Schultze on the Record

In testimony earlier this year before a Senate subcommittee on the Humphrey-Hawkins bill, and in the Godkin Lectures on the essentials of government delivered at Harvard last month, Charles Schultze spelled out some of his ideas on the different roles of government and the private sector.

ON FIGHTING UNEMPLOYMENT: "The basic problem with achieving and maintaining full employment is not that we lack the economic tools to generate increased employment. The traditional weapons for stimulating economic activity--easy money, tax cuts and government spending for worthwhile purposes--are perfectly capable of generating an increased demand for public and private goods and services. The real problem is that every time we push the rate of unemployment toward acceptably low levels, we set off a new inflation. And, in turn, both the political and economic consequences of inflation make it impossible to achieve full employment or, once having achieved it, to keep the economy there."

ON CONTROLLING INFLATION: I have no magic answer for how to reduce the inflation that accompanies full employment. But there are a series of steps each of which could contribute: There should be continued emphasis on programs to make unemployed youths [who can be paid low wages] more qualified for the mainstream job vacancies that appear. Substantial action is needed to deregulate areas of the economy where government stifles competition and holds up prices. Transportation is a key example. Actions that reduce the competition from imports should be avoided. Most important, we need an income policy. It cannot be across-the-board wage and price controls -they are ultimately far too rigid for a dynamic economy.

ON REGULATING BUSINESS: "We rely on market incentives to bring us food, shelter and clothing, but abjure the use of incentives when it comes to producing clean air, occupational safety and improvements in urban transportation. We segregate our approaches to social organization into two watertight compartments -command-and-control techniques for public intervention and economic incentives for the private economy. Yet there is a spectrum of alternatives between the two extremes waiting to be created through the public use of private incentives."

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