Evening Star Newspaper, January 22, 1942, Page 15

Compromise In Production Setup Costly Nelson’s Political Sense May End Reshuffling By DAVID LAWRENCE. It takes a long time to educate & politically-minded administration in the simple rules of industrial man- sgement. Also, it costs the Ameri- can people a good deal of § money. ‘The announce- ment of the new setup whereby the War Pro- duction Board takes over the Office of Produc- tion Manage- ment would be received with greater enthusi- asm if it were not for the fact David Lawrence. | that the detision to delegate to one | man rather broad powers is en- veloped in the same sort of vague assurafices that were given when the O. P. M. was established. Donald Nelson, the new produc- tion chief, has reshuffied the agen- cies and bureaus of O. P. M. and kept certain important personnel and functions. The only major change is that the firm of Knudsen and Hillman, which President Roosevelt told the press on January 7, 1041, was just like a law firm and ‘would function just like a partner- ship, suddenly Las been dissolved. Mr. Knudsen has been given three stars and the uniform of a lieu- tenant general and Sidney Hillman has been demoted from his post as co-chairman of O. P. M. to the posi- tion of subordinate to the new pro- duction chief. Recalls Birth of 0. P. M. Rereading the news dispatches of | Just about a year ago, one finds that Mr. Roosevelt read to the corre- spondents an executive order which he said gave all the authority that could be desired to make the Office of Production Management function effectively. He outlined exactly how production and purchases and prior- ities would be interrelated. He was asked if Mr. Hillman and Mr. Knud- #en were equals and how there could be effectiveness if responsibility were divided and neither one nor the other was boss. Mr. Roosevelt in- sisted it was a contingency that wasn't to be expected to arise and he continued with his analogy of a law firm. Going back further to informa- tion given the press shortly before the above, namely, on December 20, 1940, Mr. Roosevelt said thaf, the elements of production .and labor and purchasing could not be com- biped in the same person and that amateurs who talk aboit respon- sibility in one man prove their ignorance. Mr. Roosevelt has never had any experience himself in industrial management, but, like & good many persons who happen to lack that kind of experience, he thinks it is something he can pick up as he goes along. He learns fast and doubt- less if he were to be given the years of training needed to make a good production man himself, he would master it. But he does'nt happen to know production and he has never been willing to grant that produc- tion men should occupy important posts in his entourage. . ‘This, however, would seem to be eontradicted by the wonderful praise given Mr.' Knudsen when he was eased out of O. P. M. The fact is Mr. Knudsen is an excellent produc- tion man but a poor politician. He never had a chance. From the start he was given some one to watch over him with co-equal au- thority. Mr. Hillman quite natural- ly believes in the labor viewpoint. He is a labor union executive. But the President didn’t let Mr. Knud- sen have anything to say over labor matters or broad economic policies, and yet the House Naval Affairs Committee reported this week that strikes were the greatest single cause of delay to the defense pro- gram in 1941. Balked Labor. Only a fortnight ago Mr. Knud- sen ventured to say that the auto industry could not accept the C. I. O. plan to usurp the management function and that machine tools useful only for automobiles could not be converted into tools that could be used for airplanes. From the moment Mr. Knudsen balked labor his ouster was a foregone con- clusion. The New Deal spokesmen began sniping at Mr. Knudsen be- cause he didn't agree with the poli- ticians and, of course, he is no politician himself. Mr. Nelson has much more polit- ical sense. He is one of the few businessmen in the setup here who seems to be liked by the New Dealers. Already there is talk in New Deal quarters of how there ought to be a labor ministrv sepa- rate from Mr. Nelson's supervision. As a matter of fact, there happens to be » cabinet post known as Sec- retary of Labor, but this is not occupied by any one who has been Influential in the labor movement. The reason why efficient men are driven out of Washington is be- cause they are not politically |’ minded. And the reason why it takes several executive orders and ® continued reshuffling of personnel and agencies to get some sort of central responsibility is that Mr. Roosevelt constantly compromises and tries to keep from offending THE EVENING STAR, WASHINGTON, D. C, THURSDAY, JANIJ:ARY 22, 1942. The Political Mill Proposal to Tax Income From State and Municipal Bonds Expected to Meet Strong Resistance By GOULD LINCOLN. The Treasury Department and Congress are about to tackle a huge job—the levying of addi- tional taxes to produce the de- sired $7,000,000,000 to help meet the war program costs. The de- partment has yet to submit its recommendations to the House Ways and Means Committee— but it hopes to do so around February 1. In the meantime, in confer- ence with the ranking members of that committee and of the Senate Finance Committee, the Treasury officials have outlined a number of proposals for taxa- tion. Among them a proposal that the Federal Government seek approximately $300,000,000 in revenue by taxing the income of all State and municipal bonds. These securities have been exempt from Federal taxation since the beginning of the Gov- ernment. And by the same token, Federal securities have never been subjected to State taxation. The theory, a constitutional theory, by which these gecurities issued by the States and munici- palities on the one hand and by the Federal Government on the other have been mutually exempt from taxation rests on the fact that there is dual sovereignty. Constitutional lawyers have held in the past that one sovereignty cannot tax the securities of the other., Decisions of the present Su- preme Court of the United States, however, have led mem- bers of Congress to believe that & proposal to levy Federad taxes on the securities of the States and municipalities might be held constitutional. They point to the decision of the court hold- ing that the salaries of State officers are subject to Federal in- come taxes and, conversely, that the salaries of Federa] officials are subject to taxation by the States. Court Leaves Way Open. The court seemingly has left the way open for the levy of taxes by the Federal Government on State securities, and for taxes by the States on Federal securities. Furthermore, it .1s understood that the Treasury Department al- ready has obtained an opinion from its legal advisers—perhaps from the Attorney General— that the levy of such taxes is constitutional. In Congress there will be strong resistance to the proposal—if it is finally made—to tax the interest on State and municipal bonds, 6t whatever form these securities take. This will be so even if the Federal taxes are to be applied only to future issues of such se- curities. Should the proposal call for taxing the interest on all outstanding State and municipal issues, the opposition will be so strong, according to some of the members, that it will be impos- sible to put the legislation through Congress. The contention is made by the opponents of such taxation that the securities were sold with the distinct understanding they would be tax free. To break down such a contract, they say, would be entirely unfair to the purchasers. They contend that these securities are widely held by the people—that they are not held in large blocks by big monied interests, or by extremely wealthy individuals. Anyway, they intend to go the limit in their opposition to such a plan, The Federal Government, how- ever, must find more revenue. ‘The exigencles of the war and its tremendous costs are given as the reason for levying on incomes of the people from whatever source they may come. The State and municipal securities, interest bearing, total today somewhere between $19,000,000,000 and $20,- 000,000,000. This is really a great block of wealth, however, which 1s free of taxation by the Federal Government. Unless the tax is made to cover securities already issued—the chance of obtaining any appreciable revenue from the Pplan is slight indeed. States and municipalities are not putting out many new issues of securities these days. On the contrary, it is said that the total amount of such securities is shrinking. A preliminary statement covering long time interest bearing State and municipal securities, now be- ing prepared puts the total at $19,817,269,000. Federal bonds—Treasury bonds —outstanding as of December 31, 1941 totaled $33,367,393200. The interest on the old issues, prior to March, 1941, are subject to surtaxes but not to the normal income tax. The newer issues, in some cases, are subject to the normal tax. If the Treasury proposes to levy taxes on the outstanding State and municipal bond inter- est, there seems no good- reason why it should not go the whole way and obtain as much revenue as possible from the interest on all Pederal securities, via the normal income tax rate as well as the surtaxes. Should any such program as that outlined go through, the States may under- take to levy taxes on the interest on Federal securities through their own income tax laws. Merely a Suggestion. It was emphasized by those who have heard the Treasury of- ficials that the suggestion of a tax on these State and municipal bonds is still merely a suggestion —or it was when it was put forth in recent conferences. What the detalls of the plan would be has not been disclosed. However, $300,000,000 is a large item of new revenue. It may well be that the administration will seek to tap this source. If it does not, it will have to find some substitute. = The argument has been ad- vanced often that income from any source should be taxable— that neither in Federal securities nor in State or municipal securi- ties should wealth find a hiding place,-an escape from the burden placed upon other wealth. It sounds reasonable, although the theory in the past regarding Gov- ernment securities has been that to make them tax exempt makes them more salable and helps to bolster the credit of the Govern- ment, Btate or Federal. Today, the need for revenue is so great, however, that all such reasons may well lose weight. The Government has engaged in the sale of United States sav- ings bonds, Defense savings bonds and Defense stamps, which may be converted into bonds. The interest on such bonds will fall under the Federal income tax— as presumably will all other is- sues of the Federal Government. It had sold $3,616,088,909 United States savings bonds as of De- cember 31, 1041, and $2,935 562,000 Defénse savings bonds from May 1, 1040, to January 18, 1942. De- fense stamps, according to re- ports from the Post Office De- partment—they are sold at post offices—have reached approxi- mately $57,388,000. Thers are THI' opinions of the writers on this page are their own, not necessqrily The Star’s. Such opinfons are presented in The Star’s effort to give all sides of questions of interest to its readers, although such opinions may be contradictory among themselves and directly opposed to The Star’s. Counterattacks Vital Saving of Singapore May Depend on Action By Sea and Land, Eliot Points Out By MAJ. GEORGE FIELDING ELIOT. ‘The continuing British with- drawals on the Malay Peninsula before Japanese pressure are caus- ing great disquiet, not only in London but elsewhere — and particularly in § Australia — with regard to the safety of the base at Singa- {! pore, on the pos- session of which the outcome of the initial phase of the war in the Pacific hinges. It must be ad- mitted that so far the British Mal. G. Fielding Eliet. have shown no sign of being able to | stop the Japanese advance. They have delayed it, but they have not been able to make a determined stand. Now the Australian Corps has been put in, at least in part, and still the Japanese advance con- tinues. It is, of course, to be sup- posed that the British have pre- pared a powerful defensive position, well disposed in depth, covering the tip of the peninsula, and that at this point they are ready to make a stand and will be able to do so. ‘This supposition rests on these factors: Such a defensive position, properly organized, would be able to put an end to the infiltration tactics of the | | the Japanese gain ground in this Japanese, wh!ch_ have gained them so much ground in the jungles of | | strong that the British forces in Northern Malaya. Its flanks, and the seacoast be- | hind them, would be within the radius of action of coastal motor- boats operating out of Singapore, which, boldly employed and properly | co-ordinated with aircraft and shore patrols, should be able to stop Jap- anese landings from sampans and junks behind the British lines. Would Improve Communications. Good communications to all parts of the front from Singapore would be available. The shorter the line, the more powerful the defense can be made, hence the advantage in making a stand as the peninsula narrows to- ward its end—always provided that the Japanese artiilery be not allowed to get within range of the great naval base. Also, the longer the Japanese lines of communication, the greater amount of effort they will have to expand to keep their | fighting forces supplied. There is, therefore, occasion for great concern over the fate of Singa- pore, but no reason to give ugth. base as lost—not yet. In the'end, its fate depends on something other than s stout defense on the pen- suls. Gen. MacArthur and his men have shown that Japanese attacks also Series G of Defense bonds, which are sold at par, and which are outstanding in the amount of $1,182,751,000. ¢ ‘These are large sums of money —all will be used for the upkeep of the Government and the prose- cution of the war. The American ‘people have come to realise, how- ever, that additional taxes are imperative, time. ‘Tobruk has slready demon- strated what British, Australian and Indian troops can do in that way, especially in a fortress which can be supplied from the sea, as Singapore can be. i Attack Necessary. But mere static defense, even if temporarily and locally successful, cannot be permanently so. Tobruk, in the end, was saved when the Axis armies were swept out of Cyrenaica by an attack by superior land and air forces. Singapore will be saved when the Japanese forces are swept out of Malaya, and that seems hardly possible by any advance from Singapore itself. Rather, the even- tual relief of the base is a matter of attack directed against the far-flung Japanese lines of commuhication, both those by land down the Malay Peninsula from Thailand and Indo- China, and by those by sea to ports on the east coast of the peninsula. The land communications are the least important of the twé. They can be attacked only from Burma, and some Japanese uneasiness as to the possibility of such attack is shown by Japanese thrusts into Burma, which have given them pos- session of the airports at Victoris Point, Bakpyin and Tavoy in South- ern Burma. None of these places has any communication with Burma proper by road or rail. More serious is the indication of & Japanese ad- vance on Moulmein, an important town which is connected by road and by rail with Rangoon. Should sector, the suggestion would be very Burme are far weaker than has been generally supposed. On the other hand, should & British attack develop, from Moulmein or farther north, it might be of great strategic importance, for it would tend to lessen the Japanese pressure on Singapore and the farther it went, the more it would tend to become an assault on the Japanese bases and rear organizatiods in the Malay Peninsuls itself, It must, however, be admitted that the Japanese oc- cupation of Tavoy is particulariy discouraging to such hopes, Achilles Heel for Saps. ‘The maritime communications of the Japanese forces in the South China Sea really form the Achilles | heel of the whole Japanese effort against Singapore. That effort would have collapsed to a certainty if the Japanese air force had not been able to sink the Prince of Wales and Re- pulse, which were sent to Singapore for the very purpose of making ex- tensive Japanese landings impossible unless the Japanese were willing to risk their main battle fleet 3,000 miles from a home base. The pres- ence of other Allied battleships in the South China Sea would have the same effect, but the problem of giv- ing them fighter protection against bombing attacks must be faced. This means tying them to the radius of action of shore-based fighters, or else using aircraft carriers, or else doing what the Germans are trying to do at Malta to protect their convoys—smothering the Japanese bombardment bases under heavy and continuous bombing attacks of our own. It is certain that risks must be taken if the Japanese are to be checked. Probably enterprises will have to be undertaken with less force than would seem desirable, and under eonditions which com- This Changing World Japanese Are Preparing for All-Out Offensive Against India and Australia By CONSTANTINE BROWN. The battering of Nazl lines on the Russian front and the victo- ries of the SBoviet forces seem to have no effect on the Japanése activities in the Far East. As the enemy draws nearer to Singspore and the Netherlands Indies his strategy becomes more menacing to the United Nations. It is evident that the Nipponese forces feel ‘certain Singapore is in the bag and are making prep- arations for an all-out offensive against Indis and Australia. Such an attempt would have seemsd fantastic & few months ago, but the defenders of Burma and the government of Australis realize that it is feasible, heavily assailing the last lines defending Singapore and are at- tempting to “soften” the Dutch defenses in Java and Sumatra, other enemy forces are making feints against Burma and pre- paring to conquer the islands which lie between the Philippines and Australia for use later in the attack on Australia. It is true that operations against Australia would have the great disadvantage of further thining the Japs’ lines of som- munications. But if no superior American, British or Australian army or air force is concentrated in that region in the near future, the extension of lines will in- volve little risk, especially if Singapore becomes a Japanese naval base. Danger Not Minimized. The danger to Burma, and eventually India, is not minim- ized in official Washington quar- ters. Much of the Allied strat- egy in the Far East depends on the fighting power of the Chi- nese. This, in turn, depends ex- clusively on the amount of war material they can obtain from the United States and Great Btitain over the only remaining line of communication with the outside world—the Burma road. The,Chinese have great mili- tary potential. They possess al- most endless resources of men who don’t need heavy artillery, heavy tanks or bombers. All they expect from us is small arms, artillery and fighter planes. ‘The industrial resources of their country are not sufficient for the establishment of important fac- tories in unoccupled territory. The few plants which exist now are barely sufficient to equip a few hundred thousand Chinese fighting & defensive Dbattle. Hence, the occupation of Ran- goon and the severance of com- municatiods between the Indian Ocean and China would be s fatal blow to Gen. Chiang Kai- shek. The recent movement of Thal- Japanese forces into Burma is ominous. As far as can be gathered the British are not well prepared to meet a serious Japa- nese attack there and the pop- ulation of Burma seegis at least partially hostile to the British. ‘The Japanese fifth column has been effectively at work through- out India, and particularly in Burma, for more than a decade. It has paved the way for the 'striking forces while responsible suthorities did not dare take any determined action against its in- trigues Yor fear of offending the “friendly” Tokio government. Thus, today, while Jap forces are throwing their weight in an “ all-out attack against the Singa- pore border, other troops aided by the 60,000 Thailanders who are equipped with planes which the United States Government allowed them to purchase until about 12 rhonths ago, are moving slowly into Burma, Operations Risky on Paper. In the Western Pacific Japa- nese forces, benefitting from their air supremacy, are attacking and attempting to conquer the poor- ly-defended islands between Celebes and Australia. On paper the Japanese operations appear risky. They are a long,way from their bases and sending trans- ports such distances appears foolhardy. But the Nipponese . general staff apparently believes the United Nations, fighting .a desperate battle in the China Sea, have not enough men and airplanes to interfere effectively with the Jap landing forces. Japanese transports, escorted by light naval forces and pro- tected by long-range planes, are endeavoring to teke these islands and transform them into ef- fective naval, air and military bases whence they could threaten Australia after the show in the China Sea is over. The Australian government is reported to be gravely concerned over the situation which brings the war closer to its doorstep than any pessimist ever imagined. In military quarters it is felt that the Japanese are taking a very long chance. But they are drunk with success and seem to think they will be at the gates of Australia long before America’s war production is in full swing. The situation, from the Aus- tralian point of view, demands drastic and immediate measures. It is felt in Canberra, as well as many quarters in Washington, that regardless of whether we appear to play into the hands of Hitler, the principal effort of the United Nations must be directed toward the Pacific. ‘This might give the Fuehrer a better chance in Europe or the Mediterranean, although both those fronts are well provided with defensive war materials and enough men to meet the Nazl onslaught. But it is repeatedly pointed out that whatever set- backs the Nazi suffer on their fronts, if the Japanese succeed in bringing all their plans to fru- ition in the Pacific, the war is going to be much longer and dangerous for the United Nations than most people believe. manders of task forces will hardly | ing of Singapore is worth very con- | describe as ideal. Only a certain | siderable risks, for the results of m‘x proportion of the total available|10ss could not be otherwise than Allied fighting strength can be al- lotted to the Pacific; but the sav- us. (Copryright, 1042, by New York Tribune, Ine.) inSouth America’sMellowFlavorZone High up on the fertile sun-drenched slopes of the Mellow Flavor Zone grow the world’s finest coffeee . . . unequalled in flavor and richness. To other choice .coffees, Beech-Nut adds an extrg helping of those precious mountain- beans . . . to give you grown coffee that's always full-flavored, rich, mellow...in one word, perfect! It's easier to make fine coffee with Beech-Nut Because Beech-Nut'’s extra fragrance and extra flavor give you delicious coffee every time, Start yourday right with Beech-Nut Coffee. It puts the top on the morning! Beech-Nut COFFEE coffee . . . at the | bad-weather editor. | first man in the office and the last | man to leave. | gTasp upon any contrariness of the McLemore— War Halts Feud Of Tourist States By HENRY McLEMORE. PALM BEACH, Fla—I am still shaking what is left of my gorgeous Titlan locks in amazement. It doesn’t seem possible, this s change that has come over Flori- da since the outbreak of the war. Floridians have taken to na- tional unity with such a gzeal that they now cher- ish Californis and openly ad- mit their respect and admiration for the State Henry McLemors. they have al- ways considered an arch enemy. Plans are under way to have Florida school children taught that there are really 48 States in the Union, not just 47 and a lot of cold, partially inhabited wasteland along the Pacific Coast, quaintly known as California. Californians visiting Florida now no longer have to wear an identify- ing button inscribed “I am a Cali- fornian” in order to warn Floridians that an enemy is in their midst. There was a time when, if a Call- fornia grapefruit managed to get into this State, the Floridian into whose hands it fell immediately rushed it to a bathtub and sub- merged it in water, considering it to be just as dangerous as an infernal machine. I have heard Filoridians swear that they could hear a sinister tick-tick-tick in all California fruit that got into their State. Florida children were told that any plece of fruit bearing the label “Sunkist” would uncur] their hair, stunt their | growth and make them falr game | for the bogey man. * K x % But those days are past. Call- fornia’s wartime hardships. have touched Florida's heart. I have seen not one, but a dozen, | editorials in Florida papers express- ing sympathy for its sister tourist- trade State which, because of its geographical position, had to cur- tail so seriously its winter program. Each and every one of the edi- torials warned against any gloating. The tenor of them all was that Flor- ida welcomed a fair fight for the sun and ocean patronage, but in times like these the bigger quarrel made the little one quite unimportant. Florida doesn't even regret the wartime restriction that prohibits | the publishing of Califofnia weather reports. Until the war came along every Florida paper had a California He was the It was his duty to elements in California and whip it to a front-page story. Of course, alifornia papers had a similar edi- tor and it was interesting to watch what the boys could do with simple weather reports. They could take a morning shower and dress it up until it sounded like s monsoon. Give them a freshening southeast breese and they ran up hurricane signals. The Chamber of Commerce litera- ture was even worse. They fired upon one another vis the mimeo- graph with never ceasing fury. k% It we hadn't gone to war against the Axis powers there is a good chance that Sacramento and Talla- hassee would have broken off diplo- matic @relations and sent their Chamber of Commerce forces into battle. It would have been a viclous battle. 8an Diego's crack “Sunkist” orange brigade would have driven a salient into Orlando’s “Sealdsweet” tan- gerine fortifications. Sanford and Salinas would have come to grips with celery stalks, Miam! Beach's bathing beauties and Malibu Beach's bathing beauties would have had a hair-pulling eon= test on a 3-mile front. Weather men would have had %o close quarters and hurl temperatures and average mean rainfall at one another. But national unity ended all of that. Of course, I only know the Florida side of the cessation of hostilities, but next week I have the other side, because I am leaving for Cali- fornia. I shall do my best to per- manently cement relations between the two States, even if I have to get plastered to do it. (Distributed by McNausht Syndieate, Ine.) Mussey Tent Members To Attend Reception Members of the Ellen Spencer Mussey Tent No. 1, of the Daughters of Union Veterans of the Civil War, will attend the reception, memorial services and installation of officers of the Department of Potomac, Ladies of the G. A. R,, at the Wash- ington Hotel at 6:30 p.m. Sunday. The tent has voted a donation to the Red Cross and formed a Red Cross unit, to be under the direction of Mrs. Rosalie Shelton. FRESHEN UP YOUR HOME! Low Easy Terms PAYMENTS START IN MARCH our F. A [ REMODELING FROM BASEMENT TO ATTIO o Painting & o Enclosed Po SUPERIOR S TRUCTION