to pay taxes every year. The taxes are collected, if you please, at the source, and instead of describing them as tax-exempt securities, they ought to be described as the only kind of securities which inevitably pay taxes to Government. When ordinary money is 6 per cent, money that pays taxes, the State can borrow money at 4 per cent because the bonds are not taxed. Every year when the interest comes due the man who holds the securities has discounted his rate of interest to the municipality or to the State to the extent of 2 per cent. I am using that for illustrative purposes. It is not always 2 per cent.

"In other words, if the State of Pennsylvania issued $100,000,000 of bonds and sold them at 6 per cent because they are taxable, it must collect $6,000,000 from its taxpayers every year to pay the interest upon those bonds. But if it can sell them at 4 per cent, it collects only $4,000,000 every year and $2,000,000 is left in the pockets of the taxpayers of the State. In other words, the State is in exactly the same position as though it had sold its bonds at 6 per cent and then had collected $2,000,000 of taxes. The bonds bear the burden of taxation in that way."

State Sovereignty at Stake

NSWERING Mr. Borah, Senator Reed, of Pennsylvania, gave states rights folks serious food for thought, when he said:

"I believe that even he will admit that it is competent for the people of the United States, by clear expression of their intent in the Constitution, even to abolish the States in their entirety. A constitutional amendment utterly abolishing the existence of the States would be within the power of the people of the Nation if they saw fit to adopt it."

In other words, if state sovereignty stands in the way of this feature of the Mellon plan, abolish the States.

did not enjoy. Anything that is going to overburden the States in this work, anything that is going to pile up interest upon the agricultural classes of the country, in my judgment, is too important a matter to be jeopardized in order that the Government may save a few dollars in taxes.

"Oh, Mr. President, there is in the country to-day a tremendous effort to prize up the rates of interest and to bring about those conditions that existed be fore we established governmental loan agencies to help agriculture, to return to conditions when the farmers of the West and the South, the farmers of the East and the North, if they needed money, had to mortgage their farms and pay from 10 to 12 per cent interest. The great investment banks, the great land mortgage companies in the country, are to the front in this movement to subject State bonds, municipal bonds, farm-loan bonds, and Government bonds to taxation in order that the rates of interest may be raised in the United States and that they may be able to lend out their private hoards at higher rates than they are now obtaining."

W

Getting at the Truth

WHY the present holders of tax-exempt securities approve the Mellon plan to stop further issues on that basis is here suggested by Frederick Juchhoff, Professor of Economics, American University, in an article quoted in the Congressional Record, in part as follows:

"A careful examination of the facts leaves some doubt as to whether those who are behind the propa ganda to tax all securities advocate this change because of a desire to force the wealthy to bear a just share of the burden of taxation, or whether it is perhaps in some cases from motives of self-interest. There are, more or less clearly defined, three distinct groups who would benefit very materially by the pas sage of the proposed amendment to tax all securities issued in the future.

"The first of these groups consists of the present holders of outstanding tax-exempt securities. This group is composed largely of private individuals and financial institutions, certain of whose funds are required by law to be invested in State or municipal securities now tax-exempt and not affected by the proposal to tax future issues.

"According to the admission of the Assistant Secretary of the Treasury, the market value of the present outstanding tax-exempt securities, amounting in round numbers to about $12,300,000,000, would be increased by the passage of the bill by oneeighth, or about $1,500,000,000.

"If the taxpayers are honest about making out their income-tax returns, it would take a good many years to pay into the Treasury of the United States in income taxes the sum of $1,500,000,000, as much as would in one instant be put into the pockets of those who own tax-exempt bonds."

Professor Juchhoff then discusses other selfishly interested groups:

"The second and third groups are composed of the farm-mortgage bankers and the public utilities. While the proposed change would not as immediately and directly increase the value of securities held by these groups as in the case of the first group, both groups would be greatly benefited because of the handicap which would be placed upon competing interests.

"The total amount of farm mortgages in the United States outstanding at the present time may be Conservatively estimated in round numbers at about $7,850,000,000. Of these loans $1,271,980,658 are carried by the Federal land banks and joint stock land banks, whose securities are free from taxation, and are made to the farmer at not to exceed 6 per cent interest, while the rates charged by others upon similar security range from 7 to 8 per cent and higher.

"These Federal farm loan banks and joint stock land banks exist under the Federal farm loan act, which became a law on July 17, 1916. The general purposes of this act were to lower and equalize interest rates on first-mortgage farm loans; to provide long-term loans with the privilege of repayment in installments through a long or short period of years, at the borrower's option; to assemble the farm credits of the nation to be used as security for money to be employed in farm development; to stimulate cooperative action among farmers; to make it easier for the landless to get land; and to provide safe and sound long-term investments for the thrifty.

"While all of these things have been accomplished in a general way, the operation of the banks organized under the act has made very serious inroads into the business of the dealers in farm mortgages

and investment bankers, who no longer enjoy an unrestricted monoply in the farm-loan field.

"Under the terms and conditions of the law the maximum rate of interest which may be charged by the banks organized thereunder is 6 per cent. These banks are financed by the issuance of bonds which are sold to the investing public at an interest rate of from 42 to 5 per cent, and while the rate which may be charged to the farmer can not exceed 6 per cent, it also can not exceed 1 per cent in excess of the interest paid on the bonds of the bank.

"The removal of the tax exemption on these bonds would make necessary an interest rate thereon of from 51% to 6 per cent. This would have the effect of either suspending the operation of the farm loan and joint-stock land banks entirely or a revision of the law which would permit an interest charge of not less than 612 to 7 per cent.

"The public utilities interests are primarily interested in restricting the issuance of tax-exempt securities by the municipalities and other public subdivisions of the several States. They are alarmed by the present tendency toward municipal operation and control of public utilities. They believe that many municipalities would hesitate to engage in private enterprises of a public nature if the interest rate of the securities issued by them to undertake such municipal operation is increased. To tax the securities of municipalities would tend to raise the necessary interest rates on such securities from the present average of about 4.20 per cent to 5.20 per cent, which would bring the rate to nearer that now paid by the public utilities, which is about 5.55 per cent."

YEAR ago there was talk of the Coolidge Myth.

A Today that "myth" is made to seem a reality:

He is America. He is Uncle Sam-fuzzy beaver, blue swallowtail, striped breeches 'n everything.

Twelve months ago he was only an accidental President, a "little wintry-faced, sandy-haired, freckled, colorless person" whom Congress delighted to humiliate. Many of those who had voted for him looked upon him as a political zero in a hundred billion dollar government.

Today he is the crew, the cook, the captain bold and the mate of the Ship of State. From the White House he rules over a subservient cabinet and is gradually and inexorably taming the administrative bureaus and commissions and teaching them to fetch and carry for him.

With none of the Roosevelt genius for dramatizing his plays, he gets his results by shifting the members of his cast until only those are on the stage who are willing to keep both eye and ear on his prompter's box.

Never has party organization been as complete and, withal, so simple. Mr. Butler, personal friend,

Senator and Chairman of the Republican National Committee, with the co-operation of Senators Smoot and Curtis, upper house organization manipulators, looks after Senate legislation and there is an almost equally efficient arrangement for taking care of the lower house. The department where tax legislation originates is presided over by a man after Mr. Coolidge's own heart. Mr. Mellon's idea of what should be proper tax adjustment fits his opinion like a hand in a glove. Mr. Hoover's attitude toward Business agrees in the crossing of every t and the dotting of each i with his own famous credo:

"We justify the greater and greater accumulation of capital because we believe that therefrom flows the support of all science, art, learning and the charities which minister to the humanities of life, all carrying their beneficent effects to the people as a whole."

The other cabinet members, as it is now constituted, if we except the blundering and unfortunate Wilbur, are useful, tractable fellows of the chief-clerk type of human rubber stamps. In completing the roster of department heads the President has shown considerable political acumen by selecting

safe men from the West and Middle West, thereby offsetting the charge that his was a New England administration.

Most of the rich metropolitan newspapers are believers in the Coolidge credo and the nominally Democratic journals aim blows at him only at infrequent intervals and then the hand that makes the pass is swathed in six-ounce gloves, so that safety from inimical public opinion seems assured.

From the Coolidge viewpoint the situation seems, by and large, to be one of those where the sun is in the heavens, everything is lovely and all's well with the world. But a small cloud, bigger that a woman's hand, has arisen on the political horizon. By a remarkable concatenation of Senatorial term expirations it happens that all of the twenty-five Senators whose seats are in jeopardy are men badly needed for the carrying out of the administration program for the December meeting of Congress. The lives of the wheelhorses of the majority organization in the Senate, as well as those of the ordinary beasts of burden, are at stake. Never has there been quite such a critical situation in a by-election in the history of either political party. On its outcome hangs the success or failure of many of the Coolidge policies.

And then, in addition to the possibility of disaster at the polls, there are other irritations, situations nearer at hand that have to be dealt with. The Federal Trade Commission, with its militant minority, has for some time past been a thorn in the side of the administration. While Thompson and Nugent have not been able to block the work which Commissioner Humphrey was expected to do for Big Business on the Commission, they have been able to gum the cards and nullify at least some of the plans of the bold and daring Humphrey. They have megaphoned from the housetops the results of every attempt at news suppression by the pro-monoply men on the Commission.

The most recent and probably the most flagrant bit of fact concealment of which the Trade Board Mussolini and his two reliable assistants, Messrs. Van Fleet and Hunt, have perpetrated was the whitewashing in secret of the big sugar combine with which Charles Beecher Warren was connected. When the facts are brought out on the floor of the Senate, as seems much more than likely, the President's plan to give Warren a cabinet seat may be thwarted. The cold facts presented in the dissent to the kalsomining of the sugar men shows that there is something with a noisome and fetid odor in the land of the Danes.

Mr. Humphrey was placed on the Commission for the specific and announced purpose of making it "conservative," but the best he has been able to report in the way of progress might have been put in

the words of the sailor who tried to drive the farmer's team:

"The larboard steer's on the starboard side; the starboard steer's on the larboard side; the jinny's fouled the riggin' an' we're all goin' hell'ards!"

Just now the White House Spokesman is even more put out at the course of the Shipping Board than he is at that of the Federal Trade Commission. Admiral Palmer has been ousted and the Spokesman claims that a member of the Board, who had been carefully picked and sworn to docility, kicked over the traces and assisted in the roughhousing of Palmer, the President's man. So now Mr. Coolidge is said to "believe that the efficiency of the Board has ended," that he will make an effort to abolish it and that he "wants its work turned over to a Cabinet member." All of which means that unless Congress prevents, Mr. Hoover will assume charge of another branch of the federal government.

Senator "Young Bob" La Follette was foreordained to a course of Senate hazing when his candidacy was announced. During the years of his apprenticeship, when he was his father's right hand man, he doubtless vicariously became inured to the sort of hardships he will meet when he appears in the "Old Men's Club." The word has been passed around that he is to be "given the silence" and treated as a traitor to the Republican party.

Despite the fact that the announcement was made that politics should play no part in the reorganization of the Prohibition Enforcement branch of the government, the politicians managed the job. One administration Senator who comes up for reelection in November is accused of having journeyed all the way to Swampscott to threaten to resign if his man, -accused of being an anti-prohibitionist, was not reappointed. The official referred to was not only reappointed, but promoted. And this is said to be typical of the methods used in effecting the muchheralded non-political reorganization. It is expected that the whole matter will be thoroughly ventilated on the floor when Congress assembles in December.

Commissioners Huston Thompson and John F. Nugent, minority members of the Federal Trade Commission, have stirred up another hornets' nest by publishing a report in which they accuse the majority Commissioners of having aided in the organization of a Bread Trust by concealing the fact that complaint had been made last April by the Commission against the Continental Baking Company, one of the companies which was preparing to enter the big merger of bread-making companies.

It is said that this new $400,000,000 Trust will have 157 bakeries and will control the price of bread

in every important city in the United States. An interesting sidelight on the situation is the report that the Minneapolis flour men and some of the Chicago Board of Trade speculators are alarmed at the possibility that the new bread combine will dictate flour and wheat prices.

Whatever the result of the Donnybrook riot started by General "Billy" Mitchell on the affairs and fortunes of individuals, the country owes him a rising vote of thanks. He has not only focused attention on the aircraft situation, but has brought a number of collateral army and navy evils within the sweep of the searchlight. As a sample expression of opinion of Navy conditions, Admiral Sims' arraignment of his branch of the service was significant. Before the Aircraft Investigation Board he accused the Navy of showing low morale and lack of confidence in its leaders. He said it was controlled by men who were uneducated and untrained in the military way. It was ruled, he charged, by men put in power by national and service politics. Sims may be sharp tongued, and something of a scold, but such an accusation, coming from an authoritative source, should bring a new, general investigation of the Navy as a whole, when the aircraft hearing is out of the way.

Secretary of War Weeks has resigned and so another one of the elder statesmen passes from the scene. With Senator Butler and the President controlling Bay State politics his fadeout is of little consequence to his party. He was a stanch and dependable party man who always stayed hitched when he served his party in the Senate. He was one of the type described in Kipling's "Old Men," if we only appraise him as a statesman, but he will go back to private life with the affection and sympathy of many of his colleagues. Senator Weller, of Maryland, whose friend and sponsor he was, will miss his aid and counsel sorely as he labors at the repair of his political fences, preparatory to his stand for reelection next November.

Good Bye, Jud

IT WAS announced, late in the month, that Mr. Judson C. Welliver had resigned as Chief Clerk of the White House to become publicity director for the American Petroleum Institute. This would appear to be an incident of small public interest, but it may have a very important bearing on subsequent political events.

To go back a little, Mr. Welliver was made "Chief Clerk" by President Harding, by reason of the fact, we must believe, that he was a gifted and prodigious speech producer. During the Marion porch campaign in 1920, the procedure was simple and effecttive. Whenever Mr. Harding found it necessary to

address some delegation, which was a daily occurrence, all that he had to worry about was the reading of a speech. The proper discussion was always ready, nicely typwritten, for him to deliver. Mr. Welliver, it is reasonable to assume, was chiefly responsible for this service. And when Mr. Harding went to the White House, Mr. Welliver accompanied him. Undoubtedly, that continued to be his real function-writing speeches.

Under Mr. Coolidge, "Jud" Welliver continued as "Chief Clerk."

If he only would, Mr. Welliver could contribute entertainingly, and with wonderful illumination, to the education of America with respect to White House methods of dealing with the public. At least, those modern characters, "a spokesman for the White House," "a man close to the President," etc., whose opinions are quoted in lieu of direct presidential statements, might lose some of their intriguing mystery.

He will not do that, but there may soon be noted some distinct difference in the tone of administration oratory.

It may develop also that the petroleum interests have desired Mr. Welliver more for political than publicity purposes-to pour "oil" upon the troubled waters should storms ensue. Having been so long and intimately on the inside, he would know how and where and when to do that. But those who know "Jud" best would hardly credit him with the acceptance of such a role.

At any rate, Mr. Coolidge lost a live and useful spark of statesmanship when his "Chief Clerk" resigned.

Statement of the Ownership, Management, Circulation, etc.,
Required by the Act of Congress of August 24. 1912, of
The Searchlight on Congress, Published Monthly at
Washington, D. C., for April 1, 1925.
DISTRICT OF COLUMBIA,

City of Washington, ss.:

Before me, a notary public in and for the District aforesaid, personally appeared Dora B. Haines, who, having been duly sworn according to law, deposes and says that she is the Business Manager of The Searchlight on Congress and that the following is, to the best of her knowledge and belief, a true statement of the ownership, management, etc., of the aforesaid publication for the date shown in the above caption, required by the act of August 24, 1912, embodied in section 443, Postal Laws and Regulations, printed on the reverse side of this form, to wit:

1. That the names and addresses of the publisher, editor, managing editor, and business manager are:

Publisher, The Searchlight Publishing Co., Inc., Washington, D. C.
Editor, Lynn Haines, Washington, D. C.

Managing Editor, None.

Business Manager, Dora B. Haines, Washington, D. C.

2. That the owners are: The Searchlight Publishing Co., Inc., Washington, D. C.; Lynn Haines, Washington, D. C.; Dora B. Haines, Washington, D. C.

3. That the known bondholders, mortgagees, and other security holders owning or holding 1 per cent or more of total amount of bonds, mortgages, or other securities are: None.

4. That the two paragraphs next above, giving the names of the owners, stockholders and security holders, if any, contain not only the list of stockholders and security holders as they appear upon the books of the company, but also, in cases where the stockholder or security holder appears upon the books of the company as trustee or in any other fiduciary relation, the name of the person or corporation for whom such trustee is acting, is given; also that the said two paragraphs contain statements embracing the affiant's full knowledge and belief as to the circumstances and conditions under which stockholders and security holders who do not appear upon the books of the company as trustees, hold stock and securities in a capacity other than that of a bona fide owner; and this affiant has no reason to believe that any other person, association, or corporation has any interest, direct or indirect, in the said stock, bonds or other securities than as so stated by him.

DORA B. HAINES, Business Manager. Sworn to and subscribed before me this 29th day of September, 1925. [SEAL] VERNON D. SMITH, Notary Public. D. C.

(My commission expires October 20, 1928.)