Evening star., 1936-02-09
Drop in Dollar Reflects
Alarm Abroad Over Moves
in Congress.
ADMINISTRATION ACTS
TO REASSURE MARKETS
Need for Large Borrowing Next
Month Cited as Officials Start
Slashing Expenditures.
BY CHARLES F. SPEARE.


NEW YORK, February 8.-The ex-
port of gold this week is of little i'm
portance when measured by last years
imports of s1,74l, 100000, of which
over half was from France, to which
gold is now returning. The implica-
tions, however, may be serious if the
movement continues. The decline in
the dollar and the rise in sterling and
francs reflect the uneasiness abroad
over the inflationary program of the
element in Congress that insists on
paying the new and unforeseen Gov
ernment bills with currency instead
Of by the issuance of interest-bearing
bonds or higher income taxes
The administration is in a more
uncomfortable position with respect to
its financial affairs than it has been
at any time. This is apparent in the
close scrutiny of the budgets of the
emergency spending agencies and the
looping of Of s1,000,000,000 in the
amounts allocated to them.
Necessity for borrowing on a con-
siderable scale next month demands
a policy that will give institutions from
which the new money must come con-
fidence in the Government and in its
obligations In view of the existing
situation. the general firmness Of
Treasury issues is remarkable.
Market Holds Firm.
Not only have Government bonds
and notes been firm but throughout
the entire range of high-grade securi-
ties there has been no suggestion Of
alarm over imitation possibilities. The
urge to employ idle funds at however
low rate of return has greater ef-
feet on bond prices than the presump-
ton of disturbance in the monetary
standard.
At the same time, common stocks
and some commodities are definitely
being influenced by the imitation talk.
This Is louder than it has been here
tofore. 1t has interested wider audi
ence than in 1888 and in 1885. It has
had a certain effect on the operations
of those engaged in foreign trade.
Foreign markets have been impressed
by it and have sold some securities.
However little may come of the new
urge to meet rising Government ex-
penses by higher corporation and per-
sonal income taxes, it has reopened
the subject and made it more difficult
for those who would temporize with
the question to avoid it later.
Urges Broadened Base.
j. p Morgan stated this week that,
to make taxes more productive. it
would be necessary Ito broaden the
tax base"
Prof. o. M. W. Sprague, former as
sistant secretary to the head of the
Treasury Department, says: I'VE have
not begun to reach incomes between
$4,000 and 100000"
Al Smith. in his Liberty League
speech. in dealing with the Federal
debt, said at is going to be paid by
that great middle class that we refer
to as the backbone and the rank and
file" What he had In mind appar-
emily were the indirect, as against the
direct, Federal taxes, such as those
which users of petroleum products
paid in 1884 to the extent of over
81 900 900 900.
OF the 3,s88, 1853 individual income
tax returns filed in 1894, nearly go
per cent showed incomes under $4,000.
OF the total personal income taxes
paid in that year, only 6.42 per cent
were in this group. 1t is in 1t that the
majority of exemptions occur. During
the Coolidge administration change
in the exemption base reduced by
nearly one-half those who previously
had been liable for the tax.
Escape Federal Tax.
Then there is the increasing army
of State employees who are not sub
ject to Federal tax. One may ask
why the Judge Of State court, re-
ceiving a salary of $4,000 a year,
should be freed from paying the $1,000
tax that is imposed on business exec
utive or professional man with SIM
liar income, or why the school man
with compensation OF $4,000 should
be so graciously treated. .
Again the fact is emphasized that,
until the Government compels taxes
from all of its citizens with incomes
from $500 upward, the difficulties in
the way of balancing the budget and
of paying of liberal slice OF the ma
t;o,,a1 rloht will increase
Tax experts this week have esti-
mated that there Is possible ST.
600 ,0O0, 900 through compelling those
IN the lower income brackets to do
their share in meeting Government
expense.
Rise in Rails Prophecied.
A bit of prophecy this week by the
MANAGEMENT of the Great Northern
Railway reflects the striking change
in sentiment toward railroad securi-
ties that has occurred in the past two
months. It was that the dividend on
the stock of the Chicago. Burlington
A. Quincy, of which the Hill line
owns about 40 per cent, would be
raised next year from 81 to 81 a
share and then 60 up progressively
until it reached $40 share in 1910.
In other words, it will, in the next
Eve years, recover to the pre-depres-
sion level.
If this is a correct assumption, 1t
is equally plausible to expect the
dividend rate on Union Pacific COM
mon and Atchison common to return
TO the 10 per cent rate basis of 1929
and to see q resumption of dividends
on Great Northern, Northern Paci-
fic, Southern Pacific, Illinois Central,
New York Central, Baltimore & Ohio,
Delaware g. Hudson, Lackawanna and
other solvent roads of from 5 to Q
per cent.
(copyright. 1885 By the NORTH American
NewsDaper Alliance. X3c.l