A guest post by Benjamin Cole
The astounding and revelatory conversation between President Richard Nixon and Fed Chairman Arthur Burns was caught on tape on March 19, 1971, in the famed White House Oval Office.
Nixon: Arthur, the main thing is next year [1972, election year]…let’s don’t let it [unemployment] get any higher. I hope we can—
Burns: That’s what I have my eye on.
Nixon: Yeah. But I think we really got to think of goosing it.
Nixon: Shall we say late summer and fall this year in order to affect next year?”
The conversation above is captured in a fun, new book, Chasing Shadows, by Ken Hughes. BTW, inflation then was just under 5 percent, on the CPI.
But that’s not all—Nixon reveals himself a shrewd monetarist of the populist stripe, far more aware of the role of the Federal Reserve in the nation’s prosperity than President Obama.
The following Nixonian monologue refers to finding someone to sit on the Fed board, to fill an empty seat.
“I’ve told [Treasury Secretary John B] Connally to find the easiest money man he can find in the country and one that will do exactly what Connally wants and one that will speak up to Burns…Connally is searching the goddamned hills of Texas, California, Ohio,” Nixon said to his aides. “We’ll get a populist spender on the board one way or another.”
There is another small, and forgotten part of the Nixon Legacy: He flirted with an idea to radically expand the Federal Reserve Board, so as to “pack” it with easier money types—Nixon felt even the compliant Burns was not expansionist enough.
The UPI reported on July 28, 1971 that, “President Nixon is considering a proposal to double the size of the Federal Reserve Board, it was learned today. The suggestion, if put before Congress, could touch off a controversy rivaling President Franklin D. Roosevelt’s attempt to ‘pack’ the Supreme Court.”
Tapes show Nixon even dickered with a pay raise for Burns, in seeking Burns’ obedience on easy money.
Melancholy Money and Obama The Milquetoast
Of course, these insights into Nixon remind one of the Ronald Reagan Presidency, in which the Reagnauts were so furious with then-Fed Chairman Paul Volcker’s tightness that they floated a proposal to move the Fed into the Treasury Department, where it would answer to Treasury Secretary Don Regan.
Next to Nixon and Reagan, Obama looks like a Milquetoast-y effete, meekly tolerating the Fed in its inflation-phobic policies, even as the central bank asphyxiates the economy.
Did Obama ever demand of the Fed, “Why are we consistently below the “average” 2 percent inflation target, when the economy is sputtering?” Nor did Obama ever float proposals to pack the Fed or shift control over monetary policy to the Treasury Department.
The other melancholy part of these Nixonian revelations is the reminder that the right-wing was not always insensately addicted to tight-money rhetoric.
Today, it is impossible to imagine a GOP President strong-arming to the Fed to ease up, or for any right-wing economist with “street cred” to call for easier money. (A reader here recently opined that some right-wing economists call for Market Monetarism, but everyone knows they are not “real” right-wingers. To be for monetary tightness, or even deflation and the gold standard, are the current defining attributes of true right-wing economist).
Excellent writer Ken Hughes’ Chasing Shadows book is, properly enough, more devoted to Nixon’s skullduggery and evasions than his monetary policy.
But the book and its brief addresses of monetary policy are wonderful reminders that Nixon ever escapes easy definition, and that a peevish fixation with tight money and inflation was not always a right-wing predilection—nor the default position of the Federal Reserve.