Friday, Nbvember 5, 1982
The Michigan Dailyl
Edited and managed by students at The University of Michigan
Vol. XCIII, No. 50
420 Maynard St.
Ann Arbor, MI 48109
Editorials represent a majority opinion of the Daily's Editorial Board
Wall Street reacts
IN AUGUST of this year, President
Reagan stood in the Rose Garden
and told the world that Wall Street was
reacting with joy to his economic,
policies. The Dow Jones Industrial's
jump of 38.81 points on August 17,
Reagan said, was all due to the magic
But things have changed since
August, and the boys in downtown
Manhattan are now telling the
President 'that he is wrong.
Reaganomics scares them, and the in-
jection of Democrats into Congress is
going to be a big help.
The day-after-election record-setting
Wall Street rally means a number of
things, analysts say. One is that the
election brought no surprises. Neither
the Republicans nor the Democrats
were mauled. Another is that enough
Democrats made it into the House to
break the ideological hold the Reagan
administration had over Congress, a
hold that was killing the economy.
In August, no one on Wall Street said
the market's phenomenal rise was due
to a bright economic picture. Quite the
contrary, the quickening recession was
leading to a slack in inflation and a
major drop in interest rates, an event
for which the Bache-Merril, Lynch-
Loeb Rhoades analysts were dying.
Again and again Reagan took the
credit for the index rallies, and in an
ironic way he was right, but not in the
way he intended. The market was
reacting to bad news, not good.
With 26 seats in the House coming
over to the Democrats in this elec-
tion-and few of those seats are on the
conservative edge of the Democratic
party-the administration will be for-
ced into compromises on the economy.
No longer will skillful political per-
suasion and armtwisting swing a
defense spending or tax cut vote
Reagan's way.The block to the left is
now too strong.
So Wall Street heaved an enormous
sigh of relief, and in the process, shot
the market to record highs. The
message the business leaders of the
nation are sending the White House is
very clear and contradicts Reagan's
political happy talk of the past two
months: The economy needs correc-
tion, not Reaganomics. Compromise
with the Democrats, cut defense spen-
ding, cancel the 1983 tax break, and
reduce the staggering federal deficit.
Now the president must listen, and
A re public works projects
a solution to the 'depression'?
By Franz Schurmann
Social Security warning
T HE SOCIAL Security system system cannot continue to operate as it
wheezed some more this week. has in the past.
Today, in order to cover the Novem- It wasn't terribly surprising that
ber Social Security checks totaling Social Security officials waited until
some $12.2 billion, the old age trust the day after the election to announce
fund will take out a $1 billion loan from today's loan. Social Security has been
the disability benefits trust fund, a delicate subject for politicos for
another separate fund within the Social years-and the prospects that the
Security system. needed changes will be made to the
The loan is more than just borrowing program soon seem remote. The two
from Peter to pay Paul. For the first obvious solutions to the problem-
time since Social Security started either cutting benefits or increasing
paying benefits in 1940, the old-age taxes-are anathema to members of
fund has literally run out of money and both houses of Congress. President
has been forced to start raiding the Reagan, who in 1980 campaigned for
other funds for cash. Years of ac- Social Security reform, has relegated
tuarial insanity are finally catching up the matter to the "National Com-
with the system, and this first loan is a mission on Social Security Reform."
warning sign of very serious problems But the government cannot
which will confront the Social Security equivocate any longer. As today's loan
system in the upcoming months. to the old-age benefits trust fund
shows, the system is running out of
Simply put, the Social Security money rapidly.
system is broke. For several years, the The nature of the problem dictates
program has been paying out more that, one way or another, a decision on
money than- it has been collecting. At Social Security will be made in the
current rates, it will gobble up the two coming months. Either the gover-
healthy trust funds in the system nment will take a deep breath and start
sometime in 1984, at which time it will to look at various alternatives or it will
be left with no money, considerable continue to put the issue off until, one
debts, and no apparent means of presumes, benefits are cut. The longer
paying its debtors. Pensioners will the government waits, the more
receive their benefits in full and on remote a satisfactory solution
time this month, but it's clear the becomes.
NEVER MINPTHE FINE PgINT-Y0U CAN SEE
THE 6ENERALTREMP HAS BEEN UPWARP'
When Nobel economist George Stigler
suggested at a White House reception that the
country is in a "depression," he made more
than a political gaffe. Use of the word,
tabooed in official circles, implied a call to
government to abandon its hardline supply-
side position and use its powers to get the
economy moving again.
Stigler is a member of the Chicago school of
economics, devout opponents of government
intervention in the economy and true
believers in the great curative powers of the
THUS, HIS implied call for government ac-
tion was reminiscent of John Maynard
Keynes' abrupt ideological switch in 1929,
when the great advocate of market forces
called on the British government to fight the
depression with big public works programs.
While there are no signs that Stigler ad-
vocates similar ideas, or that the Reagan
administration is considering them, there
recently has been a spate of proposals, mostly
from liberal and neo-liberals, for creation of
1930s-style public works programs.
Newsweek, in its agenda for action on jobs,
called the notion of replicating the New Deal's
Works Progress Administration (WPA)
programs "nearly irresistible."
America's infrastructure needs major
repairing, no doubt about it. There are two
kinds of infrastructure: human (meaning
schools, hospitals, nursing homes, etc.), and
physical (roads, rails, ports, etc.). Few if any
of the proposals call for a big jobs program
for the former. The stress is all on rescuing
the interstate highway program from crum-
bling, on rebuilding sewage systems, on
SUCH PROGRAMS could put to work
thousands of jobless, particularly the young
and able. And they presemably would meet
with broad popular approval. A newspaper
survey of citizens' political concerns in Evan-
ston, Ind., for instance, indicated that filling
potholes was their top concern.
For many liberals, such a new infrastruc-
tural restoration program is economically
feasible for one simple reason: Even a small
amount of "fat" cut from the swollen defense
budget could get the program off the ground.
Robert Kaus, writing in the October issue of
Harper's, puts the cost of creating one million
new public works jobs at $12 billion, less than
5 percent of the current defense budget.
Ironically, the Reagan administration, by
having insisted on a huge defense budget and
radically pared down social spending
programs, may have set itself up politically
for a switch of funds from defense to public
works. If the economy does not recover, the
administration may have to bite the bullet
and institute such a public works program.
A REAGAN public works program, if it
should materialize, would probably move
through Congress with ease. But it would be a
dangerous illusion to think such a program
would or could be the beginning of a new
WPA, of a neo-Keynesian type of pump-
priming action for the economy as a whole.
In the 1930s, WPA was much more than a
broom-and-shovel operation meant as work-
fare. It was part of a vast government
program to build a new physical infrastruc-
ture which would be necessary for an expan-
ding consumerist society when things got bet-
ter. The giant Tennessee Valley Authority
(TVA) project laid the basis of the South's in-
dustrialization and modernization. The
government built the first transcontinental
highway system, literally paving the way for
suburbanization and interstate commerce. It
built'giant dams like Grand Coulee and
Hoover to generate power for expanding
cities and industries.
Then, there was a national consensus as to
the kind of physical-and human-infra-
structure the nation needed. Now, it is just the
APART FROM maintaining the existing in-
frastructure, there is no consensus over
whether to build new or no roads, rails, air-
ports, and dams. Liberals-then vigorously in
favor of high growth-now have become ad-
vocates of zero or slow growth. High growth,
in the eyes of the environmentalists, has
become identified with rapacious developers.
The lack of consensus is even greater in
regard to the kind of human infrastructure an
increasingly aging population wants. Not*
surprisingly, the proposals for public works
programs remain silent on this subject.
Another reason for not rushing headlong in-
to vast new public works projects is the fact
that the New Deal programs worked best
during World War II, thanks to the gover-
nment's ability to militarize society and pay
workers low real wages from which a healthy
sum was extracted in the form of savings
bonds. That got down the mountain of debt
and set the stage for the postwar consumer
boom. Clearly, World War conditions do not
exist today, for which we may be thankful.
If a new public works program financed
with defense budget fat passes Congress,
most Americans probably would welcome it.
But it would be naive to think it could be the
first stanza in some great 1980 replay of the
Schurmann is a professor of history
and sociology at the University of
California at Berkeley. He wrotethis ar-@
ticle for Pacific News Service.
LETTERS TO THE DAILY:
Free scrimmage 'too little, too late'
To the Daily:
Basketball Coach Bill Frieder
calls his free-of-charge in-
trasquad scrimmage "something
special" to try to involve
Michigan students in the up-
coming basketball season. As a
student season-ticket holder, I
think the free of charge scrim-
mage is too little, too late. The
idea of an attention-getting
scrimmage simply does not ad-
dress a much larger problem
with Michigan basketball's at-
tractiveness to students.
The problem concerns the
scheduling of many Michigan
home basketball games. For the
second season in a row, students
who live out-of-town will lose a
number of games due to vacation
days. Last season ('81-'82),
I am from Grand Rapids and I
don't know how many of these
"vacation games" I will be able
to return to AnnArbor for.
As students, we are supposed to
be getting a break on the cost of
the tickets since we get them for
half price. But for me and other
out-of-town students who try to
return for the games, the savings
is erased by travel costs.
Then to rub it in, last year the
athletic department stated that it
was sorry that three Big Ten
games were scheduled for spring
break-but they said it didn't
matter much as the "die-hard"
fans all live in Ann Arbor
anyway. Just what does a guy
have to do?
When I read that the athletic
denartment did not care if I came
going to' anotherMichigan
basketball game again. I won-
dered what those fools in the
athletic department really
thought of student participation?
I do feel that Coach Frieder is
concerned and wants to attract a
good student crowd. Coach
Frieder has brought teams into
Assembly Hall and Mackey
Arena and he knows what a
screaming bunch of crazy
students can do to an opposing
One of the best, loudest crowds
in recent Crisler Arena history
attended the Michigan-
University of Toledo NIT game in
1981. Crisler was really rocking
with a great basketball crowd,
but it took 7,000 Toledo fans to do
it Whv rcn't we fill Crisler Arena
the Big Ten season?
Why can't the band cut loose
and take charge of the crowd
throughout the game as it does in
Yost Ice Arena for hockey
This year games will be a lot of
fun to watch, and I can see only
good things in the future for the
Michigan basketball team. It
would be great to build a wild, en-
thusiastic student section that
would raise the roof off Crisler's
Cathedral or Cazzie's Castle and
delight Don Canham with a string
of sellout crowds for every game.
It is nice to know that the team
and the coaching staff wants
student participation. I wish the
athletic department would start
to see things the same way.