Prospects for '64

...In any event, the more sympathetic Johnson may be more successful in promoting Kennedy's economic policies than was their author...

...Here the President's approach was experimental and imaginative...

...On behalf of the Council of Economic Advisers, Walter Heller anticipates a 5 per cent rise in GNP during the year if the tax bill passes Congress, and 4 per cent even if it does not...

...The Trade Expansion Act, the Area Redevelopment Act, and the Manpower Retraining Act (which has just received an enlarged appropriation) all contain programs for retraining of unemployed or displaced workers in more marketable skills...

...In actual practice, many Administration actions and proposals were aggregative in emphasis...

...The Trade Expansion Act proposed to expand domestic employment by widening international trade...

...In the sober aftermath of November 22, it is all the more desirable to see what these policies amount to and what pattern emerges from the legislative proposals and executive initiatives of the three Kennedy years...

...The likelihood is that business investment, especially if the tax bill is passed early in 1964, will rise enough to make the year free from recession...

...I think that it is a mistake to conclude that this program was a failure, at least on economic grounds...

...Perhaps unavoidably, the possible benefits of the favored measure came to be exaggerated and the importance of other measures deprecated...

...This is the more likely because of the generally favorable impression that President Johnson has made on the business community...

...Certainly the 1963 record justifies business optimism...

...And in much the same way the liberalization of depreciation allowances, promulgated this past summer in the form of a complete revision of the Internal Revenue Service's celebrated "Bulletin F," encouraged global expansion in the acquisition of tools and equipment in the implicit hope that multiplier effects would increase national income and total employment by some still larger percentage...

...Where it succeeded, the Kennedy legislative strategy mobilized public opinion, organized private groups, enlisted existing organizations, and deployed Presidential persuasion behind a single measure at a time...

...Political reality usually compels an American President to present his policies piece by piece and to justify them by any argument which is likely to win public and Congressional approval...

...With a single exception, the National Bureau of Economic Research's 12 leading indicators are also pointing upward...

...Myrdal's point has been a simple one: It does no good to retrain workers unless the economy expands enough to offer them jobs...

...High unemployment continues as the major blemish upon a prosperous outlook...

...But the history of these surveys implies that they are accurate in their analysis of the direction of change and conservative in their estimates of the amount of change...

...In November it rose to 5.9 per cent, and none of the economic forecasters anticipates that in 1964 economic expansion will reduce unemployment below the 5-6 per cent range within which it has fluctuated during the last few years...

...What is more, they have been hampered by operation within an inadequately expansive economic climate...

...But another point is perhaps less plain...

...Although the Presidents initial attempt to persuade Congress to support secondary and primary education foundered on the shoals of religion, states' rights, and segregation, the effort was based on the recognition that improvement in the quality of the general skills of literacy and computation was the best assurance against unemployability in a world which compels the successful worker to change his job several times in his career...

...What does all this amount to...

...Although no rational businessman could have concluded that President Kennedy was hostile to business, the allied business judgment that he was not really one of them was justified enough...

...Hence job retraining, vocational education, relocation allowances, and expansion of education of all varieties at all levels are essential complements to policies which aim at the expansion of the aggregate demand for goods and services...

...the economic forecasters are in remarkably close agreement about the probable behavior of the American economy in 1964...

...If the Kennedy Administration achieved no more in its economic policies, at least it began to offer the prospect of a sophisticated set of measures which reflected the best that the conventional economic wisdom of the 1960s has to offer...

...Actually, in recent years the influx of young people into the labor force has been comparatively moderate as a consequence of the low birth rates of the 1930s and the somewhat higher rates of the early '40s...

...Throughout his three years in office another economic pressure operated upon President Kennedy: the persistently adverse balance of payments and the continuing drain of gold to Western Europe...

...Moreover, another year of economic expansion will make the 1961-64 upswing the longest rising phase of a business cycle that the country has enjoyed in the postWorld War II era...

...Should performance match expectation, average family income will rise in 1964 to $6,400...

...While I am inclined to agree with Hans Morgenthau in his recent judgment ("Significance in History," NL, December 9) that contemporary economic doctrine is inadequate to cope with the combination of challenges which automation, rising population, poorly designed vocational and general education, racial discrimination, and inadequate demand have thrust upon American society, I think that it is equally important to realize that no American Congress has been willing to give the policies which current economic theory implies anything like a fair trial...

...The Prudential Insurance Company's careful projection of economic trends reaches the same conclusion as Dr...

...Heller's—a rise of some $34 billion in GNP, from 1963's $583 billion to 1964's $617 billion...

...Thus in the past year concentration on tax reduction was almost bound to create the impression among non-economists that tax reduction was the cure-all of the age...

...Allowing for price increases of 1.5 per cent, such a change implies real growth at a rate of 4 per cent, by historical standards a creditable year-to-year movement...

...The President seems never to have been convinced by those who insisted that enlarged aggregate demand would wipe out unemployment, any more than he was persuaded that unemployment was entirely structural, the effect of a mismatch of available jobs with the available skills of the jobless...

...The famous wage and price guidelines which appeared in the 1962 Economic Report were designed to keep American goods competitive in foreign markets, and the President's determination to arrest inflation was demonstrated in his confrontation with Big Steel in April 1962...

...The present proposal to tax foreign issues was the final evidence of President Kennedy's effort to improve the balance of payments position without damaging the domestic economy...

...This was the technique which won the battle for the Trade Expansion Act and promised to succeed in the struggle for tax reduction, although only at the price of jettisoned tax reforms...

...Yet this is far from the whole story...

...All of this is plain enough...

...But these job retraining and education schemes have been much too small, and have either not been passed or passed only recently...

...Even though the Kennedy Administration fell short of an adequate full employment policy, in its short span it moved much closer than any preceding Administration to a postKeynesian blend of demand stimulation, treatment of the structural elements in unemployment, containment of the balance of payments deficit, and curtailment of price inflation...

...and among economists, that the President had fallen completely under the sway of the aggregate demand, oversimplified Keynesian theories allegedly promoted by his Council of Economic Advisers...

...In the third quarter of the year, corporate profits before taxes ran at an annual rate of $52 billion, a new record...

...Indeed, if he adopted anyone's prescription it was Gunnar Myrdal's...

...True, the well-regarded McGraw-Hill survey of business investment plans projects a relatively modest 4 per cent 1964 increase in investment over 1963 levels...

...In October industrial production, personal income, retail sales, and housing starts all touched historic highs...

...Grave enough by itself, unemployment is the more menacing because it is closely linked with the explosive issues of juvenile delinquency, school dropouts, and, above all...

...And by the early '70s, this number will rise to 4 million...

...In the first two months of the new model year, sales were 6 per cent higher than during the same period of 1962...

...The present tax proposal is in itself the most important aggregative attempt to stimulate economic activity which the Kennedy Administration advanced in its lifetime...

...Instead the Administration tried to raise shortterm interest rates in order to attract mobile foreign funds and to keep long-term interest rates low in order to encourage domestic investment...

...In short, an economy which has failed to offer adequate employment for an annual intake of 2.7 million youngsters must now cope with 3.5 million...

...The investment tax credit, authorized in the autumn of 1961, applied indiscriminately to all capital investment...

...At the same time, President Kennedy refused to be panicked into domestic restrictions of government spending simply because gold was leaving the country...

...civil rights...

...Demography makes the prospect still more dismal...

...In Detroit the assembly lines have been running nights as well as Saturdays, and 1963 has been an even better year for the industry than 1962...

...The usually cautious Monthly Economic Leiter of the First National City Bank declares that "President Johnson comes to office at a time when the economy is at record levels with a good deal of momentum for further growth...

...Quite possibly the Kennedy mixture was not enough, but until some more enlightened Congress authorizes a reasonably adequate combination of job retraining, expansion of aggregate demand, and general aid to education, all judgments must be somewhat conjectural...

...The investment plans for 1964 contain an important component of plant expansion...

...The poor articulation of the parts of the actual Kennedy program, the small scale of many of the programs, the belated passage of some of the measures, the mistaken preference for tax reduction over expenditure increase and, of course, the notorious recalcitrance of Congress—all point to the imperfections and the incompleteness of actual economic performance of the Kennedy Administration...

...But expansion by itself will not cure unemployment unless workers acquire the skills which the shifting structure of opportunity makes most marketable...

...Necessarily, in a Presidential election year the Johnson Administration is compelled to promote the policies of the Kennedy years...

...Much less, it has to be admitted, than a publicly stated, fully coherent assault against unemployment as the major domestic economic problem...

...Many Administration proposals and actions treated unemployment as a structural problem...

...How CAN the new Administration deal with the continuing, corrosive problem of unemployment...

...Although politics and propaganda obscured the fact, the President actually adopted a much more sophisticated, and much better hedged position...

...By 1965, however, the number of adolescents turning 18 will increase by about 30 per cent...

...Under the impetus of steady advances in consumer demand, many industries are approaching the limits of economic capacity...

...The Administration has strongly supported vocational education, and its pressure on Congress has finally wrung from that body a quite substantial appropriation...