Evening star., 1939-05-16
Government Financed
Railway Equipment
Company Proposed
Harvard Professor
Presents Program to
Monopoly Committee
BY JOHN c. HENRY.

BY JOHN C. HENRY.
Seeking an answer to the depres-
sion riddle, the Monopoly Committee
took under consideration today a
four-point recovery program, which
includes creation of a Government
financed railroad equipment COM
pany.
The proposition was laid before
the committee by DR.. Alvin H. Han
sen, professor of political economy at
Harvard University.
Outlines Program.
Summarizing the recovery prob
lem as essentially one of encourag-
ing an adequate volume of capital
goods expansion" DR.. Hansen out
lined his suggested curatives as fol-
lows:
In the first place, we must stimu-
late private expansion of productive
equipment and new construction.
We should foster and support, partly
by public funds, the development: of
new products and industries
Secondly, in the case of the rail-
roads, the retirement of equipment
In excess of additions in the past
eight years has created a consider
able backlog in the event that rail-
road traffic should increase. A rail-
road equipment company could be
set up, financed on a self -liquidating
basis by Government funds, empoW-
cred to purchase new railroad equip
ment, and lease it to the railroads
as and when needed This might
break the railroad financial log jam
and open the way for an expansion
OF railroad capital expenditures.
Thirdly, with respect to residen-
tlal construction, the time has come
when we could we'll reduce the guar
anteed rate of interest allowed
under the Federal Housing Admin
istration. Considering the current
surplus of funds seeking investment.
the present rate is abnormally high
and is certainly deterrent to pri-
vate building.
"Fourthly, private investment ex-
pansion can be stimulated by a
thorough reform of our tax struc-
ture."
Making the added suggestion that
there be large-scale public invest
ment in both self liquidating and
non-self-liquidating projects, DR..
Hansen advised the committee that
budget balancing need cover only
the amortization and interest
charges each year, but not the full
capital expenditure of the year.
Taxes on Savings.
To supplement tax income, if such
Is deemed necessary, the economist
further suggested the added taxes
be 80 levied as to fall on savings
and not on consumption
by this procedure" he said, the
savings stream is forced directly
into investment instead of being
tapped voluntarily through the bor-
rowing process. In this connection
1t is OF interest to note that in Eng
land 1t appears that savings are
oelng syphoned in very considerable
volume through the tax structure
INTO expenditures on social service.
Stated otherwise, England has a
hlgh-consumption economy. And
1t is largely by reason of this shift
that England has been able to ad-
Just herself more successfully than
we to the conditions of a less
rapidly expanding society-a So
clety requiring smaller flow of
savings than that needed in the
10Th century.
IN contrast with the British sit
uatlon, our tax structure weighs
less heavily on savings in the So
called middle income brackets. Our
ratio of savings to income con-
tlnues to be relatively high. We
need, therefore, above all to find
adequate outlets for our flow of
savings into plant expansion and
new construction, if we are to
avoid chronic unemployment"
In further detail on the subject
OF public investment and its meas
uremeht OF worth on a budgetary
basis only, Dr. Hansen declared:
Some public investments are
self liquidating in character. These
offer no difficulty with respect to
financing, and about these there
can be, L think, no serious ground
Tor controversy. Yet, because of an
obsolete system of public account
Ing, we have dumped even these
expenditures into our ordinary
budget and mistakenly counted our
selves poorer by reason of the public
debt incurred to finance these
projects
DR.. Hansen was the first witness
as the committee opened hearings
on a Securities and Exchange Com
mission study of savings and in
vestments generally considered the
most important phase of the whole
inquiry.
Peter r. Nehemkis, jr., special
counsel to the S. E. c., is directing
presentation of the testimony.