Electoral Equinox

One morning last week newshawks trooped into President Roosevelt's office to see, across one side of the room, a sight they had not seen in months. On easels near the back, newly mounted, freshly painted, stood a 6-ft. sailfish, last observed by the Press when the President landed it off Cocos Island in October. Nearer the front of the room doors were wide open to Franklin Roosevelt's fourth spring in the White House.

Better token of an election-year spring than the balmy air filling the White House office, was the way in which President Roosevelt had begun to stroke the fur of his conservative critics in the right direction. Last week he gave a White House luncheon to the members of Secretary of Commerce Roper's Business Advisory Council. That body of tycoons, now depleted by the resignation of numerous members disgusted with the way the President had ignored their advice for three years, also enjoyed a three-hour table discussion during which they basked in the equinoctial warmth of the Roosevelt smile.

More striking were Franklin Roosevelt's gestures to those who have grown alarmed by mounting Government deficits and recalled his 1932 promise to balance the budget. First was a veto which he imposed on a bill for $50,000,000 for seed & crop loans to farmers. Calling attention to the fact that the sum was not provided for in his budget, he declared that any money used for that purpose should properly come out of relief funds. Congressional pain at the veto was considerably alleviated when a few days later he allocated $30,000,000 from relief funds for crop loans. Further to avoid charges of lax spending, the President privately passed word to his friends, Senator Wagner who has a $200,000,000 housing project and Senator Norris who has a $100,000,000 yearly electric power plan, that their money demands must be reduced.

Most heroic gesture of the week was made in regard to taxes. Always one jump ahead of his opponents, President Roosevelt foresaw months ago that Republicans would campaign against him for his heavy deficits. In his January budget message he made his defense, drew an encouraging picture of a 1937 deficit of only half a billion dollars, smallest of the Depression. That picture was possible because he postponed estimating the amounts needed for Relief, took no notice of the Bonus Bill that Congress was about to pass, and did not anticipate the unconstitutionally of AAA processing taxes.

Last week as the newshawks trooped in sniffing the spring air, the President was prepared to repaint the faded picture of his budget message. For half an hour he expounded on his tax plans. There was the present damage done by the Bonus. Although that hand-out will add some two billions to the 1937 deficit, the President planned to amortize the cost over nine years. That would require some $120,000,000 annual taxes in addition to the sums that were to have been set aside to pay the Bonus in 1945. Then, there was the future damage done by the invalidation of processing taxes. In place of these half a billion dollars of new taxes would have to be levied to pay the annual cost of the new farm program (see p. 16). Then there was the past damage done to the budget by the AAA decision. New taxes of $500,000,000 would be needed to fill up this hole. Part of this sum. perhaps $150,000,000, the President thought might be recovered by a new "windfall tax'' imposed on corporations who got processing tax refunds. The remainder of the half billion might, like the Bonus, be amortized over two or three years.

While this tax lecture was in progress, two secret service men stood guard over the sailfish, prodding the rear row of newshawks to keep them from stepping back into the Roosevelt trophy. When the President finished, he answered a few questions, handed over a memorandum in his own handwriting to be photographed and published in newspapers throughout the land. It drove home his stern recommendations:

New taxes (Bonus). . . .$120,000,000

Substitute taxes (Farm program) 500,000,000

Reimbursing taxes (Treasury hole) 500,000,000

Total (round figures) $1,120,000,000

Actual requirement $1,137,000,000

Few minutes later shocked & surprised Congressmen heard the bad news, began to wring their hands over the prospect of a billion-dollar tax bill in election year.

Soon, however, Congressmen were greatly heartened by a tax message containing recommendations aimed chiefly at undistributed corporate income, entirely skipping the question of stiffer personal income taxes--a prime sore spot with elections approaching--and so shrewdly designed that Wall Street boomed. The President recapitulated the factors that made a new tax program necessary, then turned to what he termed the inequality of the present revenues imposed on business.

''As the law now stands our corporate taxes dip too deeply into the shares of corporate earnings going to stockholders who need the disbursement of dividends; while the shares of stockholders who can afford to leave their earnings undistributed escape current surtaxes altogether. . . . Thus the Treasury estimates that, during the calendar year 1936, over $4,500,000,000 of corporate income will be withheld. ... In one year alone the Government will be deprived of revenues amounting to over $1,300,000,000. . . ."

The President proposed that present capital stock taxes, corporate excess profits taxes and corporate income, estimated to yield a total of $994,600,000, be repealed. The new taxes on undistributed income, levied "without unfairness'' along lines which the Treasury will be glad to suggest, will replace this near-billion-dollar total, plus $620,000,000 which would take care of the year's outlay for Bonus and farm aid.

To fill the $500,000,000 Treasury hole ensuing from the loss of processing taxes, the President suggested a "windfall tax" levied straight at the recipients of returned or uncollected processing tax plums. If this were not enough, an excise tax on commodities would provide the rest.

"By increasing the number of commodities so taxed, by greatly lowering the rates of the old processing tax and by spreading the tax over two or three years only a relatively light burden would be imposed on the producers, consumers and processors."

P: Scrawling his signature to the resolution passed by Congress extending for 14 months the Neutrality Act of 1935, the President issued a public statement calling attention to two facts: 1) The neutrality law as re-enacted now forbids not only the sale of arms and ammunition to belligerents, but also all loans to them. 2) The re-enactment does not provide what he desired, a prohibition against any trade with the belligerents in excess of peacetime normal.

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