Drumming Up New Ways to Borrow Money
Buying war bonds would help parents protect children from Nazi oppression. War Bonds image courtesy Northwestern University Library
The federal government spent over 300 billion dollars on World War II, a staggering amount by 1940s standards. That's twice as much as the government spent in its entire existence before the war. As another indicator of the growth in spending, the federal budget ballooned from nine billion dollars in 1939 to 98 billion dollars in 1945. Obviously, the U.S. Treasury needed to come up with a lot of money fast to meet the expanding financial demands. President Roosevelt settled on two major means of raising money: increased taxes and borrowing, through the sale of massive amounts of war bonds. Besides paying for the enormous costs of war, these measures would remove excess wages and other spendable money in a time of shortages, helping to keep a lid on inflation.
New Tax Laws Bump up Revenue
With the passage of key legislation, such as the Revenue Act of 1942, the federal government made historic changes to tax policy. For one thing, the government began to collect taxes from a greatly expanded number of people. Fewer than 4 million people filed taxable individual income tax returns in 1939 but more than 42 million people filed in 1945. The amount of individual income taxes grew even more, from one billion dollars in 1939 to 19 billion dollars in 1945. This was helped by average annual earnings for full-time workers that nearly doubled during the period. Many of these people were earning between
$1,500
and $10,000
a year and because of their numbers, they would pay most of the individual taxes. However, those with higher incomes were expected to chip in a higher percentage of their personal income since they were "few in number and already subject to tax rates running from 25%
at $10,000 to 90%
at $1,000,000."
Footnote 1
Compared to the sacrifice made by this wounded soldier on
a bleak battlefield, buying war bonds appear to be the
least
home front workers could do for the cause. Wounded soldier War Bonds image courtesy Northwestern University Library
An important driver of the increased collection was the implementation of the "pay-as-you-go" plan that required employers to automatically deduct a percentage of wages from workers' paychecks as income tax. The government saw several advantages to the deductions. By taking the money out of the hands of consumers up front, they wouldn't be tempted to spend it, which would help keep inflation low. Taxpayers would no longer have to budget a large amount to pay taxes at the end of the year. And, important to the Treasury, "very few people would even be tempted to avoid paying taxes." The increased cash flow from the withholding tax was augmented by what the government euphemistically called the "Victory Tax." This was a 5%
surcharge on taxes that was also taken out of wages up front.
Footnote 2
National Strategies for Selling Bonds
While greatly increased tax revenue helped fund the war, the government still needed to borrow more than half of the money for wartime expenses. Many worried about the
size of the new deficits resulting from the massive expansion of borrowing. The largest deficit during the depths of the Depression in the 1930s, even with all the New Deal programs, was about 4 billion dollars a year while during the war these numbers skyrocketed to about 50 billion dollars each year. Still, after raising taxes, the government saw no choice but to move forward with huge bond sales. Many advisors urged President Roosevelt to force individual citizens to buy bonds. They argued that compulsory bond purchases would avoid some of the vicious excesses of World War I during which society stigmatized those who failed to buy bonds, even to the point of painting their homes and barns yellow. In the end, proponents of voluntary purchases won the day, arguing that it would "give people an opportunity to do something" more for the war effort.
Footnote 3
All home front Americans had to do was buy the planes, this pilot and his fellow flyers would take care of the rest. Air Pilot image courtesy Northwestern University Library
The Treasury Department spared no effort devising campaigns to sell
bonds. The best Madison Avenue advertisers were recruited to design promotions. Posters played a big role in pushing bond sales. One showed a wounded soldier on a battlefield asking the question: "Doing all you can, brother?" Another poster showed an anti-aircraft machine gunner who had just shot down an enemy plane with the caption "You can't afford to miss either! Buy bonds every payday." Another showed a proud pilot in flight with several U.S. fighter planes in the background and the caption: "You buy 'em We'll fly 'em!" Other posters aimed at promoting the automatic payroll deduction savings plan as a painless and patriotic way to buy bonds while children were encouraged to save with the caption: "Even a little can help a lot - NOW." While posters created in World War II were not nearly as negative as those of World War I, some did use scare tactics to sell bonds. For example, one poster showed a Nazi officer leering at three young girls. The caption read: "A high honor for your daughter" implying that by failing to buy war bonds, the reader's daughter could be victimized by the barbaric enemy.
Footnote 4
The brightest stars in Hollywood were recruited and responded by participating in
promotional efforts. Film star Hedy Lamarr offered to kiss anyone who purchased $25,000
worth of war bonds. Her press agent reported that one buyer was so overwhelmed by the anticipation of the kiss that he fainted before he could collect. Singer Kate Smith got pledges from listeners for almost 40 million dollars worth of bonds during a 16-hour network radio marathon. Auctions brought in big pledges to buy war bonds too. The stockings that had graced actress Betty Grable's famous legs fetched top dollar as did the horse shoes from Triple Crown horse racing phenomenon Man o' War. Meanwhile, Gimble's bargain basement auctioned off stage, radio, and film star Jack Benny's beloved, but screechy $75
violin for one million dollars. Imaginary heroes
joined the effort, including comic book stars Superman and Joe Palooka.
Footnote 5 (
Watch Bugs Bunny cartoon for a bond drive campaign - via youtube.com)
Oregon Bond Sales Efforts
Officials emphasized how easy it was to buy war bonds by using the automatic payroll deduction plan. Local war finance committees worked to install the deduction systems in businesses and factories. U.S. War Bond image courtesy Northwestern University Library
David Eccles, the executive manager of the Oregon War Finance Committee saw statewide bond work falling into four major categories, which he recommended as a framework for county level organization. The industrial division consisted of volunteers charged with installing and maintaining payroll deduction savings systems for employees of businesses and factories. These workers concentrated first on larger sites with hundreds of employees but later, with the help of more female volunteers, began setting up the program in firms with fewer than 25 employees. The banking and investment division focused on bond sales to banks, corporations, trust funds
and other large institutions. This was an important assignment because despite the publicity barrage aimed at individual bond purchasers, about 75%
of the value of all war bonds were sold to banks and
financial institutions. The promotional division developed special events such as rallies and provided publicity for the entire war finance organization. Finally, the community division implemented activities such as operating bond booths, stamp sales, and other on-the-ground work.
Footnote 6
While huge rallies with stars such as Bing Crosby or John Wayne made the headlines, much of the local work of bond drives fell to volunteers going door to door
making sales. Officials had plenty of advice beyond the common patriotic pitches for winning in the sales game. Canvassers were urged to get the name right: "If there is a 'foreign' or unusual name be sure you know how to pronounce it (when in doubt ask a next door neighbor)." Volunteers should also be able to "size up" or "estimate what amount a given household should be asked to buy." If canvassers saw a "service flag" (denoting a family member in the armed services) in the window, they should ask the parents to talk about it and then say: "'I know you have been backing them up by buying War Bonds, but in this War Loan we are all trying to dig a little deeper and buy extra bonds.'"
Footnote 7
Even small amounts of savings would add up to big benefits for families and the country. U.S. War Stamps and Bonds image courtesy Northwestern University Library
Appealing to community pride also worked. Quotas were set up on the national, state, county and town levels for the sale of bonds. Sales volunteers
reminded competitive people how bad their town would look if they failed to reach their quota but the rival town exceeded theirs. If nothing else, bond sellers could appeal to selfish reasons since
bonds were a vehicle for personal investment. As volunteers reminded, some types of bonds would pay nearly 3%
per year and were backed by the U.S. Treasury. The money put into bonds could be drawn out in case of emergency, or to fund postwar dreams such as buying a home or paying for education.
Footnote 8
Bond booths were another way to sell war bonds and women were key to the effort. The booths were kiosks set up in prominent locations with plenty of foot traffic such as hotel or theater lobbies. The booths required a large number of volunteers to keep them fully staffed as was the case in Portland during the Fifth War Loan Drive in 1944. A total of 561 volunteers worked in 13 hotel, theater, and store booths including 64 who sold war bond stamps at the Multnomah Hotel and 53 who work the booth at the Benson Hotel while 52 staffed the New Heathman Hotel booth. The booth at "Woolworth's Five and Dime Store" kept 65 volunteers busy while 14 worked the Meier & Frank booth and a dozen sold bond stamps at the "Penny's [sic] Store."
Footnote 9
Posters reminded workers
how important it was to buy bonds regularly. Buy bonds every payday image courtesy Northwestern University Library
Booth workers also received advice on pumping up sales. For example, competitions between
booths in the same community or between booth volunteers who worked different days could spur sales. Highly publicized quota drives featuring sales "thermometers" that showed current sales relative to the quota could help push sales too. Motivated booth volunteers would conduct "pre-sales canvasses" of friends and neighbors as officials noted that "the most successful booth saleswomen are those who 'drum up trade' before seating themselves at the post of duty." This could entail calls to friends or placement of advertisements saying "won't you stop in when you're down town and give me some business?"
Footnote 10
Local Experiences
Local communities in Oregon rose to the challenge of financing the war with enthusiasm, but
results were mixed as a 1945 report on the seventh war loan bond drive by the Department of Treasury's Portland office revealed. Counties competed with each other to reach and exceed their sales quotas. Baker County did exceptionally well by reaching 116.4%
of their "E bond quota." Along with house to house solicitations, the local "Soroptomists took charge of bond booths during presentation of 'This is the Infantry,' and Venture Club girls sold bonds through the crowd." In an example of the levels of competition, the Oregon City Public Library "won first place in the Library War Bond Campaign with a comfortable lead over the Woodburn County Library (second), and the Deschutes County Library (third)." In Seaside about 80 grandmothers bought bonds in order to have seats at a breakfast attended by a national figure. Columbia County only reached
76.4%
of its quota but officials were understanding since so many of its residents commuted to defense jobs in the Portland where they had bond purchases deducted from their paychecks.
Footnote 11
Other counties reported a variety of experiences with bond drives. For example, the Elks Lodge in Deschutes County gave two $50
bonds to the girls selling the most during the drive while another group in the county staged a "charm contest" to raise support. Volunteers in Douglas County discovered the effectiveness of a "bond wagon" according to one participant:
Hood River County proudly sold more in the national "Bonds for Babies" campaign than any Oregon county except Multnomah. Jefferson County officials praised the "promotion by the Warm Springs Indians, many of whom lost sons or brothers or husbands in the World War." Meanwhile, the Beta Sigma Phi organization in The Dalles "popped stove pipe hats like Uncle Sam's on their heads, and canvassed the town in the evenings with a sound truck." The members did so well that they raised 250,000 dollars and helped Wasco County go way "over the top" of its quota at 169.5%.
Footnote 13
"4th War Loan" Drive Brochure, U.S. Treasury Dept., 1943. Folder 18, Box 15, Defense Council Records, OSA.
Bonds For Babies Flyer, Marion County War Finance Committee, May 29, 1945. Folder 62, Box 27, Defense Council Records, OSA.
"The Mighty Seventh" War Drive Report, U.S. Treasury Dept., Portland Office, Aug.
21, 1945. Folder 62, Box 27, Defense Council Records, OSA.