For a fast takeoff
There are good reasons why President- elect Ronald Reagan is considering declaring a national economic emergency when he assumes office. The underlying inflation rate continues at a high 9.5 to 10 percent. Interest rates have soared to an unprecedented 21 percent. Unemployment remains unrelentingly high. Nor is there any relief on the horizon. New OPEC price increases will soon add to inflationary pressures, and agricultural experts warn that a bad harvest next year in some part of the world could send food prices rocketing. Another recession looms.
People -- even skeptics -- clearly are ready to give Mr. Reagan and his remedies a try.
Declaring a national emergency would certainly have to avoid generating an atmosphere of tension and fear. But it could be a useful way to grasp public attention and get various sectors of the economy -- government, industry, and labor -- pulling together on the nation's problem. Mr. Reagan indicates he wants to make a fast start on the economy. This will entail, besides tax cutting, budget trimming, regulatory reform, and other specific actions he has in mind, and educational effort. The fact is, there are no facile solutions to turn the economy around quickly. A persistent, steady effort is needed. The public will have to understand this, and also understand clearly what may be required of individuals and of the nation in the months and years ahead. The president's task is to provide a clear plan for everyone to see a role.
The long-term problem is how to make the US economy productive and competitive in the world again. The United States in recent decade has moved from a position of comfortable self-sufficiency to one of growing dependence on imports (and from nations whose interests are sometimes adverse to its own). It has to restore its ability to function without overreliance on foreign countries in energy, for instance, and it must compete more vigorously in the global market. Some progress is being made -- the US share in world trade is in fact increasing. But the US has a long way to go before measuring up to such countries as West Germany and Japan, whose modern plant and economic policies have given them competitive advantages.
In this connection we hear more and more these days about the urgent need for better cooperation between government, industry, and labor. One corporate executive points out that the only three "developing" countries which have become "developed" countries in the past 50 years -- South Korea, Taiwan, and Singapore -- are countries where there is a close business-government association. West Germany and Japan, too, are held up as models of such cooperation. Now there are obvious pitfalls in the whole concept. If by the term "cooperation" is meant economically unjustified government susidies for industry, financial bailout of ailing businesses, loosening of controls to the point of endangering safety and the environment, encouragement of monopoly practices -- this would be an unacceptable course.
But it is clear that basic economic decisions have to be made which will require diaalogue consensus. It is a serious question, for example, to what extent the US to government should continue to aid Chrysler, which has already stepped up its requests for loan guarantees. What happens when that $1.5 billion federal loan guarantee is used up? The issues are complex and we are not necessarrily saying, "Thus far and no farther." But any layman can see it makes more sense to pour financial resources into growth sectors -- to help those industries which are on the rise, which are innovative, which will contribute more to the nation's economic wealth.
Or take an aspect of the inflation problem which Mr. Reagan has not said much about -- wage and price increases. It is all right to oppose wage-and-price controls, as he does. But inasmuch as these increases account for about 60 percent of the inflation rate few economists think his economic recipes alone will take care of the situation. (The indexing of wage rates to the inflation rate, like the indexing of social security benefits, inparticular has frustrated efforts to bring inflation under control.) Chrysler now is asking US auto workers to accept a 22-month wage freeze -- a labor-management agreement which, it it comes about, could chart a constructive path in other industries. In any case, judging from the fact that the common form of presidential "jawboning" to hold down wages and prices has not usually proved effective, Mr. Reagan could usefully sit down with government, industry, and labor leaders to work out an approach no less tough and dramatic than wage-and-price controls.
In the end, moreover, it is less the economic decisions than the political decisions which are likely to prove toughest -- whose pet programs are to be axed? which groups of workers are to be "sacrified" in order to rationalize industry? which geographic locality is to be taken off the dole? President-elect Reagan not only needs to get off a running start. He will have to provide a vision that will lift and sustain in the American people as they face the uncertain years ahead.