Pge Eight

THE MICHIGAN DAILY MAGAZINE

Sunday, Mardi 30. 1958

Gv. Mnh ,f) 1

THE RECESSION
The Present Economic Picture Adds Up
To Bad News for Business

By SUSAN HOLTZER
Daly Staff Writer
C'TTBESCOPE poised, nurse in
attendance and the patient
blinking fearfully from his pil-
low, 'Dr." Dwight D. Eisenhower
has for the past month been
checking the heartbeat and pulse
rate of the American economy in
political cartoons all over the
country.
Unfortunately, although the
disease was easily diagnosed as
"recession," there has been radi-
cal disagreement among the staff
over the necessary treatment. In
fact, no one as yet has even been
able to isolate the virus. And in
this particular case, complications
have set in which make the usual
prescriptions hazardous to offer.
Out of the cloud of words sur-
rounding the situation, however,
one fact emerges clearly: Almost
everyone has finally, agreed re-
sponsibility for halting the down-
ward spin rests with the federal
government. But that very nearly
is where agreement ends.

BASICALLY, the recession is de-
lineated in a maze of graphs
and statistics that all add up to
one thing - bad news for busi-
ness.
The nation's Gross National
Product - the total value of all
goods and services produced -
suffered a 1.5 per cent decline in
the last quarter of 1957, from the
rest of the year's rate. Railroad
freight loadings - indicating the
volume of goods shipped - are far
down. Department store sales
have also fallen off. And unem-
ployment has risen as production
has slowed and layoffs continue.
GNP and freight loadings, ac-
tually, are simply financial bar-
ometers which indicate the cur-
rent economic situation. Unem-
ployment and department store
sales, on the other hand, can rep-
resent both cause and effect of a
spiralling recession that, un-
checked, could easily balloon into
a full-scale depression.
THIS IS what makes economists
wary of even a slight "read-

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justment" - the possibility of
"creeping recession."
As consumer demand falls off,
the tendency is toward production
cutbacks and large-scale layoffs.
The resultant decline in overall
consumer income eats into the
total purchasing power, which n
turn decreases consumer demand
still more.
And so on. Like the chicken and
the egg, one can never be sure
just which comes first.
Added to this is the factor of
consumer sentiment, which in this
case refused to yield to President
Eisenhower's attempted reassur-
ances, and is apparently still in-
tractable.
rTHE University's Foundation for
Research on Human Behavior
recently published a survey on
consumer and business sentiment,
and concluded within that area
at least, the recession was likely
to continue. They blamed "un-
favorable economic news com-
bined with dissatisfaction about
high prices."
And that, indeed, is perhaps the
most peculiar element of the cur-
rent recession - while production
decreases and consumer demand
slumps, prices, instead of taking
the expected downward turn, have
actually risen.

ON THE WHOLE, there seem to
be two principle reasons for
this curious situation. First, due
to highly militant labor organiza-
tions, wages no longer fluctuate
in accordance with demand. Not
only do unions fight against sal-
ary reductions, but in most cases
they will not even forego what
has become their usual yearly in-
crease. Thus, with fixed salaries
providing a fairly solid "floor" on
production costs, little fluctuation
in prices is possible.
Second, in many industries one
dominant corporation is in a po-
sition to "administer" prices as it
wshes. And many corporations
take advantage of this to hold or
even increase their prices during
a recession.
But although the causes of this
phenomenon can be traced, its
possible results are a matter for
conjecture.
THE MAIN problem lies in de-
termining what weapons to use
against the recession itself. The
standard anti-recession measures,
predicated on the theory that
prices need to be brought up, at-
tempt to get more money into cir-
culation and thus increase pur-
chasing power. If used now, the
end result might well be a serious
inflation in the very midst of the
recession.

Once again, the consensus of-
opinion among economists as to a
solution for the problem is split;
there is convincing evidence on
both sides. It is not surprising,
therefore, to find each side pro-,.
posing various panaceas of their
own.
Several administration mea-
sures, of course, have either been
put into effect, or are being
planned. Among these are an ex-
pected $5'/% billion increase in de-
fense spending for the first half of
1958, and a greatly expanded
highway construction program.
The administration is also plan-
ning to spend two billion dollars
on public works programs for the
1958-59 fiscal year.
OF THESE, the public works
projects have been given the
most enthusiastic reception. The
Senate passed a near-unanimous
(93-1) resolution asking President
Eisenhower for a speed-up of civ-
11 public works projects.
The House Armed Services
Committee passed a similar reso-
lution in reference to military
public works, and AFL-CIO Presi-
dent Walter Reuther asked for an
even broader program to relieve
the unemployment problem.
Another anti-recession measure
- expansion of unemployment
compensation - was introduced
in the House, and Speaker Sam
Rayburn, Texas Democrat, said he
expects passage of the bill "be-
fore Easter."
STILL OTHER ideas have either
been suggested or passed. Sen.
William F. Knowld of California
urged turning government spend-
ing from foreign markets back to
the United States; Reuther pro-
posed a 90-day moratorium on
collection of withholding tax "in
the event other efforts fail" and
the Senate, March 12, passed its
first full-fledged anti-recesison
measure - a $1.8 billion emergen-
cy housing bill.
But nearly all of these are
merely sideshows compared to the
often spectacular center ring bat-
tle going on over the possibility
of a tax reduction.
On one side stand arrayed the
administration and a large por-
tion of Congress, urging a cau-
tious, wait-and-see policy. On the
other side-very nearly alone-
stands Democratic Sen. Paul
Douglas of Illinois, who feels
"the time to act has arrived."
SEN. DOUGLAS has been fight-
ing a one-man battle since the
Congressional 3OInt Economic
Committee issued its majority re-
port stating that tax cuts were
not yet justified. -
The administration member who
came closest to looking favorably
on a tax cut was Vice-president
Richard M. Nixon, who was willing
to give the economy "a few weeks"
before deciding. A statement by
President Eisenhower must have
been even more discouraging to
the Illinois Senator.
"Whatever decision regarding
taxes is made," the statement
read, "will be reached only when
the impact of current develop-
ments on the future course of the
economy has been clarified and
after consultation with Congres-
sional leaders."
And there the issue stands.
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