Evening star., 1950-09-25
The Menace of Initiation

Effective october l, the new tax bill signed
by the President will raise an additional SAT-
billion. 1t will do so principally by taking an
extra So billion bite out of the earnings of some
so million Americans and by collecting another
SIS billion from corporate incomes. The purpose
of the increased levies, of course, is not merely
to help pay for the Korean war and our general
rearmament effort, but also to lessen the effect
of the powerful infiationary pressures now build
ing up as result of that effort.
But this deeper digging into the American
pocketbook constitutes only the beginning of
what probably will have to be done to curb those
pressures effectively. With full employment, with
lots of money in the hands of the buying public,
with certain goods and materials growing scarcer
and with nearly everybody in the market to pur-
chase wide variety of things ranging from gas
stoves to houses, the danger Of a skyrocketing
boom and-bust economy is by no means remote
Indeed, according to Chairman McCabe of the
Board of Governors of the Federal Reserve
System, the inflationary menace "is not around
the corner-it is right here now."
That is why Congress and the administration
are planning, among other things, to dig much
deeper into the American pocketbook. The
revenue raising measure that has just become
law is considered mere "down payment" What
Is contemplated, in addition, Is new legislation
(aimed primarily at excess profits to provide for
further "take" of from 81 billion to ST billion
annually. This means that the Federal Govern
ment in 1851 may be collecting almost $50 billion
in taxes from all sources, individual and corpo-
rate-a figure that would be record breaking for
this country, exceeding the greatest sum collected
during the Second World War.
But higher taxation is only one of the
weapons that must be brought to bear against
the present inhationary situation. Under the
recently enacted Defense Production Act, pre-
liminary counteraction has already been taken
in other ieldS-namely, the instalment- buying
of automobiles, furniture and household equip
ment, and the commercial stockping of certain
short-supply materials. As things look now, how
ever, 1t seems almost certain that some of the
Acts other permiSsive powers will soon have to
be put into effect-at least in partly the Presi-
dent. These include the powers bearing on
rationing, wages prices and credit controls.
AS for wages and prices (the latter are rising
faster than the former), the President has said
that plans are being worked out to meet the
situation. Meanwhile, the executive council of
the American Federation of Labor holding wish
fully that price controls will automatically curb
demands for higher pay, has come out against
the Idea OF wage controls and key CIO leaders
like Philip Murray of the United Steel Workers
have served notice that their unions must have
increased wages Accordingly, 1t is a question
whether the Presidents plans will be ready in
time to meet this problem or whether politics
will delay them too long to be effective against
the imitation inherent in it,
Over and above all this, one of the most
Important fields to be tackled is that covering
banking and real estate loans to businesses and
individuals AS pointed out in an address today
by M. S. Szymczak Governor of the Federal
Reserve System, "Since ours is primarily credit
rather than cash economy, one of the surest
ways to curb infationary forces is to diminish the
flow Of credit" There has been an enormous
increase in that flow within recent months and
1t must now be checked-as it can be, in a num-
Der OF ways-to prevent what Mr. Szymczak calls
the "booms and unsound credit expansion that
pave the way for future economic collapse"
or course, in our free-enterprise economy
the idea OF stiff taxes and widespread controls is
decidedly unwelcome. Yet, unless the Soviet Union
suddenly reverses its policies and peace busts out
all over, the years ahead are going to be years
IN which we shall have to impose restraints on
ourselves and pay out heavily for the sake of
our national safety. If we do not, If instead we
try to do things the easy way or let politics ride
roughshod over the vital interests of our country
then we shall be risking the kind of imitation
whose end-result could be the Krenalins mastery
Of the world