The U.S. economy has deteriorated tremendously during the past decade, and President Reagan's policies will not succeed in changing that, according to three economists who outlined proposals yesterday for a different economic policy.
The three, Barry Bosworth, Daniel Mitchell and Laurence Seidman, have prepared papers for the Center for Democratic Policy on inflation and wage and price increases. Although their views differed on how best to reduce inflation, all agreed that the present administration is fighting inflation in the most costly way: through a tight money policy that will work only by depressing the economy and raising unemployment, they argue.
Under Reagan's policies there will be a prolonged period of stagnation, with unemployment staying above 7 percent for four or five more years, Bosworth predicted. Eventually such a policy will reduce inflation, he said, but at the cost of no real growth in living standards and an historically high rate of unemployment.
The three presented their papers to the House Democratic leadership this week. Seidman's proposals were for a switch from the income tax to a progressive tax on consumption as a way of stimulating savings and investment and raising productivity growth, and for a tax-based incomes policy that would penalize companies that awarded too-large pay increases.
Bosworth said he believed that only full mandatory wage and price controls would be sufficient to fight inflation, and advocated combining these with a policy of fiscal and money restraint, a ban on multiyear union contracts and compulsory arbitration of wage disputes with strikes outlawed.
Bosworth admitted that the members of Congress he consulted had thought his proposals politically impossible.
The most attractive proposals politically, the three agreed, were those made by Mitchell for legislation to encourage "gain sharing" by firms. He said this would help to hold down the wage-price spiral by giving workers a stake in the financial health of their company. However, the other two economists said they thought this would not be an effective counter to inflation.
The Democratic Party should begin to discuss alternatives to Reagan's policies, the three urged, even if these other policies do not now seem politically acceptable.