Friendly Words

The Academy of Political Science, a prosperous group of U. S. businessmen, professors and economists at whose gatherings white ties are more in evidence than Windsor bows, made large headlines in 1933 when George Bernard Shaw delivered a saucy socialistic speech under its auspices at Manhattan's Metropolitan Opera House. Last week the Academy, gathered for its 57th annual meeting at Manhattan's Astor Hotel, heard an equally newsmaking speech, neither saucy nor socialistic, by U. S. Secretary of the Treasury Henry Morgenthau Jr.

Perhaps because of the innate conservatism which moves his light-hearted Hyde Park neighbor Franklin Roosevelt to call him "Sad Henry" or "Henry the Morgue," Secretary Morgenthau has long been encouraging the same bridge between the New Deal and U. S. Business which the President was last week trying to throw up in Washington (see col. 1). Since an excellent evidence of the sincerity of Franklin Roosevelt's intentions would be to have Henry Morgenthau publicly advocate a rapprochement with the same fervor he is understood to display in private, some 1,000 curious Academicians turned out to hear Mr. Morgenthau on "The Federal Budget."

Before Mr. Morgenthau, seated at the banquet's head table next to Morgan Partner Thomas W. Lament, got a chance to advocate anything at all, he had the chance to hear two speeches ably marshaling the grievances of Business. As alert as a college debater, the Secretary thoughtfully pursed his lips while Virginia's Senator Harry F. Byrd ("We might carry out the Democratic platform") and Morgan Partner S. Parker Gilbert ("Nothing would accomplish more . . . than the repeal of the undistributed profits tax") proceeded to needle the New Deal's fiscal policy.

As Secretary Morgenthau got to his feet for his rebuttal, the applause was more polite than enthusiastic. It was to come far more spontaneously as, adjusting his pince-nez and reading carefully from manuscript, the Secretary presented on every fiscal front positions which, while for the most part they were neither novel nor complete, were nonetheless the most satisfying public words Business has heard from Washington since the inception of its "Breathing Spell" two years ago.

Budget. "We deliberately used an unbalanced Federal budget during the past four years to meet a great emergency. That policy has succeeded. The emergency that we faced in 1933 no longer exists. I am fully aware that many of our problems remain unsolved. ... I am further aware that some persons contend that another great spending program is desirable to ward off the risk of another great business depression. . . . But ... I have reached the firm conviction that the domestic problems which face us today are essentially different from those which faced us four years ago. Many measures are required for their solution. One of these measures ... in the present juncture is a determined movement toward a balanced budget."

Deficit. "Our total receipts for this year were estimated in the President's budget summation of Oct. 19 at about $6,650,000,000, and our total net expenditures at about $7,345,000,000, leaving an estimated net deficit of $695,000,000.

"To attain an ordinary balancing of the budget next year--that is, a balance after full provision for accruing liabilities for old-age benefit payments, but exclusive of debt retirement--it would be necessary to accomplish a net improvement of about $700,000,000. . . .

"Let me give you an idea of the possibilities for savings. . . . Prior to the Depression, the Federal grants to the States for public highway construction generally ran under $100,000,000 annually. This year the total Federal outlays . . . are estimated at $253,000,000. ... I believe it is now time to return to the average annual level. . . . Second, there is the field of public works ... on which we are spending $573,000,000 this year. . . . I believe that we can and should move definitely toward a lower level. . . . The total of this year's expenditures [for agriculture] . . . exceeded $900,000,000. Despite the magnitude of this sum, you are all aware that possible further measures involving large additional expenditures are now being discussed. . . . Balancing the budget is as much in the interest of farmers as in the interest of other parts of our population; and it requires the co-operation of the farmer. . . ."

Taxes. "Although we are not contemplating any increase in the total tax burden, the character of our tax structure is being given earnest consideration. . . . We have sought to determine whether there are inequalities and injustices in the distribution of the tax burden and whether there are some taxes whose cost of collection and whose burdensome effect outweigh the revenue gain. . . . We do not wish to impose levies which tend to dry up the sources of tax revenue. . . ."

While Business wondered what to make of these friendly words, next day Chairman Pat Harrison of the Senate Finance Committee, well aware that taxes are not on the calendar of this week's special session, sought to find out by wiring to Secretary Morgenthau: "There must be some modification of the undistributed profits tax." Exulted Columnist Hugh Johnson: "Boy, that's batting this 'must' business from one end of Pennsylvania Ave. to the other--the most hopeful sign on the whole horizon."

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