Tape 26 - Nixon's first 100 days

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-	Instructional Dynamics Incorporated of Chicago	0:02
	again brings you Dr. Paul Samuelson, professor of economics	0:04
	at the Massachusetts Institute of Technology.	0:08
	Professor Samuelson, what's on your mind	0:11
	for the week of May 5th?	0:13
-	We've had a great deal of discussion lately	0:14
	about the first hundred days of Richard Nixon.	0:17
	Perhaps a few words would be in order to give my opinion	0:21
	about how things are going in Washington,	0:26
	and how things are going in the country.	0:29
	The expression in the first 100 days, of course,	0:32
	has great currency from the many and exciting	0:35
	things that happened back in 1933,	0:39
	during Franklin Roosevelt's honeymoon period.	0:43
	Again, when John Kennedy became president in 1961,	0:49
	We were bombarded each day by exciting new things happening.	0:54
	In connection with the 1917 revolution in Russia,	1:02
	we heard about the 10 days that shook the world.	1:07
	These are just ways of punctuating the passage of time,	1:10
	so that the one can delineate what is happening.	1:14
	But there is another importance	1:20
	to these periods.	1:23
	It is sometimes said in American history,	1:26
	that it must be at the beginning that a new president	1:29
	that accomplishes something,	1:33
	because after he has been in for a while,	1:35
	there is an inevitable attrition of his popularity	1:38
	and of his leadership.	1:43
	I don't know if that's the case.	1:45
	It certainly is the case that almost any president	1:48
	how ever unpopular he is,	1:53
	ultimately to be will be found,	1:56
	if you take Gallup poll ratings in the first weeks	2:01
	and months of his administration to rise in popularity,	2:05
	and the last time I saw a sounding and this matter,	2:10
	it appeared that Richard Nixon was no exception.	2:14
	Many of the people who must have voted against him	2:18
	in November are now saying that he's doing	2:21
	a pretty good job.	2:25
	If it were true,	2:30
	that one must use this popularity at the very beginning,	2:32
	then perhaps there would be reason for criticism	2:36
	because not very much substantive	2:41
	has actually been happening.	2:45
	I saw one columnist who referred	2:49
	to the New Deal of Franklin Roosevelt,	2:52
	to the Fair Deal of Harry Truman,	2:57
	to the Square Deal I guess it was a Theodore Roosevelt.	2:59
	He said that you'd have to call the Nixon performance,	3:03
	a case of no deal or the nothing deal because	3:08
	very little has been happening.	3:13
	Now there's a sense in which that might be a good thing.	3:18
	If your conception of the presidency,	3:22
	the role of government was that of a decidedly limited role,	3:24
	and that what needed to be done was to peel away the power	3:31
	and activity of government to return toward an earlier style	3:35
	of doing things, then no news might	3:40
	be the very best news in the world.	3:43
	By this definition if we work at it hard enough,	3:47
	we may finally get back to that best of all presidents	3:51
	Calvin Coolidge, the last president	3:56
	who for non health reasons took a nap every afternoon	3:59
	in the White House and who actually saved money	4:06
	on his salary even though it was the booming days	4:10
	of the 1920s on his travel allowances.	4:14
	I don't think that that's good enough	4:20
	in these days, that is not my conception of the role	4:23
	of government, and so it was just that Mr. Nixon	4:26
	was doing nothing I would not applaud him for it.	4:31
	However, I have some good things to say about	4:34
	Mr. Nixon's inaction.	4:39
	Since many of us I include myself in part in the group	4:41
	were fearful that we might have a doctrinaire.	4:46
	wild died person who would do a lot	4:51
	and we do a lot of the wrong things.	4:55
	I'm very agreeably surprised by his low keyed approach.	4:57
	Let let me give an example,	5:04
	it's an example that has a bearing upon economics,	5:06
	although it's not primarily economic.	5:08
	Let's take Mr. Nixon's emotive behavior with respect	5:12
	to the ABM defense missile system.	5:15
	Almost no scientist has a good word to say for this.	5:21
	Yet politically there's a hawkish group in the country,	5:28
	who are very much in favor of it,	5:32
	or become very much in favor of it.	5:34
	I don't think that's for economic reasons.	5:36
	It's very hard to do sensible research	5:39
	on the topic called the military industrial complex	5:43
	to try operationally to give meaning to that,	5:46
	and then to see how important it is.	5:49
	Now, when I say it's hard to do that	5:51
	I don't mean to say that because it's hard,	5:53
	that means that it doesn't exist	5:55
	and we should put it down at the zero,	5:57
	but it's very hard to say anything very concrete about it.	5:58
	But if I were to try to say something	6:02
	I think that the hawkish sentiments in the public,	6:04
	and his fears of what may be happening	6:07
	in the Soviet Union are more important than the pocketbook	6:09
	interests of a particular defense contractors,	6:14
	who would like to see an ABM missile.	6:18
	Well, what did Mr. Nixon do?	6:21
	He compromised.	6:23
	I predicted that he would,	6:24
	and I would say that his compromise is in the direction	6:27
	of very much underplaying the ABM.	6:31
	And for all I know at any moment, he may, in fact,	6:36
	slow it down still further and abandon it if it doesn't	6:39
	seem to be a good bargaining weapon.	6:43
	It has cost him something politically	6:46
	with the country I believe in the long run,	6:49
	All of the Gallup poll shows that a majority of the people	6:52
	are in favor of the ABM missile.	6:56
	Well, how do you praise this?	6:59
	Do you look at the whole of the donut,	7:00
	or do you look at the donut?	7:03
	When look at the glass of water,	7:05
	do you say it's half full,	7:07
	or do you say it's half empty?	7:08
	I think it's too bad, that Mr. Nixon didn't go all the way	7:11
	in this matter, but I'm very thankful	7:15
	that he went as far as he did.	7:19
	Now, I could go down the list of innumerable things	7:21
	inside the economic sphere itself	7:24
	and give exactly the same appraisal.	7:27
	My scoring missile always be two sided,	7:32
	compared to what one would have feared	7:36
	with respect to Mr. Nixon, he did very well indeed,	7:38
	compared to what one might hope for Mr. Nixon,	7:41
	there are certain inadequacies.	7:46
	But I don't wanna discuss personalities here today,	7:49
	I want to discuss the policies that are being followed	7:52
	and to try to give an appraisal of the hundred days.	7:57
	I think that this last lack of action	8:01
	is indicative of a genuine attitude	8:05
	and style of the new team.	8:10
	I think it also is a reflection of their indecision.	8:13
	They really don't know what to do.	8:17
	They really don't know how to do it,	8:19
	and I sympathize with them,	8:21
	because it's not an easy problem to control an inflation.	8:23
	And it is an impossible problem, in my judgment,	8:26
	to control and inflation without costs.	8:29
	You have to inflict certain unpopular costs	8:32
	upon certain groups in the population	8:36
	if you are to get anywhere with the control of inflation.	8:39
	And I believe I say this on the basis of no inside	8:43
	information, but I do see a lot of the people	8:47
	in the new government socially,	8:49
	I believe that they thought that by this time	8:52
	we would be further along in the fight against inflation,	8:57
	then we apparently actually are.	9:02
	I am sure that if I had told them how the money supply	9:06
	was going to behave, had I known this back at election day,	9:09
	and it said that from sometime in December	9:14
	up until well into May,	9:18
	the rate of growth of the money supply will be	9:21
	very significantly reduced in comparison	9:24
	to its previous rate of growth,	9:26
	what do you think the economy will be doing at that time	9:30
	and what will be the straws in the wind,	9:36
	on the economic time series which point ahead then,	9:40
	even though the believers in the importance of money	9:45
	always emphasized the legs that are involved,	9:50
	they would, I think, have expected	9:54
	a little bit more to be happening by this time,	9:57
	than has actually happened.	10:00
	Now it could be that this is a shoe which has been dropped	10:02
	from a very great height, and we're waiting	10:06
	for the shoe to fall.	10:09
	It is inevitably and remorselessly on its way	10:10
	and it will fall and things are just about on schedule	10:13
	but I think they thought it would be a little bit easier.	10:18
	It's hard to know what to make a public utterances	10:22
	we haven't had too many from the new team,	10:24
	so I have to shop and do with the pickings	10:27
	that are available.	10:33
	Dr. Arthur Burns who was a very sage economist	10:36
	who had cabinet rank, who was the year of Mr. Nixon	10:39
	was in the White House as counselor	10:42
	spoke before a TV audience some time ago.	10:45
	And one of the things that he said was that	10:49
	by the end of this year, by the end of 1969,	10:52
	mind you which is within seven months,	10:56
	we will be enjoying an increase in prices	10:59
	of less than 3% per annum.	11:03
	I don't believe that, I don't think you can get	11:07
	a jury of expert economists at the time	11:09
	who believe that.	11:14
	I would not criticize Dr. Burns.	11:16
	If his actual private belief	11:21
	was a little bit more pessimistic than that,	11:24
	but as a public official whose utterances	11:27
	will affect the situation,	11:31
	if he might have felt it on the spur of the moment	11:33
	you ought to gloss over the nature of the difficulty	11:37
	a little bit.	11:39
	But in any case, taking that as a typical utterance,	11:41
	I think it is not credible.	11:45
	Professor Houthakker well, I say professor	11:50
	but of course he's now the member	11:53
	of the Council of Economic Advisers has been very quiet.	11:55
	I monitor the press regularly at the airwaves	12:00
	and the only thing I've picked up from him	12:05
	was a speech which he made in Europe,	12:06
	which he had arranged to make I think before	12:09
	he was ever appointed to government.	12:12
	And there he rather courageously said,	12:14
	that is courageously for a public official,	12:17
	not at all courageously for an academic	12:19
	because it's what most academics have been saying	12:21
	that there is a definite need for some measure	12:25
	of flexibility and exchange rates.	12:29
	Dr. Houthakker has long been a believer	12:32
	in the fact that the American dollar	12:35
	is an overvalued dollar.	12:39
	When he was at Harvard he was one of the three	12:40
	or four Harvard professors who thought that a depreciation	12:43
	of the dollar relative to other currencies of 10 to 15%	12:49
	would be a good thing.	12:53
	Professor Godfrey tabular who was head	12:56
	of the International Task Force for Nixon	12:59
	was another one of those Harvard economists.	13:01
	Somebody once asked me, was it significant there were three	13:04
	Harvard economists in favor of depreciation.	13:07
	I said, not at all, there's three Harvard economist	13:09
	in favor of any view of that you can state	13:12
	that house has many mansions and many voices	13:15
	they did that all speak in unison,	13:19
	but nevertheless Houthakker represented a very popular	13:21
	refrain in our profession, and I think he is rather	13:26
	in favor of a crawling pig,	13:29
	maybe in his heart of hearts, he is even in favor	13:31
	of a floating exchange rate.	13:33
	I think it's rather courageous that as a public official,	13:36
	he felt free to be able to give	13:39
	a plug toward that general view point.	13:43
	Paul McCracken has been very silent for quite a while	13:48
	except for the necessary testimony before	13:52
	the Joint Economic Committee.	13:55
	I have very little to report or to appraise with respect	13:58
	to Paul McCracken.	14:02
	Herbert Stein, the third final member of the Council	14:04
	has spoken out.	14:09
	He definitely is giving out a council of gradualism.	14:14
	This is consistent with his whole lifestyle.	14:19
	He is a skeptic if he came out forthright	14:22
	with a very strong program and with great confidence,	14:26
	I would wonder whether an imposter had taken over	14:30
	whether he had changed his breakfast food.	14:33
	He is a sage fellow have good judgment,	14:38
	who follows the times and follows	14:41
	the fashion somewhat cautiously.	14:43
	One thing that was discernible in his testimony	14:45
	was a relative downgrading of his confidence	14:48
	in the efficacy of fiscal policy	14:52
	and a modest upgrading of his conference in monetary policy.	14:55
	It's my impression that there's been a change	15:02
	in the attitude of the administration economists	15:05
	towards the Federal Reserve.	15:09
	It wasn't very long ago I believe,	15:12
	that a number of the administration economists	15:13
	were wondering whether the Federal Reserve	15:16
	wasn't over doing this.	15:19
	Wasn't engaged in in overkill?	15:21
	Whether it's having the money supply,	15:25
	however you wanna define it,	15:28
	grow at only a couple of percent,	15:30
	whether that wasn't going almost certainly	15:33
	to give us a substantial slow down	15:36
	which would be semantically hardly recognizably different	15:40
	from a recession by the end of the year.	15:44
	If that was the case, I think there has been a gradual	15:48
	changing of mood, and I think this change can be traced	15:51
	very directly to what has been happening	15:55
	to the index number of prices.	15:58
	That eight tenths of a percent increase,	16:02
	in the consumers price index for March,	16:05
	which is said to be a 9.6% annual rate of increase.	16:08
	But if you go through the arithmetic of compound interest,	16:14
	it's rather more than that, more than 10%.	16:17
	That was indeed a shocker.	16:21
	The fact that industrial wholesale prices,	16:24
	the one part of the price picture which had been doing well	16:28
	for a long time, that that too now shows a deterioration.	16:33
	And chose an increase in prices.	16:37
	That was a further shocker.	16:40
	Now it's very wrong to make much of one month's figures,	16:43
	0.8 which is as high a figure as has occurred	16:49
	since the Korean War period,	16:54
	will probably be followed	16:56
	at the next announcement for the month of April just over	16:58
	one supposes with the 0.6 or 0.5,	17:04
	I've heard some noises from the Department of Labor	17:08
	in that direction.	17:10
	But if we take a three month period,	17:13
	January, February, March, then there's a little more	17:17
	statistical stability and regularity	17:20
	in an average of that sort.	17:23
	And that shows a 6% rate of increase in consumers prices.	17:25
	This tells us all,	17:31
	that as I've said, on these tapes,	17:34
	we've hardly made the first step	17:37
	in the fight against inflation.	17:40
	And I think this has changed the view of the administration.	17:43
	What is the private view	17:48
	of the economists in the administration?	17:50
	When a man sits in his office and faces himself	17:53
	in the mirror or talks it over with his wife,	17:57
	what does he really think is going to happen?	18:00
	Now, I of course, I'm not privileged to be a fly on the wall	18:03
	and to know what goes on in the mind of such a person.	18:07
	But I think that I can put myself pretty well in his shoes,	18:11
	and ask myself what would I think in the same situation.	18:15
	Now, of course, in order to put myself in his shoes,	18:21
	I must slightly change the size of my feet.	18:23
	I think given not my own	18:28
	actual attitudes with respect	18:32
	to what's good and bad about the economy,	18:34
	but transforming those into his attitudes	18:36
	and his way of thinking, what would I believe?	18:42
	And I guess I would believe something like the following.	18:49
	First, I wouldn't know any more really	18:53
	than the man in the street.	18:56
	What the intention of the president were with respect	18:58
	to the Vietnam War?	19:00
	Whether the president is prepared as the Vietcong,	19:03
	show some signs of being agreeable to talk,	19:08
	a to de escalate substantially,	19:12
	I don't know, and neither would he know.	19:14
	The estimates have to be made independently	19:17
	of any such confidence knowledge.	19:20
	Maybe the president himself doesn't know,	19:22
	but I hope that that's not the case.	19:24
	Perhaps it is the case that the president is ready	19:27
	to deescalate, having made a determination	19:31
	in that direction, but hopes to get some concessions	19:34
	from the North Vietnamese	19:39
	and the Vietcong before doing so.	19:42
	But he's prepared unilaterally to cut his losses,	19:44
	even if he doesn't get those concessions.	19:48
	Since we don't know that,	19:50
	let's go through the exercise in two steps.	19:52
	First, assuming that the war goes along pretty much	19:56
	like the following for the next 15, 18 months	20:00
	or two years time.	20:03
	If that was the case, this is the timetable,	20:06
	I think that a new administration economists would expect.	20:08
	He believes that the type money of the Federal Reserve,	20:13
	if maintained long enough definitely	20:18
	will slow down the economy.	20:21
	And he does expect the Federal Reserve	20:24
	to keep the rate of growth of the money supply in check	20:27
	whether it's kept quite down at its sub normal levels	20:33
	of the present for months to come,	20:39
	or whether it reverts back to a more	20:42
	maintainable long term level.	20:45
	Nevertheless, he is counting on the Federal Reserve	20:46
	not to reintroduce easy money until some progress	20:49
	is made towards the control of the inflation.	20:55
	Because of the delayed effects of past	21:00
	Federal Reserve policy,	21:02
	because of the later effects of maintained	21:05
	and future Federal Reserve policy,	21:10
	and because the surcharge is still on the books	21:13
	at the 10% rate till the end of the year,	21:17
	and has to be on the books, presumably at a 5% rate	21:20
	into the next first part of next year.	21:24
	For all these reasons,	21:29
	the forecasts of any Washington economist,	21:32
	and I mean now the private forecast in which he believes,	21:36
	that something that's put on TV for the purpose possibly	21:39
	of influence events, must be that by the fourth quarter	21:44
	of the year, the rate of growth of the GNP	21:48
	will be definitely less than it has just proved to be,	21:51
	less than 16 billion.	21:57
	Let's say a 10 billion, 11 billion, 12 billion.	22:00
	For the third quarter it's not so clear because now,	22:07
	that the Nixon economists have gone to Washington and looked	22:10
	very closely at the figures,	22:13
	they realize that in the third quarter,	22:15
	there's a big jump in government payrolls.	22:17
	So large that that will represent a definite blip	22:22
	in the rate of growth of the money GNP	22:27
	in the third quarter over the second quarter.	22:30
	So he would be rash at this time to put down a number	22:34
	as low as $11 billion, even though that will	22:39
	be six, seven months after the onset of rather tight	22:43
	Federal Reserve policy.	22:49
	In short, there is no doubt in the mind of professional	22:54
	Washington economist that modern macro economics can work.	22:59
	He doesn't feel defeated.	23:04
	His problem is, what is the proper dosage	23:05
	and what do we buy for each amount of restriction,	23:08
	and what does it cost us.	23:12
	Nevertheless, if he's a realist,	23:15
	and I think he is,	23:18
	he will know that by the fourth quarter,	23:21
	this will not do much to change	23:26
	the inflationary price picture.	23:29
	If we talk about the GNP deflator	23:33
	that's a very sluggish Price Index.	23:37
	It's very hard to bring it down by very much,	23:41
	he will be whistling in the wind in my judgment,	23:44
	if he thinks that the recent increase in that deflator	23:46
	which has been about 4.3% will be down to below 4%.	23:50
	If we look at the consumers price index,	23:56
	that is so heavily weighted with services	23:58
	whose wage component is still on the rise,	24:02
	and which very rarely reverses itself,	24:06
	and never reverses itself dramatically,	24:11
	will do very well if the recent 6% rate has subsided.	24:13
	Again I would say, to a bit above 4%.	24:19
	When it comes to wholesale prices,	24:26
	and particularly with respect to sensitive wholesale prices,	24:28
	there you have a better chance,	24:31
	I think, by the fourth quarter to show some diminution.	24:35
	But you'd be a rash man to bet odds on and with confidence	24:38
	that even there there would be much of a change.	24:44
	Of course, the whole strategy of gradualism is,	24:47
	that we will reap in 1970 some of the benefits	24:50
	of this slow down in the rate of real growth.	24:54
	And mind you by the fourth quarter of the year,	24:57
	if the money GNP is only growing at 11 billion	25:01
	or $12 billion per annum,	25:04
	the vast preponderance of that will be pure price change.	25:08
	And we will be at annual rates of growth in terms of the	25:13
	real economy of not the 4%, which is capable,	25:15
	but only a couple of a percent.	25:21
	Well, good.	25:26
	That means we at least we're on our way.	25:34
	No, not good.	25:37
	I think in the ones private moments one could permit oneself	25:39
	a little low despondency because,	25:45
	just at that point, the effort to fight inflation	25:47
	will begin to hurt.	25:53
	Just at that point out imply what will be rising,	25:55
	to the 4% the level, to the four and a quarter percent,	25:59
	to the four and a half percent.	26:04
	And I even there, I exaggerate but then,	26:06
	we'll come the testing period.	26:09
	And if the president wants to be popular and remember	26:12
	the 1970 elections will be getting closer in view	26:16
	as we get into 1970 itself,	26:20
	then I think that prior to the time,	26:23
	they will succeed in bringing the price inflation down,	26:27
	even to the 3% goal that gradualist talked about earlier,	26:29
	the infection will begin to hurt.	26:33
	And so if we stay with our model in which the Vietnam War	26:37
	has not substantially deescalated,	26:41
	there will be very much pressure at that time	26:44
	upon the administration and upon Congress,	26:47
	and by Congress to begin to ease up.	26:50
	I cannot pinpoint for you exactly what is likely to happen	26:54
	but one definitely good possibility is,	26:59
	that the rate of inflation will abate from 6% down	27:02
	towards 4%, maybe a little bit less,	27:06
	will be maintained there for a little while,	27:09
	but then there's a very great danger,	27:11
	that in order to minimize the cost of that policy,	27:14
	there will be an easing up.	27:18
	And so the rate of inflation will again,	27:20
	begin slowly to pick up	27:22
	to accelerate back towards a 5%.	27:26
	As a as a betting man,	27:30
	I would not at all be sure	27:33
	that if we wanna talk about where the price index will be	27:36
	at the end of the first term of Mr. Nixon,	27:39
	in comparison with word was at the beginning,	27:42
	and if we re establish the price based at 100	27:45
	at the beginning that we may not see in four years time	27:48
	something like 15 to 20% increase in prices.	27:52
	So I conclude from this diagnosis,	27:59
	that inflation is still with us.	28:03
	Now, just one word,	28:05
	all bets are off on what I've talked about,	28:08
	if the other eventuality materializes,	28:10
	namely that there's a substantial deescalation	28:14
	of the Vietnam War, that would require a whole long story	28:17
	in and of itself.	28:21
	Thank you very much.	28:23
-	Thank you Professor Paul Samuelson of MIT.	28:25
	We will be hearing more from you next week.	28:28
	If you have questions, comments or suggestions	28:30
	write IDI 166 East Superior Street,	28:33
	Chicago six, O, six, one, one.	28:37

Item Info

Title:

Tape 26 - Nixon's first 100 days

Date:

1969

Contributor:

Samuelson, Paul A. (Paul Anthony), 1915-2009

Subject:

Format:

audiocassettes

Language:

English

Digital Collection:

Paul A. Samuelson papers, 1933-2010 and undated

Source Collection:

Paul A. Samuelson papers, 1933-2010

Series:

Economics Cassette Series: Paul Samuelson

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Limited Re-Use

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Identifier:

RL10082-CS-0026
ref2191_n7f
samuelsonpaul
duke:325049
pstau001026
ark:/87924/r4g15tt29
2d9d3d21-c3af-41a5-a49a-6929628f73f2

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Tape 26 - Nixon's first 100 days

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Economists' Papers Archive

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