Evening star., 1935-05-23
MESSAGE HELPFUL
IN MONEY CRISIS.
President on Side of Econ
omists Who See Peril in
Excess Spending.
BY DAVID LAWRENCE

President Roosevelt comments Oh Iilc
economic and financial aspects of
spending and continued borrowing
than on what he said about the merits
of the soldier bonus itself
For the Capital takes 1t for granted
there will be payment of the bonus
In some form before the present ses-
sion of Congress adjourns.
What was really more important as
an indication of future governmental
policy was the Presidents reasoning
on the subject of printing press money
and on the kind of spending that
really helps economic recovery.
Mr.. Roosevelt's observations are
counted as distinctly helpful and en-
couraging to the school of thought
which believes that We cannot spend
our way out of the depression or bor-
row our way indefinitely either.
Even more significant was the Pres
ident's apparent readiness to accept
point of view which for two years
now has been urging him to consider
the plight of the heavy goods indus
tries. where the bulk of the unem-
ployment is to be found. Mr.. Roose-
welt argued that payment Of the bonus
would aid consumer industries and
retail trade, where there is less need
Of expansion than in the other in
dustries.
Basis of Capital Credit.
Mr.. Roosevelt was siding with the
economists, too, who have all along
said that spending of a certain kind
merely piles up excess reserves in the
banks and does not become the basis
of capital credit so essential in the
reflnancing of industries and manu-
featuring plants and in the creating
of employment that is enduring and
not temporary.
The Presidents fiat statement that
the payment of the bonus by Treas
ury notes that do not pay interest
and are simply a printing press ad-
dition to the currency would be mere
ly the beginning of series OF such
steps is directly contrary to what
Senator McAdoo and others contended
in the recent Senate debate. 1t shows
that Mr.. Roosevelt feels that II the
Government used printing money
to pay one debt, it would be tempted
to do so to pay current deficits, all
of which would simply lead to dan
gerous imitation
without using the word 'infation,'
the President described the hazards of
money panic such as occurred in
Germany when people with fixed in
comes suffered because of the sky
rocketing Of prices due to lack of
faith in paper money.
The fact that Mr.. Roosevelt him.
self made the all-too-familiar argu-
ment is the first word the business
and financial communities of the
country have had that he is just as
aware of the limits to which the pres
ent fiscal situation can be carried as
anybody in the orthodox group of
financial or economic observers. The
following paragraph in the Presidents s
address will be regarded as a pledge
for the future on all expenditures, ir-
respective of the soldier bonus:
"a government, like an individual
must ultimately meet legitimate OBJ
legations out Of the production Of
wealth by the labor of human beings
applied to the resources of nature.
Every country that has attempted the
form of meeting its obligations which
is here provided Gin the Patman bilD
has suffered disastrous consequences"
Coercion by Minorities.
Mr.. Roosevelt was careful to remove
an impression given by the Secretary
of the Treasury, Henry Morgenthau,
at recent Senate Finance Commit
tee hearing, when he intimated that
the payment of $4,000 100000 stood
between the Government and an i'm
pairment of its credit. The President
said he could not honestly make such
an assertion, "but 1t cannot ultimately
be safe If we engage in policy Of
yielding to each and all of the groups
that are able to enforce upon the
Congress claims for special considera-
ton" He added this vital point:
ITO do so Is to abandon the prin-
eiple of government by and for the
American people and to put in its
place government by and for coercion
by political minorities."
Unfortunately the foregoing test
could not be applied without embar-
rassment to the administration to
other parts Of its legislative program
Ihere can be no doubt that the
spending of billions without a concrete
program that is recognized as a sound
contribution to recovery, the creation
OF dozens of alphabetical agencies, the
haphazard schemes for use of works
relief funds all have produced an i'm
preston on Congress that if money Is
to be spent without really attaining
specific objective, the sums owed to
the soldiers might as well be paid now.
The trend toward spending and huge
borrowings has proved Frankenstein
for this administration. That's why,
although Mr.. Roosevelt can be sus-
tanned on the veto of the Patman bill,
the Congress will pass over his veto
another type of measure clearing up
the bonus question through the issu-
ance Of Government bonds.
(Copyrieht 1935)