Evening star., 1942-01-01
Arms 70 Require
Larger Share Of
Production
Taxes, Higher Prices
! And Forced Saving to
| Cut Buying Power
BY FORREST H. GRAVES.
Rditarfal Director Cambrfdaa AxSocfa te

the business of winning the war.
will be stupendous. So
will the aggregate national income
in dollars. Yet few If any "far for
tunes" will be created, many people
will find their real income impaired
and some will suffer actual economic
The truth Is that the familiar
term, war BOOM" has no more re.
lation to modern war than the scar
let jacket Of the husssr. "All-out
war" as we are swiftly learning.
means exactly what 1t says, q war
that reaches out to affect the life
of every man, woman and child in
the Nation and bring every effective
element into action against the enc
my. And war on this scale leaves
little that bears resemblance to .
boom.
To perceive how inadequately the
present and prospective situation
can be measured by peacetime yard.
sticks it is only necessary to consider
some Of the easier predictions that
can be made in regard to the trou.
bled year ahead.
Production TO Differ.
First, production. The Federal
Reserve Boards index Of overall
production is now lowering In the
neighborhood of ITO, with the 1885.
1889 average eQualing 100.
During 1912, production may push
slowly ahead toward the 200 level
But with a difference. In the past
two years gains in the production Of
war goods have been accompanied
by smaller but still substantial gains
In consumer goods.
During 1912 the production Of
consumer goods of many types will
be cut drastically. Shortages Of
essential materials will extend
priority restriction even where gov
ernmental authority does not step
in to order a direct slash in output.
Texas, higher prices and virtually
mandatory savings and contribu.
tions will sap much Of the purchas-
ing power that made 194l. for the
American consumer as a whole. the
best in history. In 1912 his buy.
ing power will go toward the pur-
chase of eventual victory.
In this connection there are astro.
nomical figures which show the
billions already available, and po-
tentially available, to spend for
arms. Fifty-two billions plus is tho
estimate of funds now provided.
Such figures are meaningless be-
cause the use of dollars is only linz
tied by our capacity to turn them
into the munitions Of war. One bill.
lion a week is the rate Of defense
spending set for 1912. but If this can
be stepped up 1t will be.
Islands Of Depression.
The businessman ard the worker
in the industries which supply nom
essential consumer wants may or
may not suffer from the intensity
of the war effort. 1t will depend
greatly on the type of raw materials
the business requires. Certain in.
dustries and trade are almost cer-
tainly doomed to become islands Of
depression and unemployment amid
all this seething activity.
Business profits during 1941 will.
1t is estimated. show approximately
10 per cent increase over 1910. In
spite of increased taxes. the general
run Of corporations will show good
earnings even though natural COM
servatisn may limit the share that
will go to investors in dividends.
For 1912 even higher tax charges
are in clear prospect. and business
earnings, on the whole, may decline
somewhat. OF course, If the war
Congress should decide, as it well
may, to adopt Secretary Morgen.
thau's proposal for a strict limita.
ton of profits to per cent of in.
vested capital, it would mean re-.
duction of earnings to perhaps one
half of 194l profits for many cor
porations
Although more rigid price control,
probably embodied in Federal legis-
lation, is in prospect, 1t. is safe to
look for an increase in the general
living costs. The cost of food, par
ticularly has shown an unchecked
tendency to rise and although retail
prices are not high by the averages
Of 1920's they are affecting consumer
budgets based on the comparatively
low prices Of the past 10 years.
Farmers, Wage Earners Gain.
| n,rk $hArA onntiAvSe ~
nomic commonwealth that are going
to be well off, more prosperous than
for many years.
Workers in defense industries will
continue to receive good wages aug.
mented by more overtime pay.
Farmers can look forward to shar-
ing cash income larger by 20 per
cent perhaps than that of 1941.
which itself was one-fourth above
the 1910 total. Even though wages
and farm income cannot be turned
into all the kinds Of consumer goods
that in other times would be Tempt
ing, 1t will mean q higher living
standard for groups that were the
chief sufferers in the depression
years. Higher income taxes, even q
drastic payroll tax, would hardly
eliminate all the BENEFITS Of steady
employment, high wages and farm
prices.
OF course. ,as Baron Won Clause
witz, the Prussian strategist, OBJ
served 200 years ago. "only the be-
ginning Of a war is known" Nc
forecasts are proof against the un-
predictables which are the essence
of war nor the rules which any gov
ernment, even the most democratic
In spirit. may be forced by the neces-
stiles of war to lay down at any
moment.
Two years ago we were showing
. marked preference for butter over
guns. A year ago we were trying
to believe that We could have both
butter and guns.
THIS year there y no qusstton, the
guns must come first.