Masonry Magazine February 1969 Page. 17
theWASHINGTON wire...
THE BUSINESS BOOM FINALLY SEEMS TO BE SLOWING DOWN. Economists in government and industry are increasingly certain of this. They admit that the evidence is still fragmentary. But a tremendous amount of restraint is being exerted. It is beginning to tell and will bite as the weeks roll on. A recession isn't likely, though the risk can't be dismissed entirely. But profits will dip, unemployment will rise and the price rise will slow.
You can't prove that a significant slowing has begun. The figures are still too skimpy to point a clear trend. But retail sales have been rising more slowly, including autos. Inventories have piled up, and are starting to look heavy. New orders have been edging down often a hint of layoffs. In fact, the key auto industry has already cut production. Housing starts have fallen often a sign of coming trouble.
THE FORECASTERS CONCEDE THAT THEY COULD BE MISREADING the figures. Retail sales picked up a little in January. Saving is high again, putting the unpredictable consumer in the position to go on another spending spree. (Might not prospects of peace and stability lead him to spend more freely?) The decline is new orders centered in defense work which always gyrates. And housing starts jump around far too much to be reliable in any one month.
But, net, the experts are inclined to take the evidence at face value-even if one figure or another should reverse its direction. They feel that the braking power being brought to bear on the economy these days will prove irresistible.
THE IMPACT OF THE 10% SURTAX IS GOING TO BE FELT in months ahead. Because of it-and the spending limits the Budget is moving into surplus. It is swinging from a deficit of $25 billion to black ink of $2½ billion. In other words, Federal outlays are no longer providing such great thrust. To the contrary, the Treasury will now be subtracting from spending, net. The higher Social Security tax that began January 1 will be dragging, too.
And now money is being tightened, to back up the Budget's bite. The first goal is to cut the amount of new money the banks can lend. But the deeper aim is to force businessmen to trim their plans to invest-in new plant and inventory-so that over-expansion does not bring on a painful "bust."
Many economists believe that the credit squeeze will prove critical-the key to the outlook for the rest of this year. It can be the final straw on top of the dragging Budget that will break the back of the current inflationary boom.
SOME DOUBT WHETHER THE FEDERAL RESERVE WILL BE TOUGH ENOUGH to curb the boom and the current inflation. They recall how the credit-controllers chickened out in 1967 and 1968 -easing too soon for fear of a recession. Indeed, the Fed accepts blame for being an important contributor to today's inflation because of the rapid growth it has allowed in the money supply.
But "Fed" officials say they mean business this time. They insist that they won't loosen up before inflation slows to a bearable pace, even if there is the risk of a serious slide.
THUS, THE ECONOMY MAY NOT GAIN AS FAST IN 1969 as many forecast. Lyndon Johnson's advisers saw a 2% real growth rate (net of price hikes) in the first half and 4% in the last in other words, a rebound by summer. But they assumed the Federal Reserve would be easing money again by then. The credit-controllers may not follow the script as it is written, though.
Officials now talk as though they want to overdo the slow-down a little, to make up for permitting the money supply to grow much too rapidly over the past two years or so.
NIXON WON'T FIND IT EASY ΤΟ ΜΑΚΕ GOOD ON HIS PLEDGE to nip inflation without an unwelcome rise in unemployment. Economists are highly skeptical. They don't believe he has any new gimmicks that no one has yet heard about. If he doesn't want to let inflation go on indefinitely, he must be prepared to see joblessness rise by something above the 4% to which he is reconciled.
Only a lucky break can pull it off for Nixon, the economists believe. Perhaps a decline in farm