The Chronic Optimist

Into the Indian Treaty Room of the Executive Office Building last week strode a pipe-smoking, professorial man to face a group of some 40 Washington correspondents. "My name is Burns, Arthur F.," said he briskly. "First of all, I'd like to request that some kind soul among you, after 30 or 40 minutes, declare in peremptory tones that this meeting has gone on long enough."

Thus began the first press conference held by Dwight Eisenhower's chief economic adviser since he took office 15 months ago. By the time it ended an hour later, Dr. Burns had ranged all over the U.S. economy, thumping its back, checking its pulse, reflexes and chest expansion. Burns found the patient doing very nicely. Said he: "There is definite room for hope that cessation of the economic decline will very soon be followed by a recovery in output and employment."

Prompt Response. Adviser Burns was there to answer recent charges by Harvard's Economist Sumner Slichter that the Administration had done too little to combat recession. On the contrary, said Burns, it had done a great deal, notably in loosening credit and cutting taxes. The Federal Reserve Board's first credit-easing step, in May 1953, "was the promptest response to an economic decline ever taken by a central bank in any country."

Burns based his "chronic optimism" on many factors. While non-farm employment was off slightly this May, he noted the average work week had increased by three-tenths of an hour. Factory orders for durable goods are on the rise, and "are behaving in a most encouraging fashion . . . The rate of decline in inventories has diminished. This will tend to lift production." The latest figures from the Commerce Department showed that for all of 1954, outlays for new plants and equipment should equal 1953's $28 billion, instead of dropping 4% as a previous survey had indicated.

Independent Ways. From Government and business last week came other cheerful figures. A sudden surge in auto sales in the last ten days of May cut stocks of unsold cars to the lowest level since February, the first such drop in six months. In Pittsburgh, steel production showed the biggest weekly gain of the year (current rate: 73.2% of capacity). In Chicago, Sears, Roebuck confirmed what Arthur Burns had to say about inventories. It announced that for the last month it has been buying more than it has been selling, reversing a policy started last September of living off its inventory.

As usual, Wall Street, which has overlooked the decline in business, also ignored the pickup. The stock market suffered its sharpest break in four years. Many of the blue chips that had led the long advance tumbled, e.g., Du Pont dropped 4 1/8 points. The Dow-Jones industrial average was chopped down 6.59 points to 321, slipped further the next day. By week's end, however, the market had stabilized. Most traders viewed the break, not as an omen of disaster, but as a much-needed "technical" reaction to the market's almost uninterrupted advance of 25% since last fall.

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