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LEE P. H E A C O C K 196 Lancaster Avenue, BUFFALO, N* Y* January 24,1939 Mr* Marriner S* Eccles, Washington, D*C* Chairman, Federal Reserve Dear Sir: Your radio address on the nefeessity of government spending in periods of depression interested m4 very much; I am persuaded that your position is ,sound ii* this matter* It has occurred to me, however, that you might,to advantage, pursue the Idea a little farther, with,the same remorseless logic• I meanby this: When private capital is inclined to "hedge* fbr safety, whjfhdt determine the reasons, and seek k means of iteuiedying or offsetting them ? Obviously, capital perpetually seeks the maximum in returns,in safety and in liquid!ty* When industry and commerce present a tempting combination 6f these, capital always responds and we have what we call prosperity* My contention is that through exemptions from the income tax, it is possible to offset unfavorable economic conditions—to offer Inducements for the use of surplus income, which will more than offset the present inducements to hoard such surplus* In a word, offer exemption from the income tax for all that portion of income which is consumed or invested in securities of original issue» and it would be more profitable ttf consume commodities and expand industry than to hoard the liquid buying power, either in the form of bank balances or easily negotiable securities* The present policy is to invite depression by two bonuses offered the hoarder of buying power--interest on his unused surplus and exemption from the income tax, if it is in the form of government bonds, a form of security which is universally accepted as equivalent to money* We will have plenty of spending when we stop giving these bonuses to hoarders,and transfer the advantage to the consumer and the investor in securities of industrial expansion* This can be done by provisional tax exemption* Sincerely yours, January 30, 1939 Mr. Lee F, Heacock 196 Lancaster avenue Buffalo, New York My dear Mr* Heacock: Chairman Bccles hcts asked me to acknowledge and tnank y6u for your letter of January k/+ which he^ has read with interest^ * He wishes me to express to you his appreciation of your cotamendation of his recent radio address before the National Jttadio *orum. Your suggestions regarding inco&e tax exemptions are noted, but such matters are outside the official 'concern of the Federal he^erve System and there would appear to" be nothing this office can do in the circumstances• Yours very truly, LawreAce Clayton assistant ta the Chairman fgr
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