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utilities such as streets, water works, schools, hospitals, and such.The war of 1917 marked the beginning of a new era of publicspending and borrowing. With the coming of war we had threeyears of enormous deficits as follows:i9*7 $ 853,357,0001918 9,033,254,0001919 i3,37o,638,ooo 2The history of the war measured in national debt may be statedas follows:1914 $ 1,188,235,0001919 25,482,000,000State and local debts had risen from $3,821,896,000 in 1912 to$8,689,740,000 in 1922. 3This was due almost wholly to war. After that, however, in theperiod from 1922 to the depression of 1929, the federal government,instead of borrowing, annually reduced its debt. But thestate and local authorities became heavy borrowers. However, nosmall part of the local debts was contracted for revenue-producingimprovement and practically all of this debt was created with provisionsfor amortization. None of it was arranged as part of anyscheme to produce national income, though it had that effect. Itarose chiefly out of the demand of local communities for publicutilities such as schools, education, health facilities, streets, andfrom the great demand for roads to make way for the stream ofmotorcars that poured from our factories. Whatever the purpose,however, the policy did accustom the public mind to public borrowingas a fixed policy of government.The theory of public spending as an instrument of governmentto regulate the economic system first appeared in the early part of1922. The theory was advanced by the Unemployment Conferenceof that year. Briefly stated, it held that during periods of prosperity,when private industry is supplying all the requirements of nationalincome, the federal and local governments should go slowly onStatistical Abstract of the U.S., 1941, p. 178.*lbid., pps. 230, 251.173