Evening star., 1949-04-01
Truman Seen Needing
Education in Simple
Laws Of Economics
Increase in Toxes Once
DefIotion Hos Begun Will
Speed Its Momentum
By David Laurence

SHSSe btS BFtStSShtSbF
By Dapid Laurence
II costs a great deal to educate a
President Of the United States in
the simple laws OF economics. 1t Is
q fortunate thing that there Is a
Congress of independent minds to
make up for the deficiencies in a
Presidents judgment. 1t is partic-
ularly fortunate, moreover. that
the Nation has a man with the
stature and mental capacity OF
Senator Walter r. George of Geor-
gia. Democrat, chairman OF the
all important Senate Finance
Committee, to keep a President
from committing blunders that
can intensity the present recess
sion and plunge the country into
deep depression.
President Truman says that
Senator George is wrong when the
later objects to an increase in tax
rates at this time because 1t might
lead to depression. Mr.. Truman
added that the greatest danger, as
far as depression is concerned,
would be deficit operation Of the
Government.
Mr.. Truman is a man OF very
poor memory. The Roosevelt ad-
ministration from 1888 to- 1910
showed a deficit, and it was Mr..
Roosevelt's way Of trying to re-
cover from the depression.
1t is deficit financing which Is
usually advocated when the Ma
ton gets into a depression. and
this Is because tax receipts are in
adequate to meet expenses.
Proved by Experience.
What Mr.. Truman doesn't know
apparently is that to increase taxes
when a defiation has begun is to
increase the momentum of the de-
fiation. He himself told the press
this week that the, reduction OF
stock market margin require
ments by the Federal Reserve
Board, which was done with his
approval, came about because the
board feels that the national econ
omy generally is in the midst OF a
def1ationary phase.
If, therefore. the Federal Re
serve Board announces in effect
that a defiation is on, what should
tax policy be?
Certainly experience has proved
that tax reduction Is what Is Gus
tomarily sought In def1ation.
The movies and the various serv-
ice industries which are compelled
to pay excise taxes are begging
Congress to remove such taxes be-
cause receipts have dropped. Thus
the public is resisting high total
prices that include taxes. and
many producers feel that removal
of the tax and the resultant re-
duced price will mean increased
sales. >.,.
But the excise taxes are only a
part of the picture. The imposi-
ton of higher tax rates on busi-
nesses will mean a passing on to
the pubic Of such increased ex-
penses. Tl1is must result In higher
and HIGHER. prices. and q lower. vol
ume of. sales and hence an invol-
untary curtailment OF output.
This, in turn, leads to the laying
off of employees. This means d.
minished- purchasing power and
can start the whole ,ehain reaction
that sends depression ito its most
drastic stages.o.J;-5.-. g. :. st
individuals to Be ,Pinched.
The higher tax rates will also
begin to pinch individuals. who
will have, in effect. a cut In their
take-home pay imposed on them.
Just how the Government can ex-
pect purchasing power to be main
tanned and business to continue
to make the same profits as last
year when tax rates siphon on
that purchasing power would be
a mystery to, any one except per-
haps Mr.. Truman. Since the elec-
ton, the President takes particu-
lar pleasure In saying everybody
who may differ with him Is wrong.
Even those radical advisers Of
Mr.. Truman, who. do think that
this is a year to increase taxes
have given that advice heretofore
only on the assumption that the
so-called defiation will be short
lived or that 1t Is minor dip in
the main curve and that imitation
will shortly be resumed and hence
the Government might as well go
ahead with its tax program. But
since the President now comedies
that a defiationary phase has ar
rived and the Federal Reserve
Board recognizes 1t. there would
seem to be no sound reason for
urging a tax increase.
What the President might well
have urged Is a decrease In ex-
penses as a means of balancing
the budget. It would not have been
llCCCSSdly W Wv O44 CAAoeAAAS oP
propriations but merely to re-
frain from spending money on
those extras which 1t would do no
harm to postpone for a year or
two until the economy was in bal
ance again.
Mr.. Truman doesn't know how
to cut expenses. His budget is the
largest In peacetime history. and
In the face of the highest unern-
ployment figures since the war he
favors heavier and heavier bur-
dens Of taxation. He doesn't mean
to wreck the economy and bring
on the depression that will bear
his name and rival In severity the
so.called Hoover depression, but
he talks as If he didn't know what
is the quickest way to break UP
the momentum on business and
sales volume in this country.
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