Business: THE RISING RISK OF RECESSION

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that it has created a severe risk of recession. Though neither embraces Friedman's whole concept, they maintain that the board should pay less attention to fluctuations in the money market and more to fundamental trends. They also have been arguing since last August that unless the money managers act promptly, they will eventually have to release so much money to prop a slumping economy that inflation will begin again.

As Friedman sees it, the timing and severity of a recession will depend mainly upon how quickly Maisel and Mitchell can persuade their fellow board members to ease up on money. President Nixon can cajole the members, but legally he cannot control the actions of the board, which is independent of the executive branch. As a practical matter, though, the board would find it difficult to resist presidential arm-twisting.

Nixon faces a dilemma. Inflation is his No. 1 domestic problem and, though it started long before he came into office, it is rapidly being identified in the public mind as "Nixon's inflation." The American people are angered and frustrated by inflation, and the polls show that an overwhelming majority criticize Nixon's handling of the persistent problem. Moreover, Nixon believes that he must stabilize the economy before the nation can effectively marshal the resources to carry through the social and environmental programs for which so many voters are clamoring.

The other side of the coin is that if Nixon pushes anti-inflationary policies too long or too hard, the result could indeed be what most economists define as a recession: at least two successive three-month periods of no real growth in the total economy, a condition that is almost sure to bring about a substantial jump in unemployment. At present, the nation might find such an experience particularly troublesome. A recession could aggravate social unrest. The jobless rates among blacks normally run twice as high as those common whites; among blacks under 25 years old, they often reach five times the overall rate.

Overkill and Brinksmanship

Though Paul McCracken is a socially sensitive man who fully recognizes the dangers involved, he argues on behalf of the Administration that "We have no alternative but to risk overstaying with policies of restraint." Economist Gabriel Hauge, chairman of Manhattan's Manufacturers Hanover Trust Co., agrees: "The nation has to run the risk of getting into a recession. We should not be afraid of overkill."

The Administration's economists admit that they are practicing brinksmanship. Anything more severe than a mild or brief recession would damage Republican chances of winning more Senate and House seats in next November's election. It will avail Nixon little politically to blame inflation on the Johnson Administration, even though Lyndon Johnson's failure to ask for higher taxes in 1966 to help meet Viet Nam costs is a major source of today's problem. Some congressional Republicans believe that Nixon will arrange to relax the money squeeze well before ballot time. But at least one of the President's most trusted advisers has counseled him to risk unpopularity in 1970 and concentrate on stopping inflation before the 1972 presidential race. Any letup now, he feels, would give Nixon a politically lethal credibility gap on the issue of inflation—a gap that could