MARCH 18, 1958
NEW YORK—I had a letter from a gentleman taking me to task for my views on the present state of our economy and on Secretary of State John Foster Dulles. He is a lawyer of great experience and has known all the Secretaries of State, he says, except Dean Acheson for far, far back. He insists that our economy is stronger than it has ever been.
The stock market is holding up well, and apparently the fact that there is unemployment has not reached this gentleman. Or perhaps he does not think that unemployment has anything to do with the economy.
New York's state Legislature has just passed a bill increasing unemployment insurance from $36 to $45 a week, retroactive to July 1, 1957. This was a Republican sponsored measure which raises by .2 percent all employers' payments to the unemployment insurance fund.
This will release a little more money into the spending market, because these are people who spend all that they receive. But it actually is no answer to the basic problems that now beset us.
Labor leaders are asking for a tax slash immediately, but the President has decided to wait a while in spite of the fact that the Vice-President, who is more and more in the limelight as a deciding factor in policy-making, has come out strongly for tax cuts now.
An analysis of what may happen under such a tax cut was published in one of our New York newspapers. However, until a tax-cut bill is passed, there is no certainty that this analysis is correct.
Among the suggestions made is a Federal tax cut on individual incomes of about five percent. For corporations, the Federal income tax rate probably would be cut from 52 to 50 percent and in the case of smaller concerns, a more general depreciation allowance might be granted on capital equipment during the first year of its life.
Several things are under consideration for small business, which seems to be beginning to worry the Administration. Wherever you go you hear that small businesses are being forced to close, so the provisions suggested are an estate tax relief in some form so that the death of an owner will not cripple the business. They also hope for some special tax allowance for losses, together with a number of other points being studied.
Of course, our automobile industry is feeling the present recession and on every hand you hear that automobiles are not moving.
Walter Reuther's suggestion to help this situation was laughed out of court by the owners, but now among the things suggested as possible is a cut in the excise tax from the present 10 percent to five percent. They are also studying the elimination of excise taxes on freight transportation, coal, oil and gas.
Of course, it is dangerous to cut these excise taxes, because once they are cut in one area, then all the other industries are apt to come in with a plea for their own particular relief. Where the cutting of excise taxes would stop is one of the things that must worry the economists advising the Administration on safe steps to take to meet the present difficulties.