The Economy: The Virtues of Penny Pinching

THE ECONOMY The Virtues of Penny Pinching

It was Washington's No. 1 topic last week, overpowering talk of Viet Nam, Charles de Gaulle and the Sino-Soviet split. Lyndon Johnson, who had hoped that the subject might vanish of its own accord, now found himself devoting an extraordinary amount of time to talking and thinking about it. "I remember," he told a convention of municipal officials at the Washington Hilton Hotel, "when you couldn't walk into any hostess's home without them saying, 'What do you think about McCarthy?' A month ago, it was 'What do you think about the pause?' Now it is 'What do you think about inflation?' "

Inflation was certainly on almost everyone's mind. The housewife could see it on almost every price tag in the supermarket, the businessman in the price he pays for raw materials, the consumer in the rising cost of services. In fact, inflation is so much a topic of conversation that when Los Angeles Dodger Pitchers Sandy Koufax and Don Drysdale signed last week for a new joint contract totaling some $240,000, it was widely —and wryly—noted that their raise exceeded the President's 3.2% anti-inflationary wage guidelines by quite a bit. The increase for the two amounted to about 70%, despite the fact that their 1965 productivity rose by only 32% (from 37 victories to 49).

Still, the very talk of inflation has itself been somewhat inflated. Though there are ample signs of danger, the U.S. is not yet suffering from the serious inflation that precedes, and frequently causes, severe economic trouble. Lyndon Johnson noted last week that, as far as he could tell, the economy was not "shooting off into outer space." It is to make sure that this does not happen that Johnson all week —in public and in private, over telephone and microphone—exhorted everyone from housewife to Governor, labor leader to corporation head, to fight off inflation by clamping a tight rein on his spending. "The amber light is on," he warned. "We must see that some restraint is applied."

Favorite Worry. Only a few weeks ago, the President felt confident that inflation was not a serious worry. His top economic consultants advised him that the economy was not "full of helium," and businessmen in whom he places trust assured him that inflation was not a real threat. "The favorite American pastime is worry," Johnson told a group of White House fellows when the talk turned to inflation. "It's their favorite jag." But the light turned amber—and Johnson called for an application of the brakes—when he got a look last week at a fresh stream of statistics that showed that inflation, if nothing to get panicky about yet, is certainly something to be dealt with.