ONE THING that President Carter does not need just now is a loud public row with the Federal Reserve Boards combative chairman, Arthur Burns. But he's got it. The White House has been wringing its hands and apologizing and explaining that, gee, the statement last week on interest rates wasn't meant quite the way it sounded. But Mr. Burns isn't going to let the administration off quite so easily. In a very plain-spoken reply on Tuesday night, he offered a pointed commentary on the general character of the administration's economic strategy. He concluded with the thought, emphatically stated, that the nation's monetary policy - which means interest rates - is the Federal Reserve's responsibility and nobody else's.
It's more than the usual Washington jousting over turf and prerogative. The quarrel is over a central political question: How to get economic growth up in order to get unemployment down. Mr. Carter's staff fears that Mr. Burns and the Federal Reserve, preoccupied with inflation, will force interest rates so high that they will chill the economic expansion. Mr. Burns retorts that excessive expansion of the money supply, to keep interest down, will bring another wave of inflation, destroying business confidence.
Business confidence has its ludicrous aspects. Businessmen constantly warn Presidents that they are on the verge of losing it - that they will collectively hold their breath until they turn blue and the stock market faints. But something ver much like that has in fact been happening in recent months. When businessmen have doubts about future earnings, they slow down on investment - and investment is what generates jobs. Mr. Burns is not always right, but when he gets on this subject he invariably deserves the closest possible attention. He is, you might say, the Keeper of the Confidence.
Mr. Burns is quite correct in saying that investment is lower than it ought to be at this stage of the business cycle. He cited a series of reasons. Low profits was one. The fear of future inflation was another. But then, Mr. Burns added, businessmen's confidence is also being eroded by all those complicated Carter bills: energy. Social Security, welfare reform, tax reform. Mr. Carter's answer, in his press conference yeaterday, was mildly stated, since he does not want to prolong the dispute with the Federal Reserve. But it was right to the point. Most of those complicated bill about which businessmen complain are the result of the procrastination and evasions of the Republican Presidents who preceded him. With the exception of tax reform, which Mr. Carter has wisely put aside, they are not optional legislation.
Businessmen, for example, are right to worry about energy. But the Carter bill and the circus now going on in the Senate are only a small part of it. Any sophisticated business understands the vulnerability of this country to its foreign suppliers. It is literally true that the economic stability of this country, now and for some years to come, is balanced wholly on the willingness of one small country, Saudi Arabia, to keep pumping and shipping oil at a record rate. Any business operation sensitive to fuel costs would be negligent not to spend a lot of time thinking about that one. In this instance, thinking is bad for business confidence.
Recent history gives the best explanation of current low investment by business. In the 1960s the country entered a great boom that, it seemed, would never end. Companies got used to the carefree euphoria of steady expansion - until, of course, the jolting recessions of the 1970s. Then those companies learned another unpleasant truth - that the troubles assailing the American economy frequently originate abroad.
The Federal Reserve's monetary policy is going to exert a large influence over U.S. prosperity in the coming year. But an even larger influence inwill be the performance of other countries that are the markets for American goods. Low growth there would be very bad for the United States - and, particularly in Western Europe, low growth seems increasingly probable. It goes against American tradition to concede that the success of failure of U.S. economic strategy does not lie entirely in American hands. Unfortunately, that is the reality.
Neither tight money nor postponement of necessary legislation can restore the boom of the 1960s. The old international equilibrium went askew a the beginning of this decade. Governments and business around the world are now engaged in the slow, uncertain and unconfident process of building a new one.