The Economy: The Rattles in the Engine

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Actually, Johnson could have tempered the current excesses by calling for higher taxes early this year—and then he could have rescinded the tax hike before November. Now it is probably too close to election for him to risk a tax increase, unless a major expansion in Viet Nam spending leaves him no other choice. Instead, the President has fought inflation by using the old jawbone technique and several new devices, including the speedup in withholding taxes. Most important, he has depended on Chairman William McChesney Martin and the Federal Reserve Board to cool off the economy by tightening credit and raising interest rates.

While publicly faulting the Federal Reserve for kicking up the discount rate last December, Johnson was privately happy that the Fed could take the rap for any restraints. The price of money has inflated dramatically. Since 1964, the Treasury's three-month bill rate has climbed from 3.5% to a high of 4.6%, and the prime rate for top corporate borrowers has soared from 4% to a record 51% . By leaning too hard on monetary policy and taking it easy on tax policy, the Government has further distended and unbalanced the economy. One result: many investors have shifted their money out of stocks and into high-yield bonds.

Front Runner. With these currents buffeting the economy, it is a tough time for anybody to be president of G.M. In grooming a chief executive, G.M. prides itself on picking the one man with the right combination of talents for the challenges ahead. Charlie Wilson was an engineering whiz, Harlow Curtice was a supersalesman, Fred Donner is a savvy financial man. Roche, more broadly trained than any of them, has scored a series of successes while working in marketing, public relations and international sales—precisely those areas in which G.M. senses its greatest potential for improvement and expansion.

A small-town fellow with uncomplicated tastes, Roche was born in Elgin, Ill., the son of a funeral director. His father died when he was twelve, and Roche went to work in a notions store after school and on Saturday. Unable to afford college, he took correspondence courses in accounting and economics—a practice he does not recommend for today's budding executives —and got a job with the Chicago branch of Cadillac. Soon his name was entered in G.M.'s "black book"—a loose-leaf binder with profiles of the 700 or so brightest comers in the company—and he was tapped to attend "the Greenbrier group," a triennial meeting in West Virginia where key managers debate grand strategy. Rising on the company escalator, he was moved up to general manager of Cadillac in the 1950s, the era when its cars sprouted their sharpest fins. When, in 1962, he leaped over several seniors to become executive vice president in charge of the overseas group and other branches, he became the front-runner for the presidency—the man lifted, majestically and somewhat mystically, from among tens of thousands by G.M.'s legendary management system.