The Bogey of the Federal Debt
LERNER, ABBA P.
The Bogey of the Federal Debt By ABBA P. LERNER IA» editorial introduction appears in the box at tke right.] pERHAPS the most extreme^jogicahextension of what Dr. Moulton calls the new •; ;...
...Bat cartels owned fay whom, aad Mr whose interest ran...
...29) as the abandonment of a position by the new philosophy's leading advocate...
...Those who hate labor and its gains, those who watch for opportunities to humiliate and harass labor, will probably misuse this acutely important coming debate cn the Little Steel Formula, and unless the disciplines ef decent discussion prevail, we may have a ruling based on hatreds and bitterness...
...If the Four Freedoms are good enough for the United Nations, they are good enough far me...
...The rehabilitation of Europe will have strong dependence on those decisions...
...Tin fa so place for discussion of the selective ineeaimmrie...
...It has but few newspapers, periodicals or commentators...
...Where shall we seek guidance on complex matters...
...I'm not very good at lesson-drawing, bat events of recent months suggest certain ideas to me...
...the change-over period...
...This la their right...
...Undoubtedly certain groups will try to punish their enemies...
...many issues of the human spirit, which affect the status of the individual, and deal with his dignity as a person, are inextricably tied ap with matters shout which the average individual has little equipment to form opinion...
...Whether or not you count yourself as liberals, you have a stake in these inflation decisions, and if you are traditionally of th# liberal faith, yon moat acquaint yourself with the stresses and strains, the dangers and pains...
...But...
...Every liberal must search his soul for the determination of what he will do in sueh crises...
...The government could never direct its policy toward "balancing the budget" for that would have to mean the abandonment of the responsibility for preventing depression and inflation...
...Id like the National Planning Board to do some thinking aboet the problem—men like Delano, Rural Ppapfase aad Merriam...
...Some of this occurred in the Congressional elections of 1942...
...mssfri-sJswy that "so long as a large proportion-of our population is ill-housed, ill-clothed, and Bhfsd,' It Is not difficult to determine the kinds) of additional production which the population asost needs" (p...
...You have a stake in these decisions, and yet they may go by default of liberal, intelligent discussion...
...But 1 have a sense cf guilt which you must share with me...
...But still I'd like to see the opportunity given folks in advance to indicate their desires, rather than pro-form ratification...
...te mention only a few...
...But unless the present crop of liberals wish to be confined to quarters, as they now almost are, we must get busy...
...This is fallacious thinking...
...But we, as individuals who must respect the rights of other individuals, did very little to lessen the tension, to bring understanding to bewildered miners, and prevent bitternesses developing which will plague us for years to come...
...we could have a very great easing of the burden of taxation...
...Did you recognize as liberals these members of Congress who struck down Elmer Davis...
...The communication of news and the conditions of its collection and dispatch, aB ever the world, is one field...
...Moulton's hook is to discredit the new philosophy of public debt, aad all these statements are made in a tone of crushing irony as if to aay, what sane man could possibly believe such nonsense...
...Bat—and maybe thts grewe out of my ketoafal tea mama—Pa shut to see sesse super-important hedy, rear ns sating C sag i sea, the executive branch, aad aasceJatfcaas ef < llamas, gat more precise gaMas en maay items...
...An aWe, wail-informed authority on taxation...
...What Needs to Be Done TTHE rsnks of the New Dealers in Washington have been thinning oet like tke hair aa 'a' balding pate...
...When Leon Henderson was bounced (and hoaassd is the word) from the Office of Price Administration, the vested Woes and loobies tad wea another victory...
...We most depend on such rigor and enterprise if we are to have a strong production system, cue which will rival,par admirable level of activity at the present time...
...First of all, our own thinking has not bean dear, and our aetkn program has been worse...
...Senator Byrd, leading Tory spiks—sb, stated Meetly that the issue ef "extravagance and gsvsramsat •pending'" woeid be tke chief domestic issue ef lt44...
...I confess I have not been untroubled...
...I do not'mean for one moment to suggest that liberals most control Congressional decision, or that they have a monopoly on the Bill of Rights...
...with liberalism ss it has sturdily defended the dignity of the individual for ages...
...It is based on 15 percent increase after January, 1941...
...The Planning Board could do a bit of studying on how 8 to 10 million service men can be led hack into private life with a minimum of dislocation...
...guidance which intelligently should come from analyses based on the best technical and professional knowledge...
...Total tax collections could be enormously reduced and the present complicated tax system with all its administrative difficulties and inequities could be virtually eliminated...
...Nearly 13 million of our people have fixed incomes...
...ANYONE who calls himself a liberal, ought to familiarise himself with the "Little Steel Formula...
...Conservative financial grease are pars snag the views ef Harold Moalton, head ef the staid aad respactabls Hrsskiag Insulate—an meimir research organisation financed largely by greats from foundations that aero created to evade the stiff inheritance taxes...
...But Congress today is the biggest business contractor the world has ever known...
...The average business couldn't maintain its workers without business income for more than a month or so and the largest would fail within six...
...Mere he issues a clear challenge to the liberal fifteen ejtf tee, eoentry—there meat be greater natty among progressives, SMre^hjreslfJpBt, |sajsjgsjfied actiaa...
...I knev., and you know, that hatreds run dose to the surface in these days—the unhappy occurences of recent weeks illustrate this only too pointedly...
...why not promote the desired end by cancelling all taxes...
...The course of human events for several generations to come will be given direction by the decisions of the peace table...
...The same inability to distinguish between ef -' ficiency in production and investment in aew capital is shown hi the enumeration ef a list of new industries and techniques, which wffi no doubt permit a great increase in the standard of living and in the output per man-hour, at If this somehow guaranteed that there will be the investment in new capita...
...Just as there was no "M" day on which war began— there will be no Victory Day in reconversion to peace...
...We should have known that \ war brings bestiality to the surface, and that a strong socisl order must stamp out all variations of Ku Klux Klanism as scon as the snake's head is reared...
...is to mop up excess purchasing power...
...Should we lobby...
...Let me hasten to point out that this would be a false impression brought about by a rather violent snatching of the quotations from their contexts...
...This has led us to rely in recent years on government That reliance, for many good but more bad reassons, is no longer a strong one, - jr...
...Certainly we can't expect private businesses to keep working forces intact ir...
...stem mob action...
...Liberals were always fa a minority—I believe we need some protection today, but I'm suggesting that we are not without, free, democrat)* means of protecting our ideas if we are willing to stir our stumps...
...These cries have reached a crescendo hi the war-whoops ef Senator Byrd and Governor Dewey aad found most complete political expression in the -wrecking settee*" by Congress in the past several weeks...
...skns are still without their full equipment...
...As I size it up...
...if the home front is not te be altogether taken over by the biees and lobbies, blind to the real dangers that confront as...
...Paul MeNutt, James Byrnes, et a 1. But the people's business, once safeguarded aad advanced, is badly lagging...
...war contracts are out, and whether we shouldn't build some reserves new to take care of the workers...
...ia a widely -distributed booklet called "The New Philosophy ef ' Pahttc Debt...
...My party, the Democratic party, was traditionally most concerned with the rights of man, and has been returned to office five times since it became the majority power in 1932...
...These quotations might give the impression that Dr...
...crucial drive far increased war production...
...As things stack up now, reconversion will ~hsve stages, one of the most important coming about the middle of nex: year, when, if everything turns out right, there shock be some release of raw materials...
...V~Ke-Pre*ident Wallace, as I recall.'had a few suggestions recently or internationalizing airfields...
...or it reduces demand, when necessary, by spending less jraetf or increasing taxes so that the taxpayers are obliged to spend less...
...I sense that we are feeling our way through oar first problem, that of De Gaulle and Giraud, and I know our first job is to win the mar...
...Abba P. Leraer, new at the New School for Social Research, and a leader af the irsaimlf school which Moaiton attacks, to analyse the Moulton book—Editor's Note...
...i ¦ IT appears to me that many liberals today are prepar 1 ing for the post-war period at home by repeating thai there must be no mete Hardings and none of this "re tarn to normalcy" stuff...
...There is need for substantial agreement by the general public on American attitudes...
...Moulton seems to go even further than functional finance when he says: "If the purpose of fiscal policy is not to balance the budget...
...We have mere to fear ef fait aosompH than ever before...
...Should we arrange appearances before Congressional committees...
...Tat the prevailing argument revolved around the Bill of Rights...
...Part of tke failure to bring dignified agreement is oars...
...Reaction F)R the past tea years the standby cries ef politics) reaction hi its attacks oa the New Deal have been "balance the bwdget," and "stop the mounting government debt...
...The new fiscal parley merely wishes to make sure that there will be the money demand without which the houses, slothes and food, ere not forthcoming...
...But we must guard against unhealthy scrambling last our precious ran materials supplies be dissipated for gadgets, or that they are not used for orderly reemployment...
...Moulton calls the new •; ; philosophy of public (government)\debt is my own "Functional Finance?** Functional finance "is.a policy whereby the government undertakes responsibility fw keeping money demand at the right level—neither too low, which would "lean depression, nor too high, Which would lead to inflation...
...I know that many groups, business and otherwise, are carefully formulating plana for presentation to the psaii table conference...
...Nobody, least of aB the proponents of the new fiscal policy...
...Moulton's caricature, are displayed as mteriisl.insonsmhairiMe.nd self-refutations...
...This is based somewhat on the concept that' all of a sudden one day there will be no more war and the next day we can determine the conditions of peace-time living here...
...coataisairy^ lets Congress hack them dkrwu without a big aamawfc...
...Unless I miss my guess it is bound to be trader strain...
...But I am acutely aware that say faith in the common man and his ultimate destiny are bound to be affected, and Pd fad easierJf we wite^aietsVwae.''' .-7...
...It seems to me that those who oppose the Planning Board are afraio of ideas Certainly the Planning Board 00aid not bring any of ite ideas into law—it could merely report, as it did with its Social Security study...
...POOD is big business today...
...We do not have irexhaustible supplies of every industrial raw material Right now, the full capacity of our w»r plants csnnotte^dlM because >tael, copper aad More important, however, there is no assereaes for Urn future that we have easily available all the supplies necessary to maintain 56 million persons at weak...
...Senator George, has said that the post-war employment lies within the four corners of tiie tax laws, I concur, and hope that time* who represent the liberal faith with their spaniel intelligences will give us guidance, so that the individ'ial man may net be the forgotten man It seems fashionable these gays to attack asty pfanafag by the national government, gad praise the blue prints for the future prepared for business organizations...
...But these are but guide posts aa to what our persistence should be...
...And this reduction, too, occured in the period of our greatest expenditure for consumer satisfactions...
...Its reelection, it seemed to me, had found its overriding strength in its concern for the Individual, and that seemed guarantee enough, even against the conservatism «t seme Southern members...
...My point fa that the control of raw materials, paralleling the importance of international credit, k well-known to ear conservative friends...
...Labor jrent along with this formula of adjustment tor the rising cost of living...
...of these actions, ex ignore your heritage...
...What I have to say has little content of the reasons why the suture of liberal thought has diminished...
...There are aew faces there for w artiste business— Donald Nelson...
...No doubt loyalties to the proper aspirations of labor have had some testing lately...
...and this can be done either by taxation or by the sale of government bonds to the investing public rather than to the banks...
...As a practical matter, bearing in mind the double-objective or redistributing income and controlling inflation, it would, however, still doubtless be found advantageous to make some use of taxation...
...The other night he made a ringing speech, on which this article is based...
...I don't know thst liberal groups are doing the same...
...We must'realise now that as liberals, no matter how -small Our efforts were (and I am not proud of mine), we had no right to drop our insistences thst the causes of racial prejudice be removed...
...eaastieally attacks the "New Deal ideas...
...But as a liberayl expect common, decency toward governmental planning...
...Henderson's article is likely te arouse nation-wide comment...
...THE tragedy that was Wcodrow Wilson's it much with us today...
...Despite all the conflicting talk ef Post-War Planning, the problem Is simple: WHI the Government secure fall employment after the war by the iesaassnm af creating sa -effective money demand"—or wHI we slip hack te tke Old-line Csmltspsas...
...Td like to hear something enthusiastic about self -deter > minatien...
...Fee the whole purpose of Dr...
...The prospect ef return to civilian production Is already producing watering of the month of maay maaafaetarers...
...Bat his fight, apparently, is far from ever...
...V IAM mo3t certainly not the best liberal problem-spotter ; available, but let me briefly outline a few which call for intelligent study with a view of positive decision...
...Notice that these questions point to Washington...
...here in the United States...
...Perhaps I've been too busy, hut I haven* hearc -enough to suit me about democratic selection of govern menti...
...Pi Beseem Hansen's clarification that "There ia no evidence thai our economy is in any sense becoming decadent, inefficient, incapable of continued .progress ia productivity" is then put forward (p...
...They know exactly how they wish to handle these supplies, and I doubt if liberals have more than a vague idea of their importance to the post-war of individual man...
...We hope to escape the frustrations of our country's participation in that peace conference...
...We lack rallying points, but if we persist in whet is tantamount to cowardice, we shall never find them, or, whit is better, create them.' '• , As I see it today, liberal thought has little bearing ia democratic decisions...
...You know and I know that many of the legislative actions of recent weeks have been made with November, 1944, in view...
...And we know, too, that the will to preserve peace can be fortified if those responsible for public safety will strongly advise subordinates, f Bet this is not enough...
...This implies that the purpose of taxation is never to raise money for government, expenses sat only *W reduce public spending, and that the government budget would be balanced only *f the spending, borrowing and taxation directed •¦"•ard preventing depression and inflation happened by accident to make the government tax revenues equal to its expenditures...
...Moulton would subscribe to the tenets of functional finance with perhaps more on-, phasis on government borrowing and less emphasis on taxation as a means «f keeping spending at the right level...
...I wish to be clearly understood in this matter...
...They are intended aa a devastating reductio ad absurdum to climax his attack...
...But new instrumentalities have not bean formed in keeping with demands, and the pace of action is very fast...
...The Congress will shortly adjourn, it is expected, for a period of several weeks...
...la a aeries ef front-paged articles for the Bcripps-Howard chain the ether weak...
...for aa unenamist to say what he believes about the future when he fa employed by a liberal government, but perfectly in the American tradition if he works for s committee of business man...
...To the extent that these have not had incomes increased and depend solely on such incomes, a substantial reduction in their standard of living has already resulted...
...The pressure groups seem to have commanded public attention, while the Administration, for reasons I honestly do not know, has not made its case clear...
...If the American labor movement, which has brought American war production to heights which ¦ ipsat guarantees victory, is humiliated and becomes), embittered, we shall have failed, too...
...e • * 'er ' "•e '• IT'S customary, in a discourse cf this kind, to drsw * lessons from experience...
...Moulton singles out as the most distinguished representatives of the new school erf-thought) are reluctant to accept them...
...Decision as to production, price, distribution are being made which will be partially controlling fcr many years to come...
...the prevention of inflation in periods of full employment might be achieved without resort to taxation...
...t.aK ¦ Dr...
...But long before, unless I mis* my present guess, .there will be an untimely scramble by manufacturing Industrie* to be the first to return to normal production...
...In, 1*SZ there was slso no question of the need for them...
...6 may have 20 million tons, of shipping...
...If this country is prepared to go farther, than trx lajMpni* Nations, with perhaps ag teenies ts en irnerneeVonsl maintenance cf peace, we should find it out in advance...
...Should we flood onr Congressmen wtth our views...
...Wrapped up in the package of all foods is part of justice to the farmer, cur future cost and standard of living, some part of whether our distributive system is to be healthy and competitive, and all sorts of questions which affect the individual...
...The index has already risen 2e* percent, and if the recent course of Congress is unchanged, it mast of surety rise more...
...We must seek them again...
...Unless liberals want to prove "Mein Kampf" was right —then as citizens—they must" become political fence ^ watchers, too...
...We have made » bsgliialBt wtth the Four Freedom* aad the Atlantic Charter...
...4...
...Ha radio influence hi small aad Ha voice is seldom heard ia executive departments aad even leas ia congressional hearing...
...Se mack se (hat War, Wavy aad WPB officiate have become alarmed, last there b* • let-down in the...
...Geveraers Dewey aad Bricker aad other Presidential hops fate have echoed Byrd's remarks...
...News Note:— The Alfred P. Sloan lensaaihm made grants test year totaling 1341*42 to the BreeeJnge lastitate—New York . Times, June 28.] Dr...
...I ET me ask liberals if they are thinking of taxation as i^iwill penalize or reward human effort in the future...
...the problem at sueh times...
...First in this uneasy list of course, is racial disturbance and abuse of minorities...
...To do this, the government increases demand by spending more or by reducing taxes so that the tax-Pfyer can spend more...
...Already the isolationists who almost crippled us with unpreparedness are coining slogans to paralyse rehabilitation by obscuring the price of food...
...I do jay that if liberals let discussion and influence go by default, we shall have no real reason to complain if we are persecuted for our opinions...
...W. When it is clear that the new conception is that the public debt is not an asset any more than it is a liability in the ordinary sense, that the country as a whole is not impoverished by the public debt any more than it is enriched by it, and that a very great public debt might have serious and possibly undesirable effects on the distribution of wealth (though these are in any case insignificant in comparison with the importance of directing fiscal policy so as to maintain prosperity...
...The coal strikes and the anti-strike legislation were left to governmental action, because many Of' the decisions were governmental in nature...
...Who will owr and manage the airways, and the seaways...
...All that would be required would be a properly graduate income tax, supplemented, perhaps, by estate taxes...
...Passages where this is pointed out by Professor Alven Hansen, and which are inconsistent with Dr...
...The Ideology ef Benetton is usually strengthened to two ways: through the tremendous paktttity barrages waken , make the words aad phrases irthssox te the pabtk aad provides a certain security to ass pis by their familiarity— aad the reedy availability of pontifical Prof fairs who will clothe these concepts with "Respectability" and "Authority On the other hand the aew, progressive techniques that arise to meet changing condition* have a hard fight in gaining public acceptance: they dash with vested interests, and with the psychological unwillingness of paapk te —dirslsad er master aew ideas aad habits of thought...
...These are delicate subjects even for one so indelicate as I. 1 believe, however, I can with safety suggest that it seems to me the Administration has been trying to hold the cost of living line, and has been resisted by pressure groups...
...Others save written brilliantly of its decline, and in the main I accept.their analyses as sound...
...Every evidence pdhes to this—whether measured by dollars, weights, unts, or by the sheer stark truth that most of our co.rtba: divj...
...Because liberals have not fought well...
...But I do insist that if free association of free men is to mean anything, we have ah obligation to utilize every facility of liberalism to make decent adjustments when differences arise...
...PHE effectiveness of Moulton's climax depends * en the degree to which the reader is trained to spurn anything new as necessarily absurd, and these implications of the new approach are so new that even Professor Alvin Hansen and A. A. Berle (whom Dr...
...Sure footed liberal leaders have shown us clear paths before...
...Mcniton begins his attack with the fa- . miliar strategy of setting up an easily discredited caricature of the opponent's argument Thus it is stated that "the new conception is that a huge public debt is a national asset rather than a liability" (p...
...Perhaps that is as it should be—it certainly seems inescapable that many important issues are knee-deep already in politics, intra-party and otherwise...
...But this is not enough...
...I don't like te hear that it is un-AmericaY...
...And a lot of other items that I'm not convinced are getting proper attention...
...As my record shows, I do not blindly agree and subscribe to every labor demand...
...liberal ideas, liberal leaders, liberal movement, aad liberal gains all along the line have been slaughtered by combine-, lions of their opponents...
...r It is my considered opinion that the next several months will require all-out effort for arms production, and that there will be little, if any of the essential war materials available for civilian production...
...I have no fears as to the long-time survival and triumph Of a faith which exalts the human spirit...
...But there will still be demand for railroad equipment, agricultural machinery , and rehabilitation equipment which ought to have,first call over consumer goods...
...Somehow...
...Our work is suffering from manpower shortage, while our opponents are falling all over then.selves in their efforts to strike a disabled liberalism...
...While the Planning Beard was about the job, they could do some deep thinking ahege*severaace pay for workmen when...
...I need not strain to instance the spectre of inflation as one which deeply touches the status of the individual...
...Our representatives should know the temper of the people and the temper of Congress so that firm commitments can be made...
...In carry-nqj-out this policy, the government does not hesitate to create or to destroy money (including bank credit) or to borrow money or to retire debt, because, whatever happens to tt» amount of money or to the size of the na-HWMl debt, there can be no inflation or depres-,ion »s lone...
...yet crucial, question...
...The" tj...
...The ownership ef transport is another...
...We can applaud a Harold Ickes, when he defends against bills cf attainder, and we can justly be proud when the Senate rises to principle, as it did recently on the same question...
...This is the real issue behind the bogey of "the Federal Debt," la this inapt cated...
...What action can be taken to support or oppose decisions by public administrators...
...If its status in the public eye is a bit low, perhaps it's because its personnel is still being selected on the old basis...
...I'm not seared of them but I do get scared when...
...Once we have reached peak production, it may well bp that our replacement and replenishment rate car mear s slackening of arms production...
...Hew do you feel about Elmer Davis and Domestic Information...
...Tke argument that we cannot depend on private In vestment ss sufficient to provide sdeensts employment aniens the government takes active steps te ensure the required money seal sad, ia presented net maty as a definite prophecy ef taanaanstr private la teat stent spportanitiss hat as aa whole society when the whale point m test the new policy ceeM proven* seek an i»-aisenary ef private investment opportunities from doing any harm...
...Bat, like so many others, I identified the things we are fighting for...
...or, as Congressman Gore has shown, its apparatus is antiquated...
...as total spending is kept at the right level...
...Many of these decisions will be economic, rather than settlement of boundaries...
...And we know, too, as Mayor La Guardia and others seem to realise, that in emergencies, the cool-headed action of courageous individuals car...
...Well, so great a part of social and economic determination is being made today that the direction of attention is inevitable...
...I knew for certainty there are already plans aad programs far cartels, pertieaiariy minerals and metals...
...This ought to permit " a calm review of the excited actions taken recently on subsidies, roll backs, enforcement, together with appraisal of the real causes why meat prices are high and cattle and hogs do not come to market...
...which, with oaf present saving habits, is necessary if these man-hour, of increasing potential efficiency arc net to be devoted to peddling apples on street corners.--....- ''»'*' Closely related is tike stress on the existence of great hamaa need aa If this ¦ sliaaaslaHj created the money demand without whips ear economy stagnates...
...He soon found that isolation ists, imperialists, and some air interests, had other ideas I accept their right and necessity for having plans.* But we had too much back-room and impromptu decision st Versailles to salt my liberalism I'd like some really representative body ht this country to teat ear attitude* en poet-war osatr'sl of raw materials...
...If s time, it seems to me, to look closely into the mechanism for choosing 1 primary candidates, and to stimulate interest in better-qualified men...
...As liberals, we can revive the demand for "open covenants, openly arrived at...
...the Where...
...I know today that such is not the ease...
...We have asked Dr...
...To se.....ssatid) From Leon Henderson—A Challenge to American Liberals Ah ifON HI NOEISON S s rank snd file member of the liberal faith, I share with many others the uneasy feeling that liberalism » in temporary eclipse, that many of its leaders seem to have abdicated, aad that too many of us have deferred and postponed the vigor of action which has distinguished eur faith n recent years...
Vol. 26 • July 1943 • No. 28
