Evening star. [volume] (Washington, D.C.) 1854-1972, 1936-05-11

light, the TugWell III 1%%::
philos ophy Is
more dominant
today than at any r.v,. ,v,.,..
time since the
New Deal began. AS q matter of
fact, DR.. Tugwell knows more about
what the New Deals true purposes
and detectives are and has more
brains than anybody else in the New
Deal without exception.
Take, for instance, the tax on I'M
distributed corporate SURPRISES with
which the Senate Is now struggling
and which 1t will modify somewhat for
this year only as a sop to conservative
opinion during the campaign. The
significant development is that the
principle Is to be maintained. which
means that once 1t becomes embodied
In our tax system it is simple mat
ter to elevate the rates and 60 on to
the other sequels which form a neces-
sary part of economic planning" as
DR.. Tugwell and others in the New
Deal envision it. The new tax has
been championed by DR.. Tugwell as
vital to reform.
What Tugwell Thinks.
To understand the meaning of the
proposed tax on undistributed sur
pluses in relation to other reforms
yet to come-aS, for instance, the
ALLEGATION Of capital"-it is necessary
to 60 to the foundation of the New
Deal concept described so effectively
by DR.. Tugwell in his book, Industrial
Discipline" published in 1888, and
followed since then by many legisla-
tive acts that have brought the
doctrines into actual operation. 1t
will be noted that some form OF
organization of industry into codes,
as tried under the N. r. A. and as
shortly to be revived under other
legislation now pending, is an integral
part Of planning" as the word is 50
often used by New Dealers. DR.. Tug
well writes:
Capital ALLEGATION would depend
Upon knowledge, from some planning
agency, Of how much for a measured
future period ought to be put to one
use rather than to another. Given
this information, the first step in
control would be to limit self-alloca-
ton. This Is the first great problem
in this field. ."
Assuming, however, that each in
dustry had its various firms either
combined or sufficiently closely asso-
ciated for practical action, how then
would the problem be attacked? In
general the principle invoked would
be to drive corporate SURPRISES into
the open investment market; for
most of the trouble comes from self
ALLEGATION occurring strictly within a
single organization. 1t is over
optimistic internal expansion and the
use of funds, earned in the past, to
commit the concern to increased
activity which cause the problems Of
surplus which yearly grow more acute.
U. 8. Incorporation Suggested.
"To meet this problem, it is fire.
euently suggested that a tax be
imposed on funds, over and above
replacement, which are kept for ex-
pansion purposes. If taxation forced
these funds into distribution as divi-
dends, they would have to seek re-
investment through the regular chan
nels, and q concerns plans for ex-
pansion would be subject to check in
the investment market.
Once all funds were forced into
the investment market, however, some
other means of supervising their uses
would be needed. This might be done
through Federal incorporation of
businesses. For new capital issues, then,
revision of original charters would be
necessary. An alternative to this
sometimes suggested Is a tax on I'M
used capacity, which those who argue
for it believe would achieve many of
these same results"
Since DR.. Tugwen wrote his book
the Federal Government has assumed
the right to control the issuance of
new capital securities and judging by
the way the S. E. c. CONSTITUTES its
powers and functions, the Govern
ment could very easily embark upon a
program of telling each industry or
business how much capital or capac-
ity it might or should use. But to
continue the Tugwell doctrine in the
light Of what is happening today with
the bill for a tax on undistributed
surplus:
IF funds were thus forced into the
open investment market, and If there
we're control of new capital issues,
the problem would be as adequately
met rs seems necessary to the advo-
cate of the general idea. -.
Simple in Principle.
EFT will be seen, then, that the con-
troll of investment is not so complex
q matter. at least in principle. as it
might at first seem. The principles
involved would be only two; the fore
Ing of all investment funds into an
open market. and the regulating of
new capital issues.
Neither of these seems impossible
II we grant Cd the substitution Of
Federal for State incorporation, and
ca the correctness of using the tax
ing power to force SURPRISES into the
market"
ing power to force the distribution Of
surpluses may have seemed to him in
1888 to involve perhaps some doubt as
to constitutionality, but since that
time the New Deal has determined to
legislate FIRST and htigate afterward
anyway, 50 legal obstacles are no
longer terrifying to the planners. In
deed, . bill to compel Federal incor-
poration Of businesses has been in
troduced in both Houses and has the
backing of the American Federation
Of Labor, which no doubt feels that
its opportunity to force higher wages
would be increased because of its po-
Ntical leverage upon anything the
Federal Government controls directly
Or indirectly.
DR.. Tugwell's viewpoint on Federal
incorporation is thus expressed:
III Industries were to be controlled,
incorporation of business enterprises
.-~,,II vnad In aTorf "a - tvn~e