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T.N. Vance, The Economic Outlook for 1954, New International, January February 1954, pp.8-10.
Transcribed by Ted Crawford.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
The economic outlook for 1954 has now become the dominant question, governing all political forecasts. While it is still eight months to the Congressional elections in November, there can be little doubt that the Republican politicians are worried lest an unfavorable economic outlook accentuate the normal loss of Congressional seats that the party in power must usually expect a non-presidential election year. The result could easily be that the Democrats will capture a solid majority in both Houses of Congress.
Certainly, if unemployment in November exceeds present levels – barring an all-out hot war – the Republicans will suffer a resounding defeat. Just what the present (March) level of unemployment is – the month Eisenhower stated would be decisive in determining whether the Government would intervene in the economy – is impossible to say. The January figure exceeded 3,000,000. The February figure should have been released on March 1st. Publication has been postponed until March 15th. Why? Ostensibly to permit checking of the new sample used to estimate the amount of unemployment. It might also be that the February figure shows unemployment to have risen sharply. Politically, it may be more convenient to announce a February unemployment figure of 4,000,000 or thereabouts at the end of March, while (the administration most hope) advance indications show a decline in unemployment for March.
The Economic Report of the President to Congress, dated January 28, 1954, concludes its evaluation of the current economic outlook by stating: “Our economy today is highly prosperous, and enjoys great basic strength. The minor readjustment underway since mid-1953 is likely soon to come to a close, especially if the recommendations of the Administration are adopted.” (Italics mine – T.N.V.) Actually, the “minor readjustment” is a full-fledged recession, already amounting to a decline of approximately 10 per cent since it began in the second quarter of 1953. The overwhelming majority of economists attending the annual meetings of the American Economics Association and the American Statistical Association at the end of December is clearly of the opinion that “The United States economy already is in a downturn. It faces the prospect of an ‘orthodox recession’ in 1954 with total output down $10,000,000,000 to $18,000,000,000 from 1953’s extraordinarily high levels.” (The New York Times, Dec. 29, 1953.)
While the American economists do not share the opinion of Colin Clark, leading Australian economist, that the economy is heading for a severe depression, they do appear to expect the decline to last throughout 1954. In other words, the professional economists will be surprised if the “re-adjustment” ends “soon.” As a matter of record, the Joint Committee on the Economic Report (officially established by Congress to appraise the President’s Economic Report, and composed of a majority of Republicans) is quoted in the New York Times of February 27, 1951 as “not fully satisfied with the Government’s anti-recession program, and (it) finds the administration’s farm program particularly unsatisfactory.”
Just what is the administration’s “anti-recession” program? It was supposed to have been stated explicitly and at length in the President’s State of the Union Message, the Budget, and the Economic Report. By and large, the Eisenhower anti-recession program consists of three parts denial that a recession exists and one part piously wishing that it would go away – if it does exist. These three major policy documents can be searched from beginning to end, and any anti-recession program will he found conspicuous by its absence. There is discernible an anti-New Deal philosophy, typically expressed by the following paragraph from the Budget Message:
“This budget marks the beginning of a movement to shift to State and local government and to private enterprise Federal activities which can be more appropriately and more efficiently carried on in that way. The lending activities of the Reconstruction Finance Corporation; the services provided by the inland Waterways Corporation; certain agricultural activities; and some aspects of our health, education, and welfare programs are examples of this type of action.”
Nevertheless, there is an administration program. Officially, it can be summarised as providing tax incentives and other necessary stimuli to capital investment. Unofficially, it might he called Turning the Country Back to the Indians (read: Monopoly Capital) or How To Loot the Public Treasury in Three Easy Lessons. Whether it be reducing the taxes on dividends, or more rapid depreciation allowances, or other fiscal policy, the philosophy stems from the theory that what is good for big business (General Motors and its allies) is good for the country.
Much of the theoretical foundation for the administration’s program apparently originates with Arthur F. Burns, Chairman of the Council of Economic Advisers, who is interviewed in the New York Times of Feb. 22, 1951 by Joseph A. Loftus on the occasion of the publication of a collection of Burns’ essays. The heart of the Burns philosophy is revealed by the following exchange:
In an essay written in 1948, he made this observation about Government policy in the depression of the Nineteen Thirties:
“On the whole, consumer spending responded much better to the Governmental measures than private investment.”
How, then, could he justify an Administration tax policy now that puts emphasis on incentive to private investment rather than on consumer spending?
The circumstances were quite different then, he explained. The present tax program would have made no sense whatever in the early days of that depression. Business confidence was shattered. Now it is different. Stock prices are up, commodity prices are not down. Investment expenditures are being pretty well maintained. Business confidence is running high. There is a good chance of stimulating investment further.
As the question is being stated – “do you want to stimulate consumption or production?” – Dr. Burns continued, the “underconsumptionists” would win.
But, he said, that does not state the issue correctly. As the facts are now, he said, if you cut a consumer’s tax $1, he may spend from zero to $1, no more. If you cut business taxes $1, business may spend as much as $50. A new environment for business spending is created.
If business confidence is high, why is there need to stimulate it?
There has been a decline, he said, adding that no responsible thinker can say positively it will be self-limiting. It could become a spiraling contraction. (Italics mine – T.N.V.)
Just what good it would do to stimulate capital expansion, when the source of the present recession is the crisis in agricultural production and in certain consumer durables, especially automobiles, is not explained by Dr. Burns, for he has yet to ask himself (publicly) what is the cause of the present decline? And yet, according to Loftus, in the above-quoted article: “This is some of the thinking of the man who probably does more to shape the economic policies of the Administration than any other individual except the President.”
Whether it is a better understanding of economics, or a keener political sense that is responsible, the Democrats have dramatically focused attention on the Administration’s pro-Big Business orientation by the proposal of Senator George that income tax exemption credit for dependents be increased from the present $600 to $800 and then, next year, to $1,000. Such a proposal, of course, would benefit the mass of the population and would serve to stimulate consumption.
Although the administration has officially come out against the George proposal, Congressional Republicans are uneasy about entering an election campaign with unemployment at the four or five million mark, and with the Democrats pushing tax relief for the masses while the Republicans are committed to tax relief for finance capital. That is why the Joint Committee on the Economic Report, mentioned above, is quoted as saying: “Tax relief for the middle and lower income brackets, to bolster consumer demand, might be desirable sooner than President Eisenhower has indicated.” And further: “Better preparations for a public works program are necessary; there should be a public works administrator, responsible directly to the President, and substantial credit should be available to local communities for such projects.” (Italics mine – T.N.V.) Shades of WPA and PWA!
The Loftus interview with Burns concludes by quoting from one of Burns’ essays: “Subtle understanding of economic change comes from a knowledge of history and large affairs, not from statistics or their processing alone – to which our disturbed age has turned so eagerly in its quest for certainty.” To which we say “Amen!” Such understanding, however, cannot be found in Burns or in the Eisenhower administration.
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