Masonry Magazine February 1967 Page. 20
Washington Wire
(Continued from page 17)
times for the appliance-makers. For the economy as a whole, it could mean a healthy, solid growth rate close to the desired 4%. It would assure high employment and only moderate price hikes.
DON'T ASSUME THAT JOHNSON'S REQUEST FOR A TAX HIKE will be rejected by Congress. Admittedly, there's a lot of opposition to it in both parties, and it has become fashionable to say that politics are against any action. But this dislike will not be decisive. It is not the key to the outcome. The economic outlook during the spring will determine what Congress does. Even if the tempo is only starting to level out as well may be the case the President will push hard for the increase... and Congress will go along. If the outcome is murky, though, all concerned will let the increase drop.
Even if the need for tax action does emerge, it may not take the form urged by the President. Politics may well dictate a bigger bite on corporations than on individuals. And the effective date may be put off, especially if the lawmakers drag their feet on any action until the trend of business and the amount of Budget cutting to be achieved becomes clear.
WHITE HOUSE ECONOMISTS ARE OPTIMISTIC ABOUT PROFITS this year-more so than most business analysts. They are forecasting a rise in corporate earnings a small one, to be sure, but a rise nevertheless. Specifically, they are expecting a gain of around $1 billion over 1966's pre-tax net of $82 billion. The President's advisers are expecting a second-half pick-up to help get sales rising again, even though profit margins shrink a little.
Most economists, though, are concerned about a profits pinch. They see costs rising further especially wage costs. But price increases may well be limited by returning competition. Margins would suffer, and earnings would trail last year's. The new, higher minimum wages that took effect February 1 will lift costs all along the line, as workers try to keep their differentials against lower grades. This will offer new incentives to prune deadwood and improve efficiency.
THE CLIMB IN METAL PRICES MAY NOW BE LEVELING OUT, finally, say many commodity experts. They are guessing that the recent, early-winter round of increases in steel, copper, molybdenum, and aluminum will prove to have been the last ones of any significance for a while. In some cases, those hikes were long expected, a result of still large demands and restricted supply.
But demand is bound to soften as the expected inventory run-off gets going. These special drags that seem to control in every case-strikes in copper, for example, will be losing their potency in the face of weakening demand. This doesn't mean that all prices will crack-though some will. But the recent round of hikes may have reflected the producer's last-gasp efforts to protect profit margins while they could.
THERE IS DANGER OF A RASH OF STRIKES THIS YEAR, as industry attempts to hold profit margins by controlling costs when prices are harder to raise. But the unions which will be doing their bargaining this year are out for big game. They want the same 5% package that other unions got last year. This puts management and labor on what could prove to be a collision course.
Labor bargaining will be a lot more extensive during this year-another reason for expecting more strikes. Contracts come up for renewal in such important lines as autos, farm equipment, rubber, metals, trucking and the railroads.
THE DANGER OF A BIG GOLD LOSS IS WORRYING OFFICIALS at many agencies in Washington. This is a problem that has important implications for every businessman, though this isn't always clear. If the gold outflow should surge, the government might have to follow Britain's course-severe deflation, in which sales fall, unemployment climbs, and profits shrink.
The renewed danger comes from two sources. One is the war, which puts billions into Japan, Viet Nam, Thailand, etc. The dollars then wind up in countries like France, which, in turn, cash these in for gold. The other source of danger is the decline in interest rates. There is a lot of "hot" money in this country that came in when rates were high. It can flow out if U.S. rates get too low. Gold would follow.
Big trouble may not come. Some foreign leaders realize that a recession here will only hurt them. But if trouble does develop, understanding the trend could help in planning.
THE WHITE HOUSE PROGRAM FACES MORE TROUBLE IN CONGRESS than seemed likely just a month ago. The conservatives have taken control-and quickly. They showed this in imposing the rules they want and in the Powell case. And they gave the President a hard time in raising the ceiling on the debt. Republicans and Southern Democrats constitute a majority in the lower House; they can trim most of the welfare projects and kill some of them outright.
The old GOP-Southern Democrat coalition isn't being revived, formally. Open alliance has political drawbacks back home for both groups. But you will notice a great similarity in their votes-which will often be against the Great Society.