4

Nixon, Burns, and the Political Business Cycle

No one has tried harder to help you.

—ARTHUR BURNS TO RICHARD NIXON, JUNE 1971

The complex personal relationship between Richard Nixon and Arthur Burns, which dated back to at least 1953, had profound effects on the nation’s monetary and fiscal policies in the 1970s.¹ And its legacy lingers on. Nixon needs no introduction. Burns was an esteemed professor at Columbia University and one of the nation’s foremost experts on business cycles when President Dwight D. Eisenhower tapped him to become his first chair of the Council of Economic Advisers in 1953. Nixon and Burns served together in the Eisenhower administration until the end of 1956, when Burns returned to teaching at Columbia.

But the sometimes tumultuous relationship between the two men was hardly over. Burns remained active in Republican Party circles, and in March 1960 he came to see Nixon with a warning: a recession looked likely. If it were allowed to occur, the economy would hit bottom around October 1960, Burns predicted, and that would gravely damage Republicans’ prospects in the November election. He urged an increase in federal spending and an easing of credit conditions to try to ward off the incipient recession. Notice the conjoining of monetary and fiscal policy here. Strong belief in central bank independence was yet to come.

Burns didn’t quite nail the timing to the month; the National Bureau of Economic Research (NBER) dates the 1960–1961 recession as starting in April 1960 and bottoming out in February 1961. But broadly speaking his forecast was excellent, far better than his powers of political persuasion. Eisenhower discussed Burns’s idea to stimulate the economy with his cabinet but rejected it, much to the chagrin of then Vice President Nixon, the presumptive Republican standard-bearer in the 1960 election. Nixon (1962, 310) lamented a few years later that “in supporting Burns’ point of view, I must admit that I was more sensitive politically than some of the others around the cabinet table.” No doubt he was.

Nixon subsequently blamed the recession for his narrow defeat by John F. Kennedy in the popular vote (Kennedy’s electoral college margin was far larger). Although his five o’clock shadow and nontelegenic performance in the nation’s first televised presidential debate may have been just as important, Nixon certainly had a point. Recessions hurt incumbents.² In any case, he would not forget the bitter lesson of 1960 or the wise prophet who had warned him of the electoral peril.

Fiscal and Monetary Stimulus before the 1972 Election

Nixon’s loss to Kennedy in 1960 did not, of course, end his political career. Nor even did his humiliating subsequent defeat by Edmund “Pat” Brown in the 1962 California gubernatorial race, after which Nixon famously told the assembled press “You won’t have Dick Nixon to kick around anymore.” It turned out that they would. A scant six years later he secured the Republican presidential nomination again and went on to defeat Vice President Hubert Humphrey in the 1968 election. Ironically, that election ended much like the Kennedy-Nixon election: with a razor-thin margin in the popular vote but a much more comfortable victory in the electoral college.

Burns was immediately appointed counselor to the president, a newly created position with cabinet rank. It was widely believed at the time that this was just a place for Burns to hang his hat while Nixon awaited the end of William McChesney Martin’s last term as chair of the Federal Reserve Board, at which point Nixon would elevate Burns to the Fed chairmanship. That is indeed what happened.

When Nixon assumed the presidency in January 1969, both fiscal policy and monetary policy were in the later stages of the anti-inflation policy that Lyndon Johnson had belatedly begun in 1968, and which the Fed had started two years before that. Nixon’s initial fiscal policies were appropriate to that end. Between fiscal years 1968 and 1970, what was then called the “full-employment deficit” shrank from about 4 percent of GDP to about 0.5 percent of GDP—a sizable fiscal contraction. With the economy near full employment at the time, those numbers meant that the federal budget was close to balanced. Eisenhower presumably would have approved. Monetary policy was also still tightening in 1969. The federal funds rate moved up from about 6 percent when Nixon was elected to about 9 percent in May 1969, but only half of that 300 basis point increase represented a higher real federal funds rate since inflation had risen from 4.4 percent to 5.9 percent.

For these and other reasons, the twelve-month Consumer Price Index (CPI) inflation rate peaked in early 1970 at 6.4 percent and then began to decline—albeit slowly (figure 4.1). Falling inflation was, of course, precisely the intended effect of the tighter monetary and fiscal policies. But those same forces also produced—as an unintended but unsurprising consequence—a short and shallow recession that began in December 1969 and ended in November 1970. Real GDP declined only about 0.6 percent in the 1969–1970 recession. The unemployment rate did rise by about 2.5 percentage points, but that still put it only around 6 percent.

FIGURE 4.1. Inflation in the Nixon-Ford years.

Source: Bureau of Labor Statistics.

No president relishes a recession on his watch. However, the timing was all but perfect for a president eager to engineer a political business cycle, as Nixon surely was. When a recession bottoms out two years before an incumbent president’s next election, it’s an extremely good bet that he will enjoy an expanding economy throughout his reelection campaign. And Nixon did. Nonetheless, with the memory of 1960 vivid in his mind, he didn’t want to take any chances. In January 1971, Nixon famously described himself as “now a Keynesian in economics” (Reuters 1971), which was a very un-Republican thing to say at the time—and still is.³ But he was signaling something. What?

As a matter of positive (that is, descriptive) economics, one of the central tenets of Keynesian economics is that short-run fluctuations in real GDP are dominated by changes in aggregate demand, some of which emanate from monetary and fiscal policy. These changes in demand show up mainly in real output rather than in inflation in the short run because inflation responds only with a long lag. That’s precisely what empirical Phillips curves of the day showed.

As a matter of normative (that is, prescriptive) economics, being a Keynesian sometimes means worrying more about unemployment than about inflation. This relative weighting of the two major macroeconomic maladies may be why many conservatives shun the label “Keynesian” to this day. They may be positive Keynesians, but they are not normative Keynesians. Nixon was both.

Due mostly to increases in government spending, the full-employment budget deficit rose by about 1 percent of GDP in 1971 and another 0.5 percent of GDP in 1972. The first Social Security checks reflecting a huge 20 percent increase in benefits engineered by Nixon arrived in retirees’ mailboxes in October 1972. Now, that’s timing! These generous checks were accompanied by a none-too-subtle covering letter stating that “your social security payment has been increased by 20 percent, starting with this month’s check, by a new statute enacted by the Congress and signed into law by President Nixon on July 1, 1972.”⁴ The checks must have brought smiles to the faces of many seniors—and votes to Republicans.

Meanwhile, Arthur Burns, who had taken over the helm of the Federal Reserve in February 1970, was also pushing monetary policy hard in the stimulative direction. By January 1972 the federal funds rate, which had peaked above 9 percent in 1969, was down to 3.5 percent—roughly equal to the inflation rate and thus about zero in real terms. It was still only 5.3 percent in the election month.

In those days, however, more attention was paid to the money growth rate than to the federal funds rate. Unfortunately, money growth numbers get revised constantly, and even the definitions of the Ms have changed many times since the early 1970s, including several changes made during Burns’s chairmanship. For what it’s worth, today’s data on M1 growth display a go-stop pattern similar to that of the funds rate. The twelve-month lagging M1 growth rate was a mere 2.9 percent when Burns became chair of the Fed. By June 1971 it was up to 7.7 percent and then to 8.2 percent in November 1972. A year later, M1 growth was back down to 5.9 percent (see figure 4.2). M2 growth displayed a similar but even more exaggerated pattern, rising from 2.5 percent in February 1970 to 13.1 percent in June 1971 and 12.7 percent in November 1972 and then falling to 6.9 percent in November 1973. It sure looked like the monetary leg of a political business cycle.

FIGURE 4.2. Growth rates of M1 and M2, from twelve months previously, 1969–1977.

Source: Board of Governors of the Federal Reserve System.

For decades there was much speculation, but no hard proof, that Burns was doing all this to help get his friend, Nixon, reelected. Burns vigorously denied the charge, claiming years later that “the election of 1972 had absolutely no influence on anything I did at the Fed.”⁵ But after the infamous Watergate tapes were released to researchers in stages, Burton Abrams (2006) published a number of quotations from Nixon-Burns conversations that left little doubt. Here is one excerpt from Abrams’s paper pertaining to a phone call between Nixon and Burns just four days before the December 1971 Federal Open Market Committee (FOMC) meeting:

Burns states that “I wanted you to know that we lowered the discount rate …, got it down to 4.5 percent.” “Good, good, good,” replies Nixon. Burns indicates that the announcement of the discount rate reduction would be accompanied by … an added statement that it was done to “also further economic expansion.” Burns exclaims that he also lowered the rate to “put them [the Federal Open Market Committee] on notice that through this action that I want more aggressive steps taken by that committee on next Tuesday.” “Great. Great,” replies Nixon. “You can lead ’em. You can lead ’em. You always have, now. Just kick ’em in the rump.” (Abrams 2006, 181)

The Nixon-Burns program of significant fiscal and monetary stimulus succeeded, with superb timing from Nixon’s perspective. The growth rate of real GDP, which had averaged a sluggish 2.1 percent per annum over the final three quarters of 1971, leaped upward to 6.9 percent over the first three quarters of the election year 1972. Very nice for the incumbent president. But there was more to the exquisite timing than that.

Imagine yourself in Nixon’s shoes in 1971 and with about as many scruples. You will be running for reelection in 1972. The economy is growing, though not rapidly, and the unemployment rate is about 6 percent, far higher than the roughly 3.5 percent when you took office. Meanwhile, inflation is still stubbornly hanging around 4.5 percent per annum, which is high enough to displease the American electorate.

Here’s the temptation to which Nixon readily succumbed: Suppose we boost GDP growth with fiscal and monetary stimulus in the election year (remember, Nixon had a friend at the Fed) but then reverse field after the election. To keep inflation at bay while all this is going on, we can use the authority Congress gave us on a dare in 1970 to invoke wage-price controls.⁶ Such a combination of policies should get us through the November 1972 election with the economy growing fast and inflation low. We can worry about cleaning up the inflationary mess later.

The August 1971 Surprise

That, in a nutshell, is precisely what Nixon did. Specifically, in a dramatic August 15, 1971, presidential address to the nation, he announced comprehensive wage-price controls, beginning with a startling ninety-day freeze on most wages and prices. It was America’s first and only experiment with economy-wide wage-price controls in peacetime. Coming from a Republican president who had denounced price controls as “a scheme to socialize America” less than a month earlier (Abrams and Butkiewicz 2017, 64), the controls came as quite a shock. Furthermore, the “conservative” chair of the Fed supported this “socialist” policy intervention.⁷

And the price controls worked, at least politically for Nixon. The twelve-month lagging inflation rate dropped from 4.4 percent in August 1971 to just 2.9 percent a year later, despite a booming economy (see figure 4.1). It was like a favorable supply shock that, given monetary policy, would be expected to boost real GDP growth. Of course, wage-price controls also brought with them the usual panoply of distortions, shortages, difficulties in enforcement, and the like. So, after the election the administration began to dismantle the controls in stages, starting in January 1973. Price controls were reimposed briefly when inflation flared up in the summer of 1973, but decontrol resumed in earnest in August 1973, and the last remnants of the Nixon wage-price controls were lifted by April 1974.

How did the controls affect the inflation rate? William Newton and I constructed a time series on the fraction of the CPI that was subject to price controls, month by month (figure 4.3) and used that to estimate two different econometric models of the effects of controls on core CPI inflation, that is, inflation excluding food and energy prices (Blinder and Newton 1981).⁸ According to one model, the controls reduced the price level by about a cumulative 3 percent between July 1971 and February 1974 (the month of their peak effect), but the postcontrols bounce-back erased this effect entirely by October 1974. Notice that this estimate implies a huge positive impact of decontrol on inflation between February and October 1974. According to the other model, the peak effect of controls on the price level also came in February 1974, but it was larger: about 4 percent. However, the estimated bounce-back after controls were lifted is much more modest in this second model and was never complete. Thus, the two models agree that price controls reduced the annual inflation rate between August 1971 and February 1974 by roughly 1.5 percentage points on average.⁹ But they disagree sharply over how much decontrol raised inflation after that.

FIGURE 4.3. Blinder-Newton estimates of the fraction of Consumer Price Index under price controls.

Source: Blinder and Newton (1981).

The announcement of wage-price controls was not the only news President Nixon made on August 15, 1971. In fact, outside the United States it was not even the biggest news. Rather, the headline story around the world was that the United States was “temporarily” suspending the convertibility of the dollar into gold, thereby unilaterally ending the Bretton Woods system of fixed exchange rates. In truth, the United States had been running out of gold for years and was therefore nearing the end of its ability to peg the value of the dollar to the yellow metal in any case. With whatever remaining discipline from the Bretton Woods system thus removed—and there was not much left by 1971—the major countries of the world stumbled through a period of almost two years without quite knowing what to do about exchange rates. Eventually almost all of them turned to true—well, make that managed—floating in 1973.

Ending the Bretton Woods system was neither fiscal nor monetary policy, of course. But it was highly relevant to the latter, especially in other nations but even in the United States. In simple textbook models, fixing the exchange rate removes monetary policy from the toolbox of domestic stabilization policy because the central bank must dedicate its monetary policy instruments to fixing the exchange rate, much as under the gold standard.

The reality is not quite that stark for a dominant economic power such as the United States, so Arthur Burns and the FOMC had some freedom to pursue conventional monetary policy even under Bretton Woods. Nonetheless, fixing exchange rates did impose constraints on central banks in every country that was party to the Bretton Woods agreement—hard constraints for many, a more pliable constraint for the Fed, but constraints nonetheless. It was therefore convenient for Nixon and Burns to get rid of those constraints in August 1971.

When the Bretton Woods system collapsed, those constraints on monetary policy all but disappeared.¹⁰ In fact, a number of economists have blamed the worldwide upsurge of inflation after 1973 on the end of Bretton Woods.¹¹ The end of fixed exchange rates certainly played a role. But I am inclined to place much more weight on the supply shocks discussed in chapter 5. One reason is simple: if dollar depreciation leads to higher inflation in the United States, the corresponding currency appreciations of the currencies of America’s major trading partners should produce lower inflation there. But the 1970s surge in inflation was a worldwide phenomenon; it hit virtually every country, albeit in different amounts.¹² Between August 1971 and August 1973, the CPI inflation rate rose from 3.4 percent to 8.1 percent in Canada, from 5.6 percent to 7.6 percent in France, and from 5.7 percent to 7.3 percent in Germany.¹³

Still, when all was said and done, the end of the Bretton Woods system destroyed what then passed as the world’s best nominal anchor, flawed though it was. Floating exchange rates offered no substitute. The demise of Bretton Woods also freed the Fed from worrying about gold flows and the dollar exchange rate. The Fed could focus its full attention on inflation and unemployment in the United States.¹⁴

The Great Reversal of 1973

Of the two main macro variables, inflation commanded center stage in 1973. After the 1972 election, the unemployment rate drifted slowly downward, making it less salient both economically and politically. But the inflation rate soared, from just 3.4 percent in the twelve months ending November 1972 (with price controls in effect) to a startling 8.3 percent in the twelve months ending November 1973, the highest inflation rate in the United States since 1951. With the election now in the rearview mirror, the Burns Fed reacted strongly to higher inflation, boosting the federal funds rate from 5.1 percent in November 1972 to 10.8 percent in September 1973. Dwell on that for a moment: the Fed’s main policy rate rose 570 basis points in just ten months. But inflation rose by 400 basis points over that same period, making the real tightening just 170 basis points.

Spurred on by the Arab-Israeli War, the Organization of the Petroleum Exporting Countries (OPEC) struck the following month, sending the price of oil soaring and pushing the United States and other economies into the unhappy combination of stagnation and inflation that the media dubbed stagflation.¹⁵ Stagflation presents a central bank with an unpleasant policy dilemma that, though now well understood, had a lot of central bankers—not just Arthur Burns—scratching their heads at the time. If a central bank eases monetary policy to fight stagnation, that would exacerbate the inflation problem. Alternatively, if it tightens monetary policy to fight inflation, the stagnation problem would get worse. No central bank can mitigate both ills at once. So, what should monetary policy do?

As it turned out, the Burns Fed vacillated. It reacted first by easing monetary policy through February 1974, dropping the federal funds rate as low as 8.8 percent (against an inflation rate of 10%) to spur growth. But then it reversed field and raised interest rates again to fight inflation. The funds rate peaked at almost 13 percent in June 1974. Inflation was on the rise too, however. So, that seemingly sky-high funds rate was only about 2 percentage points above the 11 percent inflation rate. According to Holston, Laubach, and Williams’s (2016) estimates, the neutral real federal funds rate at the time was slightly over 3 percent, so monetary policy was still expansionary. But of course, the Holston-Laubach-Williams estimates were not available at the time. Indeed, the very concept of the neutral real rate did not play a prominent role in the Fed’s vocabulary or its thinking back then. Furthermore and shockingly, the chair of the Fed at the time was dubious about monetary policy’s ability to move the inflation rate (more on this below)!

Fiscal policy was also tightening as the OPEC shock wracked the economy. The full-employment deficit, which had peaked at about 5 percent of GDP in the election quarter of 1972:4 (quite a coincidence!) was whittled down to about 2 percent of GDP by 1974:3. In a word, the preelection stimulation of the economy by both monetary and fiscal policy rapidly gave way to double-barreled restraint. It was a picture-perfect political business cycle.

Maybe too perfect. The obviously made-in-Washington character of the boom and bust of 1971–1974 coupled with the virtually universal condemnation of wage-price controls may have marked the undoing of the political business cycle in the United States. Nixon’s political manipulation of the economy was so extreme and so shameless that his two more principled successors, Republican Gerald R. Ford and Democrat Jimmy Carter, seemed to avoid political manipulation like the plague. This attitude prevailed even though each president had ample opportunities and even plausible rationales for applying fiscal stimulus: the deep recession of 1973–1975 in Ford’s case and the stagflation after OPEC II in Carter’s case. And no American president since Nixon has even flirted with wage-price controls, not even when inflation rose back into double digits.¹⁶ All this was Nixon’s legacy for macroeconomic policy.

The Legacy of Arthur Burns

Burns’s legacy at the Fed has two main components: his failure to control inflation in the 1970s and his willingness to surrender the central bank’s independence to Nixon. Both were soon—and decisively—reversed by the staunchly independent and devoted inflation fighter Paul Volcker. But that’s a story for chapter 7.

Sticking with Burns, it is unfair to pin the entire blame for rising inflation on him and his colleagues on the FOMC. The supply shocks just mentioned (and discussed more fully in the next chapter) deserve a large share of the blame. Yet the Burns Fed certainly deserves some of the blame, and for several reasons the Nixon-Burns episode is rightly viewed as a black mark on the Federal Reserve’s history.

First, Burns was one of the advisers closest to Nixon who urged the unscrupulous president to invoke wage-price controls and then applauded when he did so (Nelson 2020, 321–31). Doing that will not endear you to many economists or to history.

Second, the Fed’s loose monetary policies of 1971 and 1972 certainly contributed to the inflation of 1972–1974, even as Burns regularly railed against the evils of inflation. That made him look not just political but also hypocritical in the extreme.

Third, while there is room for debate on this point, Burns has been accused of turning the monetary spigots on again in 1976–1978. Over those three years, M1 growth averaged 7.6 percent per annum and M2 growth averaged 10.4 percent. Nelson writes that “the period from 1976 to 1978—the final two years of Burns’ tenure—arguably witnessed even greater monetary policy ease [than in 1970–1972] and was followed by a higher peak of inflation” (Nelson 2013, 2).

Fourth and more in the intellectual than the policy realm, Burns actually claimed that the Fed had little ability to control inflation. For example, he told the Senate Banking Committee in March 1971 that “I don’t think that our fiscal policy and our monetary policy are sufficient to control inflation. Experience indicates that pretty clearly in our own country and even more dramatically in other countries, particularly in Canada and Great Britain.”¹⁷ Really? Milton Friedman, Burns’s onetime student, and Anna Schwartz, among others, certainly thought otherwise.

Maybe Burns was just new at his job then. But in his famous Per Jacobsson lecture at the September 1979 meetings of the International Monetary Fund in Belgrade, well after he had left the Fed, Burns (1979) seemed to look everywhere but at the central bank for explanations of high inflation.

Burns blamed “the philosophic and political currents that have been transforming economic life in the United States and elsewhere since the 1930s,” by which he meant the New Deal, the Great Society, and the like, noting that “the Federal Reserve was itself caught up” in these currents (Burns 1979, 9, 15). He complained that “as the Federal Reserve … kept testing and probing the limits of its freedom to undernourish the inflation, it repeatedly evoked violent criticism from both the Executive establishment and the Congress” (16). He concluded that central bankers’ “practical capacity for curbing an inflation that is continually driven by political forces is very limited” (21).

Was it really social liberals and obdurate politicians who stayed the Fed’s anti-inflation hand? To monetarists such as Friedman, that was apostasy. To Paul Volcker, it was a dangerous fantasy. As Volcker recalled in his autobiography, Burns “(infamously) expressed doubt that central banks were even capable of controlling inflation anymore” (Volcker 2018, 107). In the eyes of Volcker then and virtually all economists now, Burns was dead wrong. Supply shocks are sometimes important determinants of inflation; I argue in chapter 5 that they were in fact far more important than demand shocks in explaining the rise and fall of inflation in the 1970s and early 1980s. In the long run, however, monetary policy is a—many would argue the—principal determinant of inflation, despite Burns’s efforts to blame inflation on the welfare state. It is hard to see how a country gets sensible monetary policy when its central bank chief doubts that monetary policy affects inflation.

Distinguished Scholar Turned Political

Arthur F. Burns was a consequential figure in both the study of business cycles and the history of U.S. business cycles from the 1950s through the 1970s. His attitudes and actions left strong marks on the Eisenhower administration, the Nixon administration, and after—including, of course, at the Federal Reserve, which he chaired from 1970 to 1978.

Burns was born in Austria in 1904, the son of a paint contractor. His family immigrated to the United States ten years later, and Burns grew up in New Jersey. He attended Columbia University, where he earned his bachelor’s degree and, in 1925, his master’s degree. For some years thereafter he taught at Rutgers—where, you may remember, he had Milton Friedman as a student—while working toward his PhD at Columbia.

There Burns encountered Wesley Clair Mitchell, the research director of the NBER who was then America’s foremost authority on business cycles. It changed both their lives; the team of Burns and Mitchell subsequently became almost synonymous with business cycle research. Years later, Burns succeeded Mitchell as the NBER’s research director.

Burns moved from Rutgers to Columbia in 1945, where, among other things, he met its president, Dwight D. Eisenhower. When Eisenhower became president of the United States in 1953, he invited Burns to chair his Council of Economic Advisers. In that capacity Burns urged Eisenhower, who was a dyed-in-the-wool fiscal conservative, to cut taxes and reduce spending to reduce the severity of the 1953–1954 recession. It was pure Keynesianism.

In 1956, Burns returned to both Columbia and to the NBER as its president. Though once again an academic, he remained politically connected, making him a natural choice for a position in the new Nixon administration in 1969. Burns was elevated to the chairmanship of the Fed in February 1970 and, as related in this chapter, had a tumultuous eight years there. As his New York Times obituary noted, “he was an unmistakable presence to millions of Americans, with his bushy gray hair parted down the middle, wire-rimmed spectacles, jutting pipe and precise, slightly nasal voice that maintained its soft-spoken tone under the most scathing questioning” (New York Times 1987, 1).¹⁸

Chapter Summary

Richard Nixon and Arthur Burns illustrated the potential power of fiscal and monetary policy, working in tandem, to manipulate an economy—in this case for political ends. It was an idea they both understood as early as 1960. And when history gave them a chance to turn this idea into action in 1972, they did not squander the opportunity. Prior to the election, Nixon and Congress applied sizable fiscal stimulus, mostly in the form of spending, while Burns and the Fed applied strong monetary stimulus. While this was going on, Nixon invoked wage-price controls to hold inflation in check temporarily. The formula worked and then was quickly reversed once Nixon was reelected.

Ironically, the political business cycle they caused in 1971–1973 turned out to be an example of what is sometimes called catastrophic success. The preelection stimulus and postelection restraint were so blatant and so obvious—and got such a bad name—that no American president has tried it since.

Furthermore, as we shall see in chapter 7, Burns’s notion that inflation was beyond the control of the central bank—perhaps a product of the welfare state—did not last long.

______________

1. The epigraph is quoted in Meltzer (2009b, 793). The source is a White House tape.

2. A voluminous literature in both economics and political science supports this point, though virtually none of it predates 1960. See, for example, Fair (1978).

3. Nixon is often incorrectly quoted as saying, “We are all Keynesians now.” In fact, those words were Milton Friedman’s, and Friedman’s full statement was “In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian.” See TIME (1965).

4. A facsimile of this letter appears in (Tufte 1978, 32).

5. The quote is from Burns’s obituary (New York Times 1987).

6. A few years later George Shultz and Kenneth Dam, who were there at the time, wrote, “The Congress had earlier, as a political dare, granted the President sweeping authority to impose controls on the American economy” (Shultz and Dam 1977, 141).

7. The truly conservative George Shultz, who was director of the Office of Management and Budget at the time, strongly opposed them. See, for example, Garten (2021, chap. 8).

8. The two models employed different measures of demand pressure.

9. The Blinder and Newton (1981) estimates of the depressing effects of controls on inflation are close to those of Gordon (1975).

10. “All but” because most countries still cared about their exchange rates.

11. See, for example, Bordo and Eichengreen (2013), who concentrate on a somewhat earlier period, when Bretton Woods was limping along, but taken more seriously. Others have expressed similar sentiments.

12. But it can be argued (and has been!) that the demise of Bretton Woods allowed U.S. monetary policy to become much more accommodative while foreign monetary policies became somewhat more accommodative, thus contributing to worldwide inflation. I thank Barry Eichengreen for pointing this out.

13. I end this comparison period in August 1973 because OPEC struck that September. The CPI data cited are from the Organisation for Economic Co-operation and Development.

14. In a famous June 23, 1972, conversation captured on the White House tapes, Nixon’s chief of staff, H. R. Haldeman, reported to Nixon that Burns was worried about speculation against the Italian lira. Nixon famously replied, “Well, I don’t give a shit about the lira” (Nixon 1972, 13).

15. The term stagflation was apparently first coined by Iain Macleod (1965, col. 1165), a British politician who later became chancellor of the exchequer, in 1965. But it was not widely used before 1973. This initial oil shock would later be dubbed OPEC I.

16. President Carter did, however, force Paul Volcker to impose credit controls briefly in 1980 (Volcker 2018, 110–12). For more on that episode, see chapter 7.

17. U.S. Senate Committee on Banking, Housing, and Urban Affairs (1971, 19).

18. Much of the information in this profile comes from the New York Times (1987).