Two Harvard Economists Discuss Nixon Controls

Economics professors James S. Deusenberry and Hendrik S. Houthakker, former members of the president's Council of Economic Advisers, discussed Phase II of President Nixon's economic program last night at Mather House.

Houthakker, Maier Professor of Money and Banking, examined the three major aspects of Nixon's program. He said the excise tax reduction was necessary because "the economy was not responding to stimulation."

Houthakker left Nixon's Council of Economic Advisers on July 15. He said that the reduction of expenditures was "largely a book-keeping procedure," with little effect on the economy, and that the import surcharge "undid most of the liberating of trade since 1930." He added that it was "put on for domestic reasons looking forward to 1972."

Counterparts

In his statement, Deusenberry said, "Our counterpart Galbraith is the only one who looks back with fondness on the World War II wage-price boards. The rest of us were pretty miserable."

Deusenberry, a former economic adviser under Johnson, also stated that "Only a terrible cynic can operate an incomes policy, because there's no way to do it equitably." He said the Wage-Price Control Board "was worthwhile...but it only makes sense as an emergency measure. We have to think that some form of intervention may turn out to be a permanent way of life."

During the question and answer period, one student asked what caused "Nixon's road to Damascus on the economic issue?" Houthakker said, "In July Nixon made it very clear that no controls were being considered."

Balancing Payments

"However, the administration may have felt it necessary in order to solve the balance of payments problem and the problem of growth in the economy insufficient to lower unemployment."

Responding to a question on preventing further inflation when the Wage-Price Board is abolished, Deusenberry said." The difficulty is that if you don't succeed, you are locked in and can't let go."

When asked whether the new economic policy was a "concession of failure on the way we've been doing business." Houthakker replied, "Our economy and whole society has become rigid and is not as adaptable as in the past. I think we will have to come to some realignment of it." He added that the "problem is that we have no effective consumer group," putting pressure on the government.