Betting on Strength

The Eisenhower Administration, with the latest economic statistics at its finger tips, is convinced that the recession is in check.

That news was apparent last week not in proclamations, but in quiet Administration optimism, and in its most dramatic form, a major decision: the Administration all but closed the door on 1958 antirecession tax cuts, decided to press for simple extension of corporation and excise taxes at their present rates when those rates expire on June 30.

At last week's Cabinet meeting. President Eisenhower and Treasury Secretary Robert Anderson were all for a flat, unhedged stand against tax cuts. Others, including Vice President Richard Nixon and Labor Secretary James Mitchell, argued for an escape hatch by promising continuous review and possible reconsideration if the recession worsens.

Confidence that the recession will not worsen was strongly expressed by President Eisenhower in a Manhattan speech to the American Management Association (see The Presidency) and was reflected at all Administration levels. Studying a batch of hopeful signs, e.g., in unemployment, housing, etc., one top Administration economist said: "The month of May. I would say, would be rather distinctly better. You can get in the frame of mind that you've been waiting for the good news for so long that you can't believe it when it comes. I honestly do not feel that the facts of the moment justify a gloomy outlook. I think they justify an optimistic outlook.'' Said Presidential Economic Adviser Gabriel Hauge: "The end of the great pressure of the downward movement will come to an end during the second quarter. It will mill around during the summer and lift in the autumn." The Administration's decision to hold the line on taxes already had the tentative approval of House Speaker Sam Rayburn and House Ways & Means Committee Chairman Wilbur Mills. But there were plenty of critics, both in and out of Congress, waiting for things to get worse.

Cried International Electrical Workers' President James Carey: "This talk about the recession 'bottoming out' is misleading and deceptive -- prayerfully awaiting reaching bottom, not knowing where bot tom is, waiting to feel bottom so they can say 'Now we don't have to do anything to get out of this slump.' "

Thus, although the Administration's big bet on the basic strength of the U.S. economy is above politics, the political risks are still awesome.

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