Action Now

One big figure loomed up like a cloud considerably bigger than a man's hand last week as President Eisenhower called a Cabinet meeting to order. The figure: an advance Labor Department report on February unemployment showing 5,186,000 out of work. This was the highest unemployment figure since 1941, some 600,000 more than January, and about 100,000 more than the Administration had expected. And one man's hand loomed considerably bigger than the cloud: the Senate's galloping Majority Leader Lyndon Johnson (see The Congress) had already whipped up a Democratic program calculated to win the Democrats credit for attacking the recession, and had the bills drawn and ready to push through.

In two hours the Cabinet, after weeks of discussion and fact-gathering, agreed on an Administration antirecession program, agreed to announce it quickly. The main points:

P: Double the rate of spending on the federal highway program, now running about $500 million, by asking Congress to repeal the pay-as-you-go Byrd (Democratic) amendment. In effect, return to the original plan to build the 41,000-mile network of superhighways in 13 years, instead of the stretched-out 21-year plan.

P: Raise the target on new house starts for 1958 from the present 1,100,000 to a possible 1,800,000 by stepping up public and military housing construction and sweetening credit opportunities for private builders.

P: Step up the federal-aid-to-hospital-construction program, now dawdling along at $25 million a year, to the legal limit, $200 million, as soon as local communities can match the funds.

P: Most important of all: rush through a bill to extend, for up to 39 weeks with federal funds, state unemployment-compensation payments that now generally run out at 26 weeks. Such a federal offer, limited to one year, would prod states to amend their laws to make such extended unemployment payments legal.

Day after the Cabinet meeting, Senate Minority Leader Bill Knowland ducked into the White House, came away with a "Dear Bill" letter from the President (who sent a "Dear Joe" copy to House Minority Leader Martin) detailing a flock of antirecession steps taken or in the process. After ticking off the relaxation of the Federal Reserve discount rate (see BUSINESS), a $5 billion boost in the current rate of Defense Department procurement, and a step-up in urban-renewal projects, the President wrote that he has ordered the Budget Bureau to cut loose $200 million in held-back funds for Army Engineers construction projects, e.g., national-park roads and camping facilities, and new roads on Indian reservations. In addition, he said, he is 1) boosting reclamation, rivers and harbors, and watershed protection spending by $186 million, 2) pumping $200 million into Fanny Mae, the Government's mortgage market, to buy up FHA-insured mortgages so private lenders can make new low-price housing loans, and 3) ordering the Defense Department to steer contracts to labor-surplus areas.

Behind the new action-now program was a growing impatience by such venturesome Cabinet members as Interior Secretary Fred Seaton, Labor Secretary James Mitchell, Defense Secretary Neil McElroy. Attorney General Bill Rogers and Vice President Nixon with the pacing of antirecession moves. In his letter to Knowland and Martin, the President hit out at Democrats, without calling any actual names, for the "sudden upsurge of pump-priming schemes" put forward by persons lacking "faith in the inherent vitality of our free economy and in the American as an individual." But all in all, the new policy marked a notable shift from the emphasis of the President's midweek news conference, when he seemed to be in favor chiefly of "watching" for the economy to right itself.

If unemployment figures go up again in March--when seasonal factors usually bring new hiring--the Cabinet's impatient men will push for a hefty tax cut. Last week Administration tax experts were already working over such ideas as a one-year repeal of certain excise taxes, e.g., halving the tax on new autos, thereby saving the buyer $100 or more a year.* And they also were making practice passes at some new ideas, e.g., a two-month forgiveness of withholding taxes that could instantly pump out $2.3 billion in spendable take-home pay, thus give the economy a quick extra surge of power.

*Henry Ford II last week urged complete repeal of the federal excise tax on autos "as the kind of action that will help reverse the present unfortunate trend." Added Ford: "We have reached a crucial point in the recession--a point where optimistic words are of little avail and where prompt and direct action is indicated."

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