UNITED STATES BUDGET.

New Zealand Herald, Volume LXIX, Issue 21142, 28 March 1932, Page 9

UNITED STATES BUDGET.

EFFORTS TO BALANCEDEADLOCK IN CONGRESS. EFFECT ON WALL STREET. SHARP FALL IN DOLLAR. STOCK MARKET WEAK. By Telegraph—rress Association—Copyright. (Received March 27, G. 15 p.m.) "WASHINGTON, March 20. The TTouso of Representatives adjourned to-day under pressure from the Democrat leaders in order to avoid a debacle in the legislative efforts to balance tho Budget. The bipartisan coalition during the dav's proceedings got out of control and wrote duties on coal and coke into tho Revenue Bill and almost turned the measure into tariff legislation.

A message from New York states that a very serious repercussion to the failure of Congress to balance tlio Budget occurred there to-day when an onslaught of foreign selling prepipitated tho worst break in tho dollar since tho final quarter of 1931. Led by sterling, which soared 8j points and reached a new high level for the year of 3 dollars 78|- cents, every important European exchange rate rose in terms of dollars. The fall in the dollar wiped out all the improvements made by United States exchange after the recent credit expansion legislation. Serious financiers in New York no longer consider the proceedings at Washington as merely preliminary skirmishes. Although the financial community is not alarmed it is anxious because satisfactory tax legislation will not be forthcoming- ' . 'flic bond and stock markets at New York were generally weak to-day. Moreover, it is felt that whereas European fears that an unbalanced Budget, or one balanced by large-scale borrowing, may force the United States off the gold standard are not justified, nevertheless they will continue to have a depressing effect on the dollar.

LIGHT BEER PROPOSAL. DEFEAT IN LOWER HOUSE. FRESH TAXES IMPERATIVE. (Received March 27, 5.5 p.m.) WASHINGTON, March 2G. In the face of a declaration by the President, Mr. Hoover, that the Budget must be balanced, the House of Representatives after two hours of heated debate defeated by 216 votes to 132 an amendment to the Revenue Bill to legalise 2.75 per cent, beer for the purpose of raising £70.000,000 of revenue. Opponents of the amendment shouted: " The nation cannot drink itself into

prosperity."Taking advantage of the situation, the supporters of the amendment started a general debate on prohibition. They restated their usual arguments—increased crime, reduced temperance, etc. The defeat of the amendment makes tho formulation of new necessary. Tho possibilities include increased postage rates, taxes on bank cheque transactions and a revival of the " nuisance taxes " imposed during tho war such as those on theatre tickets ancl other luxuries.

The New York correspondent of the Times in a recent despatch stated: —In the course of tho past week there was a notable and even dismaying predominance of bad news over good. Prices of a number of important commodities fell to record low levels; there were large actual exports of gold, besides a decline in earmarkings at the New York Federal Reserve Bank; almost the last vestiges of the January recovery in stock prices were wiped out; bank credit contracted further; currency in circulation increased by more than £8,000,000; the Far Eastern crisis, among its many other serious implications, brought into question tho practicability of the Treasury's Budget-balancing programme; and Britain, abandoning free trade, committed herself to a tariff which, will bear directly upon about half —measured by values —her imports from tho United States. Moreover, tho President, Mr. Hoover, Tightly concerned by tho disastrous hoarding of currency in* this country, perforce revealed tho great extent of the practice, and so ran the risk of increasing tho danger ho seeks to avert.

Timo will have to show how effective will bo tho President's appeal to tho patriotism and self-interest of the country and his organised campaign for producing mass confidence, Time will have to show no less how successful will bo (ho operations of tho Reconstruction Finance Corporation, which has only just begun to function. Obviously, no appoal and no campaign can prevail long if bank failures aro going to continue at tho rato at which they liavo been piling up in recent weeks. It is not a distrust of money that has produced hoarding in the United States, or even to anygreat extent distract of securities—the number of shareholders in American corporations is actually greater now than at any other tinio in history—but distrust of banks. Tho work of tho National Credit Corporation, valuable as it has been, was altogether too limited in its scope. The Reconstruction finance Corporation will have to go a great deal farther than tho Credit Corporation in relief of banks with " frozen " assets if public confidence is to replaco fear. It is, indeed, prepared to go much farther; but it is plain that if it is to bring about a change in public psychology which alone will arrest tho present disastrous trend, its managers must act with great promptness and conspicuous energy. Business defaults in the United States roso to a new high record level in the last week of January, according to Bradstreet's, the increase of 8 per cent, over the previous week's figures being in sharp contrast with tho seasonal trend, which would expect a decrease of 12.4 per cent. Steel production, which ordinarily shows a marked increase at this time of the year, showed no change from the week before, when it was 27 per cent, of capacity. Trade in general continued in the doldrums, awaiting tho results of tho Reconstruction Finance Corporation's activities. Indices of business activity reached a new low point for the whole period of the depression, a figure slightly lower than was touched in the last week of December.