Show r washington gt 0 di 9 e 45 national topics P ds interpret Iner et p pret fe f ed I 1 11 0 0 1 r washington the department of I 1 commerce has lately released its annual world a r 1 d true E c a 0 n om c view and again has painted officially I 1 a picture of general conditions that I 1 believe to be the most accurate obtainable under present chaotic conditions I 1 might add that it is one of the few official analyses coming out from the government these days that is not colored in any manner or form the reason this review is so interesting te is because it points out I 1 what can be expected to happen by a d disclosure is closure in detail of what has la I 1 happened in commerce and indus try to that extent it delivers a rather definite body blow at some new deal policies affecting business since it does this sort of thing the review is entitled to more faith and credit than usually is accorded government publications 1 whether compiled by the roosevelt administration or those before it political leaders always want to put their best foot forward and the new deal under mr roosevelt has not failed to carry on this tradition to the fullest possible extent the section of the world economic review that was most interesting te to me contained this statement deficits of great magnitude created yearly during the depression to meet payments of wages salaries interest and dividends sapped the vitality of the entire business structure and could not have been sustained indefinitely here then is an official declaration from that agency of the government most concerned with commerce and industry which says that corporations and employers of labor maintained as far as they were lable able the payrolls and interest payments during the depression it says likewise that had corporations failed to do this our unemployment problem would have been much greater the income of those who hold securities whether in large or small amount would not have received dividends on their stocks or interest on the bonds and as a result it is obvious the buying power of the country as a whole would have been sharply reduced that is to say had these payments both i to labor and capital been curtailed I 1 there would have been even a lower level of retail bu business than ob bained during the depression it ought to be added as well that had a lower level of business resulted the manufacturing industries indus indu from which the retail stores buy their supplies would have closed down I 1 their plants in even grealey number than they did As we look back over the last five or six years it is easy to see how things could have been very much worse it is easy to recognize that the strength that comes from amassing capital in corporation form has developed in this country one of the greatest shock absorb ers that any people may have when those corporations those businesses are permitted to develop under sound management and with as little governmental interference as the general public welfare will permit 1 now as to the reason why these I 1 businesses were able to accomplish the things they did the answer is simple managements of businesses emust must bollow follow the same practices in 1 guiding the financial affairs of those businesses as you or I 1 do in the management of our personal affairs i 0 0 0 I 1 this brings us to a point of current interest in preparing for the rainy day all rainy da day y business whether fund great or small lays aside a certain percentage of its profits this I 1 is called a surplus the surplus is invested it is made to yield a return i in the form of interest or dividends 1 it is seldom touched it is treated just as you and I 1 would treat our savings accounts just as we deal with our christmas savings account thus the arrival of slack times dull business no profits the arrival of the time when we must live on our own fat so to speak does not find us without a reserve because that is what a surplus is the records of the savings bank an and d of the life insurance companies through the last six years show definitely how many hundreds of thousands of people had to draw on that surplus just as the department of commerce statement now reveals 1 how many corporations drew upon their su pluses in order to maintain their organizations pay the workers and be honest by paying the interest on their debts all of this sounds like a chautauqua lecture on savings but however it may sound it links in directly to legislation that was enacted in the last session of congress a law J riven iriven through under the lash of president roosevelt after it was conceived by a bunch of radicals who constitute the majority of the so called brain trust at washington that law levies a new tax on corporations it does not touch us as individuals except indirectly the tax applies to surplus to the savings of business a savings designed to meet just such conditions as those through which we have gone and which business was able to meet because heretofore it had been permitted to pile up reserves to carry it through the rainy day official figures from the department of commerce show that the payments for wages salaries interest and dividends from 1930 to 1934 amounted to in 1935 according to incomplete figures business paid out for these same purposes thus making the total for five years apar approximately now in normal times these figures would not prove exciting under present circumstances and nd those through which we have been passing they border on the sensational this is true because these payments have been made not from the earnings of the businesses during the years in which they were paid but from earnings of earlier good years when a part of the profits were laid aside as a protection it would seem therefore that since business has performed a social service of this kind under its own management that it ought to be allowed to continue I 1 am convinced that it is a much safer method than to have the federal government mess around through laws such as the tax on surpluses for it must be remembered that under the law which I 1 have criticized no corporation can build up again such surplus as has happened in the past I 1 might mention further that the effect of this law is going to be to prevent small corporations from ever growing large I 1 mean by that if a corporation through careful management and frugal savings was able to expand its plant lac facilities increase its production and thereby increase the number of workers i it t employs it will be unable to do so it will be unable to accomplish this for the reason that the operation of this tax law prevents it from storing its savings the law takes such a heavy toll of any stored up earnings that no corporation carpo po ration can afford to store them up they must be passed out in dividends during the year they are earned or else the government puts its tax hand into the business treasury one might say that such a distribution is helpful and undoubtedly in the cases of some owners of securities curi ties it is helpful but questions of this kind must be treated in the whole and not on the basis of isolated cases consequently it takes no stretch of the imagination to see ho how w a business is forced to distribute its earnings to distribute them in good times when a comparatively small number of its sec security uit owners need the funds and the result is obviously a shortage of reserve for that rainy day in other words a corporation is compelled to be a spendthrift or else pay a tax that is designed as a punishment 0 there is another phase of these payments by businesses that de serves attention show the dividend pay upturn ments in fact many of the earnings reports of business lately have shown a decided upturn up turn this c circumstance r cum curn stance has prompted democratic chairman farley and attorney general cummings to enthuse somewhat about bu business siness recovery each of them insist in recent political statements that prosperity actually is here that it is not just around the corner as mr air hoover once predicted while he was w s president but there should be some attention paid to the meaning of the dividend payments and increased earnings they should be analyzed it is true that some industries like the automobile industry for example have increased production beyond the hope of any students of economics and that they have restored to their payrolls a considerable percentage of jie he workers they once employed some other industries likewise have moved forward and promise to get on their feet again in sound fashion yet I 1 find a number of authorities in the business world who continue to be doubtful they fear that the foundation is not sound i these facts have not deterred mr parley and mr cummings from shouting from the housetops house tops that this is prosperity resulting from roosevelt policies their declarations however are just as fallacious just as political as some political pronouncements that I 1 have heard from the republican side to the effect that business is picking up because of prospects of electing governor landon as president all of these statements in my opinion are pure hokum for the reason that the facts generally speaking do not bear out any of them 0 western newspaper union |