Masonry Magazine April 1966 Page. 13
theWASHINGTONvire...
ECONOMISTS ARE REVISING THEIR FORECASTS FOR 1966-upwards, in every case. They now conclude that we are in a full-fledged boom. This lifting of sights stems in part from the fact that business activity has been moving much faster in the opening months of the year than had been expected on the basis of preliminary figures for last fall. But the huge jumps in spending for new plant and equipment that industry is planning are also adding new stimulation to an economy already feeling the spur of heavy defense orders.
The President's economic advisers had been talking of a rise this year of about $47 billion in Gross National Product the term for total output of goods and services for a 1966 figure of $722 billion. But now $732 billion is considered conservative, while many feel $735 billion is in the bag.
Some significant conclusions follow from the revisions:
-Corporate profits may be several billions higher than the experts have been saying. The gains still won't match the 18% of 1965. But they will be above the 6% first forecast.
-Price hikes in industrial items will be larger than in '65.
-Wage-costs will rise faster, heavily in unorganized lines.
-Tax collections will spurt and permit an increase in Viet Nam spending without a corresponding climb in the deficit.
PRICE AND WAGE CONTROLS SIMPLY ARE NOT IN THE CARDS for the economy, barring a very sharp-and unexpected-step-up in Viet Nam or war with Red China. This is the conclusion that one cannot help but draw in Washington these days, based on the mood at the White House and on Capitol Hill. Such controls are repugnant to all concerned. They're cumbersome to administer and are unfair and inefficient because they do not permit use of resources in the most economical way. Every effort will be made to avoid their use.
Officials think they can get by without controls because any further build-up in Viet Nam would load less on the economy than during Korea-the last time price-wage lids were imposed. We have a relatively bigger productive machine than in those days while present plant construction is adding a huge 7½% to capacity and will ease bottlenecks. Note, too, that new tax increases would be enacted as a "control", if needed.
SPENDING FOR NEW PLANT CAPACITY MAY NOT EXCEED PLANS this year, for the first time since the current expansion began. The traditional pattern of running ahead of start-of-the-year projections that is characteristic of every boom may soon be running into natural economic limits. The nation's machinery-producing industries have had huge increases in orders and are behind in deliveries. Many firms will do well just to meet completion goals.
Many analysts believe this will be a good thing. It would take some heat off prices by giving employees less money to spend. And the orders may be deferred to a slacker period.
COST-CUTTING IS GETTING NEW ATTENTION these days from firms trying to offset the profit pinch of higher wages and materials. Many are seeking out new suppliers redesigning products using substitute materials turning to imports or fixing suppliers' prices with long-term contracts.
CONGRESS IS ADDING TO THE PRESIDENT'S BUDGET-not cutting spending. The legislators keep talking about economy and would like to practice it. Republicans are especially eager to make a campaign issue out of the rising volume of spending for the Great Society going on during the Viet Nam war. But Johnson's pre-Budget economizing slashed a number of popular programs. These include student loans, school lunches, farm conservation and research. The lawmakers wouldn't want to face the voters with these programs missing.
All told, Congress may lift spending by $500 million -even $1 billion. But these won't automatically add to the $1.8 billion deficit Johnson has projected. Revenues will be up, as well, because good times are zooming profits and income.
THERE WON'T BE MUCH NON-WAR LEGISLATION PASSED by Congress in 1966-compared with last year, at any rate. The legislators are absorbed in the problems of Viet Nam. And they want to see how the many new programs they enacted last year will actually work out in practice. Here's how observers on Capitol Hill appraise prospects of proposals of interest to businessmen.
Among those likely to pass:
-A new Department of Transportation to coordinate highway, rail and air carrying, and to rationalize rate regulation.
-Funds for poverty perhaps more than the President asks.
MASONRY April, 1966 13