Outlook Optimistic

If all economists were laid end to end, they still would not reach a conclusion.

--George Bernard Shaw

In a speech to the Advertising Council last week in Washington, President Kennedy declared that he was "more than ever convinced" of the truth of Shaw's waspish comment. He noted that by U.S. Industry quarterly with economists today "every problem has several alternative solutions, and every answer raises several questions." But the President had no doubt about his own solution for what ails the U.S. economy; he again asked support for raising the national debt limit, cutting taxes, and running the budget at a deficit. If these measures are blocked, said Kennedy, the result would be a "downturn for the American economy as a whole." The New York Times editorialized that this "amounts to buck-passing in advance, aimed at pinning the blame on Congress for any possible recession."

Drawing on history to drive home his point, Kennedy blamed "a Republican President and a Democratic Congress" for bringing on the 1958 recession by deciding "to keep the debt limit unrealistically low, to cut back and stretch out budget expenditures, to tighten monetary policy, and reject all efforts at tax reduction." The results: unemployment went from 4% to 6%, the growth rate of gross national product slipped from 4% a year to 3%, and business spending on new plants and equipment fell in 1962 to a lower level than in 1957.

Running for Cover. But while Kennedy was warning of recession, economists were scanning one of the most eagerly awaited statistics of the year, and from it finding themselves in more agreement than Shaw thought them capable of. The statistic was the Commerce Department's survey of what U.S. business plans to spend on plant and equipment in 1963, which economists regard as a key to economic activity for the rest of the year. Capital spending, said the department, will hit a record $39.1 billion, up 5% from last year. Best of all, the bellwether durable-goods industry intends to spend $7.7 billion, for an increase of 11%.

From these encouraging figures, many economists concluded that the prospects of a recession this year have just about vanished. Said one senior Government economist: "The results of this survey should send the pessimists running for cover." On the other hand, no one thought that the new figures were good enough to spell a real economic upsurge, and that view was supported by the Federal Reserve Board's report that industrial production remained unchanged in February. Capital spending still amounts to only 6.8% of this year's projected $578 billion gross national product v. 1957's 8.3%. To bring on boom times, economists agree, capital spending should rise 13% to 15% over last year.

Rueful Note. The new spending figures only increased the President's worry that his programs will have a hard time in Congress. Departing from his text, Kennedy ruefully noted that Presidents always get blamed for recessions--even when they try to prevent them. Said he: "When things go bad, the chicken comes to roost on the President's house"--an aphorism that, if not up to Shavian standards, is at least a demonstrable truth.

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