The Economy: II

Keynesian economics, for many years a dirty word in the Republican Party's rhetoric, has been accepted by the Administration more as a playtoy than an effective method of economic management. Fiscal policy planning is an awesome thing, something to be handled gingerly lest it dull all sensibility and impose itself on the player's mind.

Those programs which the Administration currently supports and those which it intends to implement in the future, while commendatory as public policy proposals, are nevertheless ineffective anti-recession measures.

The White House, for example, regards the added $11.6 billion in defense contracts as an effective economic cure. This sum, the President has noted, "will provide increased employment in many industrial communities."

If anything, defense spending should be determined by military needs alone and not by fiscal considerations. The danger, of course, is that when inflation becomes a threat, military expenditures will be reduced, regardless of the nation's security requirements.

Civilian expenditures, such as the President's highway construction plan, will not add more than $4 million--an insignificant amount--to the economy. And as is the case with most public works projects, it will take some time before this money circulates publicly.

Public works programs, however, are irreversable once begun. Rather than avoiding such programs because a sudden economic upturn would make them unnecessary, greater intelligence should be applied to the question of planning long-run civil works projects designed not only to stabilize the economy but to increase the nation's social welfare.

Such intelligence is woefully lacking in the current Administration, which has placed an inordinate amount of emphasis on monetary policy planning. Monetary policy, which intrudes silently into the economy, is the favored child of an Administration with an almost instinctive tendency to label as evil anything smacking of direct government intervention into economic management.

If monetary policy is an ineffective regulator of the economy, as the past inflation proved it to be, and if fiscal policy is too slow in making its impact on a depressed economy, then an effective unemployment compensation program remains as a potent defense against recession.

Unemployment compensation has the advantage of mitigating economic ills with considerable immediacy. An unemployed worker is a man with a suddenly reduced income and purchasing power. An automatic stabilizer, compensation begins immediately when a worker loses his job and tends to maintain his purchasing power.

Unfortunately, present unemployment compensation programs are generally ineffective. Payments are low and vary considerably between the states; eligibility time is limited, and the system of merit rating is at best an evil thing.

The Kennedy Bill, which would correct many of the short-comings of present unemployment compensation programs, should be adopted. With an Administration unwilling to poke its nose too far into the economy for fear of smelling something unpleasant, effective and automatic stabilizers might well exceed the value of Eisenhower's economic acrobatics.