Masonry Magazine October 1967 Page. 15
the WASHINGTONwire...
INFLATION IS NOW EMERGING AS THE BIGGEST DOMESTIC PROBLEM the nation now faces. The threat is no longer a potential danger. It is here-today. It is showing up in the price indexes, in the stock market, in psychology. And the pressure has only just started. It will grow in the fourth quarter. Officials are studying ways to check the inflation, before it accelerates.
The long-awaited pick-up in business activity is coming on very strong. Most indicators are climbing strongly-federal spending, jobs and incomes...retail sales...and industrial production. The inventory shake-out appears to be just about over. Plants are moving a bit closer to capacity-an ominous trend to those who worry about the imminence of inflation.
THE INGREDIENTS OF A WAGE-PRICE SPIRAL ARE ALL AT HAND these days. To some extent, the price increases now taking place are merely catch-ups; they reflect past hikes in wage and materials costs. But the quickening in business activity will be cementing in the past increases and producing new ones. Then, as the price increases work through from the wholesale level to retail and eat up wage gains, labor demands will become more insistent. So settlements grow bigger, prices go up further and so it goes...on and on.
Economists and government officials view all the speculation that has been taking place in the stock market as a symptom of the inflationary psychology they fear is taking over. Share prices have shot up. Gains have outrun foreseeable profit increases. Easy profits will prompt free spending. Some firms may be tempted to over-expand. Boom-then bust?
THE WHITE HOUSE COUNTED HEAVILY ON A TAX INCREASE to contain all the pressures of inflation the President's economists fear. Top Administration officials believe that the best way to keep prices from leaping is to soak up the buying power of individuals and business enterprises. But many of the lawmakers-Democrats and Republicans-felt that higher taxes would not be enough. They want spending cuts. To many, though, this is only a ploy.
The anti-tax position of many Congressmen largely stems from a strong desire to dissociate from "Johnson's War" and from Johnson's war tax. A number have convinced themselves that the economy is really not in all that danger. And, anyway, if inflation does erupt, the President will get the blame.
The problem is that the consumer will be the loser, as the positions of both sides harden. And time is running out. Will the President decide that, politically, he is better off without a surtax, so that he can run against the record of the "obstructionist, do-nothing Republican opposition"? He may not be able to convince the voters, but he may try.
THE FEDERAL RESERVE IS BOUND TO STOP PUSHING its easy money policy fairly soon. This doesn't mean a major shift to tightness just a nod in the direction of slower bank-credit growth. The monetary authorities are worried about the inflationary dangers and want to move before the pressure peaks. They probably would have had to do a little tidying up even with a tax hike in 1968. Without one, action must come sooner-and go further.
TALK OF IMPOSING SELECTIVE CONTROLS HAS NO BASIS in fact...as yet. Checks at the agencies that would be drafting price, wage, and credit curbs show that none are actually working on such restraints at this time. But officials do discuss it, privately, as a contingency in case the surtax is not voted-a less desirable tool of restraint, but conceivably necessary.
The lack of control-drafting also reflects a desire to avoid giving Congress an excuse not to act on taxes. But to some extent, the inactivity stems from a feeling that controls are hard to administer, unfair and inefficient in operation.
Anyway, a Congress that won't raise taxes won't have much taste for imposing controls. The voters would dislike them as much as a tax increase. Chances are that these direct controls will be invoked next time only in case of major war.