The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1936-01-08
TAX BURDEN is
FEARED EFFECT
OF ACE PENSION
Townsend Plan Would Bring
Huge Assessments, Says
Economist.
Townsend Plan for old-age revolving
pensions.
BY CLARENCE w. FACKLER
Professor of Economics. New York
University

NEW YORK, Jan. 8.-Any plan
TO provide security for the aged sue
cessfully must not only be simple
1t must also be reasonable. No ma
ton in the long run can buy and
consume more than it produces. An
annual expenditure of 20 billion
dollars for old age pensions is
about five times the total revenues
of the Federal government in 1895
and nearly 40 per cent of the en-
tire annual income of the United
States in 1884.
One doesn't need to be a profess
sional economist or a mathemati-
clan these days to understand that
if the country's total income in any
one year is so billion dollars in
goods and services, and if 20 billion
dollars are now required to carry on
the operations of Federal, state and
local governments, and if another
20 billion dollars of these goods and
services are given to the aged as
pensions, the taxpayers, who pro-
duce this income in the first place
will have just 10 billion dollars eft
for themselves.
Buying Power Transferred
Such a plan, therefore, would not
create any purchasing power no
matter how fast the dollars were
spent, 1t would simply transfer
purchasing power from those per-
sons under go years of age, who
would be performing useful services,
to those over go, who would not. So
40 per cent of the SO billion dollars
would 60 to about per cent of the
population, who were aged and idle
while the remaining SO per cent of
the population, who were younger
and not idle would have only SO per
cent to divide among themselves.
Obviously then, as long as the
plan does not create any new de-
mand for goods, the circulation of
money and credit would not in
crease. Instead, with the adoption
of the Townsend Plan, support in
the securities. real estate and COM
modities markets would be with
drawn at once, with the immediate
result that values for these things
would collapse. No one would wish
to invest his capital in any venture
unless he were certain that what
he bought for ST could be sold later
for more than ST plus four cents
with which to pay the Townsend
taxes.
Financial Panic Feared
In place of having perpetual pros
perity, the directors of the plan
would be confronted at the outset
with a financial panic. Even in
periods of full business activity, to
force the withdrawal of prof1tably
employed persons over 80 would
mean an immediate decrease in pro-
duction, and lower level of living
generally. During depressions, when
millions of people are idle, the plan
at best would merely substitute I'M
employed people for those already
engaged in income producing lines.
Of course, if the Townsend Plan
were adopted, wages would have to
be paid to a few million spies and
Omen, employed to keep the aged
spending their monthly quotas of
5000. And many able bodied people
could easily adopt parents, relatives
or guardians over so years of age, if
they had none already withdraw
from work, and live a life of diligent
leisure. Everything considered, then,
the wealth and income of the ma
ton would be distributed very
poorly.