No Quick Fixes

Today's recession calls to mind another recession 20 years ago. America was in the economic doldrums--unemployment up, inflation up--and I was working in the Nixon White House. Now, George Schultz, who was head of Office of Management and Budget, believed--and he was right--that the economy was not really in such bad shape. It was merely in one of the periodic downturns that are unavoidable in economic history. When technology changes, there is always a period when current industries decline and the economy retools. So Schultz advised then-President Nixon that the best thing to do was to sit tight. In a speech, he told the public that the president's policy would be "steady as she goes." Well, as economic policy that was good, but as public policy, it was a disaster. The impression the people picked up was that the president was indifferent to the nation's economic woes. Or that he didn't know what to do about them. Our polling immediately showed public confidence hitting the skids. We were concerned that President Nixon might lose the next election if he didn't do something--and fast. So a group of advisors got together and came up with a package of radical economic policies. Nixon announced that he was dropping the gold standard. He clamped on voluntary wage and price controls. The public responded enthusiastically. The stock market soared, and so did Nixon's standing in the polls. He won the 1972 election in a landslide. But as I look back, I realize we should have known better. The policies we instituted were a recipe for economic disaster. They contributed heavily to the debacle of the late 70s and early 80s, with its soaring inflation, unemployment, and interest rates. It was a high price to pay for a re-election bid. Why do I delve into this bit of history? Because, as the saying goes, those who refuse to learn from history are condemned to repeat it. Like Esau, who traded his birthright for a mess of pottage, the Nixon administration bought immediate popularity in exchange for long-term economic health. And today, the Bush administration and Congress are on the verge of doing the same thing. American voters are worried. There is an anti-incumbency mood, and both the White House and Congress are casting about for a quick fix to boost their popularity until the election. So they are promoting policies that boost consumption and make the economy look like it's recovering in the short run, but that undermine real production in the long run. This is what you're hearing from both Republicans and Democrats: things like national health insurance, tax credits for first-time home buyers, artificially low interest rates, expanded public works, and extended unemployment benefits. Jesus said something every government official should take to heart. "Which of you," He asked, "intending to build a tower, does not sit down first and count the cost?" Wouldn't it be nice if government representatives would sit down and count the long-term costs before they throw together some hasty tower of economic policies.

02/19/92