Henderson daily dispatch., 1935-05-04

day, and the worlds most modern
and efficient looms. Much American
equipment, particularly that used in
New England is obsolete and ineffi-
cient. If American and British manu-
facturers do not continue to take the
lead in purchasing the most modern
! machinery, then they are destined to
lose their supremacy in the industry
Tax Has Boosted Operating Costs
Now added to these fundamental
troubles is the current aggravation
of the processing tax. No one can
deny that it has imposed a severe fl
nancial handicap on the majority of
mills and has increased operating
costs considerably Raw materials ac-
count for about fifty per cent of the
value of cotton goods. With mini
mum price ofcot ton at the mill of
twelve cents a pound, the tax of AZ
cents a pound has increased raw ma
terial costs over thirty per cent. The
! fact that the tax must be paid US
ually long before the cloth can be
sold means that more funds must
be tied up in inventories until the tax
| is iiquidated. This means increased
borrowing and reduced profits thro-
ugh interest payments.
| Another serious burden which the
processing tax has imposed on the
cotton textile industry is the increas-
| ing use of silk and rayon. These COM
peting fibres have a decided advan-
tage for they are not taxed and have
| had only very slight price rise SO
| for 611riYC 70 Tnffo,o Loc
jumped approximately one hundred
per cent in price There is today a de-
| finite consumer resistance to higher
retail prices Hence, in many cases
the processing tax has been partially
absorbed by the manufacturer be-
cause he could not fully pass it along
to the purchaser Where It has been
passed along in the form of higher
retail prices, it has reduced consump-
ton.
Tax Is Straw That Breaks Cancels
Back
When all is said and done, the pro-
| cesing tax boils down to a very heavy
| sales tax on a. necessity. 1t has cost
the American public about 5000, 0,OOO 900
A recent survey made by the New
England Council shows that the pro-
cessing tax has increased selling price
| by an average of 1913 per cent. A
number of returns from this study
show that the tax is pyramided by
the practice of middlemen adding
| percentage to the total price paid in
cludine the tax Bookkeeping costs
have also risen sharply. The process
ing tax, superimposed on the above
combination of difficulties, is the last
straw. Many mills have closed down
entirely, while others are taking bust
ness at loss simply to avoid the
calamity of adding to unemployment.
Now what has been the effect of
the cotton program down South? The
goveenmrnt has been loaning twelve
cents per pound on cotton and the
commodity has been more or less peg
ged at this price. So with the big gain
in cash income over 1888, plus the
government benefit checks, the small
growers are still we'll pleased with
the AAA program. Not so with the
4 tenant farmer or "share cropper''-
the "forgotten-man" of the cotton in
dustry. He is no better off this wear
than ever, despite the increase in
prices and benefit payments. He is so
poor, in many sections, he cannot buy
the products of his own labor. He
typifies the basic trouble with cotton
I-underconsumption not oVerproduc-
ton.
Can Scarcity Create Plenty?
| It is a different story also with the
big growers and exporters of the
South. Warehouses are bulging with
| p0unrnnoopf oOntYO1Io5
should long since have been shipped
abroad. The artificial loan rate has
kept the American price of cotton
far above the world price. Foreign
buyers are not interested in paying
prmium for our cotton except on
quality grads. Furthermore, while we
have been plowing under our cotton
crop, other nations have been slim
ulating theirs. Last year Russia and
Brazil had the largest production on
record. If the present policy is con-
tinued, the United States will have
lost forever the major part of her
foreign cotton markets and will have
ruined her cotton industry.
The resent control program is not
an experiment. It has been tried be-
fore. England tried it with rubber;
Cuba with sugar; and Brazil with cof-
fee. In each instance it failed miser-
ably, its chief result being rerepar-
able loss of foreign markets. Now we
are falling for this samo catchy de-
lusion that with an economy of Sc
curity" we can bring about an "eco
] nomy Of abundance" Despits new con
tortions of arithmetic, there cannot
be more goods to divide II less goods
are produced. The solution to the
cotton and cotton textile crisis is to
swell consumtion by lower prices
not to slash outut by higher prices.
Neither Congress nor the New Deal
can repeal natural economic laws.