The Missing Ingredient

Before the American Bankers Association in Detroit last week, Westinghouse Electric's President Gwilym A. Price painted a brave picture of the new world ahead of U.S. industry, "an economy whose horizons will be almost as far beyond those of the present as today's are beyond those of our boyhood."

But, said Price, one essential ingredient is missing: the willingness of U.S. investors to risk their dollars on industry's expansion. They are hanging back. Of the $26.5 billion which U.S. industry spent on expansion in 1947, said Price, less than 4.7% (only $1.25 billion) came from stock sales, i.e., risk capital (and half of this was in preferred stock). The rest came from accumulated profits, loans, or new bond issues. The 1948 rate of investment in new stock issues is even lower. But industry cannot go on financing expansion out of past profits ("now almost completely committed") or borrowing ("an already visible limit").

What had dried up the money market? Price thought he knew: double taxation of dividends and high income taxes which made stocks no longer worth the risk or left stockholders little cash to invest. Price's solution: wipe out the double tax on dividends, limit personal income taxes to a maximum of 50%. Said Price: "We need an incentive program for the forgotten man--the stockholder ... If he is to risk his capital he must be given a wage increase."

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