Masonry Magazine March 1970 Page. 16
Washington Wire
(Continued from page 15)
Interest rate on prime commercial loans will drop a point or so-probably in two or three steps. Mortgage rates will decline very slowly-hardly at all-as always.
THE CLIMB IN PRICES WILL SLOW AS 1970
GOES ALONG, but not as much as the President's economic advisers predict. They see the current surge-at a rate of more than 6% a year-slowing to 32% a year by the end of 1970. Privately, many government analysts believe that a 42% clip is more likely. Their skepticism stems from the size of the wage increases now shaping up. The 6% to 7% won at General Electric is the minimum other unions will want.
Naturally, industry will try to pass on as much of its added wage-costs as it can in the form of higher prices. But the braking forces now in operation in the economy will heighten competition and thus limit the pass-throughs, to some degree.
PROFITS WILL PROBABLY DROP MORE
SHARPLY than Administration experts have predicted. They now project a slide from $94 billion to $89 billion. That's down 5%-6%; on its face, though, that's too high for the small growth the advisers expect in over-all activity. A drop of 10% or 15%... is seen. The stock market hasn't quite discounted this big a down-turn in earnings.
UNEMPLOYMENT MAY WELL EXCEED THE
MODEST INCREASES officials concede could occur, as a result of the slower business pace now being experienced. White House economists are on record as expecting an average figure of 4.3% of the labor force. The year started at 3.9% and could near 5% at times. Few forecasters will say flatly that this projection is too optimistic and can't come true. But they see reasons for a certain degree of skepticism.
For one thing, there's the expectation that growth will fall short of those official projections. For another, the belief is spreading that the slowdown will last through the year. Industry doesn't like to hoard labor during a long slide.
LOWER PROFITS PROSPECTS THREATEN
THE THIN SURPLUS in the new Budget for fiscal 1971. Fewer profits mean fewer taxes collected by the Treasury. And Congress may refuse to delay the U.S. pay raise or balk at new taxes. The $1.3 billion surplus could easily be turned into red ink of $3 billion. This will be a support for the economy and will help avoid a serious slump.
THE TREASURY IS WORKING ON ANOTHER
ROUND OF TAX REFORMS this year, for presentation to Congress later this session, or more likely-in 1971. Officials have already given the lawmakers hints as to what may be coming. It is hoped that, by next year, the Budget may be able to afford some cuts, especially since some proposals would largely shift-not reduce the take. Unlike last year's changes, the new crop should be beneficial for business.
Here, for example, are some of the shifts now getting study:
-Depreciation rates may be revised to spur plant modernizing.
-A value-added tax would operate as a kind of national sales tax, imposed on the extra value created at every step in the chain of processing, manufacturing, and distribution. This tax can be rebated to exporters to expand sales overseas.
-Tax incentives would encourage on-the-job training, etc.
A Presidential task force on business taxation will be filing a report with the White House some time this spring. It may give the entire process of revision a substantial push ahead.
THE PRESIDENT PLANS TO WITHDRAW 150,-
000 MORE TROOPS from Viet Nam this year in addition to the 110,000 scheduled to have left by mid-April. His aides report that, while progress toward Vietnamization of the war isn't as great as hoped, real gains are being made. Communist strength is down. A big enemy attack could still upset this timetable-but none is expected. Actually, new fighting in Laos is deemed more a threat to White House plans.
Nixon and the Republicans would reap big gains politically as a by-product of such substantial withdrawals. They could be large enough to offset any set-backs in the drive to take over Congress that would stem from failure to curb infiation
LABOR'S TRUCE WITH THE NIXON ADMIN-
ISTRATION is about ready to end. It was never so warm as to be called a honeymoon; rather, the AFL-CIO took a wait-and-see attitude. But, increasingly, unions are growing critical. The labor organizations dislike the Administration positions on job quotas for blacks the Supreme Court nominations the new Chairman of the NLRB... the unemployment likely to result from the tough steps to check inflation and what the unions consider too little protection against foreign imports.
Increasingly, it looks as though labor will be giving most of its support-money and manpower to the Democratic candidates for Congress and the governorships this year, as in the past.
THE DEMOCRATIC PARTY'S MONEY LACK
WILL HAMPER its drives next fall. The Party still owes $8 million from the 1968 campaigns but finds it hard to raise cash. Backers are not eager to contribute to the party of "outs." Party leaders realize this. They are turning back to professional experts, working full time, to rebuild machinery for retaining control of Congress.