Kennedy Seeks To Prevent Slumps

Press, Volume CI, Issue 29728, 23 January 1962, Page 13

Kennedy Seeks To Prevent Slumps

(N.Z .P. A. -Reuter— Copyright)

WASHINGTON, January 22. President Kennedy set forth four major goals in his economic policy placed before Congress today. He said the country needed full employment and sustained prosperity without inflation.

The nation could not afford to settle for any prescribed level of unemployment, but for working purposes 4 per cent, of the labour force was acceptable.

President Kennedy also called for an acceleration of the nation's economic growth to 4J per cent, a year, a rate “within the range of our capabilities.” Historically, the rate had been about 3} per cent. The extension of equality of opportunity to the poor, the elderly, non-w’hites, migratory workers and the handicapped “who are shortchanged even in time of prosperity,” was necessary. His fourth point was the increase of American exports, “a task of highest priority,” to earn the dollars to pay for United States commitments abroad without depleting the nation's gold reserves. President Kennedy asked Congress to approve a threepoint plan to prevent future recessions, or at least “keep them short and shallow.” The programme was:

Stand by authority for the President to cut personal income taxes in all brackets by as much as five per cent, and tor at least six months in recessions “where time is of the essence.” Presidential authority to add up to 2000 million dodilans to public works spending when unemployment climbed by a total of at least one per cent, in three out of tour months, or four out of six months. Permanent strengthening of the unemployment insurance system, including coverage of more than 3m more workers, and raising the wage base of the payroll tax employers

pay from 3000 dollars to 4800 dollars. With such “de-femce-in-depth,” President Kennedy said, normal fluctuations in business and consumer spending “need not doom us to an alternation of lean years and fa,t.”

He also made a strong plea tor enactment of his proposals to lower trade barriers to meet tihe challenge of the European Common Market and permit American in-dustiry to compete for exports. The President said the United States had made a good start in recovering from last winter's recession and predicted that the economy would improve further in 1962. But he warned that the pace had carried the nation only part of the way towards the goal of maximum production, employment and purchasing power. On trade, the President said the United States must “negotiate down” tariff barriers with the Common Market “so that exports of our industry and agriculture can have full oportunity to compete in Europe.”

His review of the domestic economy said unemployment was still too high, that a “determined effort” was required to reduce the international balance-of-payments deficit, and that general prosperity had not wiped out areas of poverty in the United States. “We face 1962 with optimism but not complacency,” the President said. . . Vigilance and flexibility must be the guardians of economic optimism.”

Mr Kennedy said the momentum of recovery from last year's slump was expected to raise the gross national product—the total value of all goods and services produced—to 570.000 million dollars for 1982 as a whole, or 50.000 million dollars more than the 1961 level. He asked Congress to assist the growth of the gross national product by approving the tax revision programme, which included his already announced proposal for an 8 per cent, credit against tax for gross investment in depreciable machinery and equipment. The President pictured the economy last January as being “in the grip of recession." Almost one-fifth of manufacturing capacity lay idle, he said. Nearly 7 per cent, of the labour force was unemployed. Output was running at an annual rate of 50,000 million dollars below’ capacity. At the same time, gold was leaving the country at a rate of more than 300 million dollars a month. Large and persistent deficits had weakened confidence in the dollar. As 1962 opened, his five major aims had been achieved, the President said. He listed those as follows: (1) The gross national product grew from an annual rate of 501,000 million dollars to a record rate of 542,000 million dollars in the final quarter of 1961. Industrial production in July showed a total rise of 13 per cent, by the end of the year. (2) Those gains brought into productive use nearly half the plant capacity which had been idle at the beginning of 1961. (3) Unemployment dropped from 6.8 to 6.1 per cent, of the labour force, and the number of depressed areas declined from 101 in March to 60 in December. (4) Price stability had been maintained; wholesale prices fell slightly and consumer prices rose only one-half of 1 per cent. (5) Confidence in the dollar had been restored. Gold losses were cut from 1700 million dollars in 1960 to less than 900 million dollars in 1961. The 1961 deficit in basic international transactions was about one-third as large as in 1960.

He said post-war economic growth in the United States had been slowing down, although the rate had been ahead of the record for the last half-century.