PRIMING THE PUMP

Evening Post, Volume CXXVII, Issue 61, 14 March 1939, Page 12

PRIMING THE PUMP

/ — OTHEORY AND COST

FINANCIAL PROBLEMS

['"" , "Evening Post," March 14. As long as 21,300,000 of our in- ■•, habitants, constituting one-sixth of the entire population, are receiving one or more forms of public-reliefj. . it is evident that a situation exists that is strongly inimical to economic and social progress.—Guaranty Trust Company of New York, quoting the U.S. Social Security Board's estimate. "No civilised country today," remarks the trust, "will voluntarily allow anyj of its citizens to remain in want of the necessities of life as a result of conditions beyond their control. But the very necessity of relief makes it essential that its administration be placed on a permanently practical basis." « President Roosevelt estimated in his Budget message in January "that Federal expenditures for unemployment relief in the current fiscal year will be 37 per cent, greater than a year ago and 8£ per cent, above the previous peak two years ago. Not only have these expenditures increased at a time of expanding business activity; but, viewed in longer perspective, the rise represents a continuation of an , irregular upward trend in aggregate relief payments covering the entire recovery period to date and running concurrently with a general downward tendency in unemployment. DRAIN ON TREASURIES. After considering the great increases made in relief expenditure, the Guaranty Trust comes to the conclusion that "the relief burden has • reached a point where it involves a heavy dram - on the public treasuries." The problem of relief is described as "an important factor in the general business situation. Yet it is only through business recovery that the need for relief can -be diminished and the ability of the nation to carry, the burden increased. Considerations of this kind explain the deep concern with which people in general in the Untied States have come to view the relief question. It is admitted by the trust that there is a burden which must be borne in critical emergencies. But it is equally clear that the present situation cannot be allowed to continue, and there is reason to doubt whether the necessary improvement can take place without radical changes in the approach to the problem. It is suggested by the trust that "it will probably be necessary and certainly desirable to administer relief as.such instead of continuing it with other objectives. The National City Bank of New York questions the wisdom of continued pursuance of the policy oi "priming the pump." The theory of that policy implies that Government borrowing and spending revive, although, practically, under actual conditions in which politics become a factor, that theory is extremely difficult to-carry out. The question_too, arises whether "the stimulating effects of Government expenditure do ; not diminish with each dose," and^ evidence is quoted to support that conclusion Distrust, .however, if created by large public deficits offsetting the direct effects of spending. "Where Government spending and lending are in fields competitive with private enterprise—as in some IPnases of the power programme—the effect is definitely to retard private enterprise. TAXATION AND DEFICITS. Comparison is made by the New York' correspondent of the Sunday Times," London, of the increase of taxation receipts in the United States from 2,121,000,000 dollars m 1932 to 6,564,000,000 dollars in 1938, whereas taxation receipts for the United Kingdom for the corresponding years increased from 4,255,000,000 dollars to 4,745,000,000 dollars. - The national Budgets are also compared as follows: — United Kingdom. U.S.A. Dollars. Dollars. 1934 195,000,000 surplus 3,606,000,000 deficit 1935 100,000,000 surplus 2,983,000,000 deficit 1936 75,000,000 surplus 4,327,000,000 deficit 1937 40,000,000 surplus 2,685,000,000 deficit /1938 130,000,000 deficit* 1,464,000,000 deficit (♦lncluding and because of 300,000,000 dollars expenditures under loans of Defence Loans Act.) For the purposes of comparison dollars have been taken at 5 dollars to £1 sterling. It is estimated that the Roosevelt Administration would finish its tenure in 1940 with an addition to the United States National Debt of £5,000,000,000 sterling. . ' a ~ The! condition of successive deficits is giving cause for anxiety to American bankers, but the theory of "priming the pump" finds a supporter in Mr. Eccles, chairman of the Federal Reserve Bank Board. Professor Lutz, of Princeton, takes the view that because the American Government embraced the theory of spending a way out of depression "the American people are poorer now in capital equipment, in capacity to produce goods, and poorer in initiative and incentive." POLICIES AND BUSINESS. The National City Bank of New York also deals with the policy of priming the pump, contending that the. success of a spending programme depends largely upon what other things ] are done while the spending is going on. "If the policies pursued both within and without the Government are such as to encourage harmonious i relations within the economic system, I ' and give incentive to new undertakings and enterprise, then business should indeed pick up and go ahead. But un- i less the policies pursued are carried out in this spirit and with these objec- * ■tives, spending to stimulate business j is likely to be effective only so long as it lasts, and leave the situation worse than before, with an added bur- v den of debt and taxes for individuals , and business to carry, and other ad T verse consequences." \

DOLLAR BATES. The Associated Banks (other than the Bank of New South Wales) quoted the following dollar rates today, on a New Zealand currency basis. They are subject to alteration without notice. U.S.A. Canadian Dollars. Dollars. • ■ ■ (Per £ (Per £ NZK , NZ). Selling— T.T. 3;7215-16 3.73|On demand . 3.73£ 3.74 Buying— I On demand . 3.782 3.79S WHEAT FCTURES. (By Telegraph—Press Association—Copyright.) (Received March 14, 12.30 p.m.) ' LONDON, March 13. Wheat cargoes are lower and parcels are easier. Futures: London, March, 21s 6d a quarter, May,. 21s 9d; Liverpool, old contract, March, 4s 3£d a cental; May, 4s sd; new contract, March, 4s l£d; I May, 4s 3d; July, 4s 4£d. Chicago futures: May, 672 cents a bushel; July, 68 cents;. September, 68 7-8 cents. ■ '

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