A group of 34 economists has issued a sharp critique of Reagan administration economic policies and proposed alternatives that include adoption of national wage-price and industrial policies.
The Reagan program "is based on unrealistic assumptions, lacking credible support in both economic theory and the experience of industrial countries," the group declared in a lengthy statement released today.
The program is both "inefficient" and "extremely regressive in its impact on our society, redistributing wealth and power from the middle class and the poor to the rich, and shifting more of the tax burden away from business and onto low- and middle-income consumers," the group argued in a statement published jointly by the Full Employment Action Council, a coalition of religious civil rights and union groups, and the National Policy Exchange, an economic research and educational organization.
Former labor secretary Ray Marshall, a University of Texas professor who was in the Carter administration, heads the latter group.
Among the more prominent economists endorsing the statement were Robert Eisner of Northwestern University, Lester Thurow of Massachusetts Institute of Technology, Robert Lekachman of the City University of New York, Washington consultant Robert Nathan, Richard Musgrave of Harvard University, George Perry of the Brookings Institution and Sar Levitan of George Washington University.
Some of those who endorsed the general thrust of the statement do not support all of its recommendations.
Eisner, for example, said he does not agree with the section on industrial policy, which calls for creation of a national economic policy board and an industrial development bank to channel investment funds.
The national policy board, proposed by Marshall's group, would include representatives of labor, business and government along with "independent experts." Separate committees working under the board's auspices would seek to solve specific industry and regional problems, the statement said.
The statement suggested the board could use the proposed industrial development bank to channel investment, with funding "largely by private resources with special consideration given to using pooled pension fund money."
"The concept of industrial policy does not imply 'picking the winners' or 'picking the losers' among industries or regions," it continued. "To the contrary, our goal should be to maximize the growth potential and competitiveness of every part of our economy."
The board would oversee a number of new approaches, including targeting research and development spending "toward areas of commercial promise" and adjusting trade policy to force other countries to lower trade barriers.
"Finally," the statement added, "it must be recognized that the greatest single determinant of business investment in new productive plant and equipment is not special tax gimmicks but rather steady growth of demand and avoidance of recessions.
"Moving our economy toward full employment is the single most important contribution we can make toward strengthening industry and improving productivity growth."
The group faulted the Reagan administration for relying on general economic policies to restrain inflation rather than focusing on specific inflation problems in the energy, food, housing and health care areas. "A commitment to 'cool off' an economy to fight inflation might make sense if inflation were pervasively spread throughout the economy, with demand outstripping capacity in many product and labor markets. We have not seen such as 'overheated' economy however, since 1969," the statement said.
Many analysts, however, believe that the economy was overheated in late 1978 and 1979 and Carter administration economists argued at the time that action was needed to reduce the pace of economic activity.
Marshall's group argued that the current recession was both a deliberate consequence of administration fiscal and monetary policies which were unnecessary to reduce inflation.
While proposing a sector-by-sector approach to inflation, the group had no new suggestions in its statement or any of the four specific sectors discussed.
On the monetary policy side, the group argued, that the most important immediate objective should be to reduce interest rates and keep the rates stable.
In fiscal policy, the group called for a traditional mix of spending for jobs and training, public works and revenue-sharing programs whenever unemployment rises above 6 percent.
Current deficits, the statement said, are due almost entirely to the high level of unemployment. But many budget experts believe a substantial budget deficit would remain even if unemployment were about 6 percent, which is considered close to a full employment level.