The President's Men; 11; Dr. Arthur F. Burns

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to assemble and organize the men to help him wield the executive power. President-elect Nixon, let it be known that he intended to limit the power of his White House staff in order to encourage direct communication with his cabinet officers. Nevertheless, Nixon now has a staff at least as large as his predecessors. For the first among his assistants, he created a new title, Counselor to the President, and gave him cabinet rank. Dr. Arthur F. Burns was thus singled out because of his long association with Richard Nixon. It began in the first Eisenhower term when Dr. Burns was chairman of the Council of Economic Advisors.

In 1960, he warned Nixon that his prospects of winning the presidency were threatened by the recession and urged a tax cut to balance the economy. Burns' advice was not taken, the recession got worse, and Nixon lost. When he won an election eight years later, he brought his old advisor to the White House, and assigned him the task of coordinating and evaluating the domestic legislative program. The staff which helps Burns fulfill this broad mandate includes a tax expert, an urban planner, and several men experienced in winning support for legislation in Congress. Dr. Burns and his staff played a key role in drafting President Nixon's domestic legislative program, soliciting proposals from department and agency chiefs and setting priorities among them. He has been the central figure also in shaping the administration's anti-inflation policy. His designation by the President just last week as the next chairman of the Federal Reserve Board

means that Dr. Burns will be a key economic policymaker for a long time to come. Dr. Burns, as the White House's senior economist and residence, you've been much concerned this year with inflation. Next year, as chairman of the Federal Reserve Board, it's going to be your central responsibility. Many times you've just come back from hot springs in the semi-annual meeting of the Business Council. Did you find any consensus there as to whether this problem is under control at last? Well, I think there was general feeling among the businessmen there and also among the government officials that we are finally getting the problem of inflation under reasonable control. Was the evidence there? Well, there is a fair amount of evidence, I think, that a cooling off process is now at work in our economy. The retail sales have been rising very gently during the past six or eight months in contrast to a year ago.

The trend of governmental spending at the federal level has flattened out decidedly. Businessmen have been revising downward their plans for capital expenditures. And the also industrial production in the past two months has not risen and unemployment has gone up a bit. So there are numerous indications that the economy is no longer advancing on the scale that it was previously and that aggregate monetary demand. Is now no longer rising as it once was and that of course is what we've been trying to achieve. Well, the man in the street and the housewife began to feel a little less squeezed within a matter of months. I think so, yes.

You yourself were asked on Face the Nation in April whether it would be possible to bring the increased price index from 4% down to 3% this year. And you said you hoped we could do better than that. In fact, it's going at the annual rate of about five or more now, is it not? At an annual rate, just about five was shade under five years during the past two or three months. Are you disappointed? A little disappointed, yes. This administration made a great point when it came in of abolishing the guidelines. It sounds to me a layman that the advice that you and the president are now giving to labor and business for restraint sound very much like the advice president's Kennedy and Johnson gave them. The only thing you're leaving out is the actual guideline figures. Isn't that correct? Well, I think that there is that that is one difference is not the only difference. The during the Kennedy and Johnson administrations government officials frequently criticized individual trade unions or individual business corporations advised them what to do. And there was no intention on the part of the Nixon administration to do this.

But if you tell them fairly sternly, both business and labor that the government is looking for restraint, isn't this more or less the same thing as is asking for guidelines or you're asking for restraint and reason? Isn't the omission of a figure a rather trivial matter? No, I don't think it is. The actually what Mr. Nixon has done is to ask businessmen to appraise a little more carefully than they might otherwise do what it is and their own interest self interest to do. And he's spoken in a similar vein to trade union leaders and to the rank and file labor. The president is essentially conducting an educational function. He's told the country the government has taken steps rather vigorous steps to bring inflation under control. He's told therefore businessmen that if they're counting on a continuance of inflation it's something like the pace that we have experienced this year or last year.

They're going to be making a serious mistake. It'll hurt their business. He's told the same thing to trade union leaders. So he has set in effect. The government has done his job. Now you want to do your job intelligently. And in doing your job intelligently you should take into account that we're moving into a new environment, an environment in which inflation will be kept under decent control. The point of capital investment, a private survey by an economic consulting firm named Rinfret Boston is said to have found an expectation of a whopping 9% increase in capital investment in 1970. One syndicated column said the government through the Commerce Department has exactly similar information. Is this true? Well I know of Mr. Rinfret's study. I have not looked into the Department of Commerce study that you speak of and therefore I'm not in a position to answer your question about the Department of Commerce study. But I take you the point of your question is whether I expect all this to happen or not. Is that what you're getting at?

Well my guess is that business capital expenditure plans will be scaled downward. This has been going on all this year and I expect that to continue into next year. Well a 9% expansion of capital investment would be quite disastrous would it not? Well I wouldn't call it disastrous but I would think it would simply intensify our inflation problem. But I don't think we will have that next year. The administration has been quite firm usually about excluding wage and price controls although the president did say in July I think that we won't resort to this or consider it in circumstances now foreseeable. Yes. Is that still the position can you even now not foresee any likelihood? That is correct. That is correct. The position as you have stated it was our position in the administration and that is still the government's position. Isn't it true that bankers while they hesitate to talk about it publicly are privately saying more and more that it may come to that?

Well some are. Some businessmen are. Some journalists are. Some professors are. But this is still a small minority I believe. Do you and your associates talk about it any more now in private in contingency planning than you did three or four months ago? Well we talk about it not we talk about it more yes but not as a part of any contingency planning but we are alive to the thinking of other people and now reading about the opinions of this group or that individual we were up to talk about it. And there's been more printed on that in recent weeks than six or nine months ago. But it is no part of our contingency planning. No. Inflation in other words would have to be a great deal worse than it now is for the administration to resort to this drastic measure. Yes and we moving we moving definitely the other way. There was an interesting statistic the other day that productivity per worker after going up annually for several years is now declining.

What does this mean Dr. Burns or Americans working less hard or it's got something to do with technology or what? Well I wouldn't say it's declining but the rate of increase has fallen off very sharply and this is a normal phenomenon of a period of very high employment when productive resources are being utilized with great intensity. So this is a this is an undesirable development to be sure but a rather normal characteristic of a period of very intense business activity. The Secretary of the Treasury with perhaps an excess of candor said a few months ago that the rate of unemployment now 4% was acceptable. This is of course a sensitive political problem is it less serious for a Republican administration because organized labor is not part of its political base or is it for that reason more serious. Well I'll say I don't I don't think of unemployment in in partisan terms and I don't think any one of us should unemployment whether the rate is high or low is clearly undesirable and something we should strive to correct.

And I think the American people are pretty well united on that and both parties responsible people and both parties think alike on this subject. Do some of the labor leaders who criticize a statement like that tell you privately that they realize there has got to be some increase in unemployment as a as a price for holding inflation which they don't like any more than anyone else. Well labor leaders are in our country are are able and realistic men just as our business people are and they recognize that when the government invarks upon measures to bring a serious and accelerating inflation under control. There may well be some increase in unemployment yes labor leaders recognize this as a fact of economic life but of course they are concerned as they should be and just as we in government are as we should be.

Wouldn't it be helpful to you if they would say so publicly to the administration. It's difficult for them in terms of their own constituencies obviously well they are they cannot very well they cannot very well speak. With favor of any increase in unemployment any more than you or I could. But they can recognize and they do recognize that some increase in unemployment may be a temporary price that we will have to pay for bringing the inflation under control but that is something that we must watch with the utmost care. And that is of course what we are trying to do in the government the we have instituted job banks and numerous cities and that program is being rapidly expanded because there are hundreds of thousands of jobs there are available you see they can job jobs they're not being filled and we want to speed up the process of filling these jobs. So that while the economy is cooling off jobs that are going begging can be filled and this is one way you see of checking any increase in unemployment and also we are speeding up training of people for vacant jobs.

And this year as you know has been a year of budgetary restraint but I believe that in this fiscal year the basic manpower budget manpower training budget has been raised expenditure for this purpose has been raised by some 34% And you favor this you're not know yes I'm very much in favor of those and also and also as you may recall we have introduced a legislation to improve unemployment insurance system that is something I fought for for years and believe in very passionately and we're going to bring some five and a half million workers not covered now under unemployment insurance under the system should have happened years ago. Dr. Benson another important economic subject early in the year everybody was talking about the most massive tax reform measure in years is it now look as if it's not going to be quite that radical and revolutionary.

I must honestly say that I'm confused by the tax legislation that is now in process of being worked upon by the Congress I don't know where we're going to go. What are the elements in your confusion sir. Well I read the newspapers as you do and I talk to individual senators and congressman and I hear so many divergent views. The opposition is fond of charging that the administration has responded to pressures from people among its own political supporters and has ended up advocating less relief for individual taxpayers and more relief for corporate taxpayers. How would you answer that criticism well the. This administration undoubtedly. Response to some political pressures every administration does the Congress does.

But on the specific question that you asked me let me point this out that. Secretary Kennedy when he appeared in early September before the Senate Finance Committee and indicated the administration's position on the tax bill he advocated an increase in taxes on corporations that would amount to. Three and a half billion dollars annually an annual increase of three and a half billion dollars for corporations and he recommended a reduction in the individual income tax and mounting to something in the neighborhood of five billion dollars now it is true it is true. That under the house bill this is a source I think of confusion that under the house bill the bill written by the house the increase in taxes on corporations would have been larger than three and a half billion would have been no 4.9 billion. You see and whereas the reduction for individuals would have been larger than the approximate five billion that the president has recommended.

But this does not mean is the Democrats charge the administration has come to the rescue rescue of its corporation. It's wealthy supporters well I leave that to your judgment when the administration you see argues for an increase in taxes on corporations of three and a half billion dollars you can draw your own inference. This is hardly this is hardly less than this is a house bill that you yourself put out well that's true well this is hardly music to to corporation officers. What about the talk early in the year that everybody was agreed we've got to do something about the very rich you don't pay any taxes at all a pay practically no taxes isn't it true that the administration is let up a little bit on the house treatment of those taxpayers. I'm not aware of that there has been no I'm not aware of any change in the administration's view on that. Yes it is. While this has been identified to some extent with the name of Walde Heller it's by and large been advocated over the years mostly by conservatives yet in recent years liberals have been come more and more sympathetic to it.

Isn't this rather a reversal the usual procedure that a political idea comes up from the conservatives and the liberals take it over. You mean it comes up from the conservative pretty much revenue sharing has been espoused more by conservatives than by liberals up until a year or two ago isn't that fair to say. Well I hesitate to answer because I'm not I'm simply not sure the facts in any event in any event here we are now and conservatives favorite and liberals favorite among economists among congressman. Of course when you turn to the governors and the mayor's the all favorite. So I think that what has been happening essentially is there's been an educational process and men in both political parties are increasingly I think in favor of it though we still have some distance to go before we can get legislation from the Congress on revenue sharing. Your colleague Dr. Moynihan with whom one gathers from the pressure not always in total agreement is fond of making not always in total agreement even with myself my ideas keep evolving.

He's fond of making the point that while the federal government is good at collecting money it's not very good at spending it. Is there any reason to believe that states and cities are going to be any any better at it. Well let's look out of this way the states and cities are now receiving from the federal government through grant in a grants and aid over twenty five billion dollars a year. Now these grants and aid are subject to all kinds of restrictive provisions. And they're spending the money it's being spent you see but under all kinds of inhibiting clauses all kinds of restrictions all kinds of accounting mechanisms. Well the you very often find now that in a small small town the mayor and the city council will simply what not know what funds are available what programs are available.

In a larger city you have experts devoting themselves to this question but funds may be available for one program. They may not be available for another program which is in greater more urgent to the community in the eyes of local citizens and the eyes of local officials well. In view of these difficulties the in view of the fact also that this complicated system of categorical grants and aid has not brought the kinds of reforms the kinds of improvement that we looked for in our cities and also in our rural areas in view of that it seems only intelligent to try a new or a different approach. And that is letting people in local communities who know the problems best decide on how federal money can be used again that implies a belief that they will spend it more wisely than the federal government has been spending it do you believe that I believe that will often be the case yes. You think that there will be more or less danger of vanity and corruption at lower levels of government.

Well we ought to be able to control we ought to be able to control the latter through a our reporting system that will be imposed on state and local governments. And I think I think there's this to remember or to recognize that there has been a tremendous improvement in the quality of state and local governments within the past 10 to 20 years because they've had an explosive change what they have to do. Yes and citizens are more aware of the need for integrity and government and party lines and distinctions are breaking down. You're proposing to start off revenue sharing at a very modest level and even by 1975 you're citing a figure of only five billion dollars a year. Well I wouldn't say that I wouldn't say I wouldn't consider that a trifle now. But in terms of the hundred billion plus states and cities are spending now obviously be more than isn't it a pretty small amount. Well I think I think governmental programs should be tested before they are permitted to become very large we started out in a modest scale.

We're providing for a significant increase depending on the experience that we have now you raise some questions you say about moving in this direction you have some doubts. All right now then depending on the experience that we have we can enlarge the program or diminishing. You're suggesting that if a year or two in it turns out working seems to be working better than anybody anticipated. It might be more than five years considerably more by 1975. Yes that's exactly what I mean to convey. In the last few minutes Dr. Burns I'd like to ask you a question some few questions about the White House staff and this is your second go around. You're in the Eisenhower administration to a different job. Mr. Nixon made you a counselor. Neither Harry Hopkins nor Ted Sarnson nor Clark Clifford was ever a counselor. Does this mean your job is different in kind than that in any other recently administration? Oh I doubt it my title my title is different. The job is not.

I shouldn't think so. I shouldn't think so. Dean Atcherson was asked the other day what he would done if he as Secretary of State had to compete against a Moyers or a Rostow. In the White House and he said I would cease to be Secretary of State. If you were chairman of the C.E.A. Would you want an author Burns of the White House or if you were a budget director of the Bureau of the Budget. Would you want to console the Burns between you and the President in a sense? Well it's not easy for me to answer so to answer this question let me put it this way. If the counselor in the White House was a man who recognized his limitations and recognized my authority in my own area. I might very well welcome him as an ally and to go to the heart of your question. I have sought to aid the chairman of the council and I have sought to aid the director of the Bureau of the Budget. I have not interfered with their work on contrary of trying to make their job easier to the best of my ability.

This was only an example of course but there is one theory holding that the great increase in the size of the White House staff in the last five or six administrations has put a bureaucracy between the President and his regular offices including cabinet members. Is this not a danger which those in the White House staff have to look out for all the time? Well I think that is a danger and we must certainly watch the size of the White House staff and we must not permit it to grow. Are cabinet members now less influential inevitably than they were 20 or 30 years ago? I think they are but I think it is all the more important really. If you have the character of the economic and social and military and international problems that we have. There are so much more serious than they used to be. We can, the President, can no longer permit his cabinet officers to move in their own individual directions under their own authority. Some unity, some integration has become essential and we owe the complexity of these problems.

Very interesting answer. When you go on next year to the Federal Reserve Board if concerned by the Senate will you recommend that the President appoint a successor as a consular? At the appropriate time if the President puts that question to me I will search my mind and give him the best answer I am capable of. I quite understand. Finally sir, was your appointment your designation as head of the Federal Reserve Board a complete surprise to you? No it was not a complete surprise to me. One of your colleagues to be if you were confirmed the Senate told me in February that he anticipated then that when Mr. Martin's term expired that you would be the successor. Was that your impression in January and February? Well my memory is not as good as it ought to be. What I have known for some time. Or more accurately I had expected for some time that I would be designated or named to this post by the President and I hope to the Senate will see fit to confirm me.

Thank you Dr. Bridge. Thank you. Next week George Romney Secretary of Housing and Urban Development will appear on the President's men. This is NET, the public television network. you