Changing the Economic Team

But can that end the contradictions in Carter's policy?

With the resignation of Treasury Secretary Michael Blumenthal and the shift of G. William Miller from the chairmanship of the Federal Reserve Board to Blumenthal's job at Treasury, the nation's first-string economic team has been radically altered. TIME Business Correspondent George Taber analyzes the prospective impact of these changes:

Only 30 months ago, the Carter economic team started work in an atmosphere of high hopes. Rarely had an Administration mobilized such formidable economic firepower, filling the Cabinet with five Ph.D. economists: Blumenthal, Commerce Secretary Juanita Kreps, Labor Secretary Ray Marshall, Energy Secretary James Schlesinger and Chief Economist Charles Schultze. In addition, a number of Carter's appointees possessed impressive managerial credentials. Blumenthal had headed the Bendix Corp., one of the nation's best-run firms, while Bert Lance, Carter's first Budget Director, was a highly successful banker.

Today Blumenthal is out, Lance is under indictment and Schultze might remain incapacitated for months following major surgery. The economy, meanwhile, is plagued by chronic inflation (current annual rate: 13%), has entered a recession and is suffering from a severe energy shortage.

How could this have happened to some of the best and brightest of the economists? The fault is probably not theirs. The main problem seems to be the unresolvable policy contradictions within the Administration and within the views of the President himself. Carter remains uncomfortable with economic issues and does not seem to trust any of his talented economic advisers. Early this year, for instance, he only half facetiously quipped that his economic advisers seem to be getting their inspiration from fantasyland.

Carter has also lacked a clear economic philosophy, aside from his instinctive distrust of Big Business and of budget deficits. Apparently afraid of being captured by any single adviser, he has listened first to one and then to another. This has been reflected in White House swings of policy and shifts of focus. He has fought first unemployment, then inflation, then the energy war. At one moment Carter has preached a balanced budget and then turned around and sent Congress a health-care plan that would add $24 billion to federal spending. He has said he favors decontrol of energy prices, but has always been reluctant to take such steps.

The confusion and contradiction fundamentally rest on the President's Janus-like attitude toward the Government's role in the economy. On the one hand, he shares the public's rising distrust of Washington-dictated solutions for inflation or energy. Yet his concrete policy proposals usually involve 1960s-style programs that require big spending and larger bureaucracy. Last week's energy program would mean two new bureaucracies and $141 billion more federal spending. And as the election approaches, Carter may be tempted to reach for even more Big Government solutions to prove his effectiveness and leadership ability. Said a Cabinet member: "The President has difficulty seeing the interrelationships of problems. He will master one subject superbly and then go on to the next. But he does not see the relationship between the two." Says another Cabinet Secretary: "Our basic economic problem has been that no one has been in charge."

The arrival of Bill Miller in the elegant third-floor corner office of the Treasury Building will lead to some changes in style. He is the kind of "team player" that Carter seems to prize. From his days as chairman of the Textron Corp., Miller has had a reputation for arguing hard and voicing stinging criticism behind closed doors; out in public, however, he joins ranks and forcefully presents the majority position. But Miller can also be stubborn. Blumenthal discovered this last spring when he tried to lean hard on his old friend Bill to have the Fed raise interest rates. Concluding that Blumenthal was wrong, Miller balked; eventually Carter had to tell Blumenthal to ease up the pressure. Later Miller would sit calmly in his inordinately neat Fed office on Constitution Avenue, motion out the window toward the White House and say, "All's quiet on the western front."

Ironically, because of points strongly urged by Blumenthal as he was leaving his job, Miller should have broad powers and a fairly free hand in formulating policy. Miller is also going to assume Blumenthal's key roles as chairman of the Economic Policy Group and chief economic spokesman. Still, Miller probably will discover that he will be working with a White House staff more interested in politics than policy.

Despite the change in Secretaries, Treasury policies are likely to remain pretty much the same. In fact, Miller has been something of a Blumenthal protege. The two men, moreover, are products of the urbane world of Big Business and both favor liberal social policies. When they breakfasted together, as they did almost every Tuesday, they found that they disagreed more about what to eat than about the kind of economic policy the nation should pursue. Like Blumenthal, Miller is committed to an all-out fight against inflation, large government and budget deficits. The new Secretary also believes in helping business and has urged tax breaks to stimulate corporate investment.

Initially, the reaction to Miller by the Swiss and Wall Street financial gnomes should be favorable. The business community has been aware for some time that Blumenthal had been badly wounded and his effectiveness diminished because of his internecine fights with the White House staff. Miller's good ties with Carter will cause optimism among U.S. businessmen. But while the arrival of Miller might improve Treasury-White House relations, the fundamental contradictions of the Administration's economic policy remain to be resolved. And for an Administration whose chief has kept tight personal control over these policies, it is only the resolution of Jimmy Carter's own conflicting views that will enable his new team to give the country more effective economic and energy programs.

This file is automatically generated by a robot program, so viewer discretion is required.