Lay Those Curlers Down

Prosperity, the Washington experts were finding out last week, is something like a wife. If you tell her she is beautiful, she glows. But if you tell her that she should pat here and retract there to keep her beauty enduring, she breaks into tears, convinced that she is sagging all over.

Treasury Secretary George Magoffin Humphrey, for example, has some pretty strait-laced ideas about balanced figures. Testifying last week before a crowded session of the Joint Congressional Committee on the President's Economic Report. Humphrey warned: "If we retain our present high tax rates over a sufficiently long period of time, we won't be able to maintain the activities necessary to provide jobs for our people." But he turned down committee invitations to suggest ways of trimming President Eisenhower's $71.8 billion fiscal-1958 budget (TIME, Jan. 28). Urged Wyoming's Democratic Senator Joseph O'Mahoney, pointing to a display of budget charts on an easel: "Take your scissors right now and point out places where it could be cut." A bit wistfully, Humphrey replied: "If I knew, I would have done so long ago."

The Road to Inflation. When Humphrey had finished, Federal Reserve Board Chairman William McChesney Martin Jr. took the stand, and without even noting that Prosperity was beautiful, grimly defended the Administration's "tight money" policy as an indispensable weapon against inflation. With the economy booming, he explained again, demand for credit tends to outrun supply, so interest rates push upward. For the Government to try to hold the rates down would be to follow "the road to inflation." The oft-raised claim that tight money presses unfairly on small business and local government is "debatable," Martin argued. Furthermore, frustrated borrowers "would suffer infinitely more from further inflationary bites" than they do from temporary postponement of borrowing. In fact, said Martin, if he had it all to do over again he would have laced up bank credit even tighter, beginning back in late 1954, to hold inflation down. But, he added with just a hint of relenting: "The balance between savings and investment can change completely in three to four months' time."

There was nothing to alarm anybody in Martin's testimony, taken by itself; like Humphrey he was just suggesting that it was time to think about the future. But at a Washington dinner given by the Citizens' Committee for the Hoover Report came a candid, grandfatherly rumble from a man whose very name has been used by Democrats for years to frighten Prosperity's babies. Warned ex-President Herbert Hoover: "Secretary Humphrey says that unless we change some of our ways, we will see 'a depression that will curl your hair.' Mine has already been curled once, and I think I can detect the signs . . . Unless we curb inflation on its way up, Old Man Economic Law will return with a full equipment of hair curlers."

That did it. Next day stock prices sagged (see BUSINESS).

The Complete Picture. It was just about all that even a rosy-cheeked Prosperity could take in one week. But President Eisenhower had a word too, repeating a refrain that he had sounded in his State of the Union message and his Economic Report. In asking business and labor to use wisdom and self-restraint to help curb inflation, said the President, "I wasn't merely asking them to be altruistic." Unless business and labor act as "enlightened Americans," the Government will have to move in with controls, "and when we begin to control prices and allocations and wages, and all the rest, then it is not the America we know."

Finally, after the week's second severe dip in stock prices, it was left to Commerce Secretary Sinclair Weeks to rush in to dry the tears and explain that everybody was just trying to tell Prosperity how to stay that way. At his first press conference in six months, Weeks assured newsmen that the Administration felt "no disposition" and saw "no need" to clamp on wage and price controls. "The complete picture," he said, "shows that the economy is healthy." He predicted that in 1957 the Gross National Product would surpass the 1956 record of $412 billion. "That," Weeks added, "spells continuing prosperity."

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