Last night’s introduction to the first annual NEC Herbert Stein Memorial Lecture.
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In 1965-66, he went to Stanford’s Center for Advanced Study in the Behavioral Sciences, home also to Professor Phelps for a year. He and my mother had a wonderful year there. Then he went briefly to Brookings, for which he had an extremely high regard. Then, a miracle happened in his life:
The miracle was named Richard Nixon. Through the intervention of Milton Friedman, Mr. Nixon asked my father to prepare papers on economic policy for the 1968 campaign. He hesitated to do it but I begged him to and he did. After the election, Mr. Nixon – again through the intervention of Dr. Friedman, one of my father’s closest friends — was asked to be on the Council of Economic Advisers, under the Chairman, a man for whom my father had the highest possible respect, Paul McCracken. In 1972, my father was asked to be Chairman, which he readily did.
Those were the happiest days of my father’s life. He was not by nature a scholar or a reclusive student. Nor did he particularly like teaching, which he had done briefly in Iowa in 1936.
He liked the excitement, the thrill, yes, the fame, of government work on policy issues at a high level. He loved the late hours and the pressure and the comradeship. He loved Mr. Nixon and he made close friends there, especially with Peter Flanigan, a genius advisor on trade and international economic policy.
The story of my father’s life at the White House can be summed up in an incident. In 1971, very much against my father’s wishes, President Nixon instituted mandatory wage price controls because inflation was creeping up to the unheard of level of roughly three percent. Mr. Nixon asked my father to be in charge of administering the controls, known as phase one.
My father asked me what I thought he should do. “Ideologically,” I said to him, “you should fall upon your sword. Existentially, it’s paradise.”
My father laughed, headed the administration of the hated wage price controls, but made very sure to do what he could so that the controls were phased out quickly and painlessly.
I should add here that by about that time I was a speechwriter at the Nixon White House, thanks very largely to my connection through my father.
That was a spectacularly good experience for me. I could eat lunch with my father once or twice a week, sometimes more often than that, go up to his office to visit with him, and form a far closer bond with him than I had ever had before.
Now, let me back up a moment and talk about my Pop’s economics. He was not a mathematician. He liked what was intuitively obvious. One of his main strengths as an economist, I think, was his ability to quickly size up proportions. I first saw this long ago when I was reading a famous book called Conversations With Stalin. It described lavish feasts that the Soviet dictator had with his top henchmen in the Kremlin even as the Germans were at the Moscow city gates.
How could this be? I asked my father, that there could be feasts like that in a country in the grip of a vicious, seemingly unstoppable invasion.
Pop said, “In a largely agricultural nation of over 150 million, the state can squeeze out a feast for 12 men for a long time.”
Likewise, when I, as a rotten kid, used to complain that we had a Chevrolet instead of a Cadillac, as my uncle did, my father would say, “You’re in the top two or three percent of families for affluence. It’s not appropriate to complain.” I might add that the uncle went bankrupt. My father did not.
It was that same sense of proportion that led him, after he left the White House, to have his doubts about supply-side and its ability to generate more tax revenue by lowering taxes. There just seemed to him to be no way or mechanism by which the lost revenue could be replaced by any reasonably anticipated growth from lower taxes — especially because he could not see why lower taxes would automatically generate more growth.
And this leads to his other great strength: his ability to say he did not know the answers to many vital economic questions; He did not know how big the deficit should be. He did not know what the optimal rate of growth of the money supply should be. He did not know whether very low rates of tax on the rich would help or hurt the economy.