Evening star., 1948-12-07
The Political Mil
New Congress Must Act
!. On Tax Rise or Controls
Legislation to Combat Imitation
Will Be Far From Popular
The Political Mill
Bv Gould Lincoln


The new. Congress may be confronted soon
after its arrival in Washington with the need
for increasing taxes or setting up price con-
trolls dncluding wage controls), or both. This
is putting very BADLY the problem of dealing
with imitation which already is well on the
way a problem with which the Joint Con-
gressional Committee on the Economic Report
is now concerning itself.
That's the kind of legislation which might
make the Eighty-frst Congress less popular
than its immediate predecessor-which Presi.
dent Truman called the second worst Congress
in history.
With Government spending promising to
rise, with the labor unions apparently on q
rampage for fourth series of wage increases,
prices can scarcely be far behind. Yet one
of the Truman promises during the recent
campaign was definite action to do something
about prices.
Seymour E. Harris, professor of economics
in Harvard, one of the witnesses before the
joint congressional committee, took a definite
stand in favor of the use of the fiscal and
monetary policy as weapon to combat int1a-
tion rather than the annoying controls
which the country is inclined to tolerate only
in emergencies"
Correct in Theory.
To use the fiscal policy with effectiveness,
as Prof. Harris pointed out, it is necessary to
tax more and to have the Government spend
less. In theory this may be entirely correct
but as a practical NATTER it Is going to be
difficult to put this into practice. The present
Republican Congress reduced the individual
income tax rates-and knocked 100000 OF
the small income taxpayers off the tax books
entirely The Seventy ninth Congress. Demo-
cratically controlled wiped out the excess prof-
its taxes on corporations in order to give busi-
ness a chance to 60 ahead with all kinds Of
improvements and extensions.
Mr.. Truman opposed the Republican tax re-
duction bill-he vetoed it-on the ground that
it aided the rich and well-to-do and ignored
the people in the lower brackets That may
have been a good talking point, but If the
Truman administration, aided by the new
Congress is going to increase taxes again, the
lower brackets will feel the pinch, too. There
will be no other way of making tax increase
an effective weapon against imitation.
AS for reducing government spending-that
seems an impossible task not only because
of the need for building up national defenses
and for continuing the European Recovery
Program, and possible aid to China, but be-
cause of the many campaign pledges for social
legislation made by the Democrats. If all the
promises are carried out for government aid
in housing, in education, in medical care, in
old age assistance, etc.. government spending
is going to increase by billions of dollars.
Congressional committees, under coming DEM
ocratic control, already are giving considera-
ton to legislation to put these promises into
effect
Alternative Is Controls.
The alternative is a system of controls-fx.
ing prices, rationing goods, and perhaps con-
trolling and fixing wages. The President urged
he be given power to fix prices and ration cer-
tain goods at the last session Of Congress.
After the campaign he made, it can only be
expected he will make similar recommended
tions to the Democratic Congress- These con"
trolls could easily reduce supplies and force a
lot of goods into black market. They could
make the administration as unpopular as it
was in 1916, when the Republicans won the
congressional elections.
The decision Is not going to be an easy one.
The argument has been made that profits are
too high. And if reports are true. they are
too high. But once the rise of prices has been
halted profits will decline. It will not help
much to drain of profits and pass them out
in a series of government expenditures, which
will put more money into many hands to keep
the imitation going.
Prof. Harris made one suggestion to the
joint committee which, however sensible it
may be, will raise the hackles on the congress
sional back. He proposed that the Executive
the President-have some discretion to raise
and lower tax rates in a manner to be deter
mined by Congress. 1t took major operation
to get Congress to come around to giving the
President some discretion in the application
| of customs duties. That it would permit him
to say what direct taxes on the people should
| be levied is unlikely An understatement.