Environment for Prosperity

In the economic report sent to Congress last week, President Eisenhower moved into a large area of political philosophy between Herbert Hoover and Franklin Roosevelt.-- In contrast to Hoover, Eisenhower accepted Government responsibility for effective methods to keep the U.S.

out of a depression. In contrast to F.D.R., Eisenhower rejected the New Deal doctrine that Government should move further toward direction of the economy.

The President's report in summary: The Past Year. At the beginning of the year, with the Korean war still in progress, the economy was expanding. Seeing the threat of further inflation, the Administration tightened up on credit. At about that time, demand for commodities began to fall off. The trend was magnified by the truce in Korea.

In this situation, the tightening of cred it had a "more potent effect than was gen erally expected," the President's report granted. When business began to dip, the Administration saw the trend, and promptly reversed its credit policy. The report called the year's economic movement a "minor contraction." It was the kind of postwar economic shift that occurred in 1949, but it was less severe.

The Present Position. Despite the downturn in the last half of the year, 1953 was the most prosperous year in U.S. history. It left the economy in good health. Unemployment increased to 2,300,000 workers by last month, 500,000 more than a year ago, but this is still only about half the unemployment in January 1950, and about a third of the total in prewar January 1941.

The Outlook. Looking beyond the horizon, President Eisenhower's report was firmly optimistic: the economic down turn should stop during 1954. The President's economists had a list of reasons for sticking out their necks -- and the President's: 1) the population is increasing, 2) technology is advancing, 3) personal savings are high, 4) consumers have $5 billion of new purchasing power as a result of the cut in income taxes, 5) the credit situation is sound, 6) business has broad plans for expenditures on plant and equipment, 7) housing construction is likely to continue at about the 1953 level, 8) the cut in federal expenditures will be largely balanced by increases in state and local government spending.

In addition, the economy will be shored up by built-in stabilizers, e.g., unemploy ment compensation (which the President wants to broaden), social security, farm price supports. To give the economy a push, the excess-profits tax has been eliminated and the President has proposed a new business "incentive" tax program.

The Arsenal. If a depression threatens, the President has a second line of defense.

On the Government's drawing boards are plans, specifications and blueprints for a massive public-works program that can be rapidly thrown into gear. Within a year, the Federal Government could increase its public-works program at least 50%.

Taking inventory of his whole program, Old Soldier Dwight Eisenhower saw a whole "arsenal," from tax policy to public works, to make war on depression. Said his report: "We shall not hesitate to use any or all of these weapons as the situation may require."

The Philosophy. In one paragraph, the report summed up the Eisenhower philosophy of the Government's total role: "The Government can greatly help to maintain prosperity. But it is well to recall the accumulated experience ... which has taught us that no Government can of itself create real and lasting prosperity . . . The best service that the Government can render to our economy besides helping to maintain stability and insuring a floor of protection for the population is ... to create an environment in which men are eager to make new jobs, to acquire new tools of production, to improve or scrap the old ones, design new products and develop new markets, increase efficiency all around, and thus be able and willing to pay higher wages and provide better working conditions."

If his program works, Eisenhower will have removed two specters: 1) the fear that the U.S. Government will stand helpless and let the economy slide downhill and 2) the fear that a rescuing Government will run off with the economy.

* A fascinating bit of evidence that F.D.R.

once felt that he and Hoover were not so far apart came to light last week.. In the second volume of his Roosevelt biography (Franklin D. Roosevelt: The Ordeal), Author Frank Freidel reported that Roosevelt wrote Diplomat Hugh Gibson in 1920: "I had some nice talks with Herbert Hoover before he went West for Christmas. He is certainly a wonder, and I wish we could make him President of the U.S. There could not be a better one."

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