Economics and politics

Economists and government officials in Washington were startled by what happened to the United States economy during the first quarter of the year. They had expected it to slacken. Instead it went up at a rate which would, if carried through the year, mean a growth of 8.4 percent.

Offhand one would expect such unanticipated news to be greeted with cheers. Of course, some did cheer, but it worried Reagan administration economists because it seems to undercut the assumptions on which they have based their tax-cutting plans. If the US economy is actually growing by any such rate as 8. 4 percent, then is a tax cut intended to stimulate economic activity really necessary? To protect the rationalization for tax cuts, some of them insisted that the first quarter's rate of growth was deceptive and due to temporary factors.

I submit that the first-quarter figures disclose the state of the American economy in a truer perspective than has been visible for quite some time.

We have been through a stretch of time in which American economic productivity was slowed by two main factors. One was the drastic rise in the price of fuel. The other was the rather sudden discovery that some parts of the American industrial plant were sadly out of date. These two together produced a great deal of alarming assumptions about the end of the American century. Pessimism was popular. America had lost its industrial leadership. The future, many said, would be downhill.

Well, the future was bleak, indeed, for factories and mills which had been built before or during World War I. And even some built during World War II were getting on toward the end of their usefulness. Two big industries, steel and automobiles, were in trouble because they were late in recognizing advances in technology. Pittsburgh and Detroit are still hurting.

But it was always a mistake to see the whole of the US economy in terms of Pittsburgh and Detroit. And it was even more of a mistake to think that American's economic future depended only on industry. The unfavorable trade gap which dates from the 1973-1974 oil embargo and the subsequent radical rise in the price of imported oil has been narrowing steadily for some time now. Machinery is still the largest single category of US exports, standing at 19 percent of the total against 10 percent for grains and only three percent for coal. But the export of coal and grain has been growing steadily, and will undoubtedly continue to grow.

The US is one of the world's most efficient producers of grain. World demand grows steadily. Reports are just in of a bumper winter wheat crop. Ships line up at piers for all the coal US mines can produce and deliver to the seaports. The only limit on coal export is the capacity to move it from mine to pierhead. The demand is almost inexhaustible.

Helping mightily to narrow the gap has been decline in demand for imported oil. Americans are driving more miles on a gallon of fuel by buying smaller cars and doing less unnecessary driving. Americans have learned to manage with lower temperatures in houses, stores, and factories. And domestic production of fuels has increased and become more varied. Wood stoves have cut down many thousands of household oil bills.

Besides, there is another factor usually overlooked in all the recent gloom and doom opinions about the state of the American economy. While it is true that some older industries have grown inefficient or lazy or poorly managed, there are new sectors of American industry which are often well ahead of any other country and where production in new factories is highly efficient.

One of the more important exceptions to the decline has been New England where employment is high and industry is doing well. The new electronic industries have replaced the old shoe and textile industries. New England has been enjoying an economic boom while Detroit and Pittsburgh were going through their anguish. There are plenty of other exceptions, as the new production figures show. The decline due to obsolescence in older industries has obviously reached the bottom and the climb up has begun. And this just happened to occur as President Reagan replaced President Carter at the White House. Talk about "the luck of the Irish." This is not goi ng to hurt the Reagan political reputation.

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