What To Do With The Surplus

Dr. LL. C. Adams, professor of politi cal economy in the University, consid ered the question of.'our nationp.l surplu at the meeting of the Political Science Associaiion last Friday evening. Afte showing that it would be extravagan to purchase tlie bonds of the govern ment at market prices, to distribute i among the states or extend the f unc tions of the governnienfc in a vmy no in harmony with our institutions while to begin internal improvements wonld be dangerous until Congress hac shown its .ability to control the question of reven ue He next answered the question " how shall the revenue be reduced." He said this was a question of finalice, altbough it would not be wise to ignore the industrial interests of the country. The guiding principies in reformmg tbe revenue are fonnd inthe fact that the Treasury of the Federal Government should at all times be prepared to meet the exigencies of war. Twice in the past history of the nation has such an exigency found the government poorly prepared and the serious disasters vvhich followed should serve as a warning to the present Congrass. A rev6nue system is prepared to meet an emergency when it rests on a broad basis of taxation anii the rate imposed is below the maximum revenue rate. Undersuchcircumstancesthe tíscal system would be elastic. The flrst conclusión to be drawn from this is that the internal revenue cannot be safely abandoned. The experience of this government has shown that reliance cannot be placed on cjstom duties in time of war. But though these taxes cannot be abandoned it does not follow that the rate wtich they now pay should also be retained. Indeed if they are to serve the purpose described the rates must be reduced. The American protective system differs from that ofauy Jothef people in that it taxes both raw material and manufacturad producís. Such a policy defeats its own p'nrposr . The second step in revenue reform, therefore, should be a liberal extensión of the f ree list. It remains onlv to suggest the last step in revenue reduction. The American people would probably be surprised to learn how la rere a line of industries could profitably compete with foreign producers i f only f ree access to material were granted. The third step in revenue reform, therefore, consists in acljiHting the rates on manufactured goode to the new conditions established by the extensión of the free list. These rates could then be reduced, for the most part, to the maximum revenue rate; and when this is accomplishwl the adjustmeut of income to expenditure is a comparatively easy matter.