUL: There are certain advantages. The advan-
tages don't so much need pointing out because you see
them very clearly. I think you made a very good state-
ment on that yesterday in your four-point program.
Of course, I could probably do more - make you feel
better by omitting disadvantages. I was pointing out
what I thought wasn't clear.
H.M.JR: Right or wrong, and if I am wrong - I got
the feeling through this constant pointing - if I am wrong
I an sorry - that you fellows are trying to wear me down
on this thing not to do it.
MR. PAUL: We are not trying to wear you down. We
know what it is to be worn down ourselves.
H.M.JR: I unfortunately don't have the reserve that
I should have. Now, could I just - the thing which I
wanted to get - and I have got to stop at three o'clock -
which I don't understand - this is terribly important -
is this income tax schedule which I have got on my lap.
(Indicating Chart entitled "Individual Income Tax, Effective
Rates for Married Person without Dependents.")
Regraded Unclassified
64
- 8 -
MR. BLOUGH: There are several of them there.
H.M.JR: Are there?
MR. BLOUGH: The last is the "M-2."
H.M.JR: Is that the eight, seven with all the
additions and subtractions? Does that go back to the
eight, seven?
MR. BLOUGH: That is correct.
H.M.JR: If I had the original eight, seven, and I
pointed to twenty-five thousand dollars and this is five
three point nine, now where would it be, say, when Paul
showed us at the very first meeting - he didn't show it,
but the one he had - where would that differ?
MR. BLOUGH: At twenty-five thousand dollars?
H.M.JR: Practically fifty-four percent. How much
difference between now and what it was?
MR. BLOUGH: Not over half of one percent. There
may be that much - just mechanical.
H.M.JR: This is what I would like to do and I want
to know whether you people agree. I have shifted a bit.
I first said we would go in on the low level and raise it.
I think it would be a better tactical thing to go in on
the high level and let them whittle us down.
MR. PAUL: Let them whittle us down?
H.M.JR: Yes. I mean tactical versus the people
we are going to see tomorrow afternoon.
MR. PAUL: For purposes of that conference?
H.M.JR: Yes.
MR. PAUL: I am inclined to agree.
Regraded Unclassified
65
- 9 -
H.M.JR: Are you in on that?
MR. BLOUGH: Absolutely.
H.M.JR: Let them whittle us down rather than have
somebody like Dick Gilbert or Lubin say, "Well, you are
New Deal on one hand and 'old deal' on the other."
MR. SURREY: You will be turning around too fast.
H.M.JR: The point I am getting at, on the twenty-
five thousand we are practically where we were when we
started.
MR. BLOUGH: That is right. We intended to be
exactly there. If there is any difference, it is mechanically.
H.M.JR: I think from the standpoint of maneuvering
versus this crowd, we had better stay where we were.
MR. PAUL: When you said twenty-five thousand did you
mean twenty-five thousand income?
=
MR. BLOUGH: That is right, twenty-five thousand in-
come.
H.M.JR: I mean, if I go below this, then that gives
them something to--
MR. BLOUGH: In fact this chart, if it is blown up,
shows exactly that.
H.M.JR: The only support you can give me is to blow
it up? (Laughter)
MR. BLOUGH: I mean made big. It shows exactly that
because the dotted line is our original eight point seven.
(Mr. White entered the conference.)
H.M.JR: Just for fun, without any comment - do you
mind just trying this on Harry? He doesn't know whether
I like it or don't like it. Just for fun.
Regraded Unclassified
66
- 10 -
MR. BLOUGH: This is a proposal that instead of
deducting the increased Social Security pay-roll tax
from the increased income tax and building a schedule
on what is left, start with your income tax schedule and
allow the taxpayer a tax credit for whatever increase in
pay-roll tax the Congress may impose and for no other
purpose.
MR. WHITE: My first reaction is that I don't like
it, but I would like to think it over. See if I under-
stand it, first. You are going to make them - you are
going to have an increase in tax rates, and you are going
to say that any increase which you have to pay you can
later use as a contribution towards your Social Security
payments?
MR. BLOUGH: whenever the Congress passes the Social
Security increase that automatically becomes a tax credit.
ICK. WHITE: Is it your thought that that would be
independent of a combining of both, or that you would
still present both?
MR. BLOUGH: Yes, you present it as a unified plan,
but you put the integration in the tax credit.
MR. WHITE: It is an alternative dressed up in
another dress.
MR. BLOUGH: It is the second alternative, there is
no doubt about that, but we have taken off some of the
dress. here is the part that isn't in the second alter-
native: There is no postwar credit for any purpose ex-
cept this.
MR. PAUL: You passed the test. I think he got
ninety or a hundred. (Laughter)
MR. WHITE: The first idea of the second line of
defense was clever. I still think it is a good idea, as
something that you may have to fail back on. I think it
appeals to me. but I frankly don't see in it anything
Regraded Unclassified
67
- 11 -
new but another device to bring forward the second line
of defense as the first line of defense. Maybe I am
wrong, but I want to think it over.
Mr. BLOUGH: Could I ask one question of him?
H.M.JR: Sure.
MR. BLOUGH: would you feel that as 8 second line of
defense it would be nearer to the first one and more
acceptable than the one we were talking about before?
MR. WHITE: The difference between that and the first
was they would get a credit in either case, though it
might be in the form of that.
Mr. BLOUGH: In this proposal they get no credit
unless there is an increase in Social Security and only
for that purpose. In the other one they got postwar
credit.
MR. WHITE: I believe, offhand, that I like this
wrinkie a little more because I think it may put more
pressure on Congress to have extended Social Security
since everybody who paid taxes will feel it isn't going
to cost them any more.
MR. BLOUGH: That was Altmeyer's proposal.
II.M.JR: You had better stick around because you
weren't here to go after Paul 30 I had to, and I can't
do it nearly as nicely as you do. (Laughter)
MR. BLOUGH: Fred did very well. (Laughter)
MR. SMITH: I don't think it is fair to ask me a
question at a different time than you ask a question of
marry white. we ought to both be here. We don't know
where the other one stands. (Laughter)
H.M.JR: Well, Harry, the other thing important that
I have about decided, but you can still holler, and I
Regraded Unclassified
68
- 12 -
think you are going to fight me tooth and nail on this
one, and that is the eight, seven schedule originally
proposed two or three weeks ago, in the higher brackets -
we will stick by that. I said I thought we ought to
go low, but I have changed my mind. I thought I would
let them whittle me down.
In other words, it is exactly - the twenty-five-thou-
sand-dollar salary is fifty-four percent, and we will
leave it just about the way it is.
MR. WHITE: I an not sure that I understand, but I
can easily say what I am in favor of. I am in favor of
pushing up, or advocating increased taxes above the
three thousand as far as we possibly can because, as I
say, I think that the middle income brackets - those from
three to thirty, or whatever it is - can bear and should
bear more.
H.M.JR: Looking at it from the standpoint of Congress,
I thought it would be a little more tasty to them if we
didn't 8 so high in the ten-thousand-dollar class, you see.
After thinking it over, I would much rather have
Gilbert or Lubin tell me I am too high than too low. In
otherwords, we vill stick where we were three weeks ago.
MR. PAUL: Except at the lower--
MR. BLOUGH: It amounts to practically nothing above
ten thousand.
MR. WRITE: Above ten thousand it is not a question
of the record; it is wholly 8. question of the psychologi-
cal attitude and the ease with which we below ten are
willing to pay if we know the other fellow - it is like
all these fellows in a factory. There may be twenty-
five thousand in a factory, and the fact that one boss
may get a high income and doesn't pay a higher income tax
irritates them all, even though the amount of revenue in-
volved is insignificant. You are dealing with psychologi-
cal--
Regraded Unclassified
69
- 13 -
H.M.JR: we are all agreed. would you (Blough)
SNOW this to Mr. Gaston and also Sullivan and Haas?
Now, couldn't I meet with you people tomorrow, say,
again at eleven-thirty? Are you busy at that time?
MR. PAUL: No, the only thing I have to do is call
up Senator magner. I have been in touch with his secre-
tary. I may have to go to New York to see him. I think
I could 6° after this meeting.
H.M.JR: Let's say a tax meeting at eleven-thirty
tomorrow, but before that see these other people and we
will have one more resume.
Mic. PAUL: I think it is very important to see
Wagner.
Regraded Unclassified
70
September 1, 1943
2:39 p.m.
HMJr:
Hello. Hello.
Operator:
Go anead.
HMJr:
Hello.
Fred
Vinson:
Yes.
HMJr:
Henry Morgenthau.
V:
Yes.
HMJr:
Is this Fred Vinson?
V:
ies.
HMJr:
Look, I suppose you've gotten a notice that there's
Cabinet tomorrow afternoon. Hello?
V:
Yes.
HMJr:
Well, I have, too. And that kind of ties me all
up because I have that 4:00 o'clock meeting on
taxes in the afternoon.
V:
Yes.
HMJr:
which I hope you are going to come to, 80 1
wondered if I could beg off tomorrow morning from
your meeting.
V:
Well, yes, that's perfectly all right, Mr. Secretary.
HMJr:
Is that all right?
V:
Yes, it's all right.
HMJr:
NOW, Bell isn't here eitner, go I thought I'd just
call you up.
V:
I see.
HMJr:
He's gone, taking a week's holiday.
V:
Well, that's - he ought to have two weeks.
HMJr:
Yes, I agree with you.
Regraded Unclassified
71
- 2 -
V:
All right.
HMJr:
I just wanted to explain it - why....
V:
That's all rignt.
HMJr:
....and 1 hope I'll see you at 4:00.
V:
Good bye.
Regraded Unclassified
72
September 1, 1943
4:37 p.m.
Operator:
Go ahead.
HMJr:
Hello.
Other
Operator:
Mr. Secretary.
HMJr:
Yes; hello.
Edwin M.
Watson:
Hello, there, Mr. Secretary. How are you coming on?
HMJr:
Who is this?
W:
This 1s Pa Watson.
HMJr:
My God, it's a voice from the past. It's been 80
long since I've heard you.
W:
(Laughs) Well, look here, the President wants you
and Mr. Paul
HMJr:
Yeah.
W:
to come over here Tuesday - he said Monday or
Tuesday, but I'd put it Tuesday - 'cause Churchill
won't go 'till Tuesday morning.
HMJr:
Well, I'll be in Detroit Monday anyway.
W:
All right. Will Tuesday be okay for you?
HMJr:
Wonderful. What time?
W:
Well....
HMJr:
Give us the first appointment.
W:
All right. Give you the first appointment.
HMJr:
About 11:00 o'clock. Ie that
W:
I think that will be fine.
HMJr:
What?
Regraded Unclassified
73
- 2 -
W:
11:00 o'clock.
HMJr:
About half an hour?
W:
Yes, sir, I'd say, at least.
HMJr:
That would be very nice.
W:
All right.
HMJr:
Good.
W:
Say, look here.
HMJr:
Yeah.
W:
When are you going to Charlottesville?
HMJr:
Oh, I think it's on the 12th - I think.
W:
Yes. Well, look here, Frances - I don't know
whether I'll be there or not but she will and
she said, "Why don't you come over and spend the
night with us?" Occupy the President's little
cottage.
HMJr:
Be wonderful.
W:
Well, now, you do that.
HMJr:
Wonderful.
W:
And that'll be on 8 Sunday, and
HMJr:
It's our broadcast that Sunday night, but I'd be
there the night before.
W:
Will you come Saturday, and stay Saturday and
Sunday both? And how about Mrs. Morgenthau?
HMJr:
I don't think she'd be well enough.
W:
Well, it's a double cottage and....
HMJr:
Yeah.
W:
.... there's two great big beds.
Regraded Unclassified
74
- 3 -
HMJr:
I don't think that she'll be well enough.
W:
Well, we'll put you in there and count you - on your
being there Saturday and Sunday
HMJr:
Well
W:
and you can go about your business - do anything
you please out just have that your headquarters.
HMJr:
That will be wonderful.
W:
All right, sir.
HMJr:
Ah - I'll be broadcasting the night of the 12th - -
I think it's 7:00 o'clock - something like that.
W:
fes.
HMJr:
out I'd have to go over there Saturday.
W:
108. Fine. You come on over then and spend your
time with us there
AMJr:
Yeah.
W:
and we'll reserve the cottage for you
HMJr:
Yeah.
W:
and even I'll have a julep ready for you
HMJr:
Oh
W:
after you get through.
HMJr:
That will be wonderful.
W:
And you see Monticello 1s right up the hill from
there.
HMJr:
Yeah.
W:
Well, that's fine. I'm awfully glad to - and I'm
sorry we can't get her.
HMJr:
Well, I'll speak to her but I don't think that
she's going to be able to make it.
Regraded Unclassified
75
- 4 -
W:
All right. Well, you tell her that Frances wanted
her.
HMJr:
I'll tell her.
V:
And that's - when we heard the other day, and Frances
told me to contact you right away.
HMJr:
Wonderful.
W:
All right, sir.
HMJr:
And then, 11:00 o'clock...
W:
11:00 o'clock Tuesday, the 7th.
HMJr:
Thank you.
W:
Good. Thank you.
Regraded Unclassified
76
Meeting in the Secretary's Office
September 1, 1943
Present: Secretary Morgenthau
Mr. McCloy
General Hilldring
Mr. White
The following is the gist of the conversation. I think the meeting
was called at LoCloy's request.
.r. FeCloy said that he had wanted to designate Mr. Wolfe (?) to
represent the Army on fiscal affairs in London. lie said that Mr. Wolfe
was a very able fellow and he thought that he would do an excellent job
in London for the Army. McCloy added that he was under the impression
that the Secretary had approved of that selection. The Secretary
replied that that was not his understanding, that he remembered that
coloy asked him what he thought about the man and he had said he was
all right. The Secretary said he thought McCloy asked him a general
question and he (the Secretary) had no idea that McCloy was thinking
of that man as a candidate for the top fiscal job in London. If he had
told the Secretary that that is what he had in mind the Secretary
definitely would not have approved the selection.
cCloy replied that he thought the Secretary had approved him, and
did the Secretary have any objection to his being named for that job. "
The Secretary said he definitely did not approve the selection of this
man. Mr. cCloy said that he had practically made a commitment and did
not know how he was going to get out of it and did the Secretary want
reconsider his opinion in the light of that and approve of the selection.
The Secretary said no, he was sorry but he did not feel that that man was
the proper man for that kind of a job. The Secretary said that if the
Army wanted to work with the Treasury on fiscal and monetary problems
then the Treasury ought to have some say in a selection of the man for
so important a job in the fiscal and monetary field. Mr. McCloy asked
"poes that mean the Army must pick a man from those names suggested by
the Treasury" and the Secretary "Oh, no, it didn't matter who thought
of the man first. The man agreed upon ought to be satisfactory to both
departments." Mr. McCloy replied that that sounded all right to him,
but he had ¿one pretty far with Mr. Wolfe and he wanted to think it over
and see what could be done. He assured the Secretary, however, that they
would not appoint a man to whom the Secretary objected and the Secretary
said that is all we ask.
H. D. White
HDW
Regraded Unclassified
77
CLASS of SERVICE
WESTERN
(00)
SYMBOLS
The is 3 full-rate
DL=Dey Letter
Virgram or Cable-
fram unless in de-
UNION
NL-Night Letter
Terred character is In-
deared by a suitable
LC=Deferred Cable
symbol above or pre-
NLT-Cable Night Lenter
ending the address
A. N. WILLIAMS
NEWCOMB CARLTON
J. c. WILLEVER
PREMIDENT
CHAIRMAN OF THE BOARD
FIRST VICE-PRESIDEN
Ship Rediogram
/ Une una shown to the date line on telegrama and day letters is STANDARD TIME at point of origin. Time of receipt is STANDARD TIME at point of destination
NA1003 55/49 COLLECT=PRINCETON NJ 1 559P
1943 SEP 1 PM 7 04
DAVID FREDERICK=
379
TREASURY DEPT ROOM 387 WASHDC=
PEOPLE WHO ARE HAVING TAXES DEDUCTED NOW FROM THEIR PAY
ENVELOPES VOTE AS FOLLOWS: REPUBLICATIONS 79% PAY AS YOU CO
15% PAY FOLLOWING YEAR, 6% NO OPINION. DEMOCRATS 84% PAY AS
YOU GO, 10% PAY FOLLOWING YEAR, . 6% NO OPINION, THERE ARE
VIRTUALLY NO DIFFERENCES AMONG GEOGRAPHICAL SECTIONS=
EVELYN WICOFF AMERICAN INSTITUTE OF PUBLIC OPINION,
79% 15% 6% 84% 10% 6%
THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE
Regraded Unclassified
78
Fast:
Here text withou Gallip complete to till on 1 discurs 5V-
for
V
IPI. SL 453
OK
Suppenday Signature its, therine may meat, be any.
CKTS BY WILL CALL U OK
USE
MA UFS FIELD DIRECTORS OFFICE
sun
they we'll we 9AM have hear Thursday by
KY VFC 9-1-43
TO R U COYNE
HERE IS COPY OF TODAY S CALLUP POLL
PUBLIC OPINION NEWS SERVICE
FOR RELEASE WEDNESDAY SEPT 1 1943
PAY -AS-YOU-CO SYSTEM FOUND OVERWHELMINGLY POPULAR WITH TAXPAYERS
ATTES. 2 MONTHS TRIAL
2 AMOZNT OF THOSE SUBJECT TO
WITHHOLDING TAX LIKE IT
THE THAN FORMER SYSTEM
Regraded Unclassified
BY GEORGE GALLUP
DIRECTOR, AMERICAN INSTITUTE OF PUBLIC OPINION
PRINCETON, N J AUG 31 THE PAY AS YOU GO SYSTEM FOR COLLECTING FEDERAL
INCOME TASES, WHICH WENT INTO EFFECT TWO MONTHS AGO TOMORROW, IS
APPROVED BY AN OVERWHELMING NUMBER OF TAXPAYERS WHOSE WAGES OR
SALARIES ARE SUBJECT TO THE WITHHOLDING TAX. ONLY A SMALL
MINORITY WOULD PREFER TO GO BACK TO THE OLD SYSTEM OF PAYING EACH YEARS
INCOME TAX THE FOLLOWING YEAR.
WITH MANY TAXPAYERS NOW PREPARING THEIR SEPT 15 TAX FORMS, THE
INSTITUTE HAS COMPLETED A NATION WIDE CHECK UP OF TAXPAYERS ATTITUDES
TOWARD THE PAY AS YOU GO SYSTEM. SOME PROTESTS HAVE BEEN REPORTED
FROM WORKERS WHO OBJECTED TO THE WITHHOLDING OF PART OF THEIR WAGES TO
PAY THE TAX, BUT THE SURVEY REVEALS THAT THE
GENERAL OPINION
IS HIGHLY FAVORABLE TO THE NEW SYSTEM.
TAXPAYERS WHO ARE NOW HAVING MONEY DEDUCTED FROM THEIR PAY
ENVELOPES WERE ASKED BY THE INSTITUTE COLON MARK
DO YOU FAVOR THE PRESENT PAY AS YOU GO PLAN FOR INCOME
TAXES, OR WOULD YOU PREFER TO GO BACK TO THE SYSTEM
OF PAYING EACH YEAR S INCOME TAX THE FOLLOWING YEAR
QUESTION END QUOTES
THE VOTE IS COLON
FAVOR PAY AS YOU GO TAX
82 PERCENT
FAVOR PAYING THE FOLLOWING YEAR 12 PERCENT
UNDECIDED
6 PERCENT
78-A
CONSISTENTLY FAVORED
IV IS SIGNIFICANT THAT THE TAXPAYERS OF THE COUNTRY ARE JUST
THEY Ill FAVOR OF THE PAY AS YOU GC SYSTEM TODAY., AFTER TWO
: ITS OPERATION, AS THEY WERE IN FAVOR OF ITS ADOPTION IN THE
LAST SPRING.
7 TXI THE OF THE PROTRACTED DEBATE IN CONGRESS OVER THE
ITS SUBSTITUTES, INSTITUTE SURVEYS FOUND THAT
10 PERCENT OF THE NATIONS TAXPAYERS VITY OPINIONS' WERE ID
ADDITING A PAY AS YOU GO SYSTEM, AND THAT 72 PERCENT
THE PARTICULAR METHOD SUGGESTED BY BEARDSLEY RUML FOR
THE COUNTRY 01: A PAY AS YOU GC BASIS. THE SCHEME FINALLY
TV CONCRESS, CALLING FOR A MAXIMUM FORGIVENESS 07
07 THE TAX FOR 1942 OR 1943, VHICHEVER IS THE LESSER,
CALLED "THE RUNL PLAN III THREE QUARTERS TIME.
TO SURVEY CONDUCTED LAST APRIL BEFORE PAY AS YOU GO VAS ADDPTED,
: LLOVING ISSUE TO THE TAXPAYING PUBLIC COLON
: VEAR THE FEDERAL GOVERNMENT COLLECTS INCOME TAXES = WHEY
PREVIOUS YEAR.
WOULD YOU LIKE TO HAVE THAT PLAN
I.. WOULD YOU PREFER TO PAY YOUR TAXES on THE HEMEY AS YOU
IT SUBSTION END QUOTES
THE VOTE VAS
COLON
1.42
Today
- PAV AS YOU CC
79 PERCENT
820%
ILD SYSTEM
21 PERCENT
12%
311 TODAYS SURVEY THE VOTE OF THOSE NITH OPINIONS IS 87 PERCENT
07 PAY AS YOU CO, OF EVEN MIGNER TEAN THE VOTE OF ALL
LAST SPRING.
LISTING INSERT APPEARS UNDER SECRETARY MERGANTHAU S PICTURE
D-700-00 POPULAR
OF THE TREASURY NORGENTHAU WILL BE INTERESTED TO KROW THAT
NTC TXC MONTHS UNDER THE PAY AS YOU GC INCOME TAX SYSTEM,
LIKE IT FAR BETTER THAN THE OLD SYSTEM,
-ALLYP POLL SHOWS. THE VOTE COLON
7.1728 PAY AS YOU GO
22 PERCENT
WHER
12 PERCENT
IDECTORD
$ PARCENT
21
DET
WV
Regraded Unclassified
79
September 1, 1943.
My dear Congressman Taber:
I wish to acknowledge your letter of August 24.
I would like to suggest that upon your return to
Washington you call and let me arrange for you to sit
down with me and some of our people, so that we can go
over the details of our program with you. I should
like you to know just what we are doing and I would
be glad to hear any suggestions you have to make, in
connection with the War Bond Program.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Honorable John Taber,
Auburn, New York.
Regraded Unclassified
MEMBER
COMMITTEE ON APPROPRIATIONS
Congress of the United States
House of Representatives
lasbington, D. €.
AT AUBURN, NEW YORK,
August 24, 1943
Y
Hon- Henry Morgenthau, Jr.
Secretary of the Treasury
Treasury Department
Washington, D. C.
Dear Mr. Morgenthau:-
I remember having some correspondence with you last
winter about the size of the appropriation that was made
for publicity efforts in connection with the sale of gov-
ernment bonds and securities.
I felt that the amount that was to be provided was
altogether out of line and while it was less than last
year, it was more than it should be. My fears along this
line have been borne out, As I told you at the time, the
loading up of all of your committees with much more material
than they can possibly use and the loading up of newspaper
offices with much more material than they can use was a
detriment to the government and B. detriment to the sale of
government bonds and securities.
I find that that same condition which existed a year
ago and all through the winter is still continuing as we
approach a new drive, and that nine-tenths of the things
that you are sending out from Washington are a liability
rather than an asset.
I am wondering if it is not possible for you to re-
view this situation and place it in line with what it should
be and in line with what the interests of the government
require rather than to allow the expenditure of funds to go
on in the same loose, ridiculous way that it has been al-
lowed to go before.
I ask you, please give your support to the war effort
by cutting down on this unnecessary expense.
Very John Dalir sincerely yours,
Regraded Unclassified
81
SEP
1
1943
TO INVESTMENT BANKERS, STOCK EXCHANGE FIRMS,
DEALERS AND BROKERS IN SECURITIES,
The expert services of men in your lines of business,
which proved no valuable to the Treasury Department in the
1st and 2nd War Loan compaigns, aro now in demand again.
As I recently announced in the press, the 3rd War Loan Drive
is to open on September 9, and its objective will be the
sale to buyers, other than commercial banks, of United States
Government securities in the amount of 15 billion dollars.
I am well aware that in previous drives sen from your
offices not only played a major part in the agocessful solici
taion of large subscriptions, but also, especially in the
larger cities, brought experience and skill to the organization
and training of Volunteer workers.
l/any of you are already active in making preparations for
the 3rd War Loan. Your services are deeply appreciated and
will this month be more valuable than ever before, because in
this drive, emphasis is to be placed on sales of bonds to the
largest possible number of individual buyers. This will require
a thorough canvass of large and small buyers of all kinds other
than commercial banks.
Here in Washington, I have asked Mr. Edward B. Hall, an
Assistant to the Secretary, who has had long experience in
various phases of the banking and investment banking business,
to aid Mr. Ted R. Gamble, National Director of the War Finance
Committee, in supporting the sales work of banks and bankers,
securities dealers, stock exchange firms, savings and loan
associations, and other financial institutions in the 3rd Har
Loan Drive.
Your State and local War Finance Committees will call on
you to furnish as much distributing talent as you can, and I
bespeak for them your customary whole-hearted response.
Sincerely,
(Signed) II. Mergenthau, Jr.
Regraded Unclassified
82
SEP 1 1943
TO THE BANKS OF THE UNITED STATES,
From the beginning of the Defense Program, your officers
and employees have played a. decisive role in the financing of
the war. Through cooperation with the Har Finance Committees,
your leadership has been indispensable. You have been our
main support in issuing bonds. You have, I know, given freely
of your time and resources without thought of compensation
beyond the satisfection that comes from serving your country.
During the 3rd May Loan Drive, which opens September 9,
we shall probubly have to issue in the neighborhood of fifty
million bonds to individuals. A large part of this burden
will fall upon the banks. I am confident that you will do
this job as you have many others with efficiency and dispatch.
Here at Headquarters I have asked Mr. Edward B. Hall,
an Assistant to the Secretary who has had many years of
experience in various phases of the banking business, to
assist Mr. Ted 2. Gamble, National Director of the War Finance
Committee, in supporting the sales work of banks and bankers,
securities dealers, stook exchange firms, savings and loan
associations, and other financial institutions during the
3rd Mar Loan Drive.
After the drive is over, the Treasury Department will nake
an offering to commercial banks for their own investment.
Your State and local War Finance Committees must of neces-
sity lean heavily on bankers for expert assistance and moral
support. I bespeak for them your customary wholehearted response.
Sincerely,
(Higned) I Margenthau, Jr.
Regraded Unclassified
83
TO ALL NEWSPAPER PUBLISHERS:
On the eve of the Third War Loan, I want
to impress upon you how heavily we are depending
upon the newspapers, and upon the businesses who
sponsor newspaper advertisements, to carry our
urgent message to the American people.
In the past, these industry sponsored
advertisements have proved the backbone of our
promotional campaign. I am sure they will prove
no less in the coming Third War Loan Drive.
I hope you will pass this information along
to those businesses and industries in your com-
munity who can and will help sponsor this vital
local newspaper advertising.
We all know that raising fifteen billion
dollars -- no less then five billion of it from
individuale - is going to be a tremendous task.
We must take full advantage of every available
source of support.
Sincerely,
(Signed) Henry Morgenthau, Jr.
Secretary of the Treasury.
FS:gr
Regraded Unclassified
84
September 1, 1943
Tod Gamble.
The Secretary.
On page 21, today's New York Tribune, there is a story of
R British enti-aircraft battery visiting the United States. Are
they here to help us on War Bonds? And if not, why not? Please
let me know the answer in writing today. Thank you.
Finished-
Regraded Unclassified
85
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE September 1, 1943
TO:
Mr. Gamble
FROM: Ralph 0. Engelaman
The British First Composite Anti-aircraft Battery, composed of 346 officers
and men now in this country to help train American Anti-aireraft Troops, will
be at the following camps during the Third War Loan:
September 7
Camp Edwards, Mass.
17
Fort Leavenworth, Kansas
27
Camp Haan, California
They will renain at each CaMp several days. (Time not yet determined).
We are contacting the public relations officer assigned to the group today
and shall work out arrangements to have the battery, or sections of it, featured
(wherever possible and advisable) in the already planned Third War Loan activity
of the localities surrounding the camps at which these troops will be stationed.
It is planned that these men will remain in the country until the end of
November, and they will undoubtedly be available for regular Bond rallies for
some time after the Third War Loan is over.
Regraded Unclassified
86
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DAVESeptember 1,1943
TO Secretary Morgenthau
FROM Fred Smith
The OWI has not yet used your Baltimore speech on a
short wave. They have made a recording of excerpts of it,
and report that they are "waiting for a spot." Apparently
their schedules are very full at this writing.
Excerpts were also made of the speech and distributed
widely to local radio stations through OWI.
AS
Regraded Unclassified
87
August 27, 1943
Mr. Fred Smith.
The Secretary.
Please ask O.W.I. what use they made of my speech, if any,
on overseas broadcasts. I'd like to have a written memo in reply.
88
THALGE
MUTUAL BROADCASTING SYSTEM Inc.
NewYorkOffix::H40.Broadmy
PENNSYLVANIA 6-9600
September 1, 1943
Honorable Henry Morganthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Sir:
May I take this opportunity to thank you in behalf of
the Mutual Broadcasting System for your appearance on
the broadcast on Wednesday, August 25th, from 9:15-9:30
PMEWT, from the 43rd Annual Session of the National Negroes
Business League.
Your participation on this program made it most noteworthy
and we want to assure you that the facilities of the Mutual
Network are always open to you.
Cordially yours,
Tom 10m Shter Slater
Director of Special Features
and Sports
ib
22 shill 89
MEMORANDUM
September 1, 1943.
TO:
The Secretary
$ 15
FROM:
Mr. Sullivan
Mr. Niles reports that he is not acquainted with
the Mr. Cohen who wired him regarding Doherty's political
activity. I recommend that no formal investigation be made.
I will try to inquire about this indirectly.
m
Regraded Unclassified
WESTERN
07
90
ASS OF SERVICE
SYMBOLS
This is . full-rate
DL-Deg Letter
irgram or Cable-
unless its de-
UNION
NL-Nahr Lener
di character is In-
LC=Debred Cable
eed by a suitable
bel above or pre-
NLT-Calle Hight Letter
Int the address.
A. N. WILLIAMS
NEWCOMB CARLTON
J.C. WILLEVER
PRESIDENT
CHAIRMAN OF THE BOARD
FIRST VICE-PRESIDENT
Ship Radiogram
time shown in the date line on telegrams and day letters is STANDARD TIME at polot of origin. Time of receipt 1943 la STANDARD AUG TIME PM at point T6 of destination
BB574 15 NL=WUX BOSTON MASS 26 DAVID
K NILES:
HOTEL CARLTON WASHDC
DERSTAND DOHERTY WAR SAVINGS ADMINISTRATOR MASSACHUSETTS IS
IETLY ACTIVELY WORKING FOR THE COCA COLA MAN=
A COHEN
THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE
Regraded Unclassified
912
25
Original to Thompson-
SEP1 - 1943
In reply refer to
3D
My dear Henry:
I have received your letter of August 27, 1943
enclosing a list of the Treasury personnel in the
Philippines and deprecating the absence of any such
personnel from the list of those to be repatriated in
the forthcoming exchange.
AS you say, none of the Treasury people at Manila
have 80 far been included by the Japanese authorities
for repatriation in the present exchange operation.
Despite all of the Department's past and continuing
efforts, the Japanese government has refused categorically
to agree to the general release for repatriation purposes
of any Americans captured on United States soil after
December 7, 1941. Japan indicated that it would permit
a small number to be repatriated from the Philippines
but reserved to itself -Ahe choice of the individuals 80
to be included in the list. The list of those tentatively
named for repatriation from Manila has recently been
altered somewhat by the Japanese authorities and there
may be further revisions before the exchange finally
takes place.
Although the Department is continuing its efforts
to obtain the agreement of the Japanese to the general
release
The Honorable
Henry Morgenthau, Jr.,
The Secretary of the Treasury.
Regraded Unclassified
92
-2-
release of American civilians detained in Japanese-
controlled areas of American sovereignty, including the
Philippines, it is not anticipated that there will be
any major change in the repatriation status of Americans
80 detained until after the present exchange operation
is completed.
All of us in the Department are keenly aware of the
distressing situation of Americans at present in Japanese
hands and you may be assured that everything possible is
being done to bring about their return to this country
at the earliest feasible opportunity.
Sincerely yours,
Candell Hull
The
Regraded Unclassified
93
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE September 1, 1943
TO
Secretary Morgenthau
FROM Mr. White HDW
Subject: Recent developments of Treasury interest in French
African program.
1. The dollar-sterling-franc rate of exchange set by the
President at the Casablanca Conference appears to be too high.
British and American representatives in French Africa have ad-
vised that the present rate of 50 francs to the dollar and 200
francs to the pound so appreciates the franc as to make it 1m-
possible for French Africa to sell its exportable commodities
on the world market. The Allied Governments cannot purchase
strategic materials in French Africa at anything near prices
offered by the Allied Governments in other areas because these
prices in dollars or pounds when converted into francs at the
present rate of exchange do not provide adequate francs for the
North African producers and shippers to cover their costs.
2. The French Committee for National Liberation wishes to
have the 50-franc to the dollar exchange rate apply to France
after its liberation. Representatives of the British Treasury
have advised Treasury that, during the discussions of the pro-
posed financial agreement between the British and the French
Committee for National Liberation, the French Representative,
M. Couve de Murville, expressed the hope that the 200 francs to
the pound and 50 francs to the dollar rate of exchange would be
adopted for Metropolitan France after its liberation.
Couve de Murville advised the British that he would recom-
mend to the French Committee for National Liberation the adop-
tion of a uniform exchange rate of 200 francs to the pound for
all French territories with the exception of Syria. The Brit-
1sh and the French have tentatively agreed that Syria should
be a part of the franc bloc but that the present rate for the
Syrian pound should remain unchanged: The Syrian pound cross
rate would thus remain at 43.80 francs to the dollar. Treasury
has requested the British representatives in Washington to sub-
mit reasons for the retention of the old rate in Syria.
Regraded Unclassified
94
Division of Monetary
- 2 -
Research
3. The Bank of France and the French Government possess
$866 million in gold in French Africa. This was reported to
the Treasury representatives in Algiers by M. Couve de Murville.
One-half of this amount 18 said to be in West Africa and the
other half in North Africa. The Treasury representative at
Dakar previously advised that according to French officials in
West Africa, there was originally $1,125 million in gold held
for the Bank of France in West Africa alone with unknown quan-
tities withdrawn from the area prior to the Allied landings in
November 1942.
4. After discussions with Treasury representatives in
Algiers, the French authorities have agreed to arrange for a
provisional moratorium on obligations of the Jewish people in
Tunisia arising from forced mortgages of property to meet levies
imposed by the enemy. Later a program for the disposition of
the claims will be worked out. At the request of Treasury and
State, the Treasury representatives informed the French African
authorities that this Government considered the redemption of
these mortgages and the payment of interest thereon to fall
within the purpose of the United Nations declaration not to
recognize property transfers made under Axis duress.
The existence of these discriminatory burdens upon the
Jewish Community and the failure of the French to take remedial
action was disclosed by Treasury representatives in their in-
vestigation of enemy occupation methods in Tunisia.
5. The program of war damage compensation suggested by
the Treasury is presently being studied by the French. This
program was suggested after Treasury representatives reported
that the French had taken almost no measures to alleviate the
burden of war property losses sustained in Tunisia during enemy
occupation. Treasury representatives are participating in
working out the details for administering and financing B. plan
which will lessen the burden on individuals on whom war property
losses fall either by chance or by design of the enemy.
6. The French authorities have indicated that they do not
anticipate at the present time any difficulty in balancing their
budget. Except for military Lend Lease aid they will not need
further financial assistance from the United States and the
United Kingdom.
Regraded Unclassified
95
Division of Monetary
- 3 -
Research
The French African Treasury succeeded in floating a net
13.5 billion francs of loans during the first five months of
1943. This was approximately the amount which it was expected
to borrow for the entire year of 1943. 8.3 billion franos of
the amount was in short-term Treasury bills and 5.2 billion
franos in 3-year Treasury war bonds.
7. The fforts of the Treasury to stimulate the French
to take effective action against the collaborationist elements
in French Africa have begun to produce results. This is evi-
denced by the arrest of certain leading collaborationists, by
the establishment of the Commission of Deputation to discover
and bring retribution to persons who have actively collaborated
with the enemy, by the reorganization of the French Economic
Warfare Administration on what appears to be an effective basis,
and by the increasing number of undesirable firms being brought
under control.
Although the French African authorities have still a long
way to go before a satisfactory economic warfare program is
attained, the Treasury representatives in French Africa are of
the opinion that the new French Committee for National Libera-
tion can be convinced of the value of effective economic war-
fare measures. They feel that the new administration will be
importantly influenced in this regard by French elements who are
eager for an all-out war effort.
8. French Finance Officials have accepted in principal
the program worked out by the Treasury which is designed to
penalize collaborationists in Tunisia and to prevent persons in
Tunisia from making large windfall profits from excessively
high prices charged during the period of enemy occupation. It
has not, however, been given final approval of the French Com-
mittee for National Liberation.
Treasury representatives are disturbed lest in its actual
administration the program will bear only a modified resemblance
ities are still unwilling to adopt an automatic levy against the
to that suggested to the French. Certain of the French author-
blocked deposits and currency and, if the French Committee
approves the program, it must be then cleared with the Tunisian
Administration. The provincial interests of the Tunisian
Administration will also be relied upon to administer the program.
The Treasury representatives do not feel, however, that this
Government should intervene further.
Regraded Unclassified
96
Division of Monetary
- 4 -
Research
The proposal of the French Finance Officials, which if
adopted would be satisfactory, is to apply a general tax to
all profits earned during the enemy occupation no matter in what
form they may be held. Each person earning a profit in excess
of a certain minimum is to file a declaration. If no declara-
tion is filed or if the declaration sets forth a profit less
than the increase in currency and bank deposits during this
period, the tax will be levied automatically against the bank
deposits and currency holdings which have remained blocked pend-
ing the initiation of this program. The person taxed must
assume the burden of proof to secure exemption from this pro-
cedure.
This general levy is to be supplemented by measures to
discover and penalize persons who actively collaborated with
the enemy.
9. The Treasury representatives in Tunisia, Dakar, and
Casablanca are being withdrawn to Algiers as soon as their
duties permit. Except for the minimum necessary to carry out
the Treasury responsibilities in French Africa, it is planned
to assign the personnel now in the French African territories
to other occupation areas as the services of Treasury represen-
tatives are needed.
There are now 10 Treasury personnel in French Africa-4
from the Division of Monetary Research, 2 from the Legal Divi-
sion of General Counsel's Office and 4 from Foreign Funds Con-
trol. Three additional personnel--one economist from the Div-
ision of Monetary Research, one Foreign Funds Control expert
and one lawyer from the Legal Division are preparing to leave
for French Africa. It is planned that this group together with
Mr. Glasser and Mr. Hoffman will proceed to Sicily or Italy as
soon as their services are requested.
Pvt. G. T. Kerekes formerly with Foreign Funds Control
has arrived in Algiers for assignment to the Finance and Con-
trol Division of the North African Economic Board.
10. The official U. S. dollar funds available to the
French North African authorities have continued to accumulate.
As of July 31, 1943, $94 million was held in the names of the
State Banks of Algeria, Morocco, and West Africa.
Regraded Unclassified
97
Division of Monetary
- 5 -
Research
This figure is misleading in that United States Army
Finance Officers hold dollar credits with these State Banks
and, also, in that the French African authorities are in-
debted to Lend Lease for goods already shipped to French Africa.
Arrangements are now being made between the French
African authorities and Lend Lease for a payment of approximately
832 million which will cover the balance due on Lend Lease
shipments to French Africa through June 30, 1943.
11. The French Committee for National Liberation has
agreed in principle to 8 lend lease and reverse lend lease
arrangement with the United States for military supplies and
services. In return for military aid, estimated at $100 mil-
lion dollars for the first six months of 1943, provided to the
French on credit lend lease by the United States, the French
are to provide as reciprocal aid certain military expenditures
of the United States Government in the area other than the pay
of troops and those expenditures which the military authorities
consider advisable to obtain through cash.
A similar reciprocal aid program is being worked out
between the French Committee and the British Government.
12. British Treasury representatives have submitted to
the Treasury the text of a proposed financial agreement between
the British Government and the French Committee for National
Liberation. It is proposed to handle payments between the
Sterling Area and the territories under the control of the
French Committee through special exchange accounts in the Bank
of England and B. Central Agency of the French territories.
These institutions are to be the sole holders of sterling and
francs. The respective exchange controls are to so operate as
to prevent exports of capital from one area to the other un-
less such exports serve a direct and immediate economic pur-
pose. In the proposed agreement it is provided that periodic
consultation will be held to arrange where possible that
sterling held by the Central Agency of the French Committee
and francs held by the Bank of England can be used for finan-
cial payments in third countries.
Regraded Unclassified
98
Division of Monetary
- 6 -
Research
This proposed agreement will replace the present finan-
cial agreement between the British and the Free French as
the Free French territories are now under the control of the
French Committee for National Liberation.
13. Although the British Trading with the Enemy Restric-
tions were lifted on July 16, 1943, as they applied to French
Africa, the financial and property controls of the United
States as they apply to French Africa are to remain in force.
The French African assets in the United States are to remain
blocked or vested under the regulations of Foreign Funds Control
and the Alien Property Custodian. The Treasury will continue
to monitor remittances to and from French Africa from and to
the United States under the present licensing procedure set up
by Foreign Funds Control.
The British have indicated that they are depending on
the British and French African exchange controls operating
under the proposed Anglo-French Financial Agreement now being
worked out to prevent any capital movements between French
Africa and the Sterling Area that do not serve a definite and
desirable economic purpose. Arrangements whereby persons and
firms in French Africa will be permitted to dispose of their
assets now blocked or vested in the Sterling Area are to be
made later.
The British action included the lifting of the prohibition
on commercial correspondence between the Sterling Area and
French Africa. This Government had requested the British to
continue their censorship restrictions, pointing out that as
private trade for the time being must remain on a government-to-
government basis confusion would result if private commercial
correspondence were permitted. The British advised that this
was not possible under the powers granted their Censorship
authorities. It was therefore necessary for the United States
to lift its ban on private trade messages simultaneously with
the British to prevent an advantage accruing to British 1m-
porters and exporters as against those of the United States.
This joint action was taken on July 16, 1943.
Regraded Unclassified
99
SEP 1 1943
My dear Senstor:
I thank you very much for your letter of August 19,
1943 with reference to the Allied Military Currency.
Since I have forwarded to you in my letter of August
24 the Press Release of August 17, I presuse you had not
had the benefit of that release at the time you wrote
your letter to se on August 19.
You will note from the Release of August 17 that
we made every effort to inform the public fully of the
reasons for the issuance of this currency and its effect,
with special reference to its utilisation in the Sicilian
Operations.
In my event, however, should you desire my further
or additional information on this or any other subject,
please do not hesitate to call on me and I shall be
pleased to ⑉ that representatives of both the lar and
Treasury Departments are made available to furnish any
such information.
Very truly yours,
(Signed) H. Morgenthau, Jr
Secretary of the Treasury
Honorable Arthur 11. Vandenberg,
United States Senate
IT:Drl
31/43
Regraded Unclassified
QUIMAR
our. I i
CAPPER, KAME.
M. POLLETTE - wis.
- N. MICH.
LACE H. WHITE, - MAINE
SHIPSTEAD, MTNN.
United States Senate
P. HYE, H. DAR.
COMMITTEE ON FOREIGN RELATIONS
BORARD A. CLEAN
August 19, 1943.
AMED A. WHETE, AMT. CLIEN
Membroble Henry Korgenthau, Jr.
LA
tary of the Treasury
Washington, D. C.
By dear Mr. Secretary:
I read with great interest your release of Au. ust 2nd describing
your new "Allied Military Currency" and I congratulate you upon
successfully completing your amazing preparations in this
connection.
Your release, however, provides no information regarding the
basic nature of this new currency. Insofar as I may be entitled
to the information, I should appreciate your discussion of the
following questions.
(1) Under what authority is this currency issued?
(2) What is its nature - which is to say, is it
"United States notes" or "silver certificates"
and so forth?
(3) Who is responsible for the redemption and what
is the reserve for this purpose?
(4) Is this currency to be carried on the Treasury
Balance Sheet as part of the national currency?
(3) If this is a cooperative substitute not only for
the American currency heretofore used in North
Africa but also for the "military pound" used by
the British how do we share ultimate responsibility
with the British for redemption of the currency?
To what extent has this special currency been used?
Is this the general pattern to be followed in
subsequent invasion areas?
D) Does it tie-in in any way with the local currency
in any given area or involve any local share of
responsibility for its redemption?
1 appreciate hearing from you at your convenience.
mm personal regards and best wishes,
Cordially and faithfully,
ted by Senator Vandenberg
gned in his absence.
Regraded Unclassified
101
SEP 1 1943
My dear Mr. Disneys
I have your letter of August 24, 1943, enclosing
an inquiry from Mr. J. C. Day of Tulsa, Oklahoma, with
reference to the "invasion money" employed by the
Allied Military forces in Sicily.
I an enclosing copies of Joint Statements released
by the Treasury and War Departments to the Press on
August 2, 1943, and on August 17, 1943. These state-
ments will furnish information concerning the nature
and character of the "Yellow Seal" dollar and the Allied
Military Lira Currency.
Your interest in this matter is appreciated and I
hope the enclosed statements satisfactorily answer your
inquiry.
Mr. Day's letter is returned herewith.
Sincerely yours,
(Signed) H. Mergenthau, Jr.
Secretary of the Treasury.
Honorable Wesley E. Disney,
House of Representatives.
Enclosure.
Regraded Unclassified
WASHINGTON ADDRESS:
New House OFFICE Bullows
DELAHOMA ADDRESS:
Congress of the United States
Tulsa, OKLAHOMA
WAYE
House of Representatives
MALGE
Mashington, B. €.
August 24, 1943
Hon. Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
Dear Mr. Morgenthau:
I am enclosing herewith a letter I have received
from Mr. J. C. Day of Tulsa, Oklahoma, which is self-explanatory.
I would be pleased to be advised in the premises.
Sincerely yours,
MalayEdianey
Wesley E.Disney
WED/mem
Enc.
Regraded Unclassified
103
WESTERN PETROLECM REFINERS ASSOCIATION
305 MID-CONTINENT BUILDING
TULSA, OKLAHOMA
OFFICE OF
SECRETARY
THEASURER
August 6, 1943
Hon. Wesley E. Disney
New House Office Building
Washington, D. C.
Dear Wes:
I notice that in the invasion of Sicily, the
United States forces are passing out "invasion money".
I should like to know if this currency is
backed up by silver or gold, or what guarantee is behind
it. Are we to redeem this at face value the same as
currency in this country, and by what authority did the
Treasury of the United States issue this invasion money?
I think this is a problem that our Congress
should investigate, and the American public should know
what is being done, and how.
With kindest personal regards, I am
Very truly yours,
XDAY
JCD:MC
Regraded Unclassified
104
HEL
Bombay
This telegram must bE
paraphrased before being
Dated September 1, 1943
communicated to anyone
other than a Governmental
Rec'd 11:17 a.m.,
agency. (BR)
SECRETARY of State,
Washington.
592, September 1, 10 a.m.
Your 356, August 19,.
FOR THE TREASURY DEPARTMENT.
(A) August 31 gold rupees 70 annas six per tola
fine, silver rupees 112 per 100 tolas.
(E) RESErVES August 20 gold coin and bullion no
change, silver coin including paper notes millions
rupees 140.7.
(G) STRICTLY CONPIDENTIAL. July gold imports 3
ounces Exports 2594 ounces, silver imports 4292 ounces
Exports 16,191 ounces. Revision of June 1943 figures:
silver imports 1,240,495 ounces.
(I) General working class cost of living index
Bombay, year ended June 1934 represents 100: month
Ended July 31, 1943 index number is 236; food prices
Bombay month Ended July 31 index number is 262 same base
year.
(K) Provincial governments in India launching
"save and
Regraded Unclassified
105
-2-, #592, September 1, 10 a.m., from Bombay.
"save and lend" campaign according to plan prepared
by Central Government. Target is 1,000,000,000
rupees by the End of March 1944.
This is anti-inflationary drive aimed at the
small investor. During the next few months cultivators
EXPECTED to have, as a result of high prices of pro-
duce, 2,000,000,000 rupees in EXCESS of receipts in
prewar days which would bE spent in bazaars and to
purchase land thus forcing up prices. Second
aim, therefore, reported to bE aid to cultivators
by persuading them to Save for postwar years. Plan
is to persuade each cultivator to subscribe individually
to defense savings certificates or to war loans.
DONOVAN
NPL
Regraded Unclassified
106
DM
Calcutta
This telegram must bE
paraphrased before being
Dated September 1, 1943
communicated to anyone
other than a Governmental
REc'd 8:26 p.m.
agency. (BR)
DEPARTMENT OF STATE
Secretary of State,
DIVISION OF
Washington.
SEP - 3 1943
1113, September 1, 7 p.m.
COMMUNICATIONS
AND RECORDS
FOR THE SECRETARY OF THE TREASURY FROM ADIER
OnE. Clear from cursory investigation that visit
to Bombay Essential for preparation of report. Bombay
is leading financial center and dominant bullion market
in India, while Calcutta is secondary financial center
and has only nominal bullion market.
Two. Accordingly,. subject to your confirmation
I propose to leave Calcutta September 5 and to spend
about a WEEK in Bombay and a few days in Delhi. BECAUSE
transportation connections are more eonvenient shall
visit DElhi first. Consul MacDonald fully agrees with
desirability of visiting Bombay and Delhi.
MACDONALD
WTD
Regraded Unclassified
1943 SEP 2 PM 1 48
107
NOT TO BE RE-TRASMITTED
TREASURY DEPARTMENT
COPY NO. 13
BRITISH MCST SECRET
U.S. SECRET
OPTEL NO. 288
Information received up to 10 a.m., lst September, 1943.
1. NAVAL
Coastal Forces operated off VIBO VALENTIA and the Toe of
ITALY on 30th/31st and Destroyers carried out a sweep off the CALABRIAN
Coast without incident. A Russian Submarine has sunk a 2,150 ton Bulgarian
ship in the BLACK SFA.
2, MILITARY
In the SMOLENSK SECTOR, the Russians have broken through
the German positions and captured YELNYA. In the KURSK Sector, they have
entered the Northern UKRAINE and have captured GLUKHOV and RYLSK.
3. AIR OPERATIONS
WESTERN FRONT. 30th/31st. MUNCHEN-GLADBACH and RYEYDT.
2,272 tons dropped including 11 8,000 pound, 268 4,000 pound H.E. and
(71,269) tons of incendiaries in about fifty minutes. Some broken and
drifting cloud hampered observation of results but accurately placed marker
bombs could be seen by most crews. Not yet possible to estimate extent
of success. Ground defences slight but night fighters numerous working
with searchlights. Nine enemy aircraft claimed shot down,
31st. In attacks on airfields Fortresses dropped 281 tons
at AMIENS/GLISY, Marauders 48 tons at LILLE/VENDEVILLE and Mitchells 30
tons at MONCHY le BRETON. Good results are reported in each case. 43
tons were dropped by Marauders on MAZINGARBE Power station with 'fair to
poor4 results. Enemy casualties by bombers and fighters cooperating in
those and other operations 12.4.7. One Fortress, One Marauder and 7
Fighters missing and 3 Fortresses crashed in this country,
31st/lst. 713 aircraft sent out: BERLIN - 621 (48 missing),
ammunition dump in FORET de HESDIN near ST, OMER - 41, BRAUNEILER - 5,
Intruders - 43 (1 missing), Anti-shipping - 3. Over BERLIN, there was
moderate cloud and observation was difficult. Preliminary reports indicate
that bombing was inclined to lack concentration.
ITALY. 29th/31st. Wellingtons dropped 123 tons on the
Railway centre and Steelworks at FORRE ANNUNZIATA. One Wellington missing.
30th. 38 escorted Fortresses bombed VITERBO Airfield. A
total of 150 escorted medium and light bombers attacked Railway centres
at CIVITAVECCHIA, MARINA di CATANZARO and PAOLA. Enemy casualties - 19.5.13;
Ours - 14 Fighters missing.
BURMA. 28th. Heavy and medium bembers dropped 70 tons on
AKYAB. 30th. Fighter damaged 115 Rivercraft on the IRRAWADDY.
Regraded Unclassified
108
September 2, 1943
9:20 a.m.
RE: SURVEY ON PEOPLE'S EXPENDITURES
Present: Mr. Thompson
Mr. Sullivan
Mr. Haas
MR. SULLIVAN: You recall you asked us to handle
the matter of getting funds for that survey as to how people
were spending their money.
H.M.JR: Yes, sir.
MR. SULLIVAN: And Mr. Bell had sent to me a memoran-
dum that he prepared for you, reporting on a talk with
Miss Joy in which she said she thought there should be a
coverage of about thirty-five hundred families, half
urban and half rural, such a study to cost a hundred and
fifty thousand dollars.
If they got it ahead, right now they could organize
to start October 15 and have their answer in about six
weeks or two months. She suggested that you talk with
Jones - Marvin Jones - and Brown so that the three organiza.
tions could share in that expense.
I called Ludlow's office - you remember, Mr. Gamble
said he was going out to make 8 speech and would be back
in a couple of days. Apparently his plans changed, and
he will not be back until the 14th. He is the number one
man we would have to speak to if we were going to use
our own funds.
After we three met with Hlough and White, I then asked
Randolph's office for an opinion as to whether or not we
could use the President's emergency fund, and I have an
opinion from Randolph saying that we could.
Yesterday afternoon Mr. Haas talked with Miss Joy to
see whether or not she would feel free to use the funds,
Regraded Unclassified
109
- 2 -
since they had been denied to the Labor Department, and
she said if we could get it it would be eminently
acceptable.
We are confident that if you want action you will
have to ask Harold Smith. We are recommending you do
so this morning. Tell him Labor is sending over justi-
fication for this.
H.M.JR: Would you mind carrying this - who carries
this for the Treasury opposite Harold Smith?
MR. THOMPSON: I deal with him.
MR. SULLIVAN: That is all right. I was just report-
ing because you asked me to handle the Hill end.
H.M.JR: That is right, and you have done a very
good job. I want you to continue.
MR. THOMPSON: Whether you want to use the President's
finds--
H.M.JR: There isn't a chance to get the President's
funds.
MR. SULLIVAN: We seemed to think there was.
H.M.JR: Let's try it. Nothing ventured, nothing
gained. You go after it.
MR. SULLIVAN: We thought it would speed it up a
good deal if you indicated to Harold your personal interest.
H.M.JR: I don't have the time. They know how to do
it.
MR. SULLIVAN: All right.
H.M.JR: You can say that I am very much interested
in this thing.
Regraded Unclassified
110
- 3 -
What else?
MR. HAAS: Now in connection with this I talked to
Gallup last night, vá th the idea that the American
Institute of Public Opinion could do 8. job like this.
He is also head of the research department of Young and
Rubicam. He was in town; Fred Smith told me about it.
We thought he might explore it and expedite it. We had
quite a talk about it.
He pointed out that it is a very difficult job, but
he is going back and submit a proposal.
I thought this, in any case the BLS should do this
and make it a continuing job, but it may be that if the
figures - I agree with you that all these things should
be checked some way or other, and it is so important that
it doesn't cost too much. If Gallup can come through with
anything that looks satisfactory, or a very good indication
of it, it may be that we should let them go ahead and make
the initial figures earlier and we have an additional
check in BLS. In that case that would be paid out of
Expenses of Loans. There wouldn't be any problem.
MR. THOMPSON: Depending on how much it would run
into.
H.M.JR: I am perfectly willing to sign a letter to
Harold Smith.
MR. THOMPSON: That would help. Suppose we draft 8.
letter.
H.M.JR: Suppose you draft a letter; then I will
sign it.
MR. SULLIVAN: I think it would be quite helpful.
H.M.JR: If Gallup could do 8 spot check, it would be
wonderful.
Regraded Unclassified
111
- 4 -
MR. HAAS: He said it isn't adapted to a spot check.
He said it is an extensive thing or it means nothing.
H.M.JR: All right.
Regraded Unclassified
112
September 2, 1943
11:30 a.m.
TAXES
Present: Mr. Paul
Mr. Gaston
Mr. Sullivan
Mr. Smith
Mr. Blough
Mr. Haas
Mr. Surrey
Mrs. Klotz
H.M.JR: On this statement that I expect you people
to have for me Monday night for the President, I would
like Mr. Gaston to collaborate, please, if that is all
right.
Mr. Paul and I are going to go to see the President
Tuesday on the tax bill. I call it a fiscal policy bill.
I want to be able to lay on his desk, Herbert, a
proposed statement that he should make to introduce it.
I have told these three gentlemen (Paul, Blough, and
Surrey) I want it. I am sure they have got it already.
(Laughter)
MR. GASTON: That would be a message to Congress?
H.M.JR: Yes, sir, but I would like to have it - I
will be coming back from Detroit - when I arrive home
from Detroit Monday night. Perhaps you could find some
way to put it on the Secret Service teletype and I could
read it on the way back.
MR. PAUL: You want to tie it up with what the
President said about the returning soldiers.
Regraded Unclassified
113
- 2 -
H.M.JR: What I was hoping was that the President
could do something for the common man in civil life
corresponding to the statement he gave on the soldiers.
MR. SULLIVAN: When is he giving his next talk?
I was thinking he might decide this could better be
handled in a public talk rather than a message to Congress.
MR. PAUL: That wouldn't so much change what was
said.
H.M.JR: No. Now, the other thing is, right or
wrong, the fat is in the fire.
MR. SULLIVAN: I don't think it is.
H.M.JR: On Stam.
MR. PAUL: We haven't seen the transcript but got
an account from Fred Smith, and it was all off the
record. From what - we got it through Fred--
H.M.JR: He is reliable. (Laughter)
MR. SMITH: Thank you, sir. (Laughter)
MR. PAUL: It seemed all right to me, what you
said.
H.M.JR: Well, I gather that somebody is cooking
up - this fellow from the United States Daily--
MR. PAUL: Helm.
H.M.JR: He is always very friendly. He tipped
me off that they are going to subpoena me.
MR. PAUL: The background of it is this letter
which I showed you and which we have - Stanley, have
you got the draft of reply ready? Sullivan, Helvering,
Stanley, and I talked it ove.' and worked out a course
of procedure which I think will save all our rights and
Regraded Unclassified
114
- 3 -
will avoid most of the problem. Do you want to tell
what it is?
MR. SULLIVAN: Go ahead.
H.M.JR: Do you want to do it now?
MR. PAUL: I think the letter should go off sometime
before you leave.
H.M.JR: Are you ready?
MR. SURREY: It is the first draft.
H.M.JR: I don't want any first drafts. I would
like & finished product.
MR. SULLIVAN: For your own protection, let's get
this out.
H.M.JR: On the theory that Cabinet won't last
until four o'clock - the chances are I will be back
here by three-thirty, and I can do it just before we
go into the tax thing.
MR. PAUL: We have it very carefully worded.
H.M.JR: I would like a finished product. When I
come back from Cabinet I will take the time to get it
off.
MR. PAUL: We are all agreed on it.
H.M.JR: But the thing I said - you can read my
press conference - I said, "I am not going to let a
two-by-four-man like him get my mind off the war effort."
MR. PAUL: Two-by-four is only theoretically true.
(Laughter)
MR. BLOUGH: Five-by-five. (Laughter)
Regraded Unclassified
115
- 4 -
H.M.JR: This wasn't the exact language. "He is
too dumb, can't do his own stuff, so he is trying to
find out what we have got."
MR. GASTON: To whom did you talk?
H.M.JR: To the press, off the record.
MRS. KLOTZ: He didn't really say that.
MR. SMITH: Not as blunt as that. You said he
didn't have the facility or the brains to do anything
with it after he got it. (Laughter)
H.M.JR: That is all. (Laughter) I went over it,
told them he was just small fry, I couldn't be bothered
with him.
Now listen, young fellow (Blough), the purpose,
at least this morning, is to let us know whether it is
"M-1", "2" or "3". Mr. Paul was worried going home last
night whether it was eight, seven plus or minus.
MR. PAUL: I knew it was eight, seven, but "M-2"
is six. But it is true, as was said last night, that
up above ten thousand it is three. It would be much
the same thing.
MR. BLOUGH: Let me indicate what I think you
want, and then if that isn't what you want--
H.M.JR: Then I will ask Mr. Surrey what I want.
(Laughter)
MR. BLOUGH: I put down a few remarks that you may
want to make at the beginning. (Copy of notes for an agenda
attached.)
H.M.JR: Are you fellows going on record again?
(Laughter)
MR. PAUL: We are trying to get a record for you.
Regraded Unclassified
116
- 5 -
MR. BLOUGH: No, that is water over the dam.
(Laughter)
MR. PAUL: Let's be friends, huh? (Laughter)
MR. BLOUGH: There are two things. First, you don't
want to hand these people anything to take away with
them because that means difficulty so far as publicity
is concerned. Second, the idea is sufficiently diffi-
cult that they probably ought to have something to see
when it is explained to them.
Now, that may or may not be good sense, but at least
we have proceeded as if you were going to proceed along
that line. I thought that these two charts - one is the
first chart we looked at, which shows up to six thousand
dollars, the present law, the schedule we have already
talked to them about; and the "M-2" schedule with Social
Security included ought to be shown to them. And second,
the income tax part of it on our regular income tax scale,
comparing it again with the present law, with the schedule
We have already proposed, and the "M-2" schedule--
H.M.JR: Do you mind, just for my peace of mind,
telling me what - as long as Paul raised the question -
what is the "M-2" schedule?
MR. BLOUGH: The "M-2" schedule is a schedule which
will raise about three billion dollars of income taxes.
H.M.JR: How was it derived?
MR. BLOUGH: It was derived in the following way--
MR. PAUL: It is really six altogether.
MR. BLOUGH: This schedule of income taxes will
raise about three billion dollars.
H.M.JR: Tell us how it came about, who was papa and
mama.
Regraded Unclassified
117
- 6 -
MR. BLOUGH: You were papa and mama, and I was the
doctor that delivered the baby. I kind of tore it up,
perhaps, but anyway-- (Laughter)
MR. PAUL: Instrumental delivery. (Laughter)
MR. SMITH: Paul walked the floor. (Laughter)
MR. BLOUGH: This, as I understood, is what you
wanted, and this is what we did. We started with a
surtax rate schedule, which had been designated "W"
because we had gotten down that far, from "A" to "W"
this year already in cooking up schedules.
That surtax schedule when added to the normal tax
and applied to personal exemptions of five hundred
dollars for single persons, one thousand dollars for
married couples, and two hundred and fifty dollars for
each dependent, would at the hundred and forty-six
billion dollar level of national income produce eight
point seven billion dollars.
That is the schedule which was used in that manner
in the program that was suggested to this group several
weeks ago.
H.M.JR: Say it once more. I want to get it
straight.
MR. BLOUGH: This schedule is 8. surtax rate schedule
which, when added to the normal tax and applied to
personal exemptions of two hundred and fifty for
dependents instead of three hundred and fifty - reduced
exemptions - would produce an additional income tax
revenue--
H.M.JR: Just a minute. In this plan they have
proposed to reduce the exemptions for dependents from
three hundred to two hundred and fifty?
MR. BLOUGH: From three fifty to two fifty. Now,
the first thing you wanted done--
Regraded Unclassified
118
- 7 -
MR. PAUL: That is the one that was talked about
at the last meeting?
MR. BLOUGH: Yes, and the twelve billion dollars
was built up around that.
The first thing we did was to use the present per-
sonal exemptions instead of the lowered personal exemp-
tions. That lops off about two and & half billion dollars.
H.M.JR: Doing what?
MR. BLOUGH: Substituting the present personal
exemptions for the lower personal exemptions.
H.M.JR: In other words, you leave them at three
fifty?
MR. BLOUGH: That is it.
H.M.JR: That lops off?
MR. BLOUGH: About two and a half billion dollars.
It brings the yield of that schedule to a little over
six billion.
MR. PAUL: Instead of eight, seven.
H.M.JR: Oh, I see.
MR. BLOUGH: But that is all in changing the
personal exemptions - nothing else.
The next thing we did, then, was to integrate the
Victory tax in by adding enough to the income tax rates
to make up for the cancellation of the Victory tax.
H.M.JR: Which is about three billion?
MR. BLOUGH: Which is about three billion dollars.
Regraded Unclassified
119
- 8 -
H.M.JR: And where did you put that in?
MR. BLOUGH: Uniformly from top to bottom as an
increase in the income tax rates.
Then we made a table of the increases in income
tax at various levels for a married couple and two
dependents which that would give.
H.M.JR: Which would produce the six?
MR. BLOUGH: Yes. From that we subtracted the
increased pay-roll tax which a four-percent raise in
employee pay-roll tax would make. What was left in each
income bracket was the income tax increase which we had
as our goal.
We then took that increase, added it to the previous
income tax, computed & new rate schedule to produce it.
That new rate schedule is "M-2".
MR. PAUL: Summarizing that, as I understand it,
you have left on your schedule increased income taxes
above three thousand, and Social Security increases are
the taxes below three thousand.
H.M.JR: That was his assignment.
MR. PAUL: But that operation was performed, if we
can continue to be clinical, on a six-billion-dollar
basis. So when we come out we get about three billion
tax and four of the other.
MR. BLOUGH: Somewhat more than six altogether:
Three billion of income tax and three billion and a
half of increased pay-roll tax. The reason why is
that the pay-roll tax is paid by a lot of people who
would not pay the income tax.
H.M.JR: Well, the fact remains - the way Paul put
it, you took the assignment, the increased tax of two
and a half billion which would have come from lowering
Regraded Unclassified
120
- 9 -
exemptions, and we more than make that up through the
Social Security tax.
MR. PAUL: No, that isn't right.
MR. BLOUGH: No. Instead of eight point seven we
get three billion of income taxes.
H.M.JR: You didn't let me finish. I will say it
again. By not lowering the exemptions you lose about
two and & half billion on people with income of three
thousand or less. Now, as a substitute for that you
put in Social Security--
MR. PAUL: We have no substitute.
H.M.JR: To go back, in three thousand dollars or
less by not lowering the exemptions we lose about two
and a half billion dollars in income. By applying the
Social Security to people of three thousand dollars or
less we gain about three billion dollars in revenue.
MR. BLOUGH: Roughly - both things are rough.
MR. SULLIVAN: Your loss of two and a half doesn't
come exclusively from the people below three thousand.
H.M.JR: But, anyway, the net is that when we get
all washed up, through Social Security and the increase
in the higher brackets, the fellow who pays twenty-five
thousand dollars comes to practically fifty-four percent;
and on the original eight, seven he is practically
fifty-four percent.
MR. PAUL: You have the schedule, but you don't
have the eight, seven.
H.M.JR: I mean for the individual. I am not
talking about the net in Dan Bell's bank, but the
individual of twenty-five thousand dollars.
Regraded Unclassified
121
- 10 -
When we started, the fellow who had an income of
twenty-five thousand dollars would pay approximately
fifty-four percent. Now, when we have all of this
business still the fellow with twenty-five thousand
dollars pays that. Am I right?
MR. BLOUGH: Right.
H.M.JR: So we arrived at it differently, but as
to the individual it is the same. So if they ask us,
"Have you changed it any in the higher brackets?" the
answer is no. It is ninety-nine percent the same -
ninety-nine and a half. At least it is ninety-nine
percent the same to the man of twenty-five thousand
dollars and above.
MR. BLOUGH: There are a few errors at the very
top of the schedule.
MR. PAUL: You had said you wanted to change your
strategy and present a high yield program. This "M-2"
will yield - it will present a program of about two and
8 half billion less.
H.M.JR: What do you mean, high yield as it affects
the individual or as it affects the Treasury?
MR. PAUL: Total revenue taken. We presented 8,
twelve-billion-dollar program before.
H.M.JR: The President thought twelve billion
dollars was too high. I told him I thought this was,
just rough, about ten.
MR. PAUL: Just about ten.
H.M.JR: Let me see how close. On excise taxes,
two billion more; corporate taxes, one billion more.
And how much is this other?
MR. PAUL: Six.
Regraded Unclassified
122
- 11 -
H.M.JR: I mean through Social Security and every-
thing else.
MR. BLOUGH: Let's itemize them. The individual
income tax, about three more; the employee pay-roll tax,
about three and a half more; the employer pay-roll tax,
about two more; estate and gift tax, maybe a couple of
hundred million.
H.M.JR: That is eleven and 8 half.
MR. GASTON: Your employer tax in there brings the
whole program up to where you started - almost up to
twelve billion dollars.
H.M.JR: Yes, very nice.
MR. BLOUGH: A couple of things ought to be men-
tioned. That employer pay-roll tax will have some
adverse effect on the corporate income tax.
MR. PAUL: That is a gross yield.
MR. BLOUGH: Yes.
MR. PAUL: Then you can't take those figures.
H.M.JR: Would it be eleven? This is eleven and
a half.
MR. GASTON: You have to discount the forty percent,
in the first place.
MR. BLOUGH: It depends on what happens, as prices
go up or profits go down. If profits go down, then what
you point out is right. You would have to discount it.
MR. SULLIVAN: Even if they remain constant you
will lose out of your corporate yield. You lose about
half of your additional yield.
MR. PAUL: At least half.
Regraded Unclassified
123
- 12 -
MR. BLOUGH: I say it depends on whether the prices
should go up so that the gross take of the corporations
is increased likewise.
MR. SULLIVAN: I don't think I would get involved
in that, Mr. Secretary. It is terribly complicated.
MR. HAAS: If you are that close to twelve, if the
war expenditures continue at present level we will have
to figure that on a higher national income basis, so
that will bring it up.
H.M.JR: Listen, George, you had better give Paul,
to give me when I see the President - when I see the
President I don't want to sit around and argue with the
President. If he says, "How much will this produce?" I
want to--
MR. HAAS: They are getting it all.
H.M.JR: Randolph, will you have that?
MR. PAUL: I will have all I can get. I think it
is going to take a long time to get some of that, but
I know the total over-all.
H.M.JR: But with the President, if you say that
it is between eleven and a half and twelve he doesn't
mind.
MR. PAUL: We can have that.
H.M.JR: You certainly ought to be able to hit it
within a half a billion dollars.
MR. SULLIVAN: When he spoke of how much he wanted,
that was on a gross basis, I think. I think anything
you say - that you said to him was probably on a gross
basis, Mr. Secretary.
H.M.JR: Well, I think we are all right.
Regraded Unclassified
124
- 13 -
Now, have you got some introductory remarks you
would like this afternoon?
MR. BLOUGH: I just dictated them off. They are
probably no good.
MR. PAUL: We would like to ask a couple of questions
about the meeting in general.
MR. BLOUGH: Do you want the charts up in the room?
MR. PAUL: We thought we would have the big charts
up.
H.M.JR: Sure.
MR. PAUL: The second point, we thought it would
be appropriate if you made an introductory statement at
least. I don't know whether you want to conduct the
whole meeting.
H.M.JR: I am very much in sympathy with what you
are saying.
MR. PAUL: I think Roy ought to explain the details
of this plan, and then deryou want to have a discussion
headed up to anybody?
H.M.JR: I think I will sit in the chair today,
unless it gets too hot, and then I think Roy should do
the thing. But inasmuch as this is not going to be run
quite as judiciously as you ran the other two meetings -
it takes a little more assertiveness - I think I had
better do it.
MR. PAUL: That suits me all right.
H.M.JR: I knew it would. I think I had better,
figuratively and actually, be in the driving seat. I
think it is going to take some driving. And it would
be less embarrassing to you. Right?
Regraded Unclassified
125
- 14 -
MR. PAUL: It wouldn't be terribly embarrassing,
but I think you ought to do it.
H.M.JR: I would like to. I would enjoy doing
it.
(Notes for agenda for meeting handed to the Secretary.)
H.M.JR: (Reading) "The Secretary would open the
meeting with a few remarks: At the last meeting one of
the points that was briefly mentioned but was not gone
into was the relation of Social Security and the tax bill.
"There obviously is such a relation, because the
employee payroll Social Security contributions press on"-
no, I can't say this. Let me do it kind of free and
easy.
MR. BLOUGH: Of course, Mr. Secretary, you weren't
intended to read it.
MR. PAUL: No.
MR. BLOUGH: I thought you might want some ideas
on what to say.
H.M.JR: No, this is for people - a final talk to
people who have already received their PhD. (Laughter)
MR. BLOUGH: This is just trying to put down--
H.M.JR: I got it largely here (indicating heart).
I don't want too much here (indicating head.) (Laughter)
MR. BLOUGH: This was intended to strengthen your
hand, that is all.
H.M.JR: Now that it is clear in my mind how "M-2"
came into being, we are all right. (Laughter)
Since I have had this meeting with the President -
I mean, I feel very much more confident of myself, until
Regraded Unclassified
126
- 15 -
the next thing happens, and knowing we are having 8
meeting Tuesday, and all that sort of thing, I think
we are all right.
MR. BLOUGH: Could I read one paragraph of this
to you?
H.M.JR: Absolutely. You can read the whole thing,
if it would make you any happier. (Laughter)
MR. BLOUGH: There are two or three ideas in this
paragraph that I think you may want to take into con-
sideration.
"Any expansion in the Social Security program and
of taxes to finance it must, of course, stand on its
own merits. It would be neither good fiscal policy
nor good social policy to rest the expansion of Social
Security on the financing effects. However, these
effects are a consideration and one which dictates the
present as being a very logical time to expand Social
Security.
"Heavy withdrawals of purchasing power are needed
from lower income groups at the present time. Employee
pay-roll taxes are one of the most effective measures
for accomplishing such withdrawal. Such taxes, when
linked with expanded benefits, are the one form of tax
increase which industrial workers will accept cheerfully,
and, I believe, enthusiastically."
MR. HAAS: That will kill it. (Laughter) McNutt
made a very good statement, I thought, in--
H.M.JR: If you don't mind, I am ready now. Some-
times I want a statement. This is one of the times I
don't want one. I am either ready or I am not. But
thank you very much, Roy, and I am being sincere now.
I am ready.
Then the thing is that you (Paul) are to let Mrs.
Klotz know and she will let me know when I come back
from Cabinet, and we will do that letter.
Regraded Unclassified
127
Notes for an Agenda for the 4:00 meeting
September 2, 1943
The Secretary would open the meeting with a few remarks:
At the last meeting one of the points that was briefly
mentioned but was not gone into was the relation of Social
Security and the tax bill.
There obviously is such a relation, because the employee
payroll Social Security contributions press on ability to pay
in much the same way as do other taxes. If the burdens of
expanded social security are not taken into account in the
tax bill, the result would be either that the expansion of
Social Security would be blocked or that the taxes would have
to be readjusted when Social Security was expanded.
Any expansion in the Social Security program and of taxes
to finance it must, of course, stand on its own merits. It
would be neither good fiscal policy or good social policy to
rest the expansion of Social Security on the economic and
financing effects. However, these effects are e consideration
and one which dictates the present as being the logical time
to expand Social Security. Heavy withdrawals of purchasing
power are needed from lower income groups at the present
time. Employee payroll taxes are one of the most effective
measures for accomplishing such withdrawal. Such taxes, when
linked with expanded benefits, are the one form of tax increase
Regraded Unclassified
128
- 2 -
which industrial workers will accept cheerfully, and I
believe enthusiastically.
For these reasons it has occurred to me that it would
be desirable for the President to take an active position in
support of expanded Social Security, prior to the time the tax
hearings start, and for the tax proposals to include Social
Security contributions carefully integrated with the income
tax proposals in order on the one hand to get larger amounts
of revenue from low income groups and on the other hand not
to overburden such groups with taxes for which no benefits
would be paid.
Nothing final has been decided with respect to this pro-
posal. Naturally the decision will be the President's to make.
However, I think it would be very constructive if we could have
a free interchange of opinion regarding the idea.
In order that you may have a somewhat more definite idea
of the type of income and payroll tax integration that I have
in mind, an explanation will be briefly made by Mr. Blough.
After that Mr. Paul will serve as Chairman as he has in the
last two meetings, and I hope we may have a full and free
discussion.
Regraded Unclassified
129
September 2, 1943
4:05 p.m.
HMJr:
I don't know whether you've heard about Churcnill,
but I've heard nothing.
Ted
Gamble:
I have heard nothing.
HMJr:
Call up his secretary....
G:
I will call Mr. Martin right now.
HMJr:
...and if there's anything doing, if anything's
fixed, send me in a slip. I'll be in this tax
meeting for a couple of hours.
G:
Fine.
HMJr:
Will you?
G:
Yes, sir.
HMJr:
Thank you.
G:
All right.
Regraded Unclassified
130
Envelope sent to the White House by
SS Agent addressed to attention of
John Martin, Secretary
131
September 2, 1943
The Right Honorable Winston Churchill,
British Prime Minister,
The White House,
Washington, D.C.
My dear Mr. Prime Minister:
As you know, our big Third War Loan Drive starts on
September 9th.
We have set a quota of 15 Billions Dollars for this
drive, all of which is to be raised from non-banking
sources. No job approaching the magnitude of this
effort has ever before been attempted.
The President is going to officially launch the
Program over all of our radio networks on the evening
of September the 8th. I should like to invite you to
help us with an idea that I think will go over big
with all the people in our country.
The sixteen thousand theatre screens in the
country have been made available to us, and we have
been trying to obtain a. newsreel shot that would ef-
fectively spark our drive through this media. I would
like for you to appear in front of the newsreel
cameras buying the first Bond from me. This could
be done late today or preferably tomorrow morning.
Sincerely,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Regraded Unclassified
Tax meeting
Γ
132
Thursday. Sept 2, 1943
4 P.m.
Harold Smith or mr. Loessler ( actinicator Janes)
marriner Eccles
Donald nelson
General Green Caum for Judge Patterson
Rauchlin Currie
Secretary Wickard
Sewell Key for Sam O. Clark
Ganson Purcell
arthur altmeyer
Richard Destravis Gilbert for Prentics Brawn
Isidor Lubin- also represents Secy Perkins
Bernard Baruch
Ben Cohen
TREASURY
Paul
James Porrestal
Sullivan
Sav. me nutt
Capt. Strauss
Hass
Gaston
Beough
Judge Roseuman
Fred Surrey Smith
Helvering
a. $ Hinrichs (B.L.S.)
Dr Senion timets (for
Lindors
m. maggs. Regrets Octing seen Dnelson) Labor
there
Judge Vinson
Thoup
Hart
Secy Jones- sending alternate
ADY Perkins Lubin will represent
Donald nelson. hill send alternate
WH. Davis
133-
September 2, 1943
HM Jr's ideas on why social security should be
a part of the tax program - presented at 4:00
meeting of interested agencies
And
we
THE WHITE HOUSE
WASHINGTON
1. sound economics
2. anti- inflation
3. producers revenue
4. sound social outlook
5. Post War aspectsgood
6. good Politics.
Regraded Unclassified
134
September 2, 1943
4:15 p.m.
TAXES:
Present: Mr. Paul
Mr. Blough
Mr. Gaston
Mr. Sullivan
Mr. Smith
Secretary Wickard
Judge Rosenman
Mr. Currie
Mr. Forrestal
Mr. Eccles
Mr. Altmeyer
General Greenbaum
Capt. Strauss
Mr. Helvering
Mr. Wayne Taylor
Mr. Amos Taylor
Mr. Maggs
Mr. Lubin
Mr. Hinrichs
Mr. MoNutt
Mr. Milton Gilbert
Mr. Purceil
Mr. Colm
Mr. Key
Mr. Kuznets
Mr. Loeffler
Mr. Haas
Mr. Surrey
Mr. Lindow
Mr. Shere
Mr. Shoup
H.M.JR: This is, I think, gentlemen, the third
meeting that we have had and we here in the Treasury
feel that we have made considerable progress and we
finally have a program that we like.
Regraded Unclassified
135
- 2 -
This may sound a little boastful, but as many people
as there are in the Treasury - - we think it is based on
sound economics; we think it is anti-inflationary; and
it produces approximately the necessary revenue. It
has a sound social outlook and its postwar aspects are
good. And last but not least, we think it is good
politics.
Those are the attributes which we claim for this
comprehensive fiscal program.
Now, what we have done here is this. "e have taken
the original eight billion seven program of income taxes
and we have changed it to the extent that we do not
change the exemptions. Furthermore, we added on the -
let's start with the present income tax. We consolidate
into the present income tax laws, the proposal is, the
Victory Tax.
Then on top of that, in place of lowering the exemp-
tions we have added approximately the program which is
in Senator Wagner's bill on Social Security, and as far
as revenue goes, the one about offsets the other.
And then, continuing with people of incomes of three
thousand or over, we have schedules which approximate the
original eight billion seven.
In other words, instead of lowering the exemptions
and getting the increased taxes out of people of three
thousand dollars or less through taxes, we have substituted
the Social Security program of Senator Wagner. In incomes
in the higher brackets, taking a man, say, with twenty-
five thousand dollars income, the present proposal will
give within less than one quarter of one percent difference.
It works out that approximately fifty-four percent of his
income will be paid in taxes, just the same as it did before.
The main change is in the three thousand or less.
I had an opportunity over the week end to roughly
outline this to the President. He said he had been groping
for something and this so unded very good to him, and he
Regraded Unclassified
136
- 3 -
wanted us to go further and explain it to other people in
the Administration who were interested in a tax program,
and then finally come to him with a complete program.
I should say we stay the same as we were with corporate
taxes - about a billion dollars; and about two billion
dollars through special increased excise taxes. The gross
program will very closely approximate twelve billion dollars,
where me were when we started, but the big shift being in
the method of treating the people with three thousand
dollars or less.
I had an opportunity yesterday to outline this to
Mr. MoNutt, Mr. Altmeyer, and Mr. Maggs, representing
fiss Perkins, and they will have an opportunity to say
how they feel themselves. They can do it much better
than I can.
But I would now like to have Mr. Blough give you the
more technical aspects of this program - more detailed -
and then the meeting is yours for criticisms, suggestions,
or even possibly approval.
If Mr. Blough will - would you like to do it without
being interrupted, or with interruptions?
MR. BLOUGH: I don't care.
H.M. JR: Mr. Blough will be glad to be interrupted
if any of the things he suggests are not clear. But he
will give you the technical aspects of this - what I call
sort of a complete package on the fiscal front.
MR. BLOUGH: What I have to say relates only to the
inter-relation of the Social Security pay-roll tax or
contribution increases and the individual income tax in-
creases.
As you know, at the present time the pay-roll tax
on employees is one percent for old age and retirement
insurance. That is scheduled to rise on January 1, 1944,
to two percent. There is similarly a one percent pay-
roll tax for the same purpose on employers which is
Regraded Unclassified
137
- 4 -
scheduled to rise to two percent January 1, 1944.
There are combined Federal and State taxes on em-
ployers of, roughly, three percent of pay roll, although
merit rating has cut that down in some jurisdictions. So
as of January 1, 1944, if there is no change in the law,
we would have approximately two percent pay-roll tax on
employees and f ve on employers.
The program of the Wagner bill would raise the con-
tributi ns of employees to six percent, which is an in-
crease of four above the 1944 scheduled levels.
H.M.JR: Can I interrupt you, Roy? I want to say
something which I overlooked, which is rather important.
My hope is that the President will take this as his
program rather than 8. Treasury program. I want to make
that very plain. I mean, this isn't something - our
hopes are that he will take it and will, in a speech or
message, present it to Congress rather than just Treasury.
MR. GILBERT: Would he take the benefits of the
Wagner bill along with the tax increase?
H.M.JR: That is the idea, yes. I didn't mean to
interrupt you, but in these people's minds - I didn't
want them to sit there thinking that this is just Treasury.
I am trying to think this is the Administration, with the
hope that it is something that the President will take.
MR. BLOUGH: I am going into this detail simply to
refresh your memory so I won't be going off in some
direction and get lost some place.
Well, now, under the Wagner bill the proposal there
will be an employee pay-roll tax of six percent and an
employer tax of six percent. There will be no effort to
integrate or combine the employer pay-roll tax with any
present tax on business or corporations. There would be,
however, an integration - if you want to call it that -
of the increase in the employee pay-roll tax of four
percent.
Regraded Unclassified
138
- 5 -
The integration really comes down to this: The
schedule proposed some weeks ago, or suggested some weeks
ago in connection with the program here - a schedule
which at existing personal exemptions would raise a little
over six billion dollars, and at lower personal exemptions
would raise about eight point seven billion dollars - that
six-billion-doilar schedule would not be used in its
entirety, but would be cut down to the extent that the
increased pay-roll tax was imposed on the income-tax
payer. So a person who would have an increase in income
tax of, say, a hundred dollars, and an increase in pay-
roll tax of seventy-five dollars, the income tax schedule
would be changed to give an increase in income tax of only
twenty-five dollars.
In other words, the pay-roll tax, in effect, has been
fixed up in such & way - the income tax has been adjusted
in such a way that the increase in pay-roll tax would
serve as an offset against the increase in the income tax.
MR. HINRICHS: That does have an effect of net in-
crease in the lower incomes?
MR. BLOUGH: Yes, and it is all pay-roll tax increase,
but there is a substantial increase.
I will explain this chart (indicating Chart II, entitle
"Combined Individual Income and Employee Payroll taxes"
copy attached).
The rates run up to forty-five percent, then there is
a break because you don't need the whole scale, and the
incomes run from zero to six thousand dollars. The present
law - income tax and two percent pay-roll tax scheduled for
next January - runs like this: Up to six hundred dollars
or so you have only pay-roll tax at two percent of gross
wages. The Victory tax begins at that point and is added
to the pay-roll tax up to the income tax exemptions, which
reach about nineteen hundred dollars of net income for 8.
married couple with two dependents, on which this chart
is based.
Regraded Unclassified
139
- 6 -
The present income tax then moves in and is added to
it. So we have this situation, that at a thousand dollars
the combined pay roll and Victory tax here (indicating)
amount, for & married couple with two dependents, to about
thirty-six dollars or a little over, or three and six-
tenths percent. And at five thousand dollars the combined
pay roll and individual income tax and Victory tax amount
to seven hundred and ninety dollars, or about seventeen
percent - somewhere in that neighborhood - sixteen percent.
Now, that is the existing situation, combining the
three taxes.
Now it is proposed nere - it was proposed last time,
or & couple of times ago, at this meeting - to add a
schedule on which is shown in this dotted line (indicating).
That is the eight point seven billion schedule applied to
lower personal exemptions. It did not contemplate at that
time the absorption of the Victory tax, so up to the point
at which the personal exemption was lowered to - which
was fifteen hundred dollars for & married couple and two
dependents - the tax would be exactly the same as today.
Thereafter you have a very rapidiy rising tax as shown
in this upper dotted line.
Now, under the offset which I have just discussed and
which the Secretary outlined, and using the present per-
sonal exemptions instead of the lower exemptions, we
would get this sort of a combination: At this point (indi-
cating) you would have a six percent pay-roll tax in
operation from the very first dollar of wages. And that
is, as I indicated, the proposal of the wagner bill, and
that would continue to be the only tax up to nineteen
hundred dollars of net income. At that point the new
income tax schedule would become effective and would add
a tax as shown in the dashed line in the center (indicating).
So the effective rate of tax, combining Social Security
and income tax, is higher down here because of the higher
pay-roll tax, and in this area (indicating) which fails
between the present income and two percent pay-roll tax
and the schedule which we suggested here several weeks ago.
Regraded Unclassified
140
- 7 -
You will notice as we arrive toward the end here at
six thousand dollars, the proposed schedule is rapidly
approaching the schedule which we proposed the last time.
The effect of that is shown in this chart (indicating
Chart I, entitled "Individual Income Tax" copy attached).
This is for only income tax, but which in the higher
leveis, of course, is the only tax that counts because
the Social Security tax only goes up to three thousand
dollars. Here you have only the income tax. This, again,
is an effective rate chart with the rate of tax as a
percentage of net income shown along the side and the net
income shown on the semilogarithmic scale, so that the whole
area can be included on the chart, shown along the bottom.
The solid black line represents the present law. The
dotted line represents the proposal which has been made
before - the eight point seven proposal. The dashed
line is the income tax part of the present suggestion
which, as you see, is at the very bottom, below even the
present law because of the absorption of the Victory tax,
which makes impossible precise alignment of the two at
the bottom, which then crosses the line very shortly and at
about in the neighborhood of six thousand - ten thousand -
and becomes almost identical with the present - I mean,
with the proposal previously made. Minor variations up
here (indicating) are mechanical in character and can be
erased if it is desirable to do 30.
In other words, this income tax which would now raise
three billion dollars would not fall in this area at all
but would be just as heavy from about this point on (indi-
cating) as the income tax which would raise eight billion
seven hundred million dollars, which is, of course, the
commentary on the fact that most of the income is down
here (indicating).
H.M.JR: Do you want to ask some questions?
MR. BLOUGH: Perhaps you may have some questions
about the mechanics of this idea. Now I know I haven't
made it clear or there would be some questions. (Laughter)
Regraded Unclassified
141
- 8 -
MR. PAUL: I would like to get you to put in the idea
that this is in place merely of the individual income tax
part of the previous proposals and leaves intact the pre-
vious proposals as to corporate increases and excise
taxes.
MR. BLOUGH: That should be emphasized, yes. This
combined proposal, you might say, relates only to the
individual income tax and the individual employee pay-roll
tax.
MR. PAUL: Could you give us the constituency of the
whole tax increase of which this is a part?
MR. BLOUGH: You mean--
MR. PAUL: What adds up to about twelve billion?
MR. BLOUGH: It is roughly this, as I recail the
figures: This income tax, as indicated on the chart,
would raise about three billion dollars based on a
hundred and forty-six and a half billion dollar level
of national income. The latest figures we have on
probable pay-roll taxes indicate that the employee pay-
roll tax increase would be about three and one half
billion dollars as compared to - not the present level, but
next year's level. The employer pay-roll tax would amount
to somewhere in the neighborhood of a billion and a half
dollars.
MR. FORRESTAL: Are those increases or--
MR. BLOUGH: These are increases in all cases. The
corporation increase suggested would be about a billion
dollars; the excise tax increases suggested is about two
billion two; and the estate and gift tax suggested is
about three hundred million - total, eleven and a half
billion dollars.
Now, I would point out two things about that total.
The first is that it is at a level of national income
which is a bit higher than we are running today, but it
Regraded Unclassified
142
- 9 -
may probably be agreed, lower than the probable level of
next year. So you would get a somewhat higher yield in
'44 if the level of income runs somewhat highen as may be
expected.
In the second place, however, these are what you
might call gross yields. No account has been taken of
the inter-relation of the increases with each other. In
other words, the increase in corporate tax would have
some effect on the yield of an increase in individual tax.
And an increase in employer pay-roll tax would, under
certain circumstances, have an effect on the corporate
tax and in turn, on the individual income tax, because
you have the effect on dividends. Those have not yet
been taken into account. Perhaps they would roughly off-
set each other, but I wouldn't even want to make that
suggestion.
MR. LUBIN: Am I right in assuming that in reality
what you have done is, you have increased your income tax
rate in the brackets above six thousand dollars along the
lines that were discussed when you talked about your
original eight, seven billion tax program, and that for
those people whose incomes are less than three thousand
dollars, you have increased their tax, but not by income
tax group, but Social Security group?
MR. BLOUGH: That is roughly true. Below three thou-
sand dollars - and that level is not inflexible because
it depends on the marital status to some extent - but
below three thousand dollars, approximately, there is no
increase in the income tax proper. In fact, there are
some levels where there is somewhat of a decrease, and
the increase in tax at those levels - under three thousand
dollars - is all increased employee pay-roll tax.
Between three thousand and, roughly, eight thousand -
ten thousand - somewhere in that neighborhood - the increase
is combined - it is both the increased income tax and pay-
roll tax. But the pay-roll tax increase, of course,
doesn't go on above three thousand dollars, so what is
Regraded Unclassified
143
- 10 -
below three thousand helps, but it doesn't really have
much effect on it. And from there on up it is the
schedule that was proposed before.
Now, the reason that up to about eight or ten thou-
sand dollars it is a little lower is this; that up to
about that level the personal exemption shift from a
lowered personal exemption to the current personal exemp-
tion, makes some substantial difference. When you get
to about that level the small change in personal exemp-
tion makes 30 little difference that it really drops
out and is replaced by the somewhat higher Victory
tax - higher rate necessary to absorb the Victory tax.
MR. LUBIN: What happens to that group not subject
to your six percent Social Security? How about that
first three thousand dollars?
MR. BLOUGH: Any group which is free from the Social
Security pay-roll tax would likewise be free under this
proposal. They would pay whatever income tax was charged.
They would not, of course, pay the employee pay-roll tax.
MR. LUBIN: In other words, there is no increased
tax for that group on their first three thousand dollars.
MR. BLOUGH: That is correct.
H.M.JR: Mr. McNutt, would you like to say a word on
this - what your impression is?
MR. McNUTT: Our feeling is - first of all, we are
supporting this Social Security program. We have felt
that it should stand on its own feet. We recognize, of
course, that it is a part of the taxpaying structure of
this country, but if the line of clarification is made,
and that part of the program is sold on the basis of the
benefits to be derived from Social Security, we feel that
it would be made much stronger.
In other words, I feel that it could be sold 88
such while affecting your purpose as such and not as 8.
part of & general program, because it is & continuing
Regraded Unclassified
144
- 11 -
thing and it should stand on its own feet, ensure the
benefits that come from the benefits that go to the tax-
payer himself.
I don't know whether Mr. Altmeyer wants to add to
it, but that is as simply as I know how to put it.
H.M.JR: I will be repeating myself, but we are
perfectly conscious of that, and we think that it should
stand on its own feet, but you can't talk about Social
Security - we don't think here - and put it in a vacuum
by itself, when you are talking about how you are going
to treat the people with incomes of three thousand dollars
or less.
Now, the thing - I realize I am less of a chairman
and more of a salesman today, but that is why I am sitting
here - I told Randolph Paul he was too judicial for this
meeting today (laughter), so I took the chair.
Quite frankly, we have in mind the things we have
talked about with the Army and the Navy, the question
about what the impact is on these people who they are
relying on to produce the munitions. we have talked
with Labor - organized Labor. Organized Labor likes this.
They are willing to pay the six percent. They didn't
like the lowering of exemptions or increasing the taxes,
but they will do this and do this thing cheerfully, and
they will get behind this thing publicly.
So we feel that for those people who are worrying
about the spending power of the people of three thousand
dollars or less - Mr. McNutt doesn't want me to talk
about anti-inflation, but I still have to talk about what
they have to spend - this would do the job in a manner
that they would like, which we here think is very important.
MR. McNUTT: That is those who are subject to the
Social Security act.
H.M.JR: That is right.
Regraded Unclassified
145
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MR. McNUTT: Às Mr. Lubin pointed out, there is another
group this doesn't affect at all.
MR. LUBIN: We get out of paying that tax.
H.M.JR: As a Federal employee?
MR. LUBIN: Yes.
H.M.JR: But you are paying five percent now and
you are a white-collared worker and you have had no in-
crease.
MR. PAUL: Mr. Secretary, may I--
H.M.JR: Do you want to argue about that? (Laughter)
MR. PAUL: Mr. Secretary, you spoke of this plan
having been discussed with labor. Some of the general
ideas underlying the plan have been discussed, but there
has been no discussion of this specific plan with labor,
and I would like to add that - I would like to suggest
to you that you suggest to the meeting that this precise plan
hasn't been discussed with anybody outside this group, and
that extreme care should be taken that is isn't discussed
with reporters or anybody else who tells things to reporters,
because I think it would be unfortunate to have it get
abroad at this time.
H.M.JR: Well, I appreciate you are worried. After
all, we are all here either as Presidential appointees or
representing Presidential appointees, and what I am trying
to do now is - this has got beyond just the Treasury. We
have an appointment early next week with the President and
he either will accept or reject it. That is, of course,
his privilege. Inasmuch as this is something that I
hope he is going to take, I think that - I am sure that
the group will want to keep it in confidence up to the
time that he says that this is something he likes or
throws it back and says, "Discuss it some more.
Regraded Unclassified
146
- 13 -
That was one of the reasons I was particularly
anxious that people like Judge Rosenman, Mr. Currie,
and Mr. Lubin be here because I am sure they will be
consulted and I know that in the case of Judge Rosenman
he has already interested himself in this. But I am
glad you sounded the word of caution.
MR. PAUL: At the last meeting there were twenty
reporters outside the door.
H.M.JR: I don't think there will be any this time.
MR. PAUL: I would like to ask Mr. McNutt a question
if no one else has any.
As I understand your statement, you want to be very
careful of the proper emphasis being put on Social Security
standing on its own feet, but you don't have any objection
to a joint consideration of both parts - the Social Security
and the tax part of this - provided the Congressional
Committee chairmen and leaders are willing to have it joint?
MR McNUTT: I think if you were to use the word
"simultaneous" rather than "joint" perhaps it would ex-
-
press my feeling more clearly. I realize the fact that
unless this is done in the case of Social Security it
will affect your whole structure. Therefore, it should
be at the same time. But I would hate to see, because
of the future of Social Security - the soundness of that
system - Social Security tied into a general tax system
as such.
(Mr. Eccles entered the conference.)
MR. PAUL: But if it were made clear that the tax--
MR. McNUTT: If it is clear-cut, and the Social
Security side is considered on its own merit, all well and
good.
MR. PAUL: It is ultimate separability that you are
interested in, not precise time when each is considered.
Regraded Unclassified
147
- 14 -
MR. McNUTT: That is right. It should be considered
at the same time, I agree on that.
MR. PAUL: I wanted to get that clear.
MR. FORRESTAL: What part of the national income do
you figure has been called the inflationary gap?
MR. PAUL: I don't know what the inflationary gap
is because I am not certain about military expenditures
nor about civilian goods. We tried to get into some of
that last year. I am not certain what will be the 1944
income, but if you put your 1944 income at a hundred and
fifty-five billion, say, and increased your present
yield and the yield of this bill to about fifty - about
where you would come out - that would leave a hundred
billion. There is twenty billion more - that is a hundred
and fifty less twenty is a hundred and thirty, and &
hundred and fifty-five less twenty is a hundred and thirty-
five - place that against, say, ninety for goods - civilian
goods - and you have got forty. Then you have forty
billion. Now, I don't know how much is saved there accord-
Ing to our present pattern. It is almost that. The gap
is somewhere around ten to twenty billion.
There will still be a gap, in other words, after this,
unless your military expenditures come down and therefore
make your income come down, or unless your civilian goods
go up. There will probably still be some gap after this
increased tax program.
H.M.JR: Mr. Currie, do you want to say something?
MR. CURRIE: I don't think SO.
H.M.JR: Does it interest you at all?
MR. CURRIE: Very much.
H.M.JR: Well, say something. You can't exclusively
be in the foreign field. (Laughter)
Regraded Unclassified
148
- 15 -
MR. CURRIE: I would just like to ask a question
following up what Mr. McNutt said. The Social Security
part of the program will be placed in a separate bill
altogether, would it?
MR. PAUL: The Wagner bill is before Congress now,
yes. We will try, I assume, to get the Ways and Means
Committee to take them up at the same time, keeping
clear that they were - while integrated, the Social Security
part of it would be a permanent thing and stand on its own
feet and be acceptable for itself as well as we will perhaps
minimize the anti-inflationary aspects of the Social Security
bill.
MR. CURRIE: And in the bill containing these rate
increases, pay-roll increases, would also be the benefits
under the Wagner act?
MR. PAUL: You would hardly be able to have the Wagner
collections without settling what were the benefits and
the coverage.
H.M.JR: Judge Rosenman, do you want to ask & question
or make some comments?
JUDGE ROSENMAN: No.
H.M.JR: General Greenbaum, you said last time I didn't
ask you anything. (Laughter)
GEN. GREENBAUM: That was all right.
H.M.JR: How about this time?
GEN. GREENBAUM: No comment.
H.M.JR: Have you got a message if you are aske d?
GEN. GREENBAUM: No, not today.
H.M.JR: Well, in fairness to Miss Perkins, Mr. Maggs
sent us a message last night on how she felt and possibly
Mr. Maggs would like to say what either he or Miss Perkins
feels.
Regraded Unclassified
149
- 16 -
MR. MAGGS: I talked to Miss Perkins. She is, of
course, mainly interested in having Social Security ex-
panded. She feels that from the point of view of poli-
tics, that there is danger in sending it up this way -
the danger that it would militate against the adoption
of Social Security now if this whole thing failed.
H.M.JR: Mr. Taylor?
MR. WAYNE TAYLOR: The Social Security aspect of it,
I think, is 8. very fortunate approach, and I don't think
you can segregate the two as completely as Mr. Paul indi-
cates, because it immediately gets into purchasing power
and where you are siphoning off.
I would say it ought to be presented together with
definite emphasis on what it does to siphoning off income.
MR. McNUTT: I made the suggestion the other day that
by arrangement with the chairmen of the committees con-
cerned and the leaders of the committees, that they could
consider this at the same time, recognizing that it is 8
part of the financial picture.
MR. LUBIN: Mr. Secretary, would it be amiss to
make a suggestion? Is it possible to present alter-
native pictures? In other words, "Here is what the
picture would look like if you did it this way. Now,
if you don't pass the Social Security act, we want you
to pass the other bill, which we need - the eight point
seven billion from personal incomes. Here is the way to
get it. Now, you can do it this way, but if you prefer
you can do it through the Social Security route.
H.M.JR: That is perfectly possible. As I say, again,
this is a hope. But I was encouraged by the President to
continue this thing. I am hoping that he will do some-
thing with this on the home front as he did for the
soldiers on the postwar basis, as it seems to me that
this approaches that. It may not do everything, but
still, it is an approach.
Regraded Unclassified
150
- 17 -
We have been all through the dismissal wage, as I
am sure you have. It is very difficult. After going
all through the thing, it seems to us here in the Treasury
that the Social Security program of unemployment is the
best approach on the postwar basis.
As I say, I don't know, when the President sees it
in black and white, how he will like it, but I was encouraged.
If he was going to do it, my own advice would be that he
do it in a positive way, without alternatives. But on the
other hand, he might like it.
I felt that if ne would do it just the way he did
with the returning soldiers - this is a definite program
and a definite recommendation - but as I say, I am sure
that he will consult lots of people. I hope he will.
But we simply felt that we would much rather have a definite
recommendation. I don't know how he feels. If he wants
alternatives, it is easy enough to give them to him and
Congress may - of course, we are not fooling ourselves
here. I mean, every time we have gone to Mr. Doughton he
has always said, "which do you want - a Social Security
program or a tax program? I can't give you both. Now,
if you want a tax bill you had better take it; if you
want a Social Security bill, I can't give you a tax bill
this year."
That is why we have tried to weave them together, quite
frankly, to make it difficult for him, because he has
stalled the Administration so long now on Social Security.
We have tried to weave them together like that so that
Mr. Doughton would have to consider them both and move for-
ward on both fronts. Now, if we separate them, he will
stail on one or the other; I don't know which.
I don't know whether I have answered you, but at least
it gives you some of the reasons why we have tried to weave
the two together. I know the Social Security people don't
particularly like it. They would like to stand on their
own feet. But without offense to anybody, standing on
their own feet they haven't been able to get very far on
account of Mr. Doughton.
Regraded Unclassified
151
- 18 -
MR. McNUTT: His conventional answer has been, "No
Social Security legislation until after the tax bill is
out of the way." He has said that at least 8. dozen times
that I can remember.
MR. ALTMEYER: May I say & word, please?
H.M.JR: Just because I am positive, don't let me
down anybody. I just feel that somebody has to be posi-
tive about this, so talk right up, please.
MR. ALTMEYER: As I understand it, from the stand-
point of the Treasury you had, really, two alternatives
so far as the relationship between Social Security and
your tax program is concerned. You could have presented
your sight point seven billion dollar individual income
tax program, and could have said, "This would need to be
adjusted appropriately in the event that you enact Social
Security legislation, placing an additional burden upon
the lower income groups, or you could take the second
approach which Mr. Blough has outlined and which I am
assuming you favor, and that is to adjust your individual
income tax schedules upon the assumption that you are
going to get a Social Security program costing employees
six percent.
Now, that assumption is a large assumption because as
someone remarked at the very outset, you can't just - the
President can't just say to Congress, "I believe you should
enact a Social Security program costing employees six
percent," because Social Security in the minds of people
consists of the benefits afforded, and the costs are
necessary results. So when you get into a consideration
of Social Security you are getting into consideration of
the benefits to be provided, how they are to be provided,
and you are getting into some very explosive situations -
two in particular. One is States' rights, because the
Wagner bill proposes to convert the State Unemployment
Insurance laws into one national Unemployment Insurance
law as 8. part of a combined integrated over-all social
insurance system.
Regraded Unclassified
152
- 19 -
Secondly, that combined social insurance system would
include, as 8. very important part, health insurance; and
health insurance, as you know, is not looked upon yet with
favor by the American Medical Association, or at least the
hierarchy - the political hierarchy thereof.
So if the President decides to send up two programs
wrapped together in a package, as you put it, he ought to
understand that Social Security is not something that
Congress is going to be converted to and enact over night.
I think it will be a long-drawn-out discussion, not to
say battle, before we get anything by way of an expanded
Social Security program.
I would like to feel very optimistic because it is
close to my heart, but as I see the realities, it is some-
thing that we won't get over night. So the net result
will probably be that you will not get more than you ask
for - three billion dollars - and there will be an extended
discussion of Social Security lasting over until next year
sometime, probably.
Now, my main concern - and I erdorse what Governor
McNutt says - is that we present the program in such 8
way that it is made clear that Social Security is some-
thing that is desirable in and of itself.
True, it has these other advantages that I have pointed
out to various people in the room, of anti-inflation,
and helps in the financing of the war costs, and because
it has those other things, it should be all the nor e de-
sirable.
But the enemies of Social Security have always seized
upon any discussion of anti-inflation or financing of
the war, to discredit a Social Security program which is
sound in and of itself.
And that is the thing that worries us, that they dis-
tort your arguments in such a way as to throw doubt upon
your bona fides in presenting Social Security in connec-
tion with a tax program.
Regraded Unclassified
153
- 20 -
H.M.JR: I can't argue with you. I think everything
that you say is right, and I am perfectly willing to
point out the difficulties to the President. But if
we went up with some kind of a tax bill and Doughton
said the usual thing to me, "Which do you want?" and
I said, "I want the tax bill first,' the chances are you
will not get a Social Security bill or even get it con-
sidered during Mr. Roosevelt's third term.
Now, again weighing the fact as between placing the
burden on people below three thousand, which we would have
to - the increased burden - if we presented an all around
tax bill, and taking this burden in B. form which they would
get benefits from, we here came to this conclusion.
Now, maybe I am being a little starry-eyed about it,
and I am perfectly willing to be accused of being a little
starry-eyed about it, but the final decision will have
to be Mr. Roosevelt's. But left to me, myself, I would
much rather go down and be defeated on this kind of a
program which I can honestly defend, and would rather
enjoy being 8. part of presenting - I would like once to
present something that I didn t have to trim my sails
on - and not something just because it was something you
could get through. He has to decide that.
But I personally by the end of this term would like
to present something that has got a good outlook and has
all these points, as I say; and I would rather feel it
was sort of an honor to be defeated on a thing like this.
But again, Mr. Roosevelt will have, naturally, the final
say, and I am sure that there will be plenty of people
who will point out the difficulties on the Hill, and he
is going to have to weigh them all.
When he gets through he will say, "I like your
package, or, "I don't like your package," but I can
honestly present it to him and point out all the things
you say. Paul will be there. And after all, the people
here are - there are three people here from the White
House who have all got minds of their own and who can
present to Mr. Roosevelt the difficulties if we should
Regraded Unclassified
154
- 21 -
overlook any. But having weighed all the difficulties, I
still think that we in the Treasury should present this
package to him.
MR. HINRICHS: Mr. Secretary, there might have been
an alternative way of putting this up, which I suppose
should be considered. I wondered why you thought this was
the better way.
You might have put up your original program with any
increase in Social Security taxes as something which might
be deducted when, as, and if this proposal - if Social
Security does not go through. It would show the need for
additional funds which would then probably be supplied
under the sales tax formula as the most likely substitute.
Now, was this the alternative of your schedule "W,"
with the deduction of any increase in Social Security
taxes, and if so, why is this politically the strongest
formula?
H.M.JR: Paul, do you want to answer that or not?
MR. PAUL: I am sorry, I didn't get it.
H.M.JR: Do you mind stating it again?
MR. HINRICHS: Did you consider setting up schedule
"W" and then making provision that any increase in Social
Security taxes should be deductible from the amounts due
under schedule "W"?
MR. PAUL: That has been one of the alternatives we
have had in mind.
MR. HINRICHS: Why does this seem politically stronger?
Because if Social Security falls by the wayside under this
bill, it would seem that you might be very likely to get
ten percent sales tax with certain basic exemptions as the
alternative of your straight line; and the sales tax of
ten percent and a Social Security tax are two entirely
different things from the labor point of view.
Regraded Unclassified
155
- 22 -
MR. PAUL: That is right, but there is the question
largely of strategy; if you present this thing and some
alternative you weaken the intensity with which you are
presenting this thing. You are apt to push Social Security
off the map from the strategical standpoint.
MR. HINRICHS: If the President were presenting a
Social Security program, would it in fact appear as an
alternative? That is, the basic law would still enact
your schedule "W."
MR. PAUL: You would be essentially saying to Congress,
"Let's impose additional income taxes. When, as, and if
Social Security comes, we will give credit for it." I think
a lot of people would feel - & lot of people in the low
brackets would then feel that they were being given the
run-around; and ultimately they would get Social Security,
and in the meantime get income taxes without any benefits.
MR. MAGGS: Might that not generate great emphasis
on the Congress to enact that?
MR. PAUL: On the other hand, you can look at it
from the standpoint of the war effort. If these increased
taxes go through and Social Security is delayed, a lot of
people in the war factories are going to resent it. They
are going to say, "This is just another postponement of
giving us the benefits; in the meantime we got soaked with
the taxes."
MR. HINRICHS: If Social Security falls by the wayside,
would you feel that it was possible to go in with schedule
"W" or with the proposals - would there be some new tax,
probably sales tax, to come in to fill the gap?
MR. PAUL: If you were absolutely knocked out cold on
Social Security, you would have to submit some alternative
tax program, whatever it might be, with Social Security
credits, or some other form of credits, something designed
to ease the impact in the hardship cases in the lower
brackets.
Regraded Unclassified
156
- 23 -
The point I think the Secretary had in mind was not
to cross that bridge until we came to it. You would
certainly have to be ready for any kind of a contingency,
but you wouldn't have to be quite 80 ready as if you
discussed the whole matter with Congressional leaders
and had gotten some agreement on sort of a joint consider-
ation. Ultimately the whole thing would be passed at
once or it wouldn't be. If it were, you wouldn't have to
provide for a credit. If it isn't passed at once you
would probably have to have something of the anti-inflationary
effect, some recognition of future Social Security pay-roll
taxes.
MR. LUBIN: But, as & matter of fact, you are gambling
with three billion dollars. In other words, if you get
Social Security you are going to get three billion more
in income. If you don't get it, you have lost that amount.
Whereas, under your other system--
MR. PAUL: It is not very likely that you would get
that three billion dollars in this schedule without Social
Security - without some change in the lower brackets.
Congress would never enact just the income tax phase
of this schedule because it would feel that the lower
brackets were not being sufficiently taxed. There could -
and that income tax schedule without the Social Security
aspect of it would be subject to some criticism on the
anti-inflationary point; it wouldn't be adequate in the
place where the money is.
H.M.JR: Mr. Wickard?
MR. WICKARD: I don't believe I want to express myself.
That has quite a little appeal to me. I think we positively
ought to do something to drain off some of the excess
purchasing power, and I think it is sort of a matter of
strategy involved, rather than the objective strategy in
point of what would be the best from the standpoint of
Social Security as well as how we get Congress to react
to the whole tax program.
Regraded Unclassified
157
- 24 -
H.M.JR: You know, in the Wagner Bill they include
all farmers.
MR. WICKARD: I wanted to ask that question as to
how they get at the farmers.
MR. ALTMEYER: Under the Wagner Bill self-employed
are included, as well as the employed, for old-age retire-
ment, for death, for permanent disability, for medical
care of all kinds, and the self-employed would pay seven
percent for that part of Social Security. They wouldn't
be insured for unemployment because there wouldn't be any
employer-employee relationship, and they wouldn't be insured
for temporary wage loss due to sickness, because you couldn't
establish what the wage loss was. But they would be
insured for all the rest of the program.
MR. WICKARD: Who are the self-employed? Are tenants
and share-croppers self-employed?
MR. ALTMEYER: You answer that one. (Laughter)
MR. WICKARD: Would there be 8 pay-roll deduction for
wage hands, for instance?
MR. ALTMEYER: Yes, there would be, to be collected
from the employer. There would be the usual deduction,
fifty-fifty from the farm hand and from the employer.
The employer himself would also be insured for those
phases that I just mentioned.
MR. WICKARD: From that standpoint I think that there
is something to be gained if we can get acceptance, but
you know how they - the bloc - reacts to those things
sometimes.
I always have the feeling that there ought to be
more definitely a Social Security benefit for low-income
people in agriculture. That is my own personal view; and
if we don't run against - it is a matter of strategy - if
we don't run into 8. bloc that insists that this is extend-
ing a lot of things they don't want to be extended to
farm labor, perhaps it would be all right.
Regraded Unclassified
158
- 25 -
H.M.JR: Mr. Colm, do you want to say something?
MR. COLM: No, thank you.
H.M.JR: Does your silence mean approval?
MR. COLM: It doesn't mean anything, Mr. Secretary.
(Laughter)
H.M.JR: How about SEC?
MR. PURCELL: I haven't any particular suggestions
to make, Mr. Secretary. I think, personally, the idea of
Social Security tax increases appeals to me because, as
has been pointed out, it serves best to cushion the post-
war aspects of the economy. I think that goes without
saying.
I think this last suggestion that was made as to an
alternative presentation, presenting your schedule "W" and
providing for offsets for any increases in the Social
Security program, might have an additional advantage to
those pointed out from what you originally said, in that
you would have the labor groups behind it, which I should
think While it was in committee might be pressing to see
to it that those increased Social Security schedules were
adopted in order to avoid a more attractive tax base for
the lower income groups. However, there may be mechanical
and political considerations which outweigh that.
MR. GILBERT: Mr. Secretary, is it the correct under-
standing that part of this increase is the tax on the
employer?
MR. PAUL: That is right. That is the gross tax.
MR. GILBERT: I wonder if it is advisable to impose
that increase at the present time in view of the fact
that a possible price adjustment will be necessary and the
fact that a good bit of it comes out of income taxes anyway.
MR. PAUL: It would be deductible for purposes of
five would be substantially increased for the net impact.
the corporate income tax, which would mean that the billion
Regraded Unclassified
159
- 26 -
MR. GILBERT: Would the net impact be so low that by
the time you start to readjust prices, which you would
have to do in a good many cases, the net inflationary
effect might be greater and withdraw the purchasing power
you would get - I mean, in view of the roughness with
which such calculations must be made?
MR. PAUL: If you could tell us more about that - I
shouldn't think that that particular tax would occasion
too great a readjustment of prices.
MR. GILBERT: I don't know the answer, but I would
suspect that you would get an awful lot of applications
for price increases.
MR. LUBIN: In all your fixed-fee contracts - I refer
to General Greenbaum's information on that - I imagine
that it automatically means an increase in the cost to
the Government - this extra tax upon the employer -
wouldn't it?
GEN: GREENBAUM: On contracts thereafter made, yes,
but not on existing contracts.
MR. PAUL: On the existing contracts it might enter
into renegotiation?
GEN. GREENBAUM: Indirectly by allowing 8 credit on
renegotiation for existing contracts, yes.
MR. LUBIN: I am thinking of fixed-fee contracts.
GEN. GREENBAUM: You mean cost-plus?
MR. LUBIN: Those would all automatically be stepped
up so it would wash out some of the increased taxes.
MR. PAUL: Of course you would have to take that
corporate burden, too, in relation to the other income tax -
increased corporate burden.
MR. LUBIN: This isn't a corporate burden. I mean,
the Government pays all the costs and gives the employer
a fixed fee for his services.
Regraded Unclassified
160
- 27 -
MR. PAUL: It does in those particular contracts,
but this tax would be spread among all the corporations,
and you couldn't - you would have to relate your total
increased corporate burden in places where there weren't
Government contracts. However, the corporate figures
are such now that one doesn't have to worry too much
except at the angle from which you are talking.
H.M.JR: Is somebody here from the Department of
Justice?
MR. KEY: Yes.
H.M.JR: Would you care to say anything?
MR. KEY: No, I wouldn't care to say anything.
H.M.JR: How about OPA - are they represented? I
don't see Dick Gilbert here today.
MR. PAUL: He was coming.
H.M.JR: Mr. Kuznets from WPB?
MR. KUZNETS: I have no comments to make.
H.M.JR: How about Mr. Eccles?
MR. ECCLES: I was late and missed the first part
of the discussion on this. The whole idea is somewhat
new. I haven't had a chance to consider it either from
a technical standpoint or from a standpoint of the psy-
chology of it.
I might say - rather extemporaneously, without much
thought - it is my impression however that this, to
include this Social Security with the general tax program,
is likely to jeopardize the entire tax program, certainly
delay it - delay getting an enactment. And whatever finally
comes out of it might well be a hodgepodge of compromises.
I would like to see a real Social Security program gotten
through, because I think it has - it is very desirable
Regraded Unclassified
161
- 28 -
from an economic and a social standpoint, looking to the
post-war world. I would like to see it gotten through,
if possible, on its own merits, not as a part of the tax
picture. Maybe that isn't possible.
I am conscious of the opposition to an increased
income tax on the lower income group, that is, those
getting an income up to three thousand dollars; and I
agree that you won't get a sufficient tax to get you
the eight billion that is proposed from the group that you
should get it from, except if one of two things is accept-
able: if Congress is willing to do, of course, the
Social Security program, which, in effect, means a form
of benefit that they are getting. I think the other
would have to come in a post-war credit - either one or
the other.
I believe that you may find that the latter would
be more closely related to the tax program in the minds
of Congressmen and more likely acceptable than would the
Social Security form of benefit.
There is this feature about Social Security that
Mr. Altmeyer raised, these various controversial aspects
of the problem aside from its revenue-producing feature,
that might well delay, as I say, the whole tax program.
When you begin to take away from the States what they now
have, you are going to get into a lot of difficulties and
a lot of delays. I may be entirely wrong.
As I said, those are just my observations as I have
listened here since I came into the room. The idea was
entirely new. Upon further study and discussion and
understanding of it, I may have some different views. I
would like to think of it further, and, if I may, submit
a memorandum.
H.M.JR: I would appreciate it.
we would be very pleased to get it, if we could get it
If anybody else would like to submit 8. memorandum,
not later than Monday.
Regraded Unclassified
162
- 29 -
Does anybody have any afterthoughts?
I thank you for coming.
163
Chart I
INDIVIDUAL INCOME TAX
Effective Rates for Married Person without Dependents
PERCENT
PERCENT
90
90
80
80
70
70
60
60
Proposal (W)
$8.7 Billions Additional
50
50
*
Present Law
40
40
30
30
20
Proposal ("M,")"
20
10
10
0
0
.6
I
2
4
6
10
20
40
60
100
200
400
600
1000
2000
4000
NET INCOME IN THOUSANDS OF DOLLARS
*Includes Net Victory Tax
Exemptions 1500-11000-#250 and net Victory Tax
"Present exemptions and net Victory Tax integrated
The of - - - - -
8-440
-
Regraded Unclassified
164
Chart II
COMBINED INDIVIDUAL INCOME AND EMPLOYEE PAYROLL TAXES
Effective Rates for Married Person with Two Dependents
PERCENT
PERCENT
Net income assumed to be 90% of gross income (wages).
95
95
45
45
40
40
35
35
30
30
New Income Tax Proposal ("M₂")
and 6% Payroll Tax¹
25
25
$8.7 Billions in New Income
Taxes ("W") and 2% Payroll Tax
20
20
15
15
Present Income Tax
10
10
and 2% Payroll Tax
5
5
o
o
o
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
NET INCOME IN DOLLARS
Present exemptions and present net Victory Tax
Exemptions $500-81000-$250 and net Victory Tax
Present exemptions and net Victory Tax integrated.
Regraded Unclassified
165
September 2, 1943
5:47 p.m.
HMJr:
Hello.
Brendon
Bracken:
Henry?
HMJr:
Yes.
B:
How are you?
HMJr:
How do you do?
B:
I'm glad to be in your town again.
HMJr:
Well, it's nice to hear your voice, Brendon.
B:
I thought of coming in to see you tomorrow about
12:00 o'clock if it suits you.
HMJr:
Well, here is my situation. I have asked Mr. Churchill
whether he wouldn't buy a war bond from us.
B:
Yes, he certainly ought to and help you in that way.
HMJr:
And we wanted to take a moving picture of it.
B:
Yeah.
HMJr:
We wanted to do it down at the Navy Gun Plant here in
Washington in front of a big 16" gun.
B:
Henry, I've plenty of time on Saturday. Are you
going to be here on Saturday?
HMJr:
Unfortunately, not.
B:
What's your best time tomorrow?
HMJr:
Well, my - I was going to go away unless Mr. Churchill
was going to do this.
B:
I'm sure he'll do it for you.
HMJr:
Are you all tied up tomorrow?
B:
No, I've got - I've - yeah, I'm tied up, alas, for
lunch, and I've got a few other - some appointments
in the afternoon.
Regraded Unclassified
166
- 2 -
HMJr:
Uh - pending this other, is 10:15 - would that
B:
That will do me all right.
HMJr:
Well, could I leave it this way
B:
If you've got this other thing on
HMJr:
Yes.
B:
leave it like that
HMJr:
Yeah.
B:
and go ahead with that because that's a very
wise and desirable thing to do, but if not let me
know in the morning, and
HMJr:
Yes - let me see - if you don't hear from me again,
I'll look forward to seeing you at 10:15.
B:
That's right.
HMJr:
If Mr. Churchill lets me know he's going to do this,
I'll get in touch with you through the Embassy?
B:
You can get in touch with me - I'm staying at the
Statler Hotel.
HMJr:
Statler?
B:
That's right.
HMJr:
All right.
B:
You'll get me
HMJr:
I'd love to see you.
B:
And I'm looking forward to seeing you.
HMJr:
How long are you going to be in the country?
B:
I'm going away - I'm going away on Sunday.
HMJr:
Oh - well, that's too bad.
B:
But I wouldn't pass through the town without seeing
you.
Regraded Unclassified
167
- 3 -
HMJr:
No.
B:
Or at any rate, talking to you.
HMJr:
Well, I didn't know how to get hold of you.
B:
Yeah.
HMJr:
Well, I'll look forward anyway until tomorrow
morning.
B:
Yeah. All right, Henry.
HMJr:
Thank you.
B:
Righto.
Regraded Unclassified
168
SEP
2
Dear Mr. Smith:
I have requested the Department of Labor to make ap-
plication to you for funds for the purpose of enabling
the Bureau of Labor Statistics to make a survey of the
income, spending, and saving of a sample of about 3500
families during the third quarter of 1943. The Bureau of
Labor Statistics would conduct the survey in urban regions,
and would utilize the services of the Bureau of Home
Economics, Department of Agriculture, in rural areas.
I am writing this letter to urge that the Department
of Labor's application be given favorable consideration,
as the results of the proposed survey are essential to
the Treasury Department.
I trust the funds can be made available promptly
from the President's Emergency Fund. I understand that
the amount needed for this study of the third quarter is
approximately $200,000.
The Treasury Department is constantly confronted with
the necessity of making policy decisions involving many
billions of dollars in which the issue turns largely upon
the distribution of income by income classes, upon recent
changes in the incomes of individuals and family groups,
upon the kinds of things that people in the different in-
come groups are spending their money on, and upon the
amount of savings in different income groups and how these
savings are being held or invested. You will readily
appreciate that the more abundant and the more accurate
the available information of this type, the better will
be our decisions with respect to tax policy and to the
methods of war borrowing.
The issues just described are 80 large and 80 vital
to the welfare of the country that I feel that I would be
doing less than my full duty if I neglected any method of
securing the required information at reasonable expense.
Regraded Unclassified
169
- 2 -
In the present case, it seems to me that the Bureau of
Labor Statistics and the Bureau of Home Economics are
both exceptionally fitted to obtain the information re-
quired and, because of previous work which they have
done in the field, they are in a position to go forward
without delay.
I understand that deficiency funds will shortly be
requested to place this survey on a continuing basis,
securing information for the fourth quarter and succeed-
ing periods. I should like to urge that such deficiency
requests also be given your favorable consideration as
I believe that a continuing survey is definitely needed
for the year-by-year formulation of sound fiscal policy.
Sincerely,
(Wigned) H. Morgenthau. "
Honorable Harold D. Smith
Director, Bureau of the Budget
Executive Offices of the President
Washington, D. C.
Regraded Unclassified
170
SEP 2 1943
My dear Madam Secretary:
I am enclosing a. copy of my letter of this date,
addressed to the Director of the Bureau of the Budget,
urging his favorable consideration of requests to be
submitted by the Department of Labor for funds with which
to conduct a survey of the income, spending, and saving
of a given number of families during the third quarter of
1943 and succeeding periods.
Bush survey, as you know, is essential to the
Treasury Department in the formulation of tax policy
and methods of war borrowing. The Treasury will be
pleased to assist the officials of your Department with
the view of obtaining approval of this important project.
Sincerely,
(Signed) H. Mergenthau, Jr.
Honorable Frances Perkins,
Secretary of Labor,
Washington, D. C.
CRS:je
By musin per a Brown
9/3/43- 1:05
Regraded Unclassified
171
Sept. 2, 1943
Mr. Sullivan
Mr. Paul
Secretary Morgenthau
Please read my press conference on Stam, talk the
matter over, and give me a recommendation as to whether
there is anything the Treasury should do, or whether
there is something cooking in the way of a subpoena
that I do not know about.
As I remember it, Sullivam saw George on this
subject.
In any event, get together and give me a recom-
mendation.
Finished
Regraded Unclassified
172-
25
September 2, 1943
Dear Mr. Stam:
This is to acknowledge your letter of August 31,
1943 to Under Secretary Bell, respecting section 5012
of the Internal Revenue Code.
I gather from your letter that since the material
you requested from the Commissioner of Internal Rev-
enue under date of July 14, 1943 was submitted to you
on August 30, 1943 through Under Secretary Bell as
Acting Secretary, you feel. that the statute has not
been fully complied with. Inasmuch as the information
which was thus transmitted to you 1s the information
which the Commissioner submitted to me and which he
would have furnished directly to you, the difficulty
must arise merely from the manner of its transmission
to you.
We believe that the manner of transmission adopted
was, as a matter of procedure, better coordinated
with the constitutional duties and function of the
President of the United States as Chief Executive
with respect to the submission of material to the
Congress on the part of the Executive Branch of the
Government. You are, of course, aware of the messages
of previous Presidents, the opinions of the Attorney
General, the reports of Congressional Committees, the
Court decisions, and the views of the text writers in
this field, clearly establishing the duty of the
President to determine whether the divulgence of such
material is contrary to the public interest. In the
exercise of such duty the President may act through
the heads of the Executive Departments.
Regraded Unclassified
173
- 2 -
Since it is the material and its actual ultimate
transmission which are important, rather than the
mechanics of such transmission, we did not believe
that the manner of transmission would meet with any
objection. In view, however, of your concern with
the mechanics of transmission, I have directed the
Commissioner of Internal Revenue to send directly
to you the information you have requested, so that
there will be no controversy whatsoever with respect
to this section.
I agree with you that all our efforts should
be directed to the difficult fiscal problems that
face us and in furtherance of our desire to cooperate
with the Joint Committee to the fullest extent the
Commissioner and I shall be happy to continue to
supply all appropriate information desired by the
Committee.
Sincerely yours,
(Signed) II. Morgentham, Jr.
Secretary of the Treasury
Colin F. Stam, Esq.
Chief of Staff
Joint Committee on Internal
Revenue Taxation
Washington, D. C.
SSSurrey:hdr
9-2-43
Regraded Unclassified
HOUSE
COLIN F. STAM
ASSORT L DOUGHTIN, BL c.
CHIEF or STAPP
-
F.
VICE DIARMAN
G.D. CHESTED
1
- HL CULLIDA, ML v.
ARRY, Detr or STATE
- COOPER, TENA
ALLEN T. TREADMAY, MARR.
MAROLD KNITSON, MINN
Congress of the United States
JOINT COMMITTEE ON INTERNAL REVENUE TAXATION
Belashington
August 31, 1943.
Honorable Daniel W. Bell,
Treasury Department,
Washington, D. C.
Dear Dan:
Under date of July 14, 1943, a request was made of the
Commissioner of Internal Revenue for information and suggestions
relating to raising additional revenue as per the attached request.
This request was made in accordance with section 5012 of the Inter-
nal Revenue Code which provides as follows:
"ADDITIONAL POWERS TO OBTAIN DATA.
(a) The Joint Committee on Internal Revenue Taxation or the
Chief of Staff of such Joint Committee, upon approval of the Chair-
man or Vice Chairman, is authorized to secure directly from the
Bureau of Internal Revenue (including the Assistant General Counsel
for the Bureau of Internal Revenue), or directly from any executive
department, board, bureau, agency, independent establishment or in-
strumentality of the Government, information, suggestions, data, ea-
timates, and statistics, for the purpose of making investigations,
reports and studies relating to internal revenue taxation.
(b) The Bureau of Internal Revenue (including the Assistant
General Counsel for the Bureau of Internal Revenue), executive de-
artments, boards, bureaus, agencies, independent establishments
nd instrumentalities are authorized and directed to furnish such
formation, suggestions, data, estimates, and statistics directly
the Joint Committee on Internal Revenue Taxation or to the Chief
Staff of such Joint Committee, upon request made pursuant to this
tion."
is clear that the statute requires the material requested of the
desioner of Internal Reverue to be furnished directly by him to the
lint Committee on Internal Revenue Taxation or to the Chief of Staff as
ent of that Committee. We have not received any material from the
desioner of Internal Revenue pursuant to this request. The material
Regraded Unclassified
le Daniel W. Bell,
2
tted in your letter of August 30, 1943 does not in any sense
constitute a compliance with this request. It consists merely of
copies of some suggestions submitted to Mr. Paul by the Commissioner.
The copies do not even show the date on which the material was trans-
altted to the Treasury.
The Commissioner of Internal Revenue is ready and willing
to comply with the provisions of the statute and transmit the material
requested to us directly in accordance with the law. There is, of course,
no objection to the Commissioner of Internal Revenue furnishing copies of
this material to the Treasury, but the statute is not complied with un-
less the material is furnished directly to the staff by the Commissioner
of Internal Revenue and not by the Treasury. Can we count on your co-
operation to see that the provisions of the law are complied with in
this respect?
The matter is so important that I am bringing it to your
personal attention as I feel it would be very unfortunate to have a
controversy over this matter before the Joint Committee on Internal
Revenue Taxation at this time, unless it is absolutely necessary.
Our attention and the attention of the Congress should be directed
more to the urgent needs for revenue than to any side issue contro-
versy such as this. Unless the statute is complied with in this
respect, it will be necessary to present the matter to the full
Joint Committee on Internal Revenue Taxation as soon as the Congress
convenes. The present decision of the Treasury leaves me no alterna-
Live.
Sincerely yours,
Golin 71.8tam
Colin F. Stam,
Chief of Staff.
FS-ic
Regraded Unclassified
COPY
REQUEST FOR DATA AND INFORMATION
CONGRESS OF THE UNITED STATES
Washington, D. c.
July 14
- 1943
The Joint Committee on Internal Revenue Taxation
To
Honorable Guy T. Helvering, Commissioner of Internal Revenue,
Washington, D. C.
GREETING:
Section 5012 of the Internal Revenue Code provides as follows:
"ADDITIONAL POWERS TO OBTAIN DATA.
(a) The Joint Committee on Internal Revenue Taxation or the Chief of Staff of such Joint
Committee, upon approval of the Chairman or Vice Chairman, is authorized to secure directly from
the Bureau of Internal Revenue (including the Assistant General Counsel for the Bureau of Internal
Revenue), or directly from any executive department, board, bureau, agency, independent establish-
ment or instrumentality of the Government, information, suggestions, data, estimates, and statistics,
for tbs purpose of making investigations, reports and studies relating to internal revenue taxation.
(6) The Bureau of Internal Revenue (including the Assistant General Counsel for the Bureau
of Internal Revenue), executive departments, boards, bureaus, agencies, independent establish-
menta *ed instrumentalities are authorized and directed to furnish such information, suggestions,
data
Imates, and statistics directly to the Joint Committee on Internal Revenue Taxation or to
the
Chet
of Staff of such Joint Committee, upon request made pursuant to this section."
virtue of the authority vested in me under the above-quoted section of law, I hereby re-
the following information, suggestions, data, estimates, and statistics be furnished di-
me at Room 1336, New House Office Building, within 16 days from the date of this
Alternative suggestions of your staff for raising additional revenue or
inflation, with accompanying data and statistics.
source of this mterial will be kept
dal if you so desire. It is intended
d for study purposes by the staff.
(Signed)
Colin F. Stam
Chief of Staff.
WALTER F. GEORGE
Chairman.
Date:
July 14. 1943.
a c. PRINTING arrica
Regraded Unclassified
177.
25
September 2, 1943
My dear Mr. Helvering:
I believe it desirable to have a clear understand-
Ing as to the procedure to be followed with respect to
requests by the Joint Committee on Internal Revenue
Taxation or the Chief of Staff of such Committee under
section 5012 of the Internal Revenue Code. Under the
Constitution the duties and function of the President
require that he, or the head of an Executive Depart-
ment acting for him, determine whether the divulgence
of any material 80 requested would be contrary to the
public interest. In order that T6 act in conformity
with this constitutional requirement, it will be nec-
essary that any material should first be sent to me
80 that I can make the necessary determination for the
President. Unless I determine, in such capacity, that
to divulge such material would be contrary to the
public interest I shall promptly return the material
to you so that you may send it to the Joint Committee
or the Chief of Staff. This procedure, I believe,
need not be followed with respect to requests for
statistical information that in your opinion do not
raise any question AS to the propriety of its divul-
gence.
I am sending a similar letter to the Assistant
General Counsel for the Bureau of Internal evenue.
Sincerely yours,
(Signed) I. Morgenthon, Jr.
Secretary of the Treasury
Honorable Guy T. Helvering
Commissioner of Internal Revenue
Washington, D. C.
SSSurrey:hdr
9-2-43
Regraded Unclassified
178
25
September 2, 1943
Dear Mr. Wenchel:
I believe it desirable to have & clear understand-
ing as to the procedure to be followed with respect to
requests by the Joint Committee on Internal Revenue
Taxation or the Chief of Staff of such Committee under
section 5012 of the Internal Revenue Code. Under the
Constitution the duties and function of the President
require that he, or the head of an Executive Depart-
ment acting for him, determine whether the divulgence
of any material 80 requested would be contrary to the
public interest. In order that we act in conformity
with this constitutional requirement, it will be nec-
essary that any material you desire to submit in
response to such a request should first be sent to me
80 that I can make the necessary determination for the
President. Unless I determine, in such capacity, that
to divulge such material would be contrary to the
public interest I shall promptly return the material
to you 80 that you may send it to the Joint Committee
or the Chief of Staff. This procedure, I believe,
need not be followed with respect to requests for
statistical information that in your opinion do not
raise any question as to the propriety of its divul-
gence.
I am sending 8 similar letter to the Commissioner
of Internal Revenue.
Sincerely yours,
(Signed) H. Margenthan, Jr.
Secretary of the Treasury
J. P. Menchel, Esq.
Assistant General Counsel
Bureau of Internal Revenue
Washington, D. C.
SSSurrey:hdr
9-2-43
Regraded Unclassified
179
AMHERST COLLEGE
AMHERST MASSACHUSETTS
OFFICE OF THE PRESIDENT
Sentember :, 1943
My derr Yr. Mecretary:
I have been very much touched to sureive your note
of August 27th regording Peter It is
should cterictically thoughtful of you that in the
-idst of your nany responsibilities you should
take the time to send this note of nooreciation
to the College.
The College his been to nake every contribu-
tion within its Dover to the national effort. Te
have been reg he my to make Lt wordble for Peter
to be of service to the Trenciury. I no- hor much
be her enjoyed his vor: there en what + deeu devo-
tion he her to you personally. I therefore felt &
regulier reluctance to nsk hin to return to his
duties here. Peter how ver is reinarily r tercher. -n
the Army is insisting on our secenting 1407°C end more
soldiers for training. The merticular unit in which
Peter IF to he mitroed in made TO of atcked sen from
the entire /rmy of the United states and we must -Ive
then the very best ability thich we have.
Main my werm sonreciation to you for weing it
vesible for him to take 110 his duties here.
Corditlly yours,
Hosorrble lienry Norgenthou, Jr.,
see etery 01" the Treasury,
Nochinaton, D.O.
Regraded Unclassified
180
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Press Service
Thursday, September 2, 1943.
No. 38-39
President Roosevelt, broadcasting shortly after 9:40 PM,
EST, September 8, will officially launch the Third War Loon
drive. He is expected to call for B. rededication of America
to the wer aims of the United Nations and for maximum secri-
fice to hasten an early and decisive victory.
The broadcast, which will be carried by all four net-
works, 15 expected to reach 70 million people, and will
"stop the show" in hundreds of theaters across the country.
Secretary of the Tressury, Henry Morgenthau, Jr., who
is directing the drive -- the lergest money raising campaign
in the history of the world -- will introduce the President.
The broadcast will come as a climax to an hour's pro-
gram, the first forty-five minutes of which will originate
in California.
From Hollywood, beginning at 9 PM, EWT, & program spon-
sored by the War Activities Committee, will bring the voices
of Bing Crosby, Gary Cooper, Burns and Allen, Dinah Shore,
Edgar Bergen and Charlie McCerthy, Humphrey Bogart, Robert
Murphy, Ronald Colman and Akim Tamiroff. Kay Kyser's Bend
Young, Don Ameche, Jimmy Durante, Charles Boyer, George
will supply the musical setting.
Using as the theme the slogan of the Third war Loan,
"Back the Attack!", the stars will present 8 series of
dramatic sketches, recalling the highlights of the wer to
date, from the first numbing shock of Pearl Harbor, through
to powerful offense. In anticipation of an imminent invasion the
the slow shift from peace to war, from struggling defense
of the European continent and the relentless pursuit of
Japanese from the South Pacific, the Hollywood
program will aggressors also carry B gayer note, reflecting the battle
songs of the services.
Regraded Unclassified
181
- 2 -
Government officials here estimate that approximately
17,500,000 of the country's 28,838,000 radio families, with
8 possible listening sudience of more than 70,000,000 per-
sons, will be tuned to the broadcast. Virtually all of the
567 cutlets of the four major networks 88 well 88 most of
the 324 independent radio stations will carry the feature.
Hundreds of motion picture theaters have signified
their intention to halt their performance and tune into the
President's message.
From Hollywood, the program will switch to Washington
where James Cagney, as president of the Screen Actors Guild,
will place the Hollywood Bond Cavalcade of top-flight stars
and all the resources of the motion picture industry at the
disposal of Secretary Morgenthau. After a brief acknowledg-
ment, the Secretary will introduce President Roosevelt who
is expected to speak for approximately 10 minutes.
With the President and the Secretary will be members of
the "cavelcade", including: Groer Garson, Judy Garland,
Fred Astaire, Lucille Ball, Olivia DeHaviland, Kethryn
Grayson, Walter Pidgeon, Harpo Marx, Jose Iturbi, Dick
Powell, Betty Hutton and Mickey Rooney.
From Washington, the film group will proceed for War
Bond shows and domonstrations to Philadelphia, September 9;
Boston, September 10; New York City, September 11; Pittsburgh,
September 12; Cleveland, September 13; Detroit, September 14;
Cincinnati, September 15; Chicago, Suptember 16; Minnespolis,
September 17; St. Louis, September 18; New Orleans, September
19; Dallas, September 20; San Francisco, September 23 and
Los Angeles, September 24.
grams, with an estimated listening pudience of 600,000,000
Throughout this poriod, 215 of the bigtime notwork pro-
persons, are to present the message of the Third War Loan -
the purchese of at least one $100 war savings bond in add1-
tion to present commitments.
More than 800 local programs have been built Fround
high-ranking Army, Navy and Air Force officers, while spo- com-
mentators and men on the actual battlefronts to report
cial short-wave pickups will enable military leadors, to
the American people on the progress of the war.
In addition to the screen personalities on the Cavel-
cade tour, there will be other stars touring somo sixty
Regraded Unclassified
182
- 3 -
cities as an "Airmada of War Veterans." From Los Angeles,
Dallas, Chicago, Atlanta and New York, Army and Navy trans-
port planes will l£ ave September 9, carrying groups of Army,
Navy, Marine Corps, Coast Guard and Merchant Marine returned
veterans, each group accompanied by a Hollywood star who
will act F.S master or mistress of ceremonies at Bond rallies
inspired by the young war heroes.
-o00-
Regraded Unclassified
183
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Press Service
Thursday, September 2, 1943.
No. 38-39
President Roosevelt, broadcasting from the White House
shortly after 9:40 PM, EWT, September 8, will officially
Isunch the Third War Loan drive. lie is expected to call for
8 rededication of America to the war sims of the United
Nations and for maximum sacrifice to hasten an early and de-
cisive victory.
The broadcast, which will be carried by all four net-
works, is expected to reach 70 million people, and will
"stop the show" in hundreds of theaters across the country.
Secretary of the Treasury, Henry Morgenthau, Jr., who
is directing the drive -- the largest money raising campaign
in the history of the world -- will introduce the President.
The White lives broadcast will come as B. climax to en
hour's program, the first forty-five minutes of which will
originate in Colifornia.
From Hollywood, beginning at 9 PM, EWT, 8 program spon-
sored by the War Activities Committee, will bring the voices
of Bing Crosby, Gary Cooper, Burns and Allen, Dinah Shore,
Edgar Bergen and Charlie McCarthy, Humphrey Bogart, Robert
Young, Don Ameche, Jimmy Durante, Charles Boyer, Goorge
Murphy, Ronald Colman and Akim Tamiroff. Kay Kyser's Band
will supply the musical setting.
Using 88 the theme the slogan of the Third Mar Loan,
"Back the Attack!", the stars will present B. series of
drematic sketches, recalling the highlights of the war to
date, from the first numbing shock of Pearl Harbor, through
the slow shift from peace to war, from struggling defense
to powerful offense, In anticipation of an imminent inve-
sion of the European continent and the relentless pursuit
of the Japanese aggressors from the South Pacific, the
Hollywood program will also carry & gayer note, reflecting
the battle songa of the services.
Regraded Unclassified
184
- 2 -
Government officials here estimate that approximately
17,500,000 of the country's 28,838,000 radio families, with
e possible listening audience of more than 70,000,000 per-
sons, will be tuned to the broadcast. Virtually all of the
567 outlets of the four major networks as well as most of
the 324 independent radio stations will carry the feature.
Hundreds of motion picture theaters have signified
their intention to halt their performance and tune into the
President's message.
From Hollywood, the program will switch quickly to the
White House where James Cagney, as president of the Screen
Actors Guild, will place the Hollywood Bond Cavalcade of
top-flight stars and All the resources of the Motion Picture
Industry it the disposal of Secretary Morgenthau. After B
brief scknowledgment, the Secretary will introduce President
Roosevelt who is expected to speak for approximately 10
minutes.
With the President and the Secretary
I
will be members of the "cavalcade", including: Greer Garson,
Judy Garland, Fred Astaire, Lucille BAll, Olivia DeHaviland,
Kathryn Grayson, Walter Pidgeon, Harpo Marx, Jose Iturbi,
Dick Powell, Betty Hutton and Mickey Rooney.
From Washington, the film group proceeds for Ter Bond
shows and demonstrations to Philadelphia, September 9;
Boston, September 10; New York City, September 11; Pittsburgh,
Cincinnati, September 15; Chicago, September 16; Minnespolis,
September 12; Cleveland, September 13; Detroit, September 14;
September 17; St. Louis, September 18; New Orleans, September
19; Dallas, September 20; San Francisco, September 23 and
Los Angeles, September 24.
Throughout this period, 215 of the bigtime network pro-
grams with an estimated listening audience of 600,000,000
persons the purchase of at least one $100 war savings bond in addi-
are to present the message of the Third War Loan -
tion to present commitments.
More than 800 local programs have been built around
high-ranking Army, Navy and Air Force officers, while spe- com-
mentators and men on the actual battlefronts to report
cial short-wave pickups will enable military leaders, to
the American people on the progress of the war.
In addition to the screen personalities on the Caval-
cade tour, there will be other stars touring some sixty
Regraded Unclassified
185
- 3 -
cities as an "Airmada of War Veterans. " From Los Angeles,
Dallas, Chicago, Atlanta and New York, Army and Navy trans-
port planes will l£ ave September 9, carrying groups of Army,
Navy, Marine Corps, Coast Guard and Merchant Marine returned
veterans, each group accompanied by a Hollywood star who
will act as master or mistress of coremonies at Bond rallios
inspired by the young war heroes.
-o00-
Regraded Unclassified
188-
THE SECRETARY OF THE NAVY
WASHINGTON
SCC 2 I:
Sentember 2, 1943
Dear Henry:
In response to your letter of August 24, regarding
Navy cooperation with the Third War Loan Drive, I sent
out the following dispatch, dated August 26, to the
Chiefs of all Bureaus, the Commandants of the Marine
Corps and Coast Guard, the Commandants of all Naval Dis-
tricts and the Commanding Officers of all Shore Stations
in Continental United States:
"It is desired that fullest cooperation
be given to War Finance Division,
Treasury Department, in Third War Loan
Drive. Granting of requests for person-
nel and material is authorized whenever
feasible."
I feel sure that this dispatch will insure the kind
of cooperation you are asking for in connection with
your campaign.
Under your able leadership I am confident the accom-
plishment of this task of raising fifteen willion dollars
1s a foregone conclusion. You have, as always, my
heartiest cooperation and deep respect.
Sincerely yours,
Feankshnor
Honorable Henry Morgenthau,Jr.
The Secretary of the Treasury,
Washington
Regraded Unclassified
187
Call
TREASURY DEPARTMENT
allie
INTER OFFICE COMMUNICATION
Marganthan
DATE
Mrs. Klotz
September 2,
194/=/4= 142
TO:
FROM: Harriet Elliott 112.
Secretary Morgenthau called me this morning and asked
me to send him some suggestions for speeches, based on my trip.
This is a hurriedly thrown together statement, which may be too
long, but I hope it has some ideas in it.
Please read it, and if I have not made my new approach
on the Sacrifice Theme clear, please call me and let me talk to
you about this before you give it to the Secretary. I have been
trying to get this idea over since I came back, but without success.
Regraded Unclassified
188
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO)
Secretary Morgenthau
September 2, 1943
FROM: Harriet Elliott
My trip convinced me that we have excellent leadership in
most of the states and that they are facing this responsibility
with a grim determination to see it through. Anything that I
suggest in this outline does not mean that the general situation
over the country is not good. There was very little criticism
of our plans and programs and materials. A recent survey brought
favorable reports on posters, newspaper advertisements and radio
programs.
LOCAL RESPONSIBILITY
In my meetings, I learned that workers liked the emphasis
on local responsibility. They want our suggestions, but they
want to adapt them to local conditions. Everywhere, the old
refrain was sung, "Ne are different in this state." Local pride
may be our great asset. You should play on this string. In every
meeting, I emphasized the fact that since they admitted that they
were different, it was up to them to prove that they were also
better, etc. My work with the women in every state (except
Kentucky and Nevada-these states were not represented at their
regional meetings) convinced me that our state unit is our greatest
asset.
I know that you cannot make 48 state speeches, but I
think it would be to our advantage for you to let the states know
that you are expecting each state to prove its efficiency, etc.
SACRIFICE THEME
The Sacrifice Theme should be slightly changed in emphasis.
Workers and purchasers need "a pat on the back."
The workers need a positive appreciation speech from the
Secretary of the Treasury. I know that you have said thank you in
every speech. Now is the time, I think, to make it the major
theme in a single speech.
I found a slight tendency for both workers and purchasers
to resent the continuous emphasis on the idea that they do not face
sacrifice in a forthright way. I am not suggesting that you stop
making that point, but I am certain that a bang-up good appreciation
speech would bring results.
Regraded Unclassified
189
Sécretary Morgenthau
- 2 -
September 2, 1943
On the face of it, this may sound silly. (of course, you
appreciate all that they are doing.) The fact remains that again
and again in all parts of the country the question was asked,
"Does Secretary Morgenthau know how hard we are working?" I
asked one woman if she was seeking praise and medals, rewards and
compliments. She hit back with, "Soldiers receive medals, praise,
swards, etc. We are told that our work is just as important."
One other group emphasized the point that when soldiers
start on a sacrifice drive, the General praises them to the skies--
It in good technique. They made the point that we have taken too
much for granted, etc.
Purchasers need "a pat on the back" too. In several
places, it was said, "It is so easy for people to do without who
have always had everything they need. When we do without, we are
giving up so much that we have always wanted, etc."
I am convinced that you should make a positive speech to
those making 35000 and less. I know the reason for asking more
from them has been explained, but if you pulled this out and made
e real speech on this one topic, I believe it would do wonders
to spur them on to greater buying. These people are not interested
in the economic analysis of the fact that if those making more than
$5000 invested all their income, it would not pay the bill. We
should remember that these people have always compared their status
with the advantages of the so-called rich. We need to over-come the
age-old attitude of "Let the rich pay the bill."
A down-to-earth, heart-to-heart talk to these people,
lotting them know in no uncertain way that you know full well what
they are being asked to do, what it means in their lives to do
without to win, etc., would have good psychological results.
People in the low-income group like to feel important.
I am not suggesting that our approach up to date on the
need for sacrifice has been wrong, but I am sure that a shift in
emphasis by you would be helpful.
A brief reference to the excellent state planning which
has been done would be a good "shot in the arm" for the workers.
: was more than encouraged with the reports on organization and
local planning.
Regraded Unclassified
190
Secretary Morgenthau
- 3 -
September 2, 1943
Since my return, I have heard from 40 state women leaders,
telling about their increased state work, following up on the
regional conferences. Regardless of heat, vacation months, etc.,
in most of the states the women have held state moetings, state
regional conferences, and some state women report that they have
been in every county building up a better organization and explain-
ing the program. This should be remunerative.
I know that over-confidence is dangerous, but I also
know that nothing is more helpful than the knowledge that work is
appreciated and that success is possible. They want to hear this
from you.
COMBATTING THE DANGER OF LETTING DOWN
You have mentioned, in former speeches, the danger of
"letting down" when victory is assured. This should be emphasized
again and again. In my meetings I emphasized this. I have noticed
that in the reports on state meetings in almost every state, the
women have followed up on that theme in their reports to the states.
My suggestion was:
"If you find yourself thinking the war is nearly
won, that victory is a sure thing, ask yourself this
question: 'Would you be willing for your Government
at this time to order cancelation of the production
of guns, planes, tanks, ships and ambulances?' If
you have a son, brother, husband or friend in the
services, you will answer 'no,' You wouldn't take
a chance for one minute on stopping the flow of arms
and equipment that make our boys proud of fighting
for a country that sends them its best. If you
don't want war production stopped_-you know that the
war is not over, nor nearly over-you can show your
determination to fight until it is by steadily
pushing upward your investment in War Bonds.
"If you haven't told your own boy "goodby" for
overseas, you don't know the whole sadness of war.
You can be thankful for that, but you still can
put yourself in the place of the family who has.
You can make up your mind that you are going to
do everything in your power to help bring this
conflict to an end.
Regraded Unclassified
D
19
min Elight That called shoerstated
the Today Typur
the on Page
105king
Regraded Unclassified
191
Secretary Morgenthau
- 4 -
September 2, 1943
"Money is not far removed from the place of conflict.
It is the first line of defense and offense. We
must have money to bring back all the boys we can--
boys we love and whom others love-to their homes
and farms and offices and schools. What's more, we
must bring them back to a land where they can have
the fun and opportunities they've missed by being
away.
"Our investment in War Bonds is the very best tool
we have to insure that they will come back to a
United States of America that is strong, healthy
and able to prove that it was worth fighting for."
This last may seem to contradict the "pat on the back"
suggestion, but both approaches by you are necessary.
IT'S YOUR GOVERNMENT
Emphasize that the Treasury, the Government, asking for
all this money, is your Treasury and your Government. I think a
great many people are inclined to talk of the Government as though
it had nothing to do with them, as though it were that Government
down in Washington demanding money. This is, of course, ridiculous,
but if we can stress the fact that it is YOUR Government, WE should
be able to make people dig into their pockets more easily.
-
I've heard a lot of talk lately that makes me think there
15 a feeling among some people that patriotism is the "bunk." This
la true of Emparatively intelligent people, too. Somehow, the
thought should be gotten in that the Government is the people, that
it isn't a private concern taking people's money because it wants
to save itself from going bankrupt, but rather that we are all one
big family, and when we buy more bonds and pay more taxes we are
actually helping ourselves,
Some of the people who have this feeling are cold and
cophisticated, usually make a lot of money and spend every cent of
it. They buy $2.00 lunches daily, the highest-priced dresses, etc.
They should be told that if they continue buying these luxuries now,
they will not even have the necessities later.
You might use this as an example:
Regraded Unclassified
192
Secretary Morgenthau
- 5 -
September 2, 1943
"It seems to me that the women of Pennsylvania
in a very fine way symbolize the meaning of the
Third War Loan and its slogan BACK THE ATTACK.
Women from this state have organized into a
"Blue Star Brigade" of workers. The "Blue Star
Brigade" is composed of women each pledged to sell
31000 worth of bonds to back up some man in the
armed forces-husband, brother, son, or just the
boy down the street. A Blue Star serves as the
badge of membership and each member is entitled
to wear one. In addition, she wears a Blue Star
armband and carries a membership card. She also
receives a Blue Star sticker for her automobile.
Special appeals have been made to women's organiza-
tions to form Blue Star Brigades among their own
members, and the response has been very good.
"Other states may, perhaps, have similar Blue Star
'women's armies, and I do not mean to em) hasize
one at the expense of others. It does seem to me,
though, that this organization of women have caught
the full spirit and meaning of the voluntary Tar
Finance program. By their determination to buy
and sell bonds to back up our fighting men, they
are fine examples of the stalwart character of
American womanhood."
Last night, Miss Blake called me from Harrisburg, reporting
that never had she seen such enthusiasm. They held a meeting in
Harrisburg yesterday.
Regraded Unclassified
193
September 2, 1943
Dear Harold:
I have read the enclosures at-
tached to your letter of August 30th
with great interest, and I am re-
turning them to you herewith for your
files.
With kind regards,
Sincerely yours,
(Signed) Henry
Dr. Harold Thomas Hyman,
940 Park Avenue,
New York, New York.
Regraded Unclassified
194
HAROLD THOMAS HYMAN, M.D.
940 PARK AVENUE
NEW YORK CITY
August 30th, 1943.
Yr. Henry Morgenthau
The Secretary of the Treasury
Asshington, D.C.
Dene Henry:
The two letters enclosed will give
you some idea of the difference between the manner in
hich the Amay and the manner in which the Public Health
Service are approaching the problem of five-day treatment.
The typewritten note is from Capt. William Leifer who is
at Fort Brage. The twenty-five patients he spease of
having treated have probably been spread over the course
of a minimum of four and maybe six weeks. The hand-
written letter is from a girl that I persuaded to enter
the Public Health Service, and who is in charge of what is
colled a Rapid Treatment Center in Savannah, Georgia,
With my kindest regards,
Sincerely yours,
#
Marolu Thomes Hyman, M.D.
HTH:CB
Enc.
Regraded Unclassified
1
pet
ili vin.
No The inco with
make you my the strebert
has finally decided to wel the 5 day
Regraded Unclassified
tratiment
.
11.
home
Moreis 7 have sh. - my : He
interest 10%
How. Ishall be interested in Maring
how plu water program.
"My and 6. 112
sing
Regraded Unclassified
and particularly sloppy.
The work in going nicely enough and Daniels dia-
plays great interest in it. He is practically the only one
who does, and it may be partly due to the fact that it is
being done on his service and he has a certain responsibility.
At any rate, I like him and admire him though he has not
made any effort to warm up. Perhaps 'tis better that way.
Off the record (confidential) we have completed treatment on
25 patients, and at present I have 6 more under therapy.
I have not had to interrupt therapy on anyone except one
patient, who developed fever the afternoon of the 5th days
he got a total dose of 950 mg. instead of the intended 1000 mg.
Astonishingly enough his temp. was normal that evening and
remained 30 until his discharge 7 days later. Now, I am
having q.2.h. temps. taken on all patients the 5th day and
in this way may detect elevation before it goes very far;
possibly rections can be minimised, or at least abated in severity,
in this manner.
The first 25 pts. received following dosage: 4 got
800 mg+; 1 got 950 mg=3 18 got 1000 mg.; and, 2 got 1200 mg. The
6 under treatment are receiving; 3 to have 1000 mg. and 3 to have
1200 mg. I have discarded the 800 mg. dose because I fear that
the tests are on the insensitive side. That is, some presumably
seronegative cases are more likely seropositive. However, such
testing should operate in our favor in determination of "cure".
I have been able to follow some cases after therapy and they
definitely tend to become negative sooner than would be the casez
were they subjected to the battery of tests that we employed in
our work.
In so far as reactions are concerned, the following
is a brief resume; of the first 25 patients again: 13 had primary
fever; an additional 3 vomited one or more times the 1st day but
had no fever; 2 had extremely mild almost momentary secondary fever
without toxicoderma; and, 2 had typical secondary fever with
toxicoderma.
Regraded Unclassified
198
SEP 2 1943
Dear R. Poster:
Your letter of August 10, 1943, addressed to
PS. Roosevelt, is being referred to the Procurement
Division of the Treasury Department for appropriate
attention.
The manner in which property of the National
Youth Administration may be disposed of has been
fixed by Legislation, and the Procurement Division
has the responsibility for effecting such disposition.
The disposal of NYA property in Arthurdale, West
Virginia, is under the supervision of Mr. E. G. Dowd
of the Procurement Division Regional Office, 235 West
12th Street, Cincinnati, Chio. Mr. Dowd is being
requested to inform you of the conditions under which
the Hoosier Aircraft Company may sequire certain NYA
properties, after the mandatory requirements of law
governing the priority of disposal have been complied
with.
Sincerely,
(Signed) H. Mergenthan, Jr.
Secretary of the Treasury
ur. John F. Foster
Vice President and General Manager
Hoosier Aircraft Company, Inc.
Arthurdale, West Virginia
CC: Mr. Dowd, Cincinnati
JFHOUGH/mb
9/1/43
Regraded Unclassified
199
SEP 2 1943
Dear Miss Thompsont
I an enclosing a copy of my letter to Mr. John F.
Foster, Vice President and General Manager, Hoosier
Aircraft Company, Inc., Arthurdale, West Virginia.
This letter is written in response to Mr. Foster's
letter of August 10th to Mrs. Roosevelt, which you
forwarded with your note of August 24th.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Visa Malvina C. Thompson,
Secretary to Mrs. Roosevelt,
The White House,
Washington, D. 0.
By Memerizer
JIS1kb
Regraded Unclassified
200
/
THE WHITE HOUSE
WASHINGTON
August 24, 1943.
:-
dear Lr. Secretary:
I an enclosing a letter from
Mr. John G. Foster, Vice President and
General Manager, Hoosier Aircraft Com-
pany, Inc., Arthurdale, West Virginia.
In Mrs. Roosevelt's absence,
: am bringing it to your attention as
it appears to be a matter for the Pro-
curement Division.
Very sincerely yours,
e Thompson
Secretary to
Mrs. Rooseveit.
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Aushington, D. C.
Regraded Unclassified
Washington, D.C. Office
1340 G Street, N. w.
NAtional 0414
Aircraft Company, Inc.
201
DSI
Fab ators of Plastic-Plywood Aircraft and Parts
4221-4222
Plant: ELKHART, INDIANA?
August 10, 1943
0,238
Address reply to:
Arthurdale, West Virginia
Mrs. Eleanor Rousevelt
The White "ouse
Washington, D. C.
Dear Kre. Robsevelt:
Your recent viett to our plants here at Arthurdale inspired
our entire organization. from the jenitor on up through all of
the departments, to D point where each one of us tried to give A
little better then our best to the Job in hand.
Of course, we like many others, have has problems confront
us but hap 11y the r1 1t solution has »lways been found. Our
force is daily betre expended which is resulting in daily in-
we ction.
It has recently been brought to our attention that certain
buildings and equipment formerly used by the National Youth Ad-
intetration here 1n Arthurdale are to be made available to
Government evencies, States, accopizations, etc.
The Arthurible Association :- no for IV's available to us
-1^+ house for are X one- There, ve have repaired,
alated, rn' throws put me cre now occupied by our
vericles en' their families. We cov 115F entry additional houses
- Leye been e'vise' by the Arthoriste Apportation that they will
-:- "." atr houses to is - they herome recent. Mien
hyrong orr terms' DTAT to 110 NP out our own crevs of car-
onter voluter to work manimine on' goisting these properties.
**** ve -ovel to Arthuriste, ye vere given Impliste pos-
-100 of Plants "os. 1 int 3 nnd were to have had possession of
:10ml 50. 0 in approximately 30 PAYS from the signing of our le se.
Flant "o, 2 WSP then being 1903 by the "ettonal Youth Administration
la own certain tunen of machinery, equipment, etc. In B. apirit
700 cerntion ye ve"" vary Act to with 30 Anya for this
slirt "o. 2. Towever, the "ntional Youth Administration 18 still
Regraded Unclassified
202
1.60 2
1.00 Eleanor Roosevlet
August 10, 1943
no White House
Washington, D. c.
occupying this building and we have been unable to ascertain
just when they expect to make this building available to us.
The National Youth Administration have certain machinery
and equipment here in Arthurdale which we could use advantageously
in our production program for the War Effort. If this machinery
and equipment were made available to us, we could augment our per-
sonnel immediately; thereby increasing our payroll by an additional
approximate amount of $6,000 weekly.
It seems to us It would be most economical from the Govern-
ment's standpoint to avoid expensive moving, redistribution, sales,
advertising, and various other costs, which would be necessary
were this machinery and equipment to be moved out of Arthurdele
for use elsewhere.
Certain of this machinery and equipment, If made available
to us, can be put into operation immediately thus effecting a
step-up in our employment and production programme for the War
Effort.
Our purpose in writing you is to ask whether or not you
would inform the proper Government agency in charge of this
machinery and equipment of our needs with the thought in mind
that we would lease this equipment on a token rental payment
basis for the duration, and that certain of the now vacant Tat-
ional Touth Administration buildings which we could use to advantage
be made available to us on the same basis.
We would, of course, be willing to keep up the necessary
repairs to such of the National Youth Administration items which
vere placed in our custody.
If our request is not out of order, we will greatly appreciate
your assisting us along the lines outlined above.
Respectfully yours,
HOOSIER MIRCRAFT COMPANY, INC.
John John F. Foster I Soxter
Vice President and
General Manager
Timew
Regraded Unclassified
203
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
September 2, 1943
TO
FROM
Mr. McConnell
There is attached 8. preliminary draft of "Government
V-Day Problems." This draft is merely a brief listing of
some of the matters which will be crying for attention
and direction on the day after the armistice is signed.
Before a properly considered judgment could be made
regarding the solution of any one of the seventy different
problems posed in the tabulation, it would be necessary
that months of study and discussion be undertaken by many
separate groups of experienced men competent to deal with
such problems and arrive at sound recommendations.
The tabulation serves to point up the enormous scope
and breadth of the undertaking and indicates the number
of Departments and agencies of the Government which would
be involved. It also emphasizes the necessity for some
over-all direction of the problem as a whole.
The whole intricate problem of costs and financing
has not been dealt with in this brief agenda. It also
should be pointed out that the proper solution for many
of the problems will require special legislation.
R. E. m.
attachment
Regraded Unclassified
it
NE
204
the DRAFT OF the - INT notas
wi/d.
204
6624 EB - DAT
the Propose of distration and misim)
MEMIT
Use
NEI AMERICA Procedure,
- OF 20 FROM are TMPLOY-
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(Des Protaote)
FIST MILL to PUBLIC MONTHS.)
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unexployment and Mate, (While
tal
1. Carrollation of var omiracte.
have returning soldion, milery and er
MM
(a) Medium et not welde ta plan,
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(b) Comments goods. (Partage - about tarm partad, dependents - severity
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Uniz old jobs, the first Item = the
-
(c) Termination allmantes. (specify conditious marly.)
way production.)
immployment engendered by resenting of
:
(4) Prospiners of payments. (Specify contitions early.)
(a) Secentity for legislation covering progr and opditable wethlement of sar
production losses.
2. Absorption of war workers in pessention employment.
PM
). U. 3. Employment Office experation-
75A
4a Retraining.
5. Education.
there-m
by Loans to claimes urnas OF groups.
-
7, Severance pay.
RA-1
6. Unemployment Insurance.
=
% Introed houre per week to increase mater employed.
10. Salase of Comments employees.
n. Pablic relations.
= or mess PROPERTY.
10 MONTH TO ONE YEAR.)
The disposition of all available tooks
of goods to name peaks if high desant.
T
1. Imentory and segregate that part of vartine exterial world in pascetive.
T
2, Lay out procedure for immediate controlled nale of - goods an 11
becomes surplas material.
1
(a) Fundsh supply to satisfy dammed = - with wintes dislocation of
private endervor.
1
(b) Inflaance en inflation tendency.
T
3- Conversion or acrappting WS? material not ta (2) above.
5
4. Export Foreign trade.
B
5. Balief requirements.
0. Pre-amistice release of eurplie supplies and materials.
- OF FROM THE ASMED PORCES.
The rapid realeorption of - from the
- HORTH TO TWO num.)
armed forces Into peacetize activities.
1. Timing dependent on (a) military and foreign policy, (b) transport, (e) anstation
length.
2. Friorities (a) dependency, (6) NP, (c) langth of survice, (4) skills,
(e) individual proferences.
MM-:
3. Demobilization furlough pay adjusted competion.
PSA-1
4. Unemployment insurance.
5. Absorption in private Injustry.
6. Education training (a) schools, (h) Lrade schools, (a) colleges.
PSA-TA
7. Delineation of functions of Selective Service, Teleran Amindatration, and
U. B. Employment office.
VA.
1. Rehabilitation.
- - WAS-ELAST AND are INVELOPMENT
The disposition MP integration of was
N-100-2
1. Classify mar plante (a) imetiately unatile 1a pesos, (%) unable La the future,
- (Prom FINST MATH TO TWO
plant facilities the afficiently anot-
(a) convertible, (4) standing for national safety, (a) pilot plants, (r) scrap
-
Ing reads.
or arcomé band equipment.
8-00-0
2. Plan for imediate utilization of 1(a) above, and disposition of 1(b).
$-105-1
3- Suggest procedure for correration, for separate viilization of structures, storage
or separate sales of equipment, etc.
4. Ouilisation of ghost war committies.
APC
5. Alian property utilination.
- TYPE RELAXATION OF WARTING ECONOMIC
The prevention of any united flastrations
1. Price control policy related se (a) bostomer activity, (6) employment, (e) national
(FACE vase MONTH TO 7)
OF distortions is prines and production
Income, (a) inflation, (a) tax bunden.
during the period of transition to peade-
2. Allountions of auterials related to (a) progress of descrilization, (t) sale of
time production.
eurplases, (c) improved supply, (4) foreign relief, etc.
NPI-T-OFA etc.
3. Other wartine controles Retioning, manjower, - export, stc.
or PRIVATE one
TRANSITICS
1. ENCOURATEMENT OF PRIVATE INITIATIVE.
and progri production of
=
1. Tax adjustants to increase
SHORT RANGE (6 NONTHS TO 1. TEAR.)
requirements and Increased employment.
I
(a) Prompt reduction of total burden.
T
(b) Redistribute burden - Increase payrolls.
T
(e) Indocend M capital expenditures, which Includes reconveration as well -
- enterprise.
I:
2. Redemption, refinancing and repurchase of SAP bonds. Policy, publicity.
T-100-PR
3. Pinancing
C
4. Stimulate propt disemination of knowledge of war inventions adeptable so peace
activities.
3. Stock piles the national safety.
B+ CONFIRMENT ADD AND CONTROLS.
build reserve of Ingring power after
T-8
1. International accetary manilisation.
una HANDE (1 to 4 TRANS.)
initial stocking up period. Provide
T
2. tax policy.
economão climate sonturive of properity
T-6
3+ International tax policy.
trst smiting Clash booms.
OSED-C
4. Stimilate research and development.
C
5. Patent Lew.
a
b. International trade and foreign armagements.
3. saw or FUBLIC BOWLD PROJECTS:
A. son JANKE.
To provide an envoy bridge for initial
FRA
1. Short-time projects. Small projects and Large undertakings to with the
(ax NOTTHS TO 1 TEAM.)
Lapach of unmployment after - Day.
stage is short enough to permits exployment of large maters within thirty days
of decisions, and which could be terminated Ln thirty days.
(To be outlined.)
1. um
to be prepared to take care of -
PM
1. Long-time projecte to employ A administral - of withers within ets -
(on TO FOUR TRANS.)
distable unexployment and to produce
of initiation.
finished works of high understand and
(To be milinad.)
utility. Regineering, drafting and
Masprint stage should be stariel prospily,
- FISCAL AND THAIR BLIED
Adjustment et policies nutier recorre-
-
1. Taxation-
alon and minimine
n-e
1. Interest reter, discomite, deposits, me.
M
3. Comments credit policy, (a) installment (b)
I-f
4. law material deposite reserved fur national entry.
a
5- Foreign rehabilitation add.
2
6. Foreign credite.
7. Private Intustry capital requirements.
=
B. Treasury refunding.
5
9. Exports Importe.
APC - Allen Property Costotian
E
- Commerce
n. - Pederal issure
THE - Pederal Security Agricy (Including
Selective Service, Sential,
and Bar Nanpower Commission)
yes - Polaral Seria Agency
I
- Interior
Satas This truft is tentetin, has - and is endiject to deletions,
L
Labor
CPA - Office of Price Administration
additions, and corrections.
CERD - Office of Sclentific Insearch and Development
la L. L.
RFC - Finance Corporation
5
- State
sec - Securities and Exchange
: - Treasury
1
- Mar
- - War, Savy, Maritties
EN - War Production heard
VA - Telengs'
Regraded Unclassified
205
NOT TO Br. RE-TRANSUITED
COPY NO. 13
BRITISH WOST SECRET
U.S. SECRET
OPTEL NO. 289
Information received up to 10 a.m., 2nd September, 1943.
1. AIR OPERATIONS
WESTERN FRONT. 31st/lst. BERLIN. 1,359 tons dropped in-
cluding 268 4,000 lb. H.E. and 611 tons of incendiaries in about 50 minutes,
Although cloud prevented identification of ground objects it did not hide
the marker bombs which were at first rather scattered. Accuracy and bombing
concentration of main force improved later, Good concentration of fires
finally reported one conflagration emitting smoke to 7,000 feet, Night
Fighters very active, 4 of them shot down.
FORET de HESDIN. Marker bombs well placed and no opposition.
68 tons dropped, several explosions seen.
1st. Bostons bombed ROOSENDAAL Railway Centre near ANTWERP.
Fighters damaged 2 Trawlers, a Flak Ship and 2 Barges off HOLLAND.
ITALY. 30th/31st. Wellingtons dropped 84 tons on CIVITAVECCHIA
starting fires in the town and Harbour and hitting a transformer station and
chemical factory.
31st. 152 Fortresses dropped 406 tons at PISA, hitting a
railway round house, a gas works, and an aircraft factory and several grounded
aircraft. At PESCARA, the Railway station and a bridge were hit by Liberators
which dropped 84 tons. Enemy casualties - 16. 2. 0.
BURMA. 29th. Mitchells and Liberators bombed MYITKYINA,
hitting the station railway siding and rolling stock.
Regraded Unclassified
206
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Mrs. Klotz
September 3, 1943
FROM
Mr. O'Connell
I reported to the Secretary verbally on the
matter you spoke to me about on the telephone this
morning.
For your information, we have never received
a reply from our letter to Secretary Stimson and
as I told the Secretary, our letter did not anticipate
a reply, since it was couched in terms of submitting
information to the War Department for its informa-
tion.
I am returning the article from Thursdays P.M.,
as I assume you will want it for your files.
Joen
Regraded Unclassified
12
PM. THURSDAY. SEPTEMBER 1, 1048
DAILY MAGAZINEI
PM, THURSDAY. SEPTEMBER 2, 1945
13
Hitler's Master Plan for a Soft Peace'
sorces BANK
OF COLOGRE
FAIREN
I
U.S. Capital, Smelling Profits, Goes
Present - the cultures
contitue had - -
was to have - Adalbert
- - the General ta this -
portage - - - by de
de Charles Internety Anel
Into Nazi-Controlled French Firms
of Prome was -
- - Now
- - - a - of La
- - Note - -
- developlage las which e world
and - good mainger
By WAVERLEY Boar
persons Lenalge No
be - for the -
- to to the - Patie agree
la de ww. las bed registed the
to - the amike pirties. The
of - of the American tamilitary
American sulden are will - the way to winsing the was,
Lique des Contribute (the
Fresch might be abio to date the
freis Sex - performing
But America Instrument can lase a. For # la not english to
Impri, . previous
America facts the vertals, - the
General had - - la -
The reporties - -
-
best Generany x the She must be deprived di the
- employed to we residenary
at - the of - Ammino
power to mame as adon as the democracios have de-
- Priment Be had
Fresch, and Hereby to lead -
also - - the et -
sims - no - plans
WORMS are
modical
brown internetal a organization
- - of the
were being - - the improvation
BIRNCH
or PARIS
That - Cerruny - be beatre Industrially, -
line department the (la brother-
livel di the America income
-
med - el the Serget in
The Currism thember will
Heuse
by and politically, as will as militarily,
control à shirt time later, a
-
Hile probily give up all hope of winning the unititally war
Tost - set di productive -
of ded dream with de hair
des - of to "W" the day
who bild but year But be interatted his caripaigo
julim qui the downls of
total They bine dut, leose)
The bed - endent The
les el de provide M the
they 3 tried a
to win the war, as la last hope. The cluief buttlelleld of
America - anded de
present dat mill la
Germany's la la
that campaign is Noth Africa. Du principal are the Fresch
sied any I of de ydam ad
bust. lie pient - of the -
Insulance - . partom
and dat - - tal
whole only chaire of seving thereasives la to sever
Parks
die also bentable - -
- made of the -
their German friends. The - they are whing to the tu
daily, le Inc. Anil an denter of
be the of mag America
draw American busine into with themaches, and
Bule Law, the be vegalle
- 4a - for
The - of the Asserica -
that indimetly info partnership with the Comune
al - of Fresh, le require
Commy consered daily der
pay where Pas - bei less
If the plan a American will have an interest,
el bis - Duisk plant
Post Harber, who Hills called a
desiribed in the plas as paid
when the prove injury in made, in preserving the pine that Ger-
startly after the ansistion, a) to
Dr. Blease Couley
- of be resertion MM
and charged - -
reporter dur de - mis
- builder has made through the compuests of the German
- M - a for the - of
preparting slimative pier -
only - colleportant with
ansies.
Emergency
Perm-Itimes Flandin, who
I & 1 E a I
des 1 If I I
whise the bis - -
NEUTRAL BOURSES
of trank The - very -
RENO
Part /
endorsement of Present Frank
end wire to
health and at - -
Brade - autho law the was
CHEMICAL TRUST
FRANCO-AMERICAN BANKING GROUPS
Lebidena, - manager the Be
thank frim provide. The
missing
alanda - to the -
Hile et Musk Addems
family - #
Paper Bullets
tipo tuning - tanks - Cen
U.S. traps lake North Afrira.
- be Noth Alrika. Fix
And a - le July, INC. sherty
- the Remis I a
after had - - -
and eartainly the - hall - -
that -
- and visits.
Part Il
- this the form
there - miske may -
anade trips - -
- Amortian -
nations.
de
lindle
-
à
-
done dost properties
takes.
The
Increase
-
children
-
De
The may of the - MIR,
France Betrayed
- a North Alexa with, will
and of the part played in - by -
- the permission of the Cm
net, through Freen, to Company
Viety Too Suspect
which will - the -
they - date des bel -- M
- Particularly - - the -
backs
Victory, Inc.
- of a - - -
ou Find
- of L c Father's
fale Fresh - began
Many Franksis believe, -
- That pm him apportunity
benked interprise, -
- the hand of the Americas
- - - -
de ! F I
- und - wild - other
full of International -
-
long before the - is la
endorproned -
- - - - to the -
Proposed Consortium
with the ARE - be ml
Su. Gas. Check - and
tax organizatione the
charged - Ang. BL 1962, that
la # - - and -
- could - Esso North Mrica,
A elimber --- - - -
dital which to to
demost - himited -
But - Anahr
of Galori, Test -
the
i
und
-
-
+
an Committee and
Freene - - defend to fair
- to - to Cersiny -
- of de develop.
DE place - America wight
Femb mist perb - the -
at the Time the importer.
- - Line, - all -
the Worms
that martionary 1
the relationship of
- of the be
of Ammirar - -
which -
- and only the Forth, but the
Pass Atexican -
recompted France (we will
Be fage Many that the unhapon-
the M the - -
and - Faoth ind
the -
Maked - Frank beary Industry and
and name Germany intended
French - - -
about
Γ
Name The hand wight any have
leis hand be replatative of
M that -
askend Vehr them] de
]
employee
-
de transfed -
ww the
- is the - - - las
may
when the entre
Name Miss and, mindly, the
also - - initiatry mus
- Impried la - bis
plant the - la
military - la Mahad -
right. la the exted amplinment
formation
of
the -
on signam.
for shich # M) less crested end
Hm Anniews - -
I
to
der
heavy cartel, which about
Certify be Industry and the
of this menta, Gamany was
New Companies
motion for
a establishing -
payment of Germin reparts
- - internets with
Con
-
what
-
And
the
- the win
Verious saw Fresh
the of Ema alter
Validay 345 be
Part IV
and be the Valu government.
Una and of international
Franchess alondy prom of the
- - all Europe TM Preside
and - unpel -
violently
One day . - . - the
The Twing by Valiy -- tersier
the - DI - that e -
naport . lemis - which - los
- - operate is Nath Al-
kas. Ruf a - not, and -
General Suna America any all
- the envide of Malage
Annion - toto the
- The Franch desised inhalry
- of the capital will - - IP
Contact Points
the things e bis - la Late -
miles the prind
1
-
des
also
the
- politica the role of
- who e ben invoived in the
able - work -
Braids
les
hair partners because Cerman
Origadard after. the - who had
a of Promo Who Central de
- to develop
to
Finesh
lanks,
29
per
cred
by
From - cirtify Bet
las bene - have - to Certify
which they - Inading Others
dided
M
-
used
have - - Important
Mess Valve
and African resided 48 the plane
the 3 to branch of well known
Africa punided name propition
the gild of -
may le - al a, be dost -
-
nuk
"
Tree
Card
-
best account of desibing with the
do M the in Park, -
platos of to he et -
Agention benking from. ed 00 -
notty and due replation
The pail of - brown
these du gold - - deposit -
have
to
do
boxes
with
di
then Fresh
Certify who need - . Mar-
the of Advice bed I the
visit Fresh - to
- rost - from North
- le Indo of Ane
Presis - beilded
a Liste list and to THE
the
General
again
after
to
--
du
-
named
Inc
la
paint
I
These Presium also Mild das
dul Petite's liest alier after the
sell - $ the Cermiss and engle
this - French - for la
in binks and bisken from The
et of Jarger
the - By Omail -
000,000 Sein fail fassica in &
- they postably will
the Allin - .
buther postitions to the this great
amistion.
Premis truts, the Contail des
to block Cerman purchases, Ad-
parent - as - lan de
General word lane - las -
break And a was at dia juschers
mind Durlen promptly explaced
that la appearal in . nute
I
viel
point la Certify (which may
- "wo why est - - - Be
The Fucheu-Plan
inady - - insted 51 - -
W vistue of del metrol of the
Forge (sted and - and
Finds banks - of through
In Jahn the .
with the excipe of the
grinned for nice?
Bright Spa
Mo with Feresd de Brison, nin
to 1. G.
in the development of the
Nat belm)
lim you lune a Amle -
the Comité des (nal),
The Video princess began et
war.
- a for If Fresh repird,
of the via - etat or
- pro- - with
The Fresh These De
- - of metale of the Ania
whom hands establish
- - performe for de -
Avending la to - -
or the as - -
Part y
- General had forced Mo all
im compartes ding -
which and and lare I -
I
[
is
and reactionary poll-
-
und
backs
the
1
de
I
entre
-
which
1
-
-- Howe - * a that to
taritiney.
wid as . conter of design
-
-
Victaine Pinne Etime Fluids,
the be - - la work
the address of of the
- 4 works North time
beief trip he monthly - to the
line
the
new
-
Des.
The Publist of the risentias
-
if
-
1
r
Flows cartale IN
phon telegram of to
paper, information À qual
- - - as March Ahus
timel 11 - - -
Plan at Work
- - 4
- date Freek - - the
I Our upon, the bende
U. - lend of Cm. Chard's
-- Frodu
North Mrs. - the ontig
Nash - that whether -
Value destree - issued missing
- purdaring Le
1
I
1
Miler - Be - of Mastils
-
Two
Prunch of Name, di
should the world. and
etal sews agency, . el
bind thair - Altrica
-
Las - desite 1 - these
for Finds of
last - down the - is would -
called -
ed
in
The
lubbydat for big have
have - of Franch
Part III
1
representatives
to
the
per
5
line
and
the
la -
The primerr of -
asquired he Comman be -
J
r
-
were - provided
-
I
-
-
-
-
of
- M Come beyon.
#:
Mariel
of
Bait for U.S. A.
-
with
1
to
a
-
de
I
The - of Train-
]
1
The Rush to Sell
-
I
l'an
-
lb
-
-
-
M
has Public program -
die
a
Identificas
Cerma - the
of de big
I
to
Williams Back Parta - which
securitary of de Frainer General BL-
North
Addes.
Up - de person, Company had
Be
land,
-
A.
4
E
-
la
Funch claimical - Rede
at
50
the
des
I
Be would ne
to
of
Committee to Product
-
- the Freeds agmt - the
benefity in Industrial Produces
becomes Kuhlman,
- - both the military war
de
work Maing Class de
LSS
be
which
,
-
1
-
- - - will de Certual
I
-
1
Bank if Cologia.
Promit classical tigether
and de was and the
-
-
that
0m, - the 1 for declarings
obtained As - - the -
-
-
- the primary al the
The Flot Works
-
regles
-
a em to ben Schoole's
poyer of der companies, -
-
-
-
- -
to - we truit, and them and as
-
-
the
-
agrinal
a
de
has the Hitler first - the
count may Freechmes
and if the stock in
Reply - 1 the M
The edas - for the attipes
donged -
E
I
I
I
I i 1 E
- of the -
havey aducab of the Dube
that de disting of - -
Lc. -
live de regula of was which also two
I
will
a
de
Casille
---
-
-
- of
allay defent.
-
withen
- - the D. A the
-
which
was
the
for
-
al.
the
of
de
des
who later husked Mas.
pine,
-
from the print of view of saw -
night City telped hand ever
leaders
le
The tax of of the West
tertain la Information destly by
Ma intestry, The Result -
- - the Whole of THE The
Neth
I
the
1
be
the
us
of
-
Memo Energy for
- to - Animires
bright
qui
-
de
- - Cermar -
Bank senda the . definery of -
Frame Germin relations. My taik
lad. de mink of fee
fales of That Hates to origile
of the la No
1
t
El
will be - make a - -
brier - Germa and (Its
- power find the ANM a -
1
Africa,
I
to
-
-
This
-
I
and
di
Moster " Form
INE
-
-
Pulice, - - de mome) of
of NUMBER to - -
ext.
ently that the Internet of the there
plant was total by the Brinch
- the pushility all . Cermio
to
- más the miy generale
try
-
of
-
-
the
la to person Fresch -
the day dei Lesle Realt 1
inditary delivat. Cime destribe
mis
1
da
-
de
double
operato
as
de Mg bespit to General of
should by emplusir % the Altempt
#:
-
The Meeting Ground
let
.
fun
bank
- fwl Druhis, Had
duty
legis
and
1
I
in
-
plato
1
a
AND
-
I
$
I
mil
will
-
Palas
of Camps Bran el Places La
when - refere Cerman industry
form ed opáre .
-
who
the
1
1
1
for
nother - wild le -
1
" - book of in
The
-
1
-
of that 1 since # a operating
that
- Full
-
I
-
Marie
-
the
by back is donnes ben
4
China
The
be delivery of de
-
is
the
-
of
the
for
de
1
.
-1
of - the bad Phone
- which - -
Part
Public
will
?
1
1 -
- the entime limit of is -
the
Cell
des
hopi
-
I
L
-
10006 1 the Gema Ann
Γ.
I
servi .
by
-
1
thing - the 1 al -
-
-
ben,
the
E
-
today."
À group of Fresch tasks under
- be expend taken the 1
year
F
One
of
der
11,
Their - - Franken and loss
- have entity less a Frank
chew
me
1
1
1
4.
de
-
4 1 I 1 Y 1
the of the Want Bank,
Began of - and -
North Alrina, a - under an
reads
I
1
leving
- by Fresch National Cas
1
-
- - Bard of Dine
worked
- fe the Fresch
have
-
-
-
=
-
esta
el
I
-
for
- and the -
N
-
at
Pam
-
Only
-
of
the
Friely
1
1
the
Il
]
la
1
I
date, de pain peters . the frex
-
- the - of Over
I
-
der
Rune
-
Fresh - by Germany
Name
-
J
1
-
-
Be
le
.
distribe
of
the
I
-
-
M
of
the
I
2
I
the
-
-
Regraded Unclassified
208
September 3, 1943
11:12 a.m.
HMJr:
Hello.
Operator: General Greenbaum.
Edward
Greenbaum: Yes, Henry.
HMJr:
Eddie.
G:
Yes.
HMJr:
This is official. I don't know whether you saw the
two-page story last night in P-M about the Germans
and the French and
G:
No, I didn't.
HMJr:
the financial - there's a two-page story - uh -
the gist of which is that the - a bank of Worms -
W-o-r-m-s, a French bank - is supposed to be the
people who are the most active - you see?
G:
Yes.
HMJr:
Now - oh, I don't know how long ago - I sent a
letter to Mr. Stimson showing that the representa-
tive of the Bank of Worms, a man by the name of
Dariot
G:
Oh, yes.
HMJr:
a colonel under Gregory, did not comply with the
Treasury regulations on making out this form showing
about his foreign interests, you see?
G:
I remember.
HMJr:
Hello?
G:
Yes.
HMJr:
And they've done nothing about it. Now I - this
18 just a friendly warning - uh - why wait 'till
P-M finds out that the representative of the Bank
of Worms is a Colonel in a high position in the
War Department?
G:
I get you.
Regraded Unclassified
209
- 2 -
HMJr:
What?
G:
I get it.
HMJr:
Now, sooner or later they are going to find it out
and then you fellows will have to scurry around and
try to explain it.
G:
I'll get hold of it right away and get busy on it.
HMJr:
It's just a friendly tip. I thought I'd rather
call you than call up I.F. Stone.
G:
Yes. (Laughs)
HMJr:
(Laughs)
G:
Well, thanks very much. It's very appreciated.
I'll take it up.
HMJr:
Yeah.
G:
Jack McCloy knows about the thing and I'll
HMJr:
Well, I - I can't understand why they've - I under-
stand that G-2 - General Strong knows about it.
He was interested but - I don't know - there was
something funny went on over there.
G:
Well, I'll
HMJr:
Not with Strong.
G:
I know. Okay, I'll - I'll
HMJr:
But this is a matter of a friendly gesture on my
part.
G:
Thanks ever 80 much. I'll take it up right away.
HMJr:
Thank you.
G:
I appreciate it a lot.
Regraded Unclassified
210
September 3, 1943
Joe O'Connell.
The Secretary.
Is there any question about the legality of Prime
Minister Winston Churchill buying a United States Govern-
ment War Bond? John Sullivan has raised the question.
I'd like to know. As a matter of fact, for your own
information, I am personally paying for the bond but
before the newsreels, he will be saying that he is buy-
ing the first bond of the Third War Loan. Just as soon
as you have the information, be sure and come right in to
see me. Thank you. Finished-
Regraded Unclassified
211
September 3, 1943
HM Jr sold a $100 War Bond to Prime Minister Churchill before
the News Reel Cameras:
HM JR
To launch the Third War Loan Drive, Mr.
Prime Minister, I am glad to sell you the
first hundred dollar Bond. You are setting an
example for the fifty million Americans who
are being asked to buy an extra hundred
dollar Bond during the month of September.
Today being the fourth anniversary of
the entrance of your people into the war,
I think this is a good way to commemorate it.
PRIME MINISTER CHURCHILL
Thank you, Mr. Secretary:
I can't think of a better way to
commemorate the anniversary. I will tell
you what I will do. We will use this Bond
to commemorate another event. I will give
it to the first American soldier who sets
foot in Berlin.
Regraded Unclassified
212,
SEP 3 1943
Dear Mr. Bristol:
The other day P. group of officials in my department
of the War Finance Committee presented to me a beautifully
bound book constituting a record of the advertising
support given during the first six months of 1943 to the
War Bond campaign of the U. S. Treasury Department by the
Drug, Cosmetic and Allied Industries.
I want to express the appreciation not only of myself
but of your Government on this patriotic voluntary contri-
bution by the Drug, Cosmetic and Allied Industries. This
is a vitally significant contribution because it is E.
completely organized activity on the part of an industry
dedicated to the sole objective of promoting the sale of
War Bonds. Its unselfishness has been clearly indicated
by the fact that no commercial product advertising was
employed.
The record as indicated by the book now in my possession
18 a valuable pattern which we hope other industries may
see fit to employ likewise. At all events, your leadership
and cooperation deserves full recognition from us all. It
is & splendid contribution to the winning of the war.
We are now in the midst of the tremendously important
Third War Loan campaign beginning September 9th. In con-
nection with this Third War Loan campaign, the necessity
for reaching a far greater number of individual subscribers
than ever before renders your medium of contact through
your extensive advertising more important than ever.
As Secretary of the Treasury, I wish to express to you
my appreciation of the helpful cooperation which all your
participating companies have accorded our War Bond drives.
Sincerely,
(Migned) I. Merganthan, Jr.
Mr. Lee H. Bristol, Chairman
Drug, Cosmetic and Allied
Industries Committee
630 Fifth Avenue
New York, New York
FS:gr
Regraded Unclassified
213
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE September 3,1943
TO Secretary Morgenthau
FROMFred Smith
This is a letter for the Drug Industry, which replaces
the meeting you were to have with representatives of the
Industry. It was their idea that this would serve the purpose
as well.
Regraded Unclassified
214
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE September 3,1943
TO
Secretary Morgenthau
$45
FROM Fred Smith
You will be interested in the following memorandum from
Emerson Waldman.
"We The People" inform me that they will let us know tomorrow,
September 3, the guests they propose having on the broadcast from
Monticello on September 12. The producer of the program, as a
result of the research done in Charlottesville, is quite enthusiastic
about the "local" possibilities for participation in the program."
To
Regraded Unclassified
215
September 3, 1943
Randolph Paul.
The Secretary.
I understand that you will be back Saturday. I think
it's very important that you see Judge Vinson and explain
the program to him. I don't want him to have the opportunity
to Bay that he didn't know about it. I also think that
we should ask to see Judge Byrnes - Justice Byrnes - for an
opportunity to explain it to him. At least, I want to make
every effort to get this program to them before we see the
President. We will hope that they will be helpful. Thank
you.
Paul san Byrnes
tutmas unablets
Su Ry mes as he
went ant of town-
Regraded Unclassified
216
THE WHITE HOUSE
WASHINGTON
September 3, 1943
Dear Henry:
With respect to your letter of August
twelfth, addressed to the President, about a
dispute which has arisen between the Alien Pro-
perty Custodian and the Treasury, which the
President referred to me, I understand that the
matter is in process of negotiation between the
respective agencies.
Will you please inform me when an
impasse has been reached and I will be glad to
take it up further?
I assume that as long as your staff
is discussing it with Mr. Crowley's staff in an
amicable way, their negotiation should continue
until a breakdown.
Yours Jam very truly,
SAMUEL I. ROSENMAN
The Honorable
The Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
217
MEMORANDUM FOR THE SECRETARY.
September 3, 1943.
Mail Report
Tax mail for the week -- three times heavier than
that of last week -- was again filled with acid comments
about the Declaration of Estimation. The farmer who
wrote that he simply proposed "to wash hishands of
this estimating" voiced the general sentiment of our
taxpaying correspondents. The 80 communications con-
cerning only the Declaration pointed out the impossi-
bility of estimating income for the final three months
of the year, and most of them were complaining of the
complexity of the forms. Several denounced as Fascist
the penalty for incorrect estimation. Every day brought
one or two letters from persons calling attention to
what they considered an error in the instructions -- the
omission of "not" before the phrase "more than $3,500
8. year if married". A number of completed forms were
sent to the Secretary, some with very pointed comments
along the margin. Others were returned with & note
that the addressee is now in service overseas. A number
of writers asked that the date of filing be extended
to October 15, and one suggested that for the benefit
of accountants and Collectors of Internal Revenue all
dates for future filings be staggered.
A dozen protests against further increase in
taxation were in most instances accompanied by B. de-
mand for economy in Government expenditures. The new
CIO tax program had 5 endorsements; the sales tax only
3. A tax certificate of smaller denomination was re-
quested a number of times, and there were requests as to
how to handle previously purchased certificates. A doubt
of the Government's probable promptness in making any
refunds that may be due in 1944 ran through all the mail
that dealt specifically with tax payments.
Although not increased in such proportion as the
tax mail, Bond mail was heavy. It mostly consisted of
Regraded Unclassified
218
- 2 -
Memorandum for the Secretary.
September 3, 1943.
ideas for the 3d War Loan Drive, or letters in regard
to plans, appointments, etc. With the exception of a
few persons who predicted failure because of New Deal
tactics or Government extravagance, all those who com-
mented on the Drive expressed approval of existing
sales organization, and confidence in the success of
the campaign. General suggestions followed the course
of previous mail. There was one suggestion that "E"
Bonds be sold at slightly higher rates and made tax-
exempt. Members of the Armed Forces have taken the
lead in asking for the issuance of special Christmas
Bonds. A few business firms asked permission to grant
increases in the form of Bonds, or to encourage sales
during the campaign by matching, within reasonable
limits, each Bond bought by an employee. In spite of
the greater volume of mail, fewer Bonds were submitted
for redemption, and fewer complaints of any sort were
received.
In the miscellaneous mail there were 4 requests
for copies of the radio address recently delivered by
the Secretary in Baltimore. Interest in the invasion
money used in Sicily lapsed completely, but there con-
tinued to be interest in plans for an international
stabilization fund.
Mail forwarded from the White House was again very
small in volume and very dull in comment. During August
only 241 pieces of mail were forwarded, of which 106
were acknowledged in the Correspondence Division. What
little mail came over consisted mostly of requests for
some sort of help, ranging from assistance in connection
with the Estimated Income Tax problem to 8 plaintive
request for a more equal distribution of beer. There
was almost no mail in connection with the Bond Drive,
and few suggestions in regard to taxation.
Gabriele EN Fobush
Regraded Unclassified
219
General Comments
Harry S. West, Altoona, Pa. I am B. groceryman and
had my first experience with the new pennies, which
I think is one of the most absurd things our intelli-
gent U. S. Government has ever done. These pennies,
when new, are the same size and color of a new dime
(as you know), and are certainly a head-ache to the
businessman. The least you could do would be to change
the color or distinguish them from the other money by
some plain mark which would overcome the fact that the
businessman will lose thousands of dollars a year. $
C. Mervyn Young, Wynnewood, Pa. May I have a copy of
your interesting radio address in Baltimore, Maryland?
Thanks.
Anonymous -- Camden, N.J. I see in today's papers
you want more taxes. On Saturday night at the Trans
Lux in Philadelphia when pictures of MacArthur,
Eisenhower, and the President were shown, there was
silence. But when a Russian picture was shown, there
was great applause. And whom do you think patronizes
the Trans Lux? Think it over. There is trouble ahead
and you fellows are causing it.
George A. Easley, President, The National Iron Bank,
Morristown, N. J. * As President of this bank, and
as Vice Chairman in Morris County of the Third War Loan
Drive, I have B. dual interest and responsibility in
the undertaking, and it has had and is having my most
earnest consideration. There is, however, a serious
handicap facing us in common with all other banks which
if left to drift must of necessity seriously impair or
lessen the effectiveness of our efforts to accomplish
the objective which you have set out for us, and which
we all hope to achieve.
*
We have lost to the war
Regraded Unclassified
220
- 2 -
services and industry practically all of our male
employees. Eliminating five old janitors, 93% of our
present employees are women. * # The women employees
whom we have engaged in substitution for the men are
doing excellent work, and we would be highly gratified
if we were allowed to keep them, especially since we
have been put to the expense and time of putting them
through a course of training. Unfortunately, however,
when trained, they become qualified for positions of
responsibility in war plants where they are in demand,
carrying increases in compensation to them as much as
60% more than our authorized salary schedule. #
+
In order to relieve the situation, we filed more than
three months ago, in accordance with regulations issued
under Presidential Order, an application with the
Regional Office of the Salary Stabilization Board for
salary increases for our staff, and notwithstanding the
fact that we have since been in constant touch with
that Board, we are informed that no consideration can
be given us until such time as they have received an
approved schedule adopted by the War Labor Board apply-
ing to the banking industry. During all of this time
we have been encouraging our staff to remain on their
positions by promising them salary advances, but the
continued delay on the part of the Regional Board is
causing some of o ur staff either to doubt our sincerity.
or our ability to secure the necessary authority to
make such salary increases effective. No one knows
better than you the added burden that the present war
effort has thrown on the banks of the country, and this
is especially true of small country banks such as ours,
restricted as they are by the salaries which they can
offer. 4 * #
Regraded Unclassified
221
- 3 -
Favorable Comments on Bonds
Lew Kent, Program Director, WMAZ, Macon, Georgia.
Referring to your letter concerning the "Treasury
Star Parade" programs to begin running during the
3rd War Bond Drive, September 9th through September
30th, I would like to commend your office on being
able to secure such a wonderful array of talent.
I would like to say also that during the past, the
"Treasury Star Parade" programs have been exception-
ally well done, and we consider it E. privilege to
broadcast them regularly over this station.
Dr. S. F. Galaskiewicz, Dentist, Chicago, Illinois.
I would greatly appreciate 8. copy of your address,
"The Third War Loan", given over the radio Thursday.
At this time I wish that with the aid of God, you keep
up your good work.
Mrs. Wolff Lowy, Brooklyn, N.Y. Have given my personal
check for $10,000 for the 3rd War Loan, which will be
issued September 9 through the Brooklyn Trust Company
of Brooklyn, New York, and I can assure you it is one
of the happiest moments of my life. Hope my share will
help to meet the goal. Our only son of 19 years is in
the Armed Forces.
Captain Edward C. Reamer, Ninth U.S.A. Air Force Head-
quarters, War Bonds & Insurance Office, c/o Postmaster,
N.Y.C. Information is desired by this headquarters if
special War Bonds with distinctive markings will be
issued by your office for use as Christmas presents by
men in the field. This office has received several in-
quiries from Unit Bond Officers requesting information.
It is the opinion of this office that if such EL plan
was instigated whereby Bonds purchased prior to Dec. 1
would be delivered on or about Christmas week, sale of
Bonds in this theater would be increased by fifty per-
cent or more.
Regraded Unclassified
222
- 4 -
Unfavorable Comments on Bonds
Virgil W. Cutright, Smithton, Pa. I have written
and written about my December Bond that was lost,
and all I can get is letters. It looks to me like
they could send my Bond. It was lost in December;
it is now September and no Bond yet.
#
I
either
want my Bond or the money I paid in.
Mrs. A. J. Schroeter, Centralia, Ill. I have been
advised to write you in regard to the charge we had
to pay to cash 13 of our War Bonds. We cashed them
for the sole purpose of helping to make a down pay-
ment on a home. When I took them to the City National
Bank, Centralia, Illinois, to be cashed, W&S told
there would be B. charge of fifty cents each, and when
they called to tell me the money was there, and I went
to get it, I endorsed the check, and when they cashed
it, was told they would just keep five dollars for their
trouble. I feel as every one else does that that isn't
fair. It really discourages us about buying any more
Bonds, but yet we know we should do all we can to help.
Thanking you to tell us if they have the right to "charge
this fee.
Fred P. Wood, President, Simplex Paper Corporation,
Adrian, Michigan. The purchase of War Bonds is a very
necessary obligation of the citizens of these United
States of America. War supplies cannot be purchased,
the fighting forces paid, without the citizens pur-
chase Victory Bonds. That is absolutely true, and it
is incumbent upon citizens to do this. That we fully
recognize. Nevertheless, there is no reason why Govern-
ment agencies should not do exactly what the Government
asks its citizens to do, and that is come to some
realization that we are engaged in a war, & very costly
war. I think I can say to you, without hesitation,
that 50% anyway, and possibly a higher percentage, of
the great long telegrams received from the Government
agencies do not need to be sent as 8 telegram, and
Regraded Unclassified
223
- 5 -
this telegram of yours of August 23rd certainly comes
under that category. # # # The drive does not take
place before September 1st. A letter, which would
only entail the use of a 3₫ stamp, would have been
just as good. I, B.S a citizen, believe this -- that
Government agencies are the servants of the people,
not the masters, and I feel I am justified, 8.S 8.
citizen, in suggesting to you that you be economical
in the use of public funds. * I don't know how
many thousands of dollars was spent in sending these
telegrams, but if they averaged $1.00 apiece there is
no question in my mind that many thousands of dollars
could have been saved by putting the sub ject matter in
EL letter, and also a much more intelligent appeal
could have been made.
*
William U. Watson, President, Green Duck Company,
Chicago, Ill. As I have just completed the dictation
of a letter to Mr. Norman B. Collins, Executive Vice
Chairman, War Finance Committee of Illinois, in
response to a communication received under date of
August 18 on the subject of the 3rd War Loan Drive,
I hope you will pardon me for calling to your atten-
tion that although it is probably true that the
average family's income is far greater than ever be-
fore, that there are B. great number of small business-
men, among which my company seems to fall, who have
not found it possible, under present Government regu-
lations, to continue business, to say nothing of operat-
ing at a profit. There is small possibility of this
group responding to your patriotic call. I am quite
sure that if your appeal was directed to our War
Production Board, and made strong enough to impress
them with the necessity of unfreezing the great amount
of stock that has no value in our effort, thereby
permitting small manufacturers whose equipment is not
fitted for our war effort to function, you would not
only secure 8 quick answer to your appeal, but you
would, in addition to this desirable result, receive
a great amount of gratitude from the small businessmen.
Regraded Unclassified
224
- 6 -
John A. Cross, Attorney at Law, Loveland, Colorado.
I have put in nearly a year trying to obtain for Pfc.
Raymond D. Stroh and his wife the Bonds or Stamps or
a refund of the money which was deducted from his pay
at the Sioux Ordnance Depot, Sidney, Nebraska, and
have as yet been unsuccessful in getting the matter
cleared up. It now seems that the matter is in the
hands of two different Government agencies, one for
the amounts deducted during the period from September
1 to September 16, 1942, which is apparently in the
hands of the Area Engineer of the dar Department,
located at Scottsbluff, Nebraska, and the other for
the three months prior to that, which we are now in-
formed is in the hands of the Commanding Officer,
Centralized Field Offices, Finance Department, 366
West Adams Street, Chicago, Illinois. * * # In other
words, it seems that after having been passed from
pillar to post, and one officer and organization to
another for nearly a year, the only progress that we
have made is that we are now dealing with two differ-
ent organizations at the same time. I em writing this
to you because I believe that this situation, if it is
duplicated in many other instances throughout the
country, will be an extremely strong influence against
the authorization of payroll deductions by employees,
and indirectly an interference with the War effort.
The considerable amount of correspondence I have had
with various agencies involves enough work on both my
part and theirs to have covered the expeditious and
efficient handling of one hundred accounts of this
kind, and the slack and waste motion of this sort
must be adding terrifically to the costs of the job
to be done, besides the bad effect on morale and co-
operation. # # #
Merle Cushman, Cambridge, Mass. I am buying War Bonds
with all I have left from an actual living, and banking
none for sickness or other emergencies. Here is my
question. Have we any assurance that the Government
won't come out with an order to stop payment on those
Bonds until after the duration, or later, as most
Regraded Unclassified
225
- 7 -
people claim is apt to happen? As we have taken
the Government's word before when they issue ration
stamps good for so much, then come out and tell us
that they are only worth part of what they were
issued for, we can't help but feel doubtful. Same
as the pay-as-you-don't-drive five dollar windshield
sticker. We buy the sticker 80 we can drive our car,
then the Government puts O.P.A. men on the road to
stop us. Can you assure us that something similar
won't happen to our Bonds so we won't be stranded in
case of sickness or death?
Copy of letter sent to the Division of Loans &
Currency, Chicago, by Claude A. Guren, Attorney at
Law, Detroit, Mich. As of August 1, 1941, and as of
January 1, 1942, I purchased from the Federal Reserve
Bank, Chicago, Detroit Branch, and the National Bank
of Detroit, $50,000.00 each of U. S. Defense Savings
Bonds, Series G, making an aggregate of $100,000.00.
# # I am no longer residing at 941 Hazelwood Avenue,
Detroit, and on July 15th I endeavored to change my
address, as per above, by making inquiry at both the
National Bank and at the local office of the Federal
Reserve. My purpose in doing this was to insure the
receipt of your draft for $625.00 which was due and
payable on August lst. However, I was informed that
to effect e. change of address on U. S. Registered
Bonds would require a notice of six months. This, in
my opinion, is beyond all reason, but is probably in
accordance with Governmental regulations and "activi-
ties". Had I been equally dilatory in my purchase,
you would still be "holding the bag". # * # I am send-
ing a copy of this letter to Henry Morgenthau, Jr., by
whom I am solicited to purchase additional Bonds, that
he may understand that the investor is not given EL
square deal.
Regraded Unclassified
226
- 8 -
Favorable Comments on Taxation
E. R. Castor, Pottstown, Pa. Allow me to compliment
you on your letter, "To Federal Income Taxpayers",
with reference to Declaration Form 1040-E.S. This
is the most clearly and simply worded piece of
literature I have received from Washington in two
years. (Suppose he means it?)
Charles M. Ross, Certified Public Accountant, Riverside,
Calif. It was with extreme pleasure that I learned
of the Treasury Department's plan to study our Federal
tax laws with the view of making revision in order to
simplify administration and reduce the paper work of
taxpayers. Iam taking the liberty of presenting a few
suggestions which I sincerely hope will be given due
consideration by the group appointed to tackle this
important task. Possibly some of these thoughts have
already been advanced by others -- then I trust that
I will be lending emphasis upon the crying need for
certain changes. # # I am not sufficiently familiar
with the names of the members on your Advisory Com-
mittee to ascertain whether the group contains a
prominent tax accountant. If the group consists en-
tirely of attorneys, I fear that important accounting
considerations will be overlooked. If the group is
lacking a certified public accountant, the American
Institute of Accountants should be contacted for their
recommendation of an expert. * # #
Regraded Unclassified
227
- 9 -
Unfavorable Comments on Taxation
Robert Clark Hollingsworth, New Augusta, Ind. If my
eleven-year old son should compose anything &8 confused
and unintelligible as the enclosed form letter, and
the tax forms which accompanied it, I would whip him
for being so willfully stupid. It is a great pity that
the persons charged with collecting our taxes have
never had any training in the use of clear and simple
English. Some day your bright young men will choke on
this mess of incoherent bad grammar -- an event which
will fill me with considerable joy.
N. Wood Hill, N.Y.C. As one in the "medium bracket",
I beg you to use your influence to impose other taxes
(sales, luxury, etc.) rather than those directly affect-
ing our incomes. Even 9.0 present, I have to draw on
principal, and take funds from my savings bank to pay
these Federal taxes four times a year. I am patriotic,
and eager to help, but surely the Government does not
approve of 8. wrecking process like this.
F. Y. Hill, Llano, Texas. Of all the crazy setups dur-
ing the last several years -- I thought our Government's
triple AAA was the banner freak bureaucracy until the
new income tax "pay-as-you-go"-crazy forms for estimat-
ing one's tax reached me with their accompanying
instructions. The Treasury has gotten Mr. Secretary of
Agriculture Henry Wallace's femous and infamous AAA Farm
Control skinned more ways than 8. cat has lives. My
honest belief is that when our citizens get down to work
on this Serio-Comic "Estimated Income" return in earnest
that your Treasury Department and Agents will hear from
them plenty. If the new system does not collapse of its
own freakish, meddlesome, troublesome weight of mystify-
ing complications, then you can call me a goat. I would
rather be in Hell, or Texas, any day than wading through
the new revenue-maze.
Regraded Unclassified
228
- 10 -
Representative Robert Crosser (Ohio). # # I am en-
closing the letter from Marstan Cleaners which they
sent me, and if there is anything you can do to
adjust this matter to their satisfaction, they would
greatly appreciate such consideration. (The follow-
ing is the letter addressed to the Congressman by the
President of the Company.) Enclosed is & copy of our
letter addressed to the Treasury Department, having to
do with a double assessment of our Unemployment Tax
for the reason that we were late in paying it. Our
lateness was the result of not having the funds with
which to pay it, and, although we are slowly paying up
our taxes, we still owe some and therefore are hardly
in a position to pay them twice B.S we are now called
upon to do. It just seems to us that 8. penalty so
great, equal to the original tax, certainly is not
within the spirit of any law, except there be willful
and flagrant violation. This does not exist in our
case. To apply such 8. penalty and insist upon it seems
8. very satisfactory way to destroy the small business.
There having been an extension granted in which to pay
the tax during the previous years, we indulged a hope
that this would also be done in 1942. * ** When it was
not extended, it was then too late for us to make any
corrections. * # Very likely there are other tax-
payers in the same predicament and probably Congress
in its wisdom will see fit to provide for a further
extension and thus automatically abate these penalties.
If not, we hope that something can be done in our case
to abate the penalty because payment of it will be
practical ly impossible without seriously injuring our
business.
Capt. Frank A. Jefferson, c/o SS PICKENS, Postmaster,
N.Y.C. I have before me one of your 1040 ES blanks
and beg to advise you that you haven't any seat-
warming slacker in your Department who knows what it is
all about after he has made this up and spent thou-
sands of dollars sending this out to me and the rest
of the public. Most businessmen do not sign forms
Regraded Unclassified
229
- 11 -
and blanks issued by the Government unless they can
give an honest answer. I happen to have been raised
in the old school. I nor any other living being can
estimate his income in advance during wartime. In
one of your paragraphs you state you will refund over-
payment. However, you didn't state when. My experi-
ence with the Treasury Department has been very un-
satisfactory along these lines in the past. It usually
takes from six months to twenty years to receive any
refunds from the Government, unless you have an Act
of Congress to do it. Furthermore, I will probably
be on the other side when this payment is due and
furthermore, you have a penalty attached if you under-
estimate your future income. It will cost the
average citizen thousands of dollars for useless paper
work and accountant fees and headaches over your
systematic gouging of the public. ***
Wm. N. McCormick, Box 6, Route 1, Dayton, Texas.
I have talked to several persons in regard to the pur-
chase of War Bonds. Not a one of these persons but
would prefer to pay the computed income tax on a Bond
at date of purchase than to have the headache of
figuring out amount of income to pay on Bonds held.
Personally speaking, I would prefer to pay $20.00 for
8. $25.00 Bond and not have to pay & lawyer to figure
it all out for me. By adding the income tax to the
price, I believe you can sell two billion dollars to
Back the Attack' and get more money.
Mrs. Annie E. Howell, Ballsville, Va. In March when
the call came for paying income taxes, I filled out
one of the yellow forms and sent it to the Commissioner
of Internal Revenue at Richmond, Va. I wrote a letter
stating there was no place on the blank for widows,
sent in the amount of my income, and asked to be
classified. The deadline for paying was so near, and
I had not heard from the office, that I then wrote and
sent a blank check containing my signature, and stating
that I was due to pay a tax, to fill in the check.
When my check was returned, $24.00 had been taken. My
Regraded Unclassified
230
- 12 -
year's salary was $580.00. I wrote two letters, and
finally I decided to go to the Richmond Office, but
they didn't seem to be able to tell me just what I
should have paid, but promised to let me hear from
the office. I have not heard from them as yet. Will
you please tell me how much I was due to pay? My
husband has been dead more than three years, and I
have no children, but that is what makes it 80 hard.
I have to do all that he did, and more, as far 8.5
cash is concerned, as many things he did around the
home, I have to pay for having done. 4h * # Please
help me as I had no dream that I would have to pay
so much. 40 Twenty-four dollars seems very small
to people of means, but it is 8 lot to a poor person.
Horace R. Southwick, Hotel Ben Bolt, Mexico, Mo. In
1942 the Government asked people to buy U. S. Treasury
Notes with money they were saving to pay income tax.
We did our bit and bought $2,500. We have used part
of this to pay income tax, but now things have changed,
with the pay-as-you-go, and my income tax is withheld
from my wages. Hence, I have no use for balance of
Treasury Notes. These were to draw interest if used
to pay on income tax, but now things have changed, and
through no fault of our own, we cannot use them. Do
we have to lose the interest on the Notes? It looks
only fair now that these should be paid with interest
to date. I was informed yesterday that they could be
cashed but no interest would be paid.
Margaret E. Brown, Showboat Theatre, Freeport, Texas.
I received some forms from the Treasury Department in
Austin, Texas, regarding income tax. I don't under-
stand about the withholding tax at all. And everybody
I've spoken to about it has a different explanation.
I can't understand all those printed explanations I've
been sent. There are too many if's, and's and but's
in them. I wonder if you could send me an explanation
in ordinary, plain, everyday language. I want to do
right, but I can't if I don't know what to do. #
4b
Regraded Unclassified
231
- 13 -
Albert Zange, Auditor and Public Accountant, San Diego,
Calif. (Encloses copy of letter he addressed to the
Collector of Internal Revenue at Los Angeles.) "In view
of the fact that no forms 1040 ES (Estimated Income Tax
Forms) are available or mailed to my clients up to the
present writing, and having over 100 to complete by
September 15, 1943, which is almost an impossibility,
I am requesting an extension of time of 30 days on the
following clients. "# # # Also a brief reply thereto --
"Please be advised that no extensions of time are being
granted at this time. The necessary forms will be sent
you before September 15, 1943.
--
*
*
4b
"I
have
been
& Public Accountant practically from the inception of
income tax laws, and I have always found the Deputy
Collectors at the San Diego Office very courteous and
obliging, but I cannot consider the answer to my letter
from the Los Angeles Office anything but discourteous
and insulting to my intelligence. In the first place,
his answer would imply that I am requesting a 30-day
extension for my personal 1943 Estimated Income Tax
Return, which is already estimated and the money ready
to be paid in full immediately upon receipt of Form
1040 ES, but you can readily understand it is impossible
to take care of my clientele if not a single one has
received a 1040 ES Form up to the present writing, and
as a Public Accountant, Ihave many other duties to
perform other than Estimated Income Tax Returns, and
with this in mind I am convinced you will readily under-
stand my requesting a 30-day extension on the enclosed
list of Estimated Income Tax Returns. An immediate
answer will be greatly appreciated granting my request,
as not only am I worried sick about the prompt compli-
ance of making up the returns in record time, but my
clients are worrying me crazy about why I cannot get
the forms for them.
J. H. Hoeppel, Manager, National Defense (magazine).
I am writing to you requesting information 88 to the
action taken by your office on the application of
Lester S. Terry, First Sergeant, U. S. Army, Retired,
who made a claim on your Los Angeles office, asking
Regraded Unclassified
232
- 14 -
for refund of the income tax which he paid for 1941,
alleging in his claim and protest that he was exempt
from paying income taxes during this period because
of the provisions of Public No. 262, 74th Congress,
Section 3. Your Los Angeles office, under date of
June 17th, had this question up for final determina-
tion and Sergeant Terry was requested to appear,
personally, for a hearing on his protest. Under
date of June 21st Sergeant Terry informed your Agent
in Charge of the Treasury Department at 417 South Hill
Street, Los Angeles, that he did not desire to appear
personally because of the fact that his "argument was
contained in the Brief which accompanied his claim
for refund". Sergeant Terry requested that his protest
be forwarded by the Los Angeles office to your office
for final determination. This was on June 21, 1943.
Acting for, and in behalf of Sergeant Terry, I request
that your office inform either myself, or Sergeant
Terry, as to your final decision in this matter so
that we can proceed further, if necessary, in an appeal
to the U. S. Court. ***
John Albert Pringle, Oakland, N.J. Attached herewith
please find: (1) Copy of my letter of January 28,
1943, to Collector of Internal Revenue, New York;
(2) Copy of my letter of July 28 to Mr. Joseph T.
Higgins, Collector, 3d District, New York City; (3)
Form letter in reply addressed to me as "Gentlemen",
dated August 24, 1943. I know you expect us all to
pay our required income tax promptly. Don't you think
your Department might be more prompt in a routine re-
fund of this sort, and more cooperative in seeing that
it is made than a delay of seven months or more would
indicate? It is brought to your attention in the hope
that you will do something about it.
Mrs. Rhoda R. B. Wood, Pittsburgh, Pa. March 14, 1942,
I paid by check $16.00 Federal Income tax, and on
March 12, 1943, I paid $71.00 Federal Income Tax. My
Regraded Unclassified
233
- 15 -
daughter, Mrs. John L. Sedlacek, went to the Federal
Income Tax Office and 8. man there, delegated to give
information, marked 8 yellow sheet stating my tax
amount. Now I want to protest, especially to this
latter assessment. # * # I am a retired teacher, 81
years old last March 12th. I am & wheel-chair
occupant, and almost blind. # # * My pension is $80.83
per month. It costs me for care, room, and board and
laundry, $66.00 per month, and sometimes more.
Insurance $12.65 -- 8. total of $78.65 every month,
leaving $2.18 for clothing, medicine, a doctor,
miscellaneous things. How can it be done? * # # Well,
if you will consult your files, you will recall my
having cashed in my Liberty Bonds August, 1942,
I think. With this money I bought War Defense Bonds,
paid various bills, until now, I am just about bank-
rupt. Uncle Sam says he does not want a penny un-
justly. Does my pension justify such taxation? Right
close to "Shylock", eh? Please refund. I am truly
sorry to make such a request at this critical period.
There are thousands amply able to bear the War burden.
Here is 8. clipping substantiating my statement.
(Headline: "Welles May Purchase 50-Room Maine Estate")
J. W. Snider, Calumet City, Ill. The idea is growing
on people in general that any money taken by the U. S.
Government by the withholding tax plan will not be re-
funded after March 15, 1944, if the return filed on
that date shows that too much money has been withheld.
Most any one knows that if a refund is due, that it
will take several months to check the records and make
such refund to the individual, but if he knows that he
is going to get it, he will be willing to wait. # # #
We have too many conflicting statements from different
Departments stating one thing today, and something en-
tirely different tomorrow. People rapidly lose confi-
dence in & boss who doesn't know his own mind, and
also in a Government Bureau that doesn't lay down a
plan and follow it. ***
Philip E. Hamilton, Attorney at Law, Beaver Falls, Pa.
I received the copies of the "Current Tax Payment Act
Regraded Unclassified
234
- 16 -
of 1943", and have come to the conclusion that it is
impossible to understand its meaning without reference
to the Internal Revenue Code, of which it is an amend-
ment. # As I read the amendment, the same de-
ductions are allowable as were allowable under the
general act, but just how professional men and farmers
are going to estimate the income for 1943 is one of
the many perplexing problems confronting all of us,
It simply cannot be done. We are going to witness
the most hopeless and utterly confusing state of affairs
we have yet experienced SO far as Federal taxes are
concerned, and I have not the slightest doubt that all
our great middle classes are going to enjoy the experi-
ment of being penalized for failure to do that which
is impossible. It is certainly an amazing piece of
legislation for a Government to impose on a people --
so far as I know, the only thing of the kind ever
attempted throughout all history -- namely, guess what
the future will be and pay now.
C. G. Schietinger, Sanitary Hatchery, Weimar, Texas.
A lot of people in the United States, including the
writer, have purchased Series "C" Tax Bonds to come to
the aid of the Government by paying their taxes in
advance. It is to be regretted that the Department of
Internal Revenue seems to have never heard of these
Bonds. If the Internal Revenue Department had been
informed about this matter, I would not feel so bitter
about their rules and regulations.
*
*
I
had
the
idea
that perhaps the Treasury Department had some loose
connection with the Revenue Department, that the
Internal Revenue Collector's office at Austin would be
informed who has invested in Tax Bonds, that we who
are holding these Bonds would not be penalized for the
failure of estimating our income correctly up to B.
certain percent, since the Government is already in
the possession of part of my income. Instead of
getting my Country's thanks for buying 8. tax Bond some
11 months before my tax comes due (March 15, 1944), I
should be penalized for a "mistake" in figuring my
Regraded Unclassified
235
- 17 -
income. This is one of those clear cases where the
right hand of the Government does not know what the
left hand is doing to the extent of causing great
dissatisfaction.
***
J. E. McCoy, Muscatine, Iowa. After looking over
Form 1040 ES table of instructions for estimating
farm tax, I find that it is one of the most conflict-
ing things to 8 farmer that has ever been imposed.
It looks impossible to be done. I used to plan one
to four years ahead on my farm program. This kind
of administration has made it impossible to plan over
one day ahead. With the change of ceilings from time
to time, one can never guess what the income will be
on any one commodity that I raise. I have fed quite
a few cattle in my time. They are so far out of line
that big feeders have also quit. I won't know a thing
about my income until I close my books on cattle.
Hogs were more profitable in 1940 and 1941 than they
are now, but how much I don't know until I close my
books for the year. # I never thought that Congress,
in this state of affairs, would impose on farmers what
they have in this pay-as-you-go tax plan. Now you ask
a penalty if we farmers miss our estimate 33%. When
the bankers list for a barnyard loan, they can't guess
within 33%, so with an absolute uncertainty of any
situation that arises on the farm, you have made it 8.
law for us to do the impossible. #
I
would
like
to
see each individual satisfied in preference to having
his business, his mind, etc., in a turmoil all the time.
Right is right, and good will always come from it in
the end. But no good can come from some of the things
that are being done by this Administration. Science
has been trying to make the mind last as long as the
body, but the minds of the people can't hold up in this
state of affairs. I have had quite a few worries
caused by the allocations. I have, on one occasion,
driven 223 miles to get repairs for 8. pump, 133 miles
to get repairs for hay tools. Other times I just went
in town and returned in less than an hour with minor
repairs of that sort. That is the uncertainty of which
Regraded Unclassified
236
- 18 -
I spoke that makes it impossible for me to estimate
one year's income in advance. If you want cooperation
you will have to cooperate also. As far as I know now,
I will wash my hands of this estimating, as quite a few
farmers are going to do, and will close my books as
formerly.
Warren J. Pratt, Chicago, Ill. I want to compliment
you on the last income tax law, recently put through
Congress. I think that it is a marvel and one that
musthave required an enormous amount of gray matter
to figure out. How any person given the authority to
govern the people of this United States would want to
conceive such a cockeyed law as this one, I can't
understand. The idea of having to estimate my income
for the balance of the year! How can I tell what my
income is going to be anywhere near the correct answer?
I may be working overtime every night the rest of the
year; I may get another job and work for less money;
I might even take on another job and double my money --
how do I know at this time? Another thing, what point
is there in making the rules so hard and the laws 80
screwy that no one understands them? All the Govern-
ment should be interested in is getting the 20% and
making it as easy as possible for the taxpayer. The
way the law reads now to 8 common person like me, who
is forced to pay for the gifts to England against his
will, is worse than 8. cross-word puzzle. * # % The idea
of talking four freedoms and then threatening a tax-
payer with a heavy penalty because he erred in guessing
how much he may earn! # * I don't like the law the
way it is written up; I don't like the principle of
having all these rules coming out of Washington with
a stinger on the end that if ou don't, you are subject
to a ten thousand dollar fine. Give us four more years
of the New Deal ideas of life and we will all be better
off dead. Sure, I'll pay my tax. I'll pay more next
year and like it too, but I do think we little taxpayers
are entitled to a little more feeling from the ones we
have elected to run our Government. * #
Regraded Unclassified
237
Sept. 3, 1948
Mr. Thompson
Secretary Morgenthau
Would you or Charlie Bell please investigate
the matter mentioned in the attached clipping, and give
me a written report on it not later than Tuesday
morning.
Article from Washington News
of Sept. 3, 1943 - Engraving
Cafe Horribly Dirty.
memo in 9/7/43-
Regraded Unclassified
238
25
SEP 3 1943
My dear Mr. Secretary:
This is in further reply to your letter of
August 16, 1943, concerning the release to
Mr. Charles B. Mollaniel, Jr., of 109,000 pounds
of "blocked" sterling on deposit to his account
in the National City Bank of New York in London.
In accordance with your request, we have taken
this matter up with Sir David aley of the British
Treasury. Sir David indicated a strong reluctance
on the part of his government to unblock the funds
in question. Re asked that a formal request be sub-
mitted.
For your information, I an enclosing a copy of
the memorandum no submitted to the British Treasury.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Honorable
The Secretary of the Navy.
nclosure
HDW:TMK:rl 8/31/43
By 2618 1111
File
Regraded Unclassified
239
25
SEP 2 1943
Dear a. Berle:
This 10 in reply to your letter of August 21, 1943,
in which 18 is requested that the Treasury Department
endeavor to arrange with the British for the unblocking
of the blocked sterling account of Mr. Charles 3. delaniel,
Jr., in the amount of 109,000 pounds sterling, deposited In
the National City Rank of Rew York in London.
In accordance with the desires of the legartmento of
State and Havy, we have spoken about this matter to Sir
David alay of the British Treasury. Mr David indicated
a strong relustance on the part of his government to -
block the funds in question. lie asked that 8 formal No
quest be submitted.
For your information I as enclosing 4 copy of the
memorandum " submitted to the Hritish Treasury.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. Adolf A. Derie, drop
Assistant Secretary of State,
Department of State,
Mashington, D.C.
inclosure
conto
HDW:TMK:rl 8/31/43
Regraded Unclassified
52428
TM
or STATE
@TLING AUTHORITY
25
Mail A Files
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
August 21. 1043
NE
My dear Mr. Secretary:
It would be very much appreciated 1f the Treasury
Department would endeavor to arrange with the British
Government for the unblocking of the blocked sterling
account of Mr. Charles B. McDaniel, Jr., in the amount
of 109,000 pounds sterling, deposited in the National
City Bank of New York in London.
Mr. McDaniel 1s an American citizen, and the purpose
for which he intends to use the funds 18 a matter of urgent
interest and importance to this Government. The enterprise
is related to the war effort and is supported by the War
Production Board, the War Shipping Administration, the
Navy Department and this Department. Briefly, for the
information of the Treasury Department, the funds are to
be utilized in the construction of a port and port works
in Cabinda, Portuguese West Africa, to aid in the execu-
tion of certain commodity contracts which Mr. McDaniel
has entered into with this Government. There are other
important implications of a political and strategic nature
involved, however.
It 1s hoped, therefore, that the Treasury Department
will be disposed to make this request of the British Gov-
ernment and that the British Government will be willing to
unblock Mr. McDaniel's sterling.
Sincerely yours,
Adolf A. Berle, Jr.
Assistant Secretary
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury.
Regraded Unclassified
241
AUG 18 1973
My dear Mr. Secretary:
Reference is made to your letter of
August 16 in which it is requested that the
Treasury Department take whatever steps are
proper and necessary to accomplish the prompt
release to Mr. Charles B. McDaniel, Jr. of some
109,000 pounds In "blocked" sterling on deposit
to his account in London, in order that Mr. 1100
Daniel my proceed immediately with the construe-
tion of & breakwater and other necessary port
facilities at Malemba Bay, Cabinda, Portuguese
Gust Africa. It is stated that this construction
work is required to facilitate the shipment of
mahogany and other stratagic anterials needed in
the war effort.
The Treasury Department will imaediately
take this matter up with the British Treasury,
and will keep you advised of developments.
Very truly yours,
(Signed) H. Morgenthau, Jr.
decretary of the Treasury
The Honorable
The Secretary of the Havy.
JEDUBois:ecr
Bymeringer Strenger 5:06
8/16/43
File 20 w. Hampares
Regraded Unclassified
THE SECRETARY OF THE NAVY
WASHINGTON
Serial 0119112
CONFIDENTIAL
1 6 AUG 1943
My dear Mr. Secretary:
In order that Mr. Charles B. McDaniel, Jr., an
American citizen, may proceed immediately with the con-
struction of & breakwater and other necessary port facili-
ties at Malemba Bay, Cabinda, Portuguese West Africa,
which construction work is required to facilitate the
shipment of mahogany and other strategic materials needed
in the war effort, it is requested that the Treasury
Department take whatever steps are proper and necessary
to accomplish the prompt release to Mr. McDaniel of some
109,000 pounds in "blocked" sterling on deposit to his
account in London.
Mr. McDaniel's Cabinda project has received
the support of the Department of State, the War Shipping
Administration and the War Production Board as well as
the Navy Department, in the form of letters to the Office
of Economic Warfare, where Mr. McDaniel has been nego-
tiating for the past four months for a substantial loan
of public funds for the project. The legal and political
difficulties inherent in the proposed loan are such as to
make it exceedingly difficult to give the lending agency
the safeguards it requires, particularly since the opera-
tions in Cabinda must be carried on through a Portuguese
company in which high government officials of Portugal
and the Portuguese Government itself are directly in-
volved through ownership of minority shares. In view of
this, the loan negotiations have been slow and difficult.
Mr. McDaniel is now seeking to avoid these complications
and further delay by commencing the project with his
own funds, that is, the "blocked" sterling referred to
above.
Obviously, it would be to the advantage of this
Government if Mr. McDaniel could carry forward this project
with his own money instead of borrowing U. S. public funds.
Regraded Unclassified
Serial 0119112
Likewise, there would be less political risks if his en-
terprise in Cabinda were a private undertaking rather
than one subsidized by our Government.
Thus it appears to be clearly to our national
interests to effect the immediate release of Mr. McDaniel's
"blocked" sterling account, and, accordingly, the active
cooperation of the Treasury Department to this end is
requested.
The Export-Import Bank of Washington and the
Department of State have official knowledge of this
account. So far as known to the Navy Department no valid
legal or moral claims have been made against Mr. McDaniel's
account in London.
Frankshnox Sincerely yours,
FRANK KNOX
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury
Department of the Treasury
Washington, D. C.
Regraded Unclassified
From the desk of
LEWIS L STRAUSS
Dear Dr. White -
These are the
papers of which I
spoke. after you
hair read them will
you give me a ring?
Suicerer
OFFICE OF THE CHIEF OF NAVAL OPERATIONS
13 August 1943
MEMORANDUM TO CAPTAIN L. L. STRAUSS,
201 "Blocked Currency" of Charles B. McDaniel Jr.
1, If the Treasury Department should want to
make 8. check on the information contained in the
memorandum on this subject submitted to ne by
Mr. McDaniel's attorney, which I passed on to you,
I suggest getting in touch with Mr. Warren Lee
Pierson, President, Export-Import Bank of Washington,
who has known Mr. McDaniel for some years and who
has official knowledge of this "Blocked Ourrency"
situation. Also, I suggest telephoning to Mr.
Perry Jester of the Near East Division, Department
of State, (State Department Extension 2288) who
has complete file on this subject and who likewise
is thoroughly informed about the State Department's
attitude with respect to Mr. McDaniel's project
for developing a new port in Cabinda, Portugese
West Africa.
2. As Mr. Pierson and Mr. Jester will confirm,
there is strong governmental support for this
tel
Ject from the State Department, Navy Department,
WAT Shipping Administration and the Var Production
Board.
3. If Mr. McDaniel's funds in England are
released to him or an equivalent advance made to
him against these funds as collateral he could
and would set in motion immediately his Cabinda
project. Without such an arrangement I doubt
if he can undertake the project.
Taul Poster
CHARLES B. Mc DANIEL, JR.
1119 Barr Building,
CABLES MODANIEL
Washington, D. C.
Captain Paul F. Foster,
Bureau of Operations,
Navy Department,
Washington, D. C.
Dear Captain Foster:
Supplementing the memorandum forwarded to
you under date of August 10th by our counsel,
Sidney V. Smith, in regard to my blocked
sterling account of 109,000 Pounds in the
National City Bank of New York, London, I
should like to bring the following to your
attention:-
Complete documentation covering this trans-
action has been filed with the Near Eastern
Division of the State Department and with
the Export-Import Bank of Washington.
On March 7, 1942, the Export-Import Bank
agreed to extend us an advance of $300,000
against this account. However, in view of
the objections registered b/ the Eritish as
regards the transfer of this account to the
blocked account of the Export-Import Bank,
this advance was reduced to $65,000 against
an assignment of my rights to this Sterling
to the Export-Import Bank.
For your information, I have discussed this
matter personally with the Secretary of
Commerce and the President of the Export-
- 2 -
Import Bank, who intervened with British
authorities here to obtain the release
of the Sterling but no action was taken
for the reasons &S set out in Mr. Smith's
memorandum to you.
Both Ambassador Biddle and Ambassador l/inant
intervened in this matter in London with the
Polish Novernment but Ambassador Biddle was
informed by the Polish Minister of Finance
that they would be Clad to release us free
Sterling or see us get this Sterling released
but that they were not allowed to do so by
the British Exchange Control. On the other
hand, the Eritish Exchange Control advised
the Export-Import Bank that they were unable
to make this transfer or release this Sterling
in view of the objections of the Polish
Government. We have written records of these
conflicting statements.
From confidential Polish sources, however,
we are informed that the British Treasury.
were unwilling at the time to allow the
Polish Government to utilize free Sterling
for the purchase of Francs as the Sritish
Government had certain Franc resources in
France and were insisting that the trans-
action we had be cancelled and Francs pur-
chased from the British Treasury.
I have likewise been given to understand by
one of my British friends that Sir Eric
Phillips intervened personally in this matter
in London but that he was unable to obtain
satisfactory settlement of our matter.
- 3 -
My claims against the Polish Government were
represented by notes of the Polish State
Railways, endorsed as to principal and
interest by the Folish Treasury. The amount
of these defaulted obligations represents
several times the amount of the Sterling
transaction which the British Treasury ind1-
cate might, at some time, be contested by the
Polish Government.
Evidence of the fact that the Polish Govern-
ment has defaulted on their obligations to
me is contained in a letter on file with
the Near Eastern Division of the State
Department and signed by the former Director
of Finance of Poland and likewise by a letter
on file with the Foreign Exchange Control and
signed by the former Minister of Finance of
Poland.
We have repeatedly insisted that the Polish
Government arbitrate the differences, if any,
in accordance with the terms of our agreement
with the Ministry of Finance but our requests
were refused on the grounds that any arbi-
tration of the matter could only take place
in London and would be subject to British
Exchange control.
The funds represented in this transaction
were clearly set out and defined in our
application to the Federal Reserve Bank
(Foreign Exchange Control). None of the
funds were derived directly or indirectly
from any British source.
- 4 -
In view of the fact that the work which we
are undertaking has been fully supported and
endorsed by four agencies of this Government
as being in the interest of our Defense
effort as well as our post-war planning, it
seems unfortunate that this work should be
impeded by the "freezing" of our funds in
London without moral or legal merit.
Very everyday truly yours,
js.
Charles E. McDaniel, Jr.
Regraded Unclassified
250
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
September 3, 1943
CONFIDENTIAL
Received this date from the Federal Reserve
Bank of New York, for the confidential information
of the Secretary of the Treasury, compilation for
the week ended August 25, 1943, showing dollar dis-
bursements out of the British Empire and French
accounts at the Federal Reserve Bank of New York
and the means by which these expenditures were
firanced.
EMB
Regraded Unclassified
251
FEDERAL RESERVE BANK
OF NEW YORK
September 2, 1943.
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. D. White
I am enclosing our compilation for the week
ended August 25, 1943, showing dollar disbursements out
of the British Empire and French accounts at this bank
and the means by which these expenditures were financed.
Faithfully yours,
/s/ L. W. Knoke,
L. W. Knoke,
Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
Enclosures
COPY
Regraded Unclassified
OF BRITISH AND FREECH ACCOUNTS
(In Millions of dollars)
Week Ended August 25, 1943 Confidential
BANK OF ENGLAND (BRITISH GOVERNMENT)
BANK OF FRANCE
PERIOD
DEBITS
CREDITS
Gov't
Transfers to
Proceeds of
Transfers
Net Incr.(+)
Net Incr. (+)
Expendi-
Official
Sales of
from Offi-
Other
or Decr. (-)
Total
Total
tures
Canadian
Other
Total
Securities
cial Aus-
Total
or Decr. (-)
(a)
Account
Gold
(Official)
tralian
Credits
in $ Funds
Debits
Credits
in $ Funds
Debits
Debits
Credits
(b)
Account
(c)
(d)
(e)
(e)
(d)
First year of war (g)
1,793.2
605,6
20.9
1,166.7
1,828.2
1,356.1
52.0
3.9
416.2
+ 35.0
866.3(f)
1,095,3(f)
+299.0
period through
1940
2,782.3
1,425.6
20.9
1,335.8
2,793.1
2,109.5
108.0
14.5
561.1
+ 10.8
878.3
1,098.4
+220.1
year
of
war
G
2,203.0
1,792.2
3.4
407.4
2,189,8
1,193.7
274.0
16.7
705.4
- 13.2
38.9
8.8
- 30,1
of (1)
1,235.6
9048
7.7
223.1
1,361,5
21,8
5.5
57.4
1,276.8
+ 125.9
18.5
4.4
- 14.1
Sept. 30
56.1
37.1
-
19.0
81.6
-
0.5
20.5
60.6
+ 25.5
10.1
0.4
- 9.7
1- Oct. 28
46.7
27.4
-
19.3
57.5
.
-
12.0
45.5
+ 10.8
-
0.3
+ 0.3
Oct, 29 - Dec. 2
96.6
35,5
-
61.1
83.7
-
-
5.5
78.2
- 12.9
0.2
0.3
+ 0.1
- Dec. 30
30.4
13,3
-
17.1
51.9
-
-
8.0
43.9
+ 21.5
-
-
-
Feb. 3
166.6
20,9
125.0
22.7
58,9
-
-
8,0
50.9
- 109.7
-
-
-
- AT. 3
87.2
17.8
37.7
31.7
120,8
-
-
15.0
105.8
+ 33.6
-
-
-
A - Mar. 31
35.3
12.9
-
22.4
66.6
-
-
5.0
59.4
+ 29.1
I
-
il
1 - Apr. 28
37.0
16,3
-
20.7
87.4
-
-
15.1
72.3
+ 50.4
I
-
-
29 - June 2
90.4
74.3
-
16,1
103.4
-
-
19.0
84.4
+ 13.0
-
-
I
3 - June 30
31.6
11,6
-
20,0
130.7
-
-
20.0
110,7
+ 99.1
-
-
-
1- July 28
33.0
18.2
-
14.8
100.5
#
-
16,0
84.5
+ 67.5
-
-
-
ENDED:
August 4
B.5
5.1
-
3.4
14.0
-
-
1,0
13.0
+ 5.5
-
-
-
If
11
11,0
6.9
-
4.1
34.1
-
-
10.0
24.1
+23.1
-
-
-
- 18
19.6
6.1
7.5
4.0
12.9
-
-
-
12.9
- 6.7
-
-
-
- 25
4.6
1,9
-
2.7
64.9(1)
-
-
-
64.9(j)
+60.3
-
-
-
Average the Expenditures Since Outbreak of War
See attached sheet for footnotes.
France (through June 19, 1940) $19.6 million
England (through June 19, 1940) $27.6 million
England (June 20, 1940 to March 12, 1941) $54.9 million
England (since March 12, 1941)
$21.4 million
Regraded Unclassified
ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS
(In Millions or Dollars)
Week Ended August DI 1943
Confidential
BANK
OF
CANADA (and Canadian Government)
COMMONWEALTH BANK OF A ESTRALIA (and Australian Government)
DEBITS
CREDITS
DEBITS
CREDITS
Transfers
Transfers from Official
Transfers
3
Proceeds
British A/C
Net Incr,
to
Proceeds
Net Incr.
Official
of
(+) or
Official
of
(+) or
Total
British
Others
Total
Gold
For Own
For French
Other
Decr.(-)
Total
British
Other
Total
Gold
PERIOD
Other
Dec. (-)
Debits
A/C
Debita
Credits
Sales
A/C
A/C
Credits
in$Punds (d)
Debits
A/C
Debits
Credits
Sales
Creditain $ Runds(d
First year of war (O)
323.0
16.6
306.4
504.7
412.7
20,9
38.7
32.4
+ 181.7
31.2
3.9
27.3
36.1
30.0
6,1
+ 4.9
war period through
December, 1940
477.2
16,6
460.6
707.4
534.8
20.9
110.7
41.0
+ 230.2
57.9
14.5
43.4
62.4
50.1
12,3
+ 4.5
Second year of war(b)
460.4
-
460.4
462.0
246.2
3.4
123.9
88.5
+ 1,6
72.2
16,7
55.5
81,2
62.9
18.3
+ 9.0
Third year of ver (c)
525,8
0.3
525.5
566.3
198.6
7.7
-
360.0
+ 40.5
107.2
57.4
49.8
112.2
17.2
95,0
- 5.0
1942
Sept. - Sept. 30
46.3
-
46.3
53.6
13,2
-
4
40.4
. 7.3
28.0
20.5
7.5
18.1
-
18,1
- 9,9
Oct, 1- Oct, 26
44.9
-
44.9
51.5
16,6
-
-
34.9
+ 6.6
14.3
12.0
2.3
14.6
-
14.6
+ 0.3
Oct. 29 - Dec. 2
56.5
-
56.5
80.8
14.4
-
-
66.4
+ 24.3
10.2
5.5
4.7
9.4
-
9.4
- 0,8
Dec. 3- Dec. 30
48.2
-
48.2
43.9
2.9
-
-
41.0
- 4.3
14.1
8.0
6.1
11.7
-
11.7
- 2.4
1963
Dec. 31- Feb. 3
52.5
-
52.5
217.1
-
125.0
-
92.1
+ 164,6
16,2
8,0
8,2
17.3
-
17.3
+ 1.1
Feb.
4- Mar. 3
35.1
-
35.1
101,2
-
37.7
-
63.5
+ 66.1
15.9
15.0
0,9
16,0
-
16,0
* 0.1
Mar.
4- Mar, 31
36,2
-
36,2
51.6
-
-
-
51.6
+ 15.4
7.1
5,0
2,1
6.7
-
6.7
- 2.4
for.
1- Apr. 28
29,0
-
29.0
39.6
-
-
-
39.6
+ 10.6
16.4
15.1
6.3
19.3
-
19.3
+ 2.9
Apr. 29 - June 2
79.9
-
79.9
95.8
-
-
-
95.8
+ 15.9
21.8
19.0
2.8
20.1
1
20.1
- 1.7
dure
3- 3 June 30
53.8
-
53.8
77.2
-
-
-
77.2
+ 23.4
20,0
20.0
-
27.3
-
27.3
+ 7.3
1 - July 28
102.1
102,1
61.8
.
-
-
-
61.8
- 40.3
19.2
16.0
3,2
12.5
1
12,5
- 6.7
ENTED:
August 4.
6.1
-
6.1
15.9
-
-
-
15.9
+9.8
2.3
1.0
1.3
10.5
#
10.5
+8.2
. 11
5.6
5.6
15.6
-
-
-
-
15.6
+10.0
10,3
10,0
0.3
0,4
-
0,4
-9,9
. 18
113.1
-
-
-
113.1
14.5
7-5
7.0
-98.6
0.2
-
0,2
0.3
-
0.3
+ 0,1
- 25
2.2(a)
-
2.2
18.6(e)
-
-
-
18.6(r)
+16.4
0.1
-
0_1
3-6(5)
-
3.6(g)+ 3,5
Bookly Expenditures
First year of var
6.2 million.
(a) For monthly breakdown see tabulations. prior to April 23, 1941.
Second year of war
8.9 million.
(b) For monthly breakdown see tabulations prior to October 8, 1941,
Third year of RI
10.1 million.
(c) Rx monthly breakdown, seq tabulations prior to October 14, 1942,
Fourth year of war (through August 25, 1943)
9.6 million.
(d) Reflects changes in all dollar holdings payable on demand or sisturing in one year.
(=) Date not reflect transactions in short term U. S. securities,
(f) Includes $ 9.4 million deposited by Mar Supplies, Ltd. and $9.0 million received
from N.Y. accounts of Canadian Chartered Banks,
(g) Includes $3.0 million for account of Treasurer of U.S. to be applied against U.S.
currency and Treasury checke negotiated.
Regraded Unclassified
(a) Includes payments for account of British Ministry of Supply Mission, British Supply Board, Ministry of Supply Timber
Control, and Ministry of Shipping.
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds of official British sales of American securities, including those effected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
to data supplied by the British Treasury and released by Secretary Mergenthau, total official and private British liquidation
of our securities through December, 1940 amounted to $334 million.
(c) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,
1939 apparently represent current acquisitions of proceeds of exports from the sterling area and other accruing dollar
receipts.
(d) Reflects net change in all dollar holdings payable on demand or maturing in one year.
(e) For breakdown by types of debits and credits see tabulations prior to March 10, 1943.
(f) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day.
(g) For monthly breakdown see tabulations prior to April 23, 1941.
(b) For monthly breakdown see tabulations prior to October 8, 1941.
(1) For monthly breakdown see tabulations prior to October 14, 1942.
(j) Includes: 854.0 million to be held for the credit of the U. 3. areed .orces aoroad (253.0 million of this mount was for the U.S. Army and $1.0
million for the U. 3. Navy)
16.5 million apparently representing current and accumulated dollar proceeds of sterling area services and merchandise exports.
$2.5 million transferred from Reserve Bank of Now Zealand acount at this bank.
Regraded Unclassified
255
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 290
Information received up to 10 a.m., 3rd September, 1943.
1. MILITARY
ITALY. Early this morning troops of 5th U.K. and 1st Canadian
divisions with some armour landed near REGGIO from CATANIA.
Regraded Unclassified
256
SECRETARY OFFICE OF TREASURY
1943 SEP 4 AM ft 50
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH
TREASURY DEPARTMENT
U.S. SECRET
OPTEL NO. 291
Information received up to 10 a.m., 3rd September, 1943.
1. NAVAL
2nd. One of H.M. Anti-submarine Trawlers escorting 2 ships from
LISBON to GIBRALTAR shot down 1 out of 3 F.W. 200 which attacked off CAPE
ST. VINCENT. One of H.M. Submarines has torpedoed a stranded Italian Destroyer
which was being salvaged at ALICE POINT in GULF OF TARANTO, the stern of the
Destroyer sank.
2. AIR OPERATIONS
WESTERN FRONT. 2nd. 104 escorted medium bombers attacked an an-
munition dump in the FORET DE HESDIN. Fortresses dropped 88 tons on two
airfields and escorted Marauders dropped 37 tons on MAZINGARBE Power Station.
10 escorted Bostons made an effective low-level attack on SERQUEUX railway
centro. Hurricanes destroyed 4 lock gates at HANSWEERT east of FLUSHING.
From all operations 5 Fighters, 3 Hurricanes, 1 Marauder and 1 Boston are
missing. Enemy casualties: 4. 1. O.
2nd/3rd. Aircraft despatched: Ammunition dump FORET DE MORMAL,
near VALENCIENNES - 41, Sea-mining - 89 (1 missing), COLOGNE and DUISBURG
- 8, Intruders - 13. Many large explosions were seen in the FORET DE MORNAL.
ITALY. 31st. A total of 216 escorted medium and light bombers
attacked 4 railway centres on the foot of ITALY.
31st/lst. Wellingtons dropped 77 tons on railway yards at SALERNO,
1 Wellington missing.
SARDINIA. lat. 58 Fighter bombers effectively attacked a zinc
works nea I CAGLIARI.
Regraded Unclassified