Announcer: From the nation's capital, the
American Enterprise Institute for Public Policy Research presents Public Policy Forums, a
series of programs featuring the nation's top authorities presenting their differing
views on the vital issues which confront us. Today's topic, "National Economic Planning:
Right or Wrong For the U.S.?" Peter: In an era of continuing economic problems,
businessmen find that planning ahead is a must. So do governments, from small villages to
the federal government, for example, all have budgets for the coming months. Increasingly, there are those who say that
a detailed central economic plan must underlie the federal budget. Opponents say that rigid overall planning
has been a failure in other countries, that it is undemocratic and highly subject to political
maneuvering. Welcome to another round table discussion
brought to you by AEI, the American Enterprise Institute, a nonpartisan, nonprofit, research
and education organization. Our topic is, "National Economic Planning:
Right or Wrong For the United States?" Taking part in our discussion are four experts,
Herbert Stein, who is a Willis Robertson professor of economics at the University of Virginia. Dr. Stein has been a member of the president's
council of economic advisors and served as its chairman. He is an adjunct scholar at AEI in the field
of economics. Democratic Senator Hubert Humphrey of Minnesota. Senator Humphrey was first elected to the
Senate in 1948. He served as vice president of the United
States during the Johnson administration. Senator Humphrey is chairman of the Joint
Economic Committee. Republican representative Clarence Brown of
Ohio. Congressman Brown holds a degree from the
Harvard Graduate School of Business Administration. He serves on three House committees, government
operations, interstate and foreign commerce, and the Joint Economic Committee. Wassily Leontief, professor of economics at
New York University. Professor Leontief won the Nobel Prize in
economics in 1973. He taught for many years at Harvard and has
written extensively on economic matters. John Charles Daly is our moderator. Mr. Daly was a news correspondent and analyst
for CBS. Later, he became Vice President of ABC for
news and public affairs. Now, here's Mr. Daly. John: This public policy forum, one of a series
presented by the American Enterprise Institute, may be one of the few beneficial results of
the deep recession through which we have just suffered. Economics is not a subject that normally excites
wide public interest in yet economic literacy is crucial to the long-run success of a free
society. And lately, happily, we have all become furiously
interested in inflation, stagflation, monetary supply, price stability, etc., etc., etc. While impelled by a privately sponsored initiative
committee for national economic planning, co-chaired by our panel member, Professor
Leontief, and by United Automobile Workers president Leonard Woodcock, Senator Humphrey,
who is also one of our members on the panel, and Senator Javits introduced S1795, the Balanced
Growth and Economic Planning Act of 1975, and invited a vigorous national debate on
these measures. S1795 concentrates on a general system of
economic planning, establishing a new agency, councils, and committees to compile data and
produce an economic plan with broad participation of local and state governments, private interest
groups, and the public. The question is "National Economic Planning:
Right or Wrong For the United States?" Senator Humphrey, the United States economy
is the most productive in the world and U.S. living standards, the highest in the world. If a major restructuring of our processes
of economic management and planning is necessary, why? Senator Humphrey: For the very simple reason
that we have suffered colossal waste in these past years and then over many years, the potential
of the American economy has never been realized. It is estimated the last 2 years we have lost
over $400 billion in production. Even if we had unemployment levels at 4%,
we've lost some $27 billion in revenues for our local and state governments. We've had as many as 20 million people in
any one year unemployed, as many as 75 million Americans who have been directly affected
by unemployment in their families. This is a colossal waste, plus the fact your
federal government...and let's talk about for a minute. Your federal government expends about approximately
25% of the total gross national product. Now, that government provides money, credit,
regulates money, the supply of money, regulates industries, invests, builds facilities. It is involved in a tremendous amount of economic
activity and yet there is no design. The EPA doesn't pay much attention to what
the Federal Energy Agency does. The Federal Power Commission doesn't pay much
attention to what the Federal Energy Agency does. The ICC doesn't talk to the CAB. And I don't think anybody talks to the Federal
Reserve, that's who controls the money supply of this country. So that you have a situation where nobody
bothers about coordinating this vast array of public programs. The least that we ought to do is to have some
idea of where the country is heading in terms of governmental expenditures. The federal government reduces taxes to encourage
the private sector. State and local government raise taxes at
the same time because they're short of revenue back home to take care of their public services. I happen to believe we can do a better job. I don't want a planned society. I just want a society in which there is planning
where we look ahead beyond the fiscal year, where we take a look at what the food policy
of this country ought to be, where we take a look at what the transportation policy ought
to be. The relationship, may I say, between transportation,
energy, food, all the things that go into making up commerce. Today we don't have that. John: All right. Dr. Stein is former chairman of the Council
of Economic Advisors. You know the present economic management and
planning mechanism very intimately. Is major change necessary? Dr. Stein: Well, I don't think that change
is needed in the mechanism, in the processes by which we make decisions. I agree with Senator Humphrey that the American
economy has not worked nearly as well as we would like it to have worked in the past 10
years. But that isn't because the federal government
had too little power, had too little function, had too few responsibilities. In fact, I think most of our difficulty has
been the result of inadequacy and the way in which the government manages the functions
that it now has. And I think that what we need is to improve
the way in which the government, both in the administration and in the Congress, operate
more of what are by now the traditional functions of government to manage its fiscal policy,
its budget, its monetary policy. And certainly nothing I saw when I was in
the government gave me so much confidence in the ability of either the executive branch
or the Congress to think that it ought to extend its powers, its responsibilities farther
or into the operation of the American economy than it already has. And while the Senator says that he doesn't
want a planned economy, the fact the bill that he has signed and introduced is a prescription
for a planned economy in the United States. And that is the big issue. I don't think there's any big issue about
whether we want to do more intelligently and with more foresight the things that government
has to do. The big issue is whether we want government
to take over much more power and control in the American economy, and I think to the answer
to that is clearly no. John: Professor Leontief, to come down to
nuts and bolts and following up really on what Dr. Stein has said, has the United States
government performed so well, for example, has it handled the energy crisis so well that
it may be considered equal to the task of planning for a trillion-and-a-half-dollar
economy? Dr. Leontief: Let me observe first with the
fact that United States, and I think they're all happy about it, is still the richest country
in the world which provides the greatest income to its people. Does not mean we can rest on our laurels and
innovation is necessary not only in building planes or television sets or even new ways
of producing energy. Innovation is necessary in running the entire
system. John: Congressman Brown, as ranking house
minority member of the Joint Economic Committee, you have heard reams of testimony on how big
business plans. Why shouldn't big government? Congressman Brown: Well, big business does
plan, but not always effectively. Witness the Lockheed Corporation and WT Grant
and Chrysler and some other companies that have gotten into trouble, and the Ford motor
company with its Edsel. The problem is not whether planning should
be undertaken, it should, and we do in the Congress and in the executive branch. To some extent, the budget each year is a
plan and the Congress is now getting more aggressively into that act. But the difference is, or the problem is whether
or not the planning should be done in a centralized sense by government. Business, the largest businesses in the country
control over only about 1% or less of the economy. Exxon, I think, is the largest company in
sales currently. They have less than 1% of the total national
sales and the total gross national product. General Motors, the largest employer, employs
less than 1% of all those employed in the United States. And so these are individual units planning
along with every American family about what their future would be. And it is a sort of a self-managed dynamic
system. But when we put the planning at a centralized
location like the federal government, Senator Humphrey has said it controls 25% of our gross
national product, all governments, federal, state and local, control 35% of our gross
national product. And the impact on that is almost sure to take
American freedoms from those people who produce the wealth and perhaps, most importantly,
from those people who consume the wealth and in our society today, the consumer is king. It seems to me that we ought to keep that
dynamic balance that is produced here in this country, the wealthiest nation in the world. John: Senator Humphrey, you want to respond? Senator Humphrey: I surely do. I want to respond in this way. First of all, I think energy is a classic
example of the failure to plan. We knew what the facts were, we had the reports,
but there was no mechanism in the government for any planning at all. In fact, there was no institutionalization
for it. I'm not saying that we needed some czars in
the government to tell every drug store operator, every canning factory, and every steel plant
what to do. But I do think this government needs to establish
priorities, targets, and goals. We ought to have a timeframe in which we do
things. And by the way, most states plan. I come from a state that has a state planning
agency. We have land use planning, we have regional
planning, we have multi-district planning. You cannot, in my state, in the five-county
area known as the metropolitan area, build a highway without fitting into the metropolitan
plan. You cannot put up a plant without fitting
into the metro. And by the way, it's a very prosperous area. Might I say, it's more prosperous than Cleveland. It's even more prosperous than Virginia. John: Okay. Congressman Brown. Congressman Brown: If municipal planning is
such a virtue, how come these big cities are in such deep trouble. But more than that... Senator Humphrey: Oh, wait a minute. Wait a minute. Congressman Brown: More than that... John: Let him have a minute. Then you'll have another shot. You've got the floor now. Congressman Brown: Let me address if I can
the difficulties that we face in the energy situation in our country today. As you know, I'm also the ranking member on
the House Energy Subcommittee in Congress and we've had the energy crisis now before
us for about four years. The fact of the matter is we've had a plan
proposed to us in the Congress by the president now for about 15 months and the Congress has
yet to take very effective action on that plan. Senator Humphrey: Which is just exactly what
I'm talking about. Nobody...Wait a minute. Senator Humphrey: I want to get this fellow. John: All right. Well, Dr. Stein wants to put something in
this too. Senator Humphrey: This proves my point. The president or nobody at the executive level
is going to tell this country what to do. We don't want any czars around here. The president made his proposal, the Congress
discussed it, the people came in and presented their information and we redesigned it with
the use of private individuals, state and local government, companies and all. Ah, Mr. Brown, what you want to do is have
the president present the plan and we all goose step. No way, sir. No way. John: All right, Dr. Stein, you have the floor. Dr. Stein: But I think the reference to the
energy problem and the energy program brings us back to realism. And that is the fact that a government plan,
a plan prepared and the government is going to be reviewed, amended, adopted or rejected
by those same 535 people who sat there with the energy problem for 2 years and muddled
around with it. So do not think that this is going...the plan,
if we get it, is going be spring full-blown from the brow of Athena. It's gonna come out of the same messy governmental
process that we're also familiar with. And the senator says that we had no institution
for dealing with the energy problem. The difficulty is that the senator doesn't
recognize an institution unless it's in a building on constitution Avenue with a label
over that we have an institution which is known as the free market. Our big problem in energy as that you and
we, when I was there, we're sitting on the free market and not allowing it to deal with
the energy problem as it would have done much more efficiently than has been the outcome
of any of the programs that have so far been developed. Senator Humphrey: Well, what was the free
market? Wait a minute. What's the free market with the Shah of Iran
and the King of Saudi Arabia and energy? Come on, Doctor, knock it off. Those prices were fixed. It was a cartel, an international cartel. There is no free market when a handful of
nations can get together and tell you you're going to pay $13 a barrel for oil. What's free about that? It's not.. Congressman Brown: But the federal government
is telling us what we pay for domestic oil in this country and the result is our dependence
upon that foreign... Senator Humphrey: Simply because... Congressman Brown: ...oil producer is greater
than it was before. Senator Humphrey: Simply because you were
facing an international cartel. Dr. Stein: But you couldn't control that. Dr. Leontief: Let me break in here. You know, our government's traditional procedure
is whenever you have a problem, you appoint a commission and if you have 20 problems,
you have 20 commissions and you have more mess. The problem is not what commissions they appoint,
but what technique you use to analyze the situation and planning is not the problem
of commissions. It's a problem to using information and techniques
which are available to make a list of alternatives but really not contradicted alternatives,
but complete alternatives which take in account all different aspects of a situation. In a democracy, if it had completely automatic
free market, would be no choice at all because you will just see how this big machine works
it out, we obviously don't accept it. We want to have a choice, but to have a meaningful
choice, we need presentation items between we can choose, we don't have. Congressman Brown: Information is good to
have and there's nothing per se wrong with planning. But if government was so good with its ability
to plan, how did we get in so much trouble with the railroads in the Northeast? They've been regulated for almost a hundred
years by government and it's been one mess over the last several years. Dr. Leontief: If four people want to move
a piano and everybody is pushing it, which is what our government does, somebody must
select fella one, two, three let's move. And this can be done without any additional
powers to the government. At the present time, one side of a government
works against other side of a government so piano doesn't move. Everybody is stuck. Dr. Stein: But the problem of 215 million
people living together in a society is how one integrates and reconciles all their different
objectives and there are different purposes and that cannot be done in the way that you
put a man on the moon. If the federal government was to decide that
everybody should have bran flakes for breakfast, they would be one thing and they could do
that. But we don't want that. We want these 215 million people to exercise
their choice about the way they live their lives and the way they spend their incomes. And that choice is not a choice between three
or four alternatives that professor Leontief might give them out of his input-output table. It is a choice among the millions of varieties
of products and places and ways of working and living that there are here. And the wonderful thing about the market is
that it permits all these separate individual choices to be expressed. It permits all this infinite body of information
that is out there in the hands of the people to be reflected in the action of the economy
and in the action of the society without having to be funneled through some government agency,
which obviously could not master all this information if it could ever collect it. Senator Humphrey: Dr. Stein, I must say to
you that you know full well that no one has presented a plan or a piece of legislation
that's going to tell people what they ought to have for breakfast. What we are trying to present is a program
that will indicate some hope that we'll have something for breakfast. That's what we're talking about. We're trying to talk about...we're trying,
for example...let me give you an example, Dr. Stein. Let me give you a good example. On the instance of agricultural production,
you think we ought to have any idea of where we're going to go in agricultural production? Do you think we ought to just depend upon
the elements? Do you think it was smart of us to go and
sell all that we had to the Russians and increase the grocery bill by $57 billion without any
regard to the economic consequences? And that's exactly what happened. I don't say that the government of the United
States should run things. I simply say that the government of the United
States should aid the free market in trying to have some better perspective on what the
result of certain actions will be. Let me be even more precise. I believe in helping the free market, Doctor,
and I think the people in the free market ought to have some idea of what the credit
policy of this government is going to be. I think they ought to have some idea of what
the money policy's going to be, the tax policy's going to be. And instead of that, what they've had is confusion
confounded and might I say that you were around when it happened. Now, what I do think we need, first of all,
is an actual base of data that is reliable. That's number one. Number two, we can look down and see what
some of the problems in the future might be. We could take a good look, for example, of
what the resource problems of America might be, what the capital needs of America might
be. How do you plan the capital needs of this
country, the fulfillment of those capital needs? What do you think will be the demand upon
natural resources of this country? How can we best plan for their conservation
and their use? Now, government can help in this. No one is going to tell you that government
does it, but government can help just like it does today in the health field. Congressman Brown: Let me pick up a little
bit, if I may, on the help that government gave us 10 years ago in agriculture when one
of your colleagues, Secretary Freeman, was running agriculture. At that time, we were spending more of our
gross net, more of our income for our breakfast in this country than we're spending today,
even though food prices have gone up. Another very important thing... Senator Humphrey: That's wrong, Clarence. But that's all right, go ahead. Congressman Brown: Another very important
thing is that we had exports at that time of only $6 billion in agriculture. Now, it's $22 billion. It's the strongest part of our economy. And the difference is that we freed up... Senator Humphrey: That there were 85 million
tons of grains and surplus overseas, and now there are 27, that's the difference. Congressman Brown: The difference is that
we have freed up American agriculture and it's the most productive part of our society
and the most productive thing we do for the rest of the world, and it is a contribution
to the world and to ourselves. Senator Humphrey: Mr. Brown...wait a minute,
it's nice to applaud but let me tell you something. Ten years ago, there were 85 million tons
surplus grains in the world. Today there are 27 million. The biggest reason that we freed up... Congressman Brown: But the controlled economy... Senator Humphrey: The biggest reason we freed
up American agriculture is that the Russians have been the biggest buyers and the Chinese... Congressman Brown: But they both have planned
agriculture. Senator Humphrey: Wait a minute, but I'll
tell you something else. God Almighty put the land of the Soviet Union,
90% of it north of the latitude of Minneapolis, which means that you've got a short growing
season and you know it and I know it and this is not the way to educate a public. What you need to tell the people is that the
Soviets cannot possibly be self-sufficient in agriculture. What you need to tell the people is that when
you open up land as we did for the farmers and told the farmers to plant that maybe somebody
ought to take a look, is there any fertilizer? Maybe somebody ought to have said is there
any credit for them because they need credit. Maybe somebody should've said, are there any
boxcars? Because the farmers took a whipping while
they were waiting for boxcars, Congressman, and I think that some kind of governmental
organization and coordination might've seen to it that there was a way to ship it, number
one. Congressman Brown: The ICC has had a boxcar
problem for 40 years. Senator Humphrey: That there might have been
some credit... May I? Look at...that's the reason, because there's
been no planning. Regulation is not planning. Regulation is interference. Dr. Leontief: I think planning involves a
lot of information, technical work of coordinating the see how much pollution you have, how much
energy you have, how much bread you have, how much housing, how much social expenditure
and private consumption. You cannot decide on each thing separately
because they are very closely interrelated. It is a technical work of presenting this
thing and that, in a democracy, you have a choice. You have a political process of choosing between
one or another. It is not just government interference. Now, I completely agree. In Russia, is not as prosperous as we are,
but let me say one thing. Anybody who saw a Russian plan, it's a complete
mess. Senator Humphrey: The Soviet Union is a planned
economy, a collectivist economy, state capitalism, not private capitalism. It has no relationship at all to what we're
talking about. Let's take a look at Sweden, for example,
they do fairly well. Let's take a look at the Federal Republic
of Germany, they have some planning, they do fairly well. Congressman Brown: The British? Senator Humphrey: Let's take the British...That's
right. The British haven't done very well and they've
had lousy planning, I think. Congressman Brown: I don't think it's just
the plan. I think it has to do with the control of the
society and the depth that the planning goes. The Swedes still maintain a strong free enterprise
system. The other thing about the Swedes is that the
Swedes have stayed out of war as the Swiss have for a number of years and maybe that's
a key to their success. But the Federal Republic of Germany is the
most free-enterprise-oriented society in Europe and it is the most successful in Europe, and
the Italians are among the most controlled and they're the least successful in Europe. There is a message there. Senator Humphrey: It depends on how you work. But let me just say this, one other little
matter here. We take a look at our economic policy machinery,
which my good friend Dr. Stein has had something to say about. We've got a budget policy on the one hand,
which may be totally unrelated to tax policy on the other. We have a money policy of the Federal Reserve
Board, which may very well be working in contradiction to the tax policy and the budget policy. And by having these gears grinding in their
own little separate way as if they were separate principalities, this economy of ours suffers. Now, there is... Senator Humphrey: May I point out that it
is possible to give responsibility as I've suggested in one bill to the Council of Economic
Advisors properly staffed to coordinate and set some targets through the president to
the Congress for production, a target for production, real growth, a target in terms
of employment, and see whether or not we can't designed fiscal policy, tax policy, budget
policy and monetary policy to accomplish those targets. At least have some way to measure our particular
kind of performance. Might I further suggest that when we prepare
a budget, and it was mentioned here today, that it might not be a bad idea that we had
a policy about planning and coordination that would permit governors and mayors and chambers
of commerce and labor unions and farmers' organizations to have something to say about
what goes in that budget. Here's one instrumentality of government that
is designed in-house, in government with none of the citizen input. Now, the Humphrey Bill that you're talking
about, Mr. Javits and Mr. Humphrey, requires that there be input from the local level,
requires that there be the private sector input, requires also that when the product
finally comes out, it is not compulsory, it establishes goals, it sets priorities. It is what we call indicative planning. It gives a goal for us to achieve and I submit
to you that that's not a bad idea, Congressman Brown: But we have all that input
through the United States Congress and it's elected every two years that the people can
talk to and tell them what they want. And the result is that the Congress is a... Senator Humphrey: Congressman, everybody's
business is nobody's business. That isn't the way you can run it. You can say, look, we can take care of the
medical problems by the Congress, but occasionally I need a clinic. And let's just face up to it, you've got to
institutionalize and structure some of this. And I think we have ways that we can do it. We can do better. We don't want a plan, a plan forced down the
people's throat. But I think the American people have a right
to know that when we demand pollution standards that somebody thought about how we can pay
for them. I think that when we demand, for example,
that there be a regulation over transportation in the railroads, we might also want to coordinate
regulation in the airlines. I do believe that it could do a better job. And that's what we're talking about here. A better planned use of the resources of the
American people that come to the government of the United States and state and local governments. Congressman Brown: Senator, we have these
airlines... John: Dr. Stein has been trying to get through. Dr. Stein: Well, I think I may inadvertently
be on the verge of coming into agreement with Senator Humphrey. Senator Humphrey: Don't let it come too quick. Dr. Stein: Because I agree that there are
these important functions of the federal government, spending, taxing, and monetary policy, which
need to be coordinated and which need to be better managed. I think that the senator has greatly overdrawn
his picture of the lack of coordination among these things. Of course, the president does submit a budget,
which contains both expenditures and taxes and the relation between them, has been calculated
in a rather sophisticated way, and in relation to an estimate of the rate of growth of the
money supply. You know, if you read the economic report
that it was predicated on a certain budget, a certain rate of growth, the money supply. Our problem has been that when this thing
went into the Congress, it fell apart. But now there's a great improvement, I think,
in congressional procedures. I think that's all very hopeful and I think
that we ought to be working in the direction of trying to improve the management of these
functions which are essential in the area where we have performed worst, but that we
should not try to push the government into those areas of the American economy where
it has performed best. Senator Humphrey: That's exactly right, Doctor. No one wants to do that at all. Dr. Stein: But I'm afraid whether you want
it or not, I'm afraid that's what your bill does. Senator Humphrey: That is not at all the case. Not at all, that isn't what it does at all,
and there's nothing that you can point to in that bill that does it at all. It sets up a mechanism for policy decision-making. Congressman Brown: Senator, let me give you
an example of excellent planning. You have the Interstate Commerce Commission,
which is in charge of the railroads, the highway transportation regulated truck lines, and
the barge lines. These are three different kinds of transportation,
all presumably coordinated, planned, regulated, so their routes, their rates, and their returns
in the Interstate Commerce Commission, and the thing has been a bomb. We're about to wind up without any railroads
in this country or at least without any railroads in the Northeast. If it weren't for
the Congress pumping better than $1 million a day into the railroads, we would be in deep
trouble in the Northeast railroads. Now we've tried to resolve that problem by
having the federal government take over the railroad with Amtrak, with Conrail. And I must say, I don't know that it's very
promising. Dr. Stein: The critical point is to decide
where are the important and productive areas in which to intervene and where are not? And I think that what has been established
over a long time is that the process of adapting output to people's wants, of getting things
produced efficiently, and of promoting growth does better under market conditions than under
plan conditions. Whereas the maintenance of the general conditions
necessary for stability cannot be left to the market, must be handled by the government,
and we need to devote all our effort and attention to doing that better. And that's the point in which I agree with
Senator Humphrey. But I'm afraid that all the long list of goals
that the senator is always stating in his legislation and bringing in these masses of
people who are going to consult with everybody else is just a diversion from the central
problem of how we stabilize the economy by making our monetary and fiscal policy work
better. And you don't have to decide what...Our problem
is not a lack of balanced growth. It is not the fact that west of the Mississippi
they grow faster than east of the Mississippi or whatever balanced growth means. It is a failure to maintain the overall conditions
of aggregate demand in a way that would be stabilizing and I think we know some of the
reasons for that failure and some of the reasons we don't, but they don't have to do with the
need to plan in the detailed operations of the system. John: I don't believe that anybody is proposing
that we plan detailed operations of the system. I do think it is important that you plan a
transportation system, that you have an interrelationship between water transportation, rail transportation,
highway transportation. I'm sure that this has something to do with
economic growth and development. If there's not an airport in a town, you're
very likely not to have an industry. If you're not on a trunk highway, you're obviously
are crippled in terms of economic growth. There is a relationship to even the production
of food and fiber and farm to market roads. There are relationships. All that Dr. Leontief and Hubert Humphrey
are saying is that we ought to have a better way of assessing our needs, on the one hand,
of developing an information or database, on the other hand, that we ought to be able
to layout some choices for the American people of what they wish to do in a timeframe. Dr. Stein: Well, look, the whole system is
made up of interrelations, an infinite number of interrelations. And I haven't heard this evening any one of
them that you don't want to look at and make better except whether what we eat for breakfast,
that privilege you conceded to us to decide. But aside from that, every other relationship
in the economic system is to be under the purview of this planning agency, and the Joint
Economic Committee presumably, and the rest of the Congress. And I think that is a critical question. How far does this thing go? And you listed all these goals in S1795 about
balance, economic growth, the efficient use of public and private resources. Now, that it seems to me, as a goal for a
planning policy, is absolutely unlimited. I get out of the discussion of the planning
people, no conception of the point at which they would draw the line between what the
government ought to do and the government ought not to do. And it seems to me completely open-ended legislation
to be turned over to a group of people whose natural ambitions will be to do more and more
since that's natural... Senator Humphrey: Doctor, there is no directive,
there is no compulsion. There is nothing mandatory in any piece of
legislation that you have read, and you know it. It is all in terms of analysis of database
of what we call indicative planning of setting goals and agreed upon priorities in the hope
that the private economy itself might see this of some value in its planning, in its
planning. What good does it do, for example, to put
billions of dollars into housing projects when you have no one in the locality, for
example, that everybody figured out whether or not there was going to be water and sewer,
schools, shopping center, the public services that are necessary? And we have literally had this happen. Dr. Stein: Private developers don't do that. Senator Humphrey: Private developers do do
this and this is why we've had very serious problems in our municipalities, in our states,
and what has happened? State government, may I say, does not live
under the fear of shadow that you're spreading, Dr. Stein. What you're worried about is that somehow
or another there might be some planning between tax policy, budget policy, and monetary policy. Dr. Stein: That's not true. That's what I'm for. Senator Humphrey: But you haven't got a mechanism
to get it and I suggest that we start putting it together. Congressman Brown: If you let me break in,
I agree with you on the propriety of local planning up to a degree and just for the reason
that you suggest because people can get at that local government because they can participate
actively in it. The further you get away from them though
and the more you centralize it, and that's my point, my concern about the centralization
of it in Washington, the more I'm concerned. Now, you suggested that there was no force
in this plan, but let me just say that the legislation which you've drawn provides for,
and I quote, "Legislative and administrative actions necessary or desirable to achieve
the objectives of the plan." Now, the leverage is clearly there then for
legislative and administrative actions to try to put this plan into effect and that's
what I am concerned about. Dr. Leontief: I think I can reply to it, I
mean, theologically. I think what individual regions, city government,
state government cannot plan without knowing what the central government does. I receive hundreds of letters. Texas has one of the best planning organizations. Other states, Wisconsin. Senator Humphrey: Minnesota, please. Dr. Leontief: Minnesota. We cannot do anything because we do not know
what will happen in other regions. You cannot plan if you have a plan, five workshops. Plan each workshop separately, you need a
coordination throughout the whole system. It doesn't mean dictation, but at least coordination. So that you know what the possibilities are. Congressman Brown: Can you explain the subtly
to me between coordination and dictation? Dr. Leontief: Yes. Difference is this in dictation, somebody
decide and prescribes the plan. In coordination, it means propose alternatives. And then, of course, we through discussion
decide where you want to move a piano to the dining room or to a living room that everybody
indeed has together move a piano. Congressman Brown: I suppose I don't agree. Dr. Leontief: I would say a nation in which
you cannot decide where to move the piano is in a very bad state. I would... John: We have very little time... Congressman Brown: You may get two pianos
as the result. John: We have very little time of this segment. So may I ask you a question? Doctor, can I ask you a question? Dr. Stein: I apologize. John: I apologize too. But I shouldn't ask a question, but now I'm
a layman, I don't know all of these things, but is France not now operating under an indicative
planning system, national planning system? And if she is, how is it working? Dr. Stein: Well, France has had an indicative
planning system, which I believe has had decreasing influence on government policy and on private
behavior. We had a certain infatuation with French planning
just because with French about 15 years ago and it seemed glamorous. But I think that the current state of affairs
is that it is just frosting on the cake and has very little to do with the behavior of
the French economy. John: Do you agree with that, Dr. Leontief? Dr. Leontief: No, not necessarily. John: You disagree? Let's see... Dr. Leontief: I want to say when the oil crisis
came and Mr. Kissinger got hysterical and called all foreign ministers to Washington
and want international planning without having planning in home. Mr. Zubair, French minister said, "Look here,
I have my economy pretty good control." And he had, so he said, "Let's not have international
panic because I, with my team, pretty well disciplined can go ahead very well." And it was a great embarrassment to us. It still is. We'll always have now argue for international
planning without really being able to say what will happen at all. Peter: The pros and cons of national economic
planning are many, will it, as its backers claim, actually help raise living standards
and help reduce unemployment or, as its critics contend, is it merely a wasted exercise? The many branches of government never able
to agree on a unified national economic plan. Now, to challenge our speakers, let's call
on the experts in our audience to pose questions to the members of the panel. John: Sir, would you ask the first question? Carl: Carl Knoller [SP], I'm the general counsel
for the committee to investigate a balanced federal budget of the democratic research
organization. The senator has been consistent over many
years in advocating governmental intervention in the economy and he has admitted tonight
that this has not worked out particularly well. And now, of course, rather than advocating
a reduction in government intervention, he advocates national planning. The question I'd like to ask is simply this,
what is necessary, Senator, in order to convince you that the government ought to get out of
the economy? What's needed? Is there anything that would convince you... Senator Humphrey: Change those who are running
it. That'll help a lot. When a corporation starts to lose money, get
new management, when it's lost its contact with its customers and lost its market, get
new management. The governmental institutions here can be
made to work, but they need somebody that gives them some sense of direction and also
some sense of coordination. John: Very good question now because everybody
wants to answer it. Congressman Brown. Congressman Brown: The senator and I agree
for once, but we differ slightly on the specifics. The fact of the matter is the president and
his cabinet only execute policies which had been established by the Congress. Now, we've changed the presidents over the
years and from one party to the next, but we haven't changed the Congress of the United
States in the last 40-some years. It has been a democratic Congress for all
but about 4 years of those 46 years and the policies have been consistently for more intervention
by the government in our society. This is what's created the regulation that
the senator and I both find some fault with. This is what's created the dominance of the
government over our private industry that the senator would like to plan a little bit
more and that I think has had some stultifying effects in our economic development. We've gone up in the last few years from 25%
control of the gross national product to 35% control of the gross national product and
in our bicentennial year, I think that's the wrong direction for a society that started
out on the East Coast of the United States, what now is the United States, throwing the
tea into the harbor because they didn't want to be taxed and they didn't want to be controlled. It seems to me that we have created this great
nation of ours with that spirit rather than the spirit that we've had for the last few
years. John: Dr. Stein. Dr. Stein: I think the senator is laboring
under a misapprehension about the way the executive branch works. I don't know how it was when he...he did spend
four years in the executive branch, I realize in a rather removed capacity, but nevertheless. Senator Humphrey: Not quite as much as being
chairman of the council. I
was a member of the cabinet, I might add. Dr. Stein: Yeah. Well, I will agree that we don't have cabinet
government in the United States and that no useful coordinated function is served by the
cabinet. But we do have effective machinery for coordinating
economic policy. We have very close continuous working relations
among the Council of Economic Advisors, the Office of Management and Budget, the Treasury,
the Federal Reserve, and all of these decisions. What I have observed and all this discussion
that coordination means that I get my way. We have had coordination. We at the council did not always get our way,
OMB did not always get its way, and there have been mistakes made, but they were mistakes
which we mostly all shared. And I think that at the administration level,
we have not suffered from lack of communication, interaction, exchange of information. And finally, a decision made on the basis
of the options presented to the president, which reflected the wide range of analysis
and argument. John: Next question. Senator Humphrey: Mr Daly,
May I say that what we've tried to propose in our suggested bill and again, I repeat,
it's a focal point of attention. It is obviously to be adjusted and designed
as anybody knows in the legislative process. What we've tried to do here, number one, is
to make the cabinet much more sensitive to the interrelationships. Cabinet ought to be a coordinating mechanism. But in our bill, we also bring in closer coordination
of the CEA and the OMB in with the cabinet function and the cabinet and the president
then do present their proposals for the Congress. But then what happens? They go on out to the respective governors
and each of the governors in the 50 states holds hearings, has open discussion, calls
in business, labor, community people, gets the input of people, brings that on back into
the planning process, which plan, in meantime, is readjusted in terms of the input of the
people, of the people. What happens in the government? I don't care what administration it is. The budget is the main planning instrument
that we have. It presents basically what is going to be
done by government. That is a total in-house operation. I repeat, not a single governor, not a mayor,
not a legislator, not a businessman, not a schoolteacher, not a college president, not
a single person on the outside has any input in that budget. That is an in-house document and they say
that it's prepared by people who have a passion for anonymity. Well, anybody that's anonymous and passionate
at the same time, I'm suspicious of. I think you need an input which gives you
a picture of what your country needs. Congressman Brown: But Senator, they don't
spend a nickel of that budget until Congress approves it or disapproves it, and that's
the difficulty. John: I think that question has been answered. We want to get as many questions in as we
can in the time. Let's have a question from this side. Do we have one? Sir. George: I'm George Hagadorn, National Association
of Manufacturers. I'd like to ask Senator Humphrey this question. Granted that better planning of the government's
own economic activities is needed, desperately needed. Is the type of bureaucracy that would be created
by your bill, Senator, the best way of achieving that? You have a planning board, you have a planning
commission, you have an information bureau, you have participation by the 50 governors,
you have public hearings, you have review by all the committees of Congress. Then the Joint Economic Committee goes over
it. Then it goes on the floor of Congress. It looks like what would come out of that
would be a monstrosity, Senator. Senator Humphrey: Well, let me say very candidly,
it may not be the best mechanism, but you made my case for me, you do feel that we ought
to do a better job of the planning of the resources of the federal government. Maybe our mechanism...I didn't say, you know,
this was handed down from on high. This is not a rediscovered dead sea scroll. This is just a proposed piece of legislation. Its fundamental purpose was to generate the
kind of discussion that we're having here to do some constructive thinking. It may very well be top-heavy what we proposed
here. It may be too cumbersome. What we were trying to get at though, and
we've got to find some way of bringing in to any kind of planning, I don't care what
kind it is, citizen participation. John: Dr. Leontief. Dr. Leontief: I'd like to observe two things. First, increase in steel production. We have many steel companies. Officially, we're not permitted to confer
whichever, which of course do. We have to build new steel capacity. Each of them decides how much to build without
officially taking an account what our will do, the result of this was, hit and miss. Of course, if overbuilt, it's their funeral,
we'll go bankrupt and feel competition. It's a very expensive way of getting equilibrium
through bankruptcies. Second, bureaucrat, let me see, we always
criticize bureaucrat. Now, government bureaucrats, I don't mean
political appointees, undersecretaries who come for five months and go away. I mean people who work in the department are
some of the most conscientious, best-trained expert people who we have any country at least
as good as the people in the business and we let the bureaucrats settle oil crisis. It would be much faster settled when the oil
industry officials who were called in for five months to work. John: Dr. Stein, do you want to...? Dr. Stein: Yes. Well, I think that professor Leontief's example
of the steel industry indicates what is a key issue here and what seems to me is a central
difference between him and Senator Humphrey because Senator Humphrey keeps maintaining
that all he wants to do is to improve the way in which the government performs the functions
that it necessarily, or in any case, does perform. Whereas Professor Leontief is pointing to
a function which the government does not now perform. The government doesn't decide how much should
be invested in the steel industry or what the output of the steel industry should be. And I think that is the critical issue to
which Senator Humphrey does not really address himself... Congressman Brown: If I may, Professor Leontief,
let me just say sitting on the committee where we originated the Clean Air Act, the Congress
turned over to the bureaucrats an objective with reference to clean air. And before we knew what had happened to us,
the bureaucrats, in setting that objective, literally outlawed the use of coal in this
country. We had no way to clean up the stacks, but
we did say that you couldn't use the coal and we created something of an energy problem. We've had the regulation of natural gas for
the Federal Power Commission for years and years and years. We've had declining production of natural
gas and the price now is going up sharply as we run out of natural gas currently. If we had that price freed up so that the
market would do something about the shortage of natural gas, I think we would have more
natural gas. And we have some basic differences here about
whether regulation by government, whether it's as a result of congressional set policy
by bureaucrats or the development of that congressional set policy can make the determination
for a free society. Bart: I'd like to raise a question. John: Can you identify yourself? Bart: I'm Bart Rowan of "The Washington Post." I want to raise a question about French economic
planning, which was mentioned in the first part of the program. I wonder if Senator Humphrey would agree that
perhaps it was a mistake to get the phrase indicative planning mixed up into this particular
proposal because that's the way French economic planning is known. For example, it's my understanding of French
economic planning that industry has such a role that it gets into the kind of activity
that in this country would be considered a violation of the antitrust laws. Senator Humphrey: Absolutely. Bart: So I would like to raise the question
in terms of distinction, in your a bill, Senator, how do business and labor participate and
what would be the differences in the way they would participate under your bill and the
way they participate under the French plan? Senator Humphrey: In our proposal as it is
now, the plan that would go on out to the governors for the purposes of the public hearings
and public testimony and input would be the proposals that had been presented by the cabinet
and the console. That is the three-man console that came down
from the president, the commissioner of the console, and the cabinet. That would go on out to the governors and
it would be at that stage that the private sector would be involved. It would not be in the sense of collusion
between, as Dr. Leontief was saying here a moment ago, where the steel companies could
get together and decide amongst themselves how much steel they were going to produce
and under what prices. That violates our antitrust laws. But we would have a chance for people who
are in the marketplace, people who are out doing the business, producing the goods to
make commentary and suggested proposals and adjustments to whatever proposal came out
of the planning console. John: Dr. Stein. Dr. Stein: Well, I'd like to say something
about the notion of indicative planning, that's HR50, which is associated with the French
planning and it's related to the senator's idea that there'll be nothing here but us
experts and this guidance. And we will make some decision or we will
make some finding about what should be invested in the steel industry and what should be invested
in this and that in the industry. But the government will not determine or enforce
the outcome. Well, in the French case when the plan was
at its heyday, although it was called indicative, the government you had many instruments to
use and the cases that are considered important such as tax incentives, subsidies, allocation
of credit, and just general arm twisting with which we are not unfamiliar to bring about
its results, the results that it was indicating. And I think it's quite incredible that having
gone through this whole elaborate procedure that Senator Humphrey has described, the government
then comes out with its finding about what should be the activity and investment of the
U.S economy, sector by sector. And then it just lays there and the private
sector either conforms or does not conform. It seem to be told, anybody who knows the
way government operates and its inherent tendencies knows that there will be efforts to achieve
these objectives by incentives, by subsidies, by arm twisting, by all these things. And in fact, the senator's bill says that
the president shall use his influence and these administrative procedures and may suggest
legislation to try to achieve the objectives of the plan. So the plan is not just going to be plastered
up on the wall for people to look at. It is going to be a directive to the government
to achieve it. The line of argument that Professor Leontief
and Senator Humphrey are using now seems to be that since the government does a number
of things, it might as well do everything. Since we have a cold, we might as well have
pneumonia. And I don't really find that very convincing. Senator Humphrey: I don't either, by the way. Dr. Stein: Well, it's your option is to stop
using it. This point that these incentives and subsidies
and so on do not compel anybody to follow them or nobody's required to take the tax
and send over the subsidy. It's like the math [SP] method of operation,
you know, the government makes you an offer you just cannot afford to refuse, and so you
behave in the way that the government prefers. I think the basic point that we don't seem
able to get across is that the senators keep saying we need an institution which will collect
the information and analyze information and make decisions on the basis of the information. Well, we have an institution, that is the
market economy, that's what it does. And we have seen no evidence of superior performance
in those areas that are the function of the market economy anywhere where there has been
any plan. The advocates of planning claim to be great
pragmatists and believers in the force of information. But you have a body of historical information
all over the world about the operational planning which shows failure after failure, the British
being a notable case, and the only response we get to that is, "Well, we'll do it better." I don't find that very convincing. Yes. John: Next question. Senator Humphrey: Let me just say to Dr. Stein...I
know we're getting questions but we're also going to answer some of these things. I want to say to Dr. Stein, we're not trying
to prescribe pneumonia for America, but I don't think that we're a healthier country
because you want to just linger along in a cold. If there seems to be any way to relieve oneself
of it, I think we ought to try to do so. Now, the market economy doesn't take care
of anything, Doctor. You worship at that shrine, but let me tell
you something, it doesn't take care of the needs of low-income people. It doesn't take care of the needs of people
that can't afford to buy a home under the market economy at 9% interest and tight credit. It doesn't take care of the needs of people
today, may I say, that they can't afford medical care when the average cost of the hospital
in this city of Washington D.C. is $200 a day. The market economy doesn't do everything,
Doctor, we live in a country in which there are people...and I don't believe that you
can have a market economy that's supposed to give you services at the expense of leaving
millions of people left out and left behind. The purpose of government is to try to supplement
the market economy, not to supplant it, to supplement it, to fill in, to give it energy,
to energize it, to help it, and believe me, the government has done it in many instances. Congressman Brown: My problem with Senator
Humphrey's bill is not the part that says let's do better what we're already doing. The part that I have a problem with is the
part that says we're doing a poor job now, so let's do more. I just think we ought to try to either do
better what we're doing or perhaps even in some areas try to do a little less. John: Well, this concludes...our time has
run out. Oh, you don't have to applaud me now. You can wait a bit. This concludes another public policy forum
presented by the American Enterprise Institute for Public Policy Research. On behalf of AEI, our heartfelt thanks to
the distinguished panelists and also to the experts and the press in the audience who
were kind enough to participate. Goodnight. Peter: This round table discussion on national
economic planning has brought you the opinions of four experts in the field. It was presented by AEI, the American Enterprise
Institute. It is the aim of AEI to clarify issues of
the day by presenting many viewpoints in the hope that by so doing, those who wish to learn
about the decision-making process will benefit from such a free exchange of informed and
enlightened opinion. I'm Peter Haquez in Washington. Announcer: This public policy forum series
is created and supplied to this station as a public service by the American Enterprise
Institute, Washington D.C. For a transcript of this program, send $3.75
to the American Enterprise Institute, 1150 17th Street NW, Washington, D.C., 20036.
