The Expanding Economy

It was good New Deal doctrine, back in the early '30s, that the U.S. industrial plant was built or overbuilt, that the last frontier had been reached, and that the nation had better resign itself to doing the best it could in a "mature economy." In 1932, Franklin D. Roosevelt defined the problem as "administering resources and plants already in hand." All this was formally reversed last week by Harry Truman.

Warm Words. In his annual economic report to Congress, following his State of the Union message, Harry Truman drew his blueprint for the "expanding economy." The report conjured up a picture of Government and business walking arm and arm into the sunrise of a new day. Never again had businessmen expected to hear from a Democratic President such warm words of appreciation and comradeship.

In the new economy, "the benefits must extend to all groups. There is no room for the feeling that one group can prosper only at the expense of another."

Narrowing his sights from the year 2000 to 1954, Truman foresaw an annual output of more than $300 billion (last year's output was $259 billion), and the gain in national income would average nearly $1,000 per family, provide 64 million jobs and "go far toward our goal of the complete elimination of poverty."

But business must be bold, said Mr. Truman. The one major cause for alarm was an 18% decline in 1949 in domestic business investment. Said he: "There is no need for this decline to continue. There are immense opportunities for business investment. . . The enterprise and imagination of private businessmen will be a, crucial factor in achieving the upward growth." To provide encouragement, Truman planned to recommend changes in tax laws which would "stimulate business activity and yield a moderate amount of additional revenue." He was also studying "new devices for encouraging private financial institutions to furnish equity capital to small and medium-sized concerns."

Full Partner. Such "effective teamwork" is essential to the new-fashioned economy, he said. Harry Truman sees the Government as a full, active partner, developing resources, spending on education, health and social security. "If we cut these programs below the requirements of an expanding economy, we should be weakening some of the most important factors which promote that expansion."

Prices, the President declared, "now seem at or near a stable level consistent with continued expansion of business activity." (His economic advisers, however, insisted that the recent rise in steel prices was unjustified.) In the expanding economy, the advisers explained, increased productivity should, in general, be passed on to workers in increased wages, rather than to consumers by cutting prices.

More Tax Money Too. The concept of the expanding U.S. economy was sound economic doctrine. But Harry Truman also used it for political advantage. By prophesying ever-higher national output, the President was also prophesying ever-higher federal revenues to balance the budget and pay for the Fair Deal's expanding welfare programs. It was one thing to hope for higher revenues; it was another to depend wholly on it, while the Government jeopardized the prospect by spending, year after year, beyond its means (see below). The President's economic advisers estimated that the Fair Deal's social security and health programs would be costing $25 billion yearly by 1975. But by then, they said soothingly, the national output would be $500 to $600 billion, more than enough to take care of it.

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