PRESIDENT'S POWER

Evening Post, Volume CXXII, Issue 154, 28 December 1936, Page 10

PRESIDENT'S POWER

AMERICAN PROBLEMS

INCREASING PURCHASING ABILITY

"Evening Post," December 28. "The election is over and Hoosevelt reinstated stronger than ever, having received an overwhelming endorsement of his policies. The question now is how will he attempt to use the great power in his hands? If he keeps to the middle of the road actually and pursues a policy of improving general conditions, we will be happy. The spending will still go on but in less volume, we hope. Taxes are and will continue to be heavy and their incidence will compel people to seek means of reducing them. The elimination, of many of those on relief will be effected if the administration of relief funds is returned t# the various States. Financially we are better off and business has improved and will continue to do so provided Congress does npt attempt too many new short-cuts to please labour and the have-nots. The above quotation from the letter, of a prominent member of the New York Stock Exchange to a Wellington correspondent would appear to represent conservative Wall Street opinion on the re-election of President Roosevelt and his recovery policy. Considering the world-wide economic effects of the collapse of values Stock Exchange securities m< the United States at the end of 1929, not even New Zealand can afford to be indifferent to the trend of commercial and financial events in the United States. The Washington correspondent ot xne ™ritat°ive "Wall Street Journal" (Mr. B. Kilgore) views the second fouryear phase of Mr. Roosevelt's New Deal as one assuming more and more the aspect of a "share-the-wealth" programme As he sees the policy it will nofb^oneTof crudely splitting up the Production flow and to restrict certain Ot^e Cfflnferation expects national of past years. NEW METHODS. The idea of a managed currency and a managed priceJevelL so Pre^t *n Washington during -Mr. R°^ eXf"* first year as President, has now oeen Sefy abandoned stated the correspondent above quoted. In its.,P lafe the larger and more complex theory of managed purchasing power has arisen and it bids fair to occupy a place neTr the centre of the national stage in the months to come. Leading New Dealers believe that.m the past too much of the national income has gone into the pockets; of rich individuals and rich corporations. Washington now appear* to have officially decided that md-*^ffi of income was primarily responsible for the collapse in 1929 and that the road to future economic .stability (as well as to "social justice") lies m the direction of economic planning assigned to regulate the channels into which future income flows. . . President Roosevelt as much a&saia so, remarks the correspondent, himself when he wrote, in a recent letter to Secretary of Commerce Roper: "We wm, I hope, pass into the next period of our Administration by looking to a ■wise and more equitable balancing, ot | this inter-related segments composing | our economic and social life. INCREASED TAXATION. j Methods to be employed in the plan for increasing public purchasing power include increased . taxation, with a Budget balanced primarily through larger revenue receipts but not curtailed expenditure. Reference is made to the shifting of the cost of the farm subsidy programme, to incorporated business' in the United States. The old system of processing taxes, outlawed by the Supreme Court, was replaced by higher rates on the dividend income and a penalty plan, to assure heavier taxation of corporation profits. Taxation of personal incomes on the higher levels is forecast as likely to go up. Federal relief is taking on longerterm aspects, and this is part of the same purchasing power picture. The Administration is determined that the unemployed shall share in the national income even though the Government has to administer their share. New steps to fix the cost of Federal relief more directly on industry would not be at all surprising in view of recent official statements to the effect that unemployment is industry's responsibility. „ , Subsidised housing for the low-in-come groups fits into the picture; so does a credit subsidy for tenant farmers seeking to obtain ownership of the soil they till. Higher wages and shorter hours ifi industry are part of the plan for increasing purchasing power. CAPITAL .• CURTAILMENT. There is no disposition on the part of the Administration to . deny that their redistribution schemes will reduce the amount of private funds available for new investment in the future. But they think that is a good ' idea. They are willing to cut down the rate of capital expansion- in the name of stability. • Under the undistributed earnings tax plan, net corporate savings in the future' are expected to be negligible. But individual shareholders will still be free to reinvest their dividends in new securities —after paying income tax, of course. -•- Meantime, the Social Secui'ity Act will go into operation—a large-scale experiment in compulsory saving and socialised investing. In the minds of the purchasing power planners, the correspondent concludes, socialised investing inevitably occupies an important place. The ultimate outcome of Governmental control of the flow of national income couldhardly be expected to lead to anything except.larger and larger Govern-, mental participation in the formation of hew capital; or Government ownership of industry, if it may be put in that way.