The administration will not make up its mind on a possible return to the gold standard until well into next year, despite recent calls by some supply-side Reagan supporters for an immediate move towards gold as the only way to bring down interest rates, Treasury Secretary Donald Regan said yesterday.
After the first public meeting of the U.S. Gold Commission yesterday, Regan said the issue is very complex and there is no chance of coming up with a "fast or simple" answer. He added that it will be at least six or nine months before the commission, which he heads, can complete its report, and that the administration will not take a position until some time after that.
There are many different versions of the gold standard, but the key to them all is that the dollar's value would be fixed in relation to gold and the government would promise to convert dollars into gold.
There is widespread skepticism among experts about both the feasibility and likely benefits of a return to gold. But President Reagan suggested during his election campaign that he might favor some kind of gold standard, and determined gold bugs have been hoping that the president will back their movement. Regan said yesterday that the president probably does lean slightly toward gold but certainly does not have a commitment to it.
With the commission split among ardent gold supporters, equally fervent opponents and some in the middle, Regan observed to reporters that one of the first notable points to come out of yesterday's meeting was that "they can't even agree on historical facts."
Vocal advocates of gold -- including Rep. Jack Kemp (R-N.Y.), co-architect of the president's supply-side tax cuts -- have succeeded in forcing the issue onto center stage, despite the opposition of most economists to a return to gold.
The gold push now centers on the Gold Commission, which was set up by Congress last year to study gold's possible role in the domestic and international money system. It was largely through the efforts of gold adherents that yesterday's meeting -- the second that the 17-member commission has held -- was open to the public.
One of the first decisions taken yesterday was to ask Congress for more time to study the matter.
Sources said that much of the first meeting was taken up by procedural wrangling, and it will be virtually impossible for a report to be produced in time for the Oct. 7 deadline laid down by Congress. After more than half an hour of discussion yesterday, members split evenly on whether to ask for a new deadline of March 31 or June 30, and the panel decided in the end to leave it up to Congress.
Regan managed to limit the procedural discussion yesterday to the first hour of the meeting. Members decided to hold three days of open hearings at a time to be specified, to solicit written submissions from the public, and to have all hearings open to the public except when they are so sensitive that they might disrupt markets. No time was set for the next meeting.
Although gold adherents appear to be in a minority on the commission, almost all the members were careful yesterday to appear open-minded about the issue. But it was immediately clear that there is little chance of a unanimous report emerging from the commission's deliberations.
Economist Anna Schwartz, who heads the staff that will draft a report, presented a paper on "the role of gold in U.S. experience, 1834-1981," which some commisssion members -- such as supply-side guru Lewis Lehrman -- saw as favoring their case, while others -- including Federal Reserve Governor Charles Partee -- thought it showed the opposite. Schwartz said she thinks that a gold standard makes prices unstable from year to year, although stable and predictable over decades.
Crusading gold supporter Rep. Ron Paul (R-Tex.) quickly challenged Schwartz, who has worked with monetarist Milton Friedman, for her views on gold. Backed by Regan, Schwartz refused to elaborate, saying that her personal views were not relevant to her job of expressing the views of commission members. But her comments throughout the meeting left little doubt that she opposes a return to gold.
Despite the generally polite tone of the meeting, bickering broke out between Reps. Paul and Henry Reuss (D-Wis.), one of the fiercest opponents of a gold standard. Paul had quoted figures from a gold supporters' newspaper handed out to commission members at the meeting. Reuss then read quotes from other articles in the paper, describing them as "scurrilous," before ceremoniously crumpling his copy and throwing it on the floor.
Confusion reigned over who was responsible for distributing the paper, until a man stood up in the press section and acknowledged that he had.