Kennedy's big dilemma

N mid-May the expansion of the American economy still seemed to be going ahead smoothly, if not at an exhilarating rate. Heller, chairman of the President's Council of Economic Advisers, claimed • The economy has shifted into higher gear'. Since then the big break on Wall Street on May 28 and the continued gyrations of share prices have raised doubts about the continuance of even the present mild expansion.

The demand for stimulants is growing, as businessmen fear a run-down in sales in the coming months. Small percentage changes in the main indicators of economic health are being scrutinised with more than usual concern. Lack of confidence in the future now seems to be the keynote.

What is more, doubts about the future are spreading in Western Europe, too. The financial and banking press is no longer counting upon unlimited expansion: tighter credit, pressure on profits and intensified trade competition seem to be the order of the day.

While the difficulties of the dollar have receded, they could, under these conditions, come to the fore again. That would limit the possibility of dealing with a threatened recession by increased government spending.

Yet government spending is now a permanent feature of the US economic scene. Already for the fiscal year now ending there is a budget deficit-which is partly a delayed result of the 1960-61 recession.

More spending is called for in the coming year, chiefly for missiles and oth :г weapons The US arms last fiscal year in the coming present estima over $7,000 increase since office has been than at any Korean war.

Whether met from additions budget for the was $45,700 m.; year it will, on es, increase by In fact, the Kennedy took at a faster rate time since the from taxation or to the national debt, these vast sums are, In large part, channelled into the accounts of the big monopoly concerns, and through them to sub-contractors of various kinds.

The switch in recent years to missiles and nuclear submarines has involved re-adjustments, but, by and large, the same firms benefit from the orders. The adjustment falls, for the most part, on the labour force.

To give an example of what the arms budget means for the American economy, the manufacture of missiles alone employs 565,000 people, according to a recent number of the official 'Survey of Current Business' The industries involved are mainly electrical apparatus, aircraft and ordnance —which are the preserves of a small number of giant firms.

Not only does the militarization of the economy involve a vast waste of manpower, of the most highly trained and specialized kind in many cases, but it redounds to the advantage of the monopolies.

Profits are kept up by these invaluable government orders and benefits-for example from research or improved methods of production-ensue for their civilian activities. The aircraft industry, which employs nearly one million people, could hardly maintain it's present place in international competition without huge government orders.

The motor manufacturers, likewise, benefit incalculably from the orders for tanks and trucks.

Whatever has shifted the American economy into higher gear it has not been its inherent health. But for increased arms orders, the last recession might have deepened and recovery never have begun.

At the same time, each recession now leaves a higher level of unemployment. At present the official figure is around 5.5 per cent of the labour force, but there are depressed areas or underprivileged groups, such as negroes, for whom the rate is much higher.

If, as seems likely, the recovery is never really to get off the ground, Kennedy may have to turn to more drastic measures. He obviously has to balance the different claims of particular sections off against each other and devise a policy in the interests of American capitalism as a whole which is, at the same time, politically feasible.

As The Times, wiser than many commentators, points out, Kennedy is not anti-business.

No doubt he would have dearly liked to be able to avoid the choices which now become inevitable. The coming year's budget was reckoned to show a surplus, which would have pleased big taxpayers and the financially conservative sections of American business.

Now he will have to decide whether artificial stimulants are needed to keep the economy prosperous which will produce another big deficit. To wait too long, or to fail to do enough, may mean a slide into depression by the end of the year.

To act precipitously means to make enemies and take the chance that there will be another run on the dollar and a balance of payments crisis.

In a sense, The Financial Times is right when it sees the first real testing-time for so-called Keynesian measures at hand. At the same time, it should not be forgotten that the present 'prosperity' is underpinned by the huge arms outlay.

No wonder that American businessmen are luke-warm about disarmament and that there is no sign of any let-up in the Cold War from the American side.

Kennedy: drastic by the Socialist Labour League.

In a future examine further and say why he the Communist working class ner issue, we will Gollan's report cannot provide leadership the eds.