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5 2. Limitation of b*uijc credit* even a t tho ;j cost of higher Interest rates on Federal and other borrowing, " ,» 3. A tuico on customary contests of f>or- 1 gaining power ttnd pressure among t h o ln* J tercet group* of labor, business, and farmers. , Tho report Emphasized t h a t t h e present, situation. was quite different f r o m thrtt at t h e outbreak of World War II. At t h a t t i m e / w h a t w s i demanded was intejsse economic, efforts of relatively short duration. How, what 1* needed.besides a rapid build-up of armed strength is a state of military readi-,* ncfta t h a t may have t o last for t h e Indefinite future. ,» In World War n direct controls were ncces- ' Asary a n d worked, for t h e short term, with *J<t some effect. B u t now, t h e economists said;' f'price control m u s t have far better support 1 *? * / ' f r o m fiscal, credit, and debt management! V E X T E N S I O N O ? JREMARKB ; 1 HON. SAMUEL W. YORTY QT CALIFORNIA M - IK T i m HOUSF OP REPRESENTATIVES ^ . Monddtf, February s, T9$i Mr. Y O R T Y J ; Mr. S p c a k c t every one of t l s Is a n x i o u s l o p r o t e c t a h d S t r e n g t h e n t h e A m e r i c a n e c o n o m y so t h a t t h e Nation can come t h r o u g h t h e c u r r e n t a n d f u t u r e p e r i o d 'bt h i g h g o v e r n m e n t a l c o s t s I n a s o u n a fefeite., T h e m a n n e r of a d c d m p l f s h l n j j th$s i n v o k e s s o m e d i f f e r e n c e s of o p i n i o n . , ' B c c a u s e I believe t h e i n f o r m a t i o n - c o n t a i n e d in t h e following article, which a p p e a r e d in this m o r n i n g ' s W a s h i n g t o n P o s t , will b e u s e f u l ^ t o . a l l of u s , I a m a s k i n g t h a t i t b e i n c l u d e d In <Jur Kecom>? r v Anti-Imitation Policy Backed by EconoMISTS—RESEJUfcCHUUS* HXPORT CaLLS ftj* FULL TAXAXIOW, CU*BS ON B a k k Chedit \i> (By .Alfred Friendly) , Pour^oi thV Ffttftm's leading economist® yesterday gave firm Backing to the administration's taction' and price-was* policies for Inflation eci*tn>I, but took snarp fcsue with ~ the Tlrmctjry'a 'pegged-prlce program for Government afecuriUes. Thry supported, tnfftmd, a view associated with the Federal Reserve Board that private credit extension should be cut through tightening of bank reserves, although this en* tails higher Interest rates on Government bonds/ •* • 7 '* ' . / *' The economist*. Mated their rlewa lnfrdt report prepared'for the influential Thirtieth Century Fuhtf, fc twearch foundation endowed by the fate Boston merchant, Edward A. Filene, ~ " • * • * The team of Experts was headed by.John M. Clftrk. profcssfcr of ^dimOmics at Columbia' University. Other members were Theodore WV6chiilt2t chairman of the economics department of the University of Chicago;' Arthur* Binlthles fcho holds ihe comparable post at Harvard: and Donald H,'Wallace, director of the graduate program of Prthcetoh*» Woodrow Wilson Pohtwl-of Public and Intei*nat!ona! Affairs. ^ T h i l r fitudy, one of t h e m o e t i o r t h r i g h t a n d uncomplicated u i appear o n t h e economies of t h e defense pfogramV/had as its -basic t h e m e t h e a r g u m e n t thfct d i m t controls on wages and p r l c e s c a n ^ n l j T b e supplementary to, n o t sti D*$ltutt!$-'foif, t h e measures t h a t ftttark thtf real roots* inflation. / , The three basic methods, t h e i r report said, are: 1. Pay-as-you-go taxation t o cover completely t h e costs of tho defense program and regular Government expenses, - \ \ \ ' • The report said, "Inflation is, among othef things, a sign t h a t t h e country Is giving cfit* vlded support t o the national effort. If we are willing t o appropriate money for defense, b u t unwilling to take it away from ourselves, we are trying- to cscape the basic fact of diversion of resources, and t h e necessity of initial curtailments of civilian supply. "We are supporting national defense with one hand and sabotaging it with t h e other/' t Principal conclusions and recommendations of the four economists: •• Taxation: " I t is both possible end necessary t o depend a n taxation t o finance t h e defense expenditures an<J to remove t h e bulk of inflationary pressure." The m i n i m u m objective should be a n increase of tax revenues by SI6.000.000,000. Of this, corporations can pay 4.000.000.000, t h r o u g h h i g h e r , normal r a t h e r t h a n excess profits rates; personal i n come tax should yield n i n e t o ten ^billions;. a n d t h e rest should come from excises. "From a standpoint of absorbing purchasing power, there is a coxc for heavy,,excises o n all goods i n short supply." , Monetary a n d crcdlt policy; "Ttie Federal Reserve System jnust"be enabled . tighten bonk reserves." * I t failed t o XolJjjitfft restrictive credit policy since .'the ouibf*d£ of t h e Korean War, b u t if Jt had, ifc j a m i d have IWocfccd the monetary expansion, t h a t occurred since then a n d "prevented m u c h of $he inflation.* T h e policy of not letting rates o n Governm e n t securities rise haa deprived t h e Fedf eral Reserve ,osC its major weapon to tlghteif tKvnk lending. "It Is long past time t h a t t h i s shortsighted policy be abandoned," even t h o u g h reviving t h e Federal Reserve's power In the,open market ''would doubtless Involve come increase in' Treasury interest payments;* ' ; .. - ' and price control a; S6me increases • In Wage and price ceilings will be Necessary i t o o b t a i n desirable Increases in o u t p u t . • Therefore, 1 frigid adherence t o t h e ohglnal 1 fraztin j^lefest and wage rates would bo u n desirable Ana indeed s c l f - d e f e a t i n g ? - • \ - I t te*clear t h a t some upward drift of Tthe average of commodity prices and wage r a t e s la probably wtmvoidable."' » ! - Plexibinty is seriously^ hampered by ^the provision In t h e present law providing t h a t ceilings on f a r m prtiducta cannot bp fixed a t prices leas t h a n parity. ' . Rationing: Conrrambr fationfngr will J?roba* •bly be required for some commodities! such 66 meat, b u t t h e rationing device ahould be used most sparingly, particularly because i t ' la so "very expensive In manpower* in its' administration. ; SociaJ security i Wow is u n appropriate t i m e ' t o Increase t h e size and coverage- of social-security program, because "increased! payroll taxes will absorb purchasing p o w t i y a n d t h e prospect of increased benjeftta wili j ' create a sense of security In t h e f u t u r e t h a t ) Is now badly needed." CONGRESSIONAL RECORD - 2/5/51 Government e c o n o m i c : >( The possibilities, ' bf 'economy in t h e nonmilitary field arc fre-1 'quently exaggerated. We doubt t h a t t h e j most .rigorous economy could achieve a re-f ductlon of more thhn -one-'^or two bullous' f r o m t h e budget estimates of 1951-82."
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