The Economy: The Pragmatic Professor

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The new Administration has not set any definite percentage figure as its growth-rate goal, but Heller, in a speech in October 1960, pointed to 4½% a year as a rate he considered reachable "through good fortune and good management." By Heller's arithmetic, a 4½% average growth rate during the decade of the '60s would mean a gross national product of $790 billion in 1970, as against the $680 billion G.N.P. that a 3% rate would bring. The $110 billion difference, a sum considerably bigger than the entire federal budget for 1961, would amount to roughly $500 for every man, woman and child in the U.S.

Easing the Pinch. Heller's recipe for speeding up economic growth calls for a sharp break with the Eisenhower Administration's "tight money" policy. As its main instrument for preventing inflation and achieving price stability, the Eisenhower Administration, with the cooperation of the Federal Reserve System, relied on a policy of keeping interest rates high, and pinching the overall supply of money and credit. At the same time, it labored to cut down public spending and achieve a balanced budget.

Heller argues that high interest rates and budget surpluses are incompatible; an Administration has to choose one or the other. Since both tend to hold down demand, tight money and budget surpluses acting together have a gravely depressing impact on the economy. Some economists believe that the U.S. moved so swiftly from the 1958 recession into the 1960 recession because the Eisenhower Administration combined high interest rates with a mighty drive for a balanced budget in fiscal 1960 (a considerable shock to the economy after the $12 billion deficit the previous year).

By easing the pinch of tight money, Heller believes, the Kennedy Administration will be able to do a lot better at balancing the budget than the Eisenhower Administration did. The proper course, Heller holds, lies between the too-high interest rates of the Eisenhower years and the toolow rates of the Truman years.

Removal of Ignorance. Next to dropping the tight money policy, Heller's most important prescription for faster economic growth is increased Government investment in "our most valuable resource, the human mind." In Heller's thinking, education has an enormous economic value. He points out that the chronically unemployed are largely the uneducated and unskilled—the economy has jobs waiting to be filled, but only for the educated and the skilled. He sees in education the explanation of the "paradox of persistent poverty amidst growing plenty"; substandard education, he says, "dwarfs any other cause of poverty."

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