Evening star., 1932-05-16
BUSINESS WATCHES
WORK OF CONGRESS.
New York Observes Wash
ington Closely as Efforts Are
Made to Balance Budget.
BY MARK SULLIVAN.

The heart of what is now going on
as respects the business situation lies
between Washington and New York.
Washington is taking the steps de-
signed to balance the budget. New
ship captain watching signs of the
ending Of storm. This relation OF
Washington as actor and New York
as watcher comprises the center Of the
present economic picture. II 1t looks as
If the budget will be balanced. New
York Is ready to start, not full steam
ahead, but nevertheless forward. The
concerto question is, will Congress
balance the budget? The psychological
question, equally material at the mo-
ment, is, will New York believe that
Congress will balance the budget?
In this psychological situation, the
prevailing judgment of the more i'm
portant sections of New York is that
Congress will probably fail to take the
full steps necessary to balance the bud
ton Of New York opinion Is one of
almost stubborn pessimism.
Because New York Is a center from
which news opinion flows cut to the
country, the mood of New York tends to
infect the Nation. New York also in
fects Europe; and Europe prevailingly
thinks Congress will not balance the
budget and is therefore selling Ameri-
can securities. Thus fear grows by
what it feeds upon. Beneath it all,
the fundamental question Is whether
New York is right in tending to as
sumo the budget will not be balanced.
Judgment Questioned.
In to thedisposition of New York to lean
toward the pessimistic side some causes
enter, which are not material to the
present situation and which tend to
mislead New York in the direction
Of expecting the worst. The New York
financial community has had practical
ly continuous rough sailing for more
than two years. This has given New
York such an extreme tendency toward
oessimism as to raise a question whether
New forks judgment about present
events at Washington is sound.
The answer hangs on the fundamen-
tai question. will Congress actually bal
ance the budget? The best Washington
judgment about the answer is decidedly
that it will. There may yet be another
flare-up in Congress such as has dis
mayed the country twice since the mid
die of March and it may be necessary
to have another wave of pressure from
the country upon Congress. In the
end however. Congress will pass ap-
the tax bill as it now
stands, or a stronger one, and will enact
approximately the program Of economy
as originally laid out.
In saying the best judgment Is that
Congress will balance the budget, two
qualifications should be added. Con-
gress will not and cannot balance the
budget to the exact penny or dollar. or
even within a hundred or two hundred
million dollars. This qualification is
not material. If the business men and
economists throughout the world. now
Congress, see the budget bal
anced within say three hundred million
dollars, they will be sufficiently assured
hat the sound direction has been taken.
Element of Estimate.
The other qualification Is inherent in
the situation. The process Of balancing
the budget involves certain factors i'm
possible to state with exactness. There
is to be. for example. a certain rate of
on automobiles and many other
commodities. What this tax will yield
depends upon quantity Of future sales.
has made what 1t regards
as conservative estimate Of future
sales. II sales fall below that estimate
the tax will to that extent fail to yield
the estimated amount Of money. This
element Of estimate necessarily runs all
through the problem of balancing the
budget. The picture of the countrys
business future, therefore, becomes a
battle between pessimism
and optimism. If pessimism wins, less
automobiles may be sold than the esti-
mate. II optimism wins, more will be
sold. In the one case the budget will to
that extent fail to balance. In the other
case receipts by the Treasury will be
more than enough to balance the bud
get: AS respects washington, the con-
crete keystone of fact is that processes
are under way which the best Judgment
believes will result in adoption of sub
all the measures designed to
bring the budget to balance
Another matter separate from bal
ancing the budget is the proposed ar
rangement by which the Federal Gov
may make or underwrite
loans probably limited to States or to
solvent corporations, with which the
latter can finance self-liquidating pub
lie or semi-public works The total of
such loans, If made. will not be
charge upon the budget. Only the an
nual interest charges would figure in
the budget. Moreover, the States and
corporations borrowing the money would
be expected to reimburse the Federal
Government for the interest The pre-
else form of this proposed relief for
is not yet fixed In any
event. this step will not be taken until
after passage of the measures which
will balance the budget. So far as the
financial community's anxiety is about
balancing of the budget, the answer is