New-York tribune., 1918-07-21
Business Profits From Initiation
Borrowing at Expense Of Government
Urges Change Federal Policy and Leves and
Excess Profits Ultimate Limit-Sky-Figh Commodity Prices
Make Industry Chief Beneficiary of Imitation
BY H. J. Davenport

BY H. J. Davenport
Professor Of Economics IN Cornell University
TAD Congress done as we'll a
year ago with it's revenue
programme as it appears to
be in the way Of doing now-eight
billions of taxes-the most serious of
it's present difficulties would not now
have to be faced. Perhaps-no one
knows-the present programme
goes as far in the direction of right
policies as public opinion will per-
NIT. But it is the same folk that
are now opposing who were telling
us a year ago that the thing that
Congress has now in mind to do
was an impossibility. Now the sole
tenable criticism is that the pro-
gramme does not go far enough.
Next year, when the thing gets done
that ought forthwith to be done, the
difficulties will again be the more
serious for the intermediate delay.
The unfortunate fact is that each
immediate problem Of getting reve-
nues appears to be easier through
the adoption Of methods that make
each later collection still more diff
ficult. Imitation borrowing-essen-
TALLY forced-loan borrowing the
circulation of government credit as
currency, bank borrowings easier
than ultimate borrowing, and ulti-
mate borrowing, for so far as it
will go, is easier than taxes. But al
ways the direct results are the same
in restricting individual buying and
consuming, in order that the gov
ernment shall be able to buy and
consume instead. In this sense in
f1ation borrowing and taxation are
one, only that the imitation method,
by pushing up prices against the
government, makes the revenues that
were easily obtained so far fail of
their purpose. The interest charges
are for the future to care for.
Imitation a Form
OF Indirect Taxation
For, after all, imitation borrow
ing affects the general public as
kind Of taxation. More currency
in circulation makes the prices rise.
The prices, rising faster than wages
or salaries or interest, mean that
the individual income buys less.
Taxation would make the number
Of dollars less; imitation leaves the
number not less, but each one
smaller. But each time that infa-
tion succeeds makes success the next
time more difficult; the penalties
become increasingly evident-in-
comes disturbed relatively to one
another, wages variously affected,
creditors impoverished, fixed sal
aries grossly overburdened This
sort of taxation stands also in the
way of fair and successful taxation
by excises and customs. Doubtless,
the poor must pay taxes together
with the rich if we are to carry out
our colossal undertaking. Now,
however, that we have let the prices
rise-one way of taxing the poor
we are so far cut off from excises
and customs so long as each new
revenue bill promises a further rise
in prices.
The first clear line of fiscal pol
icy is, then, that as the revenues of
last year should have been obtained
without disturbance to general
prices, so should this years reve-
nues be sought by methods that will
not further disturb the price situa-
ton. Only so can indirect taxation
be made a further fiscal resource.
From this point Of view, it must
be admitted, no choice exists be-
tween taxes and bonds, so far as
the bonds can be placed without in
volving currency imitation. Taxes
cut into individual expenditure
that is what they are for. But so
do the bonds-if and when they
are paid for out of income, and not
marketed through bond operations
made possible through the discount
activities of the banks or through
direct credit issues created to pur
chase them. With bonds, it is true,
as contrasted with taxes, the buyer
receives a contract for later reim-
bursement out Of later taxes-a
mortgage on the individual incomes
of the future. Whether this is un-
duly to favor interest and profits
as against wages-wealth as against
life-need not now be discussed; it
will be for the future to take care
of 1t. For most purposes of gov
or