M FRiDAY, AtIOUST 30, 1963 THE MICHIGAN DAILY z 1Rh~AYS AUGUST 30, 1~63 THE MICHIGAN DAILY to a 'Dynamic'Economy the principal means whereby new technology gets put .into, operation in producing more and better goods per unit of input. Thus anything that raises' the rate of investment tends to speed up the growth of our potential output... Help Investment -further structural tax reforms which the President has proposed have, the same purpose of stimu- lating private productive invest- S ment funds. These include substantial changes in the taxation of capital gains and of natural resource in- dustries, new provisions for in- comhe averaging, and the reduction from 91-65 per cent of the top bracket individual income tax rate. However. investment is affected not only by the structure but also, by the level of tax rates... In calling for reductions in cor- porate tax rates, and in the pen- alty rates at the high end of the individual tax scale, the President' is deliberately proposing to make private investment more attrac- tive. As you know,-he has proposed to reduce the corporate profits tax rate over a two-year period from 52-47 per cent, adding another $2.5 billion to corporate profits after taxes. Combined with last year's changes, this will amount to a re- duction of nearly 20 per cent in corporate tax liabilities, offset only slightly by revenue-increasing tax reforms. Reductions of this magnitude will provide businesses with sub- stantially increased internal funds to finance' added investment, and they will increase the gain to be secured from such investment, thereby sharpening the incentive to undertake it. The President's tax program is not merely a program designed to Improve the utilization of our existing productive potential. One of its central purposes is to speed the growth of that potential. Of course, the greatest stimulus to investment will come from ex- panded demand itself, of which in- creased consumer spending will form the largest part. If tax reduction were confined to business taxes, it might have little effect on investment; but combining the reduction of in- dividual and of business taxes will produce an impact greater than the mere sum of what would be the separate effects of either by itself ... Taxes and Deficits The , discussions of the past months. have produced a con- siderable consensus in all walks of life that taxes need to be cut to expand total demand. ' But many who agree with this id principle shrink from advocat- ing this course because it means, at least temporarily, increasing further our budget deficit . The American public-rightly or wrongly-dislikes federal deficits. But if we want to get rid of them we need to understand why we have- them--whyin 6 of the past 7 fiscal years we have had deficits ranging up to the $12.4 billion deficit of fiscal year 1959. The reason is not that tax rates have been and are too low. In every one of those years there would have been a surplus- usually a very large one--if the economy had been operating at a' 4 per cent of unemployment, even larger if the unemployment rate were below 4 per cent. The way to have avoided these deficits would not have been to have raised taxes nor to have re- duced total federal expenditures. This would only have further reduced total demand, the level of, output, and tax revenues. We have had deficits because our economy has not been operat- ing at a sufficiently high rate for business and consumers to earn the incomes which-when taxed at existing rates, or even at lower, rates-would balance the neces- sary level of federal expenditures. Many businesses have found that a price set too high will nroduce smaller revenues than a lower price which will stimulate de- mand. Something analogous holds for the federal budget. . This thought produces hoots of laughter from some of our critics. If tax reduction of $10 billion will raise the level of, employment, step up the rate of growth, and even eventually balance the bud- get, why stop at 10 billion? If $10 billion is good, wouldn't $20 or $50 billion be better? Reductio ad absurdum is fun, but not always a sound farm of argument. And the reason in this case is quite apparent. When total demand in the econ- omy is inadequate to buy all that we can produce we have an op- portunity to make some pretty cheap gains. What we propose to give up is unwanted idleness for ,vorkers, unutilized capacity of producers; what we will get are goods and services to raise our future capa- city to produce. But if we were to reduce taxes excessively, so that demand would expand beyond our capacity to produce, we would be inviting a renewal of inflation .. . Ann Arbor's Friendly Bookstore Tax Action The tax bill currently con- sidered by Congress is roughly similar to the recommendations of President John F. Kennedy. Income tax scales would range from 14-70 per cent in- stead of the present 20-91 per cent table. Corporation taxes would be 48 instead of 52 per cent. The healthy state of the economy and Congressional sentiments have resulted in some changes in Kennedy's pro- posals: upper - income levels have been given more of a break and lower-income groups slightly less relief than origin- ally recommended. But the net revenue loss from the current tax bill would be about the same as that put forth by the President: $10.6 billion. - For Michigan Daily Subscriptions Call NO 2-3241 THE WORLD'S FAIR--A Chinese dancer concludes her act in the variety show at last fall's World's Fair, held each year on the second and third floors of the Union. SInternational Center Serves 1800 'U' Foreign Students .~ . A good way to meet some of the University's 1800 foreign students is to amble over to the In'crna- tional Center-and take it fro:u there. For the center, located right next to West Quad on the south side cf the Michigan Union, is the' social and activities home for stu- dents from other countries (in fact, more than 100 different ' countries are represented here).. James M. Davis. director of the IC, coordinates four major service functions for foreign students. one is its ounselling program. The center has three professional counselors to deal with financial problems, visas and extensions of stay, housing difficulties and per- sonal troubles. They also assist other campus organizations in serving and util- izing foreign students, and advise nationality and area clubs about their own activities. Another aspect of the Interna- tional Center is to arrange speak- ing engagemenft in nearby com- munities for foreign students. It encourages the students to take advantage of these oppor- tunities to inform Americans about other cultures, but avoids conflict with the students' aca- demic demands. A third function is to deal with * foreign visitors who come to the University during the year for a short time. The IC sets ulplocal programming and housing for these visitors, who are frequently professors and governmental offi- cals. rourth, the center attempts to help foreign students in the often- touchy Ann Arbor private hous- i "g situation.It- keeps a list of local landlords who are willing to r rent to foreign students and in- Vestigates reasons why somerent- ers do not. U' support In fact, one of the major rea- sons for the University's support for a fair housing ordinance in Ann Arbor is the humiliation for- eign students sometimes incur when seeking a place to live. The center also awards about 70 s holarships a year to needy for- ei n students, 'clears' them for local employnment and acts, as. lid,- loon with the state department, United States information Agency and the Immigration and Natur- alization Service. The center co-sponsors, with International Students Associa- tion, an informal tea each Thurs- day afternoon as another means of furthering American-foreign student contact. ISA Structure ISA itself has a number of com- a Mittees w lhi ch' sponsor social events and political discussions, music-listening nights, art " shows and photography exhibitions. Composed of about 500 members (ahout a third of which are The association also plans a number of special short-run tours and local hospitality programs, organizes an intramural sports league and publishes a monthly newsletter which is sent to all for- eign students on campus. Besides the ISA, a number of countries represented here have their own nationality clubs with their own set of programs and activities. 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