Masonry Magazine October 1969 Page. 11
theWASHINGTONire...
THE LIMITED PROGRESS IN THE WAR AGAINST INFLATION is worrying many business analysts. Officials would still bet that the economy is cooling and that current efforts to slow things up are working to brake the price rise. But they are less certain and more confused than they were a month ago. Certain of the recent business figures have shown some disturbing strength.
Time is now growing short for the inflation-fighters. The President's economic advisers can see a growing possibility of new inflationary pressure being generated by the Federal Budget in fiscal 1971 before the present surge is ended.
SIGNS THAT POINT TO COOLING KEEP POPPING UP steadily, week by week. The evidence is growing more consistent, more impressive, more persuasive. The President's economists feel that they are now seeing the kind of results they have been hoping for all along, though they admit the signs are still largely straws in the wind and still not as conclusive as could be desired.
Officials' hopes are being buoyed by reports like these:
-Retail sales are flat; surveys show consumers now cautious.
-Nonfarm jobs last summer rose at well below the spring rate.
-New orders for durable goods have been slowly trending down.
-Industrial output has begun to slide-first time in a year.
-Inventories are now piling up at a rate that cannot go on.
-Home-building keeps falling, in response to tight money.
BUT NAGGING SIGNS OF CONTINUED INFLATION PRESSURE keep showing up. It's not just the price indexes. They were due to keep rising on momentum. But the steady, substantial climb in personal income poses the possibility of a new explosion of consumer spending, one that could erupt at any time. And new surveys of plans to expand capacity are prompting even more concern about persisting inflation; some surveys project a jump of up to 9% in '70. By itself, such a gain might not inject new zip into the wage-price spiral. But it could be warning that inflation psychology is still running strong.
masonry • October, 1969
This is why economists are beginning to focus on the Budget for the next fiscal year, which doesn't begin until July 1, eight months from now. Work is already in full swing (for submission to Congress some time in January) and traces of certain disquieting trends can already be clearly discerned.
IT'S NOW OBVIOUS THAT U.S. SPENDING WILL SOAR beginning next summer. Programs launched under Johnson are moving into high gear and costing more. And Nixon has been proposing expensive programs of his own revenue-sharing with the states welfare reforms... 10% more in Social Security benefi's. What's more, the surtax is scheduled to expire next June 30, in the bargain.
It will be crucially important, then, that the persistent business boom be slowed down before this fiscal surge can actually develop. There is less than three quarters to go.
Government economists still insist that things will work out as hoped. "We will get the necessary cooling," they assert. "It should be obvious this fall." And what if it is not? Officials have begun to review possible new steps to take.
THE USE OF DIRECT CONTROLS IS NOT BEING PLANNED by the White House. Nixon's economists still think they are cumbersome and counterproductive. Besides, the unions would rebel at wage ceilings, business at price limits. So, the tight-money policy must be kept for longer than originally planned. Interest rates would not core down, if inflation continued to run ran pant.
The Administration, though, is likely to rely increasingly on quiet persuasion, such as is being used in construction-that is, the freeze on Federal projects and the recently appointed Commission to slow the wage climb. Further, some government ordering may be deferred until conditions ease.
BANK LOANS WON'T BE MUCH EASIER TO GET any time in the months ahead, even if the economy does cool off. That's what money-market analysts think. To be sure, the need for credit could well level out from the current peak. But loan demand will stay so large that it can even corre down substantially and still overwhelm the limited flow of funds to be available for lending.
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