Evening star. [volume] (Washington, D.C.) 1854-1972, 1937-10-18
New Depression Seen
Main Question for Leaders and Congress Is Being
Studiouslv Avoided.

without revision of the entire New
Deal structure, to release capital
This involves not a slight, but very
radical change in the tax system,
and a willingness on the part of
labor to withhold. for the moment.
and until the present tendency is re-
versed, measures which will add
heavily to costs.
Labor Educated.
Unfortunately. labor has been
consistently educated for the last four
years to the belief that high labor
costs are condition Of general pros
perity; that every rise in wages con-
tributes directly to consuming power
and thus to increased turnover, and
that there is no limit at which this
theory ceases to function.
The fallacy of this idea ought to
be obvious to any one who has studied
the history of the building trades
it ought to be obvious when unem-
ployment begins to spread. But the
entire public has lived for so long
so far from reality that only the sweet
music of wisf-dreamS is audible to
It's ears. The dominant psychology
recalls the years in France when the
entire working class believed that 1t
could prosper on reparations from
Germany. 1t went on believing that,
encouraged by its political leaders,
until a terrific crash came. Similarly,
have oncnl1raOed
the workers to believe that prosperity
was not TO be won by their collabo-
ration in a great national epic-a COL
liberation in which greater economic
Justice would determine the distri-
button of the gains-but has been
deluded into the belief that redis-
tribution, OF itself. would be sufficient
to stabilize and expand our economy.
This failure TO educate its own sup
porters in the most elementary eco
Monies is perhaps from a long view
point the most serious failure Of the
whole New Deal.
New Industries Hampered.
The capital gains tax and the undis-
tributed profits tax have worked out
exactly as the CaSsandras OF year
ago predicted that they would. They
have halted the development Of new
industries, based on new inventions
always speculative ventures. They
have driven capital away from invest
ment in actual production and into
tax-exempt bonds. They have restricted
expansion of small industries. which
always depended for capital either
upon offering small lowpriced stocks,
which the public might take as spec
ulation, or upon building up capital
reserves out of profits. The admins
tration. which went out to fight mo-
nopoly, has done everything 1t could to
kill the small entrepreneur. And now.
with the capital gains tax and the
general atmosphere of political I'M
certainty. the blight is spreading TO
the big fellows.
These two taxes must be radically
changed if the present tendency Is TO
be halted. And that will mean an in
crease Of taxes somewhere else. and the
only way they can be increased is by
widening the basis Of the income tax.
Every country which has vastly in
creased government expenditures for
social purposes has been forced to this
Senator La Toilette is one of the few
New Dealers who has had the courage
to see and say that this is necessary.
But here. again. the voters OF the
country have been educated TO believe
that they can get everything for
nothing.
The administration and the new
Congress are severely challenged by
serious reality. If they are going to
go down in history otherwise than as a
terrible failure. they will have to go
back TO the original spirit Of the first
New Deal. honestly question many OF
their own measures, and carefully
propose a policy to meet what is at
this moment the only serious national
problem.
tCopyrisht, 1879