AMERICAN ECONOMY

Evening Star, Issue 25995, 9 January 1947, Page 5

AMERICAN ECONOMY

STATEMENT OF POLICY PRESIDENT TRUMAN'S MESSAGE ADJUSTING DECLINE IN PURCHASING POWER (Rec. 11 a.ra.) WASHINGTON, January 8. President Truman, in a Budget message to Congress, said that America’s prospects had never been brighter, yet many feared another depression. “ Doubtless, minor bumps will occur,” he said, “ but there should not, and must not be another economic collapse like that which began in 1929. Rewards which we now enjoy could be doubled within the life-span of many of those now living, if Americans build on a firm basis of security and political and economic freedom.” The chief weakness needing correction was a decline in real purchasing power, the President said. If price and wage adjustments were not made there was a danger that consumer buying would falter, causing decreased production and unemployment. A weakening of investment activity might operate also as an obstacle to maximum employment, as also would industrial strife. “ Therefore, although underlying factors are favourable, 1947 brings us face to face with maladjustments and unfavourable possibilities, which, if not corrected, could cause a recession.”

The Government could help to maintain a balance between prices and wages. Procurement agencies could avoid policies that stimulated price increases or prevented reductions, and the disposal of surplus goods would be speeded up. Anti-trust laws would be vigorously applied to eliminate restrictive practices and price abuses. Congress should extend rent control beyond June, and should raise the minimum wage, and extend the coverage of the Fair Labour Standards Act to workers now excluded. The system of the old age and the survivors’ insurance benefits should also be adjusted to alleviate real hardships. The building of 1,000,000 additional houses should be begun in 1947, and housing costs reduced. TAXATION POSITION. Expert and lay opinion agreed that Government revenues should exceed expenditures while employment was high, and the national income large. Because of the present economic situation, it would be unsound to reduce taxes, although the great tax burden should be reduced as soon as possible. Farmers’ incomes should not be permitted to fall below those earned by comparable productive groups. This should be accomplished without the use of subsidies. POLICY ON PRINCIPLES OF PLENTY. The Government’s policy, as far as was feasible, should be based on the principles of plenty, not scarcity. Agricultural production had increased 80 per cent, during the war, and could he substantially increased. President Truman recommended a drastic overhaul of the social security laws to increase the amount and the duration of benefits, to extend. those henefits to people not now covered, and to include health insurance. He also proposed that the social security system be financed in part from the Treasury, funds, instead of entirely from social security taxes. WORLD TRADE. Pointing out that the high volume of exports in 1946 played an important role in the maintenance - of production and employment, President Truman said that if a well-balanced degree of prosperity was to be maintained over a long period the foreign trade of the United States must be established on a more permanent basis, as she could sell to other countries only if she was willing to buy from them or invest funds abroad. Nevertheless, an indiscriminate reduction of tariff barriers must not be contemplated. “ For years we cannot expect to buy as much from abroad as others buy from us,” he said. *■ We shall find it profitable to invest part of our savings in developing the world’s productive resources through loans and the investment of capital abroad.” The willingness of many countries to enter the international trade organisation wciuld depend largely on the attitude of the United States to reciprocal tariff negotiations scheduled for this year. In return for its own tariff concessions the United States could hope to secure not only reductions on foreign tariffs and discriminations, but dlso the elimination of the mass of restrictions, such as rigid import quotas. . President Truman said he had directed his Council of Economic Advisers to study such : devices, as well as an integrated programme of employment, stabilisation, improvements in the tax structure,, the wise management of . the public debt, and a flexible credit policy. The President’s Budget message is merely a statement of policy. Actual Budget estimates are expected on Friday. The Republican chairman of the Hoqse Appropriations Committee (Mr Taber) said his Budget would not exceed 29,140,000,000 dollars, which is much lower than the figure Mr Truman expected to present. Mr Taber added that the Republicans would reduce expenditure to a point where the Budget would be balanced and a payment made on the national debt. Also, room had been made for a taxation reduction. He declared that every Government department had twice as many employees as it needed.