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January 14, 1972 - Image 4

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The Michigan Daily, 1972-01-14

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VILt £i 40mBa1
Eighty-one years of editorial freedom
Edited and managed by students at the University of Michigan

Explaining

McCrackenomics

.

420 Maynard St., Ann Arbor, Mich.

News Phone: 764-0552

Editorials printed in The Michigan Daily express the individual opinions of staff writers
or the editors. This must be noted in all reprints.

FRIDAY, JANUARY 14, 1972

NIGHT EDITOR: SARA FITZGERALD

Sinclair as a symbol

IT NOW seems that the sentence of John
Sinclair, imprisoned for possession of
two marijuana cigarettes, will soon be
commuted or his conviction overturned.
But the basic thrust of his challenge to
the state's use of law for political re-
pression may remain unanswered.
The State Supreme Court, after two
previous refusals, finally allowed Sin-
clair's release on bail in December. That
action came after the State Legislature's
approval of lessened marijuana penalties
and a widespread ball for Sinclair's re-
lease, which culminated in the massive
Free John rally here last month.
But the court may take advantage of
forthcoming gubernatorial review of
cases prosecuted under the old legisla-
tion, under which Sinclair was sentenced
to nine and a half to ten years, to post-
pone and possibly avoid an honest re-
sponse to Sinclair's appeal..
IT IS likely that Gov. William Milliken
willacommute the sentence, since Sin-
clair has already spent two and a half
years behind bars, more than that pro-
scribed for possession of marijuana in the
new legislation. The court might then
acknowledge the governor's action and
release Sinclair with only a technical
concurrence with the appeal arguing that
the governor's commutation reduced the
necessity of an official court response to
the appeal itself.
In his appeal, Sinclair contends that
the use of undercover agents to eke out
a violation of state narcotics laws con-
stituted entrapment, whether used as
evidence for a dealing charge or simple
possession - and is therefore inadmis-
sible in court.
Sinclair further argues that the clas-
sification of marijuana as a narcotic, in
the old law, which it is not, invalidates
its use in the dispensing of penalties far
out of proportion with the severity of the
alleged crime involved.
J3 TRINSIC TO the appeal is a challenge
to the exclusive treatment received
by Sinclair from the state's judicial sys-
tem and law enforcement agencies. Sing-
led out as a target for political surveil-
lance and police entrapment, Sinclair

then was belted with the maximum pun-
ishment allowable under the old law.
Once convicted, the repeated refusals
to allow Sinclair's release on bond pend-
ing appeal while others convicted of
more serious crimes were bailed out, high-
lighted the obvious discrepancies in the
purported evenhandedness and fair play
of state law and judicial proceedings.
The court is understandably reluctant
to deal squarely with Sinclair's appeal.
Should it deny Sinclair's contentions it
would be blandly defending the hypoc-
risy in the state's design and enforce-
ment of the law. On the other hand, if it
concurs with the substance of Sinclair's
appeal the State Supreme Court would
be implicitly affirming that Sinclair's im-
prisonment and prosecution were politi-
cal, as Sinclair's backers have argued
with growing support since his arrest.
Thus, the Court wavers and stalls, pos-
sibly hoping that a commutation from
the governor will allow a superficial rul-
ing on. the case, without response to its
symbolic importance.
THE STATE and the city of Detroit
made John Sinclair a symbol when
they sought his arrest, persisted in pro-
secuting him and repeatedly denied him
bond. Sinclair's backers rightfully utiliz-
ed him as a symbol of political repression
in the United States, and devoted vir-
tually years of effort spreading the news
of his case across the country.
Now, the state is very willing to defuse
John Sinclair as a symbol. But his sup-
porters should be wary of efforts to di-
lute the representative importance of
John Sinclair's imprisonment and battle
for freedom.
The probable exoneration of Sinclair
does not in itself indicate a decrease in
the use of the law to selectively discour-
age political dissent.
IT IS NOT enough to insist on John Sin-
clair's ability to engage freely in po-
litical activity, regardless of our. own
views of the Rainbow People's Party. In-
stead, we should exercise the right to
dissent ourselves and to actively ensure
everyone else's right to do so.
-ARTHUR LERNER

Q. Can you describe the state of
the economy at the time you became chair-
man of the council and outline briefly the
problems you had to solve?
McCracken: What the United States
economy was confronted with in 1968 and
1969 was a massive redirection in about
three dimensions. One of these, of course,
was that we did have a rather rapidly ac-
celerating inflationthat had to be coun-
tered. This was one dimension.
One thing that's apparently clear on the
basis of our own and international exper-
ience too, is that in the modern econoomy,
when an inflationary period has run for
quite a period, it is extremely difficult
to slow down.
Secondly, at that point we had a very
large reduction in real defense spending.
That is, if you price out defense output
In constant prices, then defense spending
today would be about $25 billion lower
than it was at that time.
Now if you work that out on the as-
sumption that gross national product per
person employed is about thirteen to four-
teen thousand you can see this is in ef-
fect a displacement of about two million
in employment.
Now the third area was of course in
the problems of international economic
policy. For a variety of reasons, only one
of which was our inflation, the pattern
of exchange rates was in disequalibrium so
far as the United States economy was con-
cerned. In other words, to put it bluntly,
at the old pattern of exchange rates the
United States economy was not quite com-
petitive in the world economy.
It was a period of unusually drastic
change in economic policy, drastic prob-
lems, and this is true. When you think
about trying to counter an inflationary
period, unwinding a defense program and
trying to regain equilibrium in the external
economic picture, and have these all sort

Prof. Paul McCracken, who resigned last month after
three unusually tumultous years as Chairman of the Presi-
dent's Council of Economic Advisors, returned to the Uni-
versity this term to resume his duties as Edmund Ezra Day
professor of business administration.
In an interview with Daily staff members Jim Beattie,
Lindsay Chaney and Andy Feeney earlier this week, Mc-
Cracken looked back over President Nixon's controversial
economic program which he helped shape from the begin-
ning of the Nixon administration until the development of
the New Economic Policy. In the excerpted portion of the
interview appearing below, he discusses the history behind
the President's economic pro . ram. On tomorrow's Editor-
ial Page, he describes his experiences as a top-level advisor
in Washington.
r":"?}:::{{.:,::: ;: :twi""}> ?}} "}}. }r, S.v.{AS.S\'. "4:.4-h'"ktC".4 v:!!Hn}?:Sa Mmrg..:?.:: :: : :

pansion slowed in the middle
It seemed increasingly clear
done about as much as we
the price front.

had to be done in this area, and in the
international area. Last year, 1971, we
almost certainly ran an excess of mer-
chandise imports over exports - the De-
cember statistics are not in yet. If we
did, as we almost certainly did, that will
be the first year since 1893 that this has
happened. I cite that merely as an indi-
cation that this was quite an unusual and
quite obviously a disequilibrium situation.
And so then, the pieces here started to
come together. We certainly needed stim-
ulus in the economy and had to do some-
thing in the external field and with the
wage price problem. These are three dif-
ficult balls to juggle. If you just start to
expand the economy - your eggs focused
only on that - and the economy starts
to expand, one thing thit it will almost
certainly do is to accelerate imports.
In other words, imports aemands will
rise also. But we were already out of line

of the year.
that we had
could do on

bite. And of course when the move came,
that's what happened.
Q. So it wasn't necessarily that the
council convinced President Nixon?
McCracken: I'm still too close to it, so I
wouldn't want to get involved. But of
course several people have inputs into
Presidential thinking and policy. The Sec-
retary of the Treasury is the ranking eco-
nomics officer in any administration. The
chairman of the federal reserve board is
bound to be influential because he is chair-
ing such an important body. The Council
of Economic Advisors is part of this.
It would be just impossible to say that
this piece of the program originated from
this agency and that piece from somebody
else's process or consultation.
Q. Didn't the President at one point
come out with something, not "tut-tut'"
with guidelines saying he would publicize
the guideline violators.

That is, the rate of inflation had reached
its crest in 1969 and early 1970, of about
six per cent per year and then had work-
ed down in early 1971 to about a four per
cent rate.
Wage increases were not declining. It
was pretty hard to see how the under-
lying cost problem, cost trend, would make
it possible to make such further progress
on inflation.
When our merchandise trade, a f t e r
March. moved into a deficit, we clearly
were in an untenable international eco-
nomic position.
Q: Would you say that political discon-
tent, the increasing sense among the popu-
lation that something had to be done, or
that policies weren't working was also a
substantial factor.
McCracken: Sure. Yes, I think that's a
factor. To some extent, it's an independ-
ent factor.
Q: So there was in some sense a political
impetus?
McCracken: Yes, sure. I was not there
for political advice, but. certainly, after all,
government is a political operation. So
that's bound to be important.
Q: 'It seemed that inflation continued to
be a problem, unemployment stayed high,
and the earlier measures in the administra-
tion were not working too well. Do you
have any wisdom now why these things con-
tinued?
McCracken: Not entirely, not entirely.
Measures of fiscal and monetary restraint
were a necessary part. Also the quarrel
would have to be with how much more
restraint turned out to be necessary. To
put it the other way around, had measures
of fiscal and monetary restraint not been
undertaken nothing else would have worked.
So it was essential. It turned out that more
was neccesary.
The fact is that, for example, if you look
at the price equations in mathematical mod-
els of the economy those price equations
generally tend to understate the rate of
inflation. In other words, the estimates
would fall below- what actually occurred.
Another aspect of this that is pertinent as
one tries to think his way through it is the
extent to which his has been an interna-
tional phenomenon.
We've seen it of course in the United
Kingdom economy as it is in the American
economy now.
Inflation continues to roll along in spite
of rising unemployment and developing
slack in the economy.
To a greater or lesser extent this has
also been true in other economies. It's not
just isolated in one country. It raises the
question, "What is it in the modern indus-
trial society that may do this?"
There are certain things that one can
identify. It is true that three year labor
contracts are more prominent. You may
get wage increases negotiated in a highly
inflationary period that will then k e e p
pushing your costs up, even after you've
relieved the basic inflation.
Q: Was this something completely dif-
ferent? A kind of inflation that didn't re-
spond to supply and demand, something
that really had the economists confused
at the time?
McCracken: If you look at the literature,
you'll find that a good many economists
were talking about the price level - not
responding in the way expected. In the

*.

I

Checking for' Usexism

VICE PRESIDENT Allan Smith's memo
directing University administrators to'
check their employes' salaries for cases
of sex discrimination is a step in the right
direction but it has some inherent prob-
lems that reduce its credibility.
The review ordered by the Office of
Academic Affairs, besides mandating ad-
ministrators - most of whom are male -
to judge where inequities exist, is limited
In scope, by being restricted internally to
each department. Thus, each department
is to search just its own ranks without
comparing its positions with similar po-
sitions in other departments within the
University.
Meanwhile, since last summer, the Uni-
versity's Commission for Women (CFW)
has been conducting a similar review of
salaries. CFW fears the new procedure
may threaten its investigation, which is
crossing departmental lines and is thus
Editorial Staff
ROBERT KRAFTOWITZ
Editor °
JIM BEATTIE DAVE CHUDWIN
Executive Editor Managing Editor
STEVE KOPPMAN ............ Editoria± Page Editor
RIOK PERLOFF .... Associate Editorial Page Editor
PAT MARONEY .... Assistant Editorial Page Editor
LARRY LEMPEfT....... Associate Managing Editor
LYNN WEINER .........Associate Managing Editor
ANITA CRONE........................ Arts Editor
JIM IRWIN ...............Associate Arts Editor
ROBERT CONROW..................Books Editor
JANET FREY ................... Personnel Director
JIM JuMIB ...... ..... .Photograr v Editor
NIGHT EDITORS: Pat Bauer, Rose Sue Berstein,
Lindsay Chaney, Mark Dillen, Sara Fitzgerald,
Tammy Jacobs, Allan Lenhoff, ArthurLerner, Hes-
Kramer, John Mitchell, Hannah Morrison, Tony
Schwartz, Gloria Jane Smith, Charles Stein, Ted
Stein, Marcia Zoslaw.
COPY EDITORS: Linda Dreeben, Chrls Parks, Gene
Robinson, Paul Travis.
DAY EDITORS: Robert Barkin, Jan Benedetti, Mary
Kramer, John Mitchell, Hannal Morrison, Beth
Oberfelder, Tony Schwartz, Gloria Jane Smith,
Charles Stein, Ted Stein ,Marcia Zoslaw.
ASSIS'TANT NIGHT EDITORS: Howard Brick, Dave
Burhenn, Janet Gordon, Daniel Jacobs, Judy Rus-
kin, Lynn Sheehan, Sue Stephenson, Karen Tink-

the only comprehensive search unit ex-
tant. "If the University tries to abolish
our file review procedure, it will be act-
ing in very bad faith," charged CFW
chairwoman Virginia Nordin.
It is unclear exactly how many persons
would be affected by the new directive.
Smith said he was unable to give an es-
timate, since the issue can indeed be-
come nebulous. But, if the administrators
do submit - as the directive specifies -
names of female employes within their
departments they deem worthy of an in-
crease in salary because male employes
performing similar tasks receive a higher
salary, Smith estimated the increases
could be taken "off the top" of next year's
salary appropriations.
Thus, at least one possible complica-
tion has been averted - there presum-
ably would be no problem of submitting
names of persons allegedly victims of
sexism and then later discovering that
there is no money to provide the increases.
BUT OTHER complications remain, for
it is hard to believe the University is
indeed acting in good faith when it sub-
mits a proposal for finding sex discrim-
ination to those who may have been guil-
ty of initiating that discrimination.
Certainly it is ironic that the group to
be affected by Smth's edict - certain ad-
ministrators, librarians, museum person-
nel and researchers - includes many wo-
men, yet the reviewers are mostly men.
It is even more ironic that the group of
employes includes persons like Cheryl
Clark, a research associate in the High-
way Safety Research Institute.
Clark filed suit last summer against
the University for compensatory back pay
on the basis of sex discrimination in set-
ting her salary lower than that of a male
employe in the same job performing the
same duties. Clark's request - the first
such suit filed - was denied by both her

of superimposed on each other, it's a rather
complex and difficult problem.
Q. Could you summarize some of
the various techniques and mechanisms
that were used at various times through-
out the administration to try and deal
with these problems. What results did
you expect from these policies?
McCracken; There is no question but
what the first basic requirement was to
deal with the overheating of the econ-
omy which had occurred because of mone-
tary policy, particularly back in 1968 and
1967 - monetary police was too expensive.
It was on a course which would h a v e
made sense only if the economy had had
more elbow room on the top side for ex-
pansion than in fact occurred.
But of course the crucial problem back
in 1968 and 1967 goes back to late 1966.
We'd embarked upon a program of expan-
sion of defense spending for the Vietnam
conflict and also for certain domestic pro-
grams, but were not willing to carry out
the implications of that on the tax side of
the budget.
Consequently, we found ourselves at that
time in a position where the budget was
showing about a $25 billion deficit even
with the economy at full employment. I
think students of economic policy gener-
ally would say that the first and most
basic requirement at that time had to be
to turn around fiscal and monetary pol-
icy.
And I believe it is fair to say with no
partisanship involved that as a matter of
fact the basic budgetary thinking finally
started to ge turned around with the tax
increase in mid-1968. Monetary policy
started to turn around right at the end of
1968, if you read the minutes of the Open
Market policy committee carefully.
Now, one of the things that more people
find difficult to accept, is how long it
takes before a change in policy will show
Some visible effects on the economy. It's
like steering a big ship. You turn the
wheel and the ship doesn't make a right
angle turn. It continues on the same course
for quite a while. This is true of the
economy. And the impact of these changes
in policy didn't start to show up in the
economy until the latter part of 1969,
right toward the end of the year.
A more controversial issue would be
when should some kind of more overt par-
ticularized program to deal with the wage
price problem come into the picture?
So long as you have a generally overheat-
ed economy, like our situation in 1969, you
can't do much with it. This is quite clear
on the basis of international experience,
incomes policies throughout this pernod.
As a matter of fact, most world economies

Lv

there. If you look only at the external
things and disregard the domestic econ-
omy, therapy there might be still tough-
er than fiscal and monetary policy. We al-
ready had slack in the domestic economy.
It took a complex pattern of something
to deal more overtly with the wage-price
problem, a program of fiscal stimulus to
inject more stimulus into the economy, and
something explicit in the international area
to try to get our cost levels back in line.
Q: When did sentiment in the administra-
tion begin to move toward the opinion that
direct intervention was necessary?
McCracken: It came to fruition at
Camp David weekend. It was growing
through the summer of 1970, the summer
of last year. Arthur Burns, chairman of
the Federal Reserve Board, but not tech-
nically a part of the administration, as
early as December 1970 was calling for

McCracken: That's a good point. If you
look back, it would not be accurate to say
there was nothing giving expression to con-
cern about wages and prices prior to Au-
gust 15, so that we went from nothing to
total control. That's not correct.
Going back to 1970 and the so-called in-
flation alerts, we started to identify cer-
tain wage an price decisions and point
out the economic implications of them. And
now. does that kind of thing have any
impact? Well, it would certainly be diffi-
cult to say that it knocked percentage
points off the CPI. At the same time, there
isn't I think any question it had some
effect.
Now the barometer that I would use then
would be the telephone calls, that I got be-
cause there were prepared by the Council.
As a matter of fact, there was a cartoon
in The New Yorker showing a chairman

controls. I think sentiment was clearly of a corporation down under his desk, and

moving in this direction through 1971 and
accelerating after the early summer.
Q: When did your views begin to change
on this?
McCracken: I had felt for some time
that we were needing more stimulus in the
economy. You couldn't just go after more
stimulus without realizing that we had other
problems too. I guess my own feeling in
terms of something more overt in the
wage price area seemed to me to be be-
coming increasingly clear in early 1971.
Q: Prior to his announcement on August
15, President Nixon had often said he was
philosophically opposed to direct interven-

his secretary had come around and said
"You can come out now Mr. Snodgrass,
the inflation alert is over."
Well, I got a helluva lot of calls, and
of course wails of anguish from anyone
whom we pointed a finger at. It lifted the
visibility or the sense of consciousness
about these things.
And calls came in - "Suppose we were
to do something? Are you going to feature
us in your next blast?" In the case of the
steel prices, just about a year ago, I guess
we probably took more initiative on that
than anybody else.
We moved in. These kind of things have

old classical view. Why do you get infla-
tion? Well, you get inflation because too
much money is chasing too few goods. Well,
how do you solve that? Well, you make sure
the amount of money chasing goods is not
to much, and that's it.
Q: This was the view in the beginning
of 1969?
McCracken: I wouldn't quite say that.
As of early 1969 or late 1968, there was no
question in my mind about what the first
chapter in dealing with this would have to
be. A basic requirement is that when you
have overly inflationary fiscal and mone-
tary policies, which we had had,-you have
to -.nrr,.t. them~

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