Evening star., 1948-12-31
Many Expansion Plans
Called Off by Industry
After Dewey's Defeat
Presidents Message
Awaited Before Action
Is Token on New Plants
By David Latprence

President Truman may be the man
OF the year and his election and
that of the Democratic Congress
may have been the surprise of the
year. but the biggest news story of
the year has not yet been published.
1t involves the extent to which
the election of Mr.. Truman caused
such a psychological shock to the
economic system as to have reduced
by many billions of dollars the
amount of money that will be spent
in 1949 for new plants and equip
ment and general expansion of phys
ical facilities.
This is something not talked about
openly but businessmen privately
have been worrying about 1t great
deal more than the newspapers have
hinted. Many an expansion program
that was all ready to go in the event
of Gov. Dewey's election has now
been suspended and in many in
stances Cancelled.
This will show up during 1949
in curtailed employment. Already
there is rise of unemployment
The figures show that the planned
expenditures for the first quarter of
1949 are down as compared with the
same quarter of 1948.
Tax Rate Feared Most.
The estimates which the Com
merce Department received from va
rious industries concerning their
planned expenditures for the first
quarter of 1949 were practically all
prepared before the 18th of Novem-
ber-most of them obviously before
the election Many companies did
not change their plans Immediately
but decided to wait and see whether
President Truman and the Demo-
cratic Congress were going to be as
radical as the campaign speeches
indicated. When they saw that Philip
Murray. president of the CIO, was
to be the dominant figure in the
coming administration and that an
profits tax and repeal of the
Taft Hartley Act were to be the
principal demands to be pressed
upon the new administration and
Congress, businessmen began to feel
alarmed.
What is most feared was that
the new tax rates would force
discontinuance of the business eX-
pansion program. This arises out
of the direct attack by the radicals
on sums earned which have been
used hitherto to finance plant ex-
pansion. If corporation earnings
are to be diminished so that less
and less money is available for
even the customary dividend rate
of prewar years and if companies
find it necessary to borrow on bond
issues because. they cannot raise
capital in the equity markets, then
the whole economic system is due
for a showdown.
The chief trouble with the excess
profits tax is that it assumes a
larger and larger demand for goods
whereas there are evidences now
that supply is catching up with de-
mand. At the very time when busi-
ness needs to be encouraged, it is
being discouraged.
There are many businesses which
are going ahead as usual but it does
not take a very large proportion of
the total to bring about a downward
turn.
The two biggest factors in the
maintenance of good business con-
ditions are, first. an ability to
finance largely out of earnings
whatever new plant may be required,
and. second. some stability in the
labor Encouragement situation.
Wait Truman Message.
With the economic power of la
Dor unions about to be increased
materially, so that there is no
longer a balanced relationship be-
tween management and labor, the
item of indeterminate wage costs
looms so large as to make planning
almost impossible in large-scale
business.
For several weeks now business
has been awaiting the Presidents
message and has been listening to
reassuring gossip that Mr.. Truman
and the Democrats ale really con-
servativeS at heart and would not do
anything to hurt the economic syS-
tenn. Nobody, of course. ever be-
lieved that Mr.. Truman or the
Democrats would deliberately kill
the goose that lays the golden egg
of Government revenues at a time
when the budget appears to be
headed for another deficit. But. on
the other hand, both the President
and the Democratic leadership have
very little practical knowledge of
what causes business TO turn down.
ward and very little understanding
Of what makes the wheels of in
dustry go round. UnWittingly both
Mr.. Truman and the Democrats can
bring on a depression and can also
blame business for bringing it on
Certainly, the administration will
not sit idly by while business re-
cedes without blaming somebody for
it. and the last people in the world
to be blamed will be the legislators
who will have tampered with the
economic system at a very critical
time.
The Presidents message will point
the way.
1t will either confirm the fears
of businessmen or it will so greatly
reassure them as to improve the
business outlook for 1949 Certain
ly there is big log jam of orders
for plant expansion and replace
ment of equipment which will be
affected favorably or unfavorably
by what Congress does on taxes and
labor legislation.
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