Masonry Magazine August 1967 Page. 15
theWASHINGTONire...
A MAJOR EFFORT TO REDUCE THE GOV-ERNMENT'S IMPACT
A major effort to reduce the government's impact on the economy has been launched by the White House. It has a number of goals to escape the politically distasteful steps of calling some reserves or increasing draft calls to avoid over-stimulating the business recovery and to make a tax increase more palatable to Congress. The result may be a healthier, more balanced expansion, with relatively mild inflation and fairly easy credit. The first sympton of the Administration hold-down effort is the limit on additional troops for Viet Nam, which President Johnson is setting. The Pentagon is not getting all the new men it wants. It must make do with less than 50,000 more, though at one time it was encouraged to feel the total would be higher. A shift in war strategy may ultimately follow.
BUT THE PRESIDENT IS ALSO WIELDING THE PARING KNIFE
But the President is also wielding the paring knife on nondefense spending. He is under great pressure from Congress to keep the $135 billion budget for fiscal 1968 from going much higher. Many legislators condition support for a tax hike on spending cuts. But talk of a 15% slash across-the-board is unrealistic. Likely goal is a 1%-2% trim-$1 or $2 billion. Agency and department heads have been told to deter as much low-priority expenditures as possible. A part of the "savings" could come from the same sources as those drawn upon by the President last year-impounding highway funds and delaying a range of new federal construction projects. What's more, Defense Secretary McNamara is trying to slice some fat from the Pentagon's expanding budget. Funds for maneuvers within the Continental U.S. may be held up. And some aircraft orders may be stretched out because losses, though substantial, have been running behind projections.
SPENDING CUTS ENHANCE PROSPECTS FOR TAX ACTION
Spending cuts enhance prospects for tax action before Congress goes home this fall. Many Congressmen are reluctant to act at all. They will grumble a lot. Some will oppose to the last ditch. But, in the end, the Administration arguments will be hard to beat the need to finance the war...to head off a record-breaking peacetime deficit. to head off inflation. Of course, Congress will probably re-shape the tax proposal... drastically.
THE NEW FISCAL PACKAGE ALTERS THE BUSINESS OUTLOOK
The new fiscal package alters the business outlook for the rest of this year. It strengthens hopes of a return to the balanced kind of growth that prevailed in the period from 1961 to 1964. There is now less fear that government demands will add so heavily to a fast reviving civilian sector. The inventory liquidation can end, and consumer demand continue its mid-summer recovery, without fear of imposing too big a load on the economy. The President's advisers are predicting good-sized pick-ups in sales, jobs, and production. The pace will be noticeably faster than in the first half. Wage increases will force prices up in a number of fields. But at least the "demand-pull" type of inflation can be kept from compounding the trouble. If taxes and spending cuts do keep things from heating up, it won't be necessary for the credit controllers at the Federal Reserve to tighten much. Interest rates won't plummet, but money would be available.
THE SECOND-HALF PICK-UP WILL SPREAD ACROSS-THE-BOARD
The second-half pick-up will spread across-the-board, according to checks by economists. They do not see any great surges in any particular sector. Machinery, for example, won't spurt the way it did during the 1964-1966 capital spending boom. Demand for building materials will swell with the rise in home-building-but like this pick-up, the firming will be mild.
Here are some appraisals for specific lines:
-Autos: Sales will rise further, but not to the 1966 rate.
-Steel: Orders will pick up, now that inventories are down.
-Appliances: The housing pick-up is helping to speed sales.
-Construction: Last-half gains will almost erase early lags.
-Retailing: Sales will top 1966 by 4.6%-especially apparel.
THE PRESIDENT'S SOCIAL SECURITY PLAN
The President's Social Security plan will be cut back by Congress before it is finally voted into law. This will be another instance of the resistance on Capitol Hill to expansion of domestic programs during wartime. The lawmakers' current objective is to minimize the size of the payroll-tax increases that must also be imposed as part of the Social Security package. There is also opposition from those who feel that the nature of the system is being changed from an insurance operation to a welfare-agency concept. Johnson's ambitious proposals have been called a disguised anti-poverty program by some of his (Continued on page 23)
MASONRY August, 1967
15