Masonry Magazine June 1967 Page. 20
Washington Wire
(Continued from page 20) not be faced without action. Finally, the business figures will at least have stopped looking so poor by mid-summer.
The President may end up asking for an even larger increase in taxes than the 6% surtax first proposed in January. He would have to, if war spending rises as much as expected and he adheres to fiscal responsibility as closely as aides say. With July 1 out as the effective date, October 1 looms as the likely date. Congress would have to move fast to get the rise on the books in time to keep the fourth quarter from heating up. But rapid action is entirely possible.
CREDIT COULD GET TIGHTER LATER IN THE YEAR if the war gets hotter. With a moderate spending rise and a tax hike, the tightening will be mild; extra defense needs will be met with little strain. But money will tighten if lack of tax action balloons the deficit; the Federal Reserve will take on the job of cooling off the economy as they did last year. They will suppress private demand to give defense producers first crack at materials and labor. Interest rates will rise-maybe to levels higher than in 1966. Yields on bonds have already turned up, too close to the past peaks, as a result of the huge supply of new issues that has flooded the market. Corporations have been rushing to lock up money because they fear tightening. They want to insure against a new squeeze. Bond rates will stay up for a while.
THE DECLINE IN MORTGAGE RATES IS ALREADY THREATENING to peter out. There is still plenty of mortgage money around. And more keeps flowing to the lending institutions. They must put it to work... logically, by cutting rates to attract borrowers. But these days the high yields on bonds are luring mortgage funds, making it less possible for the loan rates to drop.
A leveling or inching back-up in mortgage rates may dampen the upturn in home-building that has been counted on heavily to contribute to the second-half bounce-back in business activity. This bothers officials a little, but not as much as would be the case if Viet Nam weren't looming so large.
USE OF ECONOMIC CONTROLS IS CURRENTLY BEING DISCUSSED in Washington. It isn't getting serious consideration by officials at the moment, though. That will depend on how much escalation there'll be . and how rapid it is. Certainly, 50,000 troops more in Viet Nam wouldn't put enough new pressure on resources as to require direct controls. Maybe 100,000 wouldn't either. but going beyond would mean labor and materials shortages and rising prices.
The government's economic planners are casting an eye on the curbs used in the past just in case. Among the controls that might be needed if a broader-scale war erupts are lids on wages, credit, vital materials, and, of course, prices.
MANY GOVERNMENT OFFICIALS ARE BETTING ON AN AUTO STRIKE this fall. This expectation rests on analyses of the positions of labor and management. As Washington sees it, the two sides are too far apart to settle peacefully. The union's leaders are under pressude to bring home the bacon-a lot of it. Workers in other lines have been getting 5% wage packages. Walter Reuther must win at least as much -and get something extra for skilled craftsmen.
The companies, though, are not in such good shape to pay out all this. Sales and profits are still below peaks. And the new safety features will add to costs. So prices would rise even if wages jumped little. As it may turn out, big price increases could cut sales and profits-even further. Thus, officials reason, neither side can give in without a fight.
AN AUTO STRIKE WOULD KEEP THE ECONOMY COOL THIS FALL, if one erupts. Not only will autos be affected, but parts-makers, steel glass, and tires. And don't forget there may be strikes in other fields, if Detroit escapes. A short auto strike wouldn't upset officials. It might reduce some demands. A long strike, though, would pose the threat of a recssion despite Viet Nam.
DEMOCRATS MAY LOSE SOME OF THEIR BIG MAJORITY in the Senate in 1968, just as they lost much of their House lead in 1966. Washington observers cite arithmetic, advancing age, and identification with unpopular issues. Some 23 Democrates come up for reelection-only 11 Republicans. Five older Democrats are from states that could go GOP. But the Republicans over 70 all come from areas that are rock-ribbed and quite dependably Republican.
Dove attitudes on Viet Nam could cost Democrats seats in 6 states, conflict of interest still another. Net, the experts see a potential dip of 10 Democratic seats, to 54 vs. 46. Johnson's ability to enact his program would be cut further.
CAPITAL OBSERVERS SEE A RISE IN JOHNSON'S STANDING with the public. They cite the latest opinion polls which show the President pulling abreast of Romney. More important, they fell LBJ is staking out the winning issues. The President's strong policy in Viet Nam has overwhelming national support. The Republicans, many political experts are saying, simply have to go along.
Johnson's civil rights stand will preserve a lot of liberal support for him; any big backlash for Wallace would subtract votes from the GOP candidate's total. All this implies that next year-1968 -is going to see a real horse-race, after all.