RICHARD NIXON was probably the first President to take office vowing that he would slow down the U.S. economy. The nation's No. 1 football fan had a "game plan" that his advisers said would stop inflation without much pain to the public or danger to the politicians. No need to tackle wages and prices directly. No need to get involved in messy strikes or stop end runs by steel prices. There would be no mandatory controls, no nasty squabbles between the White House and business or labor leaders, no interference at all with the free market. Instead, Government would simply balance its budget and pump less money into the banking system. As funds became scarcer in the private economy, business would simmer down and so, too, would prices. For a few "awkward months," predicted Nixon's economists, the nation would suffer mild "slowing pains" of high interest rates, little growth in production, some drop in profits and a moderate rise in unemployment. Eventually, inflationary pressure would be wrung out of the economy and normal expansion of output and hiring could resume.
The need for a slowdown was evident. But now, to an ever-growing number of businessmen, workers, consumers−and voters−the game plan sounds like an exercise in fantasy. The awkward months have lengthened into painful seasons, and the alleviation of inflation that was supposed to be worth all the unpleasantness seems nowhere in sight. In his 16 months in office, Nixon has posted an unenviable economic box score:
≫ The industrial production index has risen only .2%, and U.S. factories are operating at less than 80% of capacity.
≫ Corporate profits before taxes have dropped 11%.
≫ Unemployment has jumped by almost one-half, to a five-year high of 4.8% of the work force. One million more Americans than a year ago are unsuccessfully looking for work. ≫ Consumer prices have soared 7.5%, chopping almost 70 out of the real value of the dollar. Last week the Labor Department reported that inflation accelerated in April. The cost of living rose at a seasonally adjusted annual rate of 6%, up from 4.8% in March.
Other downbeat news darkened the gloomiest week that U.S. business has shuddered through in recent years. In Washington, embarrassed Administration officials conceded that the budget surpluses they had predicted for fiscal 1970 and 1971 will turn to deficits. On Wall Street, the most unnerving stock market reports since the Depression 1930s became daily more dismal. The Dow-Jones industrial average fell 40 points to a new seven-year low of 662; during the past 18 months, it has plunged more than 320 points.
Unquestionably, the situation is serious, but some qualifications are necessary. The economic picture appears bleaker than it really is because the market tends to overreact. It jumps extravagantly when the economy is strong, plunges precipitously when business weakens (and sometimes when it does not). Moreover, the economy has not suddenly run out of steam because of some inexplicable decline of consumer demand. Most of the drops in profits and jobs are the result of a deliberate, managed slowdown.
Still, the market is the most reliable indicator of the confidence that 26 million shareholders have in the economy and in the Government's ability to keep it healthy. Even though the economy remains