Impact On U.S. Economy Slight

Press, Volume CVI, Issue 31135, 11 August 1966, Page 17

Impact On U.S. Economy Slight

(N.Z. Press Association—Copyright) WASHINGTON, August 10. The American economy is carrying the war in Vietnam with its little finger, “though the finger hurts a bit,” according to the “New York Times.”

The war had had distinct effects on the economy and on the people and business, the newspaper said. But the effects had been far less than in any other war in modern times. There has been nothing resembling a shortage of consumer goods, such as has been associated with past wars. Prices have gone up and housewives are conscious of paying about 8 per cent more for meat than a year ago. Medical care costs have soared. Little Inflation But the inflation has been small by comparison with the soaring of prices during the Korean War and the two World Wars. Taxes have risen, but they are negligible in comparison with the big cuts in income and excise taxes of 1964 and 1965, and also by comparison with the tax increases of previous wars. The main change has been merely a speed-up in tax collection. The war has worsened supply troubles in a few metals, such as copper and molybdenum. Some types of aluminium are on a delayed delivery basis, and electric wire has been hard to come by in the quantities manufacturers have wanted. The war has cost the Government money, and thus has reduced the availability of funds for domestic purposes. The President’s January budget cut the amount authorised in some 25 new “great society” programmes in health, education, anti-pollu-tion and the like. Payment* Deficit In spite of the relatively small impact of the war at home, it has had one serious economic cost not felt by the ordinary citizen. It is directly responsible for sharply worsening the deficit in the balance of international payments after a heartening improvement in 1965. The cost of the war. of course, is still rising. At present it is estimated to be running at an annual rate of 12 thousand million dollars, »

with total defence outlays now at a rate of about 60 thousand million dollars. Assuming no early peace in Vietnam, the strain on the economy might become a little more noticeable, depending on the pace at which defence spending increases. But, while the Government has refused to divulge its latest estimates of defence outlays, there is a good chance that the rate of increase will be less in the next 12 months than it was in the last.