26 MISC. PUBLICATION 570, U. S. DEPT. OF AGRICULTURE 



it would lessen employment or prevent an increase in production. To 

 levy taxes during periods of unemployment for the purpose of paying 

 off the debt is to encourage deflation and more unemployment. 



All of these considerations point to the necessity of maintaining 

 low interest rates and a high level of national income so as to preclude 

 the possibility of the debt becoming a serious problem. A general 

 policy of retiring the debt only when employment is high and prices 

 show a tendency to rise, and of borrowing to finance Government 

 expenditures when unemployment begins to appear, may not result 

 in any increase in the debt over a long period. But even if it does, 

 the real significance of such an increase would depend upon what 

 happens to national income, production, and employment at the 

 same time. One thing is certain : If the national income is permitted 

 to fall to half or less than half its present level, the debt will be 

 a vastly greater problem than a much larger debt would be if national 

 income could be maintained at a full-employment level. The demon- 

 strated productive capacity of this country is clearly great enough 

 to support the present debt of the Federal Government, together 

 with any reasonable expansion of that debt in the interest of keeping 

 the economy producing at capacity. 



SUMMARY 



Farmers, workers, businessmen, — all elements of the population — 

 have vital stakes in the maintenance of a full-employment economy 

 after the war. Agricultural adjustment problems will be manage- 

 able if jobs are available at good wages for the workers who will 

 be seeking and needing them, but these problems will become increas- 

 ingly difficult as less favorable employment conditions are permitted 

 to develop and continue. 



During the period of transition from a wartime to a peacetime 

 economy, the way in which the reconversion problems are handled 

 will greatly affect the prospects for full employment later. The goal 

 during the transition should be a minimum of delay between the 

 cancellation of war contracts and the manufacture of civilian goods. 



If, in the years beyond the transition, full employment is to be 

 achieved for an increasing labor force under an improving technology, 

 the buying power of that labor force must expand with production. 

 Farm purchasing power must be kept at high levels. Government 

 domestic policies for the maintenance of full employment should 

 be directed first and last to create the kind of economic relations that 

 will enable private enterprise to spend sufficiently to maintain full 

 employment. To the extent that efforts in this direction fail, Govern- 

 ment spending should be used as a supplement to private spending. 



Government can aid private enterprise to maintain full employ- 

 ment in many ways. One of these is to revise the tax system by 

 removing any unnecessary impediments to consumption and invest- 

 ment. The more obvious type of appropriate action in this field would 

 include the elimination of the excess-profits tax. When unemploy- 

 ment threatens, the reduction of sales taxes and other taxes on con- 

 sumption would tend to support purchasing power and maintain 

 employment. A tax system that would rely mainly on the individual 

 income tax and estate taxes would at the same time provide the least 

 impediment to private employment. 



