Economists See Limited Recovery for Recession

Two Economics professors last night joined in predicting a "limited neutral recovery" from the Nation's economic recession.

James S. Duesenberry, professor of Economics, and Arthur Smithies, Nathaniel Ropes Professor of Political Economy, agreed with the Eisenhower Administration that we are now "at bottom or near bottom" in the present economic slump.

Production should begin to pick up considerably six months from now, when meager inventories restricted by the present business inhibitions are exhausted, they said.

Need Government Measures

They indicated that this natural reaction will take us back halfway to normalcy. But the economists emphasized that Government measures are needed if 1957 business levels are to be regained within the next few years.

The professors criticized the Administration's faith in our ability to "talk our way into the road of prosperity." President Eisenhower's recent attempts to cajole business into offering the public more for its money and his pleas for labor to limit wage demands are insufficient to start a major upswing, they stated.

Defense Spending, Tax Cuts

Smithies advocated a program of "selected expenditures" in defense spending, chiefly in orthodox weapons. A tax cut would have the most immediate effect in stimulating the national economy, Duesenberry said, while Government expenditures in public works and defense areas would require at least a year to produce results.

The dangers of inflation and a budget deficit have been exaggerated by the Administration, both professors feel. "Prosperity with a deficit is better than a recession without one," Smithies stated. Duesenberry cited Keynes in characterizing the Administration's cautions to management and labor as "warning a starving man about the dangers of over-eating."