"A Great Year"--If

Like a high-pressure salesman who has his prospect on the defensive, President Nixon last week kept up the pitch for Government frugality that he sounded so strongly in his budget message. In his annual economic report to Congress, Nixon italicized one sentence: Only by holding the line on federal spending will we be able to reduce the inflation rate further in 1973. If that can be achieved, he said, 1973 can be, not just "a very good year" like 1972, but "a great year" in which the U.S. will "enter into a sustained period of strong growth, full employment and price stability." His three-member Council of Economic Advisers--Herbert Stein, Marina von Neumann Whitman and Ezra Solomon--went on to describe the prospects in a 301-page report that could best be characterized as soberly glowing.

The CEA confessed to a nagging worry about food prices--and with good reason. The Agriculture Department last week reported that farm prices jumped 5% in January, the second straight monthly rise of 5%. The Administration has responded by taking steps to raise meat output: it ordered another 9,000,000 acres of land restored to production of feed grains. The move will not affect prices until late summer or fall.

Panic. Like the President, the CEA stressed the need for economic restraint in order to prevent greater inflation. It said that the pace of the nation's boom should be slowed in the second half of the year by a combination of budget hold-downs and a less rapid expansion of money supply. Still, its projections for the full year add up to a powerful advance in every sector: gross national product should rise about $115 billion, to $1,267 billion; real growth of 6 1/4% will top even the 6 1/2% of 1972; inflation will be no higher than 3% or so; the jobless rate will fall from its present 5% to 4.5% by year's end. Wall Street does not seem to believe these predictions. Investors fear an upsurge of inflation, or a sharp tightening of money accompanied by rising interest rates, or both. Indeed, late last week four large Eastern banks raised their prime lending rates from 6% to 6 1/4%. Stock traders also have been depressed by renewed weakness of the dollar overseas; within 36 hours last Thursday and Friday the West German Bundesbank had to buy $1 billion worth of greenbacks unloaded by panicky speculators. The Dow Jones industrial average dropped another 23 points during the week, to 980, down 70 points from its Jan. 11 high.

One less-than-optimistic note in the council report: the CEA rejected the idea that the Government should set a target of driving the jobless rate down to 4%, which has long been accepted as "full employment." The CEA indicated that the Administration expects to push the rate next year below 4.5%, but refused to say how low it might go, and argued against setting any target at all. "Full employment," it said, should be defined as "a condition in which persons who want work and seek it realistically on reasonable terms can find employment"--and the Government simply does not know what the jobless rate would be in those circumstances.

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