Evening star., 1936-05-17
Presidents Economies
Amaze His Advisers
By Owen L. Scott.


they discover that the President reduces
those theories to the simple maxim:
- Higher prices, higher wages, higher
costs of production mean more jobs and
recovery.
All of the experience of N. r. A., all
of the careful explanation by economic
planners about the essential timing OF
wage and price advances, all Of the
description of Governmentsguidance for
industrial policy that would have to
accompany price adjustments, and all
of the experience with the Supreme
Court, resolve themselves into a high
price cure-al.
The fact that Mr.. Roosevelt, in explain
ing his conception of recovery, used f1g-
ures on national income that no Govern
ment department will support only adds
to the amaZement of his economic ad-
visers.
Actually, they think, what the Presi-
dent in recent speeches has attempted to
do is to explain the recovery theories OF
DR.. Rexford Tugwell Resettlement ad-
ministrator, and Mariner s. Eccles.
chairman of the Board of Governors Of
the Federal Reserve System. He showed,
to their satisfaction, that these gentle
ment had failed to make their point
clear to the boss.
Two theories really are involved in the
arguments advanced by business men
and by present guiders of governmental
policy as they seek to corral popular
support
One is that Of natural recovery from
the depression, supposedly surging
through much Of the world. only to be
held back in this country by Government
spending and Government interference.
The second is that Of stimulated recov-
cry, generated by the Government
through large e-scale spending and through
controls over some key sections OF the
economic system.
Republicans are inclined to accept the
first theory and Democrats, in power, are
trying to apply the second. The choice
of the people concerning the theory that
they prefer to follow during the next four
years will be made in November.
Recovery from past major depressions
has come when ruthless competition
forced prices wages and debts back into
balance, with the inefhcient forced out
of the picture and the efficient reaping
the rewards that came through increased
volume on a lower price basis.
In the present depression this process
proved extremely painful-so much so
that President Hoover wheeled the Gov
ernment into line to ease the pain with
the Reconstruction Finance Corp. From
that time on the Government moved
more and more into the business picture.
Now, however, business and finance
hof cfohilitv haer,
achieved, Government should step aside
from this point.
Mr.. Eccles only the other day provided
the explanation of the administration
recovery theory that President Roosevelt
sought to make but actually muffed.
The Federal Reserve chairman pointed
out that, in 1880, this country had bal
anced budget, was on the gold standard,
and was experimenting with no economic
reforms Of vital Importance, yet was slid
ing rapidly down the depression skids.
The Government stood aside while the
national income fell from $50 900 000,-
600 in 1929 to $4,000, 900 900 in 1882.
Then, he says, it became urgently nee
essary to increase purchasing power.
tIlIOukl lilCIcdScu ulSUuI SSiucIlIS
by industry or by Government, or by
both.
Government stepped in with P. w. A.,
as means of printing the industrial
pump; it started c. w. A., and now w.
P. A., to get money into the hands of
those unemployed by industry. The New
Deal theory is that the unemployed are
as essential a part of the consuming
group of the country as the employed.
Through A. A. A. money was syphoned
out to the farms, and through N. r. A.
a drive was made to increase wages.
Those activities were designed to stim-
ulate private industry. And private in
dustry. stirred by increasing demand for
It's products. was supposed to start to bor-
row to expand its plant and modernize
its facilities, thereby adding further to
employment and allowing the Govern
ment to slip out from under.
What has happened?
Mr.. Eccles said that national income
has risen from $4,000, ,00O, 900 in 1882 to
an estimated $50 600 600 900 in 1886. Bank
deposits are sharply higher. Business
profits are higher.
But the size of the Government debt
continues to grow from year to year.
Deficits get no smaller. Relief expendi-
lures still are about as large as ever.
Unemployment shows little sign of dis
appearance. Official fears are expressed
over what would happen to business If
Government spending were stopped.
Where is the catch?
The Brookings Institution, after eX-
haustive studies and comprehensive
analysis. found it just where Mr.. Roose-
velt apparently thinks it isn't.
The catch first was that prices went up
faster under N. r. A. than did wages,
with the result that the increased dollar
income of workers actually would buy
less than before N. r. A. The next catch
was that c. w. A. and p. w. A. served
to support artificial hourly wages in the
vital building industry and in some other
important industries.
Also, business men have found that
they could supply present demand with
out much addition to plant. They pro-
fess now to fear Government interfer-
ence and are not borrowing in the way
that they were expected to borrow to
create more employment and thus take
the unemployment burden from the
shoulders of the Government.
So what to do?
DR.. Tugwell and group in the Treas
ury headed by Herman Oliphant general
counsel to the Secretary of the Treasury,
~ u -f g.