Masonry Magazine January 1966 Page.16
theWASHINGTONire...
THE BUSINESS IMPACT OF THE ELECTIONS WILL BE MODERATE, despite the victory rolled up by the Republicans on November 8. That's the conclusion many observers in Washington are drawing. They don't minimize the scope of the GOP sweep; it was large. But the needs of Viet Nam will still dominate White House and Congressional action. As for the Great Society programs, the next two years are going to be a time of digestion and consolidation, anyway. The President wasn't planning to ask for many brand-new programs.
A tax increase may be a major casualty of the GOP win. With business slowing, there is growing doubt about the case for stiffer rates on incomes. The more conservative Congress will reduce the need further by braking spending increase. Johnson may still raise taxes by trying to appeal to the war in Viet Nam. But he may not consider this politically wise.
Congress could vote more for war-without tax increases by axing such Johnson projects as the anti-poverty program... demonstration cities... the teacher corps, etc. Net, the impact of reduced spending could equal that of tax hikes.
VIET NAM CONTINUES TO BE THE KEY TO THE BASIC TREND that business will be following in 1967. Forecasters in Washington-and in industry-are waiting for word on the size of any further build-up in war spending before drawing conclusions about what lies ahead in such areas as taxes prices... wages... unemployement... of course, corporate profits... interest rates... and.
Not since Korea has so much hung on governmental decisions such as those that will soon be taking shape in Washington.
THE PRIVATE SIDE OF THE ECONOMY CANNOT BE COUNTED ON at this point to provide major upward thrust. It has been easing moderately this fall. Some economists feel that the growing signs of softening had to be expected. In their view, the expansion's venerable age is begining to take its toll. Others, though, think the slowing may be temporary. But it is quite clear.
And it is appearing in some important indicators: Business loans are up less. Is inventory growth slowing? Industrial output has leveled, hinting more moderate rises. Retail sales are not making the big jumps of past months. Plant expansion will rise more slowly, surveys suggest. And home-building keeps falling in response to tight money.
BUT STEP-UPS IN VIET NAM CAN OFFSET THE SOFT SPOTS now developing. (This assumes that peace which could open a new era. isn't likely soon.) Defense spending jumped in the third quarter at a $44-billion-a-year rate. That pepped up activity again after the sluggish performance of April-June. Many experts think that even smaller jumps can over-strain-even $3 billion. Production is bumping capacity in many lines. Little more can be fitted in without adding to inflationary pressure and giving prices an upward push.
Washington thinks the step-up WILL be big-and stimulating. The President is expected to ask for $10 billion extra next January - maybe more. (Some senators predit $15 billion.) And much of this extra money will be spent by July, 1967.
BUT WASHINGTON DOES NOT SEE A RECESSION. even with higher taxes. Officials seem to be a bit more emphathic on this than experts in business. A slower growth rate is forecast-4% after price increases, down from 6%. After all, cach area of the economy promises a plus impact, however small-even the soft spots that have been causing those doubts about the outlook.
Nondefense government outlays are rising, along with those of states and localities. Business spend-