A Benjamin Cole post
TV pundit Larry Kudlow recently opined that it has never been proved that President Richard Nixon (1969-74) pushed for loose money, and that President Ronald Reagan (1981-89) “backed” then Fed Chairman Paul Volcker in his epic battles against inflation.
The old CCCP historical rehabilitationists and revisionists were pikers next to our hagiographer Kudlow.
Unfortunately for Kudlow, and even more unfortunately for Nixon, that president tape-recorded himself. So we have this conversation between Nixon and Fed Chairman Arthur Burns was caught on tape on March 19, 1971, in the 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?”
BTW, inflation during Burns-Nixon duet was just under 5 percent, on the CPI.
Then there is Nixon telling aides, “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. “We’ll get a populist spender on the board one way or another.”
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.”
Okay, enough on Nixon.
Where to start? Fed Chairman Volcker, it is now usually forgotten, was first appointed by President Jimmy Carter—and was largely viewed by Reaganauts as a tight-money D-Party Trojan Horse, determined to wreck the GOP.
At one point, the Reaganauts, like Nixon before them, were looking at institutional myrmidons to shackle the Fed, while the money-presses were kept wide open. As the AP reported in December of 1984, “’The Reagan Administration is considering a plan that would place the now autonomous US Federal Reserve under some form of administrative control,’ the US Treasury Secretary, Don Regan, said yesterday. ‘The United States is the only country in the world that has a totally independent central bank.’”
And President Reagan? Speaking before the National Association of Realtors in December 1984, Reagan echoed the Regan assault on the Fed. “Let me assure you we are not pleased with the recent increases in interest rates,” said the Gipper. “And frankly there is no satisfactory reason for them.”
Here are the national columnist GOP attack-dogs Rowland Evans and Robert Novak (back then, writing a national column was big stuff, btw) in July 8, 1984 column: “When Paul Volcker and his central bank colleagues decide later this month whether to further tighten the screws on a dangerously deflationary economy, President Reagan’s policymakers will be offstage as impotent….”
Of course, the 1984 elections were up to bat.
Evans and Nowak continue, “The Federal Reserve’s staff…monomaniacal fear of resurgent inflation ignores sliding commodity prices which connote deflation rather than inflation.”
The column-penners darkly continue, “Their (tight-money) position is being pressed by Lyle Gramley, a former Fed staffer named to the board by Jimmy Carter in 1980.”
And Evans and Nowak were the Kudlows of their era!
Things Have Changed
In fact, right-wingers were not always daft-kooky-nuts about the money supply, gold, inflation and interest rates. In 1958 famed economist Milton Friedman testified before the Joint Economic Committee, and told the august body that the Federal Reserve had caused the 1957 recession by…being too tight.
The right-wing today would exile Milton Friedman.
Today’s Misguided Right Wing
It is sad to see Kudlow and other wahoos tub-thumb for tight-money, but they could at least be truthful about their antecedents.
Well, scratch that, today’s righty-tighties have no antecedents. Nixon and Reagan were far too shrewd to let the self-destructive dogma of tight money gain control over policy levers.
Nixon and Reagan wanted prosperity, and I say good for them.
What does the GOP want today? Has some sort of auriferous theology replaced monetary realism?
Maybe so. But maybe not. The GOP, once again in control of White House in 2016, may do what R-Party forefathers have always done: Run big deficits and browbeat the Fed for loose money.
Because, you know, prosperity does trump genuflecting to piles of gold, and we want to get re-elected.