Galbraith on Reaganomics: 'for the forgotten rich'

John Kenneth Galbraith stands for many things the Reagan administration is against. He has been a Democratic Party stalwart since New Deal days, serving a string of presidents and politicians as adviser, speech writer, ambassador, and general lightning rod.

He is a tall, large-boned libral -- steeped in the economic theories of John Maynard Keynes. He does not think much of supply-side economics. He has just published his 21st book, a memoir titled "A Life in Our Times," and one of his next projects will be a volume reviewing the policies of Reaganomics. Anyone who has read Mr. Galbraith's past work realizes the judgment will probably not be favorable.

Excerpts from an interview with the Monitor:

What do you think of supply-side economics?

It begins with what you would like to do in the present and says, in effect, that is what will be ideal in the future. It's not an economic syllogism I approve of.

Are you a member of the banished opposition?

Sure. What I can't understand is why more conservatives aren't also members of the opposition. If a liberal administration was reducing taxes and increasing the deficit in the short run, and relying on very dubious methods for its reduction in the long run, I think my conservative friends would be rather severe with us.

The administration says focusing on the possible deficit misses the point of its economic policies, that the deficit isn't all that important per se.

This is a new discovery of conservatives that I hadn't heard advanced when liberals were responsible for the deficit. While it is argued that economists do not agree, cautious liberals and responsible conservatives accept that a very large increase in the deficit will increase the danger of inflation. They also accept that supply-side economics is not going to quench inflation, because the gains in productivity, under the best of circumstances, will not be sufficient.

Do you agree with the contention that the proposed tax cuts will unleash a tide of investment?

That is something worth pondering. It implies that business executives, heads of large corporations, editors of The Christian Science Monitor, and the other movers and shakers of the economy are all malingering now, involved in a sitdown strike of greater or lesser proportions because of their taxes. By [ Washington's] reducing taxes, they will all be made to work harder. Well, I have a better view of the American business executive than that. I think he works very hard now.

The 1964 "Kennedy tax cut" is often used as a historical basis for Kemp-Roth. Are they in fact comparable?

The circumstances in 1964 were radically different. In the first place, prices were stable. In the second place, there was then a very tight hold on the wage-price structure. In the third place, there was a good deal of idle [ manufacturing] capacity.In the fourth place, the effect on the deficit was very small.

How do you compare the mood in Washington today with the New Deal era?

We used to say the theme of the New Deal was "the forgotten man." I think, about the Reagan administration, you'd say it is "the forgotten rich man." After all, look at who'll get the most money after Kemp-Roth?

What do you think of the work of George Gilder [author of "Wealth and Poverty" and a proponent of pure supply-side theory]?

He is remarkable in that he seems to have read everything I ever wrote. His view of capitalism, while it relates to an economic system that doesn't exist, is highly romantic in its conception. He sees capitalism not as the world of large corporations, which is what it is, but as a world of dynamic small-business men, which is at some odds with the major reality. IBM, in his system, is just another bureaucracy. I am forced to conclude that IBM exists.