Evening star., 1950-03-12
IA Day Plan for U.S.Economy
Lower Living Standard
Would Result From
AH-Out Conflict

W. ~ 80 SsHstfSt
pensation at the same time as
applied to prices. The area of
greatest difficulty, he explains,
would be in obtaining the neces-
sary shifts of manpower from un-
essential occupations to essential
ones. In World War II this was
done by wage incentives, which
increased the war costs and added
to the infiationary pressures. Mr..
johnson does not say how he
would meet this situation. He
merely advocates "the develop
ment of measures to achieve the
necessary shifts in manpower
without relying primarily on the
creation of substantial wage rate
incentives.
He is more explicit on rationing
and 1t is here that the civilians
would feel the pinch of short sup
plies. He notes that civilians and
corporations were educated by
World War II in black market
techniques and that in an emer-
gency there would be a general
rush to buy UP the hordable con-
sumer goods in retail stores. To
prevent the disappearance of this
essential stockpile, he advocates
the immediate stopping of retail
sales on such items and the freez-
ing OF retail stocks.
THE freezing of retail stocks"
he writes, implies the institution
OF rationing within a short period.
In addition. there will be other
items, mostly gasoline, for which
rationing will be essential very
quickly after the beginning of the
emergency. Since permanent ra-
tioning systems generally require
some months to get under way.
it will be necessary to have ready
the framework of an interim sys-
tenn to carry over until the perma-
nent ones can be established.
It is by fiscal and monetary
measures that the well-to-do
civilian would feel the most re-
stricted and regimented, with the
major reliance on increased taxes.
In the last war. about so per
cent of Government expenditures
were covered by tax receipts and
Mr.. johnson says that "a really
vigorous tax program can and
should aim to do better than this"
Even then there would be a large
budget deficit.
Forced Saving Favored
THE last ounce of effort" he
writes, sis needed from employers
and employees. Furthermore, war
normally brings marked discrep-
ancies among individuals in in
come changes. The confiscatory
taxation which would be neces-
sary to cover expenditures not
only would be politically impes-
sible but also would dangerously
undermine civilian efficiency and
morale. However, a wartime sys-
tenn should approach these limits
as closely as possible. The prin-
cipal reliance should again be on
corporate and individual income
taxes, together with possibly ex-
else taxes on those consumer
items, other than essentials, of
which reduced consumption is de-
sirable. In particular, capital
gains. which was the major leak
age in the last war. should be
adequately covered"
Because taxes alone could not
drain off excess spending power
the report advocates forced saw
ings, presumably payroll deduc-
tions for War Bonds, and expen-
diture rationing. 1t discloses that
during the early war years. the
Treasury Department did consid-
erable work in this area but it
was never used because, for one
thing, real consumer expenditures
never had to be curtailed."
The report says that the Federal
Reserve System and the Treasury
should have plans for greatly re-
ducing, If not eliminating, the
volume of consumer credit, or in
stallment buying. and for con-
trolling mortgage financing.
One of the largest streams OF
expenditures that could be chan
neled into the war effort would
be private and public investments
and gross exports, now running
around $50 billion annually. The
use of this money for non-military
uses could be quickly reduced or
stopped. This would be brought
about, not so much by monetary
or credit controls, as by the Gov
ernment's refusal to issue priori-
ties or allocations for necessary
materials.
tBy special arrangement with the