Masonry Magazine September 1972 Page. 8
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THE POSSIBILITY OF RENEWED INFLATION IN 1973
is worrying economists in government and industry. They see many ingredients for a replay of the boom of the late 1960's. Business activity is gaining new strength with each passing day. And it will be getting additional thrust from rising government spending. What's more, wages could well start rising again.
The President is trying to head off the danger of reviving inflation. He is working to hold down Federal spending and tighten the controls program. Administration officials are growing hopeful that these actions will prove successful.
Renewed inflation in 1973 is still only a possibility, not a certainty. Any number of things could occur to change the economic outlook next year. But the concerns about inflation are deep and nagging... and realistic, too. Economists feel that there is a danger of an old-time, speculative blow-off.
THERE ARE STILL SOME DOUBTS ABOUT THE SUCCESS
of the fight against inflation. To be sure, the slowing in consumer prices has been encouraging. But economists fear the better price performance may be only temporary. Rents and utility-rate increases have been lagging and are sure to catch up. Food prices, of course, are very volatile. They could always turn up again.
THERE IS GOOD REASON TO EXPECT BUSINESS TO KEEP EXPANDING
into 1973. Economists are predicting that inventory accumulation will start to catch up with the general economic advance, after lagging for much more than a year. Industry is only just beginning to add significantly to its total stocks-a trend that could continue and gain strength through 1972 and next year. And spending for new plant and equipment is expected to climb more in 1973. In short, business investment could readily reach boom levels next year.
A brisk rise in business spending will create jobs and raise earnings. The unemployment rate could well fall below 5% in 1973. What's more, disposable income will be registering big advances both from the boost of Social Security benefits and from large tax refunds. Consumers should be in an optimistic mood, with their increased incomes, stimulating demand further.
THERE'S FEAR, TOO, THAT THE TRANQUIL LABOR CLIMATE MAY END
next year. Collective bargaining under major contracts will cover 4½ million employees, up from this year's 24 million. The big profits industry is reporting, and the fat contracts won by municipal employees, will whet union appetites. It is the big, militant, pattern-setting unions that will be bargaining, too.
FEDERAL SPENDING WILL BE PUMPING UP THE ECONOMY
further in the next several quarters if the Federal deficit exceeds $27 billion, as threatens. The implications of a Federal budget deficit of, say, $35 billion are grave. That much of an excess can boost total demand much too rapidly for comfort.
Specifically, excess stimulation will be developing from many sources like the 20% increase in Social Security benefits that begins this fall and disbursements in the fourth quarter under revenue-sharing legislation. The Congress is voting many programs that top Nixon's request.
THE WHITE HOUSE IS MOVING TO CUT THE STIMULATION
to curb spending. The President wants a tight spending ceiling of $250 billion. His lobbyists on Capitol Hill see a good chance he will get it. Nixon vetoed the Health-Education-Welfare bill-and will reject others exceeding his requests. Also, the controls program will be tightened the wage and price standards. A tough stand by Nixon could have a sobering effect on public psychology-and, perhaps, tone down some of the thrust in the extra fiscal stimulation.
Then, too, maybe tax liabilities will prove bigger than now estimated, so that tax refunds to be paid out next spring won't be so large. Hopefully, a good part of the refunds will go into savings and not be spent. What's more, the President could always reverse his strong opposition to a tax increase.
BUT WILL THESE ACTIONS BE ENOUGH TO HEAD OFF
a return of inflation? Nixon cannot be sure of success with a stricter wage-price control program, especially next year, when it must cope with that rapid business expansion. No tax increases could be approved by Congress until well into next year and by that time the damage from renewed inflation may have gone quite far.
Net, it will take a lot of luck for the President to avoid a blow-off. Many economists believe that much depends on whether there's a spending limit to hold the deficit down.
PRO-CONSUMER LEGISLATION APPEARS TO BE IN DEEP TROUBLE
in Congress, a drastic switch from the very favorable outlook of only a few months ago. The consumer measure was moving along nicely in Congress earlier this year. The bill would authorize Federal standards for warranties on most products, and strengthen Federal Trade Commission powers on behalf of consumers.
(Continued on page 28)
masonry • September, 1972