(FORTUNE Magazine) – FOR BETTER or for worse, no one has exerted more influence over the course of the economy in 1987 than James A. Baker III, America's ever pragmatic Treasury Secretary. As other key players, including White House Chief of Staff Donald T. Regan, Federal Reserve Board Chairman Paul Volcker, and Commerce Secretary Malcolm Baldrige, have left the scene, Baker has become the unchallenged czar of U.S. economic policy. To his newly exalted position, Baker, 57, brings little ideology and lots of political acumen. This fourth-generation Texas lawyer, who attended an Eastern boarding school and Princeton University, has been called ''a businessman's lawyer.'' An economic pragmatist, he has only one known bias: for low interest rates. Baker bashers believe the Secretary is headed for a crash. They contend that his policy plate is too full and his approach alarmingly superficial. Over the past year, they maintain, he has done nothing to ease mounting Third World debt problems. He has tried to manage an unmanageable dollar with dire consequences. Furthermore, he has bungled a historic opportunity to craft a major long-term deficit reduction package. Says one White House conservative: ''He so wanted a budget deal, he accepted a bad one.'' Baker defenders retort that the quick-witted Texan has done an outstanding job of leading the country through a mine field of potential economic disasters. Says Robert Hormats, vice chairman of Goldman Sachs International: ''He has handled his job extremely well in one of the most difficult times a Treasury Secretary has had to face since World War II -- a time when the U.S. is more dependent than ever on foreign capital and markets are extremely sensitive to currency flows.'' Given the political constraints under which he has had to operate -- among them stiff presidential opposition to tax increases and congressional resistance to spending cuts -- admirers insist he deserves considerably better than a passing grade. Says House Budget Committee Chairman William Gray, a liberal Democrat: ''I'd give him an A plus.'' Even his most devoted fans, however, concede that one of the Secretary's early 1987 accomplishments, the Louvre Accord, turned sour. Named for the Paris landmark where it was negotiated, the agreement called for the U.S. and its major trading partners to support the falling dollar within a narrow, undisclosed range while they also moved to bring their economic policies into line. The U.S. was to cut its bulging budget deficit. Japan and West Germany were to stimulate their economies to offset an expected slowdown in U.S. growth. But Baker failed to produce changes in U.S. fiscal policy, the hoped-for economic cooperation got nowhere, and the dollar continued to fall. Then came October 19, and Baker's stock plummeted with the market. Ever sensitive to the shifting political winds, he quickly announced that the Administration's top priority would be to avert a recession, even at the risk of a falling dollar. Meanwhile he turned his attention to the U.S. deficit, hoping to regain some of his lost political luster. The Treasury Secretary wins kudos for persuading President Reagan to abandon his stiff opposition to tax increases and strike a budget deal with the Congress. As the President's chief negotiator, he worked out the two-year $76 billion deficit-reduction package now before Congress. For 1988 the plan would cut spending by $11.5 billion and raise some $17.5 billion in revenues. CONGRESSIONAL MEMBERS of the budget summit laud Baker for his patience. At the beginning of the talks, he mostly listened. A reserved man, he kept his jacket on throughout the three-week negotiations, except for the day a foot of snow fell in Washington. Then he showed up on Capitol Hill in a casual outfit with cowboy boots and a leather belt with a big buckle shaped like Texas. As Baker saw it, a budget deal -- even a bad one -- was the only way to ease market jitters and persuade the Germans and Japanese to heat up their economies. In early December, West Germany finally gave in to continued U.S. pressure, and the Bundesbank cut its discount rate to a record low of 2.5%, as much to check the dollar's fall as to demonstrate economic cooperation. Though other European central banks also curbed their rates and the dollar rebounded somewhat, Wall Street remained gloomy. Baker is likely to try for another international meeting and a revised Louvre-style agreement to support the dollar. However, he continues to make clear that he will not raise interest rates to prop up the dollar if doing so would threaten a recession. His toughest job will be to try to keep the economy growing throughout 1988 and thus improve the presidential prospects for Republicans, particularly his friend George Bush. The Treasury Secretary will do all in his considerable power to avoid recession as his legacy.