The Atlantic Report on the World Today: Washington

THE overriding question posed to the country by the election at mid-term of a Democratic Congress under a Republican President is the one that has been least clearly perceived and articulated. It is whether the Eisenhower Administration is to be given a fair chance by the Democratic legislators to continue the trial of what might be called the modem Republican doctrine of the relationship of the government to the national economy.

The attempt of the Eisenhower Administration to provide a stable and growing economy in peacetime has been one of its most courageous undertakings, and one it has failed most signally to make the public understand. That is not hard to explain. It is conservative, and therefore lacking in drama. Its influence is indirect, so that the majority of the people feel no impact, and therefore it generates minimum political attention. Yet it is in this field that the sharpest and truest distinction between party philosophies exists. This is where issues which may be decisive in 1956 will arise.

In adding small numbers of Democrats in the House and Senate, the voters registered a faint alarm that the first two years of the Eisenhower Administration had moved a little too far in the direction of private interest. The result amounted to a delicate, precise, and subtle strengthening of forces deemed to be on the side of the popular causes.

In the doing, however, the party control was shifted, and with it the committee chairmanships. In the House, the President was deprived of the advantage furnished by the concentration of majority power in a tight little group of party disciplinarians: Speaker Joseph W. Martin, Jr.; Majority Leader Charles A. Halleck; and Representative Leo Allen, chairman of the Rules Committee. Yet, for a variety of reasons, the Administration entertains the belief that it can pursue its economic doctrine further, and it holds what one of its leaders called a “reasonable hope” that in another two years the validity of the doctrine can be demonstrated.

Whether or not the doctrine is valid, continuance of the experiment is of vast importance because nothing quite like it has been tried in the United States before. Unpartisan history recites that the country fell into a depression under the last Republican President before Eisenhower; that Democratic doctrine as evolved in the New Deal failed to solve the problem; that World War II did, in a way; that the Fair Deal arrived at serious recession; and that it again took war — in Korea — to restore prosperity.

Guiding. not controlling, the economy

Now the Eisenhower Administration has the advantage of the lessons of a quarter century. The Republicans have accepted from the Democrats the principle that the government ought to try to influence the economy, but the President and his officials believe in a broad, indirect influence leaving free enterprise in a state of being encouraged but to the greatest possible extent free of interference.

The influence of the government, according to the Republican belief, should be exercised through expenditure and tax policy, through flexible management of credit at its sources, Federal Reserve activities, and public debt management. The purpose is to encourage private enterprise and to avoid inflation and deflation and interruptions in development. As the Republicans see it, the alternative is to tend toward direct controls on prices, wages, and consumer credit, direct government spending supposed to “stimulate” business, and a tax policy overemphasizing the goal of putting purchasing power directly in the hands of the people.

The encouragement of investment and the expansion of the productive plant are not the whole of the Republican policy. Consumer spending power is taken into account. The $5 billion tax reduction effective last January 1 is an example of Administration thought on that point, just as its desire to postpone excise tax reductions until this year a desire largely thwarted by Congress — gives a guide to the limits it would like to set on such policy. The general revision of the tax code adopted in the last session was called by the President the “cornerstone” of all he is trying to do, and the advantages it offered business and stockholders show where the dominant interest of the Administration in fiscal policy lies.

The program also includes strong federal aid for highway construction, a moderate public housing program tied to what is now called “urban renewal” (both designed to foster industrial and business activity), and social security expansion — again to strengthen the consumer spending base. Flexible price supports on farm products are blood relatives of the rest of the program, bringing to agriculture what the Administration respects as the virtues of individual initiative and competition. The Administration has fully persuaded itself that the election results in farm areas were a vindication of Secretary of Agriculture Ezra T. Benson.

The election of a Democratic Congress may hold a paradoxical benefit for the Republican Administration in that its officers will now be called upon to make fuller explanation of what they are up to than they would ever offer on their own initiative. It is unquestionably one of the shortcomings of this Administration that its members, with notable exceptions— the President and Secretary of State John Foster Dulles among them—earnestly wish that the public and Congress would leave them alone while they are at work.

The result is reciprocal disadvantage. The public does not understand, and the Administration does not know what the public thinks of its actions. The wrangle over Dixon-Yates gave the executive branch a foretaste of the era of explanation and defense now coming up. Senator John J. Sparkman of Alabama, holding places on both the Banking and Currency Committee and the Joint Committee on the Economic Report, is planning an inquiry into “hard money” policy. Investigations promise to range the field.

Sound tax policy

The Administration, nevertheless, is hopeful that the major components of the economic policies it is pursuing under modern Republican doctrine will, after a period of sound and fury, come through rather well, It is recognized that the task of balancing the budget has been made more difficult by the campaign, in which Republicans as well as Democrats made promises now translatable into pressures for increased spending.

The Republican concept of sound tax policy is going to be harder to maintain with the Democrats controlling Congress. Its proponents are braced for attacks on dividend tax relief and business tax policy in general. They take it for certain that before the next election, efforts will be made to put through tax measures the individual can recognize as directly advantageous to him, such as further reduction in excises and increases in personal exemptions.

In the fields of spending and taxation, the Republican Administration is placing great reliance on help from a Democrat, Senator Harry F. Byrd of Virginia, chairman of the Senate Finance Committee.

Nibblings at the independence of the Federal Reserve Board, which now acts in sympathetic “coördination” with the Treasury, are to be expected, but the Administration believes it will have bipartisan support to counter them. In recent history, it is noted, even such a Democrat as Senator Paul Douglas, whom the Republicans certainly wanted to beat this year, has conducted studies on “the Fed” which from the Republican standpoint arrived at perfectly acceptable conclusions.

Indeed, the Republicans go so far as to suppose that Representative Wright Patman of Texas, always a militant inflationist, will be on their side on Reserve policy—basing their judgment on a report he made in 1952. It is conceivable that some extreme proposals, like requiring Reserve to support government securities at par, will have to be dealt with, but the Administration is not greatly worried.

Relative calm is expected on the debt management front unless something slips and a new period of inflation occurs. The Treasury takes it for granted that in such an event, any move on its part to hike interest rates would bring clamorous protests from the Democrats. The solution, of course, is to avoid inflation.

Jobs as well as prosperity

The Republicans in the executive branch do not expect that their policies will cause the economy to take off vertically with great velocity during the next two years. They do believe that a substantial, solidly based lift will occur. Their assumption is that employment will not increase in direct proportion to business volume, but they do count on a significant reduction in unemployment. They realize that the best policy is no good unless its executors are in power; and political realism requires that the people, by 1956, must be given plain evidence that the Republican scheme for guiding the economy pays off in jobs and prosperity.

The broad effect of unemployment on the 1954 election results cannot be precisely measured, but it is now taken as a fact of politics that it was the major factor in the loss of the Michigan Republican seat held by Senator Homer Ferguson.

A restudy of the record of the 19471948 Congress, when both branches were Republican in the Truman Administration, and that of the 19311933 Congress, when the House was Democratic and the Senate was just barely Republican in the Hoover Administration, does not suggest that stagnation and inaction must occur in the 1955-1956 session.

The national memory of each has been distorted by remarkably successful political propaganda, engineered in the first place by the late Charles Michelson and in the second by Mr. Truman and his allegation that the Eightieth was the “second worst” Congress. Both Congresses accomplished much and served the national interest adequately. Mr. Hoover’s last Congress gave him much in the way of economic and emergency-relief legislation. Mr. Truman’s bad boys produced the Marshall Plan legislation and the TaftHartley Act, to take two examples out of a long and varied list.

The prospect is that shifting coalitions will in the end prove to have done at least as well by Mr. Eisenhower; and if any President was ever qualified by experience and instinct to deal with coalition government, it is he. Presidents in such a plight tend to resort to vetoes more often than they might normally.

Mr. Hoover arrived at suitable compromises with his Congress that way on many issues. He even sat down with House-Senate conference committees on disputed legislation. For President Eisenhower to involve himself us deeply as that in the congressional process would be a departure from his dearly held early principles, but he has shown adaptability in such matters already.

The best value for the money

While international trade policy faces further legislative tests this year, the Eisenhower Administration evidently is moving to use its executive powers on the side of liberalization. The new direction was disclosed when English Electric Export & Trading Co., Ltd., won a contract worth over a million dollars from the Army Engineers for two generators at Table Rock Dam on the White River along the Missouri-Arkansas border. The differential from the next lowest bid, that of Newport News Shipbuilding and Drydock Co., was 11.8 per cent.

The Defense Department had been using 25 percent, in choosing between foreign and domestic bids, and the narrowest differential on which an award had been made previously was 18 per cent. The White House is said to have had a hand in the decision. English Electric had been discouraged in earlier efforts to do business here, notably in the Chief Joseph Dam cases, and the experience had introduced some emery dust into AngloAmerican relations.

Because of the Chief Joseph Dam episode, Defense Secretary Charles E. Wilson had gained reputation as an Old Guard protectionist. He brought it on himself, but it is unfair. He has arrived at the firm conviction that protectionism is obsolete as policy for a creditor nation. What threw Mr. Wilson off the track on trade policy was his equally strong belief that no one can make great big things quite as well as Americans can. It isn’t that he wants to “buy American” just to keep foreigners out. He is looking for what he thinks is the best value for his money.