Evening star., 1934-08-19
Advances Due to Drought
Held Certain Despite
Federal Efforts.
NEW FACTOR MAY BRING
CHANGES IN PROGRAM
Proposed N. R. A. Reorganization
Taken as Good Sign-Pension
Burden on Railroads Cited.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK. August ls.-The in
cident this week that will affect more
American homes and individuals than
any other is the beginning Of q rise
in food prices due to the drought.
For it is certain that the decrease in
production of grain and live stock by
natural and artificial forces must lift
the cost level of this group Of COM
moditieS in spite of the efforts of the
Government to curb proflteering.
1t introduces a new problem into q
confused and increasingly unsatis-
factory situation, though one which
may have partial compensation in
arousing the administration to action
that will give the business world o
greater degree Of confidence. Signs
of this may have appeared in the
proposed reorganization Of the N.
r. A. The demand for radical
change in its policy is universal.
A careful observer, who has re-
Gently made an extended survey Of
conditions in the Middle West, finds
the general opinion in that section
to be in favor of steady advance
in industry after the Summer dull
ness, with such trend made more
probable If abandonment of the
N. r. A. were to be effected.
Rail Traffic Lost.
The widespread losses from the
drought and the added costs to con-
sumerS and producers because Of 1t
should compel Government agencies
to reconsider orders that impose new
burdens upon its victims. The West
ern and Northwestern railroads pro-
vide an illustration. Not only will
they suffer a heavy reduction in traf-
fic, sbut they are compelled to move
farm products in the emergency be-
low the regular tariffs. So they, and
all others, ought not now to be asked
to institute the costly pension plan
enacted by the last Congress, for
there are grave doubts Of the ability
Of several roads to meet their next
years interest charges. The drought
has brought Government own4rship
Of the railroads a degree nearer the
inevitable. J
Much is expected Of the housing
program as an aid to recovery. It is
the most practical of all plans sug-
gested, but it cannot do for the busi-
ness world what railroad construction;
home building or automobile produc-
ton accomplished in other periods OF
industrial depression. The costs of
material and labor and Of the money
involved are too high to promote it
successfully. There Is suspicion that
the banks are not over-enthusiastic
about it, though their gestures are
friendly. They would prefer to deal
with larger units and those unrelated
to Government projects.
Budget Hopes Are Dim.
The prospect for balancing the ma
tional budget in 1896 grows dim as
the necessities for Federal relief, not
only in agricultural but in industrial
sections of the country, increase. 1t
is true that the volume of Treasury
obligations gains slowly. There has
been only slight advance in the net
Government debt since June 80. The
momentum of expenditures for the
account of the different agencies will
quicken, however, after Stepember l,
when payments to those afflicted by
the drought begin to be made and the
P. w. A. work is speeded UP.
On the credit side is the high pro-
portion of repayment by borrowers
from the r. F. c., as AZ per cent OF
loans contracted have been hquidated.
Some of those attempting to make
case against the administration
spending policy would have had the
public believe that all r. F. G. loans
were a dead loss and have included
them in the debt figures on which in
tereSt must be paid by future genera
tions Such is not the case.
The fact that the appropriations by
the Treasury must expand rather
than contract over period of many
months raises the question as to how
far taxation is to be adjusted to meet
the new situation. That business
profits and personal income taxes will
be materially increased for the calen-
dar year 1884 is certain. 1t is under
stood that the tax on profits is to be
raised to such an extent that it may
cause Encouragement to industry and
tend to check business initiative. Un-
doubtedly the individual with an in
come of from IS, 600 to $25, 900 will be
compelled to pay higher tribute to
the Treasury next year than at any
time since the war.
Drive on Tax-free Bonds.
In view of the requirements of the
Treasury, it is not unlikely that action
will be taken by statute to remove the
tax-exempt feature from Federal and
municipal bonds. This should have
been done years ago 1t was recon-
mended by previous Secretaries of the
Treasury. The amount of bonds free
of taxes greatly exceeds the total of
bonds and notes Of corporations listed
on the New York Stock Exchange and
subject to tax. Since 1929, or in the
period wien the requirements of the
Government demanded that it should
collect all legitimate revenues to meet
Its expanding expenditures, the sun
OF municipal and State issues, tax
free, has been $4,500 ,O0O, 900, or equal
to the output in the same period Of
taxable industrial, railroad and pub.
lie utility interest bearing obligations