The Economy: Losing His Cool

Only six months ago, the U.S. economy was heating rapidly and Lyndon Johnson decided to cool it. His damper was a dose of New Economics: he asked Congress for a temporary suspension of the 7% investment-tax credit on plant and equipment spending. The move helped chill the economy so much that last week the President requested Congress to reinstate the credit nine months ahead of schedule.

Sharp Difference. One reason for Johnson's decision was the sharp difference between capital spending and anticipated first-half trends. In 1966, capital investment had reached $60.6 billion, a 16.7% increase over the...

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