Evening star. [volume] (Washington, D.C.) 1854-1972, 1956-09-20

after the Republican Conven-
ton in San Francisco adopted a
platform asserting that the
workers pay check has not
been eaten away by rising taxes
and soaring prices"
Now the fact sheet" notes
that the cost Of living has
reached new high ground; as
serts that the average American
is paying more in taxes Of all
kinds-$809 in 1855 compared
with 1874 in 1882; and says
many consumer costs have risen
sharply in the same period
rents IL per cent, gas and cleo
tricity per cent, housekeeping
costs Z per cent and medical
care 8 per cent.
! Democratic economists offer
an explanation also for the
World War II imitation. 1t was
necessary, they contend, to pay
for the war partly in taxes and
partly in imitation. otherwise,
they argue, the overwhelming
tax burden would have crushed
production and brought on q
postwar depression.
So the arguments go round
and round. Two facts remain
undisputed:
! The recent squirt Of imitation
has given the Democrats a cam
1paign talking-point they didn't
have before. And it has taken
some of the punch out OF the
Republicans claims that they
have found the key to what Mr..
Eisenhower has called pros
Iperity with general price stabi-
lily"
What Action to Take?
Politics aside, what's to be
done to see that imitation doesn't
spiral dangerously?
Secretary Weeks twice has APP
pealed to industry and labor for
"self-restraint," lest they price
themselves out of the market and
bring on a damaging recession.
Such appeals are not wholly
in vain. But most officials rest
their faith chiefly in the indirect.
and not fully tested, powers Of
the Federal Reserve Board to ex-
lpand and contract the supply
of money and credit.
The board right now is push
ling hard against a heavy demand
for money that promises to be-
come heavier as the autumn adj
vances. Industry needs funds for
its huge plant expansion pro-
gram, and consumers will want
credit for 1857 cars and Christ
mas buying.
The Federal Reserve can in.
1uence the supply of money by
buying or selling Government
bonds. The board could also
order an increase in the amount
of deposits which each bank
must hold in reserve. This is q
broad-ax device, rarely and ren
lluctantly used. 1t cuts of credit
to deserving borrowers as well as
to those who want the money for
Ipostponable. frivolous or specu-
lative purposes.
Can Raise Rate Again
Finally, the board can do
again what it has done six times
in the past II months authorize
another increase in the interest
rate at which the reserve system
itself loans money to banks, the
discount rate.
At 3 per cent, this rate is now
lat its highest level since the
bank holiday" of March, 1893. !
Yet it has neither halted the rise
of consumer credit nor visibly
slowed industry's expansion pro-
gram.
/ 1t has. in fact. prompted Rep
resentative Patman of Texas.
chairman of the House Small
Business Committee. to accuse
the board of trying to put out
a fire by pouring gasoline on it,"
| Economists acknowledge that
this would be true if business
men were willing to pay any
price for money; they would
simply pass on the cost to con-
sumers.
But the Reserve Board and
the administration do not be-.
Ilaeve businessmen will pay any
price. And already there is
speculation as to when and
whether the board will throw
Ianother jolt into the money
Imarket-and how hard the Jolt
will be.