President Meets Recession

There was no Crisis Book to read on the U.S. economy, no reason for an ex-Senator from Massachusetts to find any surprises. "We must show the world what a free economy can do--to reduce unemployment, to put unused capacity to work, to spur new productivity, and to foster higher economic growth within a range of sound fiscal policies and relative price stability," he said in his State of the Union message. But when Kennedy got around to specific proposals in his special economic message three days later, it was pretty evident that he was limited by the same facts of economic life as the Eisenhower Administration, and his recommended deeds had a long way to go to catch up with his activist words.

Old Tools. His message eschewed the massive pump-priming plans and public-works projects dear to some economists, stressed instead the expansion of existing programs. He urged Congress to boost minimum social security benefits (from $33 a month to $43), lift the minimum wage (from $1 an hour to $1.15 immediately, then to $1.25 within two years), stretch out unemployment compensation payments, and pass a depressed-areas bill. Said House Republican Minority Leader Charles Halleck of those proposals: "We find no great quarrel with them, but we do not find them earthshaking."

Kennedy promised to do some more by executive action. He would put through a depressed-areas food-stamp plan, cut FHA mortgage rates (from 5 1/4% to 5 1/2% to bolster the housing market, pay out 1961 veterans' insurance dividends ahead of schedule, and speed up the letting of Government contracts. Cost of the package: something less than $5 billion--not much more than the $4 billion rise in cash outlays that Dwight Eisenhower had projected for fiscal 1962.

One reason that President Kennedy could not do more was that President Eisenhower had already done much. The Eisenhower Administration had extended unemployment coverage, broadened social security benefits and taxes and speeded up federal procurement. Indeed Ike had arranged things so that new Government contracts will leap by $10.7 billion this fiscal year, to $86 billion.

Long Range. Beyond his short-range proposals to spur recovery and aid the recession's hardest-hit victims, Kennedy also unfurled some long-span programs that cheered businessmen. He urged cheaper long-term loans to spur capital investment; at the same time he hoped to firm short-term interest rates to stem the flow of gold to countries where rates are more attractive. The two goals are "contradictory," Kennedy admitted, and achieving them would require all the wizardry of Republican Treasury Secretary Douglas Dillon and Democratic Federal Reserve Chairman William McChesney Martin Jr. Kennedy went on to speak of a long-overdue tax reform to come, hinting that the Administration would strive to liberalize depreciation rates and to plug tax loopholes.

Businessmen were elated also at his first public suggestion that wages--as well as prices--could rise too fast for the nation's good. "We cannot afford unsound wage and price movements which push up costs, weaken our international competitive position, restrict job opportunities and jeopardize the health of our domestic economy," said he." Inflation is now the certain road to a balance-of-payments crisis and disruption of the international economy of the Western world." At the same time, Kennedy stressed his opinion that large-scale unemployment is a greater danger than creeping inflation, that the need for recovery and growth is more important than conservative fiscal policy. If his proposals of last week fail to get the economy moving within 75 days, he will submit other ones.

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