The President and the Council of Economic Advisors: Interviews With Cea Chairmen by Erwin C Hargrove & Samuel A Morley

Author:Erwin C Hargrove & Samuel A Morley [Hargrove, Erwin C & Morley, Samuel A]
Language: eng
Format: epub
Tags: International Relations, Political Science, General
ISBN: 9781000304961
Google: qAaiDwAAQBAJ
Goodreads: 49788625
Publisher: Routledge
Published: 2019-07-11T00:00:00+00:00

DD: Martin had this great rapport with Wilbur Mills, and Martin never had any sense that there was the slightest possibility of a tax increase from LBJ. This may have been part of Martin’s thinking when he was looking at the discount rate question and the further tightening by the Fed. There wasn’t any alternative. Somebody had to do it.

EH: Mills had a very well-deserved reputation for never taking a question to the floor unless he knew he had the votes, and Johnson knew that.

GA: All right. The tax increase recommendation was not made in the January, 1966 budget. The issue remained open all during the year and the discussion continued with mainly the same protagonists, except that to a somewhat larger extent, and at various times, other people either tried to get into the act or were invited into the act. Moreover, as the problem became more obvious, the media and the interest groups began to take a greater interest in it than they had in 1965.

In 1966 you had the credit tightening and you began to have some inflation. The alternatives and the issues remained pretty much the same; it was only the evidence that was changing the record. We finally did get LBJ to recommend a modest package of fiscal measures in the late summer of 1966, which were quickly adopted: the suspension of the investment tax credit, some budget cuts, expenditure cuts. But these were obviously not highly effective. The real anti-inflation battle was being fought by monetary policy, which by the end of the year had pushed the economy to the verge of what we continued to refer to as a mini-recession. That made the first half of 1967 a very soft economy, with considerable easing of the rate of inflation and cessation of the decline in unemployment—maybe for a quarter or two a reverse, a slight increase in unemployment. The inflation then continued at a very high level, and the level of unemployment remained well below the 4 percent figure, which had previously been regarded as the inflationary threshold.

One of the more interesting, and discouraging, things to me was the role of the press during this period. Both the New York Times and the Washington Post strongly opposed any tax Increase during 1966 when the question was debated as an essentially academic issue and even in 1967 after the President did recommend a tax increase. I don’t know when they switched position—in 1968, if they ever did. The editorials in these two papers on the subject were written by two economists. Murray Rossant with the Times. I don’t recall the name of the man at the Post. In any case, we considered their editorials not only wrong but very misleading, not only reaching the wrong conclusion, but very badly argued. We made several attempts to try to get the Times and Post to change their editorial policy in this respect. We used all kinds of efforts to get at the Times management; I was not directly involved in doing it, but various emissaries did try to do so.

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