Pocketbook Politics

Buoyed by prosperity, most Americans by 1968 were able to forget economics at the ballot box and vote other imperatives instead. Their sense of financial freedom further weakened the traditional New Deal coalition, assisting Richard Nixon into the White House. Now that situation seems to be changing. Higher prices, rising unemployment, scarce credit, an erratic stock market have restored the pocketbook as a prime issue in this election year.

To meet that challenge, the Administration has made a massive and partly successful effort to restore calm and confidence. Both the politics and the economics of the slump depend heavily on mood. That mood improved considerably late last week with Wall Street's sharp, long-awaited rally (see BUSINESS). A more buoyant stock market cannot in itself right the basic imbalances of the economy. But if the rally is sustained, it will be a sign of confidence that the Administration's policies are beginning to work. Thus the national attitude would brighten rapidly--along with Republican prospects in November.

All week long, Administration critics had been demanding more than verbal reassurance. New York Mayor John Lindsay called for a mandatory six-month freeze on wages and prices. The Organization for Economic Cooperation and Development, a 22-nation body, released a report that urged consideration of an "incomes policy" of voluntary controls. Banker David Rockefeller urged Nixon to depart from his economic game plan in favor of a little jawboning --or presidential persuasion--in an effort to hold down wage and price hikes. Even Congress, which has been notably reluctant to pass stringent anti-inflation measures, showed signs of its deep concern over the worsening economic situation. Democrats on the House Banking and Currency Committee, for instance, backed legislation giving the President power to freeze wages and prices for eight months.

The Democrats have begun to capitalize on the inflation issue. Democratic National Chairman Lawrence O'Brien denounced "Nixonomics," which he defined thusly: "All the things that should go up--the stock market, corporate profits, real spendable income, productivity --go down. All the things that should go down--unemployment, prices, interest rates--go up." Individual candidates are also following that line.

Programming Trouble. Calling an unusual joint news conference, Senate Majority Leader Mike Mansfield, House Speaker John McCormack and House Majority Leader Carl Albert signaled the Democratic assault on the G.O.P. with a coordinated blast at Nixon's economic policies. Nixon, they said, should call a national conference to extricate the country from its "economic morass." The attractiveness of the economic issue is obvious. One can be accused of excessive partisanship for criticizing the President's foreign policy. To attack the Administration for provoking domestic unrest is to risk a backlash from those weary of dissent. Appealing to the voters' bankbook is never dangerous. The President understands this well. He believes one of the reasons he lost the 1960 election was that the Republicans had allowed the economy to slow down. But he remains convinced that he can control the economy by cutbacks in Government spending and tighter credit.

Quiet Reassurance. Paul McCracken, chairman of the Council of Economic Advisers, Treasury Secretary David Kennedy and Budget Director Robert Mayo expressed complete confidence in the Administration's action on inflation, insisted that Nixon's strategy would succeed in slowing the economy without pushing it into a recession. Republican National Chairman Rogers Morton denied that things were as bad as the Democrats claimed--or hoped. "They're jumping the gun," he said of Democratic charges. "The shift in the economy --most of the pain of it--has been passed."

The most significant response came from the President himself. Prompted by New York Stock Exchange Chairman Bernard Lasker, Nixon invited 45 of the country's top business and financial executives to a White House dinner. The meeting produced nothing new or specific by way of solutions. But it did alleviate many of the businessmen's doubts about Nixon's handling of the economy. Arthur Burns, chairman of the Federal Reserve Board, assured them that the Fed would provide enough cash to keep the economy going. Nixon spoke for half an hour, then answered questions. According to James Davant, of New York's Paine, Webber, Jackson & Curtis, he "succeeded admirably" in restoring the group's confidence in the Administration and the economy. Davant, concerned about the war's effect on business, left the White House convinced that "whatever happens in Indochina, there is a plan and it seems to be working." Others, impressed by Nixon's concern and understanding of the economic situation, listened cautiously as the President predicted that the market decline had bottomed out and that the economy would soon turn upward.

Hooverish. The Democrats' fondest wish is to run against a Republican regime they can call "Hooverish." With 435 House and 35 Senate seats at stake, the Democrats taste a gain of at least 30 seats in the lower chamber if the economy fails to improve. "This could be a disastrous fall for the Republicans," admits Wisconsin's John Byrnes, ranking G.O.P. member of the House Ways and Means Committee and a backer of federal credit controls. "It could be a good one. It all depends on what the situation is in September." If Wall Street can maintain an upward trend, if Administration economists are accurate in their forecasts of increasing price stability, if unemployment is checked and credit loosened somewhat, the economic issue can lose its cutting edge by fall.

Whatever the situation, both parties are likely to trot out some of American politics' hoariest shibboleths as they battle each other. One could easily pit the old charge that Democrats start wars against the chestnut that Republicans start depressions. The equation is as inaccurate as it is unfair, for both the Indochina war and the current slump are bipartisan babies. Republicans who supported Lyndon Johnson's decision to send combat troops into Viet Nam must share with the Democrats responsibility for the continuing war. Democrats who approved stepped-up spending for the war without raising the taxes to pay for it must shoulder a good part of the blame for the country's current economic problems.

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