Evening star., 1936-03-01
future BENEFIT
SEEN IN TAX HIKE
Observer Holds Increase Is
Only Way to Perma.
nent Recovery.
BY GEORGE r. HUGHES.
Special Dispatch to Tho star.

Special Dispatch to Tho star.
NEW YORK, February 29.--The
sum asked by the President in new
taxes was higher than expected, but
not as high as 1t will be before the
balanced budget stage Is reached and
not even as high as 1t ought to be II
any real progress Is to be made. New
ertheless, according to the Washing
ton advices, the program will meet
opposition in Congress from the in
nationists on one side, and the anti
administration group, on the other.
What the outcome will be remains
to be seen, but 1t Is improbable that
the advocates Of printing press money
as means Of paying the bonus will
be successful. There Is no popular
support for that device. Doubtless
there will be recurrent alarms, but
that Is all. Possibly the dollar will
weaken against the European gold
currencies and the pound sterling,
although the international situation Is
SO serious that even foreign specu-
lators will hesitate to stake their
money on so hazardous q chance.
Ought to BE Constructive.
A really effective tax proposal ought
10 be constructive development for
both business and finance. True,
higher taxes will bear down heavily
ON industrial profits, but that is the
only road to permanent and genuine
recovery. Meeting the Governments
needs by the tax route, instead of bor-
rowing on bonds and notes from the
banks who make payment by deposit
credits, will have a sobering effect on
speculation and perhaps bring about
some reaction in the markets, but
that, too, is for the best over the
longer period. Exactly that will hap
pen sooner or later. Fridays stock
market had furry Of selling in the
late trading that may have reflected
realization OF this fact, although prices
rallied vigorously at the close.
The market was not greatly dis
turbed by the order of the Interstate
Commerce Commission cutting rail-
way fares. There is no reason why it
should be. The way to meet compe-
tition Is to lower prices while main
tanning service. If there Is any hope
OF the railroads regaining the traffic
they have lost to private motor cars
and to busseS, fares must come down.
Perhaps that competition cannot be
met, but 1t is the only chance. The
trouble is that the remedy has been
so long delayed in application. The
observation of one member Of the
commission to the effect that the
order is an assumption Of managerial
duties" which should be left to the
railway executives, does not change
the case.
Street More Hopeful.
The Street takes a more hopeful
view Of the utility outlook than it did
directly after the T. v. A. decision.
1t is realized that Government COM
petition is a serious threat and that
the constitutionality of the holding
company act is still to be tested, but
the tendency is to rely on a change
Of administration at Washington, or,
If not that, some modification of
the hostile attitude assumed by the
present administration. This may be
case of the wish being the father
to the thought, but in It's present
mood the financial community looks
on the bright side whenever that Is
at all possible.
A more solid basis for confidence
is the recovery of earning power re-
vealed in current utility income state
ments. Power output is at the high
est leved in the history of the indus
try and the leading units are begin
ming to save a large proportion of
gross for net income. From the spec
ulative viewpoint there has not been
that extravagant bidding up prices
for utility stocks so evident in the
industrial list. Finally, the invest
ment return, on the average, is more
generous with the utilities.
(Copyrisht. 1850