Masonry Magazine August 1970 Page. 26
Washington Wire
(Continued from page 14)
unemployment.) But Nixon still wants the line held when it comes to government spending.
In effect, the only tolerable deficit can come from a short-fall in revenue from lower tax receipts, in turn reflecting lower profits and smaller-than-expected rises in incomes. This way, the stimulating effect of the red ink only offsets the weakness in the economy that shows up in the tax take.
But even a deficit from this source must be kept in bounds-say, $6 billion. And there is a good chance that it will. Nixon will not spend some of the extra money Congress votes.
THE ADMINISTRATION IS ALSO PUSHING FOR EASIER MONEY, which can have a quicker impact than a deficit. Officials have been putting heavy pressure in private on the independent credit-controlling Federal Reserve System, to expand the money supply faster. They have called for action publicly, too.
The "Fed" is responding... slowly... very discreetly. It does not like to back the White House. In addition, though, the monetary authorities also want to be sure the upturn comes.
OFFICIALS NOW TALK OF LETTING THE MONEY SUPPLY GROW at a yearly rate of 6% a year, instead of the 3% to 4% that was the target of few months back. The feeling is that people want more money to hold-that is, for liquidity rather than to spend for inflationary expansion. Why not let them have it? Some observers look for an important signal toward ease to come fairly soon.
The White House is believed to be already pushing the "Fed" for some action.
Easier credit conditions will mean lower interest rates, in time, as policy shifts take hold. According to one survey, financial experts see declines of up to a full percentage point, over-all, by year-end in certain classes of rates.
Easing will also mean more funds for mortgages, to add to the money flowing into savings institutions, as well as the credit supplied under the various new government financing programs. Mortgage rates will fall very slowly from recent peaks, though, as they almost always have in the past periods.
THE OUTLOOK FOR HOME-BUILDING IS BEGINNING TO BRIGHTEN moderately. The clouds of last winter have been partly dissipated by several factors-the greater availability of mortgage money a rise in building permits and greater readiness of lenders to offer advance commitments to builders. A pick-up in housing is being counted on to expedite the business up-turn-increasing jobs also sales of building materials, furniture and appliances.
But experts warn against expecting too much too soon. The rise in starts is still likely to be mild, despite June's 11% jump. Institutions indicate that they will expand lending cautiously. Builders must recruit new men and line up labor crews. Analysts hope the annual rate of new starts will reach 1.6 million by year-end-still far below the 2.6 million a year that Congress says the country now requires.
CORPORATE PROFITS WERE BETTER THAN EXPECTED in the second quarter, though they were not
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