Candor and Consensus

Under mounting pressure to act quickly in dealing with the nation's economic woes, President Ford last week intensified his quest for bipartisan support to curb raging inflation. He took the unusual step of holding an all-day, televised meeting at the White House with 28 noted economists. The group, which included six members of TIME'S Board of Economists, ranged from self-proclaimed "New Socialist" John Kenneth Galbraith to Hard-Line Conservative Milton Friedman. Whatever their ideology, what the President wanted was their "unvarnished" views on what to do about the sputtering economy.

As expected, there were strong differences about what Administration policy should be, especially in regard to wage-price controls. There were also surprisingly broad areas of agreement. The experts generally believed that under present conditions prospects for prices and growth are dismal, but not yet desperate. There also was a near consensus that the Government must ease its tight rein on credit if the U.S. is to avoid the risk of a deep recession.

Despite the experts' grim predictions, the tone of the meeting was generally convivial. In a flight of hyperbole, Ford told the group that if it succeeded in finding answers to inflation, "there will be statues of each of you in every city park throughout the U.S." Democrat Walter Heller remarked: "It is refreshing to be in a White House open to a little laughter again, and to dissent."

Warm words, but the honeymoon between Ford and his political opponents is already showing its first signs of strain. Last week Presidential Aide L. William Seidman announced that because Congress would not have time to pass on any major new policy initiatives this year, "real action" on the economy would have to wait until 1975. The Senate Democratic caucus, obviously unwilling to give up the party's most promising issue for the November congressional elections, wasted no time in replying that speedier action was needed. The Democrats pledged to keep Congress in session for the rest of the year, if necessary, to deal with any economic program that Ford may produce.

Tight Money. Politics aside, the argument for urgency is persuasive. Last week the Government revealed that business capital spending, which had been expected to increase by between 13% and 18% for the year and help soften any recession, had risen by a modest 6.5% through the first half. General Motors Chairman Richard C. Gerstenberg predicted a mere 5% sales gain for the auto industry in the 1975-model year beginning this month--cold cheer, since 1974-model sales were disastrously low.

Manhattan's First National City Bank reacted to the Federal Reserve Board's continuing tight-money policy by lifting interest rates on personal loans, and other banks are almost certain to follow. The cost of borrowing for a new car at Citibank, for instance, goes from 9.58% to 11.58%.

The President's meeting with the economists was the first in a round of eleven so-called minisummits aimed at getting the ideas of experts in key segments of the economy--from housing to agriculture. These sessions will culminate in a widely touted "economic summit" meeting in Washington Sept. 27 and 28. Prime areas of general agreement at last week's meeting:

P: Unless there is a radical change in policy, there will be little or no economic growth until the middle of 1975.

Inflation will be running at or above 8% through next year, and unemployment will reach 6.5% by next summer. Echoing a number of other economists, Otto Eckstein predicted that the country is in, or headed for, a "middling recession."

P: The Federal Reserve and its chairman Arthur Burns should ease --but not abandon--its parsimonious money policy, which has battered the housing industry, the stock market and other businesses without making any perceptible dent in the rate of inflation.

Indeed the Federal Reserve seems to have softened its policy a trifle.

P: Inflation cannot be beaten by simply following the "oldtime religion" of tight money and budget balancing. Instead, the Government should examine more imaginative approaches--notably, eliminating the plethora of protectionist rules that kick up prices in such fields as shipping, construction and steel.

P: Washington should provide more aid to people who will be hurt in the battle against inflation. The majority of economists, Friedman vigorously dissenting, recommended expanded federal grants for public-service jobs (see following story). They also urged more generous unemployment benefits, and Heller called for a tax cut for those in the lowest income brackets.

The question of whether or not to re-impose some form of wage-price controls was a source of disagreement. Conservatives such as former Treasury Secretary George Shultz and Paul McCracken argued that controls had been tried and found ineffective. Liberals such as Galbraith and Robert Nathan insisted that without controls there was little chance to strengthen the economy while restraining prices.

Whether the meeting, and those that will follow, will greatly influence Administration policy is open to question. The President has already declared his intention to tighten up on Government spending. He also seems to agree with his chief advisers that the only way to dampen inflation is to accept the pain of a stagnant economy and rising unemployment for at least another year. At week's end Treasury Secretary William Simon declared that "controls could kill the economic system as we know it." Alan Greenspan, newly sworn-in chairman of the Council of Economic Advisers, said that "a significant easing of money supply would serve no useful purpose."

For all his refreshing candor and willingness to listen to others, Ford cannot hope to fashion those attitudes into a program that Democrats will urge their constituents to accept. The atmosphere may be convivial, but the President has yet to find a way of defusing the economy as an election issue.

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