government as far out of your business, out of your lives, out of your pocketbooks,
and out of your hair as I possibly can." The choice of Chicago
seemed fitting: deregulation's economic rationale came primarily from
Milton Friedman and the other mavericks of the so-called Chicago school.
These economists had built a large, impressive body of work around the
theory that markets and prices, not central planners, were the best allocators
of society's resources. The Keynesian presumption that had held sway
in Washington since the Kennedy administration was that the economy
could be actively managed; the Chicago economists argued that government
should intervene less, not more, because scientific regulation was a
myth. Now, after years of stagflation and with the failure of wage and price
controls fresh in people's minds, politicians on both sides were ready to
agree that micromanagement by government had gone too far. It was time
to do less.
In fact, a remarkable consensus on economic policy emerged in
Washington—a convergence of attitudes between the liberal left and the
conservative right. Suddenly everybody was looking to restrain inflation,
cut deficit spending, reduce regulation, and encourage investment. Ford's
deregulation campaign initially targeted railroads, trucking, and airlines.
And despite massive opposition by companies and unions, within a few
years Congress deregulated all three.
It's hard to overemphasize how important Ford's deregulation was.
True, most of the benefits took years to unfold—rail freight rates, for example,
hardly budged at first. Yet deregulation set the stage for an enormous
wave of creative destruction in the 1980s: the breakup of AT&T and other
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ECONOMICS MEETS POLITICS
dinosaurs, the birth of new industries such as personal computing and overnight
shipping, the mergers-and-acquisitions boom on Wall Street, and the
remaking of companies would be the hallmarks of the Reagan era. And, we
would ultimately find, deregulation also greatly increased the economy's
flexibility and resilience.
Jerry Ford and I grew very close. He was consistent in his view that what
the economy most needed was a return of confidence and cool. This meant
staying away from the aggressive interventionism that started under Kennedy,
and from the abrupt, politically reactive policymaking that made the nation
so panicky and uncertain under Nixon. Ford wanted to slow the pace of policy
action, simmer down the deficit and inflation and unemployment, and
eventually achieve a stable, balanced, steadily growing economy. Since these
were very much my views too, it became easy for the CEA to function. We
didn't have to keep checking to find out what he thought. We could boil
down a problem to a set of options, and then I could pick up the phone and
say, "We've got this issue. Here are the choices. How would you like to proceed:
one, two, three, or four?" We could have a three-minute conversation
and I'd come away with very clear instructions on what he wanted to do.
Being at the center of things was admittedly fun. In January 1976,1 was
helping Jim Lynn draft the economics section of the president's State of the
Union speech. Things were changing very rapidly and we were rewriting up
to the last minute. One night we were working late at the White House
making revisions, a tedious chore because there were no word processors.
And Jim said, "I wonder how I'll feel after I leave. Maybe I'll be outside this
building with my nose pressed against the glass, wondering what all these
powerful people are doing." We burst out laughing. Sure, we were working
with scissors and tape and Wite-Out—but we were writing the State of the
Union address.
The White House was also great for my tennis game. I hadn't played
since I was a teenager, but after the weather warmed up and the crisis
cooled down, I started again from scratch on the White House tennis court.
The court is outdoors, near the southwest gate, and its great advantage is
that it's thoroughly concealed by fences. My opponent was Frank Zarb, the
energy czar, who hadn't played tennis in a long time either. So we were
very fortunate no one could see.
73
THE AGE OF TURBULENCE
I was back and forth to New York every Saturday or Sunday—I'd water
the plants in my apartment and spend time with my mother. These trips
did not involve business: to satisfy conflict-of-interest rules, I'd removed
myself entirely from the operations of Townsend-Greenspan and put my
ownership into a blind trust. The company was in the hands of my vice
presidents, Kathy Eichoff, Bess Kaplan, and Lucille Wu, and former vice
president Judith Mackey, who had come back temporarily to help out.
Townsend-Greenspan was unusual for an economics firm in that the men
worked for the women (we had about twenty-five employees in all). My
hiring of women economists was not motivated by women's liberation.
It just made great business sense. I valued men and women equally, and
found that because other employers did not, good women economists were
less expensive than men. Hiring women did two things: it gave Townsend-
Greenspan higher-quality work for the same money, and it marginally raised
the market value of women.
I always brought along some CEA work on the weekends. During the
week, I generally worked ten- to twelve-hour days. I followed a very satisfying
routine, starting with a long, hot bath at dawn. This habit began after
I'd thrown out my back in 1971. As part of the rehab process, my orthopedist
had recommended soaking in a hot bath for an hour each morning. I
found I liked it. It was an ideal environment for work. I could read, I could
write, and it was perfectly private. I could get white noise by turning on the
exhaust fan. My back eventually healed, but by then the bath was an activity
of choice.
I'd be out the door by 7:30 a.m., and my apartment at the Watergate
was close enough to the Old Executive Office Building for me to walk to
work on occasion. The streets around the White House were much more
placid than they'd been in the Nixon administration, when during visits to
the city I'd often had to thread my way through protesters. My routine was
much like that of anybody immersed in public life. The White House staff
met at 8:00, and the Economic Policy Board at 8:30, and the day would go
on from there. I'd usually work until 7:00, with breaks for tennis or occasionally
golf. The president would periodically invite me to play golf with
him at Burning Tree, a suburban Washington country club that became notorious
for excluding women. Today, no president could do that, but few
74
ECONOMICS MEETS POLITICS
people complained in the early 1970s. I'd go to dinner or to a concert, often
sitting in the president's box; or make an appearance at a reception. I took
no real days off, but I didn't mind. I was doing what I loved.
The economic recovery greatly boosted Ford's chances of getting
elected in 1976. Given the public's sour memories of Watergate, the pardon
of Nixon, inflation, and OPEQ many pundits started out saying it was
virtually impossible for Ford or any Republican to win. Before the summer's
party conventions, polls had him trailing by more than 30 percentage
points. But Ford's prudence and evenhandedness—and his results—were
winning respect, and that gap soon narrowed.
I'd have been interested in a job in his new administration—in spite of
my early skepticism about working in government, I'd become convinced
that it was sometimes possible to do good in Washington. I would have
loved a chance to serve as treasury secretary. But when asked early on if
I wanted to be in his campaign, I said I did not. I thought it inappropriate
for a CEA chairman. Certain officers of the government—the secretary of
state, the attorney general, and the CEA chairman—should not, I felt, be
involved in electoral politics, because they run institutions that are supposed
to generate information of a bipartisan nature. The president thought
I'd made the right call.
Nevertheless, as Ford got ready to square off against Jimmy Carter, I
inadvertently supplied the buzzword that was used against the president
throughout the campaign. The central economic debate of Campaign
'76 was whether the recovery had collapsed. After growing extremely
rapidly through the first quarter of the year—at a tigerlike annual rate of
9.3 percent—the economy had abruptly cooled, to a growth rate of less
than 2 percent by summer. From an economist's standpoint, this was not a
cause for concern. Because a modern economy involves so many moving
parts, it rarely accelerates or decelerates smoothly, and in this case all the
other major indicators—inflation, unemployment, and so on—looked fine.
I laid this out in a cabinet meeting in August, using charts to demonstrate
how this recovery mirrored past ones. "The pattern is advance and
pause, advance and pause," I told them. "We are in one of those pause periods.
But the basic recovery is solidly in place with no evidence of underlying
deterioration." Those remarks, relayed by press secretary Ron Nessen
75
THE AGE OF TURBULENCE
to the media, turned out to be red meat for the president's critics. To them,
"pause" was an administration euphemism for "we failed."
Suddenly the debate of early 1975 reignited, and Ford was again under
tremendous pressure—from Congress and even his own campaign team—
to abandon his commitment to a long-term, sustainable recovery and pull
out the stops on economic stimulus. In the presidential debate that October,
columnist Joseph Kraft asked bluntly: "Mr. President, the country is
now in something that your advisers call an economic pause. I think to
most Americans that sounds like an antiseptic term for low growth, unemployment,
standstill at a high, high level, decline in take-home pay, lower
factory earnings, more layoffs. Isn't that a really rotten record and doesn't
your administration bear most of the blame for it?" Ford stoically defended
his achievement, and history proved him right: economic growth went on
to accelerate for another full year. But by the time this became apparent,
Election Day had come and gone, and Ford had lost narrowly to Jimmy
Carter, by little more than 1.5 million votes. Years afterward Henry Kissinger
used to tease me, "You were right about the pause. It's just too bad it
happened to coincide with a presidential election."
On January 20, 1977, Jimmy Carter was inaugurated as the thirty-ninth
president of the United States. As he stood in front of the Capitol and took
the oath of office, I was on the noon shuttle on my way back to New York.
76
FOUR
PRIVATE CITIZEN
I
I
t's never easy being on the losing side. Still, I found plenty of reasons
to be glad to come home to New York. The services of Townsend-
Greenspan were more in demand than ever. All kinds of doors opened
to me, and I accepted as many interesting commitments as the calendar
would allow. I rejoined Time magazine's Board of Economists and the
Brookings Panel on Economic Activity, with people like Walter Heller, Martin
Feldstein, George Perry, and Arthur Okun. I stepped up my speechmaking,
appearing two or three times a month before companies, management
groups, and associations, mostly to talk about their businesses and the eco
nomic outlook.
I also found myself in demand as a corporate director, joining the boards
of Alcoa, Mobil, JPMorgan, General Foods, Capital Cities/ABC, and more.
People serve on Fortune 500 boards for lots of reasons, but the primary
reason for me was that being a director gave me a chance to learn the economic
workings of things that are familiar but that I've never fully understood.
Like Cool Whip and Post Toasties: until I became a director at
General Foods, I never knew how the processed-food business worked.
Townsend-Greenspan had done a lot of analysis of wheat, corn, and soy
THE AGE OF TURBULENCE
beans, but never of the foods you see in commercials and on supermarket
shelves. For instance, General Foods owned Maxwell House, a dominant
brand of coffee in those days before people were mesmerized by Starbucks.
I was amazed to learn (though it made sense once I thought about it) that
the main competitors for Maxwell House were not only other coffees but
also soda and beer—the marketers were competing for a share of the nation's
stomach capacity. General Foods also made me feel close to business
history—the company still bore the stamp of its founder, the heiress Marjorie
Merriweather Post. She'd been only twenty-seven when her father
died and left her in charge of the family business, the Postum Cereal Company;
with the second of her four husbands, the Wall Street financier E. F.
Hutton, she built Postum into General Foods. She'd died just a few years
before I joined the board, but their only child, the actress Dina Merrill, was
a real presence at the company.
After all the years I'd spent studying business economics, it was still
hard to fathom how big some of these companies were. Mobil, which in
1977 had $26 billion in sales and ranked number five on the Fortune 500,
was operating everywhere—in the North Sea, in the Middle East, in Australia,
in Nigeria. I gave a toast at my first dinner with the other directors
that included a joke only an economist could appreciate: "I feel right at home
here. Mobil is on the same order of magnitude as the U.S. government—
the number 0.1 on a financial statement means $100 million."
Among all the boards I joined, JPMorgan's was the one that I found
most engaging. It was the holding company for Morgan Guaranty, arguably
