Nobel prize winner criticizes Reagan's economic policies
Robert Solow, the 1987 winner of the Nobel prize in economics, says the United States economy is being mismanaged by the Reagan administration. Mr. Solow, a professor at the Massachusetts Institute of Technology, castigates the administration for running up huge budget and trade deficits. He advises that a tax hike is part of the solution.
``We have done ourselves a lot of damage in the last six to eight years. We have handicapped the long run prospects for the US economy,'' says Solow, the 15th American to win the economics prize since it was established in 1968.
Solow's criticism is no surprise to economists familiar with the MIT professor's work. Paul Craig Roberts, a conservative economist, calls him ``a leading example of the establishment type of academic economist.'' Mr. Roberts says that, as such, Solow ``is more fair-minded than a lot of academics.'' Like Solow, many academic economists have been critical of President Reagan's economic programs.
This year's Nobel winner, in a phone interview, pointed to President Reagan's insistence on not raising taxes as an impediment to resolving the budget deficit problem. Mr. Solow says that, by sticking to his ``no new taxes program,'' Reagan is ``making it impossible for others to do the right thing even if he does not want to.'' Solow singled out former Vice-President Walter Mondale as one of the few presidential candidates willing to talk about tax increases.
``We've put ourselves in a box with a consumption binge at the expense of the federal budget,'' Solow says. A tax hike, he adds, ``is part of the solution, but it is like pulling teeth to make it happen.''
Over the longer term, Mr. Solow would like to see the US economy devote more attention ``to building up its physical, human, and intellectual capital. We need more applied, industrial-oriented research, education at every level, by which I mean serious training of a skilled labor force.''
In solving its budget and trade deficits, he warns ``they cannot be repaired at the expense of domestic investment.'' He is particularly sensitive to cuts in education or technical research and development. ``These are the things to preserve,'' he says.
Solow was cited for work he did 30 years ago on how increased investment generates greater production per capita. His mathematical theories helped World Bank economist Paul Armington develop a model for the effects of price changes on international trade. The International Monetary Fund used it to develop an exchange-rate model.
Solow is a close associate and friend of Paul Samuelson, also of MIT, who won his economics prize in 1970. Some economists jokingly refer to Solow as ``Samuelson II.'' In fact, an MIT award once said, ``The intellectual partnership of Solow and Samuelson must rank among the most productive of such relationships in the history of economics.''