The six Democratic candidates for president have added a handful of newcomers to the cast of old party standbys in their search for a new economic program to capture the imagination of voters in next year's election campaign.
The search reveals a fundamental split in the ranks of the economists who are advising the candidates over the feasibility of government actions comprised by what loosely is called an "industrial policy."
According to one of them--Walter Heller, chief economic adviser to President Kennedy and now an adviser to Walter Mondale--the "best economic policy is not very colorful politically," a fact that is driving several of the candidates to search for "novelty rather than soundness."
The stronger the recovery, of course, the harder it will be for any of the Democratic candidates to sell an economic alternative to Reaganomics. "My opinion is that if the economy continues to grow, very few Democrats are going to stand a chance against Reagan," said Barry Bluestone of Boston College, who has talked to Sen. Gary Hart (D-Colo.) but says, "I do not consider myself an adviser to any presidential candidate, including Mr. Hart." He was mentioned by Hart's campaign staff as one of a number of the economists to whom Hart had looked for advice.
Bluestone agreed that all the Democrats are looking for "some new ideas." The spectacular success of Reagan's supply-side economics in winning votes and media attention haunts Democrats, encouraging them to hunt for new themes to throw off the image of a party of old policies that have not worked, some of the Democratic advisers said.
The most striking novelty that the Democrats have found is "industrial policy." Bluestone is one of several who have written books recently about some aspect of industrial policy, or de-industrialization in America. He and some others believe that the government should play an explicit role in aiding industrial change and development, although the favored mechanisms vary widely.
Some advisers say that industrial policy is just another guise for protectionism. Others believe that more direct government encouragement for education, research and development and investment in infrastructure--such as roads and railways--is essential for insuring growth and a cut in unemployment.
Bluestone commented that industrial policy is a "nice catch word" that is used only vaguely by the candidates.
"The term is so vague that everyone has their own definition," agreed Patrick Choate, a 42-year-old senior policy analyst at TRW. Choate has dealt with both Hart and Askew, he said, adding, "I don't want to make a big deal about it." Choate, who has worked in the Commerce Department and in state and local government in Tennessee and Oklahoma, believes "this country is doing much that is right . . . but we are unprepared" for industrial change and development.
Among those highly critical of the concept is Charles Schultze, chairman of President Carter's Council of Economic Advisers. He said last week, "I'd like to get all these Democratic candidates off this industrial policy kick, which I think is absolute nonsense." Schultze described industrial policy as anything that called for the government to be "explicitly trying to call the tune on industrial structure."
Schultze said that since he has been on the West Coast for the past nine months, he's "not really in that game" of advising candidates. But he is on Mondale's list of economists, and has "bumped into" and spoken with Sen. Alan Cranston (D-Calif.) in recent months, he said. Staffers for Sen. Ernest Hollings (D-S.C.) also listed Schultze as one of the economists that their candidate liked to talk to.
William Nordhaus of Yale, mentioned as a resource by both Hart and Mondale aides, commented that "the clearest difference between the Democratic candidates and Reagan" is over government intervention and industrial policy. "On this, I am on the side of the president," he added.
Another issue on which Democratic advisers appear divided is the effect on the economy of the budget deficit. Some of them are less worried than the candidates appear to be about the damage done by big budget deficits.
They lay blame for high interest rates and the high dollar primarily on over-tight monetary policy, while others say that unless deficits are reduced the economy will be unable to recover. Almost all of them, however, believe that the future budget deficits now in prospect are too large and will distort the economy, even if they do not stall growth. This leads to yet another problem for the candidates: deficit-reducing measures such as tax increases are not popular with voters.
Nordhaus and several others pointed to the candidates' need for some attractive new vote-catching policy. "They're interested in getting elected and not in being right sometimes," Nordhaus said. He has talked to Hart about economics for "a long time now, for three years." He added, however, that he also talks to other politicians and probably has spoken with all of the Democratic candidates at one time or another.
The search for new ideas has led the Democratic candidates to include several new names among the economists that they like to be in contact with, along with the well-known names of people who have advised previous Democratic presidents and candidates.
Harvard is well represented, as is the Brookings Institution, a traditional Washington source of advice and advisers to Democrats in the White House. Former vice president Mondale, in particular, is listening to many people who were in the Carter administration with him, including ex-Treasury secretary and ex-chairman of the Federal Reserve Board G. William Miller, former Commerce secretary Juanita Kreps, and Stuart Eizenstat, Carter's chief of domestic policy at the White House.
One of the new names most widely mentioned is Robert Reich, a 37-year-old professor at the Kennedy School of Government at Harvard and, along with Lester Thurow of the Massachussets Institute of Technology and New York businessman and financier Felix Rohatyn, a key proponent of industrial policy.
Reich, although modest about his role as an adviser, was mentioned last week as a key contact by aides to several of the candidates. Reich himself, the co-author of "Minding America's Business," said he had had some contact with all six campaigns, and had spoken directly with Sen. Ernest Hollings (D-S.C.), Hart, Mondale and Askew, and had talked with campaign aides for Sen. John Glenn (D-Ohio) and for Cranston.
At this stage of the campaign, however, with candidates focusing mainly on raising money, winning straw polls and working towards the early primaries, the role of economic advisers is only a small one, it seems.
"My contact . . . is very episodic . . . mostly with relatively low-level staff people . . . I have had very little contact with the candidates themselves . . . I view my input as very, very modest and minimal," Reich said, adding that he had "had enough experience of politics to know that substantive advice is not what's foremost on candidates' minds at this stage of the campaign."
Heller commented that "the public impression of the role that economic advisers play to presidential candidates may be somewhat exaggerated . . . I should be under no illusions about a close day-to-day, week-to-week relationship with a candidate."
James Capra, an economist at the New York Federal Reserve Bank who used to work at the Congressional Budget Office, was said by an aide to Hart to have given some very helpful advice to the fellow Coloradan. Capra, however, noted that he had not met with the senator since the end of 1981, although he said he sometimes sent papers and comments to the campaign.
The word adviser clearly means different things to different people. Campaign staffers for Hart and Mondale listed a large number of economists, businessmen and financiers who have given helpful advice to the candidates. Glenn's staff did not want to mention any names. "I can't give a list that would be either meaningful or representative," said a staffer.
Glenn has a number of working groups on different subjects that include economists, but the participants had been promised that their names would not be linked with the campaign at this stage, he said. They are "silent partners," the aide said.
Cranston "doesn't have a kitchen cabinet or specific people as his economists," one aide said, adding that this "is partly because he does not tie himself to any particular theory or concept." One adviser on business and finance who is a Cranston supporter and helps his campaign is New York businessman Bernard Schwartz.
"I meet with Cranston two or three times a month," said Schwartz, who is the chairman of Laral Corp., a high-technology electronics company.
Schwartz described himself as against "overplanning," but in favor of government involvement in industry. "Basic industries such as autos and steel must be saved, he said.
Hollings "solicits a diversity of opinion" from conservatives and liberals, Democrats and Republicans, a staffer said. Among the Democratic-leaning economists that Hollings "likes to have an entree to" are Otto Eckstein, Harvard economist and president of Data Resources Inc., a private forecasting group; and Lawrence Klein, professor of economics at the University of Pennsylvania and founder of the forecasting firm of Wharton Econometrics. Both are well-known, mainstream economists.
Askew's staff said that Frederick Shultz, former vice chairman of the Federal Reserve Board, supports their candidate and has introduced him to a large number of academic economists. Shultz, who lives in Jacksonville and is a part-time senior adviser to the Wall Street investment firm Drexel, Burnham Lambert Inc. and sits on several corporate boards, describes himself as "socially, somewhat liberal, and economically, somewhat conservative . . . an eclectic pragmatist."
Another Askew supporter and economic adviser is Robert Lanzillotti, dean of the School of Business Administration at the University of Florida, campaign aides said.
James Medoff, a 36-year-old labor economist at Harvard who says he has "spent a great deal of time studying the impact of trades unions on the U.S. economy," has also spent time advising Askew. The Florida governor "likes the idea of tripartite committees" of labor, government and management that Medoff believes are essential if America is to manage the industrial change ahead without leaving too many people out of work.
Another labor specialist who has advised several candidates is Raymond Marshall, former labor secretary to President Carter. Marshall is a declared supporter of Mondale's candidacy, but like many other advisers appears willing to talk to other campaigns.