President Nixon nominated him to succeed William McChesney Martin as Chairman of the Federal Reserve and later renominated him for another term. Burns was succeeded by G. William Miller when his second term expired. After leaving the Fed,President Ronald Reagan chose him to serve as Ambassador to West Germany in 1981,where he remained in office until 1985.
At age 17,Burns enrolled in Columbia University on a scholarship offered by the university secretary. He worked in jobs ranging from postal clerk to shoe salesman during his time at Columbia as a student before earning his B.A. and M.A. in 1925,graduating Phi Beta Kappa.[5]
Academic career
Rutgers University
After college,he began teaching economics at Rutgers University in 1927,a role that he continued until 1944. Burns through his lectures became one of two professors,the other being Homer Jones,credited by Milton Friedman as a key influence for his decision to become an economist. Burns had convinced Friedman,Rutgers class of 1932,that modern economics could help end the Great Depression.[2][6]
Burns pursued graduate studies at Columbia while continuing his lectures at Rutgers. As a doctoral student,he became a protege of Wesley Clair Mitchell,a founder and the chief economics researcher of the National Bureau of Economic Research. In 1933,Burns joined the NBER under Mitchell's guidance and began a lifelong study of business cycles.[2] He received his Ph.D. in economics from Columbia a year later.[7]
In 1943 he was elected as a Fellow of the American Statistical Association.[8] In 1944,he left Rutgers and assumed the role of director of research at the NBER in 1945 following Mitchell's retirement.
Columbia University
In 1945,Burns became a professor at Columbia University. In 1959,he received the John Bates Clark endowed chair. At Columbia,he blocked the acceptance of Murray Rothbard's thesis on the Panic of 1819,despite having known Rothbard since the latter was a child.[9]
National Bureau of Economic Research
Beginning in 1933,the academic part of Burns's career focused on the measurement of business cycles,including questions such as the duration of economic expansions,and what economic variables rise during expansions and fall during recessions. In 1934,Burns wrote Production Trends in the United States Since 1870 his first major publication in the field.
Often,he collaborated with Wesley Clair Mitchell,whose research directorate role he assumed from 1945 to 1953. In 1946,Burns and Mitchell published Measuring Business Cycles,which presented the characteristic NBER methods of analyzing business cycles. During his tenure,Burns began the academic tradition of determining recessions,a role continued by the NBER's business cycle dating committee. Today,the NBER is still considered authoritative in dating recessions.
In the late 1940s,Burns asked Milton Friedman,then a professor at the University of Chicago,to join the NBER as a researcher of the role of money in the business cycle. Burns's detailed macroeconomic analysis influenced Milton Friedman and Anna Schwartz's classic work A Monetary History of the United States,1867–1960.
Public service
Counselor to the President
Burns was appointed as Counselor to the President when Richard Nixon took office in 1969. The newly created position held cabinet rank and was meant as a placeholder until Burns could be appointed as Chairman of the Federal Reserve. Burns advised Nixon on economic policy during his brief time in the White House.[10]
As expected,Burns was appointed to replace the outgoing William McChesney Martin as Fed Chairman in November 1969 and resigned his post in the Nixon administration.
Federal Reserve Chairman
Burns served as Fed Chairman from February 1970 until the end of January 1978. He has a reputation of having been overly influenced by political pressure in his monetary policy decisions during his time as Chairman[11] and for supporting the policy,widely accepted in political and economic circles at the time,that Fed action should try to maintain an unemployment rate of around 4 percent.[12][13]
While Vice PresidentRichard M. Nixon was running for President in 1959–1960,the Fed –under Truman-appointed chairman William McChesney Martin,Jr. –was undertaking monetary tightening,increasing the cost of borrowing and reflected in a recession by April 1960. In his book Six Crises,Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning the presidential election of 1968,Nixon named Burns to the Fed Chair in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.[11]
Later,when Burns resisted,negative press about him was planted in newspapers and,under the threat of legislation to dilute the Fed's influence,Burns and other Governors succumbed.[14][15] Burns' relationship with Nixon was often rocky. Reflecting in his diary about a 1971 meeting attended by himself,Nixon,Treasury SecretaryJohn Connally,the Chairman of the Council of Economic Advisors,and the Director of the Bureau of the Budget,Burns wrote:
The President looked wild; talked like a desperate man; fulminated with hatred against the press; took some of us to task – apparently meaning me or [chairman of the Council of Economic Advisors, Paul] McCraken or both – for not putting a gay and optimistic face on every piece of economic news, however discouraging; propounded the theory that confidence can be best generated by appearing confident and coloring, if need be, the news.[9]
There was significant inflation during this period, which Nixon attempted to manage through wage and price controls while the Fed under Burns increased the money supply. Although Burns opposed Nixon's decision to close the "gold window," he "'assured the President that I would support his new program fully,' notwithstanding his reservations about the gold suspension."[9] After the 1972 election, due in part to oil shocks from the 1973 oil crisis, price controls began to fail and by 1974, the inflation rate was 12.3 percent.[11]
Burns thought the country was not willing to accept rates of unemployment in the range of six percent as a means of quelling inflation. From the Board of Governors meeting minutes of November 1970, Burns believed that:
...prospects were dim for any easing of the cost-push inflation generated by union demands. However, the Federal Reserve could not do anything about those influences except to impose monetary restraint, and he did not believe the country was willing to accept for any long period an unemployment rate in the area of 6 percent. Therefore, he believed that the Federal Reserve should not take on the responsibility for attempting to accomplish by itself, under its existing powers, a reduction in the rate of inflation to, say, 2 percent... he did not believe that the Federal Reserve should be expected to cope with inflation single-handedly. The only effective answer, in his opinion, lay in some form of incomes policy.[12]
During Burns' tenure, the rate of change of the consumer price index rose from 6%/year in early 1970 to over 12%/year in late 1974 after the Arab Oil embargo, and eventually falling to under 7%/year from 1976 to the end of his tenure in January, 1978, with an annual average rate of consumer price inflation of approximately 9% during his term. Negative economic events included multiple oil shocks (1973 and 1979) and heavy government deficits arising in part from the Vietnam War and Great Society government programs.
At the Watergate break-in of 1972, the burglars were found carrying $6300 of sequentially numbered $100 bills. The Fed lied to reporter Bob Woodward as to the source of the bills. Burns stonewalled Congressional investigations about them and issued a directive to all Fed offices prohibiting any discussion of the subject.[16]
In 1976, Burns received the U.S. Senator John Heinz Award for Greatest Public Service by an Elected or Appointed Official, an award given out annually by Jefferson Awards.[17]
American Enterprise Institute
William Baroody, then president of the American Enterprise Institute, brought Burns to the economics think tank in 1978 after Burns left his position at the Federal Reserve. From the AEI, Burns continued to influence public policy.[2]
Conservative economist Bruce Bartlett gives Burns poor marks for his tenure as Fed chairman because the inflationary forces that began in 1970 took more than a decade to resolve.
The only disagreement among economists is whether Burns fully understood the mistakes he was making, or was so wedded to incorrect Keynesian theories that he didn't realize what he was doing. The only alternative is that he was under irresistible political pressure from Nixon and had no choice. Neither explanation is very favorable to Burns. Economists now recognize the Nixon era as Exhibit A in how the adoption of bad economic policies in pursuit of short-term political gain eventually turns out to be bad politics as well.[19]
In more recent years, the famous quote, "The ultimate purpose of an economy is to produce more consumer goods," has erroneously been attributed to Burns in popular culture.[20] However, there is absolutely no evidence that Burns ever uttered this statement; to the contrary, he advocated–both in his speeches and his policies–for thrift and fiscal responsibility.[10]
Burns, Arthur F. Reflections of an Economic Policy Maker: Speeches and Congressional Statements: 1969–1978 (AEI Studies no. 217; Washington: American Enterprise Inst., 1978); reviewed by Paul W. McCracken, "Reflections of an Economic Policy Maker: a Review Article" in Journal of Economic Literature 1980 18(2): 579–585. ISSN 0022-0515 Fulltext online at Jstor and Ebsco.
Burns, Arthur F. "Progress Towards Economic Stability." American Economic Review 1960 50(1): 1–19. ISSN0002-8282 Fulltext in Jstor and Ebsco. Abstract: Views economic growth, 1929–59; discusses corporate growth, government subsidies, increased consumer expenditures, rise in personal income, industrialization, and overall improvement in economic organization.
Engelbourg, Saul. "The Council of Economic Advisers and the Recession of 1953–1954." Business History Review 1980 54(2): 192–214. ISSN0007-6805 Fulltext in Jstor. Abstract: The 1953–54 recession was the first in which a Council of Economic Advisers (CEA) appointed by a Republican President, Dwight D. Eisenhower, recommended policy actions. Despite traditional Republican Party rhetoric, the CEA supported an activist contracyclical approach that helped to establish Keynesianism as a bipartisan economic policy for the nation. Especially important in formulating the CEA response to the recession – accelerating public works programs, easing credit, and reducing taxes – were Arthur F. Burns and Neil H. Jacoby.
Hetzel, Robert L. (Winter 1998). "Arthur Burns and Inflation". Economic Quarterly. Federal Reserve Bank of Richmond. 84 (1): 21–44.
Throckmorton, H. Bruce. "The Moral Suasion of Arthur F. Burns: 1970–1977." Essays in Economic and Business History 1991 9: 111–121. ISSN0896-226X. Abstract: Reviews key words in Arthur F. Burns's testimony on various occasions before the Joint Economic Committee of Congress while he served as chairman of the Board of Governors of the Federal Reserve System, 1970–78. Correlates the key words with rates of inflation and interest rates to determine if there is a relationship between key words of testimony and selected economic variables.
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