G. William Miller, President Carter's nominee to head the Federal Reserve Board, may not smoke a pipe.
But last week he showed that he can blow smoke rings around a Senate committee as well as his predecessor, Arthur F. Burns.
Miller, chairman of Textron Corp., a Providence-based conglomerate, spent six hours in a confirmation hearing before the Senate Banking Committee.
But despite the best efforts of several senators - including chairman William Proxmire (D-Wis) - he what changes in policies the nation's central bank could be expected to make under his stewardship.
Many congressional Democrats have been upset with the actions taken by the seven-member Board of Governors headed by Burns, feeling - rightly or wrongly - that the central bank's concern with fighting inflation kept congressional job-creating programs from having their full impact.
Miller left the clear impression that he would direct the Fed down a monetary policy path that would support economic goals set by Congress. No matter how follish a course the Federal Reserve might think Congress has charted, the central bank's "independence" does not permit it to take steps to sabotage that direction, he said.
"I believe that it is absolutedly proper that Congress shoudl decide on national priorities," Miller proclaimed under questioning. The Federal Reserve's independence only gives it freedom to decide how to carry out policies, not "which policies to carry out," he indicated.
That should satisfy the Democrats, but Republicans like the Fed's ability to lean against the expansionist - and what they think are the inflationary - policies of the Democratic Congress and administration.
Well, Miller could satisfy them, too. Sen. Harrison H. Schmitt (R-N.M.) asked Miller why the Fed couldn't just bite down hard, set out growth rates for the money supply that were designed to bring down inflation over the long-term and, if Congress wanted to continue to run big deficits, warn that interest rates would rise.
"Why not put that kind of pressure on Congress?" Schmitt asked.
"That's one choice," Miller agreed. "Maybe that's what it comes to." But after offering the concession, he hedged. It's doubtful that putting the "monkey on Congress' back" would by itself stop deficits or inflation, Miller suggested.
The senators searched hard last Tuesday to find out just what kind of monetary course Miller would steer. And Proxmire, at least, also is worried that the slight corporate executive's lack of training in economics will make him an ineffective chairman for a long time.
Miller told the committee that the policies of the Federal Reserve Board in recent years "have been generally correct," in trying to foster economic growth but at the same time hold down inflation. Miller said he wanted the central bank to dole out enough dollars "to achieve general prosperity and higher rates of employment," but not so many as to contribute to inflation.
But when it came to specific Fed policies, Miller backpedalled.
Did he support the recent Federal Reserve Board decision to boost the discount rate the Fed charges member banks - a move designed to raise interest rates in the United States, attracting funds into this country and helping to take the pressure off the dollar abroad?
Miller, now a director of the Boston Federal Reserve Bank, one of 12 regional Fed Banks, said that the Boston Fed voted to ask for an increase in the discount rate, but only after New York and Chicago had done so. "Once it (the higher rate) had been established, there was no choice but for each bank to go along."
Proxmire said he understood that, but what if Miller had been sitting as a member of the board of governors of the Federal Reserve. What would be have done then?
"It was a close call," Miller said, noting that Burns said it was the most difficult decision he had made in his eight years a s chairman. Miller allowed as how he might have acted differently, but quickly established that he did not have all the facts that the Fed had when it made the decision. The wisest course of action.
Shouldn't the domestic economy, with its need for lower interest rates to encourage continued expansion and job creation, take precedence over the international economy? Proxmire continued.
Indeed, Miller allowed, the floating exchange rates which allow currency values to adjust in relation to policy to follow. But a continuing decline in the value of the dollar boosts inflation and encourages the flight of capital from this country, Miller cautioned. That means a decline in business investment which affects jobs.
"There are riddles, dilemmas and enigmas all over the place," Miller worried. "Everything we touch can serve to offset some major goals."
Miller cautiously walked as a conservative businessman, but one who, like the President who nominated him and the Treasury Secretary (W. Michael Blumenthal) who pushed for him, has a social conscience and a recognition that rigid economic dogmas do not work.
After six hours of direct questioning the Senate Banking Committee discovered it could pin the nominee down on three things: Miller advocated lower inflation, lower unemployment and a stable dollar. So do Arthur Burns, Jimmy Carter and every member of the Senate Banking Committee.