Evening star., 1938-04-24
Many ''Ifs'' in the
Recovery Program
BY OWEN L. SCOTT.

through the use of big figures and
through emphasis on the creation of q
huge amount of bank reserves that could
serve as the basis Of q fantastic infia-
ton Of credit, provided lenders would
be willing to lend to solvent business
men who might be interested in bor-
rowing.
As result Of this middle Of the road
approach to = cure for the pain of de-
iation, the President has satisfied
neither group Of his advisers.
The school Of spenders, headed by
Mariner Eccles, chairman of the Fed
eral Reserve Board, is quick to point
out that the White House emphasis on
q new program Of 5000 100000 in
spending and lending actually involves
not much more than a third OF that
amount Of increase over present SPEND
ing and lending.
Yet the school of budget balancers,
headed by Henry Morgenthau, jr. Treas
ury Secretary, and Jesse H. Jones,
r. F. c. chairman. is equally quick to
assert that the direction now to be
taken points along the same path that
already has carried the public debt from
$40 600, 100000 to nearly $4,000, ,00o, 900
In nve years.
~
The facts Of the matter are these:
II Congress accepts the Presidents
recommendations. actual wage payments
to w. p. A. workers will average very
little more during the next year than
they now are averaging. with little ap-
parent effect in turning the tide Of
depression.
II Congress agrees to the Presidents
requests for money to finance the C. c.
G. camps. the Farm Security Adrinis-
tration and the National Youth Admin.
istration, the additional expenditure
over the present fiscal year will be little
more than $4,000 900.
II Congress goes along with the Presi-
dent on his request for spending on
highways and on flood control, the total
expenditure will be very little more than
that now being made, inasmuch as
original plans called for a cut that
measures approximately as much as the
now-recommended expansion.
But Mr.. Roosevelt has asked Congress
to approve the expenditure Of about half
billion dollars on large-scale public
works and the loan Of another half bill
lion for similar public works He also
is asking for an additional 5000, 900 900
1Or lOW-COSt housing.
The Spenders argue, however, that
both Of these fields of activity are some
what restricted. owing to the slowness
with which plans can be transformed
into action. The expectation is that,
even with early approval in Congress- it
would be from four months to a year
before money actually would start to
now into the pockets OF contractors and
building material dealers and union
workers In very large volume.
All In all, the outlook is not for such
vast set-up in Government spending
as President Roosevelt would have the
country believe. The volume OF that
spending has been large in the midst
Of todays deflation, although it has been
Offset by about an equal volume Of cash
receipts. due to pay roll tax collections.
BY dumping nearly 1880 900 900 Of
gold certificates into bank reserves and
by reducing by $750,000 900 the required
reserves Of banks the Government has
fortified the Nations banking system
with what now is q total OF reserves
nearly $4,000 900 900 larger than re-
qulred. These excess reserves could
serve as the basis of about So, ,0OO, 900 900
Of bank credit.
when banks possessed almost no excess
reserves. The huge total of those re-
serves now on hand increases the pres
sure on bankers to find some use for
the funds that they possess.
Here, then, is the psychological factor.
BY talking about large Government
spending and by broadly limiting at in
1ation the President obviously believes
that he may be able to encourage or to
frighten the owners of the vast deposits
in the Nations banks to begin to turn
those deposits into houses and factory
buildings and ownership Of commod-
tiles and into other tangible goods. A
run out of money and into goods could
give this Nation a powerful recovery
that might then raise the question of
control.
The result is a series of "ifs"
II the pouring out Of a somewhat
larger volume of cash through w. P. A.
succeeds in offsetting the defiationary
effect of cut in factory pay rolls
amounting to about $4,000, ,000, 900 a year,
then a push toward recovery may be
started.
If cities and States still are interested
in an opportunity to borrow and to
spend large amounts Of money on
schoolhouses and roads and other public
improvements. and II they can get their
plans ready for execution anytime soon,
further impetus to spending can be
given.
II local communities are about to put
up 10 per cent in cash Of their own and
If they have the location available and
plans approved, they could give still
more Of push by spending for slum
clearance.
If corporations and other owners of
bank deposits decide that all of this
spells the beginning OF imitation, they
may be expected to start to run out Of
money and into goods, accelerating any
push that now may be started.
II banks discover that individuals or
business enterprises Of good standing
are interested In borrowing, or if they
find that the pressure of idle money is
so great that it tempts them to make
loans that may not always look quite
as good as they like, the groundwork for
prosperity definitely would be laid.
And If Jesse Jones of the r. F. G.
finds that banks are not interested in
making loans to business men who do
have sound assets, he has available q
volume Of credit that he can lend to
those business men to push along the
recovery.
The Governments principal economists
say that the President'a new recoverv