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To the Editor of the Hooky Mountain Hows:
The article appearing in your issue of January 16 by Lee
Casey so grossly Misrepresents views expressed by Marriner S. Eccles,
Chairman of the Board of Governors of the Federal Reserve System, that
I feel in all fairness you should print a correction*
The writer characterises as "idiotic* Mr* Eccles* advice to
the Conference of Mayors in »ashington that this is the time for all
local and private debts to be reduced as an offset to the inevitable
expansion of the Federal debt for war purposes* Apparently the writer
completely missed the point of such advice, for it should be obvious
that by maintaining taxation in this period local governments can thus
reduce their debts or if they have no debts, utilise funds for pur­
chasing Government securities, thus helping to finance the war* To
the extent that local taxation is reduced, it offsets the anti-inflationary effects of Federal taxation* To put it another way, to the ex­
tent that local taxation is reduced» the necessity increases for the
Federal Government to increase Federal, collections as a damper cm con­
sumer purchasing power*
The writer of your article makes the surprising statement,
"Is the prevention of inflation actually the purpose of inoreasing Fed­
eral taxes, as Mr* Eccles says? If so, I have been badly misinformed*"
Apparently the writer is not only misinformed but uninformed, because
the most responsible authorities in Washington, from the President on
down the line, have repeatedly emphasised the necessity for increasing
taxation as the most effective means of reducing purchasing power and
thus offsetting inflationary dangers.
Thus, the President in his current Budget Message under the
heading, "Anti-Inflationary Taxes", first recalled that in his Budget
Message of a year ago he had foreseen the necessity for drastic tax
measures to "aid in avoiding inflationary price rises which may ocour
when full capacity is approached.” His 19^2 Budget Message continued,
"The time for such measures has come. A well balanced tax program
must include measures which combat inflation* Such measures should ab­
sorb some of the additional purchasing power of consumers and some of
the additional funds which accrue to business from increased consumer
spending* A number of tax measures have been suggested for that
purpose, such as income taxes collected at the source, payroll taxes,
and excise taxes* 1 urge the Congress to give all these proposals
careful consideration* Any tax is better than an uncontrolled price
However, Mr* Lee Casey, the writer of your article, stated,
nAs I see it, we*re not being taxed to prevent inflation, but for the
defense of the nation and the principles the nation represents. And
I have not heard of anybody save Mr* Eccles who thinks otherwise."




Mr. Casey’s article would not call for correction except for
the fact that it is highly misleading to the public and calculated to
make much more difficult the vitally important national purpose to win
this war without the devastating consequences of ruinous inflation«
Indeed, the Hasi propagandists have been broadcasting by short-wave
statements to the effect that the President’s armament program cannot
be achieved by the American people, but even if it could be, it would
bring about a destructive inflation that would wreck the country.
It is quite evident that the writer of your artiole assumed
that the maintenance of tax rates means continued municipal expenditure,
for he wholly misrepresents Chairman Socles as opposing economy. The
truth of the matter is that in his address to the Mayors, Mr* Bcoles,
not once but over and over again, emphasised the urgent necessity for
the practice of every possible economy and the postponement of all nonessential public expenditures at all levels of government until after
the war. This, he pointed out, was essential not only to prevent
competition with defense production and the avoidance of inflation in
the war period« but in order to build up a backlog of public activities
that could be so timed in the post-defense period as to help maintain
production and employment.
In the early part of his address to the Mayors, Mr. Bccles
said: "Unfortunately, under boom conditions brought about by war ex­
penditures, the Federal Government cannot contract, but must continue
to expand its budget — and this makes all the more imperative the need
for contracting so far as possible all other budgets, both public and
private.” Again he repeated, "In war times, as we have seen, the Fed­
eral budget cannot be balanced, which makes it all the more necessary
that all other public budgets be balanced as one offset against the in­
flationary effects of Federal expenditures."
He stated further: "As you all know, the enormous military
demands for materials and man power have made it necessary for the
President to call upon the public to reduce its expenditures and thus
to release resources urgently needed for war purposes. The same con­
siderations should lead government at every level, Federal, State and
local, to reduce or postpone all expenditures that are not essential
for the war effort and maintenance of civilian morale. Public works,
all plans for capital improvements, should be deferred so far as
possible until after the war, alien such expenditures can be timed to
stimulate production and maintain employment."

-3 -

After remarking that those cities expert«icing a wartime
rapid expansion of population «ere an exception to the rule, he added:
"Otherwise, it is urgently necessary that you practice every economy
consistent with the maintenance of essential services* This does not
mean that you should reduce looal taxation, however plausible that nay
seem at first« For to the extent that you reduce local taxation, you
negative what the Federal Government is seeking to accomplish in con­
trolling inflation through increasing Federal taxation* The taxpayer’
contribution to the war effort is made by reducing his personal ex­
penditures for goods and services, thus aiding in the shift of eoanoaic
resources to military purposes« To the extent that the Federal tax
pressure upon the taxpayer is offset by reduction of State and local
taxes, the economic purpose of the Federal tax program is defeated* Ac­
cordingly, instead of reducing local taxes, you should maintain them,
thereby enabling you to pay off your public debts* If you have no such
obligations, then invest the funds in Government securities, thus help­
ing to finance the war. This is the time to pay off or reduce local
public debts as well as private debts, thereby helping to offset the
Inflationary factors arising from expansion of the Federal debt, while
at the same time building up a credit reserve for use in the post-war
era. Repayment of your securities would make available to those who
hold them funds which they could invest in Government securities. In­
deed, you have a rare opportunity for a major achievement in financial
statesmanship. I hope that opportunity will be grasped»*
This advice, which the writer of your article calls "plainly
idiotic", coincides with that; of’
all other responsible fiscal authorities.

I feel you should and you are at liberty to print this letter*
Very truly yours,