BUSINESS LEADERS PREPARED TO ACCEPT INEVITABLE HIKE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP73-00475R000102110001-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 27, 2016
• Document Release Date: December 18, 2013
• Sequence Number: 1
• Publication Date: October 24, 1966
• Content Type: OPEN SOURCE

STAT !Abbr.; J1) CALIF.
Declassified in Part - Sanitized Copy Approved for Release @ 50-Yr 2013/12/18 : CIA-RDP73-00475R000102110001-2
E 4.. 26,426
OCT 2419a
ACROSS-THE-BOARD MOVE
Dusiinesz Loud
ccera
By WILLIAM J. EATON
Chicago Daily News Service
HOT SPRINGS, Va. ? Many
? of the men who run America's
biggest corporations now accept
, an across-the-board tax increase
in 1967 as virtually inevitable.
They would prefer to see Pres-
ident Johnson make bone-deep
cuts in federal spending and
avoid any higher levies on cor-
porate and individual income.
But they apparently do not
? believe that is very likely ? or
politically possible ? and are
prepared to see a 5 per cent
tax boost to reduce business and
? consumer demand in the face
of rising government spending
on Viet Nam.
The question that many busi-
ness executives are now asking
is not whether there will be
a rise in taxes but rather: will
it do the job of checking infla-
? tionary pressures?
COUNCIL SKEPTICAL
Leading members of the Busi-
ness Council; an organization of
industrialists, bankers and mer-
chants who advise the federal
government, are skeptical about
the braking effect of additional
taxes on the economy. They also
voiced apprehension that the
Congress and the administration
would not let a budget surplus
pile up dollars in the treasury
as a deflationary device.
- "If the money's there, they'll
spend it," said Council Chair-
man Wiliam B., (Vev) Murphy,
outspoken president of Campbell
Soup Co.
Neil McElroy, former defense
? secretary who now is chairman
of Proctor and Gamble, argued
.there was no assurance that
; higher taxes would curb rising
prices.
Yet there is a decided shift of
business opinion, reflected in-in-
formal conversation andat the
closed meetings of the council
, last weekend, toward acceptance
' of higher taxes anyway.
' COUNCIL ADVISES
, An advisory group expressed
' a widely held view in its recom-
f mendation for extension of the
51WEirk
eign inventment by U.S. firms
to narrow the payments gap.
Its report said interest rates'
had been raised high enough in
1966 and called for "more time-
ly and vigorous use of fiscal
policy to dampen demand in a
full employment economy."
Business economist who pre-
pared a forecast for the council
started with the assumption that
taxes would be raised by 5 per
cent to offset the cost of the
mounting U.S. war effort in Asia.
"We are doing the same thing
in our own forecasts," said one
council member.
"I'd ;bet my shirt on a tax
increase," said another.
Others who belong to the blue-
chip group, however, said they
were "wavering" about tax mea-
sures. They worry about a sud-
den slowdown in the economy
that could lead the nation into a
recession.
SLOWER GROWTH
A panel of experts has ad-
vised the council to expect a
slower rate of economic growth
next year than the 8.3 per cent
expansion so far in 1966.
It also predicted slightly less
inflation, lower profits, reduced
investment in plants and equip-
ment and some easing of tight
money by the end of next year.
None of the experts think a
recession is lurking around the
corner. -
Several influential members of
the council have called for sharp
cutbacks in federal spending and
tax increase if needed to halt
a price spiral.
They made the recommenda-
tions along with AFL-CIO presi-
dent George Meany and other
union leaders in their capacity
as members of the President's
advisory committee on labor-
management policy.
William M. Batten, chairman
of J. C. Penny & Co., presented
the result of the economic out-
look to the 100-man council.
CONTINUE UP
"The economy will continue
to move upward in a good rate.",
Batten concluded in surveying'
?
He reported the Gross Nation-
al Product (GNP) would rise
by 6 per cent in 1967 to an an-
nual average rate of $783 billion,
up from $738 billion this year. ,
The GNP, which measures
total production of goods and.
services, is widely regarded as
the best yardstick to measure
economic progress. It apparent-
ly will rise by 8.3 per cent this t
year. But high prices mean the;
real growth will be .about 5.31
per cent.
The quarter-by-quarter breakd
down for the business council1
forecast shows only a $5 billion
increase in GNP in the last threel,
months of next year.
This would be a marked slow-
down .? about half the rise1
foreseen for the first three 'quar-
ters.
NOT A RUNAWAY
The panel of business econo-
mists expect prices to go up 3,
per cent next year compared
with 3.5 per cent or more this!
year, Batten said this was not!
a "runaway inflation rate." '
Industrial output, he s a i d; COSTS MYSTERY
should advance by 4 per cen Several businessmen were
and level off in the fourth of '-skeptical of the forecast because
'Viet Nam's costs are a mystery
Lower profits are foreseen be-, and almost unpredictable. They
cause of the high taxes assumed. said it was hard to see into the
by the economists and a pre- futurewithout knowing how the
dicted 5 per cent hie in wages,
, war would be fought in Asia
and other labor costs.
and added that continuation of
The experts also expect a the buildup at the present rate
slowdown in business investment, , was probably the least likely
especially, toward the end of 1,event.
1967.
This type of spending, on new
plants and equipment, which has
broken records for three con-
secutive years, was regarded
as a major factor in the credit
squeeze and inflationary pres-
sure in 1966.
Businessmen reported, how-
ever, a suspension of the 7 per
cent tax credit throughout 1967
did not result in any significant
changes in investment plans.
Most projects are too far along
to cancel until 1968 when credit
again is scheduled to apply, Bat-
ten said.,
The council's work-and-play
(session here drew several high
(government officials at one point.
Federal Reserve Board Chair-
man William Martin, AID Ad-
ministrator William S. Gaud and
Central Intelligence Agency, di-
trclO7?rticTidra all
were on the tennis courts.
Helms, who wore white flannel
slacks for his tennis outing, was
a guest of the council. So was
Martin. Gaud urged business to
increase its investment in devel-
oping countries as a form of;
,foreign assistance. ,
Declassified in Part - Sanitized -Copy Approved for Release @ 50-Yr 2013/12/18: CIA-RDP73-00475R000102110001-Z