Carter Glass’ benign bankers’ bank was transformed into a menace by Woodrow Wilson’s war budgets, and his insistence that his misbegotten crusade to “make the world safe for democracy” be financed mainly with debt, not taxes on the voters.
Accordingly, the balanced peace time budget of 1914, which posted revenues and expenses of $725 million each, mushroomed as follows by the war’s peak in 1919:
- Revenues rose by 7X to $5.13 billion;
- Outlays rose by 26X to $18.49 billion;
- Cumulative deficits over 1917-1919 totaled $23.2 billion or 70% of total war spending during that three year period.
Needless to say, after four decades of fiscal rectitude there was not even the remotest semblance of a New York bond market capable of suddenly absorbing such enormous financings. In fact, most of the meager $1.2 billion of Federal debt outstanding on the eve of the war did not even trade because it was held as collateral by the national banks to back their currency issuance.