Economic policymaking under five Presidents -- Johnson through Reagan
Economics in the Real World: How Political Decisions Affect the Economy, by Leonard Silk, New York: Simon & Schuster. 298 pp. $16.95. There are not many genuine economists on the staffs of American newspapers. Economists can usually make more money working for corporations, or they prefer the academic life. Moreover, not too many of them can write in a lively fashion for the layman.
Leonard Silk, a longtime economics columnist for the New York Times, has the advantage of being both a trained economist and a clear writer. He also has the clout and prestige of the Times behind him. So he has had access to top Washington economic policymakers, including some Presidents.
For instance, in this journalistic history of the last 20 years of making economic policy, Mr. Silk tells of being blatantly lied to by President Johnson during an interview. Silk had been given a copy of the forthcoming federal budget by Gardner Ackley, the chief economic adviser to Mr. Johnson. When he went in to see the President, Silk opened the interview by noting that the budget had again been kept under $100 billion. Johnson, suspecting a leak, exploded. ``You see no such thing,'' he said. ``How . . . would you know the budget was under $100 billion if I don't know it?''
When Johnson found out how Silk had learned the budget number, he apologized through Mr. Ackley.
As part of a chapter on Middle East policy, Silk gives Andrew Young's story of his meeting with a representative of the Palestine Liberation Organization and how it forced his resignation as the United States ambassador to the United Nations. ``We were afraid of fanning black and Jewish flames,'' Mr. Young explained.
Silk concludes that chapter with this assessment: ``Carter was a remarkable President: one of the most intelligent and sensitive, and one of the most febrile and unsure.''
There are enough such comments, incidents, and interviews recalled in this book to give it some extra zest and make it easy reading. Fortunately, the book's somewhat lightweight character at the start, romping through the economic policymaking of Presidents Johnson, Nixon, and Ford, becomes deeper as it reaches the Reagan era.
The heart of the book is its last chapter, entitled ``What have we learned?'' Here are some of Silk's conclusions:
``Presidents must not subordinate major economic decisions to immediate political advantage.''
As one example, Silk notes how President Johnson delayed for political reasons the difficult choice among three possible policies: raising taxes to pay for the Vietnam war, cutting his Great Society programs, or curbing military spending and getting out of Vietnam. He finally chose to raise taxes, but too late to prevent the start of a major round of inflation.
Elsewhere, Silk notes: ``Economics in the real world plays second fiddle to politics.'' In some cases it should. But Silk is right in pointing to the need for giving economics greater weight.
``The United States must pay more heed to the international economy in setting its domestic economic policy.''
Silk holds that the need to close the federal budget gap is pressing because of international reasons. He assumes that the budget deficit pushes up interest rates on dollars and that this aggravates the strains on the international financial system, including developing-country debts and the massive capital flows in the US, with its counterpart of a widening trade deficit.
``In any effort to correct the effects of a careless budget and fiscal policy, tight money must be used with great caution.''
Though less critical of monetarism (the view that a steady growth in the money supply is the best monetary policy) than he was some years ago, Silk remains a skeptic. He approves of the Federal Reserve's decision to abandon at least temporarily its money growth targets in the summer of 1982 so as to push the economy out of deep recession. ``There is a strong case to be made for opportunism in response to political pressures when economic disaster becomes a clear and present danger,'' he writes.
I suspect monetarist economists would feel Silk's presentation of their views is inadequate in this book.
``A better way must be found for combining high employment and growth with price stability.''
In his columns and probably in Times editorials, Silk has championed a proposal to dampen inflation by holding forth the incentive of lower taxes for industries that abide by noninflationary guidelines, or, conversely, higher taxes for those that do not. Here he also mentions some other suggestions for restraining wages and prices.
Silk points out that not even the Reagan administration, with its rightist ideology, has been able to move completely to a laissez faire capitalism. It has kept the ``safety net'' of the social security system, welfare, unemployment insurance, etc. -- all elements of what some rightists regard as socialism or too much government.
The Times columnist is cautious in injecting his own liberal-center views into this book. But in this case, he clearly approves of the mixed economy.
David R. Francis is a Monitor financial columnist.