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Business Priorities and Carter’s Plans Stuart Elliott New America April 1977 During the early months of his presidential campaign. Jimmy Carter often delighted business audiences by characterizing himself as a "fiscal conservative' As the campaign gained momentum, and as he began to win the support of blacks, trade unionists, and other groups on the Democratic Party's left wing. Carter shifted the campaign's emphasis. Economic change became a cornerstone of the Carter appeal, and full employment emerged as his first priority. Since the election, however, the new President has moved carefully away from the domestic liberalism of the campaign. The Carter administration began with a tone of moderation and a cautious retreat from the liberal pledges of the Democratic platform and the slightly less liberal themes of the campaign. Its economic policy represents business-oriented Keynesianism. Carter's economic advisors are men of supposedly liberal sentiments but, with the notable exception of Labor Secretary Ray Marshall, in practice their liberalism is abstract and purely formal. After a month-long drama of meetings, proposals, displays of Congressional and corporate power, and both public and behind-the-scenes fighting/the economic program of the Carter administration was unveiled on January 8. If it did not quite manage to convert Carter's erstwhile electoral opponents in the business community, it did upset the labor movement, which was largely responsible for his election. Labor's justified disappointment does not alter the fact that Carter's program is considerably better than what Jerry Ford would have given us had he been elected. The Carter program was presented as a two-year program and, though Council of Economic Advisors chairman Charles Schultze had indicated that the second year's stimulus is flexible, it represents a more reliable, if inadequate, commitment to the government's obligation to maintain full employment. In addition, the Carter program for the 1978 fiscal year has an emphasis on direct job creation that would not have been matched by a Republican. Still, Carter's program is less than labor, blacks, and his other supporters had a right to expect. In accepting the Democratic nomination, Carter had declared that "any system of government which sees virtue or value in unemployment is bankrupt." In criticizing the new administration's program, labor was only applying Carter's own criterion. Charles Schultze admitted in testimony before the Joint Economic Committee of Congress that the program would be sufficient only to reduce unemployment by the administration's own professed goal of 1.5 percent by the end of the year. Carter's program is designed to be acceptable to all interests, but the political trick appears not to have worked. Immediately after he was elected. Carter was challenged by the business community. Taking advantage of the interregnum period before the inauguration, the steel industry announced a 6 percent price increase at the beginning of December. The maneuver was conducted with exquisite political timing and skill, but with scant economic justification. Before the latest price increase, steel was already selling below list price. An earlier attempt in the fall to raise prices had failed to hold even in the oligopolistic markets, and demand for steel had fallen even more since then. The steel industry seemed to have two purposes in its increase. The first was to put the price increase on record in the event that the Carter administration were to push for wage- price controls. The rationale for this was weak at best. Carter had vaguely talked of the need for standby controls during the campaign, but had emphasized his dislike for the prospect of actually introducing controls. After his election, Carter had made it clear that he saw no need for wage-price controls. The action of the steel industry was also aimed at presenting Carter with a fait accompli, thereby establishing the ground rule that corporate economic power would not be subject to public control. Carter's intention had been to .establish an "incomes policy" that would include advance notifications of major wage or price actions to give a high- level panel time for study and comment. The steel industry acted before such a review process could be established. The steel move was part of a general corporate offensive to affect Carter's economic policies. Although most corporate executives favored Ford, that did not prevent them from claiming tribute from Carter's administration. Business sought and was given reassurance by pressing for the appointment of sympathetic figures in important posts such as the secretary of treasury, budget director, and chairman of the Council of Economic Advisors. Two of Carter's most influential advisors. Budget Director Bert Lance and Treasury Secretary Michael Blumenthal, spent inordinate amounts of time reassuring the business community, and they communicated to Carter the importance of a "favorable climate" for business. From all appearances Carter spent more time consulting with business executives and mainstream economists than with labor about his economic program. Paradoxically, the programs originally advanced by important business groups were not as conservative as one might have supposed. In early December Bert Lance said that a $15 billion stimulus was the "outer limits" of what the Carter administration would seek. Yet within two weeks a group of leading business executives called for a $20 billion stimulus and the Carter transition staff prepared a proposal calling for a similar boost to the economy. The surprising liberality of the business proposal reflects the leftward shift of the equations of the American political economy that comes with the election of a Democratic president. In this context, the business community sought to preempt and coopt the Carter administration by presenting a program that would have been the most favorable to their interests but still acceptable to a Democratic president and a liberal Congress. The business proposal called for a tax cut that would be less progressive than that enacted in 1976 and for a permanent increase in investment credits. The reason business groups, including the prestigious Council for Economic Development, madeindividual tax cuts their major priority was that they were worried about the overall state of the economy. Given the support of influential business leaders for a stimulus, largely through individual tax cuts, of $20 to $30 billion. Carter had the opportunity to present a politically acceptable package that would have been considerably stronger than the one he finally decided on. Definite Signals If the business community was to be mollified by the relatively modest size of Carter's economic program, the administration hoped that labor. Congress, and black leaders would be won over by the program's proclaimed emphasis on public works and public service employment, even though these programs were not to become effective until the second year. Important Congressional leaders did come out for the program, but it was not enough to satisfy labor. The AFL-CIO originally took a cautious approach to Carter, feeling that this would be in labor's long-term interest. Although the signals which emerged from the Carter camp in early December gave every indication that the new administration had upped its target to a $20billion plus range for economic stimulation, nonetheless, labor gave the Carter administration some rather definite signals about the type of program it thought necessary to put America back to work. Rudy Oswald, head of the AFL-CIO's research department, said that Carter's pledge to cut unemployment by 1.5 percent in 1977 may well be "too modest" and proposed that with a mixture of job creation and economic stimulus a goal of 6 percent unemployment by the end of the year would not be unreasonable. Oswald also explained labor's priorities. The major emphasis should be on a mixture of public service jobs, training programs, public works construction, and a solid boost for housing. If there were to be a tax cut, Oswald said, it should be heavily weighted toward the low- and middle-income brackets. A tax rebate would be preferable to a tax cut because it would leave budget surpluses for future programs. A tax cut, Oswald warned, should not be a substitute for tax reform. . Despite the disappointing nature of the new administration's economic policy, it would be a mistake to take an overly pessimistic view of the future. Carter, it must be remembered, has to contend not simply with the pressure of the business community, but with a public mood that is far from enthusiastic about vigorous action on the domestic front. Having been told by conservatives-and by many liberals of the Jerry Brown variety-that past federal efforts to solve social problems resulted in little more than the waste of taxpayers' dollars, many Americans have become justifiably cynical about federal spending efforts to reduce unemployment, provide housing for the poor, expand educational opportunities, or reduce the social and economic division between the races. The Carter administration's economic program may be disappointing, but there is a strong possibility that this program will be improved upon. As a candidate. Carter stressed compassion and change even above fiscal prudence. In the area of foreign policy. Carter appears to be attempting to meet his campaign promises, although in, ways few would have predicted. If the constituency for economic change-the constituency which was most responsible for electing Jimmy Carter- continues to press the new President to fulfill his campaign pledges, there is no reason to accept the Bert Lance-Charles Schultze policy of moderation as the final word from the Carter administration. |
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