On Dead Center

From every podium that politicians, economists and businessmen could find last week, the debate about the ailing U.S. economy raged on. Testifying before the Senate Finance Committee, Federal Reserve Board Chairman William McChesney Martin Jr. was asked the question on which almost all the arguments center: Should the government cut taxes? Replied Martin: "I would be opposed to a tax cut now." A tax cut would not only be fiscal mayhem, but would probably not be effective as a cure for the recession, which is really "a period of convalescence that is required as a result of a preceding inflation."

To charges that no fiscal measures are being taken to halt the recession, Martin pointed out that the federal deficit, which may reach a total of $13 billion in fiscal 1958 and 1959, is so strong a fiscal measure as to be a "risk"--but a justified one. Furthermore, he said in answer to questioning by Virginia's Senator Harry Byrd, the Fed's policies of gradually loosening credit "are just beginning to take hold." Martin laid the chief burden of curing the recession on businessmen and consumers, expects a break in the present price pattern and a drop in the cost of living that will get people buying again.

Growing Siege. Martin's wait-and-see attitude is shared by many. Still adamant in his opposition to a tax cut now, President Eisenhower has the firm backing of Treasury Secretary Robert Anderson and his predecessor. George Humphrey, as well as Administration Economists Gabriel Hauge and Raymond Saulnier, all of whom believe that the economy should be left as much as possible to pull itself out of the slump. Last week the presidents of the 12 Federal Reserve banks endorsed the Administration's stand, cautioned Congress against doing "too much too soon" to combat the recession. The Administration is also backed by many topflight businessmen: General Electric's President Ralph J. Cordiner last week warned against "panicky measures," said the nation should depend on "more confident buying and selling" rather than "sitting back and relying on Government stimulants, deficit spending, meaningless tax cuts, deliberate inflation, or any other sleight of hand."

But the tax-cut opponents are becoming more heavily besieged week by week as the clamor for a tax cut grows. Arthur Burns, the President's former economic adviser, is all for a tax cut; so is Marriner S. Eccles, who once (1936-48) held

Martin's job as FRB chairman. In pleading for a $6 billion to $7 billion tax cut, Eccles told the Senate Finance Committee that he saw "small likelihood of improvement" in the economy "without prompt and appropriate Government action." The Rockefeller report last week argued for a broad tax cut to avert the danger of a cumulative downward spiral, keep the economy growing. Leon Keyserling, head of the Council of Economic Advisers under President Truman, last week called for "a drastic and immediate tax reduction of $5.7 billion."

What gives ammunition to such economists--and makes Administration backers uneasy--is the failure of the economy to spurt ahead as the weeks go by. "April," admitted a top Administration official last week, "does not look too hot." He expects industrial production to continue slipping, retail sales to rise only a fraction, unemployment to show less than a seasonal decline. Last week the number drawing jobless benefits climbed to a new high of 3,383,300. Said he: "We will have all the signs of an economy stuck on dead center--and uncomfortably below full employment."

Dear Dave & Roger. Everyone agreed on one proposition: aside from a tax cut, what could get the economy off dead center would be lower prices. But there was little sign that basic industries intended to lower their prices--quite the contrary. Harold J. Ruttenberg, president of Stardrill-Keystone Co. of Pennsylvania and former research director for the United Steel Workers union, last week wrote to David J. McDonald, president of the Steel Workers, and Roger M. Blough, chairman of U.S. Steel Corp., the industry's largest producer. Ruttenberg suggested that they postpone all wage and price increases in the industry until July 1, 1960. Dave McDonald was the first to reply. Said he: "A contract is a sacred thing. We have not changed that belief--nor do we intend to change it." If the steelworkers insist on the pay raise scheduled for July 1, said a steel spokesman, the price of steel may be raised $10 a ton. Just what that might do to the depressed steel industry--and to the industries it affects--was something no one wanted to think about.

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