Kennedy's Economics:

...If the economy droops or, worse, fails to respond to mild medication, there is every probability that practical politics will demand strong remedies...

...One of the youngest appointees, he established a formidable record as a technician in the intricate affairs of the bureau during a previous spell of duty...

...Insofar as they stimulate business and consumer borrowing, they add to the stream of demand for a wide variety goods and services, put idle men and machines back to work, and substitute expansion for contraction...

...and the major countries of Western Europe...

...Since it is conservatives who believe most strongly in the central role the consumer plays as the free allocator of resources, tax cuts should be welcome...

...Secretary of the Treasury C. Douglas Dillon's background is that of the intelligent conservative...

...Robert Roosa, the new Under Secretary for Monetary Policy, has been most recently vice-president in charge of research at the Federal Reserve Bank of New York...

...In a number of industries, among them autos, steel and electrical equipment, European and Japanese price competition poses a serious threat to domestic producers...

...For a number of years he administered the Federal Reserve System's purchases and sales of Government securities, a vital tool of monetary policy...

...His PhD...

...In the rarefied world of central banking, this posture makes Dr...

...The report would grant the President authority to select (within a range) the number of percentage points by which withholding might drop, to choose the starting and terminating dates of the reduction, and to alter the size of the reductions at short notice...

...In that dreary month 6.8 per cent of the labor force was jobless, and the actual number of unemployed — 4.5 million — was the largest for any December since 1940...

...As James Reston has observed, the last reports of the Eisenhower study groups were scarcely filed before the first reports of the Kennedy commissions began to roll in...

...President Kennedy has not lacked advice...

...The first bundle of measures combines some easing of credit with stimulus to residential construction and improvements in the unemployment compensation system...

...Recession has hit steel, autos, appliances, and now clothing very hard indeed...

...Very shortly we shall know...

...repeated efforts to aid these areas by grants, retraining allowances and new industry will no doubt become law...

...For strictly domestic reasons, lower interest rates are of course now desirable...

...Burns was probably its most influential chairman, because Eisenhower admired and trusted him...

...it was 3.6 per cent only a year earlier...

...Even in the absence of further general contraction, normal seasonal factors hold out still worse prospects for the immediate future...

...The American structure of prices and costs is a second limitation upon economic free will...

...Kermit Gordon, the third member, is also on the liberal wing of his profession...

...This is all to the good, but it does not answer the important question...

...While the proposal makes excellent economic sense, it is doubtful, to say the least, that Congress can be persuaded to surrender even this much of its fiscal control...

...With the threat of veto removed and a recession at hand, Senator Paul Douglas' (D.-I11...

...comes from Harvard...

...In our enlightened day the magic economic remedies are well-known: lower interest rates, tax cuts, enlarged public spending...

...A President can always ignore an adviser...

...He is on public record as an opponent of Federal Reserve Chairman William McChesney Martin's "bills only" policy, which limited Federal Reserve operations to short-term securities...

...It is greatest when the Director combines conservative prejudices and accounting skills, as did the last two Eisenhower appointees, Percival Brundage and Maurice Stans...

...The proposal is far from radical...

...But even where the generalized weapons of monetary and fiscal policy might reasonably be expected to be effective, discretion is enforced by the facts of the United States position in the world economy...

...A million men and women have been out of work 15 weeks or more...

...Robert Lekachman, who is an associate professor of economics at Barnard College, is the author of A History of Economic Ideas (1959...

...Should the economy fail to respond adequately, Samuelson's second line of defense is a general cut in personal income taxes...

...Coal miners do not easily find jobs in oil refineries, and the residents of Maine do not readily move to Alabama...

...And there are signs that our largest corporations are deciding to fight on their rivals' home grounds rather than in the United States, adding yet another blow to our battered balance of payments...

...In the 15 years of the Council's life, Dr...

...The danger is only slightly smaller if the Director conceives his job only in the narrowest sense of financial watchdog...

...The new members of the Council of Economic Advisers are a considerable contrast...

...Indeed, the consumer price index is still slowly edging upward...

...In Dillon, Bell and Roosa, President Kennedy appears to have appointed three men to key operating posts whose views are either conservative or conjectural...

...The higher European rates have tempted the holders of short-term funds to transfer them from American banks to Swiss, West German and English banks, limiting American freedom of financial action...

...But the view should not be confused with any Galbraithian grasping of the opportunity to reallocate resources from trivial private to important public purposes...

...As his background suggests, he strongly endorses the continued independence of the Federal Reserve System...

...On the other hand, his Senate testimony two weeks ago was remarkably open-minded...

...At the moment, the major constraint on domestic action is the highly unfavorable balance of payments and the continuing outflow of gold...

...While inflation in recent months has ceased to alarm even the conservative press, prices show no tendency to recede from the levels which they reached after years of steady rise...

...Starting downward from the sluggish and incomplete 1958 recession recovery, the economy appears gently but inexorably to be slipping still further downward...

...In the meantime we can only look for clues in his appointments...

...Kennedy's Economics By Robert Lekachman Current recession provides first test of new President In the words of Paul Samuelson, chairman of the President's study group on the prospects of the economy, "Economic experts are generally agreed that the nation's economy is now in a 'recession.' " If the proposition demands reinforcement, the Labor Department's December report should be ample for the most skeptical...

...it is less easy to neglect a key operating official, although Franklin Roosevelt in the case of Cordell Hull and others showed that it could be done...

...If the economy recovers rapidly, then the real proof of the President's economic liberalism will come with his first Economic Message to Congress in a year of prosperity...

...Despite a few pro forma objections from economic fundamentalists, tax cuts in recessions have won the support of almost all economists...

...In fairness to Bell and Roosa at least, the lack may have been one of opportunity rather than of choice...

...Professor Walter Heller (who does not bear the Harvard seal of approval) is a tax authority who favors closing the tax loopholes, active manipulation of the tax structure in the interests of economic stability, and a vigorous role for government...

...After a career in investment banking, he entered the Eisenhower Administration as Under Secretary of State for Economic Affairs...

...When the figures are in, the roll will probably mount to 5.5 million in January and 5.6 million in February...

...Caution and experiment are the recommendations, and the policies come in three stages...

...In itself a tax cut is a highly conservative device, for it seeks to enlarge national spending not by enlarging Federal spending but rather by allowing individuals to spend more of their own incomes...

...As far as economic affairs go, the most important jobs are in the Treasury, the Bureau of the Budget and the Council of Economic Advisers...

...Roosa something of a liberal...

...Distinguished specialists have advocated housing expansion (the McMurray committee), tax reform (the Surrey committee), Federal aid to education (the Hovde committee) and assistance to depressed areas (Senator Douglas' committee...

...The Council, as constituted, is a report-writing and statistics-gathering body...

...He did not reject tax cuts or even revisions in oil depletion allowances...

...What is novel in the Samuelson tax proposal is the discretionary authority wielded by the President...

...Unemployment, moreover, has long since passed the point where it afflicts principally marginal workers...

...While the causes of this unfamiliar situation are complex and American gold stocks are much too large for panic, two facts are established: The gold drain cannot be permitted to continue indefinitely, and one element in its continuance is short-term interest rate differentials between the U.S...

...But, as always, real situations make the remedies difficult to apply...

...Among married men unemployment in December averaged 5.1 per cent...

...Professor David Bell arrives at the Bureau of the Budget from Harvard...

...Samuelson advises an even longer postponement of extensive programs of public works, the third and most potent of the economic medicines...

...It involves technological and geographical shifts to which human responses have been slow and incomplete, such as the substitution of fuel oil for bituminous coal, and the migration of textiles from New England to the South...

...Even so, his word carried much less weight than the judgments of George Humphrey and Charles Anderson, the successive occupants of the Treasury...

...Unemployment will not yield completely to general financial and fiscal remedies because it is partly structural rather than cyclical...

...However, it is doubtful whether his general economic opinions lead to more active economic policies than those of his immediate superior...

...At best, then, the omens are cloudy...

...His public utterances have breathed the Eisenhower ethos: He longs for balanced budgets, fiscal responsibility and restrained government...

...There is always danger to liberal policies in the Bureau of the Budget...

...Common human decency should suffice to eliminate some of the worse features of our unemployment compensation arrangements — the meager payments, the waiting periods, the wild variation of eligibility provisions, and the unrealistically short benefit durations...

...What finally happens probably will be dictated by the events of the next months...

...None comes to his work with a consistent record of liberal thought and action...

...If there was a touch too much of the tendency of the Eisenhower Era to study difficult issues a while longer before acting, the delicate circumstances of his recent position and present appointment may temporarily serve as a sufficient excuse...

...In the 1958 recession a leading tax-cut advocate was Arthur F. Burns, fresh from his service as Chairman of the Council of Economic Advisers...

...But if a new administration reduced interest rates its action would almost surely increase the gold drain, especially if the international financial community interpreted easy money as the prelude to domestic inflation or even dollar devaluation...

...In good part, they deserve support as much because of their social and moral merits as because of their economic efficacy: Our cities are a standing disgrace...

...While it is all to the good that he will know his way around without the necessity of a guide, his opinions on economic policy remain a question mark...

...It is hard, again, to quarrel with the good sense of this view, at least from the single technical standpoint of ending a recession quickly...

...A second member of the Council, James Tobin, is a strong proponent of economic growth, an authority on Keynesian economics, and a master of the latest mathematical gadgets...

...The test of Presidential leadership is not willingness to end a recession, it is willingness to affront vested economic interests...

...What does Kennedy plan to do with this mass of expert opinion and how does he plan to do it...

...The solution to unemployment in depressed areas is slow and complex...

...His service as Orville Freeman's adviser in Minnesota implies that he is not a political innocent...

...In these circumstances, the sober tone of Samuelson's report to the President should not astonish anyone...

...It is likely that Congress will pass a good many of these measures...

...These measures are part of the unfinished business of a Congress which was ineffective in both its regular and its special sessions...

...If it is anything more, it is only because a President makes it something more...