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Frank Demby

Treasury Plans War Cut in Wages!

Wants Labor To Pay for Boss War by ‘Savings’

(November 1941)

From Labor Action, Vol. 5 No. 45, 10 November 1941, pp. 1 & 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The Treasury Department has announced that before the end of the year a comprehensive plan will be introduced into Congress for cutting down the “excess” purchasing power of the American masses. The central feature of this “anti-inflationary” program will be a tremendous increase in social security payroll taxes. The figure of 5 per cent has been publicly mentioned.

At present, employee members of the old age pension system automatically have 1 per cent of their wage deducted from their pay envelopes. This sum, together with the employer’s contribution an equal sum for each worker, goes toward the creation of a survivor’s insurance fund. When a worker reaches the age of 65 he is then entitled to certain benefit payments for the rest of his life.

This system, known as social security, was originally designed to solve the problem of old age insecurity. It is not to be confused with another aspect of the same law – unemployment insurance – which operates through the states. In spite of numerous flaws and injustices, social security was generally accepted as a step in the right direction. Now, however, under the pressure of tremendous war expenditures, this system is to be perverted into a means for making the masses pay for the boss war, lowering the standard of living of the average worker and, ultimately, destroying the old age pension system.

Just exactly what changes are being discussed by those entrusted with the safeguarding of our money is difficult to say, as it doesn’t seem to occur to Mr. Morgenthau and Mr. Roosevelt that the workers ARE interested in the fate of their own pension system, and would like to have a public discussion of any proposals that are being made. It has been rumored, for example, that the social security system is to be broadened to include many not now covered, as farmers and government employees. If the “contribution” of the worker is to be increased to 5 per cent (and this apparently is the smallest figure under consideration), will the contribution of the employer also be increased to 5 per cent? Absolute silence from Treasury officials! If the workers contribute five times as much as previously, will their benefits increase by five times? No answer! Will the benefits increase at all? Still no answer, but one detects an embarrassed silence such as is usually present when you apprehend a person in the act of doing something wrong.

Above all, what relevance has it to the needs of the working class? There are now millions upon millions of dollars in the social security fund, of which about 90 per cent has been “borrowed” by the government for war purposes. The new proposal is therefore obviously designed not to safeguard the security of the worker but to get more money for the bosses’ war!

The bosses undoubtedly figure that this subject is too “complicated” for the average worker to understand. It involves such matters as inflation, taxation and finance. The worker, in the mind of the boss, is too dumb to discuss these matters; he should merely concern himself with sweating, toiling and bleeding so that the bosses can make more profits, and he should leave these mysterious matters to the representatives of the bosses, like Mr. Morgenthau, who will take care of everything.

Suppose, however, that somebody proposed that you take a 5 per cent wage cut. You would want to discuss it, wouldn’t you, especially with the wife complaining that the cost of everything is going sky-high? And even if you were told that by taking a 5 per cent wage cut, you would be stopping prices from going up, we are absolutely confident that the workers would want to discuss such a proposal. And yet, this, in reality, is what is being proposed. Of course, the bosses don’t say that this is a wage cut. They will tell you that you will be saving your money and that you will get it back when the “emergency” is over, when you’ll need it.

The Keynes Plan

This is the line that the bosses of England are handing out to the British workers. There, a famous economist by the name of John Maynard Keynes, who is concerned with the problem of making capitalism work, proposed at the beginning of the war his “deferred savings” plan. The trouble, says Mr. Keynes, is that under a war economy less and less of the necessities of life are produced. The war needs the factories and the machines, the raw materials and the labor. So we are forced to cut down on production of consumer goods. At the same time, more workers are being employed in the war industries. This means more money in the hands of the workers. In other words, the demand for consumer goods is, increasing at the same time that the supply is being reduced. Such a situation must result in rising prices – that is, in inflation.

This is bad, so the only solution, according to Mr. Keynes, is to reduce the demand of the workers for the necessities of life. Let 5 per cent of the worker’s wage be deducted from his payroll. This will be a sort of forced savings. The government can use this money to finance the cost of the war. Then, when the war is over, the money which the worker loaned the government will be returned to him, and there will be a big demand so that manufacturers will find it profitable to produce consumer goods once again. England has adopted the Keynes “deferred savings” plan. As a reward, Mr. Keynes was just elected as one of the directors of the Bank of England.

Mr. Keynes made a trip to the United States earlier this year. At that time, it was reported that he had discussed his plan with Treasury officials. Apparently, we are now to receive the fruits of this visit. For, it should be obvious that an increase of the social security tax to 5 per cent is merely a different form of carrying out the same basic idea.

At the same time that Mr. Morgenthau made his announcement in Washington, a small item in the financial section of the newspapers announced that Dr. Fritz Reinhardt, assistant Finance Minister of Germany, had proposed to the German workers the development of “iron savings accounts.” These accounts cannot be touched until one year after the war is over. The amount that an individual worker can save is limited and is tax exempt. We do not know if Mr. Keynes made a trip to Berlin in order to expound his theories to the Nazis, but we do know that the Nazis have adopted and perfected his theories. We also know that if the German system is compulsory savings, as the American press was quick to point out, then Mr. Morgenthau’s proposal is also compulsory savings, in spite of his denial.

Lowers Living Standard

We object to the proposal of increased social security taxes because it is unnecessary, because it will not prevent inflation and because, ultimately, it will wreck the social security system. It is unnecessary because a genuine, democratic approach to the problem of preventing inflation would start with a real 100 PER CENT EXCESS PROFITS TAX. If it is not profitable to raise prices (because the extra profits will be taken away through taxes), the biggest incentive that the bosses have to raise prices will be destroyed. Further, this American adaptation of the Keynes scheme will not prevent inflation, unless at the same time, rigid totalitarian controls are introduced. By themselves, forced savings can only mean a LOWER STANDARD OF LIVING and will throw the main burden of financing the war onto the backs of the masses.

Finally, the question must be asked: where will the government get the money to pay back these forced savings, once the war is over? The answer is that it can’t unless it pays back in inflated dollars, which would mean a worthless currency. We shall return again to this question. Meanwhile let’s hear from our readers and let every worker raise the problem in his trade union!

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