Disciple of Growth

President-elect Kennedy seemed to promise to make the Treasury a fortress of moderation when, fortnight ago, he plucked Wall Street Republican C. Doug las Dillon out of the Eisenhower State Department for his Treasury Secretary.

But last week he opened the White House gates to an economic philosophy of another hue when he chose his chairman of the influential three-man Council of Economic Advisers. The chairman: Walter Wolfgang Heller, 45, a smiling, polysyllabic professor of economics at the University of Minnesota, who ranks among the nation's most articulate believers in Government-planned growth of the U.S. economy.

"Human Capital." Like Harvard University Economist John Kenneth (The Affluent Society) Galbraith, Heller believes that a steady growth rate in the economy is a national necessity. Such growth, as he sees it, probably will require a "forced draft" of new capital investment. The Federal Government (aided by state and local governments), rather than private enterprise, should be in charge of the increased investment -- concentrating on such fields as education, scientific research, health and other forms of "human capital."

To promote growth, Heller is ready to accept -- in preference to high unemployment -- a "tolerable" amount of inflation, but does not define how much is tolerable. He hopes that foreign competition and an attack on domestic monopolies and labor featherbedding will help keep wages and prices in line. If they do not, "we should not shrink from selective controls" over such fields as consumer credit, mort gage rates and depreciation allowances --but not necessarily over prices and wages. He is for lower interest rates to spur the economy, for a broader taxation base to pay for the new projects. On the budget: "You run a big surplus to fight inflation; you run a big deficit to fight recession."

Private Affluence. Over the years, affable Walter Heller has developed enough private affluence to afford a redwood four-level contemporary home in St. Paul, Minn, and a sporty Peugeot. Born in Buffalo of German immigrant parents, he graduated from Ohio's Oberlin College ('35), earned his doctorate at the University of Wisconsin six years later--just seconds after his wife got her Ph.D. in physiology. Rejected for military service, Heller joined the Treasury Department in 1942 as an economic consultant. After the war he went back to teaching but kept up his profitable sideline as an economist at large. For a year (1947-48), he was an adviser to the U.S. military government in Germany. In 1951, as a consultant to the Treasury Department, Heller helped draft special Korean-war legislation that raised corporate taxes from 45% to 52% (where they stayed), raised excise duties on a wide range of goods, including beer and liquor, cigarettes, gasoline, auto parts, etc. (still taxed).

Since then, Heller has been an economic consultant to the U.N. and to Jordan, a tax adviser to Minnesota's Fair Dealing Governor Orville Freeman (the new Secretary of Agriculture). Along the way, he has earned the grudging respect of even classical economists. "I would have preferred an individual more on the conservative side," says a Republican business friend, adding: "Heller is sound. He is one of the most brilliant young liberal economists in the country."

Among Heller's liberal views:

On Tax Reform: Plug such unfair loopholes as percentage depletion allowances on oil and other minerals, rebates on stock dividends, and unbusinesslike expense-account deductions. Cut down the scope of income that can be classified as capital gains and is thus taxable at a lower rate. Thereupon, revise personal income tax rates, with special attention to confiscatory high rates in top brackets: instead of paying from 20% to 91%, individuals should be obliged to pay from 14% to 60%.

On Aid to States: Congress should consider turning back to the individual states 5% of the federal income tax on basis of origin, should also give the states such federal taxes as those on local telephone service, admissions, club dues and cabaret bills.

On the Federal Debt: Congress should remove the federal debt limit (currently $293 billion) because it amounts to "fiscal hypocrisy" and leads to "financial brinksmanship"--frantic and artificial Government efforts to stay within the debt limit in years when a revenue deficit is inevitable.

Heller believes that big depressions belong to history, and that "only mild and relatively brief recessions are in store for us in the '60s." For proof, he notes that the economy righted itself during the 1958 recession in less than a year when the Eisenhower Administration stoutly resisted any drastic federal action. Under proper care and feeding, he believes, the U.S. economy can become "the most affluent economy the world has ever known"; by 1970 the gross national product will expand 50%, average family income will be up 30%.

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