A typographical error changed the meaning of a sentence in Hobart Rowen's column yesterday. Referring to World Bank president A.W. Clausen, the sentence should have read: But the former BankAmerica boss has been in a running fight with Treasury officials, who bum-rap him as a big spender who in any event should be giving more encouragement to private sector possibilities.
Democratic politicians have been saying that the greatest danger in a second Reagan administration is the probability that the president might "pack" the Supreme Court with ultraconservative justices who then will determine the nation's priorities well into the 21st century.
That would depend, of course, on vacancies arising because of death or retirements on the nine-person court -- which may or may not occur between now and Jan. 20, 1989.
But no one mentions the certainty that, if reelected, President Reagan will make a number of critical economic policy appointments over the next four years, including the chairmanship of the Federal Reserve Board, and at least two other Fed governors.
On Jan. 31, l986, the term of Fed Gov. Charles Partee, appointed by President Ford, expires. (He's eligible for reappointment.) Then, two years later, the term of Gov. Henry Wallich, who was appointed by President Nixon, expires. Wallich, who by 1988 will have served a full 14 years, will not be eligible for a new term. And in between, the chairmanship of Paul A. Volcker, renamed to that post by Reagan last year, will come to an end on Aug. 6, 1987 -- if, indeed, Volcker hasn't stepped out even earlier, as many anticipate he will do.
Thus, if Reagan completes a second term, he will have appointed a majority of the seven-member board (including two governors he's already named), as well as the chairman.
What sort of individuals might Reagan appoint to the Fed, to the vacant chairmanship of the Council of Economic Advisers, and to the top jobs of Treasury secretary and director of the Office of Management and Budget if Donald T. Regan and David A. Stockman don't stay on in their jobs for a full second term?
If recent words and actions provide a clue, a second Reagan administration is likely to be dominated by a reversion to supply-side economic theory after the harsh realities of the real world forced the president to retreat by approving two major tax-increase bills. With a return to supply-side ideology would come officeholders ready to try to make it work.
As was evident at the Republican Party convention in Dallas this summer, supply-side theorists gained a new lease on life as the economy recovered from the 1981-82 recession. The platform rejected all worries about the budget deficit and pretended that the economy would "grow its way" out of the deficit.
One significant hint of things to come may be represented by President Reagan's most recent economic appointment -- that of Martha Seger to a place on the Federal Reserve Board. Seger, an economist/bank regulator from Michigan, turns out to be a confirmed supply-sider.
In an interview last week with Paul Blustein in the Wall Street Journal, Seger said she saw no reason why the economy couldn't grow at the astonishing real annual rate of 4 percent to 5 percent over the next 10 years, far above the estimate of most mainstream Republican or Democratic economists.
Seger said that she doesn't buy the gold-standard arguments made by supply sider Rep. Jack Kemp (R-N.Y.). But according to Blustein, "she said she shares the view of the supply-siders that the economy has a great deal of room to grow before inflationary pressures are touched off."
Thus, Seger and Fed Vice Chairman Preston Martin -- Reagan's other appointee to the board -- form a nucleus of two likely to break away from the majority led by Volcker. Martin has been dissenting from recent Fed majority decisions, urging a somewhat more relaxed monetary policy. If Partee is replaced in early 1986, the "anti-Volcker" minority could go to three. When Volcker's chairmanship expires (assuming that he would not stay as a mere member), majority control of the Fed would pass to Reagan appointees. A Wallich replacement in 1988 could make it five out of seven for Reagan.
Two prospects for the CEA chairmanship -- to succeed Martin S. Feldstein, who tried unsuccessfully to get Reagan to raise taxes and cut the deficit -- are Jack Albertine of the American Business Conference, and Lewis Lehrman, who as Republican candidate for governor of New York lost to Mario Cuomo. Lehrman is a businessman, a leading supply-sider and gold bug. It is also possible that the CEA, as an institution, might be downgraded in a second Reagan administration, which is growing impatient with economists.
Albertine, an articulate spokesman for one of the newer business lobbies, has been a solid supporter of Reaganomics and strongly opposed to a tax increase. He's an economist, but not identified as an academic who would be distrusted by White House right-wingers. "Albertine would be perfect," says a White House watcher. "He's a high-growth, business-type -- just what they want."
Who would get the key Treasury post -- outside of the Volcker job, the biggest catch of all on the economics front? Regan has given no hint that he's tired of this prestigious job, and Reagan, who likes to swap jokes with his fellow Irishman, would be disposed to keep him on, even though Regan is not a favorite of the White House "Mafia."
But if Regan should go, former Citibank chairman Walter Wriston is thought to be eager to try his hand at borrowing money instead of lending it. Another prospect for Treasury is White House Chief of Staff James A. Baker III, if a coveted foreign-policy job doesn't turn up. White House aide Richard Darman and former Transportation secretary Drew Lewis -- now director of the National Strategy Committee for the Reagan-Bush campaign -- have been mentioned as possible successors to Stockman.
And then there is the presidency of the World Bank, which will come up in mid-1986 when the term of A. W. Clausen runs out. Technically a decision for all of the bank's shareholders, the World Bank presidency really depends on designation of an American acceptable to the incumbent administration.
Whether the Reagan administration would support a second term for Clausen isn't yet clear. But the former BankAmerica boss has been in a running fight with Treasury officials, who bum-rap him as a big spender who in any event would be giving more encouragement to private sector possibilities.
In the end, the litmus test for this and all other economic/financial appointments in a second Reagan term would be the theme articulated by Fed Governor Seger: count on the productive potential of the private economy, stress growth instead of taxes as the solution to deficits, and -- above all -- get government out of the way.