Crafting an Economic Policy That Actually Works

Article excerpt

This is the second of a two-part series concerning the author's tenure in the Reagan White House, where he was chairman of the Council of Economic Advisers and one of the main architects of Reaganomics.

LOOKING BACK, the President's response to the assassination attempt by John Hinckley was a defining moment. When he was quoted as saying to his wife Nancy, "Sorry, honey, I forgot to duck," he did more to reassure a shocked nation than all of the medical reports. In view of the seriousness of the event, Reagan surely demonstrated grace under the greatest of pressure.

Simultaneously with the development of a host of government policies, important structural changes were taking place inside the Administration. Most of these actions reflected the collegial nature adopted by the Reagan White House. Some did not favor this approach. For example, former Secretary of the Treasury Donald Regan complained in his book, 'To this day I never had so much as one minute alone with Ronald Reagan." (When Regan subsequently became Chief of Staff to the President, that situation quickly changed. In retrospect, however, that was not a happy rime for Regan.) Personally, I liked a process whereby the President was presented with a variety of views, minimizing the likelihood of end runs by my colleagues in the Administration. I also thought that the meetings at which Don Regan and I both briefed the President went quite well.

A key example of the collegiate nature of decisionmaking was the institution of Cabinet Councils to replace the host of interagency committees that typically had been organized by the White House in the past. The Council of Economic Advisers was an active member of three of those cabinet-level groups---Economic Affairs, Commerce and Trade, and Natural Resources and Environment. When my schedule permitted, I also attended the meetings of the other councils (Human Resources, Food and Agriculture, and Legal Policy). Members of the CEA and our senior staff served on the working groups and task forces set up by the various councils.

The Cabinet Council system ensured that the CEA was represented in the decisionmaking apparatus that handed a host of issues--Social Security, foreign trade, regulation of financial institutions, transportation, environment, energy, agriculture, and many other areas. At key points, the President attended a Cabinet Council meeting and, at times, made a decision on the spot. At least in my time, the key role of the CEA was not to develop additional new programs, but to operate what my CEA colleague William Niskanen labeled "a damage limitation mechanism." Thus, the CEA was expected to, and predictably did, oppose every proposal to subsidize some segment of the economy, or to shield a specific industry from competition. At times, a Cabinet member proposing an additional form of government intervention in the economy would start off" by saying, "Mr. President, Murray will probably give you a different view, but..."

The effectiveness of the CEA on any specific issue depended on the cogency of our analysis, but only in part. For example, we won the battle to eliminate import restrictions on shoes, but lost the straggle to contain restrictions on imports of textiles. Was it coincidental that the Congressional delegation to the White House successfully urging textile quotas was led by Sen. Strom Thurmond (R.-S.C.), chairman of the Judiciary Committee, who was diligently working for the approval of the President's nominations to the courts? In conwast, the unsuccessful shoe delegation was chaired by a prominent Northeastern liberal Democrat, Sen. Edward Kennedy of Massachusetts.

The CEA did not win all the battles, but the proponents of additional governmental involvement in the private sector knew that they would have to do battle. In certain instances--autos and maritime, for instance--I was hampered by presidential campaign commitments to aid those two sectors of the economy. …