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- | Welcome once again as MIT professor Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:05 | |
This by-weekly series is produced by | 0:07 | |
Instructional Dynamics Incorporated | 0:09 | |
and was recorded August 20th 1971. | 0:11 | |
- | This has been a very busy week for an economist. | 0:14 |
President Nixon announced just last Sunday night | 0:18 | |
his new economic game plan. | 0:22 | |
In effect he threw out the window most of his old | 0:25 | |
economic game plan and all this week | 0:29 | |
Wall Street has been in a turmoil, | 0:34 | |
the capitals of Europe have been in a turmoil, | 0:36 | |
the telephone of the economist has been ringing | 0:38 | |
repeatedly and I've been no exception in this regard. | 0:42 | |
For me, the week began before the President's announcement. | 0:46 | |
I didn't have the slightest leak | 0:52 | |
that something new was to come | 0:54 | |
but in the middle of the previous week | 0:57 | |
when I had a Newsweek column on some general issue, | 1:02 | |
actually it was on the blood-giving system of the | 1:07 | |
British in comparison with that of the United States, | 1:10 | |
I decided that I had to pull that column | 1:15 | |
and instead I wrote a column on devaluation economics. | 1:17 | |
It doesn't mean that I thought that by Monday | 1:22 | |
when that column would appear that the American dollar | 1:26 | |
would be devalued but as an economist of experience | 1:29 | |
I just knew that something was gonna give in the next | 1:33 | |
few weeks, either the yen was going to be appreciated | 1:37 | |
or something would have to happen. | 1:41 | |
That brings me to the first thing that I should say | 1:44 | |
about the President's bold, new program. | 1:46 | |
It was a program forced upon him | 1:49 | |
by the international situation. | 1:54 | |
If you talk to the man on the street | 1:57 | |
the most important thing that's happened this last week | 1:58 | |
is the wage price freeze but what caused | 2:00 | |
President Nixon to go to Camp David | 2:05 | |
to have an agonizing reappraisal all along | 2:07 | |
was the fact that the dollar was in very deep trouble. | 2:11 | |
So, number one, what we have had is a defacto | 2:16 | |
devaluation of the dollar. | 2:21 | |
The President avoided the word devaluation of the dollar. | 2:23 | |
By indirection, he suggested | 2:30 | |
that he was not devaluing the dollar. | 2:32 | |
The next day, at Secretary Connally's news conference, | 2:34 | |
he deliberately tried to use language | 2:38 | |
to deny that the dollar was devalued. | 2:44 | |
But, let's call a spade a spade. | 2:48 | |
The moment that President Nixon issued orders | 2:50 | |
to Secretary Connally not to honor our commitments | 2:55 | |
to pay official gold to official central banks abroad | 3:01 | |
according to the agreed upon covenants | 3:06 | |
of the Bretton Woods International Monetary Fund agreements, | 3:10 | |
at that moment the dollar was defacto devalued. | 3:15 | |
It's surprising that this fact | 3:22 | |
has not been more widely appreciated. | 3:25 | |
There were very few surprises to me | 3:32 | |
this last week, but there was one. | 3:34 | |
The obtuseness of the Japanese government | 3:38 | |
has been beyond any prediction. | 3:42 | |
The Japanese government, in the first days of the | 3:46 | |
present week, has frittered away two and a half billon | 3:49 | |
dollars of their reserves in buying dollars. | 3:56 | |
They have done this to avoid yen appreciation. | 4:00 | |
There is no possibility that next week | 4:07 | |
or the week after, or six months from now | 4:11 | |
the yen can be in the same parity with respect to the dollar | 4:14 | |
as was the case last week. | 4:18 | |
You would have thought that the Japanese would be the | 4:22 | |
first to understand this, but the old saying, | 4:24 | |
whom the gods would destroy they first make mad, | 4:28 | |
seems to apply with a vengeance to the Japanese government. | 4:31 | |
Let me mention what is an open secret in inside circles. | 4:37 | |
These two and a half billion dollars | 4:43 | |
of speculators' money, which the Japanese | 4:46 | |
have been buying up for good solid yen, | 4:50 | |
and which will undoubtedly create a neat profit | 4:53 | |
for those speculators. | 4:58 | |
Who are the speculators? | 5:00 | |
It is very difficult under the comprehensive | 5:03 | |
exchange control of the Japanese for a | 5:06 | |
non-Japanese speculator to take a position in the yen. | 5:11 | |
I read in the newspaper about a smart cookie | 5:16 | |
on the West Coast who, like me, is planning a trip | 5:19 | |
to Japan, and who bought the Japanese travelers checks | 5:24 | |
which he could still buy at the | 5:29 | |
old par rate during this crisis. | 5:31 | |
Let's suppose that he bought $2000 worth of these | 5:34 | |
travelers checks, then as the newspaper story says, | 5:36 | |
he does have, probably at a minimum, a 10% profit. | 5:40 | |
Big deal, course that is, that's nothing | 5:45 | |
and there's been almost nothing of that kind. | 5:48 | |
What has happened is that the four or five | 5:50 | |
large Japanese banks have been stretching their | 5:53 | |
lines of credit with American commercial banks | 5:56 | |
to the very limit and they are, have been buying dollars | 6:00 | |
and turning them into their own government. | 6:03 | |
This, the recycling, could go on indefinitely. | 6:06 | |
If there's any justice in the world | 6:10 | |
and if the Japanese government comes to its senses | 6:12 | |
one would suppose that they will retroactively | 6:16 | |
take away the profits of their own | 6:19 | |
large commercial banks in this speculative operation | 6:21 | |
but it's as if the Japanese cannot believe their eyes. | 6:26 | |
I suppose if I can depart for just a moment from | 6:33 | |
straight economics, there is increasingly a | 6:37 | |
crisis in Japanese, American relationships. | 6:41 | |
Our sudden change of face with respect to Mainland China, | 6:46 | |
which caught the Japanese quite unprepared, | 6:50 | |
has already caused a crisis of nerve in the Japanese | 6:53 | |
and a certain amount of friction | 7:00 | |
and friction with the American government. | 7:05 | |
These latest moves, I'm afraid, will add to that friction. | 7:08 | |
And yet, I believe on the economic side, | 7:13 | |
that this was pretty much inescapable. | 7:17 | |
Listeners to these tapes will know | 7:19 | |
that I have not hesitated on any occasion | 7:21 | |
to criticize President Nixon when I disagreed | 7:24 | |
with his economic program but his decision | 7:28 | |
forced upon him pretty much by events, | 7:33 | |
events of the last weeks were not themselves | 7:37 | |
commanding given another week or two | 7:43 | |
I'm confident they would have been commanding. | 7:47 | |
The President had no choice. | 7:49 | |
There is a tremendous amount of protectionist sentiment | 7:52 | |
in this country and the President could, | 7:54 | |
at least one would understand in a person | 8:01 | |
interested in political office, | 8:03 | |
could be imagined to give into this. | 8:04 | |
I think there would be a tremendous popularity | 8:07 | |
to be received by any politician who suddenly | 8:11 | |
becomes jingoistic and chauvinistic | 8:15 | |
with respect to economic protection. | 8:17 | |
To me that would be a calamity | 8:21 | |
but as a realist I know from talking to businessmen, | 8:22 | |
from talking to union people, from talking to | 8:26 | |
the man in the street that the old protectionism | 8:29 | |
which used to be so endemic in the American ideology | 8:34 | |
and the American mind in which blissfully | 8:37 | |
was weakened over 35 years of the Cordell Hull | 8:43 | |
Reciprocal Trade program, the Kennedy Rounds, | 8:50 | |
and so forth, that old virus was laying latent there | 8:53 | |
and to tell the truth, to tell the strict economic truth, | 8:58 | |
with the American dollar so badly overvalued | 9:03 | |
as it has been in recent years, | 9:06 | |
that protectionist sentiment had a strong | 9:09 | |
rational base to it. | 9:13 | |
In this week of exciting happenings | 9:16 | |
I cannot review all of the abstract | 9:18 | |
and concrete reasons for this, | 9:23 | |
but let me just dwell for a moment on the case of Japan. | 9:28 | |
The Japanese have been a miracle nation. | 9:34 | |
Their gross national product in real terms | 9:37 | |
has been growing at the rate of 10% per year | 9:40 | |
every year, 11%, 12%, 13%, 9%. | 9:45 | |
There's almost no precedent in the history of any nation, | 9:50 | |
in any epoch of such continued rates of growth | 9:54 | |
over what is now becoming a 20 year period. | 9:57 | |
Moreover, this was not done in isolation. | 10:02 | |
If Japan, on the basis of autarchy | 10:06 | |
had grown faster than the rest of the world, | 10:09 | |
then only the statistician who collects | 10:11 | |
the annual world economic fact book | 10:16 | |
would know that the share of Japan | 10:21 | |
in total world GNP was increasing rapidly. | 10:23 | |
On the contrary, this was not done on the basis of autarchy, | 10:29 | |
this was done on the basis of a strong export program. | 10:32 | |
Japan has increased its share of world trade gigantically. | 10:37 | |
Now, if somebody wins in share of trade | 10:43 | |
and that's not the way to look at the benefits of trade, | 10:47 | |
and that's not the way to look at the welfare | 10:50 | |
because everybody can win if we get | 10:52 | |
a good division of labor and a fruitful interchange of goods | 10:54 | |
but let's just look at it in terms of relative share. | 10:58 | |
If somebody wins, somebody has to lose. | 11:01 | |
Now, who's been losing? | 11:03 | |
A prime loser has been the United States. | 11:06 | |
Our share of world exports has been going down, down, down. | 11:10 | |
More than that, the market, which has been the big market | 11:16 | |
of expansion for the Japanese | 11:20 | |
has been the American domestic market. | 11:23 | |
It's true the Japanese manage to sell a little bit | 11:27 | |
to Western Europe but it's amazing to look at the disparity | 11:30 | |
in their penetration of the American market | 11:35 | |
in comparison with the Western European market | 11:38 | |
and yet the Western European nations are now | 11:42 | |
at a very comparable level of living, | 11:45 | |
standard of living, as the United States. | 11:49 | |
Can it be expected that a country | 11:53 | |
like the United States will, in the long run, | 11:58 | |
be willing to turn over industry after industry | 12:04 | |
to a particular invading commercial competitor? | 12:07 | |
Yes, the answer could be, if America has certain | 12:14 | |
new industries in which we have a comparative advantage | 12:20 | |
then we would be turning over the old industries | 12:23 | |
to the newcomer who has now acquired | 12:25 | |
a comparative advantage in those industries | 12:30 | |
and we would go on to more efficient industries. | 12:32 | |
That is what the textbooks of economics, very properly, | 12:35 | |
prescribe for the prosperity of a developing country. | 12:40 | |
However, that's not been the case for the United States. | 12:46 | |
That would be the case for the United States | 12:49 | |
only if whether because the dollar flows relative to the end | 12:51 | |
or the end flows relative to the dollar | 12:55 | |
or because we have a sliding peg or some kind | 12:57 | |
of flexibility in foreign exchange rates. | 13:01 | |
The foreign exchange rate between the dollar | 13:03 | |
and the end is always equilibrium. | 13:05 | |
That has not remotely been the case of the Japanese yen | 13:07 | |
and the American dollar these last 10 years. | 13:11 | |
On the contrary, the American dollar | 13:15 | |
has been increasingly over valued. | 13:17 | |
The result has been that when the Japanese | 13:19 | |
send textiles to the United States | 13:23 | |
the workers who are thrown out of work | 13:25 | |
are not shifted to more efficient industries | 13:27 | |
they are shifted to nothing. | 13:30 | |
Now, textiles are not the important matter, | 13:33 | |
they're very important politically, | 13:36 | |
but I think no rational calculation would show | 13:37 | |
that it remains to the advantage of the United States | 13:41 | |
to be producing the cheap textiles | 13:43 | |
which any developing nation of the world can produce. | 13:45 | |
But let's just go down the list. | 13:49 | |
In the case of steel, the Japanese used to | 13:51 | |
take more hours to produce a ton of steel | 13:56 | |
but they were competitive because they had | 13:59 | |
lower wage rates per hour. | 14:02 | |
It is now probably no longer the case, | 14:04 | |
that the Japanese take more man hours | 14:07 | |
to produce a ton of steel. | 14:10 | |
The Japanese have become a very expert | 14:12 | |
at producing machinery to produce steel. | 14:16 | |
We're moving to the time when we will be importing | 14:19 | |
that machinery from the United States. | 14:21 | |
The Japanese get cheap ores from Australia. | 14:23 | |
Japan has both absolute and comparative advantage | 14:27 | |
in steel and it's only been a voluntary quota program | 14:30 | |
that's been keeping out these products. | 14:34 | |
Shall I go on? | 14:37 | |
Let's take the case of electronics. | 14:39 | |
We boast in new England that although textiles and shoes | 14:42 | |
are down because of competition from abroad | 14:47 | |
and also I may add competition from the south | 14:50 | |
that we have 128 high technology MIT type companies | 14:53 | |
and so we've shifted, it is said, into electronics. | 14:59 | |
That picture is very rapidly changing. | 15:02 | |
The cassette recorder that these words | 15:06 | |
are being recorded on is an excellent one. | 15:11 | |
I look over and it of course says Sony, | 15:15 | |
but it wouldn't matter if it said Panasonic. | 15:18 | |
A nice American name if I ever heard one | 15:21 | |
because that's simply the name | 15:23 | |
for the American distributor of a Japanese brand. | 15:25 | |
It would not even matter if it said | 15:29 | |
General Electric or if it said Eastman Kodak | 15:32 | |
because if you just took off the outer cover | 15:35 | |
you would see that the insides | 15:38 | |
were of Japanese construction. | 15:40 | |
Now, I ask you or rather I ask the Japanese. | 15:44 | |
Did they really think that they could go on indefinitely | 15:49 | |
growing much, much faster than the rest of the world | 15:54 | |
and much, much faster than the United States | 16:00 | |
and maintaining the export component of their | 16:02 | |
GNP undiminished through the process, | 16:07 | |
taking over more and more of American markets | 16:11 | |
at a time when the resources released from those industries, | 16:14 | |
displaced industries, had no place to go? | 16:18 | |
They should have been the first to realize | 16:21 | |
that the policy of benign neglect was causing them | 16:24 | |
to build into their export industries vested interests. | 16:29 | |
We now realize how powerful those vested interests are. | 16:33 | |
They're so powerful that the Japanese government itself | 16:37 | |
is afraid of any reduction in Japanese exports. | 16:40 | |
The Japanese export industries | 16:46 | |
which make no mistake about it, are gonna be hit | 16:48 | |
and are gonna be hard hit not only by | 16:50 | |
President Nixon's 10% tax on imports | 16:52 | |
but by the new floating level of the dollar | 16:56 | |
vise versa the yen because the appreciation of the yen | 17:01 | |
is inevitable, it cannot be avoided, | 17:05 | |
this is going to hit the Japanese exports quite hard | 17:08 | |
and it's gonna hit the rate of growth | 17:12 | |
of Japanese exports very hard. | 17:13 | |
It's not only gonna do that but that | 17:16 | |
is what it ought to do, that is what its purpose is. | 17:18 | |
And if the Japanese have not yet got that message | 17:21 | |
then they have indeed been living in a dream world. | 17:26 | |
The only thing which could have saved | 17:33 | |
the dollar from defacto devaluation, | 17:35 | |
and I'm using the wrong words because it sounds | 17:38 | |
when I use the word saved as if devaluation of the dollar | 17:40 | |
is a fate worse than death, which of course it is not. | 17:44 | |
It is a movement towards equilibrium from disequilibrium. | 17:48 | |
The only thing that could have put off | 17:52 | |
the adjustment in that form would have been | 17:54 | |
a dramatic announcement, long overdue, by the Japanese, | 17:57 | |
that in some kind of an orderly way | 18:02 | |
they were going to appreciate the yen. | 18:05 | |
I may say that the Japanese had opportunities | 18:07 | |
in this regard that have been denied | 18:09 | |
to all the other surplus countries. | 18:11 | |
When Germany contemplated appreciating the Mark | 18:14 | |
and she did appreciate the Mark, she had to run into a | 18:17 | |
tremendous amount of speculation because Germany | 18:21 | |
does not have comprehensive exchange control. | 18:24 | |
All I would have had to do would be to lift the telephone | 18:27 | |
and I could take a position in the Mark. | 18:31 | |
I cannot just lift my telephone | 18:35 | |
and conveniently take a position of | 18:37 | |
a couple hundred thousand dollars in the Japanese yen. | 18:39 | |
The Japanese have exchange control. | 18:43 | |
They could, in an orderly way, have appreciated the yen | 18:45 | |
and let it float but this they steadfastly refuse to do. | 18:49 | |
They steadfastly refuse to do this even though | 18:55 | |
economist like myself were advising them to do it. | 18:58 | |
Well what's that? | 19:01 | |
Economist advice is a dime a dozen. | 19:02 | |
The fact that the people like me have been writing | 19:05 | |
for the Wall Street Journal in Japan so called | 19:08 | |
that is the Neo-Keynesianismo, for years | 19:11 | |
on the under-valuation of the yen. | 19:13 | |
That can of course be likely shrugged off. | 19:16 | |
More important though is that our government | 19:20 | |
behind the scenes has been putting pressure | 19:22 | |
on the Japanese to appreciate the yen | 19:25 | |
and that they have shrugged off. | 19:27 | |
Moreover, within Japan itself, | 19:30 | |
28 of the most prominent economists banded together | 19:33 | |
and issued a statement saying | 19:37 | |
that the yen should be appreciated. | 19:39 | |
I repeat, whom the gods would destroy | 19:43 | |
they first make mad and in the mundane | 19:45 | |
and prosaic field of currency exchange disequilibrium | 19:49 | |
we've had a new lesson for that. | 19:54 | |
Let me turn back to the Nixon program. | 19:57 | |
The big news with the man in the street | 19:59 | |
who always, properly, naturally says, | 20:02 | |
what's in it for me? | 20:05 | |
What's gonna effect me? | 20:06 | |
Is the wage price freeze. | 20:08 | |
I think that the wage price freeze | 20:11 | |
was a bold, calculated risk. | 20:12 | |
Anything short of a comprehensive freeze | 20:16 | |
could not possibly have worked. | 20:21 | |
If you were going to have anything like this at all | 20:23 | |
I think you had to go all the way for at least this period. | 20:26 | |
There is ample precedent abroad | 20:30 | |
that short-term freezes, at least during that short time, | 20:32 | |
do work and they do work very effectively. | 20:36 | |
It will tell us something about the solidarity | 20:40 | |
of the American people or the lack of cohesion | 20:44 | |
and solidarity of the American people | 20:47 | |
after these sad years of the Vietnam War conflict, | 20:49 | |
after these years of civil right disturbances, | 20:53 | |
after the years racial inequity, | 20:57 | |
after the law and order controversies within our country. | 21:00 | |
It will tell us much about the present state of our cohesion | 21:05 | |
if unlike any other mixed economy in the world | 21:10 | |
we cannot even make a wage price freeze last for one week. | 21:14 | |
If you were to tune in on the television airwaves | 21:19 | |
of just last night and sample the statements by | 21:23 | |
George Meany titular head of the AFL-CIO, | 21:29 | |
the statements by Ralph Nader, | 21:33 | |
the statements by Leonard Woodcock, the successor to | 21:35 | |
Walter Reuther at the United Autoworkers Union, | 21:39 | |
you would have reason to wonder whether in the face | 21:44 | |
of what the Gallup poll has confirmed | 21:49 | |
and what I was sure one could confidently predict | 21:51 | |
would be an initial great upsurge of popularity | 21:55 | |
of the President for his bold new program. | 21:59 | |
Well if in the face of that kind of temporary consensus | 22:01 | |
you had as much wheedling away at the program | 22:06 | |
it might, I think, tell you something disquieting | 22:10 | |
about the state, not of the American economy, but the state | 22:13 | |
of the American psyche and the American society. | 22:19 | |
I find it ironical that Woodcock of UAW | 22:24 | |
was one of the most vociferous in asserting that if after | 22:29 | |
the 90 days the autoworkers don't get theirs as given | 22:33 | |
to them by contract that they will regard themselves | 22:37 | |
as having no contract with the implicit threat | 22:39 | |
that we will have a new wave of strikes, slowdowns, | 22:43 | |
sit-downs, non-cooperation because, one of the most notable | 22:47 | |
things about President Nixon's program, | 22:52 | |
I suppose it shows there is no gratitude, | 22:55 | |
anything we get we attribute to ourselves | 22:57 | |
and anything we lose we attribute to the President, | 23:00 | |
is the tremendous give-aways to the automobile industry. | 23:04 | |
The one item of his tax reduction program | 23:09 | |
which could remotely be thought to filter down | 23:14 | |
to the middle income recipient would be | 23:17 | |
the remission of the excise tax on autos. | 23:22 | |
That will not help the person with under $6000 a year. | 23:25 | |
He doesn't buy a new Galaxys or for that matter | 23:29 | |
new Pintos or Vegas he got to take the hand-me-down | 23:33 | |
used cars and make the old car a go. | 23:36 | |
But the middle classes do buy cars. | 23:39 | |
This is a boom almost without precedent | 23:41 | |
in fact it's almost indefensible to the automobile industry, | 23:45 | |
and the first union spokesman to speak out | 23:49 | |
against the President's program, | 23:53 | |
against that part of the package, | 23:55 | |
which he didn't like, was the head of the UAW. | 23:57 | |
Well there's a good deal of irony in the prosaic | 24:04 | |
passing scene of economics. | 24:08 | |
The President, I think, made an error in economics | 24:13 | |
in the qualitative shaping of his domestic programs | 24:19 | |
that went along with the revaluation of the dollar | 24:24 | |
and with the wage price freeze. | 24:28 | |
He put himself into the position | 24:32 | |
of seeming to have a lopsided pro-business program. | 24:34 | |
Let me enumerate, although he hoped corporations | 24:40 | |
would not raise their dividends, he did not | 24:45 | |
forbid them to raise their dividends. | 24:50 | |
Perhaps he didn't have executive powers for this | 24:52 | |
but since he's going to Congress | 24:55 | |
and must go to Congress for so many powers | 24:56 | |
in connection with this new program | 24:59 | |
he could have asked for that power. | 25:00 | |
Mind you, I don't think there'll be very many corporations | 25:03 | |
who will be so crass and stupid | 25:06 | |
as in this 90 day period to raise their dividends. | 25:10 | |
But you must appear to be doing even-handed justice | 25:13 | |
as well as defacto, learning in a history book years later, | 25:18 | |
that some injustice was avoided | 25:22 | |
and this was a tactical error. | 25:25 | |
In this country there's great populist desire | 25:29 | |
for low interest rates, an excessive one, | 25:32 | |
I may say, speaking as an economist. | 25:35 | |
The President hoped that interest rates would not be raised | 25:37 | |
but he did not do anything in the way of coercion. | 25:41 | |
At a time when he's coercing school teacher | 25:44 | |
and union labors who have already be conceded, | 25:46 | |
wage increases coercing them from getting their increases, | 25:51 | |
he is putting no coercion upon the banks | 25:56 | |
and finance companies, mortgage lenders and so forth. | 26:01 | |
There are powers that the federal reserve does have | 26:06 | |
in which the President could have asked the federal reserve | 26:09 | |
to invoke but he did not do that | 26:11 | |
and so he is very vulnerable. | 26:13 | |
I know why he didn't, he didn't want funds to dry up | 26:16 | |
in a crisis because of fixed rates. | 26:18 | |
There was no great prospect that that would happen | 26:23 | |
but if it had happened the federal reserve | 26:27 | |
and the various housing agencies, I'm sure, | 26:30 | |
could have done a great deal to off-set that. | 26:33 | |
Well, the job development tax credit | 26:36 | |
which is a nice euphemism for investment tax credit | 26:40 | |
which is a payment to business | 26:43 | |
and will appear to be a payment to business | 26:46 | |
is the most important revenue aspect | 26:49 | |
of his particular program. | 26:51 | |
I'm not gonna go into the merits and demerits of that | 26:54 | |
at this time 'cause my time is running out | 26:56 | |
but let me say that with investment boom just behind us | 26:58 | |
and with a great deal of excess capacity all around | 27:03 | |
it is a dubious prediction that | 27:06 | |
even a 10% investment tax credit | 27:11 | |
and even one which is known to be temporary | 27:13 | |
which puts a great stimulus, if there is any stimulus | 27:15 | |
in that weapon, it is dubious that this will ignite | 27:17 | |
a real plathe-equipment, a boom, | 27:21 | |
and in terms of any sort of long-run, orderly priorities | 27:24 | |
and also a long-run maintainability | 27:29 | |
it's of some doubt that we should engineer, | 27:32 | |
at this point, a deepening of capital. | 27:35 | |
My time is running out, let me conclude with the single most | 27:38 | |
unfortunate part of the President's domestic program. | 27:45 | |
At the same time that he was reducing taxes | 27:48 | |
in order to make jobs, as he put it, he promised | 27:51 | |
that he would be reducing expenditures, if I understood | 27:55 | |
his arithmetic correctly, more or less pari passu. | 27:58 | |
Now, attrition of federal workers | 28:01 | |
like attrition from the Army which the President improperly | 28:05 | |
gave as his alibi for the increases in unemployment | 28:09 | |
improper not because we haven't let people out of the Army | 28:12 | |
but because in a growing, healthy economy | 28:15 | |
you absorb labor resources like that. | 28:17 | |
If with the President's left hand | 28:22 | |
he has expenditure austerity that matches tax laxity | 28:25 | |
then according to almost every theory of | 28:30 | |
modern fiscal policy this will not be job-creating net. | 28:35 | |
In fact by many theories it would hurt jobs. | 28:39 | |
So, I'm hoping that the President did this just | 28:43 | |
in order to seem orthodox and respectable in a time | 28:47 | |
of national crisis when the dollar was being devalued | 28:49 | |
and I'm hoping that he had his fingers crossed | 28:52 | |
but more than that I expect Congress to take over | 28:55 | |
and introduce a little fiscal sanity | 28:59 | |
into this part of the recovery budget. | 29:01 | |
Well, there's a lot more to talk about | 29:07 | |
but we'll do that in the weeks ahead. | 29:10 | |
- | If you have any comments or questions for | 29:12 |
Professor Samuelson address them to | 29:14 | |
Instructional Dynamics Incorporated | 29:16 | |
166 East Superior Street | 29:18 | |
Chicago, Illinois 60611 | 29:20 |
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