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Show mmm IRANIAN DEVELOPMENTS WILL AFFECT MANY U.S. DECISIONS What has happened in Iran during the past month and a half and what will happen in the weeks immediately ahead could have considerable impact on the U.S. economy in 1980 as well as on Washington's policies and programs. For one thing, the new stress on military preparedness and domestic energy output will mean that efforts to balance the federal government's govern-ment's budget will go withering on the vine. Coming, too, in the wake of U.S. embassy takeovers in Iran and Pakistan, sack of our embassy in Libya, and the abortive attempt on its counterpart in Kuwait will be a step-up in security of personnel, buildings, and documents at all our foreign diplomatic missions. 1980 will also see changes in U.S. intelligence-gathering operations abroad and extensive reexamination of U.S. foreign policy and foreign aid. ENERGY AND ECONOMY By itself, the cut-off of oil imports from Iran won't make for big, widespread oil shortages here in the U.S., at least not in the period directly ahead. This assumes that greed and allocations mismanagement can be kopt to a minimum. But over the intermediate in-termediate term and beyond we will likely have to face up to spreading cutbacks in oil output that will be dictated by the needs or whims ot individual OPEC member nations. It is then that domestic supply shortfalls of oil and gasoline could become more serious, especially if we have not by that time taken definite steps toward domestic er-gy production incentives that will more nearly approximate those going to encourage conservation. Tight oil supplies and the new testing of American strength, endurance, and flexibility that we expect are bound to hike costs and result in added uncertainties. un-certainties. Without doubt, they will make it more difficult to stop the upward up-ward march of inflation. They could make for a somewhat longer and deeper recession than the Babson's Reports research staff now expects, though on the whole we believe that new policies and programs coming on stream in 1980 will give the economy fresh impetus. QUICKENING MILITARY BUILDUP Federal outlays for defense are sure to be expanded substantially as new projects for beefing up our conventional con-ventional military and naval forces encounter considerably less opposition than in recent years. But, initially, increased ship strength for our naval fleets will still be slow to get under way. And there are bound to be some rough times ahead for Pentagon chiefs as Congress investigates the shortcomings short-comings of U.S. military intelligence in Iran, Pakistan, Saudi Arabia. ..as well as in Nicaragua and other Latin American nations. Military pay levels will be increased and there will be new questions about the wisdom of relying on a volunteer army. Congressional thinking on the reviving selective service registration in changing, and despite the fact that 1980 will be an election year, the needed approval may be forthcoming. Finally, our forecast is that the boost in federal outlays for the military will be in the neighborhood of 10 percent. TAX CHANGES Uncle Sam's larger outlays for energy and for beefing up military programs are bound to increase the Treasury's needs for revenues. But although federal spending will be rising substantially in 1980 and ensuing years, inflation, recession, and certain inequities built into the U.S. tax system assure that Congress will vote for and the President will sign a tax cut during the coming year. Beyond 1980, however, pressures for new federal tax income will become acute. That is why Congress is already considering the pros and cons of a value added tax and will be continuing con-tinuing its search for new levies as well as for additional government-planned income redistribution. While this search could lead to massive tax "reform", more likely it will result in enactment of a series of far-reaching tax changes encompassing little or no real reform. |