The Economy: The Rattles in the Engine

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In one of history's most misquoted statements, Charles E. Wilson, ex-chairman of the General Motors Corp., told the Senate Armed Services Committee in 1953, during hearings to confirm his appointment as Secretary of Defense: "For years I thought what was good for our country was good for General Motors, and vice versa." The truth of that celebrated remark has never been more apparent than today. For five straight years, the U.S. economy has enjoyed unprecedented good times, and no company has benefited more from the prosperity or contributed more to it than General Motors. Now that the sales of the nation's biggest and most influential manufacturer are slowing down from spectacular to merely excellent, the rattling at G.M. has raised doubts about the direction of that greater engine, the U.S. economy.

The worries are reflected primarily on Wall Street, repository of the hopes and dreams of 100 million Americans who directly or indirectly have a stake in the stock market. Vexed by the vagaries of Viet Nam, jittery about symptoms of inflation and talk of higher taxes to come, the stock market has dropped 119 points since it scaled an alltime peak of 995.15 on Feb. 9.* Two weeks ago, the slide gained speed with a surprise announcement from Detroit that General Motors was cutting back production. The market lost 26 points just after the news came out.

Last week there were more brakes in Detroit and another break in Wall Street. Ford, though its sales in April were 4% higher than it had projected earlier in the year, said that it would assemble 18,000 fewer cars this month than it did last May. Chrysler reported sales down 13.6% in the first ten days of May, said that it would idle two plants for four days between now and June 30. Then G.M. reported that its April sales fell 24% from last year's record rate. With all that, the stock market dropped another 27 points, closing the week at an eleven-month low of 876.11. The loss in paper values since G.M.'s original cutback announcement has cost investors approximately $20 billion.

Changes of Mood. General Motors' troubles and Wall Street's gyrations crystalized a distinct change of mood on the part of the American people. For 62 fat months, prosperity has fed itself because Americans have spent, lent, borrowed and invested with confidence. They have felt correctly that jobs, production, profits and paychecks would continue to go up and up. Now, uncertainty has replaced confidence with disconcerting suddenness, giving rise to a number of disturbing questions. Is the boom over? Is the long postwar bull market finished? Does the nation face recession, or inflation, or perhaps both at the same time? And what is good for the economy?