Masonry Magazine January 1967 Page.13
theWASHINGTONire...
Strikes have been obscuring the strength of the business upturn that got going in earnest late last summer. The shutdowns in autos, copper, and steel-hauling have kept many key business indicators from demonstrating zip. Personal income is up only slightly. New orders are off. Factory production has fallen. All told, strikes clipped $2 billion from the annual rate of increase in total output of goods and services in the third quarter of 1967.
But even with strike losses, total output rose $15 billion $8 billion after washing out the impact of price increases. That was more than half again as much as the second quarter pick-up. And it contrasts sharply with the flat, sidewise trend that characterized the first three months of the year. The big thing now going for the economy is the fact that the inventory adjustment is over. While industry was reducing its inventory buying, and businessmen lived off shelf stocks, strength elsewhere was being offset. Now that businessmen are beginning to add to inventory again, the trend is being reversed. Demand is rising-in every sector not on strike.
The strength will show once the strikes are finally settled and plants are back in high gear again. Indeed, there are some fears that activity will bounce back too rapidly too feverishly. It could well balloon demands for labor and for materials and trigger the inflation so widely anticipated.
The White House will move for a tax rise early next year, because of these threats of inflation. By that time, the danger should be clear to Congress. The lawmakers may be willing to put aside politics to check the price surge that may be disturbing the voters. This may be wishful thinking but it is still the fond hope of a great many key Administration officials.
But for now, as 1967 finally nears its end, the President's influence with Congress is low. The heavy losses of liberal Democratic seats last November are clearly telling. More important, anti-war feeling has cut LBJ's support further.
Legislators of both parties have been trying to dissociate from Johnson's War and from Johnson's war tax. They sense a lessening of support by the voters. The resulting deadlock reminds many of the last days of the Truman and Kennedy eras. It may even prevent tax action next spring as well.
Some lawmakers will push tax reform next year, as a substitute for a tax increase as well as because reform may be overdue. The Administration has promised to send a bill up, but may hold off as long as there is a hope for a surtax. Principal target of liberal Democrats will be capital gains that go untaxed at death, oil depletion allowances, the tax exemption now permitted industrial development bonds, and perhaps deductions for interest.
But prospects for reform are not bright-for next year, at any rate. For one thing, such proposals always require very long hearings. For another, changes would run into strong hostility. And Congress will want to quit early to campaign.
Washington sees 1967 winding up with the best Christmas sales ever. With employment at a peak, and wage increases large, incomes are climbing. And surveys show that people are growing more inclined to step up spending. They plan to buy more autos, major appliances, and home-furnishings, etc.
A spending spree isn't likely. Consumers are still sobered by the war, persistent surtax talk, and inflation. They'll continue to save a lot, though perhaps at a slightly lower rate. Christmas sales could easily top 1966 by 6% to 8%.
Not all economists expect an all-out boom in 1968. There is a small group that foresees the possibility of an only moderate expansion-though by no means a recession. Their competence makes their views worth noting to keep in the back of your mind in thinking about the outlook. These analysts feel that past trends are being projected too automatically-that not enough attention is being given to the possibility that some forces are losing zip.
For example there are signs that military orders for Viet Nam are leveling out. Spending may rise some more as the Pentagon finally gets delivery.