Masonry Magazine February 1972 Page. 21
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The economy isn't going to get much additional push from President Nixon's enlarged budget deficits. Economists just can't see all the thrust that the White House is expecting from the $39 billion deficit. To be sure, some further stimulus appears to be needed at this time. The current upturn in business activity has not been showing all the vigor economists expected.
To be sure, recent economic statistics feature a number of plus signs. Business activity has been on a steady uptrend for some months. But there has been little evidence of a really vigorous upturn. Consumer spending is still rising moderately. And business continues cautious on investing.
The economic picture must be kept in perspective, the economists say. The strengths predominate, of course, but simply not all that vigorously. On the plus side, economists note steadily increasing retail sales volumes. This has helped push up new orders and has nudged up capital spending plans. Also, housing starts keep zooming along at a record clip, month after month.
Government fiscal and monetary polices have been major assets, too-the 1971 tax cuts and the moderately expansive push for money-supply growth by the Federal Reserve System.
The dissatisfaction centers on the failure to start a chain reaction of really strong consumer buying leading to a surge of inventory-building. None of the remedies has really seemed to work so far to kindle a real boom. The signs of strength have generally appeared to lack a good follow-through. Car sales jump-then slow. Christmas sales were fine for some but not all.
Unemployment remains too high, with little improvement in sight. New jobs are created, but the labor force grows, too.
Many private economists are starting to shade down their forecasts for this year, though this fact has not received very great publicity. They are still not prepared to change the numbers in their projections, but there has been a distinct decline in the confidence they are feeling. If this trend continues, the experts would soon be lowering their sights.
They would have to cut the boost they expect in Gross National Product the total output of goods and services-from the $100 billion being forecast by government and private economists.
Economists see a number of flaws in the President's plan to stimulate the economy through deficit spending. Most analysts simply do not see how all the extra $9 billion increase in the deficit can be spent by June 30. Federal outlays have a momentum of their own -changing the rapidity is very difficult. Defense spending is the easiest type to accelerate. But it has been lagging behind schedule and will have to be pushed even harder to reach the target.
What's more, the budget counts on passage of revenue-sharing, retroactive to January 1, to push $2 billion into the economy. Congress may pass a bill by June, but without retroactivity.
So instead of a $39 billion deficit, the red ink may turn out to be only $33 to $34 billion when fiscal 1972 ends.
The President means to get business moving at a faster pace, though. He leaves little doubt about that. He has acquired a taste for activism... as the Peking-Moscow trips, dollar devaluation and wage-price controls show. And he will take further drastic steps-maybe more tax cuts if necessary. This is an election year, and a lagging economy is no asset for a candidate.
The state of the economy will be a major political issue during 72. But it is not at all clear that the Democrats can get much mileage from it, with President Nixon taking important steps to claim the issue for himself. The pocket-book issue has done well by the Democrats in many past elections. People tend to credit them with an ability to keep jobs and income rising. History seemed ready to repeat-until the President changed his game-plan, the New Economic Policy aimed at boosting business and curbing inflation.
The economy's performance will determine who will capture the issue. At the moment, many business analysts believe neither party will be helped. It looks as though 1972 won't be better enough to make the President a hero. But business won't be sick enough to spark a rush to the Democrats. In other words, the economy issue could be neutral-a political stand-off.
The much-discussed value-added tax is dead-for 1972, at any rate. The Nixon Administration has decided to make a six-month study of the plan. Even if it then decided to propose it, Congress couldn't take action in 1972. The new tax holds out the promise of