Franklin D. Roosevelt photo

Excerpts from the Press Conference

October 29, 1937

Q. Is there anything that can be said about the stories appearing recently, particularly the last two days, in The New York Times this morning, about the possibility of adjustment in capital gains and surplus profits taxes?

THE PRESIDENT: The only thing I can say about those stories is something rather interesting. If you will read them you won't find in any of the stories anything relating to changes in taxes—not a single reference—of that portion of the population which has very little money to live on. It is rather an interesting fact that as these stories come out of Washington, not one statement contains any reference to the very large section of our national population that doesn't have a decent standard of living. I have been rather struck by it of late. In other words, here's a national problem that apparently in these stories is only being viewed from one angle. Did you ever think of that? It's an interesting thing.

Q. Is there any mention in any of these stories of the kind of taxes? They pay taxes on sales. The sales taxes that these very poor people pay?

THE PRESIDENT: Never, no mention of that ever. Never any mention of increasing the purchasing power among the thirty or forty millions of people who have today practically no purchasing power. I think very probably it is an interesting thing for you to use your imagination on and write interpretative stories.

Q. [Mr. Trohan] I had much rather you would interpret it.

THE PRESIDENT: No, it would be a very useful practice on the part of all of you.

Q. [Mr. Trohan] I may be slow, Mr. President, but I don't find any significance in that.

THE PRESIDENT: No, you are not slow at all.

Q. Do you expect us to psychoanalyze ourselves in our papers?

THE PRESIDENT: No, I am just thinking about the stories that Bob [Post] asked about.

Q. They have no purchasing power and they pay no taxes?

THE PRESIDENT: No, I didn't say that at all. Nobody ever said they paid no taxes. On the contrary, the suggestion was that they paid very large taxes. Why don't you dig up that report? Don't attribute this to me, for frankly, I don't know whether it is accurate or not, but in the report of the Filene Foundation you get the whole thing in one paragraph. It showed the taxes that are paid by the family with income of one thousand dollars a year, and then on up. . . .

Q. Obviously these people who talk about it do not have capital gains.

THE PRESIDENT: Very few of them. I know what you mean-you have to do some tall thinking. The point I emphasize is that in all these stories the point of view which is stated is not that of the people who have very little purchasing power or no purchasing power at all. There isn't a mention of the effect of changes in the tax law on the forty million people who are sub-standard so far as living goes. Isn't it an interesting fact that that isn't taken into consideration in these stories?

Q. Isn't it true that a great many tax experts believe these changes wouldn't have any effect on these forty million people?

THE PRESIDENT: I wouldn't know. After all, you have to have real method to run a government; you have to have a number of dollars. Where are they coming from?

Q. Don't some of them think changes in these taxes will provide additional capital to give additional employment?

THE PRESIDENT: Some do and some don't. Like those two letters I think I told you about the other day. They came in from two economic experts of the first water. One says the entire question is one of the velocity of capital turnover credit, so do not pay any attention to purchasing power. The other one says: forget all this algebraic formula about the velocity of capital turnover credit; the whole question is purchasing power on the part of one hundred and thirty million people. It is a fascinating study.

Q. Do you mean that if they have to pay out beyond—[interruption]- that it goes into wages and dividends, which is then spent? If you take the distributed profits it goes into wages and dividends?

THE PRESIDENT: Your velocity says that it does. There is another thing, if you want to check up— I can't give you definite figures. I don't know whether I mentioned it the other day. The people of this country are getting about two and one-half billions of dollars less—you have to check up on these figures; Lubin has them. Don't write the story without checking. I haven't got them except very, very approximately. The only figure I have is the total figure.

The national income, because of a change in government action in one year, has been decreased two and one-half billion dollars. That's an extraordinary thing unless you analyze it. There has been a billion and one-quarter less payment this year on the bonus, for instance. You will have to check on these figures, and I think they are public. There is a billion and a quarter less going out this fiscal year on the bonus. There is a billion dollars less going out on relief, nearly a billion. . . .

Then there has also been a contribution of money by employers and employees that runs about three hundred and fifty or four hundred million, for social security. Of course, a layman would say that that contribution is being held in trust, a reserve fund, part of it, and part of it for payments. But quite a large portion of the total payment goes into a reserve fund which the Government invests in something. Now, typical of completely foggy thinking, the Hearst papers came out and said that this money was going into government bonds, that the government bonds have no assurance of being made good ultimately, and that the Government was taking the cash that these people were putting up, and was paying the ordinary running expenses of the Government with it. This, of course, isn't true. When you receive money for a trust fund you have to put it into something, obviously; and if you study the financing methods of the Social Security Board, you will see it is better to put those trust funds into Federal Government bonds than into stock exchange stocks and bonds. You have something which can always be made good if we have a government. It is all predicated on that.

Now, the total of all these things, the bonus, the decrease in relief, decrease in public works, and the contributions to social security, mean about two and one-half billion dollars less than the figures of a year ago. Now, that is one of the contributing factors. Of course, business is supposed to be taking it up and they are taking up a portion of it, which, of course, you know. The national income has risen from thirty-eight or thirty-nine billions to—what was it this year?- sixty-five, and probably this coming year will go to seventy. And, of course, the aim is ninety or one hundred. When, the Lord only knows; but that is a perfectly sound goal to set up in a country which is going ahead in the increase of its wealth and the betterment of living standards. The wages and hours bill, of course, ties right into that; the crop control or surplus control bill ties right in, increasing the national income.

Q. Do you have any ideas about the proposed tariff section of the wage and hour bill?

THE PRESIDENT: I don't know. I haven't seen anything about it at all.

Q. There was one in the beginning, of course, and someone said you ought not to put tariff in the wage bill.

THE PRESIDENT: There was one perfectly impossible section which would mean a Chinese Wall around the country. The only thing to say about that is that the people who are for it have failed to realize you can't export unless you import. It is a perfectly obvious, simple, straight fact. You cannot export unless you import. In other words, people on the outside have no purchasing power, no method of paying for our goods. . . . That section you are talking about in that bill simply meant there would be kept out goods from every other nation in the world, with the net result that we wouldn't export our goods.

Q. Defeat of the reciprocal trade treaty idea.

THE PRESIDENT: Not only that, but defeat of foreign trade; in effect reestablishing in this country the old nonintercourse Act of 1807.

Franklin D. Roosevelt, Excerpts from the Press Conference Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/208963

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