Masonry Magazine June 1968 Page. 7
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THE SLOW PROGRESS TOWARD PEACE IN VIET NAM isn't dismaying officials in Washington. They expected the going to be rough and the Communists to be difficult. But they remain hopeful and patient. Even when a truce does finally come, though, a business slump won't necessarily follow. Some new studies suggest that the government's expenditures won't shrink very much. Taxes may have to remain high to finance big defense and poverty programs.
Most observers doubt the drift toward peace can be stopped. The military stalemate makes this inevitable. But officials do not look for a settlement before next year. Meanwhile, until a truce is signed, defense spending will remain high.
AMERICAN TROOPS WON'T BE WITHDRAWN from Viet Nam automatically, and in numbers, when the shooting stops though that's only way war costs can be cut significantly. The security of South Viet Nam must first be assured. But even assuming that a substantial amount of troops can be brought home some time in 1969-government officials think that defense costs will still hold close to current high levels until well into the Nineteen Seventies.
There are several reasons this prospect:
-U.S. power must guard Thailand after troops quit Viet Nam.
-Manpower reserves must be rebuilt in the Continental U.S. after depletion for Viet Nam-to back up world commitments.
-Inventories of arms must be rebuilt as well. They ran down during the forced-draft expansion of strength in Viet Nam.
-Money for weapon development will jump once the war ends.
YOU CAN SEE WHAT IS LIKELY TO OCCUR FROM PROJECTIONS of war outlays. In 1969, total defense outlays are likely to rise $3 billion to $83 billion. They aren't expected to fall below $75 billion before 1972, even with peace. There will be pressure to use the $8 billion "saving" to reduce the deficit. Sure, revenue will be up $10 billion a year for a $20 billion gain by 1972. But that will only cover Viet rebuilding and Round 2 of old poverty programs.
But spending for poverty is likely to explode to swell the total of nondefense expenditures of the government. The riots and minority unrest make this expansion inevitable.
masonry • June, 1968
THE CURRENT BUSINESS BOOM WILL SLOW DOWN in the second half of this year, even if the fighting in Viet Nam continues intense. Many economists in government and industry agree on that. They are not talking about a real recession, by any means. But the rate of growth of the economy should drop significantly from today's excessive, unsustainable and very inflationary tempo. Total output of goods and services-Gross National Product-will rise at an annual rate of $12 to $14 billion a quarter, instead of $20 billion.
The overwhelming first-half surge in growth will lose a lot of thrust when inventory building tops out after the August 1 strike deadline in steel. What's more, dealer auto stocks will have peaked. So, even if consumers keep on buying at a fast pace, new orders and production-will rise more slowly.
Another reason for expecting a slowdown: Tight money will be braking home-building and curbing hikes in plant expansion.
NORTH KOREA MAY POSE A NEW THREAT TO PEACE, just as there is hope for Viet Nam. South Korea has been warning of a new thrust across the border. It is convinced that the Communists still plan on reunification by force. Some American military officers in the South have come to share these fears. Strength in the South is depleted, as shown by the Pueblo and other incidents. Any need to beef up defenses would require many billions, for several years.
FRANCE'S INTERNAL DIFFICULTIES WILL BE A MIXED BLESSING for the U.S. in months to come. American officials think the unrest can be good and bad. On the plus side, the big wage hikes spell greater demand for our products. France will have to spend some of the gold it has been draining from here. And France may be ready to cooperate on reforming the world's money system.
Washington feels a certain satisfaction, but not too much. All economies and currencies are interdependent these days. When confidence in the franc slumps, the dollar is hurt, too. Nervous citizens suspect all currencies, and switch to gold.
The French unrest may succeed in curbing American tourism more effectively than the President's well-publicized pleas. No one cares to be caught in the middle of a riot in Paris-or Brussels or Stockholm. Some trips have been cancelled.