New Deal Paradox

Franklin Roosevelt's anti-inflation program produced a neat socio-political paradox last week. It turned out that the New Deal had taken control over all wages and salaries in the land, had set a $25,000 ceiling on earned income--but had let the nation's coupon clippers go scot free. It was enough to make a New Dealer weep.

In the new Price Control Act, Economic Czar James F. Byrnes found enough power to freeze salaries: henceforth employers will have to ask WLB or the Treasury for permission to give raises--and will have to prove that the increases will not affect the prices of their goods. There are a few exceptions: 1) raises accompanying bona fide promotions; 2) Merit increases; 3) regular raises based on term of service; 4) extra pay under incentive plans to increase production. But no employer can now lift the salaries of his stenographers from $20 to $40 a week just to keep them from moving to a firm which has an established $40 scale. No employe can expect a raise just to help pay for a new baby.

Jimmy Byrnes also figured he had enough power to set the $25,000 salary ceiling, first suggested by C.I.O., adopted by the President in his April anti-inflation speech. Henceforth, no firm can pay its executives more than $67,200 a year, which would leave them $25,000 after Federal income taxes. A high-salaried man with large insurance or charity obligations may get some allowances--but only if he can prove that he has no other income to meet them, and could not liquidate his investments without loss. This means that no man who works for a living will get even moderately wealthy during the war. Out of the $25,000 must come State income taxes. Men used to high salaries will have to trim their sails quickly.

But nowhere could Jimmy Byrnes find the power to apply his controls to the leisure classes. Thus while business executives, cinema stars and authors who work for a living are limited to $25,000, those who let the money roll in from investments or real estate can go merrily on their way.

The Administration hopes to close this loophole through further legislation, but the chances look slim. Congress has once rejected the $25,000 ceiling; many a Congressman thinks that the whole idea is 99% social theory and 1% anti-inflation or revenue measure. Pertinent statistics: only 20-24,000 Americans make more than $67,200 a year before Federal taxes; the Treasury once estimated that it would raise only $180,000,000 by confiscating everything above $25,000. This is not quite enough to pay for one day of the war.

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