Uncle Sam Wants You--To Buy Something

While filling out his own federal tax return before he turned to the job of supervising the scrutiny of 67 million others, Internal Revenue Commissioner Sheldon S. Cohen had a happy experience. Sheldon Cohen, tax collector, it turned out, owed Sheldon Cohen, tax payer, a $43 refund. Under the rates introduced last year, Collector Cohen will also owe rebates to many another tax payer this year, and the thought makes Government economists almost rapturous. They figure that all the returned money will help start the U.S. consumer spending again, and thereby get the economy out of its present stall.

Worry & Save. To the distress of merchants and the dismay of the Government, the consumer has been conserving. The University of Michigan's Survey Research Center found that consumer confidence, as measured by the center's index of sentiment, dropped last November and December to its lowest point since the recession of 1958. In spite of record-high personal income, consumption rose only sluggishly and the demand for consumer credit reached its lowest point in four years. Personal saving, on the other hand, rose to 5.9% of income.

Retail sales in particular have suffered from the shift. They rose in February only 1% from February 1966, and from results totaled so far Easter spending this year barely equaled Easter of 1966. Color-television sales are running ahead of last year but at only about 50% of the increase originally expected. With housing starts off sharply, sales of appliances have been predictably slow. Few segments of the economy have been hit as hard as autos. Auto credit is running 55% below the boom year of 1965, and the industry now expects to sell only 3,730,000 cars during the first six months of this year, a drop of 15% from the first half of '66.* Privately, automakers have told Washington that they are writing off 1967 as a bad year.

Rising Confidence. With retail sales a key to revival, the situation may get a little worse before it improves. Sales slowdowns have caused layoffs in such industries as metals, machinery, transportation equipment and textiles, and the average factory work week in February was chopped by 45 minutes from January. In February, also, average real take-home pay for factory workers slipped from $98.81 a year ago to $97.11. But for all that, one bright note was heard last week. After running a new survey of consumer sentiment, Michigan's Dr. George Katona reported an upturn from the November-December low. Higher-income families especially were satisfied that they would either make more money this year than last or at least make as much as last year. Moreover, retail prices are generally holding firm and even falling in scattered instances; in Miami last week, the Winn-Dixie supermarket chain threw out trading stamps and sliced its prices. Ketchup, for example, went from 27-c- to 19-c- a bottle.

Retailers especially hope that the return of warm weather may finally bring out shoppers who have been staying away from stores. To woo them even more, Washington economists believe that Lyndon Johnson may well forgo the 6% surtax on personal-income taxes that was supposed to take effect on July 1.

* Blaming excessive safety requirements for some of the drop, auto companies last week sued to have them modified, particularly Standard 201, which requires extensive interior protection to reduce injuries in case of collision. The federal court suits were filed because a legal deadline was approaching; meanwhile, the companies will continue negotiations with the National Traffic Safety Agency in hopes of having agency standards eased.

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