Good News for Bad

I was talking to a friend of mine the other day. He's got a good job, makes good money, but he said there is so much talk about recession that he isn't going to buy that new car he'd been planning to get.

--Dallas hardware dealer

A lot of U.S. jobholders were in the same wait-and-see mood last week as the Dallas hardware dealer's friend. With relatives and neighbors out of work, and reports of new layoffs on the front pages, confidence in the economy's health was still ebbing, and the ebb brought an increasing reluctance to buy and invest.

Semi-hysterical outcries did not help. In Miami Beach, Fla., the A.F.L.-C.I.O. executive council called upon labor leaders to gather in Washington in mid-March for a "National Emergency Conference" on the economy. In Connecticut, with 8.3% of the state's labor force out of work, Democratic Governor Abraham Ribicoff summoned the general assembly into special session. And in Washington, Capitol Hill Democrats, convinced that recession will be their party's most profitable issue in the November congressional elections, were doing the nation's confidence no good by trumpeting statistics of sag and calling for crash programs reminiscent of Great Depression days (see Politics).

Big Black Statistic. The looming crisis of confidence was a serious challenge to Administration leadership: the great economic danger was that crumbling confidence might still further shrink buying and investing, and so turn a dip into a more severe recession. Confronted with this challenge, Dwight Eisenhower and four of the Government's top economic-policy shapers huddled in the President's White House office one afternoon last week. Present besides Ike: Treasury Secretary Robert B. Anderson, Federal Reserve Chairman William McChesney Martin Jr., Economic Advisers Chairman Raymond Saulnier, Presidential Economics Assistant Gabriel Hauge. They knew that next day the Labor Department was to release a big black statistic certain to shake the nation's already jolted optimism: from December to January unemployment soared by a startling 1,120,000, bringing the mid-January total to 4,494,000, highest mark since the recession pinch of early 1950.

Both Ike's economic and political advisers decided that the Administration had to counteract the bad news. Stacked up in the custody of Ike's public-works assistant, Major General (ret.) John S. Bragdon, were detailed plans for several billion dollars worth of public-works projects, ready for sending to Congress on short notice. But the Administration saw no reason to abandon its long-standing basic position: I) eased credit, stepped-up defense spending and underlying economic strengths will get things perking up by midyear, and 2) drastic, too-much-too-soon recovery programs might fuel a new spiral of inflation. The decision: a reassuring statement by the President, plus a token public-works program.

Beginning of the End. Next day White House Press Secretary James Hagerty announced the public-works token: a $2 billion plan for building and modernizing post offices over the next three to five years, largely by private investors, with the Government's $175 million-a-year share provided by the "fifth cent" of the Administration's proposed -c-^ postage for out-of-town first-class mail. Actually, this was a meager, gimmick-ridden four-year-old plan that, despite whatever merits it might have for speeding mail, was a puny antirecession weapon. Next morning, before a battery of cameras and microphones, the President read his statement.

"I believe," he said, "that we have had most of our bad news on the unemployment front [and] that we are not facing a prolonged downswing in activity. Every indication is that March will commence to see the start of a pickup in job opportunities. That should mark the beginning of the end of the downturn."

To the prediction the President added a promise: promoting economic recovery is "the firm policy of the Government," and if remedies are needed. "I assure you they will be proposed--and in time."

From major cities of the U.S., TIME correspondents reported that the President's statement fell flat. The prediction that unemployment would decline in March was safe enough: winter's end always brings a job pickup as outdoor work resumes in farming and construction. But the impression lingered that the President expected the economy to bound upward in March. Accordingly, many business' men and economists, expecting no general upturn until midyear at the earliest, scoffed at Ike's statement instead of applauding it. Even the former chairman of Ike's Council of Economic Advisers, Columbia University Professor Arthur F. Burns, dissented from his ex-boss's forecast. The recession would last, ventured Burns, until ended by "massive" Government intervention.

What the President apparently meant to say--and he had sound economic reasons for saying it--was essentially what Franklin Roosevelt said in 1933: "The only thing we have to fear is fear itself." Instead, what came through was an echo of the hollow prediction popularly attributed to Herbert Hoover in the early 1930s; "Prosperity is just around the corner."

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