forecasts, and while Townsend-Greenspan did provide them to
clients, they weren't central to our business. I had to admire what Heller
had pulled off. But I also remember sitting in my office at 80 Pine Street
with its view of the Brooklyn Bridge and thinking, Boy, I'm glad I don't
have Walter Heller's job. I knew that macroeconomic forecasts are far more
art than science.
Those rosy economic results deteriorated as the Johnson administration
began pumping vast sums of money into the Vietnam War and Great
Society programs. Beyond the necessities of day-to-day operations at
Townsend-Greenspan, I took a deep interest in governmental fiscal policy
and often wrote newspaper op-eds and articles for economics journals that
were critical of the administration. The economics of the Vietnam War in
particular fascinated me because of my earlier work on Korean War spending.
When my old colleague Sandy Parker, who was still chief economist at
*Richard Nixon picked up this line and used it as president in 1971 in defense of his administration's
fiscal deficits and economic interventionism.
55
THE AGE OF TURBULENCE
Fortune magazine, asked in early 1966 for Townsend-Greenspan to help
examine the cost of the war, I readily agreed.
Something in President Johnson's accounting didn't add up. The administration's
estimates of war costs seemed low, based on what was becoming
known about the growth of the U.S. deployment—General William
Westmoreland was reportedly asking behind closed doors for an increase to
four hundred thousand troops. I pulled apart the president's budget proposal
to Congress for the fiscal year starting July 1, 1966, and by applying
what I knew about the patterns and practices of Pentagon spending, I determined
that the budget lowballed the likely cost of the war for that year
by at least 50 percent—$11 billion or more. (The budget also assumed, in
a revealing footnote looking toward 1967, that combat operations would
end on June 30 of that year, so no costly replacements of planes or other
equipment lost would be needed after that.)
Fortune broke the story in an April 1966 piece entitled "The Vietnam
War: A Cost Accounting." The article concluded bluntly: "The budget barely
begins to suggest the level of Vietnam War spending that lies ahead." Coming
from a respected business publication, it added fire to the growing debate
about whether LB J and his administration were hiding the cost of the war.*
Apart from being suspicious about the war's economics, however, I was
pretty much out of step with the times. When people think of the sixties,
they think of civil rights marches, antiwar demonstrations, and sex, drugs,
and rock and roll—a culture dramatically and flamboyantly in upheaval.
But I was on the other side of the generation gap. I'd turned forty in 1966,
which meant I'd become an adult in the 1950s, when you wore a jacket and
a tie and smoked a pipe (with tobacco in it). I was still listening to Mozart
and Brahms, and to Benny Goodman and Glenn Miller. Popular music became
almost wholly alien to me with the arrival of Elvis—to my ears, it was
on the edge of noise. I thought the Beatles were reasonably good musicians;
they could sing well and had engaging personalities—and compared with
some of what soon followed, their music was almost classical. The culture
*President Johnson played loose with the numbers from the start. The historian and former
LBJ consultant Eric Goldman, for example, described in a 1969 memoir how Johnson misled
reporters about his first budget to "heighten the impression of devotion to economy and skill
in achieving it."
56
ECONOMICS MEETS POLITICS
of the sixties was alien to me because I thought it anti-intellectual. I had a
deep conservatism and a belief in civility. So I didn't relate to flower power.
I had the freedom not to participate, and I didn't.
My involvement in public life started in 1967 with Nixon's campaign
for president. I'd been writing an economics textbook on the side with a
Columbia University finance professor named Martin Anderson. Marty had
made a reputation for himself in conservative circles with a book called The
Federal Bulldozer, a critique of urban renewal that had caught Nixon's eye.
Our plan had been to collaborate on a textbook describing a laissez-faire
capitalist system; with some sense of irony we'd decided that Marty the
academic, would write the chapters about business, and I, the business consultant,
would write the chapters about theory. But we hadn't gotten very
far when Nixon asked Marty to join his presidential campaign as his chief
domestic policy adviser.
As soon as he joined the campaign, Marty asked if I could help their
little crew develop policy and write speeches. The senior staff at that point
consisted of just four people besides Marty: Pat Buchanan, who was chief
of staff, William Safire, Ray Price, and Leonard Garment. Len was the only
one I knew, although I had seen him only rarely since we'd played together
in the Henry Jerome orchestra more than twenty years earlier. Now he was
a partner at Nixon's law firm in New York, Nixon Mudge Rose Guthrie Alexander
& Mitchell. The six of us went out for lunch and talked about what
I could do for the campaign. They liked some of my ideas, and finally Buchanan
suggested that before we went further, I should come talk to
the candidate.
A couple of days later I went to meet Nixon at his office. It intrigued
me that he was back in the political game. Like everybody, I remembered
his farewell gibe at reporters after losing the California gubernatorial race
in 1962, in which he thought the press had been against him: "You won't
have Nixon to kick around anymore, because, gentlemen, this is my last
press conference." Nixon's office at Nixon Mudge Rose was chock-full of
memorabilia and autographed photos—I had the sense that here was a
once-important figure who had been pushed off into a little room with a
lot of memories. But Nixon was very elegantly dressed, and he didn't just
look the part of the successful senior New York lawyer, he acted it too.
57
THE AGE OF TURBULENCE
Without wasting time on chitchat, he drew me out with thoughtful questions
about economics and policy. When he set forth his ideas, he did so in
perfectly turned sentences and paragraphs. I was very impressed. Later in
the campaign, I'd sometimes have to brief Nixon on an issue before he met
with the media, and he'd go into that same intense, factually oriented lawyer
mode. He could listen for five minutes on a subject he couldn't possibly
know much about—a breaking news event, for instance—then get out
there and sound as knowledgeable as a professor. I would say that he and
Bill Clinton were by far the smartest presidents I've worked with.
The Nixon for President committee had offices at Park Avenue and
Fifty-seventh Street in the old American Bible Society Building. I initially
worked a couple of afternoons a week, increasing to four, five, or even more
as the campaign geared up. They appointed me "economic and domestic
policy adviser," but I was always strictly a volunteer. I worked very closely
with Marty, who'd taken a leave from Columbia and who was on the campaign
plane full-time. Part of my job was to coordinate responses on any issue
that came up: we'd scramble to assemble the necessary research and fax
it to Nixon and the campaign team overnight. He wanted to come across as
informed, and I helped organize task forces on economic issues. The main
objective of these task forces was to bring people into his camp. There were
almost twice as many registered Democrats as Republicans in America,*
and Nixon needed to include everyone he could. Each task force would get
together, the members would tell Nixon what they thought, and everybody
would smile and shake hands and take pictures. But the work I enjoyed
most, and my most original contribution, was integrating state and local
polls. During the election campaign of 2004, politicians could go on the Internet
and each day get an up-to-date electoral count based on polls within
the fifty states. That technology wasn't there in 1968, but I built something
as close to it as you could get. I took all the state polls we could find, related
them to past voting patterns and trends, and extrapolated for states that did
not have polls—all to project the popular vote and the electoral vote.
*The distribution of voters, according to the Center for the Study of the American Electorate,
was seventeen million registered Democrats versus nine million registered Republicans.
58
ECONOMICS MEETS POLITICS
In late July 1968, just a week before the Republican convention, Nixon
assembled the senior staff at Gurney's Inn, a beach resort in Montauk on
the far eastern tip of Long Island. About fifteen people were present—all
the senior staff including the handful I'd started with many months before.
Nixon already knew he had enough votes for the nomination, and this was
meant to be a working session to frame the issues he wanted to hit in his
acceptance speech. When we sat down at the conference table, though, for
some reason he was angry. Instead of the policy discussion I was expecting,
he launched into a fulmination about how the Democrats were the enemy.
He didn't raise his voice, but his speech was so intense and so laced with
profanity that it would have made Tony Soprano blush. I was stunned: this
was not the man I'd been dealing with. I had no inkling then that I was observing
an important part of the Nixon personality. I couldn't understand
how a single human being could have such different sides. After a while
he subsided and the meeting went on, but I never looked at him the
same way after that. It so disturbed me that after the election, when I was
invited to join the White House staff, I said, "No, I much prefer to go back
to my job."
Nixon's profane side became public five years later with the release of
the Watergate tapes, of course. In them, he comes across as an extremely
smart man who is sadly paranoid, misanthropic, and cynical. A member of
the Clinton administration once was accusing Nixon of anti-Semitism, and
I said, "You don't understand. He wasn't exclusively anti-Semitic. He was
anti-Semitic, anti-Italian, anti-Greek, anti-Slovak. I don't know anybody
he was pro. He hated everybody. He would say awful things about Henry
Kissinger, yet he appointed him secretary of state." When Nixon left office,
I was relieved. You didn't know what he might do, and the president of the
United States has so much power that it's scary—it's very hard for a military
officer sworn to uphold the Constitution to say, "Mr. President, I'm not
going to do that."
Of course, Nixon was the extreme. But I came to see that people who
are on the top of the political heap are really different. Jerry Ford was as
close to normal as you get in a president, but he never was elected. There's
a constitutional amendment that I've been pushing for years without suc
59
THE AGE OF TURBULENCE
cess. It says; "Anyone willing to do what is required to become president of
the United States is thereby barred from taking that office." I'm only half
joking.
Even though I did not take a permanent job in the administration,
Washington became an important part of my life. I worked as interim budget
director before the inauguration, helping plan Nixon's first federal
budget. I served on task forces and commissions—most important, the President's
Commission on an All-Volunteer Armed Force, which Martin Anderson
masterminded and which paved the way in Congress for the abolition
of the draft.* And with friends and professional acquaintances manning
many of the government's key economic and domestic policy posts, I found
myself spending more and more time inside the Beltway.
The economy was behaving erratically as business grappled with the
effects of Vietnam and domestic unrest. A 10 percent surcharge on the
federal income tax, belatedly clamped on under President Johnson and
kept in place by Nixon to help pay for the war, wasn't having a healthy
effect. In 1970 we slid into a recession that pushed unemployment up to
6 percent—about five million people were out of work.
At the same time, inflation seemed to be taking on a life of its own. Instead
of dropping, as all the forecasting models said it should, it was running
at an annual rate of about 5.7 percent—low compared with what came
later, but disturbingly high by the standard of the day. Under the prevailing
Keynesian view of the economy, unemployment and inflation are like kids
on a seesaw: when one goes up, the other goes down. To oversimplify, it was
argued that the more people there are out of work, the less upward pressure
there is on wages and prices. Conversely, when unemployment falls
and the labor market gets tight, wage and price increases are likely.
But the Keynesian economic models failed to account for the possibility
that unemployment and inflation could climb in tandem. This phenomenon,
which came to be called stagflation, put policymakers at a loss. The
forecasting tools that had made government economists seem so prescient
*Though Anderson assembled the commission, he did not serve on it. It was chaired by
Thomas S. Gates Jr., who had served as secretary of defense under Eisenhower.
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ECONOMICS MEETS POLITICS
a decade before were in reality not good enough to let the government
fine-tune the economy. (A poll a few years later showed that the public
now rated economists' forecasting ability on a par with that of astrologers.
This made me wonder what astrologers had done wrong.)
