Evening star., 1948-12-07
Profits Not Excessive,
Michigan Economist
Tells Joint Hearing
By J. A. 0Lsay

Business profits are not excess
sive in view Of the present
volume of sales, Prof. w. A. Patton
of the University of Michigan
told q congressional committee
today.
mo sir" he answered, when asked
by Representative Huber. Democrat.
of Ohio IL he thought current profits
are excessive.
The witness, testifying before the
Joint Economic Committee, ex-I
planned that corporations are subject
to a pattern of "fat and lean
periods" Earlier, he had argued
that statements of corporation
profits frequently give an exagger-
ated impression because accounting
methods do not reflect the changing
value of the dollar
But even if there was not this
accounting problem. he added, he
would not say current profits are
too high.
Supports Earlier Statement.
'eWhy should a company double its
sales and not show a larger volume
of profit?" he inquired.
Prof. Paton's testimony supported
the claim of Prof. Sumner H. Slich-
ter of Harvard. Prof. Schiller said
yesterday that business in the last
three years has "overstated" its
profits by about SIG. .400, ,000, 900 be-
cause present accounting methods
do not accurately reflect new con-
ditions and new problems.
The Senate-H House group Is look
ing into the profits of business. Its
report may influence what Congress
does about taxation, money controls
and rationing.
Prof. Patton said business is de.
ducting costs, particularly deprecia-
ton, in terms of dollar worth two
or three times what 1t Is now" He
added:
The result is overstatement of
real earnings, in some cases signifl-
cantly. In my judgment the
change in the value OF the dollar
has been so marked, and return to
an earlier dollar has become so
unlikely. as to warrant changes in
accounting procedure to meet the
situation"
Building Valuation Stressed.
AS an example, Prof. Patton said q
building which cost 100000 in
1898 cannot be called a $1,000. 900
building today. He said the reason
able cost Of the books of the COM
pany should be $2,500, 900, based on
higher construction costs.
He suggested that the 194S dollar
be called collar" to impress peo-
pie with the fact it Is no longer
worth what it used to be.
"As every citizen knows, the only
aspect Of the dollar that remains
unchanged from year to year is the
name, and I sometimes get the no.
ton that we would all think more
nationally about our economic af-
fairs If we changed the name every
year or so as the economic content
changed" Prof. Patton said.
George D. Bailey. another expert
In sccountancy, also emphasized the
fuctuating value Of the dollar as q
factor to be considered in weighing
the current volume Of business prof.
its. 90.
ANY consideration Of profits as q
return on investment must recog-
nize that profits are reported in cur
rent dollars, whereas most invest
ments were made in dollars of much
greater purchasing power" he said.
Another Harvard economist, Prof.
Seymour Z. Harris said yes
terday, my considered judgment Is
that profits are too high"
In order to stop imitation" he
added, 'it is necessary 10 use Gov
ernmenD fiscal policy with effec-
tiveness. Tax more and. insofar as
broad national objectives allow,
sDend less"