Evening star., 1938-12-30

questlon OF now
to mix them into n.-,.1.u.-
q palatable dish
is not yet answered. The basic rea-
son for this is that we have In
Washington two opposing groups,
two differing schools of thought,
each clinging to particular philos-
ophy or approach and each insist
ing that the one must be applied
In order to save the country from
ruin.
The exponents of these two camps
the advocates of more Govern
. ment spending and the advocates of
budget balancing-are not aware
that each may be right. They in
sist instead that the other is abso-
lutely wrong.
The average citizen, or for that
matter, the observer who wants to
make realistic analysis, has to veer
away from both these rigid views
and ask himself if perhaps there
isn't a third point of view which is
even more important because it
starts from existing facts rather
than what might have been.
Effect of Trends Profound.
The most important fact in the
whole business world today is that
the flow of Government funds, lend
ing as we'll as spending, has a pro-
found effect on business ups and
downs. When Government expen-
ditureS contracted, even as pay roll
taxes for social security started
withdrawing more and more from
the citizens pocketbook, back in the
spring of 1887, the ground was laid
for deep business recession. When
the Government early in 1898 re-
versed the engines, the ground was
laiffor recovery.
Anybody, therefore, who tries to
ignore the vital part played by Gov
eTnment expenditures just doesn't
understand the impact of these
Government billions on the eco
nomic system as whole. OF almost
equal Importance, too, is the scope
and character of restrictive legisla-
d. ton which impedes expansion or at
least postpones certain recovery
movements, such as the stalemate
created by the administrations fight
on the utilities.
To determine what kind of busi-
ness year 1889 will be it is important,
first, to learn what the Government
flow of funds will be like. 1t will
continue even more bountifully than
IN 1888, because many Of the P. w. A.
projects which were approved this
year will be fully under way next
year.
Next, it is important to observe
that pay roll taxes have become i'm
bedded in the price structure and
that tax rates have been digested
to the point where they have become
fixed part of business COSTS The
longer business has to get accus-
toned to fixed rates the better it is
able to absorb them.
Aiming to Bolster Business.
The billions of dollars that flow
in from business in the form of
taxes of all kinds and the billions
that flow out of the Treasury in the
form of expenditures make now
adays the difference between pros
perity and depression. The coming
program of armament will unques-
tionably lift the business structure
up. This is not comment on the
merits OF the policy, but merely a
recitation of some of its economic
effects.
Official Washington is much more
conscious than it has been for many
years Of the significance of tax
money Withdrawals and the creation
Of business through artificial de-
vices such as subsidies or lending
for residential construction. There
is a broad desire to encourage busi-
ness, but there is a difference Of
opinion as to how the objective
shall be attained.
1t may sound discouraging to say
that budget balancing is out of the
question this coming year, but it is
nevertheless statement of fact.
And it is probably out of the ques-
ton for two or three years more.
The advocates of budget balancing
insist it can be done now. Doubt
less 1t can-but at what social costt
This Is the question business men
answer with stoical courage to the
effect that the damage will be great
er in the long run If budget bal
ancing doesn't occur very soon. But
the political minds here, sensitive
as they are to what the effects of
social disorder might be, will not
listen to painful defation. They
point to the def1ation Of 1882 and
the devastating consequences to the
Republican party.
" Expense Reduction Unlikely.
It seems a safe prediction that
Government expenses will not be
reduced by Republican influence and
that though the increased minority
will talk about economy, they will
for the most part 60 along with the
spending. Even if the Republicans
had obtained control of both houses
of Congress last November they
never would have dared in this COM
ing session to perform a surgical
operation on the economic structure
by a sudden balancing of the budget,
Or by an abandonment Of Govern
ment stimulus to economic we'll
being.
So, given the facts as they are
an existing debt and an existing
structure dependent on q vast flow
OF Federal funds-what Is the best
policy to pursue? This is really the
challenge before the Republican
minority as well as the independent
Democrats for whi1o there has heer