Word: okun
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...plan that offers a tempting carrot was conceived by Arthur Okun, a Brookings Institution senior fellow and a member of TIME'S Board of Economists. In April. Brookings will hold a two-day closed-door seminar of economists to debate the Okun proposal; an open meeting of business and labor leaders is planned for midyear. Participation in his plan would be voluntary, but companies that held wage increases to 6% or less and price increases to 4% or less would be granted a 5% rebate on their federal income taxes. As an inducement for their cooperation, employees in such firms...
...Okun's plan was seriously discussed by the Carter Administration. At first, Charles Schultze, chief presidential economic adviser, wanted to adopt it. But then the Business Roundtable, which is composed of corporate chief executives, denounced it as unworkable, and labor leaders argued that it placed unfair restraint on collective bargaining. Thomas G. Moore, a senior fellow at Stanford's conservative Hoover Institute, dismisses both TIP plans as "gimmicks." Says he: "They are just a hidden form of wage and price controls, pure and simple." Barry Bosworth, President Carter's chief of the Council on Wage and Price Stability, complains that...
...Okun concedes he has not worked out all the details, but he argues that his plan is not a form of concealed controls. Further, he maintains that the reporting procedures would not necessarily be more complex than those envisioned for the home-insulation tax credit. "TIP would be better," he says, "than the inequity and inefficiency of continued stagflation...
...overwhelmed by diametrically opposed advice. Conservatives like Beryl Sprinkel, executive vice president of Chicago's Harris Trust & Savings Bank, contend that the Federal Reserve should concentrate on moderating the growth of money supply and let interest rates go wherever the market takes them. Liberal economists like Arthur Okun of the Brookings Institution retort that the Fed should concentrate on holding down business borrowing costs and not worry so much about money-supply targets...
Liberals Heller, Okun, Pechman and Nathan all urge some kind of "incomes policy"-essentially, presidential pressure on companies and unions to hold down wage and price boosts. Conservatives argue that that policy would only cover up inflation, and Grove, a nonpartisan who tends to liberal views, this time agrees. Wage-price guidelines, he thinks, would actually speed up inflation temporarily. Companies and unions would be tempted to get all they could while the guidelines were being formulated...