Evening star., 1937-11-14
More White Rabbits
BY OVEN L. SCOTT.


bottomless hat. His problem this time
is to divert attention while he again
shifts his course to meet fast-generat-
ing depression.
The Governments economists are
astounded by the rapidity with which
industrial activity and commodity prices
have gone into tailspin. 1t was only
last April 4 that Mr.. Roosevelt, on the
advice of Mariner Eccles, Federal Re-
serve Board chairman, used a confer
ence OF newspaper men to warn that an
unhealthy boom, based on rising prices,
appeared to be developing. And it was
less than three months ago that the
country seemed so prosperous that Con-
gress displayed scant interest in q sec
ond New Deal.
Now Senators and Representatives are
scurrying back to confront something Of
an emergency In agriculture and indus
try. At the same time, the White House
is looking over its white rabbit supply
with great care and 1t has an eye out
for new stock.
A wholly different technique is taking
shape to deal with the present situation.
To be noted Is the fact that the Presi-
dent has shifted his direction several
times since March, 1888. He now is max
ing another shift.
On taking Office in 1888, Mr. Roosevelt
first was determined upon quick wind
up OF the def1ation that had gone on for
four years. He cut Government ex-
penses, sought ways to force creditors to
take cut on interest rates and prepared
other moves to complete the Hoover de-
flation. But the President quickly found
that this policy had been compromised
by creation of the r. F. C. and by the
legal impossibility of forcing creditors to
accept lower interest rates on contracts
already entered into.
So the first New Deal then blossomed
with combination of N. r. A., A. A. A.
and dollar imitation. The prospect of
higher costs brought inventory buying
that gave the country quick boom. BY
mid-July 1888, however, this boom had
broken and deflation set In again. Re-
covery through planning and mere hints
OF imitation did not work.
x* X
In october, 1888, President Roosevelt
was sold on pump priming as the way
out. The President came to accept the
following statement, as an axiom In
comes broadly speaking, can be increased
in two ways-by the disbursements OF
business and by the disbursements of
public bodies. The prospects OF natural
recovery depend upon increased dis
bursements by business or by Govern
ment.
This means the crux of the recovery
problem that again faces Mr.. Roosevelt
today.
But, in 1888. with business men still
depression shell-snocked, the Govern
ment decided to take over the spending
load temporarily, 1t entered on a vast
program of spending borrowed money.
This spending was designed to increase
private incomes, creating demand for
goods that would make it profitable for
business to produce more and to add to
plant, while the resulting profits and
higher incomes would lead to more and
more home building. When this stage
was reached, the plan called for the Gov
ernment to step aside, to end borrowing
and to start retiring debt that had been
created in positive attempt to start the
wheels turning.
Active deficit spending went on for
three years The national debt was in
creased to unprecedented heights. Those
economists who were responsible for the
program were highly encouraged a year
ago about prospects for the full success of
pump priming They were convinced
that the Government now possessed a
powerful new weapon to deal with future
depressions
Then three things over which they had
no control happened to upset calcula-
tions. Those three things add up to the
problem that confronts President Roose-
welt today
In the first place. the Supreme Court
upset the farm program. with the result
that the Government was forced to bor-
row half billion dollars to meet prom
Uses to farmers. Next, Congress voted to
pay the soldiers bonus. adding another
huge unplanned dose of deficit financed
purchasing power.
The result was that. in 1886, the Fed
eral Government added more than four
billion dollars to the country's purchas-
ing power where planners had expected
TO start curtailment. Three billions had
been added In each of the two previous
years. such doses OF spending led to
very active business. Prosperity seemed
at hand
Here entered the third factor. The
good times led labor to make increasing
wage demands. Granting of these de-
AAAe-AA@o ~ AAAAASIAy NdS 1OllOWSU Dy
price increases. The dollars that the
Government was pouring out and the
dollars poured out by industry in wages
would not buy so much.
Then, in the face of this situation.
President Roosevelt set out on a deter
mined drive to balance the Governments
budget. Taxes were raised and relief
was curtailed. Where 1886 had seen
more than four billions of pump -priming,
this year will see less than one billion.
Rising prices, coupled with decreasing
Government outlays of borrowed money,
explain the present business upset.
The result is that success of pump
prlmlng is shown to depend upon Gov
ernment control over the rate of that
priming and over its effect on costs and
on prices and on wages. But this implies
Government control over organized labor
and over private business Only in a
crisis would that power be transferred to
a central government, as it has been in
Italy and in Germany, unless industry
and labor were permitted by Government
to do their own price and wage fixing.
N. r. A. tried that and broke up with a
bang.
1t is at this critical point that Mr..
Roosevelt is preparing to produce new
set of white rabbits
He is opposed to any more large-scale