A Show of Confidence

Amid the pressing concerns of his first week in office, the President of the U.S. showed that the economy and its welfare are very much on his mind. Barely 30 hours after he was sworn in, Lyndon Johnson began meeting with his economic advisers, and three times during the week he conferred with Walter Heller, chairman of the Council of Economic Advisers. His speech before Congress bore down heavily on the economic policies endorsed by John Kennedy--the tax cut, the stability of the dollar, the expansion of foreign trade. To Christian Herter, the chief U.S. trade negotiator, he restated his "strong support" for broad tariff reductions when the U.S. meets European nations at Geneva in May.

The key word was continuity. In talks with Heller, Treasury Secretary Douglas Dillon and Budget Director Kermit Gordon, the new President surveyed the economy and made some early economic decisions and readings. Among them: 1) Johnson will hold to John Kennedy's commitment to limit the increase in next year's federal spending to $3 billion or less; 2) in view of his promise of spending restraint, he will give congressional leaders an earlier-than-normal look at next year's budget--perhaps just before Christmas--to show them that he really means it; and 3) the Administration expects the economy to continue at its present rate of expansion for at least nine months (though it expects a tax cut to help keep it young).

Historic Rally. Wall Street took a look at all this and found the prospect reassuring. After panicking in the chaotic minutes after the shooting of President Kennedy, investors had the weekend to reflect on the basic strengths of the economy and to witness Johnson's sure-handed assumption of power. When trading opened on the day after the funeral, the New York Stock Exchange recorded the greatest rally in its history as paper values soared by $15 billion. The Dow-Jones industrial average jumped 32.03 points for the day, more than making up for the previous Friday's 21.16 loss, and, after a slight dip, went on rising to close the week at 750.52, ten points below the alltime high set a month ago. Heavy odd-lot buying showed that the small investor was back in the market in force. And the U.S. dollar held steady on world money markets, as speculators were fended off by the elaborate defenses that the Kennedy Administration had set up with European central banks to operate in times of trial.

Business leaders continued their show of confidence in Johnson. Said Boone Gross, president of Boston's Gillette Co.: "Johnson will get quicker action on some of President Kennedy's bills, and we don't consider any of those harmful." Chase Manhattan Bank President David Rockefeller was "delighted to hear an endorsement of the tax cut, and pleased with the endorsement of thrift and frugality."

Conservative Advice. President Johnson--less interested than John Kennedy came to be in the theories and intricacies of economics--did not take part in the inner discussions that shaped the Kennedy economic policies. Though he is determined now to pursue the Kennedy economic programs that already have momentum, a new president is eventually bound to alter somewhat the course or the speed of such programs. Had President Kennedy been re-elected --by which time he expected the employment situation to be much improved --he planned to embark on a wide variety of new economic programs aimed at curing sectional dislocations in the economy. Whether Johnson will push such programs is less sure.

Aside from his longtime advocacy of tariff cutting (the U.S. "cannot be protectionist and prosperous"), Johnson is not known for strong expressions of economic philosophy. Much of his economic counsel in the past has come from fairly conservative businessmen and advisers. Among them: Robert Anderson, a Texan who was Dwight Eisenhower's Treasury Secretary and is now a limited partner of Wall Street's Loeb, Rhoades; George Brown, president of Houston's Brown & Root, one of the world's largest building contractors; and Manhattan's Edwin Weisl, a wealthy corporate lawyer and Johnson's campaign co-manager in his 1960 bid for the presidency. Such men will doubtless have their say, but so will Walter Heller, whose personal memos kept Johnson informed of Kennedy economic policies. Johnson admires Heller and, unless Heller chooses to return to Minnesota because of his wife's poor health, intends to keep him on as chief presidential economist. Recently the President told a confidant: "Heller is the only economist I can understand."

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