Taking Stock of the New President

The stock market is the most sensitive barometer of investor attitudes, and it has reacted to Jimmy Carter's election with a minicrash. During the first eight trading days since the vote, the Dow Jones industrial average plummeted more than 38 points, to a close of 927.69, the lowest since last January. Though stock traders have had other things to worry about--primarily the slowdown in the economy--the chief reason for the sell-off appears to be fear that Carter's programs to speed up the economy will set off a new burst of inflation.

Talks with leading businessmen around the country indicate, however, that in this case the stock market has been oversensitive to the point of neurosis. Among dozens of executives interviewed by TIME correspondents, few were nearly as frightened as the plunge on Wall Street might lead a headline reader to believe. To the contrary, though the business community voted solidly for Ford, executives are taking a relaxed, wait-and-see attitude toward the forthcoming Carter Administration. They hope that the new President can indeed get the business recovery moving again, and that his populist oratory during the campaign will not be followed by any significant anti-business action.

The most important indication of the business mood is that, whatever stock market investors may think, corporate chiefs are not cutting back on the vital investments that they make in new plant and equipment. "We made our plans, and they haven't changed," says Joel Goldberg, president of Rich's, a chain of 12 department stores, which has its headquarters in Atlanta. Speaking to shareholders in Boston last week, U.S. Steel Chairman Edgar Speer declared that his company would go ahead with plans to spend about $900 million in 1977. Somewhat similar statements came from J.C. Penney and American Electric Power.

A number of industrialists are outright bullish about the Carter victory, which at least ended a long period of uncertainty. "The election put me in a good mood," says Earle W. Pitt, president of Foxboro Co., a Massachusetts electronics manufacturer. "We are looking at good times right into 1978." Though he is a registered Republican, Pitt says that "deep down I feel that Carter's been a businessman himself, and I guess I don't expect him to go off the deep end."

Businessmen do, nevertheless, have reservations and worries about the President-elect. They center on four issues:

o Wage-price policy. Carter is committed to more active federal intervention in wage and price decisions. Initially, at least, he probably will start with relatively mild jawboning; he said during his last television debate with Ford that he would call corporate and labor leaders together to work out voluntary guidelines for pay and price boosts. But businessmen have not forgotten that early in the campaign Carter spoke of requesting stand-by authority to impose wage-price controls, which executives abhor. Says Raymond Herzog, president of 3M: "The mere mention of federal intervention causes companies to raise their prices in anticipation. Inflation would spiral. Carter should go on the record to stop these rumors."

o Attitude toward labor. Many businessmen worry that Carter has mortgaged his policymaking future to the union chiefs whose get-out-the-vote drives helped him squeak through to victory. The AFL-CIO's crusty old president George Meany pooh-poohs that idea. Says Meany: "The only commitment I have from Jimmy Carter is that when we've got a problem, he'll consider it." The numerous executives who doubt that may take some heart from the fact that Meany also opposes wage-price controls, which he feels hold down wages more than prices.

o Defense cutbacks. Carter's announced intention to cut $5 billion to $7 billion from the Pentagon budget has caused intense concern among contractors in the West, with its big aerospace and military complexes. West Coast executives are asking: Will Carter kill the B-1 bomber? The B-1 alone would employ 6,000 by next year.

o Federal spending. Businessmen are concerned about Carter's apparent plan to juice up the economy by cutting taxes and other pump-priming measures next year. "He faces a terrible temptation to heat things up," says Thomas Ayers, the chairman of Chicago's Commonwealth Edison. "I hope he chooses a moderate course." Declares Norman Robertson, senior vice president and chief economist of Pittsburgh's Mellon Bank: "If he should try to adopt the Humphrey-Hawkins bill [which calls for heavy spending on public-service employment] or something like it, trying to reach a predetermined level of unemployment too quickly, this could seriously worsen inflation. One wonders what restraint can there be on a liberal Congress. President Ford vetoed spending programs that Mr. Carter might not be inclined to veto."

For all these reservations, many executives hope that Carter will turn to the business community as an indispensable ally in revving up the economy. Carter has repeatedly said that most of the new jobs needed to reduce unemployment must be created by private business, not the Government; corporate leaders hope he will realize that that strategy requires policies to encourage investment. Says U.S. Steel's Speer: "People are not going to stand for unemployment, and they are not going to stand for higher taxes [to finance federal job-creating programs]. I wouldn't be surprised if certain tax reforms go in place early in his term--investment tax credits, faster [one or two years] write-offs for, say, pollution-control facilities, elimination of the double taxation of dividends." If Carter does take that tack, he is almost certain to draw enthusiastic support--and the investment dollars to back it up--from corporate board rooms and Chambers of Commerce throughout the country.

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