Notice, first of all, that although expenditures in fiscal 1949 total 19.7 billion dollars, actual new obligational authority for 1949 is 24.3 billion dollars. In short, the delayed effects of a broader national security program have in nowise been fully experienced. Furthermore, no calculations are included for possibilities like lend-lease or for an expanded Air Force. Indeed, no part of the 2.6 billion dollars estimated to be spent in fiscal 1950 for natural resources, transportation and communication programs is here included although perhaps as much as a fifth finds national security justification. The 22 billion dollars estimated to be spent next year are not only 6 billion dollars more than expenditures of fiscal 1948 but will constitute 52.5 percent of the total Federal budgeted expenditures. To express it another way, it represents more that one-twelfth (8.7 percent) of the total value of all goods and services produced in the boom. year 1948. In short, the present and prospective national security programs, with their rising trend, must be superimposed on an economy operating at near-capacity levels. There is little slack in manpower; no slack in raw materials, because the capacity of our industrial plant to chew up raw materials has grown so much faster than the supply of raw materials; no slack in plant capacity in our basic industries of primary import to national security programs; not much slack in prices, particularly in fields primarily affected by national security programs; no slack in the Federal budget; and no slack in the Federal debt of 252 billion dollars. 1 Thus during 1948 the role of the Federal Government was reversed. Far from helping to control inflation, its operations, according to the Department of Commerce "were the main expansionary force in the economy. The rise in Federal purchases was the only major autonomous increase in demand." (For details, see table 12 in appendix A.) The $5,000,000,000 tax reduction, the Foreign Assistance Act setting up the ECA, and the increased defense program were the main factors ending the economic hesitancy of the first quarter of 1948 and initiating the renewed rise of business activity and of prices. In 1949 the activities of Government may play a similar role. The second group of buyers putting a great deal of money on the line for metals, metal products, and capital goods are the purchasing agents for business. Never has private domestic capital investment been at higher levels, either absolutely or relatively. (See table 13 in appendix A.) While personal consumption expenditures only amounted to 70 percent of total national expenditures as compared with 75.9 percent in 1929, investment expenditures by businers reached an all-time high of 15.4 percent, rising from $30,000,000,000 in 1947 to $40,000,000,000 in 1948. Nearly one-half of such business investment went into new plant and equipment, the figure being 16 percent higher than in 1947 as compared with a 10-percent rise in gross national product. As chart XII clearly indicates, the rate of increase in 1948 tapered off, as war-accumulated backlogs were met. The largest increases in plant and equipment outlays in 1948 were in the petroleum, iron and steel, machinery other than electrical, and food groups. 1 U. S. Department of Commerce, Survey of Current Business, February 1949, p. 3. The survey of Business Needs of New Plants and Equipment made very recently by the McGraw-Hill Publishing Co. indicates that industry plans to spend 14.1 billion dollars in 1949 (compared with 14.8 billion dollars shown as planned for 1948 in a similar survey last year); that postwar expansion in most manufacturing lines excepting steel and petroleum refining is virtually complete; and that expansion programs of railroads, utilities, and oil companies have still 2 to 5 years CHART XII.-Expenditures for New Plant and Equipment, by 1 Includes trade, service, finance, and communications. 49-24 Sources: Data beginning with 1945, U. S. Department of Commerce, Office of Business Economics and Securities and Exchange Commission; data prior to 1945, Board of Governors of the Federal Reserve System. to run. In short, business demand for capital goods is likely to remain high. However, excellent as this sample survey may be, there remains a serious lack of information on the general subject of the investment plans and requirements of business. This committee believes that a thoroughgoing study of the investment problems of our modern economy should be undertaken, including new developments in the role played by our great investment institutions not only in the investment markets but in industry and in the economy generally, |