U.S.A.'S PLANNED ECONOMY

Greymouth Evening Star, 29 September 1938, Page 10

U.S.A.'S PLANNED ECONOMY

PAST FIVE YEARS REVIEWED. WhatHs the situation in America,? If one is to judge by the articles and the statements which the cables bring daily from London that question seems uppermost in those English minds which are concerned with affairs in the States (writes the New York correspondent of the London “Sunday Times”). If the question is to be answered by those who have no means of judging the present and the future except by the past the answer is this: The United States has come to the point where a five-year programme of economic planning has ended in chaotic failure, and from this point the United States is embarking upon 'an identical programme except that this time the scale is much grander and' the period of’ experimentation much more indefinite.

It is particularly fitting at this time to take stock of what, has happened in America, in the last five years because in this very month of July, 1938, five years of planning by the American Government was to have come to fruition with a permanent, and rounded prosperity established, with a better social order set u,p, with all ob jectives of the New Deal attained and with the Federal Budget balanced'. Now that the fiscal year which closed June 30 has revealed a deficit of £300,000,000 and the President has announced that the present year will show a. deficit of £800.000,000, the record is complete and ready for the reading. The analysis to be. made here may be viewed as cold-blooded since there shall be an utter disregard of humanitarian and spiritual intangibles which do not show up on' balance sheets and which, to say the least, are highly debatable. The Roosevelt Administration came into power in March, 1933, pledged to balance the Budget, to cut Government expenditures by al least 25 per cent., to foster world markets for agriculture and, inferentially, to maintain the existing gold standard. With the banking crisis settled, confidence and business began to pick up. helped along by a. message to Congress in May in which the President outlined his plans lor reducing governmental costs and balancing the Budget. Dy the Autumn of 1933 Mr Roosevelt had abandoned economy, (he gold dollar and orthodox economics and had .embraced in full the doctrine of planjning as expounded by Professor TugI well in the United States and' Professor Keynes in England. When in 1934 I Professor Keynes called for the (spending of £80.000,000 a month (in addition to ordinary governmental costs) for a. strong business revival in six months’ time be found hi:; views accepted not only tor 1931 but for ths ensuing years as well. , Speaking in California, on October 28. 1935, Professor Tugwell, a member ot the Administration, gave in full the draft of the economic plan lor lhe United States and fold how in 1938 if would bo successfully completed. He scoffed at those economists of the old school who feyped inflation, who showed how other countries, most notably the German Republic, had been unable to check the spending once it was started. He said: Let us see in what manner arguments of this sort may be met. My calculations show that we can satisfy every humanitarian demand which may be made upon us and come to a balance ol the Budget within the fiscal year 1938. . . . The truth of the matter is that we can project our adopted policy ahead into 1938, still

continuing our investment in public works and in the prevention of human distress and come out at the end with not only a currently balanced Budget but with net Federal obligations creased' very little over March, 1903.

BUDGETS TO BALANCE. President Roosevelt in his Budget messages to Congress in January. 1936, and January, 1937, carried out this line of thought. In 1936 he said: It is cause for congratulation to realise that a consistent broad national policy, adopted nearly three years ago, has thus far moved steadily, effectively and successfully toward its objective. Spending will increase national income so that revenues will increase and spending decrease so that within a reasonable period revenues will pass the declining costs of Government. Our policy is succeeding. The figures prove it. Secure in the knowledge that steadily decreasing deficits will turn in time into steadily increasing surpluses, and that it is the deficit of to-day which is making possible the surplus of tomorrow, let us pursue the course that we have mapped.

These Budget messages are not political speeches, they are' State dcciunents, and in the one of 1937 the President promised a, balance of the Budget, excluding debt retirement funds, in 1938, and went on to say: “Wo shall soon bo reaping the full benefits of those programmes and shall have at the same time a balanced Budget that will also include provision for reduction of the public debt.”

Obviously, it has not come off as it was planned. The Budget was not balanced in the fiscal year 1938. Instead, a new cycle of deficit financing begins with the staggering sum of at least £800.000,000 for the first year, and with no one rash enough to forecast in what year the deficits will end.

The national income has been raised a little, as Mr Keynes said it would, but not anywhere by so much as it might , reasonably have been, expected to rise in a normal recovery from a depression. The banks, which passed through a. crisis in 1933 because of frozen assets and had loans, to-day arc loaded with Government lOU’s in the form of bonds representing the deficits. And within the past fortnight the banks have had official warning- that unless they let down the bars to what heretofore have been counted poor risks the Government will take over their functions.

Unemployment, conservatively estimated at 10,000,000, remains about as it; was when the Administration set forth upon the new idea of spending its way out. of the depression.

The billions of dollars of reserves which the corporations of the cou'htry employed to keep the wheels turning between 1930 and 1935 have been depleted' because, recover}’ did not last long enough for replenishment and becau.so tax laws as advocated by Professor Tugwcll and Professor Keynes, made it. impracticable, if not. unpatriotic, to save beyond a point fixed by the bureaucracy. Such is the situation in America today. These cold facts may explain why one hears on all sides rumours of further experiments with the currency, and, which follows naturally, with gold. They may explain, too, the forecasts of inflation which Professor Tugwell scoffed at. in 1935, but, which many to-day believe to be the basis n)f the rise in the securities’ markets.