Confidence at Hot Springs

The nation's leading businessmen got a chance last week at Hot Springs, Va. to sound a clarion call for what the Government should do about the recession--but they never got the horn to their lips. Instead, the more than 100 members of the Business Advisory Council, a blueblood business group that advises the Secretary of Commerce on top policy matters, spent their semiannual meeting without reaching any clear-cut conclusions about the economy, particularly the matter of a tax cut.

The time is not ripe for a tax cut, said the council's antirecession committee, headed by Theodore V. Houser, chairman of Sears, Roebuck; but a cut may be needed if the economy continues to decline. In that case, the group favored an across-the-board slash in personal income tax rates; it did not go on record about corporate or excise taxes.

Two-thirds of the delegates were opposed to a tax cut now, said Secretary of Commerce Sinclair Weeks. Opposition to a cut centered in the council's committee on taxes--headed by President Paul C. Cabot of Boston's State Street Investment Corp.--which questioned the value of "sprinkling a few dollars per taxpayer over the economy," considered a tax cut only a surface palliative for deeper economic ills. If a tax cut is inevitable, said the committee, it should be framed as a long-range reform of the entire tax structure instead of just a slash to spur business. This "would not end the recession tomorrow," but could have "highly desirable results" in the long run.

Keep Your Shirt On. One of the most vocal members of the antitax faction was George Humphrey, former Secretary of the Treasury, now board chairman of National Steel Corp. Snorted Humphrey: "They say a budget deficit is needed to cure the recession. Well, we've got one already." The tax cut he sponsored in 1954 was an "honest" tax cut, said Humphrey, because it was covered by savings in Government spendings. But present tax cut proposals are "dishonest" because they involve bigger Government deficits. Humphrey's formula for curing the recession: "Keep your shirt on." Against this view, Fred Lazarus Jr., chairman of Federated Department Stores, argued for a tax cut to stimulate consumer buying now. Thomas McCabe, president of Scott Paper Co. and onetime Federal Reserve chairman, urged Government leaders to "turn on the juice" by authorizing a tax cut when it is needed.

When it came to other cures, Houser's antirecession committee came out for expansion of Government spending already under way and product improvement and price reductions by business, suggested that President Eisenhower use his influence to get a one-year moratorium on price and wage hikes. But the idea of a price-wage freeze got little support from the meeting's free enterprisers, who had no enthusiasm for urging the President to take such a direct hand in the wage and price process, even on a voluntary basis.

Bumping Along. The unwillingness of businessmen to talk for a tax cut was surprising, because only a few months ago business sentiment seemed to be overwhelmingly in favor of it. One reason for the wait-and-see attitude was the increasing confidence of businessmen. After a "horrible" February that saw business 9% below last August's peak, said Sears, Roebuck's Houser, his firm had recovered half the lost ground by April. In his private reading of the delegates' views, Commerce Secretary Weeks said that 15% thought that the economy had already started upward, 15% said it had not yet hit bottom, and the majority that it was bumping along on the bottom.

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