Sizing up the economy isn't as simple as the debates on TV suggest
Two campaign debates covering three hours of television time have thrown a lot of statistics over the airwaves. Some of them were wrong, some of them seemed to me more or less meaningless. Meaningless, at least, in terms of relevance to the voter on Nov. 6.
It was some misstatements by both the presidential candidates about social security during their first TV debate which brought this to mind. Then in the second debate, about the third time George Bush referred to the 21-percent interest rates of the Carter administration, this column began to form itself.
Politicians feel accountable on a four-year basis; as a result of the election schedule, they therefore tend to account for the economy on a four-year basis. Of course, the policies of a new president and his success in working with Congress do result in economic change. No one can deny the success of the Reagan tax cuts, although it still isn't clear whether it is a normal Keynesian result (deficit spending that boosts the economy) or the unleashing of individual incentives that the large tax cuts were intended to bring about.
Nor can one deny that presidents try to have everything coming up roses in years divisible by four. Or that if one has to ''take'' a recession, it's better to get it out of the way early in a presidential term. But economic life is really not that simple, and most of the American people knows it. If the public today is inclined to go along with Mr. Reagan because times are generally better , I would argue that it is doing something more than merely comparing its bank-account balance today with what it was in 1980.
Let us go all the way back, for just one moment, to 1965, the year of the Vietnam buildup. In the 20 years since then, this nation has been through much. Forgetting the political turmoil of civil rights, Vietnam, and Watergate, the economy itself has been wrenched several times. The guns-and-butter approach of Lyndon Johnson started the nation on an inflationary spiral that was worsened by the energy price adjustments of the 1970s - first the tripling of the price of oil in 1973-74 and then its at least doubling again after the fall of the Shah in 1979. During this same period, US industry began to face major new competition, both from sophisticated manufacturers in nations like Japan and from many emerging third-world countries.
It was the appearance of our having lost control over our destiny as a nation that disturbed many citizens at the end of the 1970s. That appearance may not have been correct. The United States had already taken many positive actions to correct its excessive energy dependence. The Fed, under Paul Volcker, who was a Carter appointee, had already begun to take consistent measures to rein in money supply growth. The 21-percent interest rates were a part of the corrective process at work, and we should be more concerned than we are now over the high level at which real interest rates remain stuck four years later.
This is not to belittle the accomplishments of the Reagan tax cut, or his administration's emphasis on getting government out of unnecessary functions. But the public is feeling better about the course of the economy becasue of some policy changes that actually occurred under Mr. Carter. For instance, the move to deregulate many of the regulated industries was already well advanced under Mr. Carter. The fact remains that the public perception of events was getting worse right through the end of Mr. Carter's term, and it has been improving so far in the 1980s. Whatever the reason, the incumbent President is getting the benefit of that change in perception.
If one were to judge Mr. Reagan's economic policies only by what can be seen in the four-year time frame 1981-84, the events or policies that would have to be looked at most closely would include a major recession, a good recovery, the virtual ending of inflation, a major budget deficit problem for which no solution is yet offered, and an overvalued US dollar as a result of the budget deficit and resulting high interest rates. All these things together do not give reason for unrestrained jubilation. Rather, it's the general feeling that despite new problems, some of the old problems have been dealt with.
That - and not the fact that for one brief moment under Mr. Carter interest rates reached 21 percent - results in the President's getting a generally good rating on the economy.