Evening star., 1932-01-03
Technical Bars to Recovery,
Like Tax Selling, Have
Been Removed.
PROTECTIVE MEASURES
WILL SOON BE IN FORCE
American Financial Fabric to Be
Shielded From Any Further
Unsettling Attacks.
BY CHARLES F. SPEARE.
ecial Dispatch to The Star.

special DlSpatCn TO Inc SIaT.
NEW YORK, January 2.-What is to
happen to business and to securities in
1882 will depend upon what is done in
the next 60 days to restore international
credit and to shield the credit of our
own Government, and with it the in
tegrity of our financial institutions and
corporations, from further attack. If
the leaders in Europe and in the United
States prove to be statesmen and not
politicians and if national patriotism is
put ahead of political advantage, we
may expect to see a more satisfactory
set of conditions and one permanently
encouraging to industry and to invest
ment markets.
During the next two months solu
ton must be found for the German
economic situation. Within this same
period the American Congress must
banks and to corporations through
some such agency as the Reconstruction
Finance Corporation. Congress must also
formulate program to meet the Gov
ernment deficits for the fiscal years
1882 and 1898. The matter of railroad
wages that are to apply during the
coming year must likewise be deter
mined. Inasmuch as in these months
most of the States and municipalities
make up their budgets and fix the tax
rate for the year, their primary con-
Germ should be that of economy of ad-
miniStration and the sacrifice of politi-
cal advantage to the common good.
Reperations Settlement Sought.
The report of the Basel Committee is
sufficient groundwork on which to
build up the case for a radical modifi-
of tho German ranarotippc nav
ments. The next chapter will deal with
the political espects of the case, which,
unfortunately, have always had prefer
ence over the economic ones. AS 1t
looks today, the outcome rests mainly
with France and Great Britain. Our
Senators and Congressman may talk
about what they will or will not do con-
corning debt cancellation. If Germany
cannot pay France, or Great Britain,
or Italy, two of the three cannot pay
the United States. The third will not.
We might as we'll accept this at once
and adjust our affairs to it. We may
That does not influence a situation
where debtors are without means of
satisfying their creditors.
Recently attention has been shifted
from the international credit status to
the unsatisfactory surroundings of our
own Government finances. We passed
successfully through the acute stage
of the flight from the dollar" in Oc-
tober. Now we are dealing with a
considerable amount of propaganda in
favor of cheapening the dollar in
other words, for imitation. The school
Of moderate inflationistS is rapidly
gaining followers. There is considera-
BILE merit in their thesis, which is that
Iafotiny, hoc for cho11I
go; so long as def1ation continues in
commodities and in the various evi-
dences of debt it is hopeless to ex-
pect a revival in business. Imitation
is possible through the functioning of
a concern like the Reconstruction
Finance Corporation, if the Federal
Reserve Board is given authority to
rediSCount its bonds. 1t is obvious that
we cannot continue much longer to let
all forms of wealth join in an end
less sag.
Loans VS.. Higher Taxes.
Involved in the protection of Gov
ernment credit is the congressional
program of taxation. This boils down
to the proposition whether it is best
to cover the deficit with additional
loans or meet the greater part of it
be learned by the action this week of
United States bonds and Treasury GER
tificates, which have been under great
pressure, in contrast to indications of
recovery in corporation bonds. The
argument of those who are least in
sympathy with the plight of European
nations is that they have been prOf1i-
gate in their borrowings and have
erected financial structure that is
toppling from its weight. Too late
they have enforced ratio Of taxes
to incomes that is imposing tremendous
burdens on their nationals and leading
to revolutionary political tendencies.
Politically, 1t is eXpedient to exempt
large portion OF the public from tax
burdens From the standpoint of Gov
ernment credit, it is dangerous. AS
Acting Secretary Mills Of the Treasury
Department points out this week, there
is no good reason why man with
an income of $4,000 cannot afford to
pay an annual Federal tax OF $31 so. He
might have gone further and applied
the same argument in proper ratio to
all income producers above $4,000 The
list OF those who make no contribution
to the Government in the form of taxes
though able to do SO, is an aStoniShingly
long one. There is no argument against
those with the largest incomes. The
arithmetic of the situation is that this
produces but a small portion of the
amount required to cover existing Gov
ernment deficits. The emergency COM
pelling higher income tax schedules
and the introduction Of other forms
of taxation is even greater today than
it was in the years following the end of
the war.
Call for leadership
What the business men and the in
yeStorS OF the United States today want
to see is evidence of leadership in
Washington and in banking and cor
poratiOn circles in New York that. first
OF all, considers the restoration Of sound
economic conditions rather than DO
litical opportunity or group advantage.
They do not care a great deal whether
this develops under Republican or
Democratic administration Looking at
1t from an unprejudiced standpoint, it
would seem to the layman that the best
way for the present majority in Con-
greSS to gain political strength would
be to move quickly and senSibly in mat
terS concerning the credit of the Gov
ernment and of American institutions
and corporations and, through the
enactment of constructive measures,
permit gradual development of con-
fidence with which American business
could proceed at better pace even
should the outcome of the approach
ing European conferences prove un-
satisfactory.
Some of the technical hindrances to
recovery In the markets, such as selling