The Atlantic Report on the World Today: Washington

ON THE WORLD TODAY

POST-WAR planning haw been given an impetus by the Baruch-Hancock Report. The irreverent call it “The Millionaires’ Beveridge Report,”because it pleads for cash settlements when war contracts are terminated. The alternative would be chaos. The Baruch Report says that without speed in the final settlements we should be “legislating a depression.” Even the most expeditious procedure costs time. Accordingly the Report comes out for a system of guaranteed loans pending settlement.

Congress reacts

At first it seemed that there would be conflict with Congress over this and other provisions of the Report. Senator George was especially critical. The Georgian, who is chairman of the Senate Committee on post-war planning, regarded the Report as a challenge to the Committee.

Later the Senator admitted he hadn’t read the Baruch recommendations when he vented his spleen. His outburst was due to the natural jealousy of Congress for its policy-making prerogatives. This particular issue has now disappeared. Senator George finds there is no conflict of objectives. Senator Murray recognizes that the Report “entirely supports my own Contract Termination bill.” So the two Senators have framed an omnibus bill which embodies some of the Baruch ideas.

Report and bill are not exactly parallel. The major difference lies in the administrative setup. While Mr. Baruch recommends that demobilization should be handled by the existing agencies, supplemented by one or two new appointments, the MurrayGeorge bill would establish a new agency called the “Office of War Demobilization.” The difference is more apparent than real. Offices established by executive order under the Baruch program could easily be brought under the system proposed in the Murray-George bill.

The Murray-George bill counters what Congress considers Executive encroachment by seeking to invade the Executive domain. It would set up a precedent-breaking provision in the form of a Congressional Committee to confer with the Director of Demobilization in matters of broad general policy. Members of the Committee would be free to attend all meetings of the proposed “Board of the Office of War Demobilization.” And the Director of Demobilization would be required to report all general policy decisions to the Committee not less frequently than every thirty days. These provisions would put the head of an executive agency under a kind of legislative surveillance.

Congress ought to be jealous of its prerogatives as a lawmaking body. But, having laid down general policies for appointive officials to follow, it should be careful not to invade the Executive domain. This sort of thing always happens when Congress strikes back. Right now a case is coming before the courts over the right of Congress to withhold the salaries of officials whom it dislikes in the Executive branch. The Executive also has the right to complain when lawmaking provisions are incorporated into appropriation bills.

What will happen to government plants?

One of the most difficult of the adjustments to peace will concern the disposal of surplus materials and plant facilities. Take the plant facilities first. The government’s total investment is as much as 15 billions, scattered over 2500 industrial projects. The total is actually a quarter of the aggregate value of America’s industrial plant. The government owns about 90 per cent of our aircraft production facilities. Many of the firms which have had a mushroom growth in this war are in reality managers for the government: Jack and Heintz, for instance. Only $100,000 of this spectacular company’s worth represents initial private capital. But the government a year ago had sunk 15 millions in it.

How is this government interest to be disposed of? If it is knocked down to the highest bidder, big business will become bigger. For 70 per cent of the property is in lots of 10 million dollars or more. A better plan, it is suggested, would be to lease the properties, so far as possible, to small concerns, so that the wartime impetus to bigness might be checked. This is the type of problem that Senator George had in mind when he said that the handling of demobilization would determine the nature of our economy for years to come.

As to raw materials left, the amounts eventually to be disposed of must be enormous. But this is a less complex problem than that of the disposal of facilities. The government will need to retain control of much of the materials for strategical stockpiling. Incidentally, that need will call for a good deal of purchasing abroad. As for the remainder, there must be consideration for the little fellow, and this is assured by WPB’s Nelson.

Disposal of surpluses should also begin now. Otherwise we shall have considerable localized unemployment. It is reported that many small concerns are being forced even now to dismiss employees for lack of war work. Prime contractors, in other words, are farming out fewer jobs to the subcontractors. Accordingly the Baruch Report suggests that a Surplus Property Administrator ought to draw up a list of the most critical civilian items and that the Army and Navy should then examine their inventories, stocks, and stores of such items to see what could be safely released. Action is bound to come soon.

Congress is touchy

Congress is reasserting its authority. War agencies are in existence which have been created by the President out of emergency funds. In the last two years he has allocated emergency funds to no fewer than forty-six such agencies. Some go “unrecognized” by Congress. Others are “recognized” by reference — that is, when they go to Congress for fresh appropriations.

Officials in charge of important war agencies have been appointed without the advice and consent of the Senate. The “Assistant President,” as Director of War Mobilization Byrnes is called, is one of these. Stabilization Director Vinson is another. The Senate believes that the President, in not submitting these names for approval, has been derelict in his constitutional duty. The organic law provides that all top officials of the United States must have Senatorial approval. Resentment over the shelving of Congress in these matters is responsible for the move to see demobilization handled by a statutory agency.

The ruckus between President and Congress over the tax bill owed a great deal to Congressional jealousy of its prerogatives. Senator Aiken put the issue squarely when he asked: “Is the Legislative branch a coordinate branch of this government, to be respected as such, or is it to become a cipher?” He was referring to the contempt proceedings threatened against the President’s assistant, Jonathan Daniels, for refusing to testify, as Secretary Wickard had refused before him, before a Senate Committee. But he cited the tax brawl as well.

Barkley’s bite

Trouble over the tax bill had a personal angle. Senator Barkley as the majority leader is the President’s voice in the Senate. And the President traditionally relies on him for advice. The Kentuckian has served as a wheel horse, sometimes being passed over for a more alert Senator in crisis. Occasionally in the past the President relied upon the then Senator Byrnes instead of Senator Barkley to pilot an Administration measure through the Senate.

Such neglect has rankled with Barkley. The old resentment came back in a blaze when the President told him he had consulted Mr. Byrnes on the tax bill and Byrnes had recommended a veto. This was in reply to Barkley’s earnest plea for signature of a bill over which so much sweat and thought had been expended.

Barkley thus had two reasons for his indignation. He had again been passed over in favor of an official with no responsibility to Congress, and Congress itself had been humiliated. The President gave the Kentuckian and his colleagues a further smart in his stinging veto message.

Politics and taxation

Whether there will be another tax bill on top of the $2,000,000,000 Act is doubtful. To be sure, the President called for a “realistic” measure. At his elbow are Byrnes and Vinson and the Bureau of the Budget, who have long been asking him to call for one. But this is election year. And word has gone out that neither feuds nor great risks will be tolerated till the people’s choice has been registered. The kind of tax bill required by Byrnes and Vinson and the Bureau of the Budget is what is called an “unnecessary risk.”

One feature of the tax program of the stabilization officials which is too “realistic” for the President provides for compulsory savings. This is an item that has caused more hard feelings among the President’s advisers than any other. Secretary Morgenthau, who has created a mammoth organization to sell bonds, considers the suggestion a reflection on himself and the Treasury. Even the Treasury is divided about compulsory savings. Randolph Paul is an advocate, though he is the Secretary’s closest tax adviser. It will not be surprising if Mr. Paul ends a bad situation in the Treasury by resigning.

The President in his veto message accused Congress of being partial to favored groups. The object of war taxation is to mop up war-created inflationary income. That object has never been achieved. The main excuse for a veto was that the bill as passed by Congress was inadequate in this respect.

Economists feel that the only realistic bases of a wartime fiscal policy are a general sales tax and compulsory savings. But the President has backed and filled on both, and his Secretary of the Treasury has been equally timid.

Simplification of taxes

A subject that is close to the heart of taxpayers at this season of the year is the need for simplifying taxes. That reform will be undertaken. The outcry throughout the country cannot be ignored. In this matter the President in his tax veto sought to pin the sole responsibility on Congress. But he must share the blame.

The chief headache at present is due to the adjustment to a pay-as-you-go system. To be sure, pay-asyou-go originated in Congress. But it was then as simple as daylight saving. The Treasury refused to reject or accept it, and instead sought to compromise it. The reason lay in the opportunity of collecting a lot of revenue by describing the device as “forgiveness.” So we now have the burden of working ourselves into a pay-as-you-go system.

There will be interim simplification, of course. Both the Treasury and the House Ways and Means Committee are working hard at it. We may possibly look to a merger of the Victory tax, the normal tax, and the surtax rates into a single minimum rate to be collected at the source by means of the withholding tax.

THE MOOD OF THE CAPITAL

The mood of the capital is out of line with the great successes of the naval war in the Pacific and the air war on Germany. There has been a reaction against extremist statements and propaganda.

It is felt that Barkley’s remonstrance will generate healthier relations between Congress and the Executive. But most of the speculations in Washington corridors these days concern political chances and prospects — on both sides of the political fence.