Evening star., 1937-10-31
Business Recession Has
Become a Grave Problem
BY OWEN L. SCOTT.

cession under way in business Is gener-
ating momentum that can become in
creasingly~ serious.
The Presidents predicament in the
face of this situation is anything but
comfortable.
A business upset is at hand when the
Federal Government budget still is un-
balanced on bookkeeping basis. The
acuteness of the upset was wholly unex-
pected at the White House and was not
charted in existing plans. A warning of
its approach, given by Leon Henderson,
one of the Governments principal eco
nomic advisers, went unheeded. AS a
matter of fact, 25 of the country's lead
ing big-business employers, meeting less
than two months ago as the Business
Advisory Council of the Department of
Commerce, agreed unanimously in the
privacy of their room that this fall and
winter would see a boom in business
activity. They were as wrong as the
President in their judgment.
s More than that: Unemployment is
rising and pay rolls are declining just at
q time when the Government has made
up It's mind to cut down on relief. This
reversal of trend has developed at time
when the President is assuring the coun-
try of returned prosperity. Deflation-
rather than the long -touted credit inf1a-
tion-has finally flowed from New Deal
policies as they worked out in practice.
Those policies have not provided an an
swer to the problem of the business cycle.
AS consequence, some hurried choices
today confront the President. Those
choices now are before him in the form
of memoranda from his advisers. They
involve variety of shifts in direction.
First, there is always the opportunity
for letting nature take its course, doing
nothing until more clear indication OF
the outlook is to be had. But this course
does not fit into the presidential mood.
The first signs Of trouble in agriculture
are bringing Congress back to Washing
ton to take action. Mr.. Roosevelt is
pledged to produce recovery. Rising un-
employment provides the danger signal
that always in the past has galvanized
him into action. The parade of impor-
tant figures in business, finance and
government, passing quietly through
President Roosevelts Hyde Park study,
provides a clue that something is up.
\
If drifting policy is to be set aside,
then, next. there is the opportunity Of
fered by continued large-scale spending
of borrowed money in vast new ventures
into pump -priming. This was the tech
nique of the first four New Deal years.
1t produced results. But the national
debt now is up to s37 100000. Gov
ernment cannot forever borrow and
spend without producing runaway Sit
uation. The people are sold on the need
for ending deficits. Also, Mr.. Roosevelt
is pledged to balance of the budget and
has set this as his main immediate goal.
The trouble is, however, that new farm
program is going to cost more money and
Treasury experts already are admitting
quietly that they need to make another
downward revision of prospective Gov
ernment income. owing to lower than
expected business profits
Just a drive for a balanced budget in
itself will not automatically bring recov-
cry. In fact, the rapid contraction OF
pump printing is one major cause Of the
present slowing in business. Private bor-
rowing on a large scale to finance COLI
struction and plant improvement has
failed thus far to take over where the
Government left off.
4 i
So this suggests a third way that Mr.
Roosevelt might turn. He could make
up his mind that this Is the time to try
again to get together with the countrys
more forward looking business leaders in
the search for agreement on some funda-
mentals of government and business
policy.
It is this course that the President Is
being urged more strongly to take. The
urging comes not alone from the more
conservative wing of the New Deal. but
from the left wing as well. Even those
who in the past have favored an uncom-
promising attitude in dealing with busl-
ness now say that there are many points
at which Government policy might be
modified in return for agreement on the
part of business leaders to alter their
own attitude and agree to cooperate.
For instance: Mr.. Roosevelt could
make an important concession by agree
ing to urge Congress to modify or repeal
the new surtax on the part OF corpora
tion earnings not paid out in the form OF
dividends, and to modify the tax on
gains from the sale of stocks and bonds
and real estate Business and finance
whether rightly or wrongly-blame these
taxes for many of their troubles.
& X
Again, the President could agree to a
very mild return venture into the field
of Government control over minimum
wages and maximum hours. If there
must be return for political purposes.
He might use his influence to restrain
John L. Lewis and William Green in
their enthusiasm for continued wage
raise demands. Also, he could let the
electric utility industry know how far he
intends to 90 in fostering Government
competition. This industry, more than
any other is In immediate need Of vast
new plant.
In return for concessions IN these
fields, the President could demand CO.
operation from banks and business men
in vast program of home financing and
home building in the lower price field.
This would involve promises on the part
of business leaders and bankers that they
would discourage price-kiting of the kind
that has Just put knife into one recov-
cry movement.
There are strong indications that the
President may be ready now to move in
this direction. AS one of his left-wing
advisers expressed 1t privately during
this past week:
"The time has come for crow-eating on
both sides. The President should recog-
nize mistakes that he may have made
and should be willing to forgive buSi-