Evening star., 1948-11-16

Democrats Will Be Held
Responsible for Actions
Leading to Any Recession
By David Laurence
The Democratic Party has ac-
quired a tremendous responsibility
as a result Of the last election. The
Democrats have taken the credit
for the high farm income and for
the high wages. They cannot now
allow the levels Of farm income or
wages to drop. These factors are
inseparably interviewer with the
economic future of the United States
and also with its national politics.
For the voters in the next con-
gressional elections will hold the
Democratic Party responsible If any
recession or depression has occurred.
To avoid any recession or depres-
sion, the administration must make
the present economic system func-
ton efficiently. It cannot tinker
with the machinery or put into effect
such restrictions as will kill the
goose that lays the golden eggs"
The fact Of the matter Is that the
administration is irrevocably COM
mitted to maintain the inflationary
prosperity" or to try to level it of
but 1t cannot permit any serious de-
fiation to occur unless 1t wishes to
lose both Houses Of Congress In 1850
The Republican Party, which had
been worried about the economic
future during the four years ahead
and there were many comments that
Gov. Dewey, If elected, would have
had q difhcult time preventing a
recession-is now breathing a sigh
Of relief and saying that perhaps
1t Is just as well that the Democrats
are to undertake the most difficult
Job In a century-to prevent a
depression under present circum-
stances.
Recessions Not Inevitable.
Depressions and recessions are not
inevitable. There Is no reason why
economic factors should be allowed
to get out Of hand in a nation in
which economic facts are as widely
publicized as they are In America
The danger lies solely in the
manner in which attempts are made
to prevent the growth Of imitation.
This can lead precipitately to a
serious defiation. There are certain
facts, of course, about the economic
future which no administration can
influence.
Thus there Is the matter Of arma-
ment. In order to prepare America
against q possible war with Russia,
billions Of dollars are being spent
for armament and billions are being
sent to Europe under the Marshall
Plan. If there should be peace with
Russia or q lessening Of the tension
and a reduction Of the armament
expenditure or II the harvests in
other countries of the world should
produce a surplus Of farm products,
thus depressing prices in the United
States, an adjustment OF some kind
will become necessary.
There are many businesses in the
United States which at the moment
are not enjoying prosperity" due to
balancing Of supply and demand and
to readjustments forced on them
either by high costs or their in
ability to compete efficiently with
plants built by larger competitors in
times when construction costs were
much lower than they are today.
When some Of the labor leaders lump
together all the profits of industry
and generalize from such a result,
they are overlooking the smaller
business units in which the rate of
profit happens to be low.
Could Cause Defiation.
The idea OF an excess-profits tax
has been suggested as one means of
reaching the larger companies but
unfortunately nobody has been able
to devise an excess-prof1ts law that
was ever applied fairly to smaller
businesses or to those which hap
pened to be in the growth stage
when the excess-profits tax was i'm
posed. Examination of the expert
ence with World War I and World
War II excess -profits-tax laws shows
that they invariably helped the
larger business by permitting them
to pay lower per cent overall in
taxes than was paid by their smaller
competitors. In this way, it may be
said that the excess-profits laws
have hurt competition and have
Disseminated in favor of the larger
businesses.
It was easy enough for President
Truman on the stump during the
campaign to call for an excess
profits tax, but he may see an excess
profits law putting out of business
many smaller concerns which will
find the equity markets closed to
them because the outlook for a fair
return on the investment will be
considerably dinmed for those who
are asked to invest risk capital.
Similarly, the large companies may
find it necessary to abandon ex-
pansion Of facilities because pros
pective dividends will be less. This,
in turn, could cause a def1ation in
the heavy-goods industries and bring
on unemployment.
For these reasons, the manner
and method Of imposing taxes and
the manner and method of con-
trolling prices are all-important.
When the Democratic Party in the
next Congress really comes face to
face with its responsibility, there
will be less and less talk Of radical
and extreme legislation and more
talk about how to maintain the pres
ent prosperity.
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