When Richard Nixon becomes President next month, he will take charge of an economy that has been growing fast for years, and lately has been expanding too rapidly for its own good. Business has been on the up swing for 95 months — since February 1961, the month after John Kennedy took office at the tail end of a recession. Though the Democratic policymakers certainly cannot claim all the credit for the longest advance in the nation's history, they have done a conspicuous amount of managing and masterminding through their Keynesian New Economics. They leave behind a remarkable record for the Republicans to try and match—as well as many difficult problems for them to try to solve.
In the past eight years, industrial production has gone up more than 50%, the gross national product has advanced more than 70%, and corporate profits after taxes have increased almost 100%.
The median income of a U.S. family of four has risen 54%, to $9,695. More than 75 million Americans are at work today in civilian jobs, and unemployment has dropped to a 15-year low of 3.3%. It is true that too many Americans remain ill-clad, ill-housed and ill-fed, but the U.S. has come close to achieving its goal of full employment.
Not the least of the economy's strengths has been its resistance to stresses and strains. Over the past eight years, production and general prosperity have continued to grow vigorously, despite political assassinations, race riots, international monetary crises and breaks in the stock market. In the past year the economy advanced in the face of all of that, and more. Yet economic Utopia is far from the nation's grasp. This year, the expansion has gone too far, too fast. In fact, there have been excessive increases in three vital areas: wages, prices and Government spending. During 1968, more than in any other year since the early 1950s, the joys of expansion were shaken and weakened by the jolts of inflation.
The Pangs of Prices
Though there are a few signs of a slowdown ahead, the economy so far has resisted all attempts to curb its expansive excesses. Congress belatedly passed a 10% income surtax in June, but production and demand—and prices —only kept moving higher. From November 1967 through last April, the Federal Reserve Board raised the discount rate three times, boosting it from 4% to 5½%, a 39-year high. The board later dropped the rate to 5¼% , but last week, declaring a new assault on inflation, it lifted the rate again to 5½%. Whether the rise will have any rapid effect is debatable. The causes of inflation are deep, and it will take time to root them out.