Labor Secretary Ray Marshall said here today that the Federal Reserve System "should not be autonomous" if the nation intends to reach the Humphrey-Hawkins Bill goal of reducing unemployment to 4 per cent by 1983.
He said in a speech to the Industrial Relations Research Association (IRRA) that the Fed should retain its independence, but that autonomy is another thing. "We can't have effective economic policy making if the Fed is outside the political process," Marshall declared. The IRRA is one of a number of allied social science associations holding national conventions here.
Marshall's statement came a day after President Carter refused to reappoint Federal Reserve Chairman Arthur F. Burns, in a move intended to assure greater coordination of the government's economic policy making procedures.
Carter replaced Burns, 73, with Textron, Inc., Chairman G. William Miller, 52, a man whom Marshall praised in a separate conversation today.
Meanwhile, former economic council member James Duesenberry, who was chairman of the Boston Federal Reserve Board while Miller was a member, said that Miller is "a rational man who is electric He takes things as they come - he's not a guy with hang-ups."
In similar vein, Harvard economist Otto Eckstein said in an interview that "Miller is a brilliant and aggressive businessman." Eckstein suggested that the Textron executive was not likely to be intimidated by the bureaucracy in the Federal Reserve or be hidebound by Federal Reserve traditions.
Speaking without a text, Marshall said that strict coordination of fiscal and monetary policy will be required by the latest version of the Humphrey-Hawkins Bill. The proposed legislation, which now has been endorsed by Carter, is expected to be passed early in the next session of Congress.
What was implicit in Marshall's remarks was that Burns had resisted such policy coordination attempts. Marshall said he recognized that getting effective working arrangements while maintaining the so-called independence of the Federal Reserve "is a tricky business, but it's important."
The mechanics spelled out by the Humphrey-Hawkins Bill, which Marshall said is not yet well understood in Washington, would require the Federal Reserve to state waht policies it proposes to follow in order to carry out economic targets that the bill demands the President establish each year.
Under the current system, the Fed merely announces what its monetary growth targets for the year ahead will be. But those may or may not be supportive of a President's objectives. It was the potential lack of coordination that worried Carter's advisers about retention of Burns. And some of them concluded that there had been an actual contradiction of policy in the past few months when Burns tightened the monetary strings at the same time that fiscal policy was mildly expansionary.
Marshall also said that the Carter administration is completely commited to using "selective" jobs policies to supplement broader monetary and fiscal tools to move the economy ahead.