Masonry Magazine November 1968 Page. 11
theWASHINGTONvire...
THE ROAD TO PEACE EXTENDS FAR BEYOND a bombing halt something to keep in mind in assessing the economic impact of events in Viet Nam. There could be many months before a cease-fire is arranged. Fighting might die down during the period of negotiation, but U.S. troops would have to remain at the ready for a time to come. Not until there is an end to the shooting could the U.S. risk repatriation on a scale that could dent war spending.
A cease-fire could take months to devise-if Korea and the recent Paris talks are any guide. The new Administration will need time to work out an honorable compromise. (Any other kind would be unthinkable...and politically unwise.)
NO SUDDEN SLUMP IN DEFENSE SPENDING IS IN THE CARDS. Implementation of a settlement would be stretched out over a fairly lengthy period; it will take time to hold elections and see a new government set up in South Viet Nam. So troops will be withdrawn only gradually. There will be plenty of time for other spending programs to blend in and to take up any slackening.
Spending will increase on several fronts:
- Rebuilding of inventory of defense material is bound to require billions. Production was kept down bare bones to keep outlays from soaring further. A catch-up is due.
- New weapon systems will get a green light. Development, too, has been held down for Budget reasons. Meeting the Pentagon's requests could easily involve billions a year.
- Social welfare programs for education and rebuilding the cities.. many already authorized by Congress. can absorb many billions. These will expand fast in 1969 and later. Outlays wouldn't drop more than a billion or so, with peace.
PRESIDENT JOHNSON'S LAST BUDGET WILL BE A LOT BIGGER than the one for the current year -in itself a record $186 billion. Work is now going on, for submission to Congress in January. The new Administration will be able to modify the blueprint in many respects but changing the basic form will be very difficult. The expenditure level for fiscal 1970-which will begin next July 1-may conceivably reach a total of $200 billion or beyond.
What's going to push the spending figure higher? A pay hike of $31½ billion for Federal workers. Higher Social Security benefits for more people and maybe a cost-of-living bonus. An automatic step-up in some education programs. Bigger welfare payments to the states. More money for interstate highways. And higher costs of many things from inflation.
INFLATION HAS BECOME THE NATION'S MAIN ECONOMIC CONCERN once again. Forecasters still see a slower rate of growth in the next six months or so. But they doubt that the cooling will be great enough to deal a major check to the psychology now so strong. And a new boom is shaping up for mid-1969. With Federal spending slated to rise, the new Administration will find that putting a lid back on the soaring price indexes will not prove very easy.
So extension of the surtax-the whole 10% or a major part of it becomes a "must," if the deficit is not to balloon again. In fact, money may have to be tightened during 1969.
ECONOMISTS ARE NOW FOCUSING ON THE SECOND HALF OF 1969 and the new strength in business activity they see on the horizon. In addition to the zip in public spending, there are elements of boom in the private sector. For one thing, home-building... already displaying new life. will lead the economy higher next year. Consumer spending could spurt again, as nerves relax with concrete progress toward a peaceful settlement in South Viet Nam.
Spending for new plant and equipment could rise in response to the strength in Federal outlays and home-building. More inventory would be required. The economy would then be off and running once again...under another full head of steam.
THE NEW ADMINISTRATION MIGHT FIND ITSELF HELPLESS to check the zest. Even if it was willing to accept a business slowing and more unemployment and it won't be it will discover that Fed-