The War Pinch

The Viet Nam war has not yet caused any critical squeeze on the U.S. economy--but inevitably and inexorably it is beginning to pinch in a lot of places. Partly because of military orders, delivery times have lengthened on a range of civilian goods from roller bearings to high-alloy steel. Prices have shot up for several commodities, from sulphur to shoe leather. Although reluctant to pre-empt civilian demand, the Pentagon has been forced to declare military priorities on such varied products as clothing, glass, copper wire and electronic gear; priority purchasing has doubled in a year to an annual rate of $380 million.

The tightest pinch is in skilled labor. Last week the Bureau of Labor Statistics announced that unemployment fell to 4.1% in December--the lowest rate in nearly nine years--and Commissioner Arthur M. Ross warned that this year "will test our capacity to eliminate potentially inflationary manpower bottlenecks." Though labor shortages are not yet general, he said, defense industries cannot find enough tool and diemakers, electronic maintenance men, engineers, scientists or mathematicians. In the Great Lakes' heavy manufacturing belt, unemployment has dipped to about 2%. Result: delays in construction and production of metal-working machinery. With the armed services likely to grab 300,000 of the 350,000 men over 20 who will be entering the U.S. labor force in 1966, Ross forecast: "Some jobs will have to be redesigned so that women, older workers, young people and part-time job seekers can perform them."

This week the National Association of Purchasing Agents reported the longest list of items in short supply since the Korean War: aluminum, antimony, copper, brass, castings, hardwoods, bearings, paper and paper products, cotton yarns, dyes, soda ash, sulphur, electrical equipment, formaldehyde, porcelain insulators, forgings, magnet wire and zinc. "Broken delivery promises and lengthening lead times are an increasing headache to purchasing executives," said Elwood F. Andrews, chairman of N.A.P.A.'s business survey committee and a vice president of Allegheny Ludlum Steel. "I don't see anything on the horizon that might relieve our problems. But if peace breaks out, I take it all back."

Problems in Pants. So far, most of the war-caused delays and diversions are more annoying than seriously disruptive to industry. Delivery of hard-alloy aluminum items, such a's the Aluminum Company of America's seamless tubing, aircraft and rail-car panels, has slowed from a normal one month to as many as four months because extrusion presses are jammed with war production. A rush of orders from prime defense contractors has helped create an eight-month backlog in the small but crucial machine-tool industry, which builds the lathes, drills and presses for other manufacturers. Some toolmakers complain of a scarcity not only of high-performance screws and bearings but even of foundry castings for their output. Four times last fall, Pittsburgh's Crucible Steel Co. briefly shut down some melting operations for lack of molybdenum, an important hardening ingredient of tool and stainless steel.

One of the more pressing shortages is in men's pants. Last week the Defense Supply Agency issued mandatory orders for 550,000 pairs of cotton trousers, its third priority purchase in a month. In all, 34 clothing makers have been forced to shunt aside civilian output in favor of 2,500,000 military trousers. Some producers predict late deliveries this spring of men's suits, pants and overcoats. There is no shortage of leather for shoes, but prices have risen 12% in six months, largely because of Government requirements--including orders for 1,100,000 pairs of combat boots last week alone. The price of quinine, a drug in heavy demand because the prevalent Vietnamese strain of malaria resists synthetic substitutes, has shot up from 450 an ounce two years ago to $3.25, even though the Pentagon has dipped into its stockpile to relieve price pressures.

Defense authorities admit that they lack air transport to supply Viet Nam; yet they have refrained from commandeering commercial planes. Instead, the military relies on regular U.S. airline flights to carry 371,684 military passengers a month around the globe, leases airline jets between regular flights to haul half of its 220-ton-a-day Viet Nam air cargo. One result: sharply rising earnings for some airlines. For cargo-carrying Seaboard World Airlines, with 40% of its traffic across the Pacific, profits nearly doubled, to $4,700,000 in 1965.

Strike Benefits. Taking advantage of last summer's maritime strike, the Defense Department also leased 34 of the 106 idled U.S.-flag cargo vessels. That leased fleet, now choking Viet Nam's skimpy port facilities while contractors scramble to build more docks, gave the Pentagon time to tap the 983 cargo ships mothballed from World War II. So far, 62 vintage Liberty ships--all old, slow and small--have gone back into service; last month Defense Secretary McNamara ordered another 25 reactivated. Finding enough engineers and mates to run all of them may prove difficult. "We're already having trouble getting qualified officers," says President George Killion of San Francisco's American President Lines. In fact, some ships now sail without a full complement.

During the Korean War, defense outlays shot up 160% in two years, to 13% of the nation's 1952 output of goods and services. Today's military spending comes to only 8% of an economy twice as large. Though President Johnson last week decided to ask Congress for an extra $12.5 billion for Viet Nam (see THE NATION), the Pentagon maintains that actual defense spending will rise no more than 10% above its present level over a two-year period. And a top Defense official insists: "With only a few minor exceptions, the civilian economy should not be affected at all." Among those who disagree is Dwight Eisenhower. "The American people," Ike said last summer, "are being promised guns and a lot more butter--guns almost smothered in butter. I don't believe it's possible."

When the picture is viewed from both sides, rationing or consumption controls now seem improbable. But the war buildup already has brought much closer the possibility of some unpleasant choices.

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