Today in Washington

Washington, March 5, 1934.

WHAT has happened in the first year of the new deal may be historically interesting but practically it is significant only insofar as it tells us what is going to happen in the second year, and maybe the third and thereafter.

Indeed, it is important to observe what is happening, this very month, this very week. For it may be said some day that the month of March, 1934, marked a departure in policy almost as far-teaching as the steps of one year ago.

For America is swinging to a more dominant position in world affairs. For several months this has seemed unwise to the Administration. Getting one's own house in order first was the paramount obligation. Now that we have in a sense integrated our domestic position and discovered incidentally that economic isolation is dangerous as well as of doubtful permanence, the United States under the inspiring leadership of its president is reaching out to make world recovery more of an influence on our domestic problems than the new dealers have been willing to concede in the last year.

It has Herbert Hoover's philosophy that American recovery waited on World recovery. It was Franklin Roosevelt's answer that American recovery will produce World recovery, or at any rate that a stronger domestic economy would fit us for the trade enlargements that would come out of World recovery.

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The President has his hardest battle ahead. He wants power to negotiate tariffs. This is a wrench which Congress is not happy to see applied to the traditional control of tariffs by the Legislative body. But it is none the less desirable. If it is admitted that we could not have made progress during the first year of the New Deal without executive authority to manage the dollar, to fix the price of gold, to reorganize the banks, to fix wages and working rules, then it is illogical to deny Mr. Roosevelt the one major power he now seeks, which may bring more results than all the other delegated powers put together.

It is equally old-fashioned to oppose giving Mr. Roosevelt by the tariff-making authority the power of life and death over the part of American business and industry which has been dependent on a protective tariff. After all, hasn't the NRA the power of life and death in fixing the wages and hence the selling costs of American business and industry in domestic trade? Once the principle of a "planned economy" is conceded, the right to negotiate tariff agreements with other nations and to say what particular businesses must either become more efficient or pursue some other line of industrial endeavor is also admitted.

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But the making of reciprocity agreements is not alone a matter of improving the economic volume of this country. It is a question, too, of holding the prices down for the consumer. Business will be put on its mettle as never before: the theory of competitive tariffs, namely that American producers will be expected to compete with foreign products and will not be always given what has amounted hitherto to the protection of an embargo, will come into its own once more.

The principal difficulty will arise with union; labor. The latter have always fought side by side with the projectionists. Many of the NRA codes could not have stood higher wage levels had it not been for the assurance that the embargo power would be used, if necessary, to keep out products manufactured in countries where lower wages and, by comparison, lower standards of living were in effect.

The solution which will be sought will be in the direction of discriminating between those industries which must have continued protection and those in which competition from abroad will be looked upon as benefiting the American consumer. Temporarily it may throw some businesses out of gear and add to unemployment, but the Roosevelt Administration has nearly a billion dollars a year to spend on relief and doles and on transporting populations around from urban to rural areas, or vice versa, depending on the setting up of new industries, perhaps, or new services.

So the dislocation of a few businesses or industries in this or that section is not troubling the Administration at the moment. It is convinced that planned economy, with its surgical operations, is the maximum good for the maximum number. The people wanted a new deal--they are getting it. And hence painful readjustments must be left to the wisdom of the administration, which is just as anxious as anybody to find the right answer.

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Meanwhile, it is essential, that the steps about to be taken shall be examined so that by public criticism and constant study of the facts mistakes may be pointed out before it is too late to remedy them. The NRA meeting this week, together with the sessions last week, marks a milestone in the history of American business. The code authority members here were chosen by industry itself. Many will protest against tariff changes. Members of Congress from districts that have had and need protective tariffs will declaim and conscientiously object to change. The vote will show a split in the Democratic as well as the Republican parties, but Mr. Roosevelt will win in the end.

For if the first year of the new deal has proved beyond any doubt one basic principle of economic law, it is that living standards cannot be abruptly reduced to square with the amount of purchasing power available. To put it another way, if there is only $40,000,000,000 worth of domestic trade, the wages that come out of that sum may be enough to pass around so that every individual gets enough to live on. But it makes no provision for payment of mortgage interest on one's home or for other debts, and, carried to its logical conclusion, makes everybody come down to the standard of living of 1890.

The other way, namely finding an increased volume of business by getting some business abroad, permits payment of high wages and hence satisfactory standards of living, and to reach that objective and make the necessary readjustments is the task of the second year of the new deal and perhaps the years thereafter too.