Evening star., 1950-07-26

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HOW STRONG is OUR ECON
tion is answered in charts in
nOmic Advisers. In this chart
all goods and services, its indu.
ment are shown to be at record
outlays and procurement will pro-
duce infiationary pressures much
more rapidly than If existing ca
pacities and facilities were not
already being so fully utilized.
Most important of all, even when
We Shall have taken up the present
slack in the economy, we shall not
have reached the longer range
limits of our total productive po-
tential. National output per man
hour has in the long run increased
about 2 to 212 percent a year, and
total output, which reflects also
population growth, has increased
over 3 percent year. With the
enormous Improvements in plant
and technology already accom-
plished, this rate of increase should
be equaled or even exceeded in the
years Immediately ahead. This
means that, with maximum en-
ployment and production achieved
and then maintained in a growing
economy, it will be well within our
reach to increase our total annual
output in real terms by 9 to 10
billion dollars in 1851 and cor
respondingly in succeeding years.
This appraisal of our general pro-
ouctlve strength is significant. but
1t does not cover the whole situa-
ton with which we now must deal
The specific requirements of OUR
enlarged military effort cannot be
spread over the whole country. In
stead, they will fall most heavily
upon certain sectors, and our ex-
pansion of production can only part
ly be concentrated within these
specific sectors.
In the interests of the military ef-
Tort, action is needed now to direct
the use of some commodities essen
tlal to the national defense. and in
some cases to increase the output
ms is necessary also to reduce in
f1at1onary presSureS.
mus we are faced with an over
all economic situation which is
essentially strong although threat
eneo by considerable general in
Ilatlonary pressure, coupled with in
tense and rising pressures in limited
areas.
Duty Of Government.
"A primary duty of Government is
! TO provide for the common de-
tense" In fulfilling this responsible
lty, the test is not how far we can
go without placing strain upon the
domestic economy or without Great
ing infiationary pressures. We must
go as FAR as changing circumstances
may require. In the final ANALYSIS
tnere are no limits except our total
strength to guide us in our deter
mlnatlon to resist aggression and
thus to strive for peace.
The realities of the current situa-
tlon now require certain changes in
national economic policy. These
changes will take us in the right
direction at once. And If the sitl1a-
ton should become even more seri-
Gus later on, the measures which
now propose for the current situa-
tlon are also the measures which
would make us more ready for fur
ther steps.
FIRST of all, for the immediate
situation, we should rely in major
degree upon fiscal and credit meas
lres. These general measures can
be helpful not only in restraining in
f1atlonary presSures, but also in re-
ducing the civilian demand for some
specific products, such as automo-
blles and housing, thus making
available for necessary military use
larger proportion of an already
short supply of some critical mate
rials.
The more prompt and vigorous
we are with these general measures.
the less need there will be for ali
of the comprehensive direct con-
trolls which involve the considera-
ton OF thousands of individual sit
uations and thus involve infinitely
greater administrative difficulties
and much greater interference with
individual choice and initiative.
Since I made tax recommended
tions to the Congress in January,
the situation has changed drastical-
ly. There is now no need to reduce
any taxes to stimulate business re-
covery. That recovery even before
the development in Korea was more
vigorous than most expected, and
increased military spending will
now accelerate this trend. The need
to reduce, and as rapidly as possible
to remove, the deficit is also greater
now, because of the temperance
of strong infationary forces.
The amount of revenues required
to accomplish this will also be
greater, because the military situa-
ton and the general world outlook
make inevitable an overall increase
in public outlays of many billions
of dollars in this fiscal year. Sub
stantial tax increases now are calico
for by the requirements of sounc
budget policy and by the threat oi
, imitation. The general business stu.
alton makes this feasible.
S. Billion Tax Asked.
, I am therefore, recommending
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