Business: 1970: The Year of the Hangover

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Productivity will show gains largely because companies, having learned to live with less manpower, will be slow to take back the laid-off workers and executives. At the same time, there will probably be a reduction in the hiring of the newer, younger workers who have always provided the fresh ideas—the zip and leaven—for business. Unemployment will climb next year, probably exceeding 6% during some months before tapering off later in 1971. The members of TIME'S Board of Economists foresee relatively high unemployment, coupled with about a 3)% rate of real economic growth and close to a 4% rate of inflation. That would make for a total of something more than 7% growth in the gross national product, lifting it from $977 billion this year to $1.045 trillion or $1.055 trillion next year.

The Nixon Administration wants more. It is hoping for a 6% spurt in real growth for the year—or an astronomical 8% if measured from this year's strike-depressed fourth quarter to next year's fourth quarter. That unlikely rate of gain would lift the G.N.P. to $1.060 trillion. Beyond that, Nixon is aiming to go into the 1972 elections having achieved both reasonably full employment and reasonably stable prices. Almost all economists outside the President's immediate circle agree that such a feat is nearly impossible in such a short time.

Nixon has tried redefining his targets to make victory easier. A year ago, his closest economic aides said that they were aiming to reduce the rate of inflation to 14% or 2% by the end of 1971. Now they say that 3%, or perhaps a bit more, would represent price stability. Until lately, Administration officers have defined "full employment" as a 4% rate of joblessness. Recently they began talking of getting down to "the 4% zone," and at his last press conference, Nixon implied that anything "lower than 5%" would be a commendable showing.

Gung-Ho for Growth? Whatever the numbers, the President has to decide on which of two policies to emphasize. Should he aim for a modest rate of economic recovery, risking a continuation of high unemployment? Or should he strive for a faster snapback, risking more inflation later? Every sign now indicates that the President, prodded by Chief Economist Paul McCracken and Budget Boss George Shultz, has made a decision to go for speedy, job-creating growth. It remains to be seen whether John Connally, Nixon's surprise choice for Secretary of the Treasury, will alter the strategy. Though he has Texas populist roots, Connally is considered to be an economic conservative.

The easiest way to put people back to work is to put more money into the economy. That can be done by expanding the budget deficit or increasing the money supply, or by using a combination of both. In either case the President's power is limited. He can increase the budget only if Congress agrees, and he may well run into resistance from Capitol Hill's fiscal conservatives, as well as from Democratic liberals who are not at all eager to help his re-election drive. One possibility is that Nixon will offer only token opposition to spending bills that he dislikes, and allow the budget to tumble $15 billion or $20 billion into the red.