WIN and the PBC
By Bryan Caplan
I’m too young to remember, but my memory still instantly links Ford with his risible “Whip Inflation Now” (WIN) buttons. The same memory inspires James Hamilton to write an inspired account of the famed Burns-Nixon Political Business Cycle (PBC). I didn’t realize we had a smoking gun:
When Nixon himself became president in 1968 and had the opportunity to appoint a new Chair for the Federal Reserve in 1970, the man he turned to was the same Arthur Burns who had advised him to ease up on monetary policy prior to the 1960 election. Milton Friedman offered these impressions in a 2000 interview that is included in the book Inside the Economist’s Mind:
From the moment Burns got into the Fed, I think politics played a great role in what happened. So far as Nixon was concerned, there is no doubt, as I know from personal experience. I had a session with Nixon sometime in 1970– I think it was 1970, might have been 1971– in which he wanted me to urge Arthur to increase the money supply more rapidly [laughter] and I said to the President, “Do you really want to do that? The only effect of that will be to leave you with a larger inflation if you do get reelected.” And he said, “Well, we’ll worry about that after we get reelected.” [page 116].
Now, I do agree with Dave that it is easy to make mistakes running the Fed in real-time that many of us would have avoided with 20-20 hindsight… But I am forced to conclude also that, in the face of such uncertainties, Nixon and Burns appear to have been wanting to err on the side of doing whatever would most help them win the next election.
And, despite the clever arguments that Dave brings up in the WIN button’s favor, I think one great disservice of that campaign was to cultivate the misperception that inflation is somehow the responsibility of ordinary U.S. citizens. In my view, maintaining the purchasing power of a dollar is instead exclusively the responsibility of the people who control how many dollars get printed.
If we want to bring those cute little WIN buttons back, the only people who should be wearing them are the folks who sit on the FOMC.
Ben Bernanke’s old enough to have a box. I wonder if he does?