Evening star., 1939-05-19

example, tne re-
Charles G. Ross. pressive taxes
on consumption should be reduced
but, 1t is maintained, private invest
ment alone cannot produce the re-
quired flow of savings out of stag
nant pools" If we are to have the
capital goods expansion, without
which we cannot overcome the un-
employment problem, Government
spending on public works must come
to the rescue. Failing this aid, sit
Is not likely that we shall absorb
our full flow of savings, put them
to active use and raise our national
income above the current chronic
stagnation level"
1t is part of this Government in
vestment" theory, as ably laid before
the committee by DR.. Alvin H. Han
sen, Harvard professor of political
economy, that the field of private
investment today Is sharply limited
by the self suff1ciency of the great
basic industries. They don't need
investors funds as they once did,
but are financing themselves largely
out Of their own earnings.
DR.. Hansen's paper is a carefully
considered expression Of the eco
nomic philosophy now guiding the
New Deal.
1t may throw light on the con-
f1ict of thought in Washington
without settling anything-to re-
port part of a colloquy between
DR.. Hansen and the chairman of
the committee, Senator OMahoney
of Wyoming.
DR.. Hansen said the Govern
ment ought to explore to the limit
all worthwhile self f-liquidating pub
lie projects and undertake such cap.
ital outlays as rapidly as feasible "
He urged, also, investment in other
projects of social usefulness, but
ne was speaking at the moment Of
self-liquidating projects. borrowing
for which, he said. was perfectly
legitimate and financially sound
procedure"
AS an example of a self -liquidat.
ing project. DR.. Hansen named
Boulder Dam.
you have referred" said tn.
chairman, Ito Boulder Dam. Tho
principal source of revenue to Noui.
date the cost Of that project comes
from the sale of electric power and
also. l think, of water. The prln-
cipal market for the power is the
power district Of Los Angeles, and
the fund from which the repav-
ments to the Government must be
made is raised by the rates which
the citizens Of Los Angeles and
the surrounding area pay to the
company which distributes the elec-
trio power. Now, if those persons
are not employed, they can't pro-
duce the income If those persons
or any large majority of them are
on relief or the w. P. A., they are
not earning the income which
would make it possible for them to
contribute to the self f-liquidation.
Does it not SEEM" he asked,
that the first step is to provide
employment before you can de-
velop income for n-nquidating
projects?"
DR.. Hansens reply failed to
satisfy the Senator, who continued:
But in an economic society in
which there are between 10 and II
million persons unemployed and
between two and three million
drawing security wages from the
Government, how is it possible to
imagine that deficit spending on
plant and equipment by the Gov
ernment will produce wage income
to the unemployed of a sufficient
amount to start the wheels going
again and even to liquidate these
projects?"
That, Senator" replied DR.. Ham
sen. "all depends on the volume,
as to whether it is sufficient or not,
but it operates precisely in the same
manner as private outlays on plant
and equipment, and in the event
that the public projects are also
directly productive, not only does
it increase the flow of the income
at the moment, but 1t also increases
the productive power just as the
expansion of private plant and
equipment does"
Senator O'Mahoney observed that
the income producing expenditures
of Government in 1887 amounted to
only 5.3 per cent of the total of such
expenditures. He could not see how
this little segment" could produce
the wages to the masses of the
people which must lie at the bottom
of the new structure of prosperity"
DR.. Hansen replied that In 1897
the expansionist influence of the
Federal Governments public works
expenditures was largely offset by
the Social Security taxes. He
pointed out that in the previous
year the net income-creating ex-
penditures of the Government
were much larger and attributed
the recession of 1887 to the fall
ing-off.
Senator OMahoney insisted that
the reply didn't answer his ques.
ton. 1t seemed to him that the
Government should devote its at
tention to expanding the private
sources of income-producing ex-
pendiures.
1t boils down to this: Senator
OMahoney says the emphasis ought
to be on creating jobs in order to
get the money with which to pay
off the Governments debts. DR..
Hansen says you have got to create
further debt in order to create
the jobs that will produce the
money with which to pay of the
debts.
The difference in approach rep
resents the difference between the
two schools of thought that are at
war in Washington.