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Five basic forces

This view is based upon several basic economic forces which I believe will be operating in the Sixties, as follows: ( 1 )

Recent events in the General Assembly of the United Nations confirm that the cold war will remain with us, and probably intensify, for the foreseeable future.

This makes it certain that Federal expenditures for military preparedness and foreign economic aid are likely to rise further in the next several years.

We are just beginning the task of trying to win or maintain the friendship of the new African nations against the ruthless competition of the Communist bloc.

Our efforts to overcome the lead of the Russians in space are bound to mean accelerated Federal spending.

Moreover, it is likely that Federal policies aimed at stimulating a faster rate of economic growth of the country, to keep ahead of the Communist countries and to demonstrate that our free economic system is better than theirs, will lead to rising Federal spending in certain areas such as education, housing, medical aid, and the like.

There are serious dangers involved in this trend toward rising Federal expenditures, of which I take a dim view, but it seems very likely to occur.

( 2 )

During the Sixties we have the prospect of a significant stepping up in the rate of household formations, which should contribute to a rising volume of consumer expenditures and home building.

According to the latest projections of the Bureau of the Census, the annual rate of household formations will increase for the next 20 years.

Under the most favorable assumptions for increase, the Bureau of the Census projects that the annual rate of household formations will rise from about 883,000 in the last two years of the Fifties to an annual rate of about 1,018,000 in the first five years of the Sixties, and to a slightly higher annual rate of 1,083,000 in the second half of the decade.

During the Seventies the projections show a more pronounced rise to an annual rate of 1,338,000 in the second half of that decade.

Accordingly, the expanding markets for consumer goods and housing occasioned by the higher rate of household formation should enhance the general economic prospects of the Sixties.

However, the impact of a rising rate of household formation this decade should not be exaggerated.

The average annual rate of 1,083,000 in the second half of the Sixties is still considerably below the annual rate of 1,525,000 in the three-year period from April 1947 to March 1950.

( 3 )

With the expansion of family formation in the Sixties, a continued substantial rise in expenditures by state and local government units seems to be indicated.

This is an area in which there is still a large backlog of demand.

State and local expenditures ( in real terms ) increased persistently from $26.5-billion in 1949 to $44.3-billion in 1959, and it would not be surprising if they showed a comparable increase in this decade, which would carry them to the neighborhood of $75-billion by 1970.

Here would be a powerful force for raising business activity.

( 4 )

It seems likely that with the three preceding forces at play, the rate of business and industrial plant and equipment expenditures should continue to move upward from the levels of the Fifties.

Spurred by keen competition in our industrial system, and still further increases in the funds devoted to industrial research, plant and equipment expenditures by business and industry should rise during the decade.

( 5 )