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Frank Demby

Economic Notes

(22 September 1941)

From Labor Action, Vol. 5 No. 38, 22 September 1941, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The Senate of the United States has outdone the House of Representatives in the race to see which branch of the “people’s” representatives can place the heavier tax burden on the masses. It’s all in a good cause – financing the “war for democracy”’ – so don’t mind if your tax bill is increased from three to seven times next year.

The Senate voted to lower exemptions on the income tax from $800 to $750 for single persons and from $2,000 a year to $1,500 a year for married persons. This means that about 6,000,000 more persons – 23,000,000 in all – will have to file an income tax in 1942 if this bill becomes law. It also means higher rates for those earning from $2,000 to $10,000. Altogether, over $300,000,000 will be raised by this device.

To show their seriousness in making the poor pay for the bosses’ war, the Senate lowered the excess profits tax almost $70,000,000. It then more than made up for this by raising the ante on excise and miscellaneous taxes some $85,000,000. This was done chiefly by raising the admission tax for amusements from 10 to 15 per cent, doubling the tax on local telephone bills (10 per cent instead of 5), imposing a 10 per cent tax on electric light bulbs, and a new tax on gas and oil appliances was included. The Senate has topped the House by more than $450,000,000 – of which almost 100 per cent falls on those who work for a living.

Whether this will satisfy the National Association of Manufacturers, who agitated for a national sales tax and a payroll tax, remains to be seen. It will certainly not meet with favor among the workers. A loud roar of protest from the trade unions can still make Congress retreat a few steps!


Meanwhile profits continue to soar for the big companies under the impetus of huge war orders. The following figures show quite clearly to all except the Congress of the United States that taxes on profits and corporations can still be increased SUBSTANTIALLY without denting profits very much (figures are for the first half of each fiscal year):


Profits Before Tax Provisions

Net Profit








Tire and Rubber
(5 companies)







Railroad Equipment
(10 companies)







Automotive Equipment
(13 companies)







And this is only a small sample of what goes on every day. The patriotism of the rich thrives on this sort of diet. But what about the rest of us?


The first measures so far taken to prevent inflation remain a farce. Where they amount to anything, they are, as we predicted, further blows at the standard of living of the masses. The 7 p.m. curfew for the purpose of rationing gasoline has not only not reduced the consumption of gas, but available estimates show on increase in the sales of gas stations during the past few weeks.

Meanwhile, Henderson’s order setting a price ceiling of 18.9 cents a gallon in the New York area has been honored more in the breach than by observance. This has brought a threat from “Little Flower” LaGuardia to have the mayors of various cities revoke the licenses of those dealers who are raising their prices. The only thing that will prevent a first-rate tempest from blowing up over this first example of what a war economy means is the sudden “discovery” that there are thousands of railroad oil tankers lying idle. The railroads and oil companies, were just having a private feud. The let-the-public-be-damned attitude of big business is due for a small curb in this instance.


On September 1, the new curbs on installment buying – aimed at restricting the purchases of durable consumers’ goods by the low income groups – went into effect. The Federal Reserve Board limited the maximum time for payments to 18 months and increased the down payments substantially in many cases. Sellers of these items report a brisk business; in some cases better than ever. Since the overwhelming majority of the $10,000,000,000 installment business is carried on among the workers and lower middle class, a serious restriction of this form of credit would mean a sharp decline in the standard of living of the masses. At present, the curbs on credit remain a joke – but watch out for the future!


On the organization front the President shuffled his “defense” agencies a bit. A super seven-man board, formally known as the Supply Priorities and Allocations Board, has been set up, charged with the responsibility of supervising the OPM and the other war bureaus. The SPAB is headed by Vice-President Wallace. The other members are: Secretary of War Stimson, Secretary of the Navy Knox, William S. Knudsen and Sidney Hillman of the OPM, Price Administrator Henderson (who relinquishes his control of civilian supply) and Dollar-a-Year-Man Donald Nelson, who will be the executive director. Thus does Roosevelt hope to remove the conflicts that have been going on in Washington and satisfy the critics of the production program. That this will not do the trick was indicated by the blast from Barney Baruch, chairman of the War Industries Board in World War I, who continues to insist on the necessity for a one-man head.

Meanwhile, another Wall Street speculator crashed the Washington dollar-a-year racket with the appointment of Floyd B. Odlum as director of the new Division of Contract Distribution. This replaces the Defense Contract Service and is supposed to see to it that small business gets sub-contracts on the huge war orders that the big corporations are getting and can’t fill. Fat chance! Small business is doomed and the war economy will hasten the process. After all, why should organizations controlled by big business order themselves to split their profits with a lot of little competitors? Monopoly capitalism doesn’t work that way. Not only can’t it create a decent peace economy; it can’t even establish an efficient war economy!


Two developments along Wall Street are worth noting. We are very happy to report that Wendell L. Willkie, the man who made the supreme sacrifice of resigning from the presidency of Commonwealth & Southern to crusade against the dictatorial aims of the New Deal third term, is not doing so badly for himself. After becoming senior partner in the lucrative law firm of Willkie, Owen, Otis & Bailey, this junior partner of the unincorporated firm of Roosevelt & Willkie was elected a director of the Federal Insurance Co. on June 4. Now he is being proposed for a second directorship – this time in the very important firm controlled by the Lehman brothers, known as the Lehman Corp. We are confident that the October 15 meeting of the stockholders of the Lehman Corp. will elect Mr. Willkie a director. Just another example of how it pays to be a public-spirited citizen, provided, of course, you know the right people! Who says this isn’t the land of opportunity?

The other interesting development in Wall Street is further evidence of the tremendous opportunities that await the eager and patient youngster of today. The American Telephone & Telegraph Co., a Morgan subsidiary, which has conducted all its financing for the past 30 years through the House of Morgan, has announced that its forthcoming issue of $94,500,000 worth of debentures is to be subject to competitive bidding. Here’s a chance for you to make a million dollars in commission. All you have to do is to submit the lowest bid for handling these bonds. The lowest bidder must get the issue. Then all you have to do is to sell them. The bonds are absolutely gilt-edged. There should be no trouble at all. So far, however, there are only two syndicates in the field; one, a group of 28 powerful investment bankers, headed by Morgan Stanley & Co., Inc. (Mr. Morgan’s son-in-law is head man in this outfit); the other, one of the largest syndicates every assembled, comprising about 175 investment houses, headed by Halsey, Stuart & Co., Inc., and the Mellon Securities Corp. We are about $94,499,999 short of the required amount, else we would submit a bid. Maybe our readers can help us out.

Kidding aside, though, this is important because it shows that all attempts to maintain competition must remain solely between the big capitalists. And it can’t be otherwise, considering the kind of economic system we live under. One more proof of the necessity for socialism!

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