Financial History Issue 114 (Summer 2015) | Page 28
Joe I. Herbstman Memorial Collection
war profit tax as well. Approximately onequarter of the cost of the war was paid for
by the changes made to the tax code.
The remaining revenue would come
from the sale of government debt. All told,
more than $20 billion would need to be
generated by the sale of war bonds over a
two-year period. Such debt issuance had
never been attempted before in American
history. Indeed, the national debt stood at
only some $3.6 billion in the summer of
1916. Previous Treasury bond sales were
usually targeted at banks and large investors, but the Liberty Loan program was to
be different. McAdoo knew that financial
institutions alone could not buy up all of the
needed debt, so the Liberty Loans had to be
sold to individual American families as well.
The Liberty Loans (also known as Liberty
Bonds) were sold throughout five different
issues: a First Liberty Loan (30-year bond),
a Second (25-year bond), a Third (10-year
bond), a Fourth (20-year bond) and a Victory Loan (four-year note). Issued from
June 1917 through May 1919, the program
raised some $21 billion through the sale of
about 66 million securities.
McAdo