Spend v. Save

Listening to testimony for and against the proposed $20-per-capita cut in federal income taxes, the U.S. Senate's Finance Committee last week heard a clear contrast between the economic philosophy of the Eisenhower Administration and that of the Fair Deal Democrats. Speaking for the Administration was Secretary of the Treasury George Humphrey, lawyer and industrialist. For the Fair Deal Democrats the spokesman was Leon Keyserling, lawyer, economist and onetime bureaucrat, who was chairman of President Harry Truman's Council of Economic Advisers in 1950-52.

"Strictly a Phony." Humphrey had his say first. He was firmly against the $20 tax cut. Reason: it would mean more deficit financing and thus would have a serious inflationary effect on the U.S. economy. By increasing the cost of living, Humphrey believes, inflation could take away from the taxpayer more than he would get from the tax cut.

Looking straight at Florida's Democratic Senator George Smathers, Humphrey said that Smathers' "compromise" plan to schedule the tax cut tentatively for July 1, 1956 was "strictly a phony" device to offer the voter an election-year plum that might later be snatched away. Said the Secretary of the Treasury: "This Administration advocates further tax cuts, but only at such time as we can see them justified by further cuts in spending and increased revenues from economic growth that broadens the tax base."

Next day the Fair Deal Democrats brought on their man. The real danger in the U.S., said Leon Keyserling, is not inflation but deflation. Keyserling believes that the Government should not only cut income taxes to increase consumer buying power, but should also increase federal spending in this calendar year by about $3.5 billion to stimulate jobs and production. While such steps would increase the federal deficit this year, Keyserling theorized, they would stimulate so much growth in the economy that federal revenue would increase and the budget could be balanced by the end of 1956.

"Unwise & Untimely." On the Finance Committee, the key Democrats. Virginia's hardheaded Harry Byrd and Georgia's hardheaded Walter George, decided that the Humphrey road showed far more promise of getting to the right destination. Byrd and George joined the committee's Republicans to vote down the $20 tax cut, 9 to 6. Said Walter George: "A tax cut would be unwise and untimely."

This week the Democrats who wanted to take the Keyserling road were preparing to fight for restoration of the cut on the Senate floor. But there was little hope that the Senate Democrats could close ranks. Enough of them were expected to follow Byrd and George to kill a tax cut at this session.

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