FISCAL: Cheaper Money

The U.S. Treasury, which last summer loosened the purse strings of its tight-money policy, last week let them out a little more. In announcing two new security issues to raise $2 billion in new money and refund $7.2 billion of maturing securities, it set the lowest interest rates in several years. And instead of a longer-term bond issue, the Treasury resorted to shorter-term notes for fear of siphoning off long-term investment money needed by industry as well as state and local governments. The issues: <! To raise new money, a $2 billion issue of notes maturing in four years and nine months, with an interest rate of 1|% a year, lowest rate for such an issue since October 1951.

¶ For refinancing $7.2 billion worth of maturing securities, an issue of one-year certificates bearing an interest rate of 11%, lowest since September 1949.

Altogether, the Treasury this calendar year faces its biggest refinancing job in history, with $49.8 billion in securities coming due. On top of that, it will have to raise a total of $10 to $12 billion in new money. Last week, with 1954’s big volume of financing less than one-third completed, an old problem returned to haunt the Treasury Department. Last year, when Congress brusquely turned down an Administration request to boost the $275 billion debt limit to $290 billion, the Treasury managed to scrimp along under the old limit. Now, because of heavy tax receipts in March, the national debt is down to $271 billion. But it is expected to rise when corporate tax receipts fall sharply by year’s end. (Corporations are paying 90% of their 1953 taxes in the first half of 1954 in an effort to get closer to a pay-as-you-go basis.) Seeing no other way out, President Eisenhower will probably ask Congress for a boost in the debt limit again this month. This time it looks as if the boost cannot be postponed.