I FIRST MET WALTER WHEN HE ZOOMED ONTO THE NATIONAL

SCENE AS THE CHAIRMAN OF KENNEDY'S COUNCIL OF ECONOMIC ADVISORS.

WHAT HEADY DAYS! A NEW CAMELOT PRESIDENT; HUMPHREY

~ HIGH TIDE, AND TO TOP IT OFF, OUR WALTER HELLER AT THE

CENTER OF ECONOMIC POLICY. THE WORLD WAS OURS!

WALTER DI DN'T LE'r US DOWN . HE i1AY HAVE BEEN 'EHE MOST

INFLUENTIAL OF ALL THE CHAIRMAN IN THE COUNCIL'S HISTORY .

KENNEDY LOVED HIM, SO DID THE CONGRESS AND EVEN THE PRESS

LIKED HIM. WHAT'S MORE, -- GLORIES BEHOLD! -- WE COULD

EVEN UNDERSTAND HIM!

~f!J ~~D

__ ---EQ-~OMIS~ AS A NEW SENATOR, I LIVED IN

REFLECTED GLORY. WALTER WAS BEFORE THE CONGRESS ALL OF

THE TIME. HE BRIEFED EVERY PRESIDENT AND APPEARED ENDLESSLY

ON THE NATIONAL NEWS.

HE WAS BRILLANT. HE COULD MAKE THE COMPLEX SEEM SIMPLE

AND MAKE THE SIMPLE FEEL COMPLEX.

HE PREACHED A HEADY GOSPEL: A WISE PEOPLE COULD SHAPE

A HEALTHY GROWING ECONOMY. WE WERE NOT DOOMED TO SUFFER

GYRATIONS , STAGNATION AND MISERY.

I KNOW NOW, MORE THAN I UNDERSTOOD AT FIRST, WHY I

SO ADMIRED HIM.

I DID SO BECAUSE WALTER ALWAYS CARED. ECONOMICS, AS

TAUGHT BY WALTER WAS NEVER THE "DISMAL SCIENCE"; ECONOMICS

WAS NOT AN ABSTRACT Ion : IT HAD A PURPOSE, TO HELP PEOPLE,

TO EXPAND OPPORTUNITY- TO ENLARGE JUSTICE; AND TO CARE FOR I

THE VULNERABLE.

HE WAS ~A~r=i=-~v~ MARVELOUS TEACHER, NOT ONLY OF PRESIDENTS,

BUT OF STUDENTS AT HIS BLESSED U OF MINNESOTA. JUST BEFORE

HE DIED, HE TOLD HIS FAMILY HOW THRILLED HE WAS TO BE PREPARING

HIS FALL LECTURES FOR HIS FRESHMEN COURSE

,; ~ ,,;;c 'J.L- u...r HALL. l¥HIS IS EXACTLY WHERE WALTER WOULD

SERVICE TO BE HELD.

HERE AT WILLY

WANT HIS MEMORIAL

IN HIS DECENCY SHOWED IN HIS WONDERFUL FACE AND HIS BEAUTIFUL

4 SMILE.

---I FEEL THE SAME ABOUT WALTER AS I DID WHEN HUBERT DIED ~

- A SAD FEELING OF ENORMOUS LOSS AND A DEEP CERTAINTY THAT /

~ HIS WORK WILL ENDURE. ---- ----------~ -

~UOT~SHAKESPEAR~-;,;;;- I',? LIKE _T~ ~L~~~!!=~ ~~

- 2 -

r:;~~ AG= ). , HE SAID

-----.. -~-.. ~ . ~.---- ... -- ........ --- --

"A STRAIGHT BACK

WILL SLOPE;

A~EARD

WILL q~ vfRfrE;

A CURLED PATE

WILL GROW BALD;

A FAIR FACE WILL

WITHER;

A FULL EYE

WILL WAX HALLOW

BUT A GOOD HEART

IS THE SUN AND THE

MOON, OR RATHER

THE SUN, AND NOT

THE MOON, FOR

IT SH INES BRI GHT

AND NEVER CHANGES,

BUT, KEEPS ITS

COURSE TRULY."

WALTER'S GREAT HEART KEPT ITS COURSE TRULY. IT DIDN'T

REFLECT LIGHT; IT PRODUCED IT.

WE WILL MISS HIM, ALWAYS.

- 3 -

Heller: Presidential Persuader go,

mist reminisce((about his public career.

NYT 6/21/87

W AL TER W. Heller, chief eco­nomic adviser to Presidents Kennedy and Johnson, came of

age in the postwar era when many of the most creative economic thinkers were drawn to the theories of John Maynard Keynes. But Mr. Heller. who died last week at the age of 71, was un­usual in that he was In a position to apply those precepts. Moreover. he was an enormously personable man with a soothing manner that served him well in convincing Presidents to follow his prescriptions, even when they clashed with political expediency.

On a visit to New York earlier this year from his native Minnesota, Mr. Heller talked with Ky le Crichton, the Business Forum editor, about his ca· reer as a PresIdential counselor. His reminiscences provide a fascinating glimpse into the Inner circles of power and a reminder of how great policy decisIOns are often made by people who may have had something more Impor· lant on their minds that day .

Q. You have called yourself an "educator of Presidents." A. This is perhaps self-serving, but I

was struck last spring when somebody introduced me as the economist who ad­vised more Presidents and Presidential candidates than any other economist. I guess that's right. Going back to Adlai Stevenson, I worked - well, he didn't think much of economics and working with him as an economic adviser was not a terribly demanding thing - but I was one of the inner coterie there, and worked with Humphrey, Mondale, Ken­nedy, Johnson and Carter and so on.

Q. Of all the Presidents and Presidential aspirants you have known, who was the smartest? A_ Mondale was, ~ would say, the

brightest of the lot, the one who not only understood something while you were explaining it to him but retained it. And if you had a meeting with him three months later and went over the same ground, he would say 'Yeah , I've got that, let's go on from there.'

Q. The Kennedy tax cut. which touched off an economic boom that lasted almost a decade, Is generally regarded as the seminal economic event of the 1960's, perhaps of the postwar period. Do you regard It as such? Was It your Idea, as history seems ready to concede? A. As far as our activities in. the 60's,

everything started with - it 's immod­est to say so, but it was - my tax cut. It was born on my desk, and at the time not with the cooperation of my two col­leagues on the Council, Kermit Gordon and James Tobin.

It was Clear that we were not going to

reach full employment under the bur­den of that heavy income tax - which at the time ran to 91 percent marginal rates. It was then, in March 1961, that I began pushing for a major tax cut, which President Kennedy eventually proposed in 1963. That was the first time in history that a President specifi­cally endorsed and adopted the Keyne­sian approach - the first President who was willing to say that a deficit could be a good thing. I know, because I wrote the words for him. I had a fasci­nating experience WIth him on it.

Q. What happened? Old you have a difficult time converting the President to Keyneslanlsm? A. In a sense I felt that the milestone

in the education of a President in ap­plied Keynesian economics occurred in January 1963.

At the last minute, four days before it had to be printed, I took 22 typewritten,

double-spaced pages to the pr.esldent. I thought I'd just give them to him, tell him a little bit about It and then let him read it and tell me what changes to make. But he was a speed reader, and by now he was pretty savvy on the eco­nomic front. Of course, economic advis­ers always claim their President Is savvy, but Kennedy really was. Al­though, always within limitations.

But. instead of having a little conver­sation and dismissing me he said, 'No. I'll go over it right now.'

Now you have to remember that the tax cut was a totally Innovative thing. because we had no recession. The econ­omy was moving up. We had a substan­tial defiCit, and never before had any President had the wit or wisdom to put in a tax cut in an expanding economy with a big budget deficit.

Anyway, we were standing there -he on one side of his desk and I on the

Continued on Page 13

2 Rms., ElK, Microwave, 7 M.P.G.

ByN. R. Kleinfield

Page 4

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THE NEW YORK TIMES, SUNDAY, JUNE 11, 1987 F 13

Reflections on a Career as a Presidential Counselor Continued (rom PaRe I other - and he flipped through the speech In perhaps no more than 10 minutes, maybe less, and then tossed It to me and said ' that ' s fine.' I said, laughing, 'My God, Mr. President, you're sure shOWing a lot of confl· dence In me.'

He said 'Sure, why not? ' ' 1 said, ' Don 't you know I have you

saying something In there that no other President hal ever said - that a deficit under certain circumstances can be a good thing ; that there are constructive deficits and destructive deficits and It depends on the circum· stances?

He said 'Well , all right, let me take another look at that.' And so he went back and he looked at that part, and he changed one sentence, just very moderately, and then he tossed It back to me and said 'let's go.'

Q, You said wt the best youna minds were attracted to econom· luln the wake of the Depreulon.

A. Yes, and then the best minds In the field were very literally attracted to the Kennedy Administration. When Jim, Kermit and I were assembling the Council of Economic AdvIsers we had almost no turndowns. Almost without exception, whoever we asked was glad to serve with us. I maglne a council that had Jim and Kermit and a staft with Ken Arrow and Bob Solow. I operated it as much as I could as a coordinate counCil, quite contrary to Ihe advice of one very towering econom ist from Harvard.

Q. You are referTInlo of course, to John Kenneth Galbraith? ,... Good old Ken Galbraith, whom

I'm very fond of - we're good fr iends - but he Is fundamentally patronlz· Ing In his way, and he came over and he said, ' Now Walter, I know the Ken· nedys very well and I want to share some thoughts with you, and one Is that I don 't thlnlt economlsLS should advance on the President en masse.' He urged me to keep that authority In my own hands, and so forth. I did just the opposite.

Q, You said In a 1N1 article that you were pushing for a IU

· revision wt wouid close the maraJnal rates from a range 01 10 to .1 pen:eot down to 14 to II percent, and eliminate virtually

· all1oop11olet and preferences. A. Where does that come from?

Q. It wu a COYer story in Time magazine. "Heller advocates a radical prosram 01 IU reform, but COftMrvatlves eouId weU su~

· port it unleu. .. " A. Isn't that interesting? f'd forgot·

ten thaL Well, go ahead, read IL

Q, "Heller conalders the present Income tax structure not only Inequitable, but uneconomic too. It ImpedH economic effl· clency by dlatortlnl economic decision .. So a tax reform, he be­lieves, would Improve the econ­omy's overall efnclency" ," The dlacuaalon hun't chanled much throulh the yea .... bat It?

A. I wrote the first article on tax re­form In 1951. At that time we needed additional revenue for fighting the war In Korea without Innatlon. So I .uggested eliminating all these dlf· ferent categories of tax preferences Instead of raising rates.

Within a year or two, Joe Pechman took that, converted It Into a thor· oughgoing examination of where the base was being riddled with these special provisions and calculated that you could reduce the rates by 40 per· cent If you closed all the loopholes and preferences.

Q. One otller part 01 thla INI article haa a familiar ring to IL It states that "an excltlnl new con­cept In economlca. , ,"

A. Oh, yet.

Q. "with Vaal ImpUca!lonll for public policy, , ," President Kennedy naming Walter Heller chainnan of the Council of Economic Advisers, A. Of course.

Q, "Ia the Investment In human caplta~ knowledle, skllla and In· ventlon, rather than In tanaJble capital." Another areat Idea that we redlacover periodically? A. Well, I had been working with the

National Education Association. It was a new concept to them , they just loved it - the Idea WI one could think of education II an Investment. But the Investment In human capital lOa. something Kennedy endorsed and understood. It 1081 extraordi·

narily dlltlcult to devlsc good pro­grams in that field. We did our best, which wasn 't tcrr ibl y good.

Q. Back to Presidents. You said that Kennedy was a qul<k study, What about President Johnson?

A. Well, Johnson was also extraor· dlnary. I think he had a areat I.Q., but he didn 't want to go into things in the same depth that Kcnnedy did. Bill Moyers once said to me. 'One thrng you ought to know IS that you don' t

Who Was Who, Circa 1962 Kenneth J. AIrfIw Professor

of economics at Stanford ; won the 1972 Nobel Memorial Prtze In Economic Science; economist. Council 01 Economic Advlaers, 1962 ; prealdent, American Ec:o­nomlcl AsIocladon, la13.

Kennft Gordon Member o( C.EA, I96HI1 ; directed the Bu· reau of tile Budlet. 1962-65 ; presl· dent 01 tile Brooklnp fn.liNdon, 1967·78; died In 1978.

Joeeph A. PKtln .. SenIor fellow of the BrookJn&s Instltu-

tlon; economist. C.E.A. 1954-56; consultant to the C.E.A., 1961~9; leading analyst of the tax system.

Robert M. Sotow Professor 01 economics at the Massachu· setts Institute of Technology; staff economist, C.E.A., 1961~2; president of the A.E.A-, 1979.

...... Tal*! Professor of economics at Yale University ; won the 1981 Nobel Memorial Prize In Economic Science; memo ber of C.E.A., 1961~2 ; president of the A.EA, 1971.

want to bring your mcmos ovcr hcre In a wheelbarrow.' So I developed this staccato style for him . where the stuff was put in a highly digestible (arm.

And to my great embarrassment . PreSident Johnson held up one of my memos at a Cabinet meeting one lime, and he sa id, ' Herc 's one of Wal · ter Heller ' s memos. See how It 's set up? That's the way I want you all 10

wrtte your memos.' God. How to lose friends and alienate people - I could have sunk through the floor.

Q, By this time, you were be.et with that gath~ring Vietnam War Innatlon. How were you dealing with It? I suppose that. for politi· cal .. alOft&, Prealdent Johnson Jllat didn't want to hear about tackllna Inflatlon? A. That ' s true. He asked me to stay

until after tile election, which I did (or a year. But even after I went back to Minnesota, he would have me come down to the ranch or the White House for a couple 01 days, so that I contln· ued to work with him.

We wanted to apply Keynesian eco­nomics In reverse - that Is to cool off an overheated economy with a tax In· crease rather than stimulate an underutlllzed economy with a tax cut. We couldn't sell him. He cailed me down to the ranch in December 1965 - the occasion was that he was sore as a boll .t the Fed chairman, WII·

liam McChesnry Marlin. for raising the discount rate.

When I arrived hc was Just (ulm i· nallng about the Martrn double·cross - you know. stabbed him rn the back and so forth - and I was In a le rrlble quanda ry. Now. how a m I gOing to get across the Idea thai the reason Mar· lin IS dorng thiS IS that a lU!regate de· mand Is beginning to mount . and that hiS only mistake wa s not fir s t comrng to the PreSident and say 109, . Look , unless you put a tax mcrease into your budgct program for 1966, I'll have 10 mc rease the discount rate and tighten money.'

In the middle of a ll IhlS, I was trying to sell him a tax Increase, a very modest 5 percent surtax on the Individual Income tax. What gave me some help was that we sat down after dinner and here was a wonderful cable saying that a Commerce De­partment survey showed a 16 percent jump in real terms In plant and equi~ ment spending was coming up in 1966. I said, 'You know, Mr. PreSident, this spells trouble, because we' re very close to full employment, and we need' - we got interrupted - ' a tax increase' - and we got mterrupted again. The subject didn't come up again until the next mornmg while we' re deer hunting In a white Conti· nental convertible.

And here's the President driving. We're on the ~ack 2,000, which I.

about (our miles from the ranch house, and George Hamilton i. slttlna up Ihere. Hamilton , who had told me the night before that he hadn't had a gun In his hand for live years, tapped me on the shoulder and asked me If I was nervous. I lied through my teeth and sa id no. But I was the spotter -the President driving - the best auto­mobile driver I've ever seen. He gunned It over dirt roads, through water, at 50, 60 miles an hour.

Q, In a white Lincoln?

A. A white Lincoln convertible. And he goes right on with our conversa· lion of the night before. No matter what he was domg, whether he was gomg to the tOilet or whatever, he 'd conllnue the conversallon. Out of the 22 hours that I spent at the ranch, I spent 17 hours with him. And so he said, while barreling a long these dirt roads, I understand you want me to ask (or a tax mcreut'. What do you want me to do, call Congress back mto speCial session? This IS Decem· ber. And rcscmd those excise tax reo peals? He was very wily. Those were temporary excise taxes dating from 1933. and we were so glad to get rid of them he knew damn well I wouldn't advocate thai .

And I said, no, no, not that Mr. PreSident. Let ' s have a surtax on the Income tax. Well, he said, I can 't get a handful of vote. on t!lther SIde o( the a isle of either House of the Congress on that. And so he dldn 't a.k (or It until January o( 1967, and because Congress feared a recesslon,lt wasn't cnacted unlll 1968. By then, Ihe infla· lion tiger was out of the cage.

Among the many tragedies o( Viet· nam. one of them was that It Simply negated the great KeyneSian expert· ment In economics.

Q, Has Keyneslanlsm survived the war, the 70'. and Rea .. nom· I<.? Is there any chance the ell, periment will be resumed? A. There's no question that it has

surv ived, despite the claims o( the monetarists and in spite of the chal· lenge (rom the super supply siders -punk supply siders, as Herbert Stein so aptly calls them.

What we have today is a kind of modified Keyneslanlsm that could be called the mainstream In policy thinking these days. I call myself a chastened Keynesian, after the beat· Ing we took In the 1970's, with slmul· taneous high unemployment and high inflation, the stagnation bugaboo. We've built In Milton Friedman's natural rate of unemployment. We've tried to deal with stickiness in wages and prices. This modified Keynesian­Ism still provides the most satlsfac· tory guidance for policy, and the moat satisfactory explanation of the re­sponses to policy. •

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