Hard Times

...All the same, I hazard the guess that Wall Street demoralization has been so nearly total that the magic words "credit relaxation," uttered even in so conditional a context, warmed hearts starved these dreary months for the caress of good news...

...In the last two years, the real incomes of factory workers have actually declined, annual wage improvements having been more than consumed by rising prices...

...What goes up must come down...

...All that has thus far averted serious recession has been business disbelief in the seriousness of Nixon's commitment to the defeat of inflation...

...Already the decline in hours of the average work week has deprived blue-collar workers of the overtime they have relied upon in recent years to pay their bills and fulfill installment contracts...

...After the binge the hangover...

...About the only momentarily reassuring note is the failure thus far of unemployment to rise significantly and there is every danger that it will soon do so...

...The corporate decision-makers have been placing their bets upon continued inflation, the briefest dip in economic activity, and an early resumption of rapid growth...

...The Administration must be given time for its policies to work...

...Profits and automobile sales are dropping...

...President Nixon may ascribe his 1960 defeat to the recession of that year, but he need not face his constituency again until 1972...

...Retail sales are disappointing...

...But what disturbs the rest of the affluent is the behavior of prices and wages...

...Labor spokesmen are also spurred to fighting it out by the spectacle of the gaudy gains made by construction unions...

...What is rather more likely, though, is a return to the sluggishness of 1953-60, when average unemployment was 5 per cent, resources were underutilized, and the country was made ready for the Kennedy message of movement and growth...

...Should they choose to wait, they can contemplate the happy thought that last year construction costs ascended some 20 per cent...

...He stated his belief that someday, when conditions were more "normal," credit restraints would be eased and interest rates lowered—but not, he emphasized, unless the Federal budgets both this year and next were in balance...

...Any ordinary citizen who concludes that the economy is in a mess is absolutely and unconditionally correct...

...The brute fact has to be faced that, in 1970, this country cannot afford the social costs of controlling inflation by imposing unemployment on the people least responsible for creating the problem which their loss of income is supposed to cure...

...For in sober truth, there is absolutely nothing to cheer about...

...In real terms, such a package amounts to at best 3-4 per cent, little more than productivity gains in an average year...

...The '50s, however, were comparatively tranquil years, at least in comparison with the assassinations, riots, turmoil, and arson that soon followed...

...Nevertheless, the stock market celebrated Burns' dour pronouncement by rising nearly 14 points on the Dow-Jones barometer...

...Finally, there is the quite accurate blue-collar perception that the last few years, mediocre enough for unionists, have been just great for conglomerate organizers, stock option beneficiaries, expense account commandos, real estate promoters, and every other sharp lad hip to the latest financial wrinkles...

...This explains the puzzle of investment plans being larger for 1970 than they were in '69...

...As an unadmiring student of Republican economic policy, I have every confidence that these worthies will generate a serious downturn...

...By that time he apparently calculates the economy will have recovered...

...And so on...

...In all probability the Republicans will do a reprise of the economic trick for which they were celebrated in the 1950s: a combination of continued inflation and brand-new unemployment...

...The General Electric strike drags on, one suspects, not only because of the company's well-known appetite for confrontation bargaining or its patriotic eagerness to assist the President's war against inflation, but also because the market for electrical appliances is sufficiently sour to make it convenient to close the plants down for a while...

...Any student of conservatives would have expected nothing different from either Burns or his predecessor, William McChesney Martin...

...Each month since August, the Federal Reserve's Index of Industrial Product has been sliding lower and lower...

...The only slender hope that remains is congressional sabotage of Administration fiscal and monetary policy...

...When the sentiment is translated into reassessments of equipment purchase and factory extension plans, the outcome will be the termination of the great investment boom of 1964-69 and the removal of the last prop to prosperity...

...The signs are beginning to appear—notably in General Motors' December announcement of downward revision in its 1970 expansion plans—that at length businessmen are discovering a sad truth about the statements the Nixon people make on economic affairs: They mean what they say...

...How can unions settle this year for less than 9-10 per cent more...

...These are days of almost universal militancy among blacks, students, white-collar clerks, and blue-collar factory workers...

...State and local governments, meanwhile, have been forced to choose between floating new bonds at 9 or 10 per cent yields or postponing new schools and hospitals until interest rates fall...

...Burns, of course, was the first chairman of the Eisenhower Council of Economic Advisers...

...THE NIXON ECONOMICS Hard Times BY ROBERT LEKACHMAN On December 18, just before his confirmation as chairman of the Federal Reserve Board, Arthur F. Burns testified before the Senate Banking Committee...

...the present chairman, Paul McCracken, was a Council member during the same period...

...If these were the only marks of adversity, sound men of affairs might be inclined to complacency and the mumbling of folk wisdom...

...In recent months the silent majority has taken to staying away from stores and showrooms out of sullen resistance to present prices...

...and Maurice Stans, now Secretary of Commerce, used to be Budget Director...

...From the business standpoint, 1970 is the wrong time to hike wages...

...it cannot be expected to cheer the news of still higher charges...

...The fact remains, however, that at the end of a year of responsible management of economic affairs by hard-faced Republicans, the cost of living not only has risen by 6 per cent but continues to rise at about the same pace...

...Inflation, capitalist-style, further skews the income distribution in favor of the already affluent...

...Unemployment aside, every omen is sour...

...Really serious unemployment could easily carry with it intensified urban violence and lethal warfare between groups of well-armed Americans of different colors or opposed statuses...

...Certainly the historical parallels are not reassuring...

...All that Washington can suggest to frustrated home buyers is that they get themselves a trailer...

...This practically flawless case for equity in plump contract settlements is probably convincing to most people except Republican economists and corporate negotiators...

...These three veteran anti-inflation warriors, girded for the long pull, are no doubt prepared (the Vietnam parallel is unavoidable) to persevere until light is visible at the end of the tunnel...

...For one thing, they need to correct a serious mistake: In negotiating the long-term contracts currently expiring, they most unwisely traded the cost-of-living escalators won in the 1950s and early '60s for other concessions...

...Since so many markets are turning soft, it is far less certain than it was a year ago that sellers can readily pass on to consumers in amplified form any gains that unions extract...

...Faltering sales, in turn, generate unneeded inventories, and excess inventories amount to an open invitation to managerial resistance to even reasonable union demands...

...Here lies the easy clue to union militancy in recent and future collective bargaining negotiation...

...Under the impact of tight money and prohibitive mortgage terms, new housing has ground to a halt...

...In short, 1970 bids fair to make 1969 look like a banner year...

...There are no geniuses in sinking financial markets...

...This ghastly realization, as much as glum earnings statements, has been depressing stock averages...

...About the very best that an optimist or a Republican can say about the Consumer Price Index' recent behavior is that its rate of increase has ceased to accelerate...

...No omelettes without broken eggs...

...As I need scarcely assure my readers, an outsider like myself can scarcely profess insight into speculative psychology at a time when even the young financial wizards celebrated by Adam Smith in The Money Came have lost their touch...

...From present indications, the major automobile companies are making the same analysis of their depressed market...

...Several additional pressures impose themselves on union bargainers...

...In this election year, congressmen face a danger that many of them consider graver than social turmoil—the loss of their official positions...

...Intending to control inflation, the Administration will within the next year or so nudge the economy toward the 7-8 per cent unemployment rates that were common in the '50s...

...The companies are now just about as eager not to return to the escalators as the unions are to reinstate them...