defects in averments of citizenship shall be amendable even on an appeal, and that a decision of a State court that an act of State legislation is in violation of the United States Constitution may be reviewed by the Supreme Court.

These reforms will greatly facil tate the speedy decision of cases. upon the merits.

THE PROBLEM OF READJUSTMENT.

No accurate calculation of the total cost of the war is as yet possible. Some of the most careful estimates range around $200,000,000,000 without allowing for the loss of life.

In round numbers the Central Powers have increased their debts by about $40,000,000,000; the Allies by about $82,000,000,000, of which that of the United States (net) is over $10,000,000,000. These figures, while failing by far to measure the direct costs of the war, stand as a mortgage on the resources of the various countries. Interest and partial payments on this great principal must be paid in taxes each year.

The war leaves the United States a creditor instead of a debtor nation. To date, the country has paid foreigners for securities sent home probably $2,500,000,000; it has invested in the obligation of foreign governments about $3,100,000,000; it has advanced to its Allies through government loans over $8,588,000,000; and has raised for its own needs through loans about $10,000,000,000. In addition Federal war taxes raised in 1917-18 were approximately $3,700,000,000, a figure which will be greatly exceeded by the levy of the current fiscal year. This remarkable achievement has been possible only by curtailing extravagance and resorting to saving on a great scale. That is, it was made possible only by the creation of new capital.

In the coming readjustment, the United States must face the necessity of another large government loan in the spring of 1919, of heavy expenditures on the army and navy yet in service. More than that, it is the only country in a position to finance other nations in their period of reconstruction and at the same time to meet the demands of home industry.

That there are obvious difficulties in the way of doing this it would be useless to deny. In spite of proverbial American optimism

it must be realized that credit, while not dangerously inflated, has been made to carry an unusually heavy burden. The one and only remedy is a continuance of saving just as in the hardest days of the war. Evidence of this need can be seen in the condition of the Federal Reserve Banks. The original purpose of their creation was to rediscount only short-time commercial paper; the carrying of securities was discriminated against. To-day, however, as a consequence of floating government bond issues, member banks and the Federal Reserve Banks have made enormous loans on the security of United States bonds. In 1918 such loans by the Federal Reserve Banks had grown from $1,200,000,000 to nearly $2,800,000,000. This action has been quite contrary to the spirit of the Federal Reserve Act, because these assets, while of the highest character, are not liquid in the sense that commercial paper is liquid. The repayment of these loans is the first task of financial readjustment.

The primary needs of readjustment are ample capital and sound credit. Behind all must be a well-adjusted condition of business, so that industries are kept fully occupied in meeting a legitimate demand and not injured by senseless struggles between managers and workmen. If goods are being actively produced, capital can be saved and credit kept sound. It is imperative, therefore, to do everything possible to stimulate prosperity in all industries, since thereby unemployment can be obviated, large savings made possible, and a current of healthy blood put into the credit organism. For employers and workmen to quarrel at this juncture would be comparable to two men in the water who, instead of quietly trying to save each other, endeavor to strangle each other.

Closely related to the problems of capital and credit, and sharply reacting on industrial activity, is the question of taxation. Under the urgent demands of war, taxes have increased heavily, but the unusual prices for merchandise have made it possible for industry to meet them. Heavy taxation must, moreover, be faced for a long time. But clearly the burden must be adjusted to the ability of the nation to bear it under new conditions. The one fundamental principle of taxation is that it shall not be so heavy as to discourage the production of new wealth from which taxes can be paid. In the troublesome problems of readjustment the scientific determination of just rates of taxation is of foremost importance.

Perhaps no feature of the readjustment problem is of more im

mediate concern than the question of wages. Rates of wages increased enormously during the war and earnings not infrequently were doubled. That present wage scales are acting as a serious deterrent to new undertakings by employers in ordinary manufacturing lines, and even more so in the case of construction work, where present labor costs mean a permanently high overhead charge because of inflated investments, is too apparent to permit of argument. A revision of wage scales is bound to come eventually, but the task of readjusting wages on a just and acceptable basis is exceedingly complicated. War bonuses have been discontinued and frequently the elimination of overtime has done away with the payment of extra rates. But even this modest reduction of earnings has been attended by unrest in the ranks of the workers.

Wage-earners naturally object to any proposal for a reduction in wage rates. This is particularly true while the cost of living remains at its present level. It is not easy for them to understand that lowered rates of pay if accompanied by decreased prices of the necessities of life may leave them as well off or even better off than they are to-day. Despite the severe lessons of the war, the distinction between real or effective wages and nominal or money wages is still but incompletely grasped by the average worker. He does not clearly see, moreover, that prevailing abnormal prices of food and other commodities are in considable measure an inevitable corollary to extraordinary wages. From this vicious circle of increasing wages and increasing costs, a way out must somehow be found. One of the first steps is to present the situation to labor in a fair way.

DISCLOSURE BY TAXPAYERS.

By Roy C. Osgood, Chairman Committee on Taxation, Investment Bankers' Association of America.

The question of whether the law requiring a disclosure of income under the Revenue Act of 1918, paragraph 4, subdivision A of section 214, is a constitutional measure has been considered mooted between attorneys. Many inquiries have been made of The Editor by taxpayers asking an opinion as to the requirements of the Federal Income Tax Law as to disclosures of municipal income. The opinion of Messrs. Reed, McCook & Hoyt of New York City we consider sound. It was given in answer to a definite inquiry from the Investment Bankers' Association of America. The question, while a fundamental one, has many angles and the precise delimitation of the principles affecting it would be found difficult. We assume the opinion is by Mr. Reed, which is as follows:

It is, we think, clear on principle that Congress has no general power to require a citizen to disclose information or answer inquiries, imposing a penalty for refusal, merely as a matter of governmental curiosity or inquisitiveness into the private affairs of a citizen. In the language of Mr. Justice Harlan, speaking of the inquisitorial powers of the Interstate Commerce Commission in I. C. C. v. Brimson, 154 U. S. 447,478:

"Neither branch of the legislative department, still less any merely administrative body, established by Congress, possesses, or can be invested with, a general power of making inquiry into the private affairs of the citizen."

This general principle has been frequently asserted. In In re Chapman, 166 U. S. 661, 668, Mr. Chief Justice Fuller said:

"In Kilbourn v. Thompson, 103 U. S. 168, among other important rulings, it was held that there existed no general power in Congress, or in either House, to make inquiry into the private affairs of the citizen; that neither House could, on the allegation that an insolvent debtor of the United States was interested in a private business partnership, investigate the affairs of 'that partnership, as a mere matter of private concern; and that consequently there was no authority in either House to compel a witness to testify on the subject."

In the Kilbourn case, Mr. Justice Miller said (page 196) that

*

the committee, therefore, had no lawful authority to require Kilbourn to testify as a witness beyond what he voluntarily chose to tell."

In the case of In re Pacific Railway Commission, 32 Fed. 241, Mr. Justice Field, sitting in the lower court, said (page 250):

"Of all the rights of the citizen few are of greater importance or more essential to his peace and happiness than the right of personal security, and that involves not merely protection of his person from assault, but exemption of his private affairs, books and papers from the inspection and scrutiny of others. Without the enjoyment of this right, all others would lose half their value."

The above dictum was quoted with approval by Mr. Justice Harlan in Interstate C. C. v. Brimson, supra.

In Harriman v. Interstate C. C., 211 U. S. 407, it was held that the questions propounded were not within the authority of the Commission. The appeal from an order of the lower court directing the witness to answer was sustained. The Court recognized that the power to answer the question must be found both in the powers of Congress over the subject matter and in the powers given by Congress to the Commission. As to the specific power claimed in that case, it said (page 418):

"How far Congress could legislate on the subject matter of the questions put to the witnesses was one of the subjects of discussion, but we pass it by. Whether Congress itself has the unlimited power claimed by the Commission, we also leave on one side. It was intimated that there was a limit in Interstate Commerce Commission v. Brimson, 154 U. S. 447, 478, 479."

Although the leading case of Boyd v. U. S., 116 U. S. 616, is not directly in point, as it dealt with the compulsion of incriminating testimony under the 4th and 5th Constitutional amendments, yet the opinion in that case is of great value for its historical discussion of the principle involved; also for the ruling that to impose a penalty for the non-production of evidence is as clearly unconstitutional as would be a violent seizure of such evidence. After quoting at length from the opinion of Lord Camden in the celebrated case of Entick v. Carrington, 12 Howell's State Trials 1029, Mr. Justice Bradley (page 630) says:

"The principles laid down in this opinion affect the very essence of constitutional liberty and security. They reach farther than the concrete form of the case then before the court, with its adventitious circumstances; they apply to all invasions on the part of the government and its employees of the sanctity of a man's home and the privacies of life. It is not the breaking of his doors, and the rummaging of his drawers that constitutes the essence of the offence; but it is the invasion of his indefeasible right of personal security, personal liberty and private property, where that right has never been forfeited by his conviction of some public offence.