Cantor, Jeffrey. A HISTORY OF THE BUREAU OF THE PUBLIC DEBT 1940-1990 with historical highlights researched & written by: CH ASSOCIATES January 1990 HJ 8101 ∙C361 1990 Acknowledgements CH Associates wishes to thank those people who, through each of their unique contributions, made the completion of this public history possible. Paramount on this list is the rank and file work force of the Bureau of the Public Debt; through their time spent answering our questions, locating documents, explaining happenings, etc., their information proved to be a valuable contribution to our writing. We thank the members of the Editorial Board, Dr. Robert Gair, Mr. Volney Taylor, Mr. Michael Smiley, and Mr. William Saunders, who through the coordination of Claudette Duckett provided valuable suggestions and clarifications to our manuscript. We also thank the Bureau's executive management, past and present for their contributions and assistance, including Mr. Richard Gregg and Mr. Van Zeck for their support. We especially thank Mr. H. J. Hintgen, former Commissioner of the Public Debt, for his tireless efforts in reviewing our work, providing guidance and suggestions and personal insights which assisted our writers in understanding events, processes, and legislation. CH Associates February 6, 1989 Researched & Written by: Jeffrey A. Cantor and Donald R. Stabile ii GRAD DEDOS. USA 4-27-91 Foreword As early as the Renaissance, the modern idea that man could successfully shape his destiny was expressed in the communal financing techniques of Florence and other Northern Italian citystates. These techniques anticipated both the funded debt and the consolidated-fund budget of a much later age. It was the enlightenment, however, and the idea that order could be achieved through the exercise of human reason that prompted the framers of the United States Constitution to consider, and then to adopt, Article I, Section 8, giving the new government power to borrow money in order to pay its debts. Alexander Hamilton, the first Treasury Secretary, defined the central issues of the public debt. These are issues that have remained central to the economic life of American culture down to the 20th Century: faith in public credit based on the government's ability to meet its obligations; the relationship between taxing, spending and borrowing; the role of a central banking system in public finance; and the duties and responsibilities of a professionalized public service. All of the great figures of American government who followed Hamilton in office were forced to confront the issues he raised and were deeply influenced by him even when they took opposite positions. As President Thomas Jefferson was heard to lament: "We shall never get rid of his financial system." This book was written to record for posterity the story of the public debt in the development of the United States. The story begins in the early years of the new Nation and expands with the growing country, and ultimately evolves into the mission of the Bureau of the Public Debt, which celebrates its Fiftieth Anniversary on June 30, 1990. In particular, it is the purpose of this book to celebrate the contributions of those Federal employees who down through the years have performed their individual duties with competence and courage and "made a difference." This is their story and one that should be remembered with pride. This book makes available for the first time to those interested in the financial history of the Republic, a ready reference to earlier decisions and experiences in administration of the public debt. Until now, this information has been available only in scattered writings, in the anecdotal recollections of those involved directly in the growth and development of the Bureau, as well as its antecedent agencies whose experiences have not been recorded previously. It is therefore with great pleasure that the Bureau, in cooperation with C.H. Associates, Inc., shares this important public record of change and achievement. The project was planned by Dr. Robert Gair and Ms. Claudette Duckett of the Office of Administration. Dr. Jeffrey Cantor and Dr. Donald R. Stabile of C.H. Associates were contracted to research and write the manuscript, with editorial assistance from Mrs. Ruth Cantor. A Bureau editorial board reviewed the manuscript. The Board consisted of Mr. Volney Taylor, Office of the Commissioner, Mr. William Saunders, Office of Finance; and Mr. Michael Smiley, Office of Administration. They provided many valuable suggestions and clarifications to the numerous drafts, chapter by chapter. We were especially fortunate to receive the support and guidance of Mr. H.J. Hintgen, former Commissioner, who worked in the Bureau in one capacity or another for more than 35 years. His personal recollections and insights into events that occurred as much as five decades ago helped the authors give this history the authenticity of an eyewitness account. It is a pleasure to acknowledge the Bureau's debt to these individuals and to the many rank and file employees who answered questions, located documents, and patiently explained how their jobs contributed to our mission; to borrow money and account for the resulting debt. RICHARD L. GREGG Commissioner 1989 Introduction The History of the Bureau of the Public debt is a fact of life in the United States. The country was founded in debt. This is not a unique situation; it merely reflects a problem faced by all governments when they must spend money. Money can be obtained in one of three ways. It can be printed, it can be raised through taxes, or it can be borrowed. Each of these methods of financing governmental expenses has advantages and disadvantages. The printing of new money to pay for needed resources is quick and easy, but when done to excess can cause a shrinkage in the value of that money through inflation. In times of emergency, citizens are willing to pay higher taxes. There are limits to how much they can or will pay, especially if the increase takes place in a short time period as might be the case in times of war. Deficit financing or borrowing places the short-term burden of government expenditures on those most able to pay. This was done on a voluntary basis, and the government would have to eventually experience a period of budget surplus in order to ensure that the debt is paid while the interest charges are low. A drain on the government's ability to obtain sufficient revenue would otherwise result. Over the past 200 years, the United States has used all three methods from time to time to pay for government expenditures. Once the government decides to finance a portion of its spending through borrowing, it becomes important for it to manage and administer the resulting debt effectively. Today, as part of the management of the government's debt, the Bureau of the Public Debt performs important administrative functions including the preparation of offering circulars, issuance of securities and drafting of payment checks. It also regulates the government securities market. The Bureau maintains two offices, the headquarters office in Washington, D.C., where the direct-access securities, commercial |