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JAMES GALBRAITH Tyson, Taylor, Clinton, Dole According to the New York Times , Senator Bob Dole has formed an economic policy team. This group is a dog4 breakfast of Reaganautical supply-siders Gerald Ford retreads and one bona fide egghead Professor John B Taylor of Stanford University. Dole’ s team has noticed that the economy need not be Bill Clinton’s winning issue. True, Clinton has enjoyed four years of steady economic growth, with falling unemployment and falling inflation. But the pace of growth has been slowabout half the average strength of past expansions. Working Americans feel neither prosperous nor secure. Opportunities for faster growth, lower unemployment and reduced inequality have been missed, or defeated. The challenge for Dole is to take advantage of this situation. And the challenge for Clinton, of course, is to stop him. Dole’s man Taylor was a member of the Council of Economic Advisers under George Bush, and he seems inclined to gloss over the dismal record of that last Republican administration. A key Taylor memo in May “acknowledges the positive aspects of the nation’s economic performance, but denies the President any credit for it,” the Times reported. Dole’s first argument is therefore that Clinton’s successes are “largely the legacy of Republican policies of the 1980s.” If this is true, Clinton at least deserves credit for not changing the policies bequeathed to him by George Bush. But policy did changethrough a huge deficit-reduction package in 1993. So the premise is false: we live under Clinton’s own policies. It is true that Clinton’s changes tended to make growth slower than it would otherwise have been. But this fact only creates difficulties for Dole. At the time, Dole’s complaint was that Clinton’s deficit reduction did not go all the way to a balanced budget, which would have slowed growth even more. Or, Dole can argue that the economy is not strongthat the voters should reject Clinton because of weak economic performance. But to go this route, there are two steps Dole must take. First, he must also reject the Bush record, which was markedly worse than Clinton’s. And second, he must produce a credible program that will spur economic growth and cause unemployment and inequality to fall. But here Bob Dole has a credibility problem. He has been for his entire political lifereasons, an anti-growth conservative, dedicated to balanced budgets above all. In the Reagan years, it was Bob Dole who led the Republican Senate to repair the worst excesses of the 1981 tax cuts, raising taxes in 1982 and again in 1984. More recently he has been the leading sponsor of the balanced budget amendment. What can Dole do? Reports have it that he will propose a tax cut: Reaganomics redux. But if he does, Clinton’s people will have a field day with his legislative record. A tax cut is the one thing that can make Dole look like more of an opportunist than Clinton. Could Dole turn into a pro-growth conservative on other grounds, for example by attacking high interest rates? Not likely under Professor Taylor, who has just published an article stating that under a policy rule he favors, “actual Federal Reserve policy was too easy in much of 1993, but after the tightening moves in 1994, it is again close to the policy rule.” Taylor also presented a paper at Harvard in April, 1995, in which he argued that the “natural rate of unemployment” was about six percent meaning that the current actual rate of unemployment, which is below six percent, threatens accelerating inflation. Since that time, Taylor continues to defend the concept of the “natural rate”against increasingly sharp attacks from his colleagues in the academic community. Dole’s top economic adviser, in other words, is an inflation hawk. He thinks that Federal Reserve policy should remain tight. He thinks that unemployment should go up, not down. In sum, Professor Taylor believes that economic growth should be slower, not faster, than it actually is. And Bob Dole himself has never offered one word of criticism against high interest rate, anti-growth policies of the Federal Reserve, so far as I know. Earlier this year, he co-sponsored legislation that would actually have ordered the Federal Reserve to disregard the unemployment rate altogether, focussing solely on fighting inflation, whatever the cost. This bill would have repealed the Full Employment Act of 1978 and the Employment Act of 1946. Clinton should have an easy time of this. Despite the weakness of his own economic record, it is better than we got under Bush. Clinton’s top advisers have made a good case for edging the unemployment rate lower, bit by bit, over the years ahead. And Clinton has never endorsed a “zero-inflation-uber-alles approach” to economics. But Clinton could have problems, if he isn’t careful. Clinton’s dangers come, first of all, from his own economic team, led by Laura D’ Andrea Tyson. Their claims that performance has been “outstanding” are not credible. This is exactly the mistake Bush made in 1992, claiming then that the recovery was strong when everyone knew it wasn’t. Clinton should stop saying such things, and he should stop his advisers from saying them. After all, there is still a danger that the economy could sour between now and November, in which case today’s exaggerations will look even worse than they do now. Second, Clinton should work on his own plan to create jobs, keeping in mind public reaction if Dole produces a growth program, however incoherent, and the President has no program of his own first. Such a development, not at all unlikely as things stand, would bring us full circle back to the political conditions of the summer of 1992. Dole seems to have figured out, as Clinton did four years ago, that you can’t fight nothing with nothing. Now Clinton had better remember that other useful lesson, which is that you can’t fight something with nothing, either. . James K. Galbraith is a professor at the Lyndon B. Johnson School of Public Affairs and in the Department of Government, the University of Texas at Austin. THE TEXAS OBSERVER 9 JULY 12, 1996