Fear of Overkill

THE ECONOMY

Candidate Richard Nixon promised last year "to halt the inflationary trend in our fiscal and monetary policies, to check the drift that defeats our purposes and steadily narrows our range of choices." Now that he has begun to move cautiously against the inflation that last month shaved another half-cent of value from the already shrunken consumer dollar, Nixon has found his range of choices narrowed by both economic factors and a strong-willed Congress.

The Administration last week offered Congress a three-point initial package to moderate the economy's pace. The plan would repeal the 7% investment credit for business expansion. It also provides for the retention of existing excise taxes on telephones and automobiles. Most important, the Administration would continue the 10% income tax surcharge for six months and then halve it for the following six months. Treasury Secretary David Kennedy said: "This will do the job." House Ways and Means Chairman Wilbur Mills, who feels that Nixon's economy efforts to date have lacked conviction and impact, argued that any reduction of the surtax would be "an egregious error."

Freezing the Budget. Mills has wide backing in the House. Even as Secretary Kennedy and other Administration spokesmen were testifying before Ways and Means, the House debated --and then passed--an extraordinary proposal. It clapped an absolute ceiling on federal spending,* limiting outlays for fiscal 1970, which begins July 1, to $192,900,000,000. The freeze has a chance for Senate approval as well, although the upper chamber is generally less economy-minded than the House.

Willing to Gamble. Theoretically, the limit should work no great hardship on the Administration. The figure is exactly what Nixon requested in his formal budget presentation. The catch is that spending during a fiscal year is almost always substantially above the estimate made earlier. If the House bill becomes law, any unexpected but necessary increase would force a curtailment elsewhere in a budget that is already relatively lean in domestic areas. Thus the restriction could severely limit the Administration's ability to deal with emergencies and handle such "uncontrollable spending" as interest on the national debt and Social Security benefits.

Nixon has been walking a thin line between the savers, like Mills, and the spenders, who want to devote more resources to social programs. Above all, he fears that excessive stringency would "overkill" the economy and cause a recession like the three that occurred during the Eisenhower years. The President also wants to avoid precipitous major slashes in federal spending. These would hike the unemployment rate and put an increased number of Negroes--always the last to be hired and the first to be fired--out of work. He is unwilling to curb inflation at the price of social upheaval. Increasingly, Nixon's opportunity for slowing down the economy in a manner acceptable to all factions in the country is narrowing to one prospect: a Viet Nam settlement. He seems willing to gamble, if Congress will allow him, that the U.S. war effort can be reduced by a sufficient degree and soon enough to help the domestic front.

* Last year Congress placed an expenditure limit on the Johnson Administration. That measure was less stringent than this year's because it permitted exceptions to the restriction in some major categories.

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