The Outside Insiders

Now that Lyndon Johnson has won the Presidency in his own right, U.S.

businessmen-many of whom supported him-will watch closely to see what kind of economic policy he will pursue. Johnson faces the complicated problem of keeping the economy expanding and prices relatively stable while simultaneously trying to solve persistent unemployment, budget deficits and payments imbalances. Some clues to his future course can be found in the large group of private, non-Government economists he has been calling on for advice. Already at work on many economic projects for Johnson, these men can generally be expected to make their influence felt in favor of higher spending, lower taxes, planned deficits and easy credit.

The activities of these advisers are more or less coordinated through the President's Council of Economic Advisers, but they range far beyond the usual scope of the CEA. Walter Heller, author of the tax cut and the most influential chairman in the CEA's history, is expected to resign soon and return to the University of Minnesota, though the President is eager to keep him on. Heller's replacement could well be Michigan's Gardner Ackley, 49, a somewhat quieter but equally activist CEA member. Whoever heads the CEA, the band of outside economic advisers is certain to be used increasingly by the Administration. Spread from coast to coast, this fraternity is linked by bonds of friendship, philosophy and years of service together in universities and Government.

Two probably rank above the rest on the influence chart. One is Joseph Pechman, 46, the short, greying economist at the Brookings Institution, who importantly shaped the form of the tax cut and now is lobbying for a reduction in excise taxes. Pechman went to the University of Wisconsin with Heller, landed his first Government job (in the Treasury) through Heller after World War II, now frequently discusses the economy with the CEA chief. Specializing at the moment in federal-state relations, Pechman this week will hand to the President a lengthy report that recommends methods for channeling a portion of federal tax revenues back to the states. "Johnson and his aides seek advice and know how to use it," says Pechman. "They have turned to consultants because they find it increasingly difficult to attract men to Government jobs."

Pechman shares honors in influence with Paul Samuelson, 49, M.I.T.'s globe-hopping author of a bestselling university economics text and a close adviser to Johnson-as he had been to Kennedy.

Samuelson was a moving force behind the decision to tax purchases of foreign securities, and was asked by Johnson to critically appraise details of the 1965 budget before top Government aides knew of them. At Johnson's behest, he will soon suggest an overall, long-range approach to economic policy designed to further stretch out recovery periods. He believes that "the Government doesn't usurp the role of the private economy but rather helps it to reach its potential." Among the others who have become regular advisers to the Administration: - Seymour Harris, 67, who has sought the sun at the University of California at San Diego after four decades at Harvard, now jets to Washington for about five days a month to give his advice. He has mobilized 25 top economists to brief Douglas Dillon and his Treasury officials, argues that "completely free enterprise doesn't work-it needs Government help to protect it from abuses and excesses." >Richard Musgrave, 54, one of Harris' monthly consulting group, a Princeton professor who is making a major contribution to the Government's current review of excise taxes. He has served on economic missions to countries from Burma to Germany.

> Edward Bernstein, 63, an interna-tional-money-policy expert who edits an economic newsletter (subscription price: $1,000 a year) widely read in the Federal Reserve System. This week Bernstein will hand in to the White House a report on how to improve balance of payments statistics so that the Government can better analyze them.

>Robert Lampman, 44, of the University of Wisconsin, the major economic adviser on the President's anti-poverty program. He favors greater federal tax rebates for lower-income families.

> James Tobin, 46, former member of the President's Council of Economic Advisers, a prime Government consult ant from his post at Yale. Among his specialties: consumer behavior and bal ance of payments. Another Yaleman is Arthur Okun, 35, a former CEA staffer who has helped to form the Government's tax policy.

>A Harvard group, which includes Carl Kaysen, Alvin Hansen, Arthur Smithies, and James Duesenberry. A noneconomist, Don K. Price, dean of Harvard's Graduate School of Public Administration and a former Tennessee newspaperman who became a Rhodes Scholar, is a top consultant to the Budget Bureau. Though John Kenneth Galbraith recently saw the President, he is generally less affluent nowadays in terms of influence in Washington.

Economic issues are becoming so complex, and economic statistics so overwhelmingly complete, that no Government agency feels that it has enough expertise to deal with them. The Budget Bureau, for example, needs a 33-page booklet simply to list its consultants.

Many Government officials take the position that the outside economists, not bound up with existing policies, are apt to be more critical and accurate than the men who are.

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