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09/30/91

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Bush considers economics in every major decision

George Bush is the type of president who considers the economics of the situation in every important decision, the chairman of the president's Council of Economic Advisers said at Stanford on Saturday, Sept. 28. But the realities of politics sometimes alter the results, Michael Boskin noted.

Boskin, on leave from his position as Burnet C. and Mildred Finley Wohlford Professor of Economics at Stanford, spoke to friends and alumni of the economics department and the Center for Economic Policy Research. In his prepared text, he outlined a cautiously optimistic view of the short- and long-term prospects for the economy. But in answering questions, he also offered a glimpse of the life of an economist in Washington.

Imagine a pinball machine, Boskin said, where every bumper is a lesson from an Econ 1 text: macroeconomics, microeconomics, price theory. "Then imagine me as the pinball." Part of his job is explaining different aspects of basic economics to senators and congressional representatives -- for example, trying to show politicians from Texas or New England "that a tax on oil will not ruin the country."

He warned that Stanford must be aware of the political climate for its affairs, particularly in a tough fiscal environment where support for research universities is being balanced against other priorities that people may understand better.

"The university has to understand that it's operating in the world that it's operating in, not just a world where you have accounting rules and legal opinions. You have to be aware of appearances and be aware of when you're subject to someone who'd like to take you down a notch," Boskin said.

Boskin said economic indicators show that the most recent recession ended in the spring, but told his audience to expect relatively low growth over the short term. Over the long term, he said, the United States faces economic problems due to its poor savings rate, poor turnaround on research and development, and the crisis in the banking system. But these are not insoluble: "We are building on a rich base," he said.

He said that of the long-term problems that must be solved to steady the U.S. economy, the most important is investment in human capital -- particularly strengthening the nation's elementary and secondary education.

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