Assessing the New Program

THERE is a little joke going around in economic circles that at the time Henry Kissinger secretly went to China, Democratic Economist Arthur Okun was slipped into the White House by the back door and in disguise. His mission: to talk President Nixon into changing policy on inflation, jobs and the dollar. Indeed, the President's new package contains many ideas long advocated by Okun and the eight other members of TIME's Board of Economists. The board cheers Nixon's new activism. "It's a triumph in common sense," says Otto Eckstein. Walter Heller agrees. "It's a historic initiative. The economic world will never be quite the same again."

Still, if the board members were grading the specifics of the President's program, the report card would be mixed. They would generally give him an A-plus for reviving the nation's confidence, an A-minus for tackling inflation, a C on his plans for reviving the economy and creating jobs, an A for devaluing the dollar, and a B for clamping the surcharge on imports. A sampling of the board's comments:

WAGE-PRICE FREEZE. "It's a dramatic change of direction," says Arthur Okun, "and we have bought time. But I'm sorry that it was so late. I can't see any President ever again staying completely out of wage and price decisions." Adds Walter Heller: "Now that the initial euphoria is wearing off, the country is rightfully saying, That was great for openers, but where do we go from here?' After the 90-day freeze, do we slide into a straitjacket of mandatory controls, or do we use this time to develop a set of noninflationary ground rules and a wage-price review board to monitor them?" Echoes Robert Nathan: "If the Administration's leaders are tough enough, we'll get a good incomes policy and a wage-price board. But I don't know if they've got guts enough to do that, and do it so that labor doesn't bear the brunt." Says David Grove: "Nobody believes that the 90-day freeze won't be extended in some way, probably by setting up a policing review board. That's the minimum Government apparatus that is needed." In dissent, Beryl Sprinkel says: "A wage-price review board won't work. There are too many devices to thwart it."

TAX CUTS. David Grove figures that "the fiscal stimulus is very small and will have little effect on the economy." Joseph Pechman believes "there is not enough immediate stimulation of demand." He argues that the cuts, which become effective Jan. 1, should be instituted right now, and that the increases in Social Security levies should be postponed until 1973. Walter Heller contends that it was wrong "to feed corporations with the economic raw meat of a $5 billion investment tax credit on top of the $4 billion depreciation give away, and at the same time toss the consumer the small bone of a $2.5 billion speedup in income tax reductions." Robert Nathan calls the tax cuts an "absolute fraud." Their stimulative effects, he believes, will not even take place during the freeze period.

GOVERNMENT SPENDING CUTS. Alan Greenspan argues that "the $4.7 billion reduction in this fiscal year's budget and the one-year delay in the welfare bill are the most important moves in the longer run. If we do not reduce our huge deficits, we will have grave difficulties controlling inflation." To that contention David Grove adds: "Instead of the cuts, I would have preferred more fiscal stimulation. The reductions were mainly a political maneuver, to show that everybody has to sacrifice. President Nixon was saying, 'See, we are making cuts, too.' "

IMPORT SURCHARGE. Otto Eckstein predicts that "the import surcharge will encourage a worldwide revaluation of currencies, particularly by Japan and the Common Market. Now the U.S. can really become competitive in trade, and it is the efficient companies--here and abroad--that will win." On the other hand, Robert Triffin issues a warning that: "There is a real danger that a trade war will break out. The Common Market has a deficit in trade with the U.S., and the import surcharge can only deepen it."

FLOATING THE DOLLAR. Though Alan Greenspan believes that "the only viable option was to let the dollar float," he warns that if it is left unpegged for too long "trade could be stifled." Joseph Pechman says: "Strengthening the dollar is a move that is long overdue." As David Grove summarized: "The dollar has been overvalued for some years, but no one wanted to recognize that. Now the Administration wants the dollar 'devalued' enough to get a strong balance of payments position. That could come very quickly and be a big and dramatic improvement."

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