Indianapolis Times, Volume 45, Number 13, Indianapolis, Marion County, 26 May 1933 — Page 18

PAGE 18

‘MAIN STREET’ TAXPAYERS WILL BE CENTRAL FIGURES IN GOVERNMENT PROGRAM Congress, Ready for Action on Recovery Measure, Will Think First of ‘The Little Man.’ BY MARSHALL M NEIL Times Special Writer WASHINGTON, May 26.—It's the taxpayers out on Mam street who are actually the center figures in this Washington drama of jobs for the jobless, and income taxes for the very rich as well as the ordinary citizen. V /’ll ■ I’#. %> in nnlnaafnl C

You have read colorful stories of ' Morgan the Magnificent” testifying ’Mth jovial calm before the senate committee, answering the barbed inquiries of Ferdinand Pecora, lawyer son of an immigrant father. The newspapers have told of new taxes about to be levied to put men back to work, of hot controversies over these taxes. News stories have related how J P Morgan and his partners paid i o income taxes these last two years, and how the white-collar riork with a few thousand dollars income from salary is about to be compelled to pay 50 per cent more than last year. Priming Prosperity Pump These detached scenes are sensational; but let's bring them together and see what all the shooting's about. President Roosevelt proposes to issue and sell $3,300,000,000 in bonds, to use the money to construct buildings, waterways, bridges, highways, subways, viaducts. Men will build these public works, men will fabricate the materials for them. * Men will be put to work; they will have only to spend. They will spend it with business and industry—the prosperity pump will have been primed. But who will buy the notes of a government whose outgo exceeds its income, which provides no way to pay ofT its new' debt, even though it be incurred to re-employ the jobless? Takes Little Even More The administration's national recovery bill provides new re-employ-ment taxes to pay this new debt. It takes the little and the big, but takes the little more than the big, because it raises the normal in- '

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come tax rates without at the same time increasing the surtaxes. It raises the feaeral gasoline tax, : and subjects stock dividends to the normal rates for the first time. These hardly had been agreed to by the ways and means committee when .J. P. Morgan revealed that neither he nor his partners paid any income tax the last two years. Congress boiled. Why tax the little fellow more when the big ones don't pay? •'There’s something wrong with the law that lets such a man as J. P. Morgan by without an income tax! "We must tighten up its provisions! Now'!” "So say congressmen publicly, others privately. Some congressmen want surtaxes increased in proportion to the normal rate increases. Others want the general sales tax substituted for the whole re-em-ployment tax program. A third group is ready to stand by the administration's plan. And there are a few who want no new taxes at all. The house approaches a showdown today among these three. Before that comes, it will have a chance to tighten up the law, to rewrite some of its provisions so that persons suffering in business in one year must not credit them against profits in later years. This amendment has been proposed by the house leadership which heard and heeded the Morgan testimony. Before the vote, the house will have a chance to transfer the power tax from the consumer to the producer.

Today and Tomorrow BY WALTER LIPPMANN

TN the first two days, the senate investigation of the private bankers produced a vivid illustration of the well-known vice of the capital gains and losses section of the income tax law, and has exposed conspicuous examples of the system of favoritism to insiders which is so very common in business, but yet so very shocking. It

is a system which can be explained, but can not be defended. If thus investigation did nothing more than to outlaw the system by force of public opinion, it would have done a most useful work. But it has an even larger task to perform, and that is to throw light upon the management and control

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i of the capital market. In the mass of the testimony it is I difficult to discover whether the committee and Mr. Pecora have any | clear plan of investigation into this j subject. There is a very great deal that it is most desirable to And out about the function and practices of the large private banking houses, about their place in our economic system, and about public policy in I regard to them. The present investigation is an j unusual opportunity. . The bankers | themselves, as any one can see from j the testimony of Mr. Morgan and , of Mr. Whitney, are in a mood, j which is unprecedented, to remove the veils of mystery which surround them. There is an administration in office, and a congress which are obviously not afraid of new departures in public policy. All that is lacking is the knowledge to formulate reforms, and that knowledge it ought to be the business of Mr. Pecora and his committee to supply. tt a TT is clear enough, I think, why -*• this inquiry has been undertaken. The chief function of the large private bankers is to direct the flow’ of the people’s savings into long-term investments in securities. They transact other businesses, but this is their principal role in the economic life of the country. Now r , in the period up to 1929, a very great volume of securities, representing loans to domestic corporations, to local governments, and to foreign corporations and foreign governments, w 7 as issued through these houses and sold to the public and to institutions w’hich are trustees of the people's money. On these securities there have been heavy losses. The fundamental question, therefore, is whether the system under w’hich savings are converted into capital investments is managed properly and sufficiently regulated. a e a IN seeking an answer to this question the first thing that would r need to be explored is whether the business of long-term capital investment is nr fact a monopoly— W’hether. in other w’ords, there is a money trust directed by J. P. Morgan & Cos. —or whether the business is in fact highly competitive and dangerously chaotic. In developing public policy, and in fixing personal responsibility, it is of first importance to know’ w’hich of these two diagnoses is the true one. If there is a monopoly which directs the flow’ of American long-term capital, then those who direct this monopoly are chargeable with that obvious misinvestment at home and abroad which happened during the '2os. If, on the other hand, there is sharp competition, then it is most likely that the basic cause of the misinvestment of capital lies in the w’aste and disorder of an unregulated and blindly competitive system. It is to be hoped that. Mr. Pecora ! will make a clear demonstration as J to which of these two equally un- ! desirable, but essentially different, conditions confront ns. For until we know’ the answ’er, we do not know whether our task is to break up a monopoly, to regulate a monopoly, or to control, as we are 1 now beginning to do in industry, a destructive competition. n a a THIS seems to me the essential line of the inquiry, not only with a view’ to fixing responsibility for what has happened in the past, but with a view to reforms for the future. Moreover, until the truth on this point has been developed there really is no standard by which judgment can be passed on the conduct of the various banking houses. Suppose there is in fact a money trust. Then the rulers of that monopoly are accountable not merely for each particular issue of securities. but for the total volume. The previous investigation by the senate of the large loans to Germany indicated rather clearly, for example, that while almost all the individual loans were based on what was regarded at the time as sound security, the total volume of those loans was greater than the German economy could bear. The same condition undoubtedly prevailed in other debtor countries, and right here in the United States for particular industries. It follows that if there is a monopoly, the monopoly has been badly directed. But if there is chaotic competition among the issuing houses ; then a wholly different set of questions needs to be asked What one would want to knowthen is whether the bankers were honest according to the prevailing code, whether they were as prudent as it is possible to be under competitive conditions, whether they I were as far seeing about the whole situation as men of their standing ought reasonably to be expected to be. • Copyright, 1333) ROOSEVELT ABOLISHES INDIAN COMMISSION Transfers Records, Property, Personnel to Interior Department. B'_‘ l /lift <i Press WASHINGTON. May 26—President Roosevelt Thursday, in an executive orde-. abolished the board of Indian commissioners, and transferred their records, property and personnel to secretary of interior. T

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THE INDIANAPOLIS TIMES

Open Saturday and Monday Until 9 P. M. Alterations completed in time for the holiday.

MAY 26, 1933