Business: The High Cost Of David Kennedy

Treasury Secretary David Kennedy is becoming an increasing source of embarrassment to the Nixon Administration. His chronic foot-in-mouth habits, which are costly in terms of both dollars and prestige, began to be revealed the moment that he was appointed. Last December, Kennedy said that he wanted “to keep every option open,” including the option of asking for an increase in the price of gold—and that set off a new flurry of gold speculation on the London market. In June and again in July, he said that the Administration might be forced to consider putting controls on wages and prices. President Nixon issued firm denials, but Kennedy’s remarks shook business and caused sharp dregs in the stock market.

Last week Kennedy did it again. During questioning by friendly Republican Congressmen on the Joint Economic Committee, he was asked whether the current 4% unemployment rate was “acceptable or unacceptable.” Ignoring a prepared statement that a staffer hastily handed to him, Kennedy replied with more candor than tact: “Under present circumstances, it is acceptable.” To compound matters, Kennedy also raised anew the idea that if present anti-inflationary policies do not work, the Administration would have to consider “moving into the field of controls of some kind.”

Immediately, critics from both parties castigated as unfeeling the official assertion that 4% unemployment is acceptable. The stock market dropped again after Kennedy’s statement about controls. Once more Nixon issued disclaimers and, a day later, so did Kennedy.

It hardly matters that Kennedy was right the first time. Nobody expects that the U.S. can defeat inflation by conventional means unless it accepts at least a 4% unemployment rate, and if inflation continues to soar, the Administration may indeed be forced to introduce controls. But Kennedy, a longtime top Chicago banker with no previous experience in sensitive public office, has not yet learned that a Cabinet member’s pronouncements are automatically taken as seriously considered policy. Nor has he learned to dodge a potentially explosive question. While even his critics applaud Kennedy’s innate decency and amiability, his gaffes have deprived him and his office of political weight in the Cabinet and before Congress—at the very time when the nation sorely needs a Treasury Secretary who has clout.