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~