Word: hellers
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...economists were particularly cheered by an unexpectedly sharp drop in the so-called core rate of inflation, which measures the inflationary impact of wage gains. That key indicator has fallen to about 6%, from a high of about 9% in 1980. Said Walter Heller, chief economic adviser to Presidents Kennedy and Johnson: "A sustained period of 6% core inflation is a very substantial improvement." Adds Charles Schultze, chief economic adviser to President Carter: "The slowdown in the rate of wage increases has brought a real long-term benefit to consumers...
...interest rates come down. Bosworth doubted it. Said he: "Right now, the Fed is just not part of this discussion. It stands on the sidelines and says, 'We don't care what you say. We're just going to sit on the money supply.' " Heller, though, argued that recent statements of Federal Reserve Chairman Paul Volcker indicate that some loosening may be coming. Said Heller: "I'm reasonably optimistic. Volcker is sounding a good deal more accommodating...
Behind that broad accord, however, there was great disagreement over how exactly to bring down the size of the deficit. Liberals on the board want to raise taxes and cut defense outlays, while conservatives side with the Administration in urging further reductions in social spending. Heller, a Democrat, called for the elimination of next year's third and final installment of the personal income tax cut, and for major savings on defense. Those and related steps, he argued, could whittle the 1985 deficit to a manageable $75 billion. That would be a major drop from the $233 billion deficit...
...Heller maintains that the fundamental flaw of current economics policy is that the Administration is battling high prices by tight monetary policy alone, leaving fiscal policy too loose. Said he: "You simply can't step on the fiscal gas and simultaneously stomp on the monetary brakes without generating a terribly bumpy economic ride." Heller and other liberals on the board would like to see some agreement among the Administration, Congress and the Federal Reserve that would result in both significantly lower interest rates and budget deficits...
...economic policies, think that these gains are not just a temporary result of the current economic slump. They see signs that the inflationary cycle of the 1970s may really have been broken-although it took an exceptionally severe recession to finish it off. The drop in inflation, says Walter Heller, chairman of the Council of Economic Advisers under Presidents Kennedy and Johnson, "is in good part a fundamental change, a structural change." Adds Otto Eckstein, a member of TIME's Board of Economists: "Sure, if the economy picks up, there might be some acceleration in inflation, but it should...