Evening star., 1938-01-26

sum went for wages, materials, in
terest and taxes as we'll as some
dividends
Surpluses Exhausted.
When Mr.. Roosevelt asks industry
10 resume the digging into surpluses
70 as to maintain employment and at
the same time to reduce prices by
selling below cost, he is facing differ
ent situation than Mr.. Hoover did
For surpluses have been consumed in
large part and also there is very little
cash. relatively speaking, in those
surpluses which remain.
Thus the total surplus for all man.
ufacturing industries is only about
$8,000,000000 and not more than
NTH of it is in cash. To meet pay
rolls, cash is always needed. There
comes time when the thing called
SURPLUS being very largely in the
form of bricks. mortar and machinery.
cannot be converted into cash and
paid out in wages, but the company
must borrow.
Will commercial banks or invest
ment banking houses grant loans to
companies which actually sell products
below cost, as Mr.. Roosevelt advises
or which keep on producing goods that
cannot be moved into markets?
II the question needs an answer it
can be found by asking the bank
examiners what they usually say about
loans made by banks for operating
expenses when the surplus of a COM
pany Is diminished and the goods are
being sold below cost; in other words
when a company is just using its
funds to subsidize pay roll and buy
fsw materials for production that
cannot be disposed of.
Conflict in Policies.
Mr. Roosevelt would never ask the
farmers to reduce their prices when
they have surplus. In fact, he is
planning to grant Government sub
sides to the farmers so they can
maintain their prices. Just why the
President applies one rule of his
economies to support farm prices
while, at the same time. he advocates
production of prices below cost to the
manufacturer of industrial goods is
not explained, yet economists assert
that business volume grows only when
goods may be exchanged at fair prices
between different groups in the ma
tional economic entity.
If Mr.. Roosevelt's thesis were cor
rect the United States Government
could afford to reduce taxes-which
are one Of the biggest items in pres
ent-day costs-and let business re-
duce its prices. The President. on
the other hand, has told Congress
that If any tax revision is to be
granted 1t must not be by changes
that in any way reduce revenues.
As for costs Of production today,
taxes are usually added on, and the
tax bill Of the Nation-Federal. State
and locals about 100000 900.
20 that a sizable reduction in prices,
stimulating volume, could easily be
accomplished If taxes were cut, say,
in half.
But what would happen to Govern
ment credit If taxes were cut out?
The same thing that happens to busi-
neases wherI they keep on employing
people to make goods that they can
not sell-their securities begin to drop
and their credit, too.
Knudsen Gives Answer.
Everybody is in sympathy with the
idea Of maintaining wage levels. and
no sensible business man will cut
labor costs except as last resort,
when demand has materially fallen
OF. The other day at the Senate
committee hearing some one asked
William Knudsen of General Motors
why he didn't keep the 10000 men on
his pay roll, and he asked the Sena-
tors: What would the workmen be
doing?"
Raw materials cost as much almost
As pay roll, and to use up materials
to make cars for which there is no
demand or to sell cars at prices
which are below what other cars
already produced are selling for is
merely to demoralize the industry
still further. No corporation can long
continue to maintain a pay roll when
It doesn't make its production fit de-
nand. Certain levels can be MAIN
tanned artif1cially for few weeks,
perhaps, or even few months, but
It's q dangerous process. Business
men did it in 1880 and 1881, and then
the cycle Of demand and purchasing
pbwer ran so low that the debacle
Of 1888 ensued.
Today the surpluses in private busi-
ness are not what they were in 1880,
20 industry will be cautious about
doing what it thinks are uneconomic
things. Mr.. Roosevelt refuses to pay
az n &ln ,f