PRODUCTIVITY QUESTIONS SPLIT ECONOMISTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B01152R001101440035-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 21, 2016
• Document Release Date: April 30, 2008
• Sequence Number: 35
• Publication Date: June 19, 1983
• Content Type: OPEN SOURCE

Approved For Release 2008/04/30: CIA-RDP85BO1152RO01101440035-1
r
lit e.cono
By MICHAEL FLAGG
srse w.uw
DURHAM -. Martin. S. Feld-
stein, President Reagan's top eco-
nomic adviseri had just finished a
speech on business productivity to
a group of economists and busi-
ness executives last week at Duke
University. Then Robert Nathan, a
Washington consultant and a Dem-
ocrat, stood up and asked: "But
Marty, when are we going to see
some changes?"
The 65 participants in the White
House Conference on Productivity
agreed that changes in the nation's
economy are necessary to buck up
industry's anemic productiv
rate. But Nathan's challenge
highlighted the kind of differences
that split some participants along
ideological and political lines.
Productivity - output for each
hour worked - grew by only 0.3
percant in the United States during
most of the 1970s, below the rate of
many other industrialized coun-
tries.
Although it has improved in the
past year,. there's still concern
that less productive American in-
dustries are at a disadvantage in
world competition.
Feldstein contended during the
conference that- only by reducing
federal budget deficits can inter-
est rates be lowered, providing
cheaper capital for American in-
dustry to renovate aging plants
and boost output per worker.
But next year's federal budget is
tied up in negotiations between the
House and Senate, each of which
has proposed differing versions.
The News and Obsarrer, Raleigh, N. C.. Son., dune 1g, V9ga
Reagan has vowed to veto any
compromise budget bill he thinks
would compromise his attempt to
hold down spending.
Like the budget wrangle, solu-
tions to the productivity problem
will. involve- politics `as much as
pure economics, some of the Duke
participants said.
"Feldstein's talk was basically
political," Nathan, chairman of
the board of Robert Nathan Asso-
ciates, -said in an interview. "It
doesn't fit together any more than
the rest of the Reagan program."
Nathan believes the deficit is an
impediment to increasing produc-
tivity, but says Reagan's program
of tax. cuts prevents the federal
government from reducing its
debts. The next cut of 10 percent in
income taxes takes place July 1.
"But right now we need relief on
the deficit instead," Nathan said.
Others offered differing solu-
tions. Donald Fullerton, an assis-
tant professor of economics and
public affairs at Princeton Univer-
sity, said tax reform is the single
most important change needed to
boost productivity.
"We have a diverse and crazy
system of tax incentives in this
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Productivity questions split economists
(continued from previous page)
The rate hit 8.3 percent in the first
Productivity - output, for each hour three months of 1983.
worked - grew b only 0.8 percent in NO~y knows why productivity
by y p growth has slumped since 1967,
the United States during most of the + though dozens. of explanations
have been ..advanced by econo-
1970s, below the rate of many other in- mists. L. William Seidman, dean
dustrialized countries. 'of the College of Business at Ari-
zona State University and chair.
man of the= national
d
t
country," Fullerton said in.an in-
terview. "There are investment
tax credits for some investments,
and not for othersi with no particu-
lar rhyme or reason." Taxing cer-
tain kinds of investments; Fuller-
ton said, discourages some useful
investments that would increase
productivity.
Tax policy - either incentives
or higher taxes - affects produc-
tivity by channeling the flow of
capital into plants, equipment and
research and development.
Vito Tanzi, director of fiscal af-
fairs for the International Mone-
tary Fund in Washington, favored
a combination of both approaches.
"Certainly the wide dispersion of
tax rates is a problem," he said.
"Certain investments aren't
taxed, and people are playing
of shifting investments
gamed.'
Tanzi would reduce the federal
deficit by cutting expenditures if.
possible, or by increasing taxes as
a second choice.
From 1947 to 1967, productivity
in the United States averaged in-
creases of 3.1 percent yearly. Then
the growth rate declined until last
year, when it began improving.
ro
c
ivi
conference,. mentionedp severalu ity
n
a speech earlier this month.
Among them" were a low rate of
savings, decreasing capital spend-
ing, the "antagonistic relationship
between labor and management
and government" and "our liti-
gious society; with its tremendous
cost in time and money."
Seidman. also blamed govern-
ment regulations, tax laws, feder-
al deficits and reduced spending
for research. and development.
The White House Conference on
Productivity;'created by President
Reagan, wilP'attempt Co find solu-
tions to these problems in three
more regionalm conferences this
summer and a national conference
in Washington in September. The
first conference - the two-day ses-
sion last week-at Duke - focused
on the problems of creating more
capital for . business investment.
The next tbrea~will look at human
resources, the?role of government
and private sector initiatives.
Said Fullerton: "It's hasn't gone
as well as jt.c, ild. Some of the dis-
cussion has been fairly diffuse, but
I think we're all learning some-
thing. I'd say it was worth the
trip.
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