Letter to the Chairman, House Committee on Banking and Currency, on Receiving a Forecast of Business Investment Plans.
Dear Mr. Chairman:
I have received your letter of March 5 referring to the Lionel D. Edie survey of business investment plans. The Council of Economic Advisers received a copy of their report sometime ago and has been studying it.
The Edie Survey has often in the past given a fairly reliable indication of business investment intentions. The regular investment survey conducted by the Department of Commerce and the Securities and Exchange Commission has substantially broader coverage. it has proven remarkably accurate in the past. The Department of Commerce and the SEC have a new survey that is now virtually complete, with final results to be available shortly.
The Council of Economic Advisers believes the Edie Survey substantially overstates the situation. The present expectation is that the Commerce-SEC Survey will show an investment gain for 1966 up only slightly over the 1965 gain--in the 15.5% to 16.5% range. You recall that total plant and equipment expenditures increased by 15.5% in 1965. The machinery and construction industries were able to accommodate it without excessive strain. In manufacturing in particular, the Commerce-SEC likely survey figures are far from the 32% predicted by Edie. Of course, as your letter noted, the economy is closer to full use of its resources this year.
If the final figures show an increase in 1966 comparable to the 1965 increase, we must continue to keep an extremely close watch on economic developments. We must be prepared to act quickly in the field of taxation if such action appears necessary. In this connection, I am pleased to learn that a Subcommittee of your distinguished Committee will be holding hearings later this month.
As I said in my Economic Report:
"We must always be prepared to meet quickly any problems that arise in the path of continued, stable economic growth, whether the problems call for fiscal stimulus or fiscal restraint. Background tax studies by both the Congress and Executive Branch should therefore be adequate to permit quick decisions and prompt action to accommodate short-run cyclical changes. If quick action is ever needed, we should not have to begin a long debate on what the changes in taxes should be."
I shall watch your hearings with great interest.
LYNDON B. JOHNSON
[Honorable Wright Patman, Chairman, Banking and Currency Committee, House of Representatives, Washington, D.C.]
Note: Representative Patman's letter of March 5 called the President's attention to the 32 percent increase in business investments forecast for 1966 by the survey made by the Lionel D. Edie Company. "I am sure that you agree that a good rise in private investment is a healthy thing for our economy," the letter continued. "But an increase of this size appears to me as possibly too much of a good thing, at a time when our unemployment rate is already down to 4 percent, and we are also mounting a sizeable military effort in Southeast Asia."
Representative Patman's letter is printed in the Weekly Compilation of Presidential Documents (vol. 2, p. 338).
Lyndon B. Johnson, Letter to the Chairman, House Committee on Banking and Currency, on Receiving a Forecast of Business Investment Plans. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/238455