With Statistics That Are Steadier than the Arguments

In their determined efforts to maneuver between recession and further inflation, the Johnson Administration's economic policymakers have somehow managed with splendid impartiality to alienate some of the more important segments of Congress, labor, business, the banking community and the formidable fraternity of economists. Last week the simmer of discontent between economy molders and their critics heated up and nearly boiled over.

For weeks now, former White House braintrusters of such varied stripe as Walter Heller and Paul Samuelson, editorialists as far apart as the Wall Street Journal and the New York Times and Senators of such diverse views as New York Republican Jacob Javits and Missouri Democrat Stuart Symington have been sniping at everything from the government's fiscal blunders and the often broken wage-price guidelines to the faulty forecasting of the President's Council of Economic Advisers. Finally, when Wisconsin Democrat William Proxmire called 1966 "the year of the big goof," charging that the Administration had underestimated Viet Nam spending and was culpably negligent in its failure to raise taxes enough to head off a 3.3% rise in prices, it was simply more than Treasury Secretary Henry Fowler could bear.

"Analytical Lag." Settling into a witness chair before Proxmire's Senate-House Joint Economic Committee last week, Fowler flailed away with unaccustomed vigor at almost every target in--and out of--sight. As for economists who have lambasted him and President Johnson for first not raising taxes and now for asking that they be hiked, Fowler accused them of "suffering from an analytical lag that has them currently applying their calipers to conditions of a year ago." He rapped "bank letters notable for consistency if not accuracy." He scoffed at "herd-thinking, Monday-morning quarterbacks," and skeptics who "had nothing to recommend in 1966 except the time-tested cliche of cutting federal spending." He even suggested--on doubtful grounds--that tight money would have continued willy-nilly all last year if a tax hike had been imposed. Gasped one amazed White House aide: "It all sounded like Joe Fowler's swan song--a personal rebuttal he wanted to get off his chest."

Next day, from the same witness chair, Federal Reserve Chairman William McChesney Martin jabbed back. "The markets don't wait for kings, Presidents, Secretaries of the Treasury, chairmen of the Council of Economic Advisers--or even the chairman of the Federal Reserve Board," said he. As for Fowler's imputation that the board failed to mesh its policies with those of the White House, Martin disclosed that he had tried from September 1965 on --three months before the board finally acted to tighten money--to persuade the Administration to go along. After that, according to secret minutes also disclosed last week, the Reserve Board on eight separate occasions between July 15 and Sept. 2 last year rejected requests from Federal Reserve Banks to lift the discount rate from its present 41% to 5% or 51%. Not since 1957 had the board failed to approve such a request from one of its district banks.

The Seventh Year. While supporting President Johnson's request for a 6% income tax surcharge effective July 1, Martin expressed fears of "a strong upsurge in inflationary pressures" later this year. But his most immediate worry, he testified, is business inventory building, which soared "far beyond current sales" late last year. It was primarily to prevent a subsequent drop in business purchases from slowing the whole economy, he said, that the Reserve Board started last Nov. 22 to ease credit.

Despite the hostilities, the uncertainties and the policy mistakes, the U.S. economy this month entered its seventh year of continuous expansion, and both Fowler and Martin were in agreement that the prospect is for more of the same. "The statistics," says White House Economic Council Member Arthur Okun, "are steadier than the arguments." About that, at least, there is little doubt.

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