Bipartisan Inflation

September 22, 1958

So far as economic principles are concerned, it grows increasingly difficult to detect any difference between the two major parties. The President has said that he is going to stress “getting down these deficits and keeping our money sound.” A look at the record does show that the Democrats are more openly the party of inflation and massive spending than the Republicans. But it does not show any excessive devotion to economy on the part of the Republicans.

Let us glance back at the economic record of the last session of Congress, and begin with the credits. The list is short. It extended the Reciprocal Trade Act. It alleviated some of the difficulties of the railroads and other taxpayers by repealing the 3 percent tax on freight transportation and the 10 percent tax on passenger fares. Most important of all, as a result of the courage and persistence of Secretary Benson, it reduced the price supports for cotton, rice, and corn, and gave us a less expensive and outrageous farm law.

SUPER-SPENDING

On the debit side the list is much longer. Congress began furiously to “fight the recession,” i.e., to start a new round of inflation. It hastily passed a spate of “emergency” spending measures, including $1.8 billion for Federal housing loans and another $1.8 billion to speed up Federally aided highway programs. It increased and prolonged unemployment-insurance benefits. It offered a $500 million Federal loan guaranty program to rescue railroads from the results of excessive Federal regulation. It appropriated another $3.5 billion for foreign aid. It voted Federal aid (which the President fortunately vetoed) for “depressed areas.”

Nobody in Congress had time to keep count. When the session was over, the Tax Foundation, a private research group, announced that a peacetime record of $83 billion in appropriations and other forms of spending authority had been voted. The Treasury looks forward to a $12 billion deficit for the current fiscal year. So Congress raised the Federal debt limit to $228 billion.

The Kennedy-Ives labor bill did not become law, but that was fortunate. The bill contained no effort whatever to deal with the basic sources of union monopoly and coercion. Under the pretense of correcting union abuses it placed more burdens and restrictions on management.

SOCIAL INSECURITY

But if the record of the last session of Congress, and of both political parties, was typified by any one measure, it was the new social-security amendments. For the fourth successive election year, Congress approved a bill to “liberalize” the benefits. It had done this substantially in 1950, 1952, 1954, and 1956. This year’s amendments provided another 7 percent general increase. The one thing to be said in extenuation was that Congress did have the candor to provide higher social-security taxes to pay for the higher benefits. Effective next Jan. 1, employers will each have to pay 2.5 percent in payroll taxes, and the self employed 3.5 percent.

This is a tax on employment. It reduces the current living standards of self-supporting people. It does not increase the supply of goods and services, but places added burdens on production. There is no serious discussion of the long-range costs of this program or the dangers of overexpansion. Once more Peter is robbed to pay—Peter.

Worse, for the fifth time in twelve years, Congress provided for an increase in the Federal share in state public-assistance programs. The President not only signed this bill but hailed it as “a significant forward step.” He did object to the successive increases that have raised the Federal share of old-age assistance from 45 percent in 1956 to an estimated 58.5 percent under the new bill Last January he recommended gradual reduction in the Federal share to 50 percent. But why not, in accordance with the moderate suggestions of the Life Insurance Association of America, and in accordance with a purpose of the original Social Security Act, a gradual but complete elimination of any Federal contribution to state old-age assistance?

As of now, a vote for either party is a vote for more inflation.