The interest policies followed in the refinancing operations will have a major impact not only on the provision for interest payments in future budgets, but also on the level of interest rates prevailing in private financing.  The average rate of interest on the debt is now a little under 2 percent.  Low interest rates will be an important force in promoting the full production and full employment in the postwar period for which we are all striving.  Close wartime cooperation between the Treasury Department and the Federal Reserve System has made it possible to finance the most expensive war in history at low and stable rates of interest.  This cooperation will continue.

No less important than the level of interest rates paid on the debt is the distribution of its ownership.  Of the total debt, more than half represents direct savings of individuals or investments of funds received from individual savings by life insurance companies, mutual savings banks, savings and loan associations, private or Government trust funds, and other agencies.

Most of the remaining debt—­more than 100 billion dollars—­is held by the commercial banks and the Federal Reserve banks.  Heavy purchases by the banks were necessary to provide adequate funds to finance war expenditures.  A considerable portion of these obligations are short-term in character and hence will require refinancing in the coming months and years.  Since they have been purchased out of newly created bank funds, continuance of the present low rates of interest is entirely appropriate.  To do otherwise would merely increase bank profits at the expense of the taxpayer.

The 275-billion dollar debt poses a problem that requires careful consideration in the determination of financial and economic policies.  We have learned that the problem, serious as it is, can be managed.  Its management will require determined action to keep our Federal Budget in order and to relate our fiscal policies to the requirements of an expanding economy.  The more successful we are in achieving full production and full employment the easier it will be to manage the debt and pay for the debt service.  Large though the debt is, it is within our economic capacity.  The interest charges on it amount to but a small proportion of our national income.  The Government is determined, by a resolute policy of economic stabilization, to protect the interests of the millions of American citizens who have invested in its securities.

During the past 6 months the net revenue receipts of the Federal Government have been about 20 billion dollars, almost as much as during the closing 6 months of 1944 when the country was still engaged in all-out warfare.  The high level of these receipts reflects the smoothness of the reconversion and particularly the strength of consumer demand.  But the receipts so far collected, it must be remembered, do not reflect any of the tax reductions made by the Revenue Act of 1945.  These reductions will not have their full effect on the revenue collected until the fiscal year 1948.