A new nationwide survey of business confidence shows executives generally are optimistic about the long-run economic outlook, but are holding back on major capital investment projects because of uncertainty about taxes and government regulations.
The poll, conducted jointly by the Gallup Organization and the U.S. Chamber of Commerce indicates that businessmen are more buoyant than consumers over how the nation will fare in the next four years. Most expect hefty gains in both sales and profits.
However, the results show the executives are gloomy about the short run, estimating there is a 50-50 chance there will be a recession within the next two years. They also are worried about a spate of potential problems ranging from higher taxes to added government paperwork.
As a result, while the executives are continuing to buy "short-life" equipment such as cars and new machinery, they're holding back sharply on longer-term investments such as plant expansions and modernization, according to the poll.
Jay Schmiedekamp, the Gallup vice president who supervised the polling, said one of the major findings of the survey was that relatively few of the 1,174 executives who responded had very much confidence in the ability of the government to manage the economy in coming years.
"The pattern that emerges from this survey is one that should raise serious concern among policy makers," he said. "The basic optimism of American businessmen remains intact. But when you begin to talk about the government, people feel the business climate is worsening."
The survey marked the first entry of the Gallup Organization into a regular poll of business confidence. Schmiedeskamp, formerly director of the Survey Research Center of the University of Michigan, recently began a Gallup survey of consumer confidence.
Meanwhile, the economic forecasting arm of the Wharton School of Business made public its projections for 1978 showing the economy is likely to grow only at a moderate pace - with a modest reduction in unemployment - even with a substantial tax cut.
The forecast shows that if taxes, are cut by $20 billion, the economy will grow 4.5 per cent next year, compared with an estimated 4.9 per cent this year, with the jobless rate edging down to 6.5 per cent by year-end, down from 6.9 per cent now.
The projection [WORD ILLEGIBLE] the inflation rate is apt to continue at about its present pace. It predicted that consumer prices would slow to a 5.4 per cent pace, from 6.4 per cent this year.But a broader measure, the GNP price index, was slated to remain at a 5.7 per cent rate.
The survey on business confidence was grim news for the Carter administration. White House economists have been counting on a visible pickup in capital spending this year and next to keep the recovery going in the face of an expected falloff in consumer spending.
President Carter is considering a series of tax cut measures designed to stimulate more long-range business investment by increasing tax credits for plant expansion and reducing the corporate income tax from its present 48 per cent rate.
However, the Gallup survey appeared to suggest that that alone may not be sufficient. Schmiedeskamp said what was holding investment back was business concern over government regulations and paperwork, rising payroll taxes, soaring fuel bills and a spate of other problems.
Jack Carlson, the chamber chief economist, said most businessmen surveyed were lackluster about investment prospects for the next several years. He said their hesitance came despite general optimism that sales and profits would be high over the longer run.