Masonry Magazine January 1971 Page. 19
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THE NIXON ADMINISTRATION IS NOW MOVING TO STIMULATE the economy to head off new weakness and then cut down the current high unemployment rate. Business activity has proven softer than most government analysts had seen. And the sluggish economy cost the Republicans dearly in the last elections. There was spirited debate at the White House over whether more is needed to get growth back on a healthly track. But the verdict now is a definite yes.
To be sure, 1971's first quarter will seem buoyant as the auto industry pushes hard to get back into full production-and to make up for lost sales. But most economists don't expect the rebound to push business activity to sustained rapid growth.
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THE AUTO SHUT-DOWN DISTORTED THE UNDERLYING TREND of the economy-first overdepressing the figures, and now beginning to overstimulate them. Assembly is resuming, but it will be months before a clear picture emerges until you know how much damage has been done or how far the pickup carries. Most Administration officials think that the strike only delayed an upturn. But the upturn is not going to create sales or jobs at a satisfactory rate.
The major business statistics look soggy, over-all, even after you make fullest allowance for the impact of the auto strike.
-Unemployment is rising: new jobs are fewer than new workers.
-Business spending for new plant in 1971 is expected to rise only 2%-a drop in real terms, netting out price increases.
-Industrial production is still 5% below its mid-1969 peak.
-Consumer spending keeps lagging, from a "rainy-day complex."
-Loan demand is weak as firms reduce capital-spending plans.
-Home building is rising, but not enough to start a new boom.
Forecasts for 1971 see lagging growth under the recent Nixon "game plan" of letting sluggishness cool the inflation down. That's not enough to absorb new workers, let alone make jobs for the jobless. Growth can't do better under that policy.
POCKET-BOOK ISSUES HURT THE REPUBLICANS in the November elections. White House officials now privately admit that unemployment and inflation weighed heavily in the voting results during November. GOP politicians shaken by the outcome were critical of the neglect of the economic issues. They did much to bring the decision to use more Federal clout to stimulate. The President also wants a "good" economic trend for the 1972 election-rising profits, falling unemployment, and a slowing in the climb of prices.
Fiscal policy is one of the two key tools the Administration will be relying on to prod the economy. Nixon has bought a new concept-the Full Employment Budget-which sanctions spending up to the level that revenue would reach in a boomy climate. (Of course, revenues sag in a slowdown, as today.) The White House will not fight quite so hard to hold down Congressional spending. Deficits may well hit $15 billion.
In addition, the President is pushing for more credit growth. He is nudging the money-controlling Federal Revenue to let the money supply grow more. The Fed is easing.. slowly and cautiously. Interest rates are due to decline even further.
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THE PRESIDENT WILL PLAY A MORE DIRECT ROLE in braking the wage and price spiral that still plagues the economy. He dislikes intervening in private economic decisions. But now many officials are urging him to adopt an "incomes" policy. They say it is necessary to hold down prices, so that budget and monetary stimulus can be pushed to the degree that may be needed. The only other way to curb big wage hikes is to keep the economy dragging.
Nixon isn't about to invoke mandatory price and wage limits. Neither labor nor management would accept these, short of a new, major war. He will stop far short of any such drastic step. Indeed, he won't go any further than he really must.
THE ADMINISTRATION IS TRYING TO BUILD UP THE INFLATION ALERTS-as a tentative first step-to call attention to wage and price decisions Nixon considers inflationary. But many believe that, ultimately, he will have to get even tougher if the cost-push spiral continues by returning to the percentage-type guidelines approach of the previous Democratic era.
Some think that the President may ask unions to curb the size of their wage and benefit increases to a percentage figure. He would address himself to big unions in big industries, which have the power to make big hikes stick. He would ask business not to zoom prices. The hold would last 18 months.
(Continued on page 39)