How They're Spending Their Tax-Cut Money

In the past dozen weeks, shopkeepers and economic policymakers have pondered a $9 billion question: What would consumers do with their new tax savings? Some businessmen wondered whether the extra $4-a-week in the average paycheck would really bolster their sales by much. Others worried that consumers might go on a spending binge, which could turn the orderly economic expansion into an "overheated boom" followed by an inevitable day of reckoning. Last week it became clear that consumers are indeed in creasing their spending, apparently just enough to give the economy a nice lift without producing too much heat.

Looking over the new statistics on retail sales, up a handsome 1.5% during May, Commerce Secretary Luther Hodges said that the cut "is beginning to take effect pretty well." There was a distinct shift in mood among the nation's storekeepers, many of whom had not seen much change at the cash registers in the first few weeks after the reduction. Said James Bliss, counsel for the National Retail Merchants Association: "All of a sudden, merchants seem to be unified in the belief that the extra dol lars are finding their way into stores all down the line."

More Saving. The billion-dollar figures are being translated into millions of everyday, personal decisions to spend. In San Francisco, the Western Girl temporary-employee-placement firm asked its young women how they were handling their plumper paychecks, reported that "the majority are putting it toward better living, new clothes, things like that." Travel agents say that the tax cut is largely responsible for the upsurge in their go-now, pay-later installment business. "This means taking my family to Scotland instead of Massachusetts this summer," beamed a Columbia Broadcasting vice president. Compared with the same month of last year, sales during May in leading chain stores and mail-order houses were up 11%.

A good part of the money is also being saved or used to reduce personal debts. Only 153 out of every 10,000 installment borrowers are behind by 30 days or more in their payments, the lowest number in five years. New deposits in savings and loan associations during May ran 3% higher than in the same month in 1963, the first such gain this year. To Washington's chart watchers, this is a clue that many Americans are building up a backlog of spendable funds that will contribute to keeping the economic expansion going.

More Production. Helped in large part by the healthy mix of spending and saving, the economy continues to do well. That important barometer of investor confidence, the Dow-Jones average of 30 industrial stocks, rose for four straight sessions last week, closed just five points off its alltime high of 830.17. Last week also the Commerce Department reported that the average American factory worker earned a record $102.97 a week before taxes during May, and that industrial production--the supreme measure of business expansion--climbed by more than one-half of 1%, to 130.3% of the 1957-59 average.

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