ECONOMISTS' TURNABOUT
Withers, Professor William
Economists' Turnabout ConservativesWantDeficitSpending, Liberals Seek Balanced Budget By Professor William Withers V-jrjrEADS WE WIN. TAILS WE I I lose." We seem to be at the "flip-of-a-coin"...
...Never were the economic optimists and pessimists more evenly divided...
...William Wilh.r* it professor of •conomici at Quaans Collage...
...For example, there is Senator Paul Douglas, presumably a liberal...
...This present oddity of conservatives taking over withi ut a blush the concept of spending for recovery is ample evidence of the mental etrogression, if any were needed...
...The business man often chooses to "ride out'' a depression rather than prevent it...
...THE OPTIMISTS, usually conservatives, have as the final basis of their faith, (Strangely enough, 'the spending of the federal government...
...He was recently trounced in the Senate by the Republicans and the party Democrats for advocating economy, the elimination of waste, and a balanced budget...
...But the total man-hours worked is a truer basis for figuring employment and that has probably fallen as much as the other business indices...
...In short, liberal political thought has not gone forwf.rd from the New Dec...
...If the New Dealers were ready by now with a Eupra-Keynes liberal economic ideology and a relevant long-run program, they would be more than a match for the conservatives and Henry Wallace alike...
...But the index of employment seems unperturbed...
...This writer tends toward the pessimistic view...
...Once upon a time when demand declined, business men had to reduce prices because of competiUon...
...And personal incomes in 1949 are higher than in 1948, by an estimated 4.8 percent...
...None of the Republicans wanted higher taxes, few feared a deficit like Senator Douglas and only the most conservative wanted to continue with their old economy arguments...
...It seems two can play the same game, after all, I doubt if business worries too much nowadays about an unbalanced federal budget...
...Will reducing the price of a house from $12,000 to $10,999 greatly stimulate demand, when the house was worth $5,000 in pre-war days...
...THE ODD FEATURE of our present situation, however, is the increasing reliance of conservatives on government spending...
...They have a choice now...
...lower prices with sustained sales at lower profit margins, or high prices with high profit margins and reduced sales...
...They could cuiKeynes the New Dealers and regain their lost political power, if they were shrewd...
...half, a temporary moderate recession and a substantial recovery in the fall...
...But human nature is human nature...
...In fact it has become a watered-down anemic version of the New Dea...
...Thoughts, like animals, begin to die, if they fail to grow and develop...
...We try to do the right thing, slip and repent...
...When I hear the optimists say the great need, for automobiles and houses won't permit a depression, I ask, what about the prices of automobiles and houses...
...It can always be relied on to spend...
...The writer strongly suspects the Gurrent estimate that unemployment is only 800,000 above last year...
...the decline is apparent enough...
...The spectacle of Republicans and business men supporting the economic tenets of Lord Keynes and the political adherents of the New Deal favoring the views of Henry Hazlitt is confusing indeed...
...The buyers' strike has forced both prices and industrial production down...
...Another group wants economy, reduced federal spending, and a balanced budget...
...The behavior of liberals and conservatives alike is becoming decidedly confusing...
...When I hear the optimists claim business is now alert to its marketing problem and is reducing prices, 1 am inclined to ask other questions...
...t ONLY THE EXTENT and length of the, present decline are i* doubt...
...The various fundamental economic indices have dropped from 3 to y percent...
...But income and employment figures are likely to be less reliable in reflecting current trends than other types of economic data...
...This rock of ages comes in particularly handy now that monopoly has superseded competition in significant portions of our economy...
...Will the great fall of $10-40 in the prices of pre-war $800-3,000 cars now selling at $1,6005,000 cause a frenzied buying spree...
...production and employment have falllen in consequence...
...The liberal Republicans were for a reduction of taxes, greater spending and a deficit to prevent depression...
...Of course the sensible business behavior at a time like this would be to cut prices, produce better goods and continue capital reinvestment on a large scale...
...of brain-trust days...
...Business men know this and should try to be good and do it...
...Haven't we priced ourselves out of these markets despite the great rise in money incomes since 1940...
...Some even regard it as a neded stimulus to buying power...
...I have had a long and checquered career as an economic pessimist and an incorrigible...
...If governments spends $8 billion more this year, that power will still be in its heaven and all will be right with the economic world...
...And competition is not strong enough to check his tendency, high prices and low volume frequently ensuie greater profits than low prices and high volume...
...New orders for both durable and non-durable goods have been falling oft sharply...
...Granted our frailties of insufficient private and business spending, there is fortunately a great power that watches over us and protects us from harm, the government...
...All manage to agree that the postwar boom is aver and that it is now time to take W&us stock of the situation...
...Some of them suggest that business can best be revived through a tax reduction (made possible by expenditure cuts...
...To be sure shorter hours and increased part-time employment are holding the technical estimate of employment up...
...Not these days...
...They could easily slough off their Hazlettism too if they thought it politically wise...
...Just how long will the Roosevelt names and the tradition of the New Deal substitute in political effectiveness for a new progressive liberal ideology...
...One group seeks to raise federal appropriations, opposes an increase in taxes, and doesn't worry about a probable $2-4 billion deficit...
...We seem to be at the "flip-of-a-coin" stage oi economic events...
...The ambivalence of the economists is paralleled by an ambivalence in Washington on economic policy, primarily over the federal budget...
...In similar situations in the past the latter alternative has been preferred...
...The New Dealers might then be in the peculiar predicament of supporting classical economics"to stand by their record...
...Taxes are their worry...
...They expect only a slight recession and the subsequent reappearance of dangerous inflationary tendencies...
...They doubt that prices will fall enough to restore purchasing power...
...Hall predict an appreciable, indefinite depression...
...Forced into high taxation and budget balancing by inflation the political New Dealers can be easily confounded by conservatives citing Keynes, if they do not go beyond Keynes...
Vol. 32 • June 1949 • No. 25
