"ANNALS of the American Academy of Political and Social Science, The"

Buehler, Alfred G.

doi: 10.1177/000271625932600101pmid: N/A

Many persons have recently expressed great con cern over the problem of inflation. The President has warned repeatedly against its dangers and a Cabinet Committee has re ported that action is needed to forestall inflation and assure sustained economic growth and social progress. Inflation in volves rising consumer prices under conditions of so-called "full employment." Many explanations of inflation have been offered, but whatever the cause, the consumer bears the brunt of it, and it unequally affects the population. The price level flattened out during the 1957-58 recession and has recently shown signs of advancing toward new peaks. Some persons regard inflation as no real threat in peace time and may even think it is a necessary price of continuing economic growth. It is more difficult to arouse the population to the evils of in flation than it is to the dangers of recession and depression. To halt inflation it is necessary to curb excessive spending by governments, businesses, and consumers until the supply of de sired goods and services has become adequate. It may also be necessary to increase taxes and apply other controls which are unwelcome. Reasonable stability of prices must be accepted as a national goal along with reasonable economic growth and social progress.

Maxwell, James A.

doi: 10.1177/000271625932600102pmid: N/A

The federal government has never explicitly de clared that prevention of inflation is its responsibility, and only recently has a strong opinion arisen that such a declaration should be made, possibly by amendment of the Employment Act of 1946. Some of those who desire price stability believe that, to achieve it, the federal government should add control over installment purchases and over major wage contracts to its repertoire. They feel that fiscal policy, depending upon Congress, is untrustworthy and that a tight monetary policy does not quickly reach important sectors of the economy. Op position to federal assumption of responsibility for price sta bility comes especially from those who fear that its implemen tation will slow up economic growth. In their view, the "cost- push" is chiefly responsible for our recent inflation and for the prospect that creeping inflation lies ahead. It should be ac cepted as a fact of economic life, with some effort to miti gate its inequities through widespread extension of escalation. Such a step is, however, to be opposed both on grounds of equity and of theory. Widespread escalation is not feasible, and creeping inflation, if accepted as policy, will create eco nomic disorder rather than accelerated growth.

Stans, Maurice H.

doi: 10.1177/000271625932600103pmid: N/A

It should be the policy of the federal govern ment to aim always for a balanced budget or financial stability will be upset. To balance the budget, action should be taken to reduce or end some federal programs which we have been acquiring in the past thirty years. The compensatory theory of federal spending has not been successful until now and offers little hope for the future unless there is control in the growth of federal spending. We should not initiate programs as tem porary expedients during times of recession since they create great problems in future years. Although we must accept deficits when the country is in a national emergency, we should later create equivalent surpluses to offset deficits caused by the emergency. It is, therefore, necessary to pay as we go if we want to reduce the national debt and taxes. It is also neces sary to plan for budgetary surpluses in good years if we do not want to extend inflation in the future.—Ed.

Colm, Gerhard

doi: 10.1177/000271625932600104pmid: N/A

There is no clear correlation between the rate of economic growth and price developments. Very rapid ex pansion is usually associated with price rise, a business slump with price drops. In the wide range between these extremes, growth may be associated with rising, stable, or falling prices. This is explained by the great variety of factors influencing prices, often working in opposite directions. Since there are multiple causes of price rises, there are also several policies which should be combined to combat price rises. They in clude: positive policies designed to increase productivity and to overcome obstacles to greater production; more effective credit policies to combat demand inflation; and arrangements designed to articulate the public interest in price and wage de velopments as a means to restrain cost increases.

Meany, George

doi: 10.1177/000271625932600105pmid: N/A

The major needs of our time are adequate na tional defense, public services for a growing population, com prehensive economic and technical aid for the uncommitted peoples of less-developed areas of the world who are emerging from colonial domination and social and economic adjustments to rapid technological change. These needs must be met for national survival and the continued progress of our free society. They can and should be met by economic expansion of at least 5 per cent a year. Restrictive economic policies that curtail economic progress and growth must be abandoned. The "tight money" policy should be halted if growth is to be stimulated. Continuing wage and salary increases should be encouraged if growing consumer markets are to be attained. The govern ment's budget policy should aim at balancing the budget in times of full employment from an expanding economy rather than restricting government expenditures and retarding eco nomic growth. Full employment and economic growth of 5 per cent a year should be established as basic national objec tives, to be implemented by government policies. To achieve these major requirements, there should be an end to the inces sant propaganda campaign about runaway inflationary pres sures that have not existed in the past eight years. Solutions for the type of price changes of recent years have to be devel oped on the basis of the facts in each separate part of the economy. The main task of the day is more rapid economic expansion to sustain full employment and meet the nation's needs. This will do more than anything to stabilize the price situation.

Perry, Harvey

doi: 10.1177/000271625932600106pmid: N/A

Canadian postwar experience with inflation has closely paralleled the American with the exception that its fed eral government budget has been balanced for most of the pe riod, capital expenditure has been a higher proportion of gross national product, and foreign investment in Canada has been extremely heavy. Recent attitudes towards inflation reflect an intense reaction on the part of investors towards govern ment financial measures and a concern that returning prosper ity will produce price rises. Lessons of Canadian experience raise some serious questions as to the efficacy of fiscal and monetary policy.

Shanks, Carrol M.

doi: 10.1177/000271625932600107pmid: N/A

Under conditions existing in the American econ omy today, there are periods when it is extremely difficult to achieve simultaneously the two major goals of high employ ment and stable prices. Abandonment of the goal of price stability is not an acceptable solution to this problem—first, because reasonable price stability is essential to a just distribu tion of output, and second, because it would be even more diffi cult to maintain high employment under a conscious national policy of inflation than under a policy directed toward stable prices. Under every assumed rate of inflation, the monetary and fiscal authorities would again be faced with exactly the same dilemma. The goal of stable prices would have been sacrificed only to find that nothing had been gained with re spect to employment and output. As in the case of most di lemmas, the solution is found by restating the problem: it is not stable prices and high employment which are incompatible; it is unrestrained monopoly power and high employment which are incompatible. The acceptance of inflation will not solve the problem. High employment and an equitable distribution of output can be maintained only by taking steps to restrain monopoly power, wherever it may exist in the economy.

Groves, Harold M.

doi: 10.1177/000271625932600108pmid: N/A

It is adequacy of taxation in the quantitative sense and in relation to public expenditure that is the most important aspect of taxation for inflation control. A well- developed public economy financed by a progressive tax sys tem supplies a powerful automatic check on fluctuations in the private economy. A less progressive tax system would have some advantage in its reduced impingement on savings and in centives, but the advantage would not be large nor important enough to offset considerations of equity which must be weighed in the balance. As to state and local taxes, the federal gov ernment could do more to protect the states from interterri torial competition—income tax credit—and it could provide a more flexible support for state public works than tax-exempt securities. Several tax gadgets for inflation control are re viewed but none appear to be politically or otherwise promising at present. Nevertheless it must be recognized that oligo polistic practices in industry are a major factor in the present inflation problem. Fiscal policy, including its tax element, is important for counterinflationary purposes, but it encounters powerful vested interests, and it should not be our sole reliance in a stabilization program.

Gainsbrugh, Martin R.; Gaston, J. Frank

doi: 10.1177/000271625932600109pmid: N/A

The income tax, which has been regarded as the chief weapon in the battle against inflation, has come to be scrutinized as a possible factor in inducing inflation. Prior to World War II, the comparatively low rates of corporate and personal income taxation made such taxes appear rela tively unimportant. High rates of taxation, however, have been carried over to the postwar period and, consequently, have served to focus attention upon the effect of such taxation upon economic growth and stability, distribution of income, and the efforts made by corporations and individuals to pass along the higher rates of income tax as well as the effect that these taxes may have on savings and investment. Until fairly recently, it was generally expected that business corpo rations and the stockholders bore the burden of the corporate income tax. This absorption theory has been giving ground to the shifting theory which maintains that under present-day competitive conditions, the corporation is able to shift taxes in the form of higher prices. Empirical studies have noted an increasing tendency for businessmen to say that they take in come tax increases into consideration when setting prices. With respect to the personal income tax, there is growing reason for believing that work incentives and willingness to make risk investments are adversely affected and that efforts are made to pass along higher income taxes in the form of higher wages and salaries.

Schmidt, Emerson P.

doi: 10.1177/000271625932600110pmid: N/A

It is not obvious that taxes in themselves are a significant element in inflation. When taxes reach a level that is regarded as unduly high by a broad spectrum of taxpayers, protective and defensive reactions are likely to take place. Al though the primary cause of inflation is the growth in the money supply resulting from deficit financing, even a balanced budget under certain circumstances can be inflationary. The corporation income tax is probably largely shifted forward to the consumer; but its level tends to defer new investment, and therefore has a price-lifting effect which, however, is not cumu lative. A shift toward a tax system emphasizing direct rather than indirect taxes might help encourage opposition to govern ment expenditure increases.