The MacNeil/Lehrer Report; Charles Schultze Appointment

ROBERT MacNEIL: Good evening. Jimmy Carter made three more top government appointments today. He named his long-time political friend and colleague, black Congressman Andrew Young, as Ambassador to the United Nations. Columbia professor Zbigniew Brezezinski was appointed national security advisor, the post once held by Henry Kissinger. And Carter chose Charles Schultze of the Brookings Institution to be Chairman of the Council of Economic Advisors. Carter has thus completed the troika of men who will direct the American economy: Atlanta banker Bert Lance as Budget Director and Michael Blumenthal, head of the Bendix Corporation, as Secretary of the Treasury. Tonight we look more closely at these appointments, particularly the man widely known as Charlie Schultze.

JIMMY CARTER: Charles Schultze is a man whom I`ve known for several years. He`s a graduate of Georgetown University; he has his Ph.D. from the University of Mary land. He`s an economist, he`s been head of the Budget Bureau and he has superb qualifications which will help him to be at my right hand throughout the next four years as I make economic decisions. He`ll be the senior person in deliberations on that subject in the White House, working very closely with me. The other members of the Council of Economic Advisors will be chosen later in consultation between myself and Charles Schultze. So I`d like to introduce to you now one of my good friends and a person who will bring superb judgment and background experience and training to the job of deciding the answers to our difficult economic problems -- Charles Schultze. (Applause.)

CHARLES SCHULTZE: Thank you, Governor, and all us other non-Ivy League economists -- thank you. (Laughter.) I thank you for the kind words, the trust and the confidence, and perhaps a little reluctantly for the hard work that you`ve laid out ahead of us. I`ve only one thing to say, I think, and that is that next to keeping the peace, I don`t think I`d be biased in saying the most urgent, immediate and important problem facing the administration is getting the economy back on the path of a solid, sustained recovery; and I`ve known Governor Carter long enough and had enough talk with him and conversation with him to know one thing: it`s going to be done.

CARTER: We`ll do it together.

JIM LEHRER: Charles "Charlie" Schultze carries two well known personal characteristics to this job. One is his incredible energy, and the other is an ability to talk, economics in plain English, so everybody, including news reporters, can understand. As Lyndon Johnson`s Budget Director back in the sixties Schultze was considered to be of a traditional liberal Democratic mind. He apparently still believes in an active federal government when it comes to the economy, but maybe not so active in Great Society-type programs. He said in a recent Brookings Institution report on setting national priorities, "Ten years ago a review of major economic. and social problems would have concentrated on how government might best deal with them, but now the same kind of review must begin by asking whether government is capable of dealing with them. Schultze has been a Brookings, a Washington think-tank often thought of as a Democratic Cabinet-in- waiting, since the Democrats went out of office eight years ago. It`s been an open secret for months now that he had truly caught the attention and the fancy of Jimmy Carter, Carter himself saying today at the press conference that he had considered the 52-year-old Schultze for several jobs, Secretary of Defense and Secretary of the Treasury among them.

MacNEIL: The President-elect made it clear that Schultze would be the first among equals when it comes to economic policy. From his Brookings base, Schultze is a known quantity. He`s spoken out frequently on what`s been going on economically in the recent Republican years. For instance, last January he was on this program discussing the new Ford budget. Here`s the flavor of what he said about balancing budgets:

(January 22, 1976.)

SCHULTZE: The central question right now is, how fast do we want to push this budget back to balance? The faster you push it back to balance -- the faster you push it back to balance -- the harder it is for the economy to recover. Now, what the President has done is play a very cautious game. That is, on his own projections he`s budgeting for a. decrease in the deficit rapid enough to give us only a slow decline in unemployment. In the President`s budget he says that two years from now the rate of unemployment will still be only slightly under seven percent, compared to 8.3 percent right now. In my judgment that is too slow; number two, there is a limit to how fast you can recover, because it could set off inflation. The President has played well under that limit, and the reason, I think, is -- and it stems from the fact that he`s trying to balance the budget too quick; and the central question, therefore, is how quickly you should try to balance it, not whether you should or not.

MacNEIL: Later on in that interview he expressed himself on another key economic question -- on employment and the role public service jobs should play:

SCHULTZE: The administration proposes to eliminate the special public service employment program basically by the end of 1977, to eliminate some of the special unemployment compensation programs by the end of 1977, by which time, by the administration`s own estimates, we`ll still have seven percent unemployment. Now, public service employment -- public service jobs -- is not the world`s greatest miracle, but it is a good way to pump money into the economy to people who need it during periods of high unemployment. When we get towards full employment they ought to be cut out, but, Dear God, not when the unemployment rate is till going to be seven percent by the administration`s own estimate.

LEHRER: One man who has been exposed to Charlie Schultze up close for many years is Arthur Okun, also a senior fellow at Brookings. In 1968 and `69, during the Johnson administration, Mr. Okun held the same job Mr. Schultze was appointed to today -- Chairman of the Council of Economic Advisors. How would you characterize Charlie Schultze`s basic economic beliefs, Mr. Okun?

ARTHUR OKUN: I think he is a traditional liberal -- sensible, moderate liberal in most respects. I think perhaps what distinguishes him from others and, perhaps, from where he was a decade ago is more concern about effectiveness in government, about not only doing things but doing them right, with a concern about management, efficiency, about delivering what we promise in government.

LEHRER: What do you think has caused his change over these ten years -- does he think now that government programs, or the government to don`t just isn`t the answer any more? What caused him to feel that way?

OKUN: Oh, I think we`ve all learned something from the experience of the sixties, recognized that some of the more ambitious goals that were set then weren`t being fulfilled, that some of the programs that looked awfully promising weren`t delivering. I don`t think this is a basic reassessment of what the government ought to get into, but it`s certainly not a shift to laissez-faire; but it`s a shift to greater caution, and in that sense, I suppose, it`s somewhat of a conservative move.

LEHRER: Well, look, Governor Carter said today that obviously Schultze is going to be number one when it comes to calling economic shots. You`ve been in that job; is that kind of thing dependent on the personalities and the abilities of the people involved, or is there something just inherently powerful in the job itself?

OKUN: I think the job carries some power, but the real ability depends upon the personality of the individual and particularly upon his relationship with the President. And I think we`ve seen some cases in the past -- apparently Alan Greenspan has won the heart and mind and ear of his boss, and in that sense is very effective in steering President Ford`s policy. I think the relationship that Schultze and Carter have developed in recent months, which seems to be excellent rapport, bodes very well for Schultze being able to have that effectiveness. And Schultze`s background in a wide number of areas of economic policy certainly means that he brings to the Council Chairmanship the opportunities for exerting much more leverage over things, including energy and regulation -- the whole range of priorities in organization as well as the standard macroeconomics issues of employment and Inflation that the Council typically is concerned with.

LEHRER: Mr. Okun, I realize you`re a close friend of Charlie Schultze and it`s hard `to be objective here, but as you say -- and everybody says -- that he and Governor Carter have become very close, and let`s face it, Carter has literally flipped over Charlie Schultze obviously -- why do you think that is? What is there about Charlie Schultze that would cause Jimmy Carter to go the way he has, so strongly for this man?

OKUN: I think they think alike on a number of issues, and particularly, I think, in reassessing the one big flaw in the liberal programs of the sixties; this emphasis on management, on effectiveness, on doing things right, on not promising more than we can deliver is something that both Carter and Charlie, I think, share very deeply. I think Charlie`s ability to communicate, his expositional effectiveness, which is tremendous, certainly appealed to Carter. Carter`s an excellent student and Charlie`s an excellent teacher.

LEHRER: All right. Thank you, sir. Not everybody thinks Carter`s appointments trends have been so great thus far, and the most vocal critic before today has been Ralph Nader, the well known consumer advocate. Mr. Nader, what`s your assessment of this final economic lineup of Lance, Blumenthal and now Schultze, today?

RALPH NADER: Well, Mr. Lance`s views aren`t very well known in terms of the kinds of policies that are going to be recommended, so he`s an open question except for his background, which is banking. Secretary-designate Blumenthal has primarily been articulate in his career in international trade policy and speaking out against corporate crime -- the bribes and payoffs-- so we don`t know too much about what he is going to urge. Charles Schultze, on the other hand, is a known quantity; he`s testified a great deal before Congress and written a great deal, and that`s probably the most promising appointment that Mr. Carter has made thus far. Because Mr. Schultze, quite apart from his sense of humor, is not a closed mind; he`s always willing to learn, to reflect on experience and to consider alternative modes on haw the economic policy and economic system in this country should be organized. By that I mean that if the evidence is that corporate power and monopoly trends -- the kind of administered pricing that the steel industry threw up before Mr. Carter recently -- is brought to his attention, he`s the type of person who would not be bound by ideological rigidities; he`d respond and say maybe the structure of the economy itself, rather than throwing aspirins at the economy, maybe -the structure, heavily dominated by a few giant corporations, should be looked at.

LEHRER: So you`re not concerned, then, about the shift that Charlie Schultze has gone `through in the last ten years about government programs that Mr. Okun just talked about -- that doesn`t bother you, right?

NADER: No, because basically it`s been a shift recognizing waste -- recognizing the ineffective follow-through between the policy and the disbursements of money. Medicare is an example of that, for example, in the health area. What possibly bothers me about Mr. Schultze in some of his statements is that he has precipitously concluded, from decades of non- enforcement against corporate and other institutional violations, that perhaps we shouldn`t go the way of enforcement and try to do it better.; we should try to go the way, perhaps, of self-regulating processes, which often is described as voluntary compliance. The difference, of course, is, do you prohibit water pollution by corporations, for instance, or do you tax the water polluters and try to get it done that way?

LEHRER: In your initial criticism of the Carter appointments you said, among other things, that they basically represent the corporate interests in this country. Where does Schultze fit into that umbrella, and Schultze, Lance and Blumenthal as a group fit into that?

NADER: I think Mr. Lance and Mr. Blumenthal do represent corporate interests; they obviously are not going to identify themselves strictly with the business roundtable and the Fortune 500, but that`s their background and their predilection. Mr. Schultze does not; he left government and he didn`t go and become a president of a large corporation - - he went to Brookings Institution, he was constantly advising public officials and researching and writing. He is the open window in the Carter administration. He is the person you can say, "Should there be more federal policy supporting consumer cooperatives, consumer-owned businesses? Should there be tougher antitrust enforcement? Should there be the kind of jobs program that will connect up with energy conservation and fulfill two policies at once -- curbing energy consumption and developing semi-skilled and lower-skilled jobs throughout the country?" That`s the promising appointment for Mr. Carter thus far.

LEHRER: Mr. Nader, thank you. Robin?

MacNEIL: Well, let`s have another point of view on Mr. Schultze and the others. We have with us another former senior fellow at the Brookings Institute who is now one of the country`s leading economic journalists, Leonard Silk. His column appears in the New York Times, and before he was a journalist he served with Mr. Schultze on President Johnson`s Budget Reform Commission. Mr. Silk, how do you evaluate the troika?

LEONARD SILK: I think it`s a balanced team. In terms of personalities there are considerable differences. Charlie Schultze is the world`s nicest guy, if I may use a superlative not permitted in the pages of the New York Times; he is a gentle and sweet and at the same time very tough-minded person, and remarkably humble. I don`t mean to deny these qualities to the others, but that`s certainly not the image one has of, say, Mr. Blumenthal, whose reputation is as tough, hard-driving, a very tough negotiator. The Europeans, during the Ghat negotiations, said that "this man behaves like a European" -- and they didn`t particularly like that. Mr. Lance Is a southerner, he is apparently a warm person and with a good mind. I think he is -the most unknown, at least to me, of the three gentlemen, but his style is certainly more conservative and I think it remains to be seen whether his policy is conservative as advertised. In terms of policy, Charlie does come on --- at least, historically,-- as a liberal in the American spectrum, but with the updates that have been already mentioned toward greater respect for the market. He is nobody`s radical liberal by many, many miles. I think, really, Charlie is sort of middle-of-the-road or slightly left of center. Mr. Blumenthal is an uncharacteristic businessman, in the business spectrum; he is certainly left of center, among businessmen. In the community at large, again, I suppose that he is sort of middle-of-the-road, but these are clich‚s. Mr. Lance, as I said, comes on as a conservative.

MacNEIL: How big a factor was it, do you think, in Carter`s mind in making these appointments to reassure the business community?

SILK: I think he thought it was important, and I guess that it was, to a degree. The business community, meaning the heads of major corporations, at least, overwhelmingly supported Mr. Ford; and I think it showed proper restraint and. concern for the nation`s welfare not to wish to antagonize people who nevertheless were his political opponents. The nation needs recovery...

MacNEIL: Apart from politically, what about the necessity, as some people say, to restore confidence so that there`s more capital investment and things get moving again a bit faster?

SILK: There`s probably something in it, but I think that the notion that you can cheer people up and then they pour money into investment is a bit of a myth. Who could have cheered them up more than Mr. Ford? Nevertheless, we had the most severe recession of the post was period and capital spending lagged seriously; during the end of the Ford administration it`s still lagging; I think that people make their investment decisions on how much plant and equipment they need, what their profit picture is and is expected to be, rates of interest -- factors like that. Confidence plays a role, but it shouldn`t be exaggerated.

MacNEIL: Thank you. Jim?

LEHRER: Yes, let me ask you, Mr. Nader, the same question that Robin just asked Mr. Silk. Do you think that these appointments, taken as a group, were done to reassure the business community?

NADER: Yes, I do. I think that Mr. Carter should now ask the business community, particularly the big business community, to start reassuring him. I think the large corporations that control this economy should reassure Mr. Carter that they`re going to start competing, they`re going to start being efficient, they`re going to innovate, they`re not going to always ask for federal bail-outs and subsidies if they are mismanaging their business, and they`re going to obey the law.

LEHRER: How do you feel about it, Mr. Okun?

OKUN: I think I`d offer a slightly different interpretation. A few weeks ago the feeling was that the price of reassuring the business community was the Secretary of the Treasury was a Republican and a banker representing one of the nation`s big banks; President elect Carter dial not make such a choice. We chose a Democrat, one who had been in the Kennedy and Johnson administrations, one who`d been an active political operator on, as Lenny Silk put it, the left wing of the business community. He is a businessman, but he`s certainly not the typical conservative businessman. In the case of Lance, what I see is more of a choice of someone whom Carter has deep personal confidence in than somebody who represents in any sense the business community. It seems to me one might read the Lance appointment as suggesting that Carter really wanted in the Office of Management and Budget somebody who was an outsider to the Washington scene, who was more. likely to favor the kind of shaking up of organization and procedures that Carter himself wants and to use Lance as his arm of major procedural reform.

LEHRER: Mr. Silk, what about the appointment of Charlie Schultze in terms of the business community? lie is considered a traditional liberal; do you think that he will upset them in any way, or do you think he got so many points with Lance and Blumenthal that he`s off the hook as far as Schultze is concerned?

SILK: I think the business community is capable of being scared by any Democrat, and there doubtless will be some businessmen disturbed by what is, in my view, a perfectly sensible appointment. But I think there has already been some advance indication, including, for example, from the Wall Street Journal, our distinguished competitor, that Mr. Schultze is acceptable if you have to have a Democratic administration. And I think that the whole Washington press corps that knows Charlie Schultze has the highest regard for his integrity and his objectivity.

LEHRER: Let me ask all three of you now, looking ahead. We have these three men: Blumenthal, Lance and now Schultze. Can we look to these three to give us, or give the country, any what you`d call innovative or new or daring approaches to resolving our economic problems, or. is it going to be, really, new wrinkles -to old traditional solutions that you tried, Mr. Okun, back in the late sixties, or whatever?

OKUN: I`m not sure that there`s ever anything new under the sun, and it`s hard to distinguish the new wrinkles from the bold venture until they`ve either succeeded or failed. I think you`re going to see a very activist administration, a very marked contrast to the Ford administration, one that is willing to take on challenges, to rise up to them, to do it in ways that...

LEHRER: Active, meaning government intervention in the economy, stimulating the economy, slowing it down through government actions; is that what you mean?

OKUN: It means government action; I don`t think all government action is intervention. Some government action can be action to eliminate waste, and indeed, action to eliminate some of the kinds of intervention that have grown up in the past. But I think it is taking on the challenges, it is not leaving it to nature -- leaving it to the marketplace -- it`s recognizing that the only solution to problems does require action by government as well as by private -- the sector.

LEHRER: Mr. Nader?

NADER: It seems to me that the range of alternative solutions is circumscribed by an implicit feeling among many government people that they can`t confront entrenched power that`s led to so many of these problems, or at least prevented them from being resolved. Take housing; you can say, what are the Solutions to try to deal with our housing problem? And there are a number that have been tried over the years, but they all seem to end up not doing a very good job for the people who need housing. They do a good job for developers at times, or for the mortgage bankers or for insurers, but not for people who need housing. And I think we always have to ask ourselves when we consider the appointments to high cabinet posts, what is the history of sensitivity to consumers, to workers, to shareholders, to small. businesses, to tenants, to poor people on the part of these men and women who are appointed or are about to be appointed by Mr.. Carter? I don`t think that these three gentlemen that we`ve been discussing are going to have that large a role to play. You have to consider other cabinet members; for example, Brock Adams, the new Secretary of Transportation, has made it, I think, quite clear over the last few years that he doesn`t look with favor on many forms of de-regulation in the transportation area, when some of us feel, particularly in the trucking; and airline area, that more price competition will be better for the consumer. Now, Mr. Adams Is going to have a say in this whole area of de- regulation as far as transportation is concerned.

LEHRER: And each one of them is interlocking, from one thing to the other. Robin?

MacNEIL: Gentlemen, could we move away from -the people for a moment to policies, just to conclude? Mr. Carter reiterated today very strongly that he was not going to ask Congress for standby authority for wage and price controls. Why is he being so categorical about that -- should he be so categorical?

SILK: I don`t: think lie`s been totally categorical; he said if an emergency should occur that he would ask for them. But what he is not, asking for is standby controls. I think what he is trying to do is to remove from business the threat of controls -- the daily threat, you might almost say -- which may induce many companies to say, "We`d better move a little bit faster to raise prices, because I`m lamer than these other fellows and I may not get there." Now, in saying that he is not going to ask for standby controls, in effect he`s saying, "It`s not at the drop of a hat; it takes a genuine emergency for me to come back in and ask for controls." He is also perfectly clear in saying he expects wage and price restraint. It remains to be seen exactly how he means to go about getting that restraint. There will be some form of incomes policy, that`s clear. But what is not clear is exactly the form it will take.

MacNEIL: Do you think he should be, Mr. Okun, as categorical even as he`s been so far about wage and price controls?

OKUN: Yes; to the best of my knowledge, everyone whom he`s consulted, among the economists who were down to Plains and others, unanimously told him that he should renounce any intention of using standby authority. I think during the primaries Governor Carter thought that, so to speak, -the club in the closet was a constructive thing to have; it was not that he intended to use wage and price controls under the circumstances that he envisioned taking office, but rather that having this as a kind of warning was a good thing. I think he found that it was a bad thing that it actually encouraged certain kinds of behavior that were designed to beat the club in the closet, so he took the club out of the closet, he put it on the fireplace and burned it, and I think that`s highly desirable and I think it stall leaves him open to and in a better position to effectuate an incomes policy that does get some wage and price restraint.

NADER: I think it`s important to also note why he had to back down on his pre-campaign pledge to ask for standby authority for wage and price control. His hand was forced by a crude and collusive power play on the part of big steel, which, in effect, said, "We`re going to raise our price about the same time roughly six percent on flat-roll steel products;" and he had no choice, because if he didn`t withdraw his pledge he could have become President on January 20 riding the crest of a massive wave of corporate-induced price increases and the consequent inflation. I think that`s a powerful first lesson for Mr. Carter in terms of how he must confront the anti-trust issue; and I`m pleased to see that the Justice Department today announced that it was engaging in a preliminary inquiry into the steel price increase.

MacNEIL: Mr. Silk?

SILK: I think his first reaction was a bit heated, and there were some threats of action against the steel industry. He moderated it, I daresay, after his advisors had gathered and suggested it was the wrong play. Undoubtedly he will confront market power after he takes office, as Mr. Nader has said, and he will confront it from the unions as well. But I think that he`s in a very good position now in dealing with both to deal from a position of restraint and control on his own part and to expect what he called acts of conscience or patriotism from the others.

MacNEIL: Mr. Silk, thank you very much. Thank you all in Washington. Good night, Jim. Jim Lehrer and I will be back tomorrow night. I`m Robert MacNEIL. Good night.