The Economic Issues

Two members of TIME'S Board of Economists have close ties to two of this year's presidential nominees. Alan Greenspan, chairman of the Council of Economic Advisers under President Ford, is now a strategist for Ronald Reagan; Walter Heller, who was President Kennedy's chief economic aide, is an occasional consultant to Jimmy Carter. During a luncheon discussion last week, the two economists debated their candidates' policies. Some highlights:

ON THE BUDGET. Greenspan: The budget is severely out of sync. Reagan's program would hold federal revenues to less than 21% of G.N.P. in 1985. Carter's proposal accepts a huge rise in the tax burden to nearly 24% of G.N.P. This is a turning point in American history; unless we choke off budget growth, we cannot rebuild the economy.

Heller: What budget cuts has Reagan specified? None except the elimination of waste, extravagance, abuse and outright fraud. I call those the four horsemen of the budget apocalypse. Actually, they are tired old nags that have been trotted out by every presidential challenger. No more than $4 billion could be saved that way. Until Reagan gives us chapter and verse on what programs he will cut and by how much, his balanced-budget pledge is no more than a pious hope. It's a little cruel to call this voodoo economics, as George Bush apparently did. I'd call it Indian-rope-trick economics or Houdini economics.

ON THE GOVERNMENT'S ROLE IN THE ECONOMY. Greenspan: The President's Economic Revitalization Board is a bad mistake. At the White House door will appear not progressive new industries, but companies on the verge of bankruptcy. In our political system this board can be nothing other than a bailout operation. Carter's plan would gradually increase Government control of the economy.

Heller: I'm not wild about the Revitalization Board idea either, but a governmental hands-off approach can be carried too far. I've heard nothing about Reagan's wage and price policy. Without wage and price restraint, no strategy against inflation is realistic. Reagan would simply return to the discipline of the marketplace--the same discipline that has GM, Ford and Chrysler raising prices in the face of the slowest summer auto sales in almost 20 years.

ON GOVERNMENT REGULATION. Heller: Carter has the record on his side. Deregulation of airlines, trucking, banking and telecommunications, goals that we have been struggling toward for almost 20 years.

Greenspan: Some of these deregulation efforts were started during the Ford Administration, but I do applaud the progress Carter has made. My only difficulty is that during the President's first three years in office, the number of pages of regulations in the Federal Register went up 35%.

ON CARTER'S MANAGEMENT OF THE ECONOMY. Heller: The President's inflation record is not good, but he has added some 8 million jobs during his term. Industrial output has risen faster than in any country except Japan. He's shown political guts: no tax cuts in 1980 and only modest, business-oriented ones in 1981.

Greenspan: The rise in jobs is consistent with the slow growth in productivity. Much of the production increase was inflation-induced, and the dollar has plunged. By allowing the economy to deteriorate, Carter was forced into a crash program of restraint that led to a massive decline in the economy and a huge rise in unemployment.

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