With the departure of Bert Lance now assumed, there comes up for grabs the question of who can take his place in the making of economic policy. All the political, and not a few of the economic, pressures drive the President to seek another figure who can make a strong appeal to business confidence.
But business confidence is not substitute for economic policy. So the easy course is not necessarily the right one.
So far, to be sure, the Carter administration has emphasized the business-confidence approach to economic matters. Lance has been the out-front symbol of a policy that has emphasized a stance in keeping with the business ethos. Thus Lance committed the administration to hold down spending and seek a balanced budget by 1981. He repeatedly resisted moves to cut inlfation through an incomes policy that would use government powers of persuasion and publicity to hold down wages and prices. He led the President in backing away from the proposed $50 income-tax rebate as an economic stimulus.
Politically, the results of this careful, don't-rock-the-boat policy have been excellent. The PResident, with a 66 per cent favorable rating in the latest Gallup Poll, stands very well with the country. Election returns from New York City and opinion polls in other parts of the country do not suggest that he could improve his standing by liberal economic measures.
And the economy hasn't done all that badly either. Economic growth in the first half of 1977 was 7 per cent - well above predictions at the start of the year. Sales, personal income, employment and production are all high, and consumer confidence is rising.
Not only has the record been good but the softest spot in the economy is especially sensitive to the climate of confidence. It is business investment, which has hung behind the rest of the recovery and remains relatively low. With new tax and energy programs in the works, it is subject to new shocks.
So renewed emphasis on business confidence seems to make good economic sense. That is why the line of least resistance is to put another person with a business background in Lance's slot at the Office of Management and Budget.
Still, business confidence is a limited and chancy thing. It is notable that the corporate heads who profess to admire Lance have been leading the pack in demanding his resignation.
Emphaiss on business confidence through the Ford administration and the nine months of the Carter administration has not caused investment to take off or the economy to hit its stride. More of such emphasis will not necessarily yield a bunch of new orders now - especially if sales slump.
In fact, the marked slowdown int he economy has been apparent for the past two months. Growth in the third quarter, which ends this month, will probably be about 4 per cent. Umemployment remains high at over 7 per cent. Friendly governments in Frnace, Britain and Canada and other allied countries that have hooked their economic policy to the American recovery are breathing very hard.
Already it is clear that the outlook would have been better if the $50 rebate had been withdrawn. Further budgetary stimulus may be necessary to keep the economy from stalling later this year or next.
That prospect raises anew the danger of inflation. Consumer prices are rising at about 6 per cent annually, and the energy program plus various moves to prop up minimum wages and farm prices suggests that little respite is in sight. But new stimulus cannot comfortably be undertaken unless there is in place an incomes policy able to hold down rising wages and prices and a new inflation cycle.
In other words, there are curves ahead on the economic road. Locking the steering wheel into a fixed position on such important and delicate matters as government spending and incomes policy does not make sense.
Which suggests to me that Lance need not be replaced by a businessman. The more so as Secretary of the Treasury W. Michael Blumenthal can, with Lance gone, become the adminsitration's spokeman for and to the business community. As to OMB, what is required is a traditional budget director - a person good at administration and with a feel for the fine detail of government and an open mind on economic questions.