The Country's Plight---What Can Be Done About It?
Government has power to give but little aid
Depression Is Largely the Problem of Industry
Present Day Distribution of Wealth Found to Be the Root Cause of Both 'Overproduction' and Unemployment
An Exposition of What President Hoover Has Characterized as "the Greatest Crisis the World Has Ever Known"—The Significant Facts Underlying the National Predicament Which Will Be Presented to the Coming Congress.
Something to think about!
A Billion Dollar Deficit, Millions Out of Work!
I. Hard times have produced hard thinking—The capitalistic system of government is on trial.
II. We must know the facts if we are to deal intelligently with the depression.
III. The distinction between the Government's depression and the general depression—Why the Government is in debt.
IV. Economy in government is a good thing, but it can't cure the deficit.
V. Should the Government in this emergency depend on borrowing or on new taxation?—How should the burden of new taxation be distributed?—A three-point tax program by which the Government could diminish the present flow of wealth into a few hands.
VI. The stages of thinking through which we have come to a realization of the facts—Our general depression is homemade, and it is due fundamentally to the maldistribution of wealth.
VII. How the machine has accelerated the growth of this economic disease.
VIII. The wages of capital and the wages of labor—The balance between consumption and production can only be restored at the expense of dividends.
IX. The issue is drawn between labor and capital—Solution of the problem rests primarily with industry and not with the Government.
X. But there are certain important things the Government can do—A possible program, covering taxation, the tariff (with a note on the plight of the farmer), public utilities, the five-day week for Federal employees, prohibition, our part in world affairs.
XI. Conclusion: Conceivably we can usher in a new prosperity through a readjustment of the distribution of the benefits of the machine—Amendment of "men's economic and social ideals" is the great need.
I.—Hard times have produced hard thinking—The capitalistic system of government is on trial.
By CHARLES G. ROSS
Chief Washington Correspondent of the Post-Dispatch.
(Copyright, 1931, by the St. Louis Post-Dispatch.)
WASHINGTON, November, 1931.
To a greater extent than ever before in this generation, the people of the United States are thinking in realistic terms. The old slogans by which the thought—or the emotion—of the country was guided in the Coolidge era have been examined and found to be but a form of words. The mood in which the country accepted as inspired doctrine the prophecies of "a chicken in every pot" and "a job for every man" has changed into one of doubt and questioning. Now that "this, the greatest crisis the world has ever known," as President Hoover called it in his Indianapolis speech last summer, has run into its third year, the volces of even the most confident believers in the early return of prosperity are pitched in a lower key.
Too much gilt has been rubbed off the forecasts of the past for any political or industrial seer to tell us in the present state of things that "prosperity lies just around the corner." We have begun to see, as the wise Mr. Justice Holmes said in another connection, that "certitude is not the test of certainty." We know now that "we have been cocksure of many things that were not so."
Challenge to Be Met.
Events have forced us to consider the facts. Phrases do not feed the hungry, or give jobs to the six or seven million who want work and cannot find it. The jobless man can derive no comfort from the proclamation that we are merely in one of those "cyclical" depressions which are bound to come every so often and, having passed, leave us better off than before. Hard times have produced hard thinking. In one line, at least, under-consumption is not to be deplored. We are consuming less and less of the buncombe engendered in the lush days of our prosperity—and in this fact lies some measure of compensation for the plight into which we have got ourselves.
One need not go into the field of radical writing to find vigorous expression of the view that the capitalistic system is on trial. In growing numbers, highly placed defenders of capitalism, men who have prospered under it and who desire its basic features preserved, are saying that if capitalism is successfully to meet the challenge of other forms of soctal organization, it must clean house.
Not Norman Thomas, the Socialist leader, but Daniel Willard, the president of the Baltimore & Ohio Railroad, told the Wharton School of Finance and Commerce last spring that a system which permitted five or six million men to be out of work in a country bursting with wealth "can be said to have failed in at least one yery important detail." It was Willard, again, and no member of a proscribed order, who said that if he were one of the jobless in those circumstances he would steal before he would starve.
Warning From Capitalists.
No upholder of the Marxian philosophy, but Robert S. Brookings, wealthy retired manufacturer, president emeritus of Washington University, of St. Louis, wrote in the Post-Dispatch this year, in advocating a modified form of capitalism, that "our Western civilization must vindicate its worth if it is to endure." And he added that it could vindicate its worth "only by demonstrating its ability to correct its own defects, and its consequent capacity for constructive development."
Prof. F. W. Taussig of Harvard sees "control and power concentrated in a few hands to an ominous degree," and Henry W. Anderson, conservative Virginia lawyer and a member of the Wickersham Commission, finds in his recent survey of the causes of crime that the American people, as an incident to the exploitation for private gain of one of the most fruitful areas of the world, have "created the widest spread between the extremes of wealth and poverty extsting in the Western worid."
Senator James Couzens of Michigan, who helped to create the Ford Motor Co. and made a fortune out of it, sounds the warning that "people will not suffer indefinitely in the midst of plenty," and Dr. L. D. Coffman, president of the University of Minnesota, declares that "communism im its various forms will not be held at bay by negative actions."
More Than a "Depression."
Dr. Nicholas Murray Butler, president of Columbia University, asserts that we are passing through no ordinary depression but through a revolutionary period brought on by long-accumulating forces. What the country needs, he says, is "personalities who are not anxious, like the jockey, to keep their seats in politics but who are willing to tell the people the truth and to guide them toward a constructive, a liberal and a progressive solution of these vast problems."
Dean Wallace B. Donham of the Harvard Graduate School of Business Administration, author of "Business Adrift," sald to the recent meeting of the International Chamber of Commerce in Washington that if there were not sufficient brains and good will in the world to solve the problems of the depression, "then our mass production, our sclentific progress, our control over nature may actually destroy civilization."
Quotations of this sort might be multiplied. They are appearing in our newspapers and magazines almost daily. They represent the views not of revolutionists who would destroy capitalism, but of thoughtful men who believe in capitalism and would save it from its own excesses.
II.—We must know the facts if we are to deal intelligently with the depression.
It is the purpose of this article to set out, as simply as may be, the elements—the A B C—of the plight in which the country finds itself. Diagnosis is the chief aim, not prescription. One of the writers already quoted, Prof. Taussig, says that we have made hardly any progress toward obviating or even minimizing the curse of unemployment; that with respect to prevention or remedy we are all very much in the dark. Decrying the assumption that "one simple panacea" will bring back prosperity, he pleads "for moderation and good sense, for cessation of sham talk about sham remedies, for an earnest facing of the really great, really ominous problems."
That is, if we are to get anywhere at all toward the solution of our problems, we must know the root facts out of which they spring.
Such is the confusion of counsel from various sources that it is no wonder the people are at times bemused. What are we to believe when the Chamber of Commerce of the United States and Gerard Swope, the president of the General Electric Company, present to us hopefully plans for the "stabilization" of industry, while, on the equally authoritative other hand, Albert H. Wiggin, the chairman of the board of the Chase National Bank, informs a Senate committee that "no commission or any brain in the world" will avail to prevent future depressions?
Stating the Real Issues.
What are we to believe when we find business groups in solemn conclave adopting resolutions against the interference of government in business, and then, the next day, running to the Government for subsidies and subventions? How shall we choose between the mutually destructive theses that we should build up a large foreign trade as a guaranty against unemployment, and that we should take no step to lower our tariff barriers or reduce the war debts?
We must know the facts underlying our depression if we are to form enlightened judgments upon it. Because of the babel of tongues offering remedies, we mistake, too often, the symptom for the disease, and in the clamor for Government action we are prone to forget there are limits beyond which the Government, under the Constitution, cannot go. We need to distinguish between the sham remedy, designed to meet the political expediency of the moment, and the remedy that strikes at the root of the disease.
The coming session of Congress will have before it economic issues of transcendent importance. It will be, at the least, a highly interesting session. It may be historic. Only if the citizen has certain essential facts clearly in mind can he follow the unfolding of the drama at Washington with intelligence and understanding.
III.—The distinction between the Government's depression and the general depression—Why the Government is in debt.
It is important in our thinking about the American depression to keep clear the distinction between the United States, meaning the whole people thereof, and the Government of the United States. These two entities are often confused: hence, for one reason, the loose assumption that whatever the Government may do to get itself out of its depression will likewise help to get the American people out of their depression.
The problem is not so simple. The Government is a part of the whole. It follows that if the American people, with or without Government ald, regain a measure of prosperity, this prosperity will be reflected in the financial status of the Government; but it does not follow that the curing of the Government's particular depression—its excess of outgo over income—will spell good times for the country.
Government's Plight Separate.
In other words, the American depression presents a duplex problem. The Government is head over heels in debt. It ran a deficit during the last fiscal year of $903,000,000, and the deficit for the current fiscal year, which began last July 1, stood on Nov. 1 at $661,000,000. Private industry and business are likewise in a bad way, and hence the people of the United States, who are dependent upon private industry and business for their wages or dividends, are in a bad way. Each person, therefore, has a dual interest in the depression. He wants his Government to get out of the hole it is in, so that it will stop calling on him (or his children) for increased taxes, and he wants industry and business to get out of thelr depression, so that his income may be brought back to a satisfactory level.
The Government's depression flows from and is a pert of the general depression in the United States. It needs, however, because of the special set of problems involved, to be considered separately.
From a Feast to a Famine.
Only 14 years ago we were marveling that the Government had reached a billion dollar level of receipts and expenditures. Today, by virtue of the normal expansion of Government activities in a fast growing country and the abnormal expansion caused by the war, it is spending more than four billion dollars a year. Nearly a billion of this goes for military pensions, compensation, etc., and the care of disabled veterans, and more than a billion for interest on and statutory retirement of the war debt. As long as the country remained fairly prosperous, it was easy enough to collect the revenues to cover our outlays. It was so easy, in fact, that notwithstanding four successive tax reductions since the war (five if we count the temporary reduction of 1929), the Government had an unbroken series of surpluses from 1920 down to and including the fiscal year 1930.
The change began in the fiscal year 1931, when the effects of the general business depression began to make themeelves felt. These effects were double-barreled: they sharply reduced the proceeds from income and miscellaneous taxes and from customs tariffs and they heightened expenditures for relief. In addition, there was a further drying up of non-recurrent sources of revenues, such as the sale of surplus property and the returns from wartime loans to the railroads—items which, by contributing to the impressive Treasury surpluses of earlier days, had helped to make the fame of Secretary Mellon as "the greatest Secretary of the Treasury since Alexander Hamilton."
Expenses Keep Right On.
Under our present revenue system, the Government depends on corporation and individual income taxes for more than half its receipts. These taxes combined yielded for the fiscal year 1930 $2,410,986,977 and for the following year only $1,860,201,640. The proceeds of miscellaneous internal revenue taxes (such as the tobacco tax), which form the second largest source of income, dropped from $628,308,035 in 1930 to $567,978,579 in 1931. The total decline in internal revenue receipts from all sources (income tax and miscellaneous) was about 20 per cent, or $611,965,513. Customs receipts fell from $587,721,925 to $300,856,473.
Now, as we have seen, while the Government's revenues have been thus dwindling as a result of hard times, expenses have piled up on an ascending scale. The interest on the war debt must be paid, and the President has said that the statutory provisions for retirement of the debt should not be disturbed. Pensions and annuities must be paid, loans must be advanced to war veterans on their bonus certificates, hospitals for disabled veterans must be maintained. All these items growing out of wars are first charges against the Government, and there is constant pressure upon Congress from the outside, and upon the President from Congress, to have the benefits to veterans increased.
Even a Dole Looms Up.
There is a postal deficit to be paid; there is money to be advanced to the States under the Federal road acts; there are Government buildings to be erected under an expanded program; there are rivers and harbors to be improved. In prosperity or depression, these expenses go on, and some of them are increased by depression.
The Government is in the same position as a manufacturing plant which has suffered a severe loss of business but has been unable to cut its overhead expenses. In the present fiscal year, moreover, the Government may have to spend large sums—whether as "dole" or in some other guise—for the relief of distress caused by unemployment. Certainly there will be strong demands in Congress for new relief measures.
The farm problem, notwithstanding the $500,000,000 appropriated by the last Congress for the uses of the Federal Farm Board, remains urgent. And it should be noted, to complete this rough picture of the Government's financial plight, that in this fiscal year, under the Hoover moratorium, it is foregolng the collection of about $260,000,000 due it on the foreign war debt.
IV.—Economy in Government is a good thing, but it can't cure the deficit.
What can the Government do in order to balance its budget? First, and obviously, it can economize. In times like these the cry goes up throughout the land, from people and politicians, that the Government should cut expenses. "Economy" is the promise and watchword of every administration, the slogan of every candidate for office. Chambers of Commerce demand a "business-like" pruning of expenditures, and the average citizen is certain that if he were given control there would be wholesale firing of useless Government clerks and a slaughter of boards, bureaus and commissions. Equally with the alphabet and the multiplication table, economy commands the support of us all.
Economy in government is the easiest thing in the world to preach, because all agree upon it "in principle," and the hardest thing in the world to practice. Undoubtedly, a material saving would be effected by a thorough overhauling
