Evening star., 1950-03-12

G. GRIFFITH JOHNSON.
there were 912 millions unem-
ployed, and in 1941 still some 6
Millions; idle plant capacity also
existed in many fields. The in
crease in aggregate output made
possible by these unemployed re-
sources, together with temporary
additions drawn in by war in
centives. was sufficient to absorb
all of the direct and indirect mill
tary requirements and still pro-
vide for substantially higher
standard of living for the civilian
population than in 1939-in-
creased consumption of non-dur-
able goods and services more than
offset the enforced decline in dur
ables.
THE presence of this slack in
the economic situation meant that
stabiliZation measures could be de-
veloped gradually as idle resources
were drawn into production. It
also meant that at no time did
real sacrifice have to be enforced
on the home front.
Imitation Problem
''No such possibility exists today
in the event of war emergency.
Economic activity is already
straining available resources of
men. plants and materials. The
problem of imitation would be i'm
mediate, a matter of days rather
than months or years.
THE military requirements
would make necessary a rapid
and substantial reduction in the
current standard of living of the
average American. 1t is important
to note that it is relative levels
which are important. and increases
tor decreases from existing levels.
The fact that the required reduc-
ton would still leave living stand
ards above subsistence levels is
not directly relevant to this point" :"
The report is out of date in cal
culating the amounts of goods
and services available for military
and civilian consumption in event
of war, but the percentages give
an idea of what, would be with
drawn from the. civilian markets.
The Council of Economic Ad-
visers. in its confidential memo,
used the gross national product
for 1947 of s241 billion with $173
billion spent on consumption, $38
billion on private investment and
$50 billion on Government expen-
ditures. The total national out
put in 1949 was $3.50 billion; con.
sumer expenditures were $179
billion. The forecast for 1850 is
a continuation at this level.
Using the 1947 figures, Mr..
johnson estimates that consump-
ton in the event of war would
be forced down SAT billion to $126
billion, that private investment
would be curtailed from S38 to
81 billion while Government pur-
chases would jump from $50 to
Sill billion.
Taxes Just One Factor
BY this calculation consumers
would be faced with a 80 per cent
reduction in the physical volume
OF goods and service, but Mr..
johnson points out that actually
the necessary cut in consumption
would be less than 80 per cent
because under war conditions total
output could be somewhat raised.
1t has been printed in a weekly
news magazine that average per-
sonal income taxes would have to
be raised from an effective rate of
10 per cent to 35 per cent to
drain off the excessive purchasing
dollars that would be chasing the
diminished supply of goods. This
is not found, however, in the
johnson report. 1t was a theo-
retical calculation by the CEA but
Mr.. johnson observes that the in
crease to 35 per cent "is well
beyond the bounds of economic
and political practicability. In
creased taxes alone cannot handle
the problem.
Thus, increased taxation is only
one Of the factors Mr.. johnson
would use to prevent imitation and
to distribute goods equitably
Equally important are price and
wage controls, rationing, priori-
ties and forced savings.
Noting that the drafting of
legislation to freeze all prices and
wages is already well advanced,
the economist writes:
'The initial objective should be
to obtain Immediately a freeze on
all prices, wages, rents and other
market transactions. The need
for speed in this matter cannot
be overemphasized. Prices In
particular, notably of raw mate
rails, would otherwise spurt
rapidly and the distortions created
would greatly handicap subsequent
stabiliZation measures.
On Wage Control
"Once a general freeze is ac-
complished. basis has been es-
tablished for supporting measures
of other types. Numerous adjust
ments, exemptions and refine
ments would doubtless be re-
quired, but these can be left to