THE WHITE HOUSE WASHINGTON March 22, 1976 Dear John, Thanks for soliciting my views on the subject of government's role in the setting of long-term goals and strategies. Because my area of responsibility is economic affairs, I will limit my comments to this sphere. Question 1: What role should government play in setting long-term goals and the development of strategies for achieving those goals? The most effective contribution government can make in economic affairs is to adopt policies fostering a climate conducive to steady, stable growth of the private sector. This sector, not the government, has been the source of an expanding economic pie. Only a healthy and dynamic private sector can satisfy the aspirations of our people for expanding economic opportunities. Priority must be given to "steady-as-you-go" fiscal and monetary policies in contrast to roller coaster economics which has alternately attempted to "heat" or "cool" the economy through erratic government intervention. The emphasis must be on longer-term reliability and predictability in government economic policies so that consumers, business and labor can do a better job of planning. Government economic planning should be limited to that necessary to discharge its fiscal and monetary responsibilities and for necessary regulation of economic behavior to foster competition and to protect health, safety and the environment. Direct intervention in the marketplace is justified only in times of national emergency or in pursuit of agreed-upon national objectives such as energy independence which cannot be reached by the marketplace alone. 2 Question 2: What is government presently doing in this regard, and is it in any way deficient? The Economic Policy Board provides an invaluable mechanism for coordinating policy development and execution in the Executive branch. The Board brings together the heads of agencies with major responsibilities for both domestic and international economic policy. Views from outside government are regularly solicited. Opportunities for operational improvement are continually sought by the Board. We need, for example, to improve the quality, availability and coordination of the statistical tools we now possess. Proposals to extend government planning to the private sector are not only unsound but unfeasible, since they are predicated on a detailed economic forecasting capability beyond the capability of the economics profession and, hence, government planning bureaucracies. Question 3: If it is deficient, what can be done to improve the effort either through reform of existing institutions or the development of new institutions? I am convinced that the evolution and improvement of structures such as the Economic Policy Board constitutes the best strategy for developing sound, longer-range policies having positive economic impact. The Board provides the single focal point in the Executive branch for organizational and policy decisions necessary to accomplish this. X X X I hope the foregoing is helpful. Sincerely, Bue L. William Seidman Assistant to the President The Honorable United States Senate Washington, D. C. 20510 69-838 O 76-45 1. This asks for the role of government in setting longterm goals and in developing strategies for achieving those goals In the letter of invitation to the participants in the hearings of the Government Operations Committee held last February which you chaired, your committee pointed out that, "There has been a rising concern for many years that our Federal Government has too often operated on a stop-gap, fire-engine' basis, taking action on the immediate problem of the day with comparatively little time, thought, or effort going into assessing and outlining our longer range problems and potentials." We have, however, a bill before Congress, the Balanced Growth and Economic Act of 1975, to initiate such a program. On the other hand, the Russians have been operating on centralized planning since 1925, when the first five-year plan was adopted. At the end of the five-year interval, having lived up to more or less and achieved more or less, but generally less, of their five year objectives they adopted additional five-year programs. A natural question is, shall we enact the centralized planning bill? I know that the authors of the bill will deny that this is what they have in mind, but, if we start it, it will certainly grow into that. But before we start it, we might ask, what have the Russians achieved by their centralized planning? They certainly did not achieve anything distinctive as far as the well-being of the 225 million Russians, perhaps they never even tried to. But, on the other hand, they have never succeeded in raising enough food to take care of their minimal physical require ments and this they tried to do and failed. The reason for that Senator Glenn -2 3/22/76 is that the Russian planning was directed primarily in how to run their economic system to achieve the political objective of the Soviet state as an authoritarian state and to continue the people in power who were in power. Other western societies have adopted or are operating planning systems set up subsequent to the end of World War II. Included among these are the United Kingdom, France, the Netherlands, Norway, Sweden, and there are several others. There is no question as to the lack of success in the two largest of these countries. France today is in a mess. The United Kingdom started on a heavy program of state ownership (this was part of the centralized plan) of electric and gas energy, steel, the railroads, coal, nuclear power, and in the thirty-year interval that has elapsed since 1946 what has been their success? The New York Times of last Saturday carries an item on the first financial page headed, "Britain's Nationalized Industries in Turmoil." It also carries a fascinating story about Sir Montague Finniston, chairman of the nationalized steel corporation, who was fired from his job, and Sir Richard Marsh, chairman of British Railways, who resigned his, and also the story of last year's performance of the nationalized industries, which had a loss in the elapsed year of $2 billion. Curiously enough, the next step in this tragic cycle is apparently going to be the nationalization of the British banking system. There are obviously other areas than the economic. What about the social areas? In the mid 1960s there began to be a great deal of disturbing talk about the deadend street that we had reached in our economic development to give the American people the highest standard of living in the world by the introduction of automation, which started actually as far back as our revolutionary days, which, however, is commonly credited to have begun with Henry Ford when in 1915-16 he set up his assembly line and announced the unheard of minimum wage of $5.00 a day. One of the great pseudo-intellectual journals we have is The Saturday Review of Literature and I recall that in the mid 1960s its editor, Norman Cousins, published an editorial with the alarming headline, Modern Man is Obsolete, the inference being that the machine has simply displaced man--the robot has obsolesced man. Fortunately, Congress passed a law setting up a National Commission on Technology, Automation, and Economic Progress to study this problem and this question and, fortunately too, there were brought together on that commission very close to a dozen outstanding Americans from a wide variety of segments in our national society. It had on it three distinguished and very Senator Glenn -3 3/22/76 able labor leaders, Walter Reuther, Albert Hayes, and Joseph Beirne. It had an especially able group of economists and sociologists, Daniel Bell, Robert Solow, and the chairman, Howard Bowen. It had a group of able businessmen experienced in technology, Patrick Haggerty, Thomas Watson, and (included with apologies) myself. And there were at least two or three other very able people. This commission went to work and in a series of some twenty sessions, most of which lasted two days, aided by a very able staff and with a lot of homework, eventually put out a report on this question which appeared in February 1966 under the title of Technology and the American Economy. It was and remains today, ten years later, one of the great social-economic documents produced in this country. It completely proved the falsity of the myth that automation is an enemy of society. It showed that the improvement in American productivity, largely supported by automation, was responsible for all the surplus that made possible our social welfare, our reduced work week, our reduced work day, our high standard of living, our great educational systems, and, while there always was an initial loss of jobs when men were displaced by machines, the large increase in new jobs much more than compensate for the temporary loss and made possible the employment of many millions more of Americans and their achieving much higher standards of living. It is very interesting that at the last meeting of the commission, after it had completed its work, Mr. Reuther addressed the other members and expressed his satisfaction with the report and his conviction that he had arrived at as a result of his work on the commission that as a result of automation more people were engaged that day in building automobiles in Detroit for use by American families than would have been the case if there had been no automation. This did a great deal to quiet down talk about automation the human enemy. But I am certain that if this study had not been made we might have ended up with some kind of law prohibiting or materially restricting further automation. I could give you details of a series of discussions on the same question which I personally had with the late John L. Lewis, who was an ardent exponent of higher wages for miners, safer working conditions, and automation in coal mining. Out of a great deal of experience, some of which I have cited, some merely thought about, I have come to the conclusion that when one of the smoldering, tough, unavoidable problems arises in our society the best mechanism for taking care of it is |