Evening star., 1939-01-05

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ident's survey OF 4
the international
situation e W ~
observers will n.v;aI.-..
dissent. Indeed,
there will be widespread approval
of the clear restatement of America S
traditional policy of awareness to
dangers that confront democracy.
The national defense plans are yet
to be revealed in detail, but their
basic purpose is no longer in doubt
throughout the world-America lines
up with democracies and can no
longer remain indifferent to inter-
national lawlessness anywhere"
But does this mean war? Not at
all, the President answers, for he
points out there are many other
means "of commanding decent
respect for the opinions of mankind. F"
He then proceeds to mention the
one-sided application to world
events which rigid neutrality laws
require and hints that America will
use her economic influence and eco
nomic power to bring home ito
aggressor governments the aggregate
sentiments Of our own people"
Different Paths to Goal.
When the President transfers the
thoughts of readers and listeners
from international questions to do
mestic issues, he seeks, of course, to
persuade the American people that
united democracy" is necessary
to ward off trouble from the outside,
and with this broad statement few
will quarrel. When it comes, how
ever, to deciding how social and
economic reforms can bring unity
at home through removal of the
present unemployment and threats
of economic crisis growing out of a
rising debt, Mr.. Roosevelt will find
economists differing with him.
The whole thesis of the Presidents
speech is that the United States
can work up to an $50, 900 900 900
national income by careful planning
and that the tax yield from such
national income would be around
$500, 900 900 year, or about enough
to balance the average budget
nowadays.
Statistically the President is right.
The tax rates now in effect are SO
much more productive Of revenue
than when the 1929 rates were on
the statute books and we last had
an $81 600, ,000, 900 national income
that a revenue OF around $780,
100000 year could be obtained.
Soundness Questioned.
But could the tax revenue be de-
rived on sound economic basis, that
is could more than 10 per cent be
the methods now in use, such as pay
roll taxes and heavy taxes imposed
directly on business operations, and
yet cause national income to expand
and not break down? The rules Of
experience show that it is all very
well to project large tax revenue,
but it is quite another thing to
collect it without causing the ma
tional income to drop.
It is a matter of debate, of course,
as to what caused the 1887 recession
In business, but a school of thought
right down here in the Government
comedies that the pay roll taxes for
social security early in 1887 began
to withdraw from the stream of
business rather abruptly more than
81, 900 900 900 and caused halt in
business and consequent abrupt
drop in national income.
It's the way taxes are imposed and
where they are placed that makes all
the difference in the world between
a rising and falling national in
come. Somewhat the same conten-
ton applies to the Presidents point
about the total debt of the country,
public and private, which, he says,
ais no larger today than it was in
1929 and the interest thereon is far
less than it was in 1929" This is the
kind of a general observation which
on its face is true, but upon analysis
does not justify the deductions
which will be drawn from it.
Debt Rate Is Crux.
Thus while the interest on Gov
ernment debt has declined materi-
ally, this is not true of private debt
to the same extent Likewise, the
writing down of private debt through
liquidation has left the country with
plant assets which are by no means
functioning as they did in 1929. To
put it another way, if we separate
private debt and publ debt, we find,
Of course, that private debt is the
larger part and just because liquida-
ton has curtailed the assets of
private citizens and has caused huge
losses to the economic system does
not in any way justify or relate to
the fact that Government debt has
risen at an unprecedented rate.
Again and again, for example, 1t is
argued statistically that England's
per-capita debt is larger than ours
and yet her population is smaller.
What matters is not per-capita debt
or the size of public debt, but the
rate at which it is being piled up.
The practical question is how long
America can pile up $4,000 ,00O, 900
deficits every year and what effect
will this rapidly increasing debt
have on the whole economic sys-
tenn. There are but two alterna-
tives-one, of course, is what may
be termed national bankruptcy and
q breaking down of Government
credit and the other is deprecia-
ton of the dollar.
The first of these will not k.ppen,
because political power is too great
to permit it and, besides, deprecia-
ton of the dollar, that is bringing
the purchasing power down, is a
much easier device from a political
standpoint. It is means Of cut
ting labor's real wages before labor
wakes up to what has happened.
It is the politicians modern way of
preserving his power and it has
been resorted to in other countries
for the last decade through man
aged credit and managed currency