Nixon’s Political Business Cycle
Abrams, Burton A. 2006. “How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes.” Journal of Economic Perspectives, 20: 4 (Fall): pp. 177-88.
He transcribe many Nixon tapes regarding the president’s relationship to Arthur Burns.
177: “In Nixon’s 1962 (p. 309-10) book, Six Crises, he recounts that Arthur Burns called on him in March 1960 to warn him that the economy was likely to dip before the November election. Nixon writes that Burns “urged strongly that everything possible be done to avert this development. He urgently recommended that two steps be taken immediately: by loosening up on credit and, where justifiable, by increasing spending for national security.” But when then-Vice President Nixon took this recommendation to the Eisenhower Cabinet, “there was strong sentiment against using the spending and credit powers of the Federal Government to affect the economy, unless and until conditions clearly indicated a major recession in prospect.” Nixon sums up: “Unfortunately Arthur Burns turned out to be a good prophet.” Herbert Stein (1995, p. 96), who was a member of the Council of Economic Advisers from the start of Nixon’s term and became chairman at the start of 1972, confirms that Nixon blamed a modest rise in the unemployment rate as one of the reasons he lost the 1960 election.”
180: October 10, 1971 (Conversation No. 607-11): Nixon, speaking Burns, expresses his concern about the economy: “I don’t want to go out of town fast,” he said, apparently referring to the possibility of losing his upcoming reelection bid. Nixon tells Burns that “this will be the last Conservative administration in Washington,” perhaps seeking to raise Burns’s concerns that Nixon might lose the election. Nixon claims that the “liquidity problem,” by which he seems to mean the problem of too much liquidity in the system, is “just bullshit”.”
183: February 14, 1972 (Conversation 670-5): “[Office of Management and Budget Director George] Shultz reports that Burns is quite optimistic about the economy. Nixon views Burns’s optimism with suspicion: “Another defense he’s building up for not raising the money supply …. I’d rather he weren’t so optimistic …” Shultz and Nixon conclude that Burns is not expansionary enough with monetary policy. Nixon becomes very critical of Burns. “This is the last time I want to see him … [garbled] or get the hell out of here. War is going to be declared if he doesn’t come around some.” Nixon notes further that Burns is “talking to the Jewish press.”
183: Conversation continues: “Shultz recounts a story. At Burns’s swearing-in ceremony, Robert C. Holland, Secretary of the Board of Governors, commented that Frederic V. Malek would make a good addition to the Board. Shultz claims that Burns, upon hearing this suggestion, “glowed because that is the guy he wants to see on the Board. He will control him, just absolutely.” Shultz goes on to say that Burns also “would like to get [Andrew] Brimmer off the Board.”
185: Ehrlichman, John. 1982. Witness to Power (NY: Simon and Schuster) describes a meeting between Nixon and Burns on October 23, 1969, just after Burns’s nomination to the Fed had been announced: “My relations with the Fed,” Nixon said, “will be different than they were with [previous Federal Reserve chairman] Bill Martin there. He was always six months too late doing anything. I’m counting on you, Arthur, to keep us out of a recession.” “Yes, Mr. President,” Burns said, lighting his pipe. “I don’t like to be late.” Nixon continued. “The Fed and the money supply are more important than anything the Bureau of the Budget does.” Burns nodded. “Arthur, I want you to come over and see me privately anytime …” “Thank you, Mr. President,” Burns said. “I know there’s the myth of the autonomous Fed . . .” Nixon barked a quick laugh. “… and when you go up for confirmation some Senator may ask you about your friendship with the President. Appearances are going to be important, so you can call Ehrlichman to get messages to me, and he’ll call you.”
187: “As Nixon had told Burns in February 1972, “I really don’t care what you do in [or after] April.” One year after the election, in November 1973, the Federal Reserve had hit the monetary policy brakes in earnest. In the year since the November 1972 election, the discount rate had been increased from 4.5 percent in July 1972 to 7.5 percent. The federal funds rate, which had been 4.49 percent in July 1972, jumped to 9.71 percent.”