Masonry Magazine April 1968 Page. 7
theWASHINGTONire...
SUPPOSE THE TEMPO OF THE WAR DOES SLOW DOWN, as one result of the bombing pause the President has inaugurated-what implications would this have for business? It is still too early for economists to draw any firm conclusions. Hanoi's backing and filling-encouragement alternating with rejection-will mean that this country must go slow in lowering its guard. But some of the steam will go out of America's war effort, if Hanoi responds.
If the pace of the fighting slows, the consumption of war material-bombs, gasoline, ammunition-will drop in time. Pentagon procurement officers won't have to push for such rapid deliveries-of planes and vehicles, too. But the bulk of defense spending will continue at current levels through the year the costs of maintaining troops still on the spot.
Even though no big decline is possible because other trouble spots must be reinforced-some pressure would be taken from the economy. There would be less intensive hiring efforts by industry. Materials wouldn't seem so scarce. Slack would show up. Pressures on prices could readily begin to ease.
There would be no precipitous slide into recession. But the fever would go out of the boom that was so evident in the first quarter. Today's inflation would begin to abate.
GOVERNMENT OFFICIALS HAVE BEEN DRAFTING PROGRAMS to be activated in the event that peace does come to Viet Nam. The main aim is to smooth the transition back to a peacetime economy with as little upset as possible. No one wants unemployment to shoot up at a time when racial unrest dictates a policy of creating new jobs, especially for the inmates of the ghettos.
One thing that will smooth the transition is a reversal of the current Budget hold-down on non defense spending. Such Great Society programs as those for education, rebuilding the cities, etc., need no planning only a go-ahead on blue-prints that already exist. And credit could be made easier. What's more, the U.S. must be prepared to pour billions into Viet Nam to help that country rebuild its shattered economy.
But all this comes into play after a peace formula has been worked out-many months from today.
Now, officials are still wrestling with the immediate problems of gold and the boom problems that seem very pressing and crucial at this writing.
THE GOVERNMENT IS NOW GOING ALL OUT
TO SLOW THE BOOM in business. The preferred curb is fiscal policy-higher taxes and spending reductions. In reserve is much tighter money, which has already appeared on the scene. Inflation has reached a dangerous point. Officials are grimly determined to check it before it leads to devaluation of the dollar...and a recession.
Economists fear that continuation of present boom rates of expansion will generate excesses-too much inventory built up plus price-wage distortions that eventually brake sales. It could suck in imports and as prices rise-slow exports.
THE TROUBLE BEGINS WITH THE DOLLAR
and its damaged world position. The U.S. has run big deficits in its balance of payments for too many years. Enormous amounts of dollars have piled up in the hands of other countries. They cashed in much of these for our gold, raising questions as to how much longer the gold would last. These doubts led to those recent gold rushes.
Officials have promised to reduce the payments deficits in exchange for other countries' promises to help conserve our gold. So the import rise must be reversed and sluggishness in exports must end. This in turn requires deflating the economy to free capacity to meet domestic demand and to keep American goods competitively priced in world markets.
GOVERNMENT POLICY IS NOW TO CUT THE
RATE OF GROWTH of the economy from a 5%-plus rate of the first quarter of this year. The target is a pace of 3% to 4%. That is still expansion, to be sure. But it is the kind the country can tolerate without severe inflationary strains. Indeed, the current climb in the price indexes could slow down under these conditions.
The slower growth rate will be felt in many ways. Incomes won't grow as fast. Unemployment may edge up a bit. Home building would certainly take it on the chin-again. And business profits may rise more slowly-or dip in some cases.