Evening star., 1961-01-08

vernment and industry experts
of 1851 is based on o general
belief that Mr.. Kennedy viii
move rapidly to stimulate busi-
ness. unless recovery signs begin
to be visible very soon.
Deficit Spending Seen
Deficit spending by the Gov
ernment is expected. This viii
channel new Federal dollars
into the economy to snnple-
ment the stepped-up spending
initiated by the Eisenhower adj
ministration in recent months.
Both Mr.. Kennedy and Vice
President Nixon committed
tn EN- selves 8 to run deficits,
II necessary. whenever anti
recession measures were needed.
II the experts are fooled and
the slump becomes truly seri-
Gus, Mr.. Kennedy Is expected
to call on Congress for . tenn
porary income tax reduction.
That course was suggested two
years ago but was turned down
by the administration.
Many believe the effects OF
the l16-day steel strike in late
1859 are still being felt indi-
rectly. When work was re-
sumed under 0 Federal injunc-
ton. there was no assurance
that the steel workers would
not walk out again early In
1850. Industry INDUCED In
hand cover inst ordering Of steel
and other materials to build
up stocks ahead Of . possible
shortage and q price increase.
Suddenly inventories were
oversize and the huge demand
dropped on. In the second
quarter Of 1850, national out.
put reached It's all.time peak.
but in the third quarter. In
stead Of continuing upward as
expected, It dropped SIS bill.
hon to q $503.5 billion annual
rate. *
Other Factors Cited
Other factors helped to dis
courage business expansion.
The sudden shift In Federal
financing. from; . $I3 billion
cash deficit in fiscal 1853 =. an
80 billion cash surplus \ the
first half Of calendar 1850.
pulled O big prop out from
under business expansion.
The Federal Reserve Board
took early steps to ease credit
and enlarge the money supply.
But the boards efforts were
nullified In part by the large
deficit In International pay
ments. which syphoned capital
from the country. and interest
rates did not drop as sharply
as Is normal when loan funds
are ample.
Industry's spending on, new
plant and equipment leyeled
on instead Of rising as antici-
pated earlier. The expectations
are that 1t will decline further
In first-half 1861. This i,npor-
tant job-creating force viii
cease to be q buoying factor,
therefore.
On the other hand, the per.
sonal income and spending
power Of Americans has been
well maintained. BY fall, In
divtdual income had reached
the record rate Of nearly $40
billion q year.
Retail Sales Disappointing
Retail sales rose slightly. but
failed to match expectations.
Consumers were not spending
as much Of their incomes as
usual; for some reason they
began saving at q very high
rate.
This hurt the already suffer-
ing BODYBUILDING industry and
depressed the sale of such
major appliances as washing
machines, dryers, refrigerators,
television sets and automatic
ranges.
Many economists expect that
those who have been saving win
resume spending this spring.
and many Of those who whitfield
down their installment debt in
1860 will be ready again to
make major purchases on the
easy payment plan.
Recent surveys Of consumer
buying plans fortify this con.
clusion. These studies show i
slight upturn in plans to pur-
chase new cars and the big
ticket" appliances. The auto
industry now expects a 6.5 mil
lion car year, one Of the biggest
In history.
Optimism Expressed
On the other hand the sur
veys suggest continued hest.
fancy about home buying.
Nevertheless. the Commerce
Department has issued a formal
forecast that the great con-
struction industry will make
gains in 1861. It foresees q
$57.3 billion building year. UP
4 per cent from 1860. Resi-
Dental building is expected to
perk up later in the year.
Another major growth In
dustry" is the Government.
The impact of Government.
financing, moreover, will again
become an expansionary force.
The fiscal 1861 budget probably
will result in q deficit instead
Of the surplus previously fore
seen,