The Economy: We Are All Keynesians Now

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rising faster than production; wages are rising faster than prices; corporate profits are now rising faster than the stock market, even though the Dow-Jones average has jumped more than 400 points since mid-1962 and last week closed at an alltime high of 966. Businessmen plan in 1966 to increase capital spending 15% ; automakers and steelmakers expect to top this year's production records. Ackley and his colleagues anticipate that the gross national product will grow another 5% in real terms during 1966, to $715 billion—or perhaps more.

The Feeling Is Mutual. More meaningful than breaking records is the fact that the U.S. economy is changing for the better. In Lyndon Johnson's profit-minded Administration, Government planners have come to appreciate the importance of helping private business to invest in order to create jobs, income and demand. Johnson knows that he must have a vigorous economy to support his Great Society programs as well as the war in Viet Nam and the U.S.'s reach for the moon. To further that aim, he has more day-to-day contact with businessmen than any President since Hoover; he telephones hundreds of them regularly and invites scores to the Oval Room to hear their opinions. Under the atmospherics of the Johnson Administration, the U.S. has a Government whose economic policies are simultaneously devoted to Keynesianism, committed to growth, and decidedly probusiness.

Businessmen, for their part, have come to accept that the Government should actively use its Keynesian tools to promote growth and stability. They believe that whatever happens, the Government will somehow keep the economy strong and rising. With this new confidence, they no longer worry so much about the short-term wiggles and squiggles of the economic curve but instead budget their capital spending for the long-term and thus help to prolong the expansion.

If the nation has economic problems, they are the problems of high employment, high growth and high hopes. As the U.S. enters what shapes up as the sixth straight year of expansion, its economic strategists confess rather cheerily that they have just about reached the outer limits of economic knowledge. They have proved that they can prod, goad and inspire a rich and free nation to climb to nearly full employment and unprecedented prosperity. The job of maintaining expansion without inflation will require not only their present skills but new ones as well. Perhaps the U.S. needs another, more modern Keynes to grapple with the growing pains, a specialist in keeping economies at a healthy high. But even if he comes along, he will have to build on what he learned from John Maynard Keynes.