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Then there is the question of the money supply. In his speech to the National Association of Manufacturers three weeks ago, the President said that Burns had given him a "commitment" that the Federal Reserve Board would "provide fully for the increasing monetary needs of an expanding economy." The following week. Burns, in a typically Delphic passage in a speech, left policywatchers guessing as to whether any such deal had been struck. Most common guess: no. Besides, Burns is only primus inter pares on the Reserve's twelve-man Open Market Committee, which regulates the money flow. A number of anti-inflation hawks on the committee, notably the New York Federal Reserve's Alfred Hayes, recently voted against faster expansion.
A Matter of Mood. Even if more money pours forth from Congress or the Federal Reserve, the big question is how much jittery consumers will spend. "The consumer is the key to 1971," says Harvard's Otto Eckstein, reflecting the overall view of TIME'S Board of Economists. "If retailing does not do very well next year, nothing else will."
This year the American consumer has been saving at an unprecedented rate of 7.3% of his income, and banks have tried to attract more deposits by offering gifts like appliances, luggage and wigs for women. The average American family has a fat $7,610 put away in savings accounts. Usually, a lot of money begins to burn a hole in the consumer's pocket, and a splurge of spending begins. But the usual consumer psychology may have changed. Last week George Katona, a consumer expert who heads the University of Michigan Survey Research Center, reported that the consumer's confidence is low and still falling, largely because he is worried about his job security and about a prolonged recession. In marked contrast to earlier years, says Katona, today's consumers spend money freely only when they are in the right mood to do so, rather than because they urgently need goods and services. Katona believes that buying habits are more affected than they once were by such problems as racial conflicts, student riots, crime, even pollution.
In 1971, to a much greater degree than in most years, the state of the economy will be determined by the mood of the people. Compared with 1970, it should be a fairly good year for business. Whether it will be better than that will depend on what the President does, more through deeds than words, to inspire the confidence of the American businessman and consumer.
*The growth gap is measured in terms of constant dollars at the 1958 rate, in order to discount the effects of inflation.
*A small pack of macadamias had cost United 90, and the line had been using 5,000,000 packs a year. The peanuts cost 40.