Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-03-20
U. S. Finding a Way Out

to TOO narrow IaA ps>Sc ~ 1AAoSt
strikingly exemplified. The number OF
Individual returns for the calendar year
1928 aggregated 4,071 900. OF this num-
Der. 382 900 taxpayers contributed ST.
1928. 600 COO and the other 1888, 900 In
diyiduals who made returns contributed
but $50, 900, 900. Clearly, under our sys-
tenn. large and moderately large incomes
bear practically the full burden OF the
individual income tax. Now, these In
comes are the very ones subject TO the
widest fluctuations, since they include
business profits.
In brief. our Federal Government
places its chief reliance on an income
tax which. because of the character OF
its structure and the narrowness OF
its base, Is susceptible to sharp in
creases and precipitous drops. AS
result. our budget lacks stability and Is
particularly vulnerable to depression
as sweeping as the one which has over
taken us. Our total receipts from tax
alton have shrunk from $3,626, 600, 900,
in the fiscal year 1880, to an esti-
mated amount of less than 81 DOC, 000,-
coo in the current fiscal year. OF this
loss Of more than 1900 100000, no
less than 81 1856 600 900 Is accounted
for by a falling of of income tax COL
lections.
The problem as 1t presents itself to
the country, therefore, may be stated
in very simple terms. 1t is, on the one
hand. to halt the defiation by restoring
confidence. and, on the other, to bal
ance the budget; and the program
which the President and Congress are
busy putting into force has exactly
these two objects. They are, OF course.
so closely interrelated that they are
virtually one. since to restore conf
IN the fever nf AnnrQ-
hension which has been carrying the
defiationary movement beyond all rea-
sonable limitS-it has been found nee
essary to administer to the patient Ju-
dicious but generous doses OF the credit
of the United States; and that credit
in the long run rests on the ability and
willingness OF the Government to pay
its bills In this respect it differs In
no particular from the credit OF the
private individual. and the budget Is
its tombstone. To live on prospects
while mourning debt may be permissible
to either individual or nation, depend
ing upon circumstances, but under no
circumstances, and especially those OF
the present, can the process be pro-
longed without disaster.
Improvement In Situation.
should Nke first to consider and
explain the measures by which the
President. with the hearty cooperation
of Congress, has already greatly i'm
proved the feeling and, therefore, the
situation in the country. The Recon-
struction Finance Corporation, with
capital of $500, 900 600 supplied by the
United States Treasury and borrow
ing power of 81 500 900 600, is already
functicning. The corporation Is EN-
y,oaka Inang m HANKS "
ings banks, trust companies, building
and loan associations, insurance COM
panies, mortgage loan companies, Fed
eraI land banks and intermediate credit
banks. Joint stock land banks, credit
unions and agricultural and live stock
credit corporations. 1t may also, with
the approval Of the Interstate Com
merce Commission, make loans to rail-
roads helping them to meet their fixed
obligations, which form so large part
of the investments carried by savings
banks. insurance companies and other
public institutions. Aside from the
Affirmative assistance which this corpo-
ration should render, I visualize 1t as
constituting a solid wall under the pro-
lection Of which men and institutions
can carry on their normal operations
| without fear Of sudden and devastating
interruption. I know Of no instrument
better designed to lift that psychology
CT fear which should play no part in
| American economic life:
AS this is being written, and before
the corporations commitment to loans
in any volume, its mere presence on the
scene seems to be fulfilling its pur-
pose For the week ended February "a
| net a single failure among national
banks was reported. This is the first
| time in almost year that this class of
banks has made so good a record.
| On February 26 the Federal Reserve
Board announced that for the first
time "in quite awhile" it had received
| in the course Of a full business day
no report of bank failure. Such news
may be nothing to crow over-but,
relatively speaking, 1t Is highly sig
niflcant
No doubt the imminent enactment
Of the Glass Steagall bill, now accom-
plished, was contributing factor This
bill supplements to very great extent
the work that has been undertaken by
the Reconstruction Finance Corpora
ton. BY its provisions banks lacking
eligible paper for rediscount at the
Federal Reserve Banks, as rather mar
rowly defined in the Federal Reserve
law, may obtain the necessary credit
from the Reserve System on the
strength Of other first class assets. It
takes the pressure of the banks to call
| loans and to sell investments in order
to obtain greater hquidity and by Gre
ating q feeling Of security permits
them to extend the necessary accom-
mediation to correspondent banks and
to individual and corporate borrowers.
Again, It adds to the country's free
gold reserve approximately $750,OO0 900
until now sequestered as q reserve for
currency, without impairing in the
slightest the 40 per cent gold reserve
against currency required by the Fed
eral Reserve act. The dificulty has
been that as the demand for currency
eligible paper which might be used a.