THE TWENTY-YEAR CENTURY: Essays on Economics and Public Finance by Felix G. Rohatyn
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THE TWENTY-YEAR CENTURY: Essays on Economics and Public Finance

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Successful partner in the investment banking firm of Lazard Freres specializing in mergers and the reorganization of troubled companies; member of a committee formed to save the New York Stock Exchange in 1970; head and main architect of the Municipal Assistance Corporation, or Big MAC, formed to save New York City from bankruptcy in 1975; Rohatyn has now become a formidable proponent of national economic reconstruction. With the New York Review of Books and congressional hearings as his main forums (and the main, though not sole, source of the essays and addresses in this collection), Rohatyn is most often associated with his idea of establishing a new Reconstruction Finance Corporation (RFC) on the Hoover/FDR model, to plan and coordinate the allocation of capital to rebuild America's infrastructure--bridges, public transportation, etc.--in order to provide employment, revitalize basic industry, provide a regional balance to economic growth, and otherwise rationalize the piecemeal and haphazard de facto economic planning that already goes on. (Steel trigger pricing and import restriction agreements with the Japanese are examples.) Rohatyn's RFC would raise the capital through stock and bond sales, as the MAC did in New York; a troubled industry, like autos or steel, could thus be aided without increasing its debt load. (In a 1981 article, Rohatyn criticized the Chrysler ""bail out"" because it was accomplished through government loans--which he thought, not-so-presciently, would finish off the company.) Rohatyn also continues advocating a 50¢ per gallon gasoline tax--though he is generally opposed to regressive, demand-depressing taxes on consumption--in order to bring discipline to our energy consumption and prevent still another future on price shock. The revenues from that tax, estimated by him to be in the range of $50 billion, together with savings from a 30 percent corporate tax and a simplified income tax (along the lines proposed by Senator Bradley and Representative Gephardt, with a maximum rate of 28 percent and the elimination of loopholes), could be coupled with defense and entitlement cuts to reduce the federal budget deficit to below $50 billion in four years. To make either Rohatyn's fiscal scheme or his RFC plan work would require cooperation from organized labor, the government, and business. RFC capital would be contingent on wage concessions, for example, and those would have to be voluntary. (This is an equity capital version of the austerity required by the IMF in its loans to the developing world.) The politics of all this are difficult, and Rohatyn's assurances that this can indeed be done democratically are not wholly convincing. (Unorganized labor rarely shows up here.) But his proposals for industrial recovery (without the cant invocation of high technology), for fiscal reform, for the stabilization of international monetary policy (he opposes most loans from private banks to foreign governments, and advocates the bankruptcy of Poland to force Soviet financial aid): these are all presented in detail, and with economy. Rohatyn's is an influential voice to be taken seriously, and this is the place to start.

Pub Date: Jan. 30th, 1983
Publisher: Random House