Word: okun
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...vigorous upturn will leave unemployment dismayingly high through 1976. That is the consensus of members of TIME'S Board of Economists, who assembled in Manhattan last week to discuss, among other key issues, the probable course of the nation's bounce back from recession. Board Member Arthur Okun sums up: "The rate of growth in the economy is going to be sensational, but the level of operation is going to be lousy...
...after that. During the fourth quarter, most expect real gross national product-output of goods and services, discounted for inflation-to rise at an annual rate of 6% to 7%. For the whole of 1976, a majority of board members predict that production will increase by 6% or more. Okun believes that real G.N.P. will increase at a hefty 8% rate during the first twelve months of the rebound...
Liberal members of the board, such as Okun and Pechman, think that a faster upturn is possible, but it would require more Government stimulation of the economy. Most would wait until late this year or early next to see if big new tax cuts or spending programs are necessary, but they believe that some steps could be taken now. At minimum, they think the income tax cut should be extended through 1976 rather than being allowed to expire on Dec. 31, as it will under present law; Congress is almost certain to agree. Some members would also have the Federal...
...Incentives. Okun, in addition, favors relatively modest new revenue-sharing aid to states and cities that are now being forced to lay off workers, cut services and raise taxes. In an unusual proposal for a staunch liberal, Nathan suggests special tax incentives to selected industries so that they could speed up investment in such things as oil-pipe plants and coal transport and build storage facilities to hold a year's stockpile of oil as insurance against another Arab embargo...
...Pechman, Okun, Nathan and others retort that the economy is operating so far below its potential that for at least the next 18 months or so, a rekindling of inflation need not be feared. They are concerned about inflation from a different aspect: they believe that the savagery of the recession and the subsequent drop in demand should have forced a sharper slowdown in the rate of price increases than has, in fact, occurred. Businessmen, they suspect, are refusing to cut prices partly because they want to keep profit margins up, partly because they do not think that price cuts...