I am in D.C. with Alex to speak at a gathering of the National Economists Club. My father helped to found it decades ago and was the first President of it. Now the Club has started the Herbert Stein Memorial Lecture, to be an annual event. The main speaker at tonight's soiree is Dr. Edmund Phelps, a Nobelist in Economics at Columbia University. I am the warm up, and my topic is "My Father, Herbert Stein." This is what I said. The "Bob" I refer to is the kind Bob Graboyes, outgoing President.
Bob, Dr. Phelps, fellow economists, thank you very much for having this event and allowing me to speak. My father would have been extremely happy to have the first speech in this series given by a man of the eminence and brilliance of Professor Phelps.
Let me tell you about my father, Herbert Stein. My Pop was born August 27, 1916 in Detroit. His father, who had emigrated from Russia as a small child, then run away from home in New York to be a Cavalry soldier in the U.S. Army, who had fought in the jungles of the Philippines against the Aguinaldo insurrection, was an auto worker at Ford Motor. He was a skilled tool and die maker, not an easy job.
My grandfather then did similar work at GE in Schenectady but was unemployed through most of the Great Depression.
My father was an astonishing prodigy, At 15, he entered Williams College, the finest small college in America, without any money but a small stipend, alone, and extremely shy.
He worked his way through school in a variety of odd jobs. The longest lasting one was as a dishwasher in the basement kitchen of a fraternity that did not admit Jews or blacks. He worked next to a black man from the town with whom he became a close friend, rare in those days.
When I asked him many years later if he felt furious about working over a hot sink at a frat house where Jews were not admitted, he said, “Not at all. I was just happy to be able to attend such a fine college in the midst of the worst depression there has ever been. I was grateful for the job.” My father loved Williams College dearly. But that isn’t the point of the story. The point is that he realized at an early age what was important and productive and what was a waste of time and thought.
After Williams, where he greatly benefited from the friendship of a young economics prof named Taylor Ostrander, my father studied at the University of Chicago graduate school in economics. It was a school of stars. He had as teachers Frank Knight and Jacob Viner, and as classmates and/or friends, Milton Friedman, Rose Director Friedman, and Aaron Director -- immense names in economics.
He also met my mother, a fine economist in her own right, Mildred Fishman, who had come to Chicago from Barnard. They were married in 1937.
After Chicago, he worked at the FDIC here in Washington, and then at the War Production Board, and then in the U.S. Navy. In the latter phase of the war, as victory appeared certain, there was concern that the U.S. might slip back into what had seemed from 1929 to 1941 to be a permanent Depression. The Pabst Brewing Company sponsored a contest among the nation’s economists to write a short essay about how to avoid such a fate and instead go into lasting peacetime prosperity.
All of the biggest names in economics entered the contest. My father, at age 28, an unknown Ensign in the U.S. Navy, submitted a 1500-word essay and won the first prize, which was the then spectacular sum of $25,000 -- most of which he paid in wartime income tax.
His ideas in the essay were basic but very well written: free markets, variable fiscal policy for stimulation of demand and subduing inflation when needed, care for the least well off, and an aggressive anti-trust policy -- which seemed much more important then than it does now.
At the end of the war, a group of extremely high up businessmen started a group to work on policy proposals to keep the U.S. prosperous and not go back into Depression. They needed a research staff to collect their ideas, explain to them how economics worked, and then put the ideas into a coherent, easy to read form.
They chose my father for that job -- first, vice Research Director for the Committee for Economic Development, then research director. The CED put forth a number of extremely well-regarded papers on health care, trade, defense, education, labor relations, many other subjects. They were almost all written by my father.
After a time, he wanted a change, although he was always extremely happy with the relationships he formed with business leaders at the CED.
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.
What did he know? He knew, above all, loyalty. I knew him from 55 years. I never saw him even look at another woman besides my mother. He never wavered in his loyalty to my sister and me. He and my mother brought us up to have absolutely zero competition between us. The result is that my sister and I have never had a serious argument. Rare, I would say.
After the White House, he taught at UVA and was a senior fellow at the AEI. For part of that time, I was writing a series of articles for Barron’s and a book about the Milken/Drexel junk bond fraud. I saw it -- and the people at Barron’s magazine saw it -- as a massive scam. However, Mr. Milken had his friends, especially at the AEI. On one occasion, an official of the AEI brought in Mr. Milken to talk to the most distinguished economists at the AEI -- whom the younger people at the AEI jokingly referred to as “The Wild Bunch.”
My father declined to even meet Milken and when Milken’s friend at AEI asked him why he would not even listen to Milken, my father said, “Because I have read what my son wrote. I believe my son. It makes complete sense, and that’s all I need to hear.”
My father was loyal to Mr. Nixon until the end of Mr. Nixon’s life. He saw Mr. Nixon’s flaws, but loved him for his kindness to my family, for his devotion to peace, and for his salvation of Israel. If you go to YouTube and watch the RN farewell to the White House staff in August of 1974, you will see many staffers looking sad, including me. But the couple you see in genuine agony are my mother and father.
I vividly recall my father telling critics of RN who asked him to renounce Mr. Nixon, that “I will never turn my back on a peacemaker.” To my father, that same sense of proportion applied: whatever wrongs Mr. Nixon had done -- and there were plenty -- they were small compared with the bringing of a generation of peace to a dangerous world.
My father was fiercely devoted to the United States of America. He and my sister used to tear off the tin foil from packs of Camels for the war effort in 1944 and 1945. He was proud to serve in the Navy. He would not hear any severe criticism of the U.S. Again, he believed that whatever wrongs had happened here -- and there were plenty -- they paled beside what the USA had done right.
At a Stein family reunion about 20 years ago, he spoke of the various accomplishments of the Steins. All of them, he said, were nothing compared with the decision of his grandparents to come to America.
A final few short notes, since I, as a tiny bit of an economist myself, know that when a speaker starts a speech, the main thing the audience wants is for him to finish. Time is money.
My father was a superb calculator of economics. On his deathbed in 1999, with tubes and wires running into him as if he were a switchboard, I asked about why it made sense for the Clinton treasury to buy back in high interest rate long term bonds. After all, I said, they will have to pay the net present value of all that interest anyway. My father had in a tracheal tube and could not speak. But he wrote down, “Perhaps Treasury has a different view of future interest rates from the sellers.” I have that page and it has blood and genius on it.
But my father was above all a warm and loving man. Two very brief examples.
He told me shortly before his death that the happiest day of his life was when, old and unwell himself, he spent a day helping a blind woman who was new to D.C. to find her way to GW and back home on a bus. He had never met her before and never saw her again.
And perhaps this, that sums up everything I want to say about my Pop. In 1974, when I was writing some speech for Mr. Nixon and needed some statistics, I went into his office and said to him, “Could you help me find these if you don’t have anything more important to do?”
He looked at me levelly and said, “What do you think I have to do that is more important than helping my son?” He is justly famous for his axiom that, “if a thing cannot go on forever, it will stop.” But the essence of Herbert Stein was the next sentence, “And if we only do the things we can do forever, we won’t do very much.” He did plenty.
I miss him keenly every minute of every day and I thank you humbly for honoring him tonight.
It was raining and cold when Alex and I got back to the Watergate. Our apartment 603 there still smells of Pop’s pipe tobacco and Mom’s perfume. I guess I have figured out that I will not stop missing them until I am with them. I know I would not feel so scared if Pop were alive.