Cracks in the Ceiling

A few months ago, Administration experts were wondering how they could keep the nation's record boom going. Now, they're wondering how they can keep it from going wild.

Tougher Than Usual. The possibility of an inflationary steel settlement was only one cause for concern as the U.S. basked in its 54th straight month of prosperity. Even more disturbing was the anticipated spurt in defense spending to pay for the expanding war in Viet Nam. So far this year, President Johnson has demanded only $2.4 billion in supplementary funds to fight the war, but that figure is virtually certain to top $5 billion by the end of the current fiscal year; it could soar as high as $12 billion a year thereafter. In addition, congressional eagerness to expand Administration proposals for medicare, social security, regional development, education, housing and other programs will add several billion dollars to the Government's original price tag for the Great Society.

Plainly, while not acceding to Republican warnings that he will have to choose between "guns and butter," Lyndon Johnson can do little to control defense costs. Thus the President let it be known last week that he was taking steps to spread the butter--domestic spending--more thinly in next year's budget. He summoned Budget Director Charles L. Schultze for a White House conference--the 29th since June--and ordered him to launch a "more rigorous and searching quest for savings" among Government agencies and to be "even tougher than usual" with requests for new or expanded programs. The Administration's target: cuts of between $6 billion and $9 billion from the total requested by nondefense agencies for next year. The President has also instructed all Government agencies to apply Pentagon-style "cost-effectiveness" techniques to find "the most effective and least costly" alternatives for achieving Administration goals.

Signs of Sag. The underlying irony in the current cutback campaign is that only last June the President's experts saw serious signs of sag in the economy, persuaded him to engineer a $3.4 billion excise tax cut and to hint at another slash in income taxes aimed at stimulating business activity next year. Now, by contrast, some officials are beginning to talk guardedly of a tax increase in 1966 if Viet Nam gets much more expensive. Thus far, the talk is muted, for no Administration likes to contemplate tax boosts in an election year.

Nonetheless, Lyndon Johnson has already had to abandon his cherished, if unrealistic, goal of keeping the U.S. budget below $100 billion. He did so by a scant $300 million when he originally submitted his budget for the current year, thereby projecting a politically valuable image of fiscal responsibility.

Now, only two months into the fiscal year, it is already clear that the $100 billion mark, in the words of Budget Director Schultze, will "quite probably" be topped. Once that ceiling falls, it will almost certainly fall for good.

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