Arthur F. Burns

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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. [8]

There was significant inflation during this period, which Nixon attempted to manage through wage and price controls while the Fed under Burns maintained an expansive[ further explanation needed ] monetary policy. 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." [8] 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. [10]

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. [11]

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. [15]

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. [16]

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. [1]

Ambassador to West Germany

Arthur Burns was appointed United States Ambassador to West Germany by President Ronald Reagan. He served in Bonn from June 1981 to May 1985. [17]

Death

He died on June 26, 1987 at Johns Hopkins Hospital in Baltimore, Maryland. [1]

Criticism

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. [18]

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. [19] 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. [9]

Selected works

Sources

Notes

  1. 1 2 3 4 5 6 "Arthur F. Burns Is Dead at 83. A Shaper of Economic Policy". The New York Times . June 26, 1987. Retrieved December 5, 2012.
  2. 1 2 Crawford, Claire. "Why Is Arthur Burns of the Fed Smiling? He Sees Recovery". People. Retrieved December 5, 2012.[ dead link ]
  3. Roberts, Steven V. "An old grad returns to Bayonne High School for his tenth reunion and finds he is; Old-Fashioned at 27 Old-fashioned at 27", The New York Times , December 6, 1970. Accessed April 17, 2020.
  4. Sobel, Robert (1980). "The Worldly Economists". Free Press.Cite journal requires |journal= (help)
  5. "Milton Friedman and his start in economics". Young America's Foundation. Retrieved December 5, 2012.
  6. "Arthur Frank Burns". Columbia Electronic Encyclopedia. 2004.Cite journal requires |journal= (help)
  7. View/Search Fellows of the ASA, accessed 2016-07-23.
  8. 1 2 3 French, Doug (2010-12-27) Burns Diary Exposes the Myth of Fed Independence, Mises Institute
  9. 1 2 "Arthur F. Burns is Dead at 83; A Shaper of Economic Policy". The New York Times. 27 June 1987.
  10. 1 2 3 Bartlett, Bruce (2004-04-28) (More) Politics at the Fed?, National Review
  11. 1 2 Hetzel, Robert L., "Arthur Burns and Inflation," Economic Quarterly, The Federal Reserve Bank of Richmond, Volume 84/1, Winter 1998, pages 21–44
  12. See also: Phillips curve
  13. Safire, William (2005) [1975]. Before the Fall: An Inside View of the Pre-Watergate White House. New Brunswick: Transaction. ISBN   1-4128-0466-3.
  14. Greider, William (1989). Secrets of the Temple: How the Federal Reserve Runs the Country. New York: Simon & Schuster. ISBN   0-671-47989-X.
  15. Robert D. Auerbach, Deception and Abuse at the Fed, ch. 2
  16. "Archived copy". Archived from the original on 2010-11-24. Retrieved 2013-08-05.CS1 maint: archived copy as title (link)
  17. Pond, Elizabeth (March 1985). "Ambassador Burns leaves a West Germany 'uncertain of itself'". Christian Science Monitor. Retrieved 23 October 2013.
  18. Bartlett, Bruce (2006). Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. New York: Doubleday. p.  147. ISBN   0-385-51827-7.
  19. "The Ultimate Purpose of an Economy is to Produce More Consumer Goods – Quote Investigator".
Arthur Burns
ArthurBurns USArmyPhoto 1955.jpg
United States Ambassador to Germany
In office
June 30, 1981 May 16, 1985
Political offices
Preceded by
Chair of the Council of Economic Advisers
1953–1956
Succeeded by
New office Counselor to the President
1969
Succeeded by
Succeeded by
Government offices
Preceded by
Chair of the Federal Reserve
1970–1978
Succeeded by
Diplomatic posts
Preceded by
United States Ambassador to Germany
1981–1985
Succeeded by

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