Evening star. [volume] (Washington, D.C.) 1854-1972, 1949-01-07

income and investment, and prices
profits, and wages which will b.
conducive to sustained economic
progress.
Economic Justice Needed.
Fourth. We are dedicated to tn
principle that economic stability an,
economic justice are compatible
ends. "'' A prosperity that is to,
uneven in the distribution of it.
fruits cannot last.
Fifth. We must fulfill the require
ments OF our essential programs
national defense, international re
construction and domestic improve
mentS and Welfare-even if doing S,
may require the temporary exercis,
OF Selective controls in our economy
Sixth. The vigorous commitment
by the Government to an anti
imitation policy should not obscur,
the fact that the Government i
equally committed to an anti
depression policy. In fact, curbin,
imitation is the first step toward pre-
venting depression. And in time
like the present, when the economi
situation has mixed elements. tn
Government needs both anti-infla
tlonary weapons and authorization
any weapons so that it will be read
for either contingency.
With these principles as a guide
l turn now to the recommendation
which I am presenting to new
Congress invested by the American
people with enormous responsibility,
Tor their welfare and security.
New Taxes Proposed.
Fiscal policy-It is essential t.
sound fiscal policy to have a bulge
surplus now. This is our most eff.
fective weapon against imitation
1t will enable us to reduce our deb
now; 1t would be much more diff.
cult to do so in less prosperous
times.
l recommend le9isla ton to in
crease the Government revenue
from taxation by $4OOO,OO0, 900
year. The principal source of
additional revenue should be adj
dltlonal taxes upon corporate
profits, which can be applied
without unduly interfering with
prospects for continued business
expansion and with assurance
that profits, after taxes and divi-
dends, will be sufficient for in
Vestments and contingencies.
Another source of additional
revenue should be the tax upon
estates and gifts. The already
small yield from this tax was
reduced by one-third by the
Revenue Act of 1913. Careful
study should also be directed to
the increase of rates of individual
income taxes in the upper and
middle brackets. Some addi-
tional excise taxes may be desir-
able, but some excise taxes, par
ticularly on oleomargarine, should
be repealed.
I also recommend an increase
In social security contributions
under existing and extended So
cial insurance programs. This
would exert an anti-inflation
effect in addition to that of the
s4,000,000,000 increase in taxes
which. have recommended
above.
The national tax policy should be
flexible and should be promptly ad-
Justed to, the changing needs OF
business and consumers in the
course Of evolving economic events
Increased taxation is only one of
the means by which we can ac-
cumulate budget surplus. The
other is a careful limitation of Fed
eral expenditures. ""*
Debt Policies.
Debt management-The public
debt will continue to be managed
in manner that will make a maxi
mum contribution to the stability
Of the economy. An important
factor in this program will continue
to be the maintenance of stability
in the Government bond market.
The stability of the Government
bond market was maintained
throughout 1948 by the joint effort
of the Treasury Department and
the Federal Reserve System. De-
spite the necessity for market sup
port at times during the year, there
was only moderate increase in the
total Government security holdings
of the system as result of the sup
port program. ="
Credit policy-On previous occa
sions I have recommended that
adequate means be provided in order
that monetary authorities may at
all times be in a position to carry
out their traditional function of
eXerting effective restraint upon ex-
cessive credit expansion in an in
flationary period and conversely OF
easing credit conditions in a time
of deflationary preSsures.
The temporary authority to in
crease reserve requirements of men,
Der banks of the Federal Reserve
System, granted by the Congress
last August, will expire on June 80
1949. The expiration of this author
ity without further action of the
Congress would automatically re-
lease substantial volume of bank
reserves irrespective of credit needs
at the time.
The Congress should promptly
provide continuing authority to the
Board of Governors of the Federal
Reserve System to require banks to
hold supplemental reserves up to
the limits requested last August
10 per cent against demand deposits
and 4 per cent against time de.
posits. This authority to the Board
of Governors should not be con-
fined to member banks of the Fed
eral Reserve System but should be
applicable to all banks insured by
the Federal Deposit Insurance Cor
poration.
Authority for the regulation Of
consumer installment credit, which
likewise expires under present law
on June 30, 1949, should be con.
tinued in order to exert a stabiliz-
ing influence on the economy. -
Industry Proposals.
Promotion of supply and produc.
tion-There are shortages of sup.
ply in certain critical areas which
are so serious as to impede maxi.