America's Economy: Failure and Potential

...So far, our postwar experience has been that each recession has cut more deeply than the one before...

...Consumer buying has risen, but not as fast as most businessmen had expected...

...An adequate money supply and lower interest rates on loans must be provided to encourage maximum production and employment...

...Defense expenditures must also be raised, if necessary...

...These policies must be reversed swiftly...

...Economic growth has barely managed to keep ahead of the rate of population increase...

...According to the U.S...

...Are there other economic forces that can be expected to boost sales, production, incomes and jobs through the year, in order to offset the end of the inventory build-up...

...Department of Labor, productivity rose by an average yearly rate of 3.5 per cent between 1947 and 1958...

...For the second time within the brief lifetime of the present Administration, we have moved out of a recession into a "recovery" that is no true recovery at all...

...Continued Government efforts to suppress economic growth in the years ahead can result only in increasing national troubles, both at home and abroad...

...before the last recession started...

...Steel inventories, however, increased at a very rapid rate in December and January and production schedules are being eased earlier than expected...

...According to the Labor Department, the labor force is expected to grow by about 1.2 million a year between 1960 and 1965—an average yearly rise of approximately 1.5 per cent...

...Production cutbacks in February have already resulted in reduced earnings...

...At home we see the paradox of a great backlog of unmet needs, both public and private, side by side with the highest plateau of unemployment during any so-called "recovery" year of the postwar period...

...The assault against economic growth, in the name of combating the phantom of runaway inflation, centers around the following misguided policies: tight money and high interest rates, restrictive Federal budgets, unbalanced tax policies which bring special benefits to wealthy families and corporations and a stepped-up attack by parts of the business community on trade unions and collective bargaining...

...It is unprepared at present to counter a recession if one occurs, since it has at hand only inadequate tools...

...More and more young people are entering the job markets...

...The fact is that in recent years our economy has failed to make any substantial progress...

...They should be adopted promptly, in view of present trends...

...have not been reflected as they could be in expanding production and jobs, but to a substantial extent have resulted in spreading unemployment...

...Wage and salary increases are needed...

...and in the second half of the year about 60 million tons, with operations at approximately 80 per cent of capacity...

...The vast steps forward in science and technology which have been achieved since World War II could help us to build an economy of abundance for the first time in human history...

...What we have lacked is leadership—with the vision to recognize the possibilities before us...

...National needs must be met by expanded and comprehensive Federal programs of direct financial assistance, grants-in-aid to states and local governments and long-term, low-interest loans to improve such public services as education, health, community facilities, urban redevelopment, low- and middle-income housing, the conservation and development of natural resources...

...These policies, in combination, have meant a continuing curb of the rise of sales, production and jobs...

...A rapid rise of consumer buying throughout the year is far from assured...

...If the economy is to continue to expand through 1960 and avoid a recession, dynamic programs to sustain economic growth and to meet national needs are required quickly...

...An increasing number of economic activities may be curtailed at about the same time that the inventory build-up ends...

...William F. Butler, vice president of the Chase Manhattan Bank, for example, recently told the American Petroleum Institute to "watch with increasing vigilance for signs of the next recession as we move through 1960 and into 1961...

...What we need most of all is a decisive change to national policies that are firmly rooted in an optimistic faith in America's ability to solve its many problems...

...The large corporations, with their huge financial resources and great cash flow, are immune to early effects of a tight-money squeeze...

...The tax burden on low-and middle-income families should be reduced...

...A comprehensive, national shelf of public works programs should be established now, to be put into operation promptly when a recession starts...

...They have meant curbs on Government spending, although there is great need for improvements in national defense and public services, as well as for a rapidly rising demand for goods and services...

...Business investments in new plant and equipment—particularly the investments of large corporations—are expected to rise 14 per cent in 1960, according to recent Government estimates...

...The Social Security Act should be amended to provide increased benefits and hospital and medical care protection to those who are eligible for old-age and survivors' insurance...

...At the start of 1960, steel industry leaders reported that they expected the industry to produce about 70 million tons in the first half of the year, with operations at approximately 93 per cent of the industry's capacity to produce...

...The outlook for 1960...

...The great increases in output per man-hour of work, which have been made possible through technological progress, WALTER REUTHER, who is a vice president of the AFL-CIO, is the president of the United Automobile Workers...

...Outstanding installment credit rose by a record $5.4 billion between December 1958 and December 1959...

...A 5 per cent average yearly pace of economic growth will enable us to wipe out the remaining pockets of poverty and economic distress, while we improve living standards generally...

...Construction programs of many state and local governments are being curtailed or postponed because borrowing has become too expensive...

...Our potential for growth is greater than ever before...

...And since the 1958 recession, unemployment has failed to decline to pre-recession levels...

...Primarily, the Administration's policies have been doomed to failure because they have been based on fear of or hostility to the forces which are vital to balanced growth...

...In the meantime, industry's capacity to produce more goods much more efficiently is expected to continue to rise slowly—as new equipment is added and old equipment is replaced—while sales and new orders for goods may be lagging or beginning to fall...

...All plans for new public facilities, such as government buildings and post offices, should be examined to determine which of them are most readily available for prompt action...

...The tight-money policy had already brought a slump in home building in 1959...

...Such measures to strengthen the economy are needed, whether or not one believes that a general economic decline may occur within the near future...

...The January-March production schedules, therefore, were not expected to be maintained through the year...

...Federal technical aid should also be made available to the states and local governments to establish shelves of public works programs there...

...Thus, after the early months of 1960 the economy appears to be headed for a decided slackening in the rise of sales, production, incomes and jobs, and for a widening gap between productive capacity and sales...

...I would suggest the following: • The policy of tight money and high interest rates must be halted...

...Federal Government assistance for the increasing number of economically distressed communities is essential—to attract businesses to establish new operations in such areas, to retain workers in new skills, and to assist businesses in such communities to change their production for markets that are expanding...

...Last year, there were 69.4 million people in the labor force—at work or looking for jobs...

...Despite the slowdown of economic growth in the past six years, output per man-hour of work in the postwar period has risen faster than in earlier periods...

...At the same time, it will enable us to make vast strides in improving public services and national defense, and to provide more adequate development funds to aid the less-developed nations of the world to advance in freedom...

...Furthermore, the increase of consumer credit, which supported a considerable portion of the rise of consumer spending in the past year, may begin to taper off in the months ahead...

...In addition, the Administration has insisted on producing a budget surplus in the fiscal year ending June 30, 1961...

...As a result, cutbacks of auto production schedules started in February and industry spokesmen are reducing their 1960 sales anticipations...

...The buying power of a factory worker's average straight-time hourly earnings has slowed down to an increase of only 1.6 per cent a year in the period 1956-59, from a pace of 3.3 per cent a year in 1953-56...

...Sales, production and incomes rose rapidly between November and February, as business rebuilt inventories of steel, steel products and autos which were reduced during the steel strike...

...With the Federal Reserve System's re-discount rate at 4 per cent and the prime interest rate for the best credit risks at 5 per cent, interest rates for home-buyers, small businessmen, farmers and consumers generally were 5.5 per cent, 6 per cent, 7 per cent or higher...

...Unemployment has risen and there have been considerable amounts of idle productive capacity...

...At the beginning of each year, the President's Council of Economic Advisers should present to Congress and the American people the objectives and policy guidelines that should be sought, in each major group of economic activities, to sustain balanced economic expansion of 5 per cent a year and full employment...

...A recession in 1961, if not earlier, is already being generally predicted by economists...

...Business today is in a state of jitters, climaxing a very shaky "boom" which threatens to be nothing more than a period between two recessions...

...Here are some of the steps that I think should be taken in this area: • The unemployment insurance system, which offset approximately one-fifth to a quarter of the decline of total wage and salary payments during the last recession, should be improved...

...Additional cutbacks, as the inventory build-up tapers off, will mean lower incomes for hundreds of thousands of workers...

...Farm investments in construction and new equipment will probably slip in 1960 as a result of the combined effect of tight money and declining farm incomes...

...The number of unemployed rose from 3.1 per cent of the labor force in 1951-53 to 4.3 per cent in 1955-57—indicating the economy's failure, after the 1954 recession, to create a sufficient number of new jobs...

...In the name of fighting a non-existent runaway inflation, the economy has been squeezed by restrictive policies in recent months, despite continuing high levels of unemployment and persistent idle productive capacity...

...Growth of the nation's labor force, as well as its productivity, is speeding up...

...The basic essential for growth in our economy is a steadily increasing demand for goods and services...

...Such quick action, at the beginning of a general decline, would stimulate the demand for construction materials and heavy goods when those industries would be weakening, and it would increase employment opportunities...

...They have meant curbs on the private economy, which accounts for the sale of 80 per cent of the nation's total production, and a lack of balance between the economy's improving ability to produce and its lagging ability to consume...

...In the past several months, the average number of jobless has been over 5 per cent of the labor force—considerably greater than it had been prior to the 1958 recession...

...Steel industry spokesmen have already trimmed their forecasts for 1960...

...The economy never fully recovered from the 1954 recession...

...The most optimistic industry leaders, however, who expected auto sales to be about 7 million in 1960, included approximately 500,000 imports...

...Despite this rise of economic activities, the number of non-farm wage and salary jobs in February was less than 1 per cent greater than in July 1957...

...Abroad, at a time when emphasis in the world contest is shifting increasingly to the economic sphere, the economic power of the Soviet Union is growing rapidly, while our own economic growth is lagging far behind...

...The restrictive squeeze on economic growth is making itself felt now, as it did in 1956 and early 1957, before the last recession—by curbing the rise of spending of most private groups and state and local governments, while the obsession with budget balancing curbs Federal expenditures...

...We should move without delay to adopt measures designed to minimize the impact and shorten the duration of further declines in economic activity...

...Madison Avenue told us for many months that the new decade will be "The Golden Sixties...

...On the basis of present trends, therefore, most lines of economic activity will be rising slowly or declining after the early months of the year, except for the investments of large corporations in new plants and equipment...

...Planning, blueprinting and land purchases for such programs should be done before a recession starts...

...The adoption of Federal standards to increase benefit levels and the duration of unemployment insurance payments would aid unemployed workers and their families and improve the counter-recessionary effect of unemployment insurance...

...It means, too, a further discouragement of the rise of sales, production and jobs at a time when additional public services, as well as rising job opportunities, are needed...

...We have at hand the physical means and the technical skills to make this age-old dream of abundance come true...

...Such a development would mean a slackening of consumer buying of expensive hard goods when other economic activities are slowing down, unless there is a substantial rise of buying power...

...State and local government spending is scheduled to continue to rise through 1960...

...Moreover, the signs clearly portend that unless there are vigorous and immediate changes made in our national economic policies, we shall soon be staggering into another recession...

...Little if any push to economic activities is expected from Federal Government expenditures...

...Policies to sustain growth through 1960...

...In the following five years, between 1965-70, the Labor Department expects the labor force to expand by 1.4 million a year or an average rate of about 1.75 per cent a year...

...Long before anything approaching full employment could be attained, the Government applied stringent curbs on economic progress...

...But this Administration has interpreted every expansion of demand as a threat of inflation, something to be curbed by Federal policies rather than stimulated and encouraged...

...It cannot be expected to rise at anything like that pace indefinitely...

...But production soared, while sales lagged and auto inventories became the greatest on record...

...These are the same policies that have produced two recessions in the past seven years and have dangerously cut down America's average rate of economic growth from 4.7 per cent a year in 1947-53 to 2.3 per cent a year in 1953-59, while the volume of total production in the Soviet Union has risen 6-7 per cent a year...

...No nation is better equipped to meet the new and challenging responsibilities that have been thrust upon us as the major power of the free world...

...Why have the policies of the current Administration failed so miserably to maintain the economic health of our nation...

...These investments, with an emphasis on cost-reducing automatic and semiautomatic equipment, will probably continue to rise during the year, adding to the demand for goods and services...

...By Walter Reuther AMERICAS ECONOMY: FAILURE AND POTENTIAL OUR COUNTRY is failing to measure up to its economic opportunities at home and failing to respond to the economic challenge that faces us abroad...

...Total government outlays—Federal, state and local—will rise during the year, adding somewhat, but not greatly, to the nation's total demand for goods and services...

...America has the human resources, the skills and ingenuity, the productive power and the democratic traditions for a society of economic abundance and freedom...

...Along with growth programs the country needs counter-recessionary programs...

...In fact, the combination of accelerated productivity and a growing labor force will enable us to achieve a 5 per cent growth rate even as we progress in reducing annual hours of work per employed person, through lengthened vacations, increased number of holidays and shortened work weeks...

...In early 1960, the money supply was tighter than at any time since the late 1920s...

...But by the middle of February this "boom" began to falter...

...Installment buying may taper off at about the same time that inventory build-up ends...

...With a step-up in both productivity and the labor force, continuation of a snail's pace of economic growth in the 1960s will mean a continuing rise of unemployment and mounting social and economic problems...

...Fuller utilization of the nation's productive capacity means that output per man-hour of work can rise at an average pace of 4 per cent or more a year in the period ahead...

...It is for these reasons that many conservative business and university economists predict a recession in 1961, if not earlier...

...Balanced economic growth of 5 per cent a year and full employment should be established as the goal of national economic policy...

...Thus, the decade of the 1960s can indeed be golden, if we, as a nation, use our human and material resources...

...Loopholes in the tax structure that permit special privileges for wealthy people and corporations should be eliminated...

...Provision should be made for long-term, low-interest loans to help execute such projects at the state and local level...

...That means the Government will be taking in more money than it spends...

...The Fair Labor Standards Act should be amended to extend that law's coverage to millions of unprotected low-wage workers and to raise the Federal minimum wage to $1.25 an hour...

...If the tight-money squeeze continues, it will gradually curb the purchases of small businessmen, farmers and consumers...

...We must face up, however, to our national responsibilities in the second half of the 20th century...

...As the new year started, the auto industry scheduled the production of 2.2 million passenger cars in the January-March quarter...

...If we permit a recession to develop, it might be the sharpest and deepest we have experienced since the 1930s...

...Accelerating advances in both our productivity potential and the size of our labor force makes a 5 per cent economic growth rate not only feasible but urgently necessary...

...An accelerating pace of advancing output per man-hour of work at an average yearly rate of 4 per cent or more, plus a stepped-up rate of labor force growth of 1.5 per cent to 1.75 per cent a year, makes it entirely feasible for the nation's total production of goods and services to rise at an average annual pace of 5 per cent...

...America needs a much faster rate of economic growth than in the past six years—to provide the extra margin for adequate national defense, public services for a growing population, social and economic adjustments to automation and rapid technological change, the elimination of poverty and economic and technical aid for the less-developed, uncommitted nations of Asia, Africa and Latin America...

...With the inventory build-up already beginning to ease and with home building in a slump, what other economic factors can be expected to carry economic activities forward to the end of 1960...

...Continuing improvements in wages and salaries are needed, particularly for low-wage workers...

...After accounting for a growing population, per capita total production in the United States has been squeezed from an average growth rate of 3 per cent a year in 1947-53 to only .6 per cent a year in 1953-59—merely one-seventh the rate of the Soviet Union...

...A revision of the Federal tax structure is required to provide more equitable and balanced means for raising needed Federal revenues...

...We are now 20 years past the date when the birth rate began to rise...

...New housing declined from a yearly rate of 1.4 million early last year to 1.2 million in the October-December quarter, and it is expected to decline further in 1960...

...We can achieve abundance...

...An early end to the inventory build-up can be seen in steel and auto industry reports...