Evening star. [volume] (Washington, D.C.) 1854-1972, 1946-03-02
Subsidy Precedents
Old, as Government
First Congress Aided Shipping
in 1889 by Lowering Tariff
BY Berfram Benedict

@Let's call them production premium
payments says Housing Expediter Will
son Wyatt about the subsidies proposed
on building materials. There is this to
ments would be paid, not for normal
production, but for above-normal pro-
duction to help meet the present acute
housing shortage. The producers argue
that, if the present ceiling prices are to
be retained, they need additional pay
Laents to meet the extra expenses in
volved in stepping UP production-not
only from expanding plants and INSTALL
ing new machinery but also from higher
wages due to overtime.
The stark word, subsidy" has always
had around it an odor of favoritism.
Yet the United States has paid subsidies
to certain favored industries from the
very inception of the Government.
These early subsidies chiefly concerned
transportation.
After the depression of 1929-1933 the
Government paid subsidies for the erec-
ton of public works to help create en-
ployment. Public housing and public
sponsored housing got various forms Of
subsidies on the theory that housing
construction was so expensive that with
out subsidies families in the lowest in
come brackets could never afford to live
in new housing. The fixed price of silver
today constitutes subsidy for silver
producers.
Between World Wars I and II almost
every large country, and particularly
Nazi Germany, considered subsidy pay
ments to certain industries as an accom-
paniment of national defense program.
Formerly, distinction used to be drawn
between direct and indirect subsidies
(many economists call the protective
tariff an indirect subsidy, but the dis
tinction has now been generally aban-
doned as meaningless.
The first Congress, in 1889, aided
American shipping by allowing a 10
per cent tariff reduction on goods en-
tering in American ships. A modified
form of preferential import duties and
fees remained in effect until 1885, In
were initiated to combat the virtual
mail monopoly then enjoyed by British
shipping. Later the mail subsidies,
after being several times terminated,
were Reconstructed to stimulate the con-
struction and maintenance of an Amer
lean merchant marine.
Early in the 10Th century public land
rrontoJ for b,1i1Iipr hi
canals. In 1850 public land was granted
to States, which regranted it to rail-
roads, for the benefit of projected rail-
roads. Later, until 1871, public land
was granted directly to railroads to
stimulate construction.
The Merchant Marine Acts of 1920
and 1928 not only increased postal pay
ments to American ships but also pro-
vided Government loans at low interest
rates for ship construction. Postal
subsidies to commercial air lines began
with the Air Mail Act of 1925. During
the defense emergency which began in
1910 the Government began to pay
subsidies to high-cost producers of
certain essential products, also on Ger
tain imports, IN order to stimulate
production and maintain fixed prices.
The Government would buy at above
the fixed price, sell at the fixed price,
pocket the loss. A higher fixed price
for everybody would have let low-cost
producers reap exorbitant profits. The
industry wide prices fixed under the
Inflated NRA were really subsidies to
the higher-cost producers or sellers.
Today the emphasis is on subsidies
as holding down prices for the con-
Stunning public. Inasmuch as profit per-
centages added in the different stages
of marketing are based on prices, the
subsidies to hold down the first price
are assumed to cost the Government,
and the whole national economy, less
than higher prices would cost the
public.