Page:Economic Reform Policy by Envoy Dodge (Dodge Line).pdf/5

 It is government which turns on the spigots of inflation and government which must turn them off. Inflation must first be sterilized at the source. This means that all economic and political decisions must be directly related to cost and the production needs of the economy.

It is not easy for a government to reduce its own spending in terms of subsidies, investments, and other general expenses. Nevertheless, it has to be done and awkward decisions cannot be set aside. Government expenditures have to be limited to the resources from available taxes. Reduction of taxes is the end result of reduction in government expenditures.

Also it must not be overlooked that government investments and expenditure are rarely as productive as private investments and expenditures of the same amount. In a shortage economy every resource, whether money, labor or material, drawn off for unnecessary or non-productive purposes tends to add to inflationary pressures. Therefore the questions of absolute need, priority of need and the effective use of the funds absorbed by taxation and spent by the government have equal importance with the principle of their being covered by the revenues actually received.

To meet the problem it will be necessary for the Japanese Government to assume and exercise the power and find the means to discharge its responsibilities to the nation, to the United States, and to the Allied Powers. Restrictions on private consumption and expenditure cannot be advocated by the State and then most widely ignored by the State. The average man cannot be induced to practice thrift unless his government sets the example. No government can expect from its people virtues which it does not itself practice.