Big Christmas

Sailing from Manhattan last week for a vacation in Ireland, James Aloysius Farley risked his shining reputation as a prophet with a new prediction. The man who was right about Election solemnly declared: "It is my firm belief that the country will soon have the most prosperous time in all its history. . . . This Christmas will be the best and most prosperous in the history of the nation. I am sure that we will see people spending more money than in any previous Administration."

Even discounting Mr. Farley's native optimism, the prospects of big Christmas spendings were rosy indeed. Aside from the continuing upward drive of Recovery, there are two good reasons for this rosiness, for both of which Mr. Farley could claim Democratic credit. One is the rising tide of extra dividend declarations, the other the nation-wide movement to raise wages, pay bonuses.

So stiff are the new taxes on undistributed corporate earnings (up to 27%) that managements are trying to get substantially all 1936 profits into the hands of stockholders before the year-end, when the tax-year for most corporations also ends. Whatever the ultimate effect of this policy may be on corporate finance, the effect on the spendable national income is plain. Total distributions to stockholders in the last three months of this year directly traceable to the tax law, the New York Journal of Commerce estimated last week, will be $500,000,000.

The tide of extra dividends continued to rise last week. Chrysler Corp. voted a $5.50 payment, bringing its dividend total for the year to $12 per share. Gulf Oil Corp. proposed to split its stock two for one, added a 50-c- payment to the regular 25-c- quarterly. Eastman Kodak ordered an extra of 75-c- per share, Columbian Carbon $1.25, Jewel Tea $2. In some cases the tax law has prompted resumption of dividends, Western Maryland Ry. last week voting the first payment ($7) on its first preferred since it was reorganized in 1917 and Libby, McNeill & Libby the first common dividend ($1) since 1921.

Another and just as effective way of pushing profits beyond the reach of the tax collector is to pay bonuses to workers. As a matter of practical industrial relations it is almost imperative to give employes something extra when they know that stockholders are being showered. Bonuses, ranging from the $10,000,000 appropriated by General Motors last fortnight to common Christmas presents planned in hundreds of little businesses, have a greater vogue this year than ever before.

How much of this generosity was inspired by the Roosevelt landslide was impossible to determine. Certainly the rush to raise wages that developed in industry after Nov. 3 looked suspiciously like a hasty effort to climb aboard the band wagon of a President who is deeply indebted to Labor. Only big industry to get aboard ahead of time was Packing, which upped its scales 7% one week before Election. Steel hopped on as soon as returns were in. Wage boosts followed in the textile and automobile industries, in hundreds of miscellaneous manufacturing enterprises throughout the land. By last week United Press estimated that at least 1,000,000 U. S. workers had received pay increases amounting to more than $130,000,000 annually, exclusive of bonuses.

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