Evening star., 1926-11-08
MEN AND MONEY
BY NJ. S. Rukeyser
(Couyright. 1026.l

Prohibition, as even former Repre-
sentative Volstead recognizes. has
not yet stopped drinking in the
United States. In six out Of eight
States in which the referenda as to
the wisdom of the policy were held
those who went to the ballot boxes
evidently followed the advice to vote
as you drink.
Apart from it's deleterious effect or
the quality Of liquor consumed, an
important effect of prohibition has
been to render the liquor industry tax
free.
In pre.volstead days, when the
merits Of the question were debated
the vets fallaciously argued against
the reform on the economic ground
that 1t would deprive the Government
Of substantial internal revenues. II
the law had been vigorously enforced.
the argument would have collapsed
because the people would have exert
ed their spending power in other di-
rections, which could have been
taxed.
But what appeared a fallacy has
become fact. Individuals in large
numbers have poured money into the
liquor traffic, which no longer pays
taxes.
incidentally, two factors help to
explain the relatively high rate Of
Federal taxes compared with. the
pre-war situation. In the first place,
the chief expense of Government Is
paying interest and reducing the
principal on the war debt. In the
second place, the Government must
seek in the income tax and in other
sources of revenue a substitute for
the funds formerly received from the
liquor trade.
Traders and Economic Outlook.
These economic considerations afe
cited with no thought that they
should he a determining factor in the
matter Of the prohibition policy, but
merely as an Interpretation of how
the new regime Is working out under
present enforcement.
The stock market in its post-elec-
ton apathy revealed again that spec
ulators are primarily concerned with
the economic outlook.
=, The burning question is: How long
will prosperity last?
As a matter of fact, even prosperity
does not determine the fate Of all
types Of business enterprises. Certain
lines Of industry. it is true, are fair
weather trades, dependent on the con-
tinuance of good times. In this group
are the steel. non ferrous metal. auto
mobile. wholesale dry goods. and a
variety Of other trades. Other indus
tries are not entirely dependent on
prosperity. but are affected by
changes in the tides Of trade. In this
group are the railroads, whose gross
earnings are, of course, dependent on
the volume Of freight offered for
transportation by current business.
However. a touch of adversely In
general business, resulting in declin-
ing commodity prices. reduces the
cost Of materials Of which the rail-
roads are heavy buyers and thus re-
duces expenses. The railroads tenn
porarily gain from such develop
ments, because there is virtually al
ways lag between the time when
commodity prices decline and the
time when rates are reduced. The
lag springs from the fact that public
regulatory bodies cannot move as
quickly as economic events. In 1925
we have been experiencing the un-
usual phenomenon of prosperity, ac-
compa MED by substantial gradual
decline in commodity prices. Thus
the railroads have been helped. on the
one side, by an unprecedentedly large
volume of traffic, and, on the other
by falling costs.
Cheap Stores Benefit.