Google Books gives us some extracts from A Time For Reflection (Bill Simon's autobiography).
(emphasis mine) [my comment]
SUCCESSOR TO HAMILTON
President Johnson's "Great Society, based on the fallacy of Keynesian economics, had assured an entire generation that they could have their cake and eat it too.
Throughout the 1960s, politicians promised that we could wage war on foreign soil, control pollution, rebuild our medical system, overhaul our transportation network, guarantee the good life to the poor and elderly, provide a college education for everyone, feed the world, improve our weapon systems, and continue to increase everybody's disposable income—all at the same time.
It was a fools paradise, and the Nixon administration was determined to do everything humanly possible to break the crazy cycle of boom and bust that had begun with the decade that encompassed the Great Society and led to steadily worsening inflation, recession, economic dislocations, and instability.
Chronic deficits, coupled with President Johnson's irresponsible spending, had weakened the dollar terribly. Once the world's most highly valued currency, the dollar, by the time President Nixon took office, had become a glut on the market and a threat to international trade.
In August 1971, Secretary of the Treasury John Connally and, to a lesser extent, Federal Reserve Chairman Arthur Burns, had convinced the president to impose a ninety-day freeze on wages and prices. George Shultz, then secretary of labor, argued strenuously that the controls were a terrible mistake. As usual, George was right on the money.
PETER M. FLANIGAN, INVESTMENT BANNER, FORMER AIDE TO PRESIDENT NIXON, JULY 14, 1999
All of us in the Nixon administration had a free-market orientation, except John Connally, who really was not a philosophically dedicated free marketeer, and Arthur Burns. Arthur would always claim he was not for wage and price controls, but he wasn't comfortable letting the market manage itself, saving we needed a wage "regime." However, he never defined the term "regime."
The president was, philosophically, a free marketeer. He just didn't think it was important compared to the political advantage he could get front things like wage and price controls, limiting soybean exports, slamming the gold window.' That's not to say the people who did then: liked them. There was a political need, and they were done, and it was a mistake.
Bill was a voice in the wilderness, a strong voice for free enterprise and markets [It is no accident that audit of Ft. Knox happened while Bill Simon was Secretary of the Treasury]. He is a good leader. He has strong ideas and he advocates them forcefully. The nation owes him a debt of gratitude for what he's done.
Controls are the most structurally damaging thing that can be done to an economy and amount to nothing more than political window dressing that allows government leaders to present the image that they are doing something constructive, when they are actually exacerbating the problem. They distort the economy by eliminating natural, and necessary, price and wage fluctuations, which respond to the allocations of resources. The end result of controls is that competitive relations are disrupted, which causes domestic shortages and a concurrent increase in demand for exports. Government intervention merely suppresses underlying wage and price pressures; it does not in any way alleviate the normal market pressures. The moment the controls are eliminated, as eventually they must be, the mounting pressures push through the surface—not unlike volcanic action—and a surge of further inflation follows.
Although the president's initiatives—both the wage and price controls and the removal of the gold standard—were domestically popular and seemed to remedy the immediate economic flux created by the irresponsible spending by President Johnson's Great Society, they were extremely unsettling to the international economy, and particularly troubling to the oil market.
Around the world, oil sold in dollars, so the health of the dollar was vitally important to exporters. Without the gold standard, the dependability of the dollar was suspect, and it lost purchasing power—its value—on the world market. Since the dollar was worth less, inflation ensued: It took more dollars to purchase goods because each dollar had less value.
over two hours, and Bill Simon came down very hard for keeping government spending down, for austere policies in terms of government spending... recognizing, of course, that the final answer is productivity of the economy.
The secretary of the treasury is the chief financial officer of the federal government. As the second ranking cabinet member, he is also the president's chief economic spokesman and chief architect of the administration's economic policies. The treasury secretary works with the Council of Economic Advisors, the Office of Management and Budget, and the Bureau of Economic Analysis in the Department of Commerce to develop forecasts for the administrations' budget projections.
Under the secretary is the undersecretary for monetary affairs and the IRS commissioner, who have equal status in the hierarchy, followed by five assistant secretaries and the counsel for the department.
For a financial man like myself, becoming secretary of the treasury is akin to a lawyer becoming Chief Justice of the United States, and I was eager to get to work on the most troubling economic issue facing the administration: inflation. Our economy was reeling from the ravaging effects of double-digit inflation (it soared as high as 12.2 percent in 1974) and the energy crisis was still looming in the background.
In the autumn of the administration, Alan Greenspan was brought in as chairman of the Council of Economic Advisers, and our joint mission was to get America off that disastrous economic roller coaster. Alan, like me, had achieved success in the New York financial markets. But our personal styles were markedly different; he is scholarly and reserved while I am more impulsive and outspoken. Although we are philosophically alike, we did not always agree on policy matters. For instance, Alan thought that my concern over the immediate threat of federal borrowing was overstated. But, as a rule, we sp oke in a unified voice in favor of checking government spending and reducing the role of government in the economy.
Bringing inflation under control is an extraordinarily difficult and complicated problem, precisely because it is a political as well as an economic problem resulting from myriad, interconnected factors. The energy crisis was a contributor, certainly, but the underlying momentum had been built up by the excessive economic policies of the federal government for more than a decade.
Deficit spending forces the Federal Reserve to increase the money supply, which decreases the value of the dollar, leading to higher and higher prices and lower and lower purchasing power. The tragedy of the misguided policies is that they were sold on the mistaken notion that they would help the poor, the elderly, the sick, and the disadvantaged. Yet when those policies trigger inflation and unemployment, it is the poor, the elderly, the sick, and the disadvantaged who suffer first, most, and longest. Ironically, inflation is foremost an attack on the poor, because it means that their few dollars can buy less and less. And, ultimately, an attack on the freedom of the marketplace becomes an attack on other civil freedoms, under the end-justifies-the-means bromide.
By the time President Nixon rook office in 1968, the federal government had become the single largest employer, the single biggest consumer, and the single biggest borrower. When government exercises such enormous authority over our economy, it also exercises enormous control of many of the economic decisions of its citizens— and when economic freedom disappears, you can be certain that personal and political freedoms are not far behind.
I urged the president to cut taxes by $20 billion, accompanied by a $20 billion reduction in federal spending, a proposal which ignited a frantic response: White House aides were scurrying to party leaders, furiously arguing the political consequences of budget cuts; Roy Ash argued that nowhere in the budget could significant cuts could be made; and the president retreated to San Clemenre to decide between my position and Roy's. With Watergate monopolizing his time and energy, President Nixon never did come to a decision on that issue.
During that entire period. I felt as if I were in an endless race requiring the speed of a sprinter and the endurance of a marathoner. By 7 a.m., I'd be in the office reading the daily newspapers and an advance copy of the Treasury Department's news digest. Within forty- five minutes, I would have gulped my coffee, smoked a few cigarettes, met with staff, and issued the day's marching orders. The rest of what was often a sixteen-hour workday was consumed responding to the crisis of the moment, and it seemed there was a crisis every moment.
I sustained myself on beer and pizza, delivered to my office late at night. I kept three secretaries frantically busy, and required that every single call be returned every single day, insisted that every single letter be responded to promptly and courteously—a policy I maintain to this day. The New York Post observed that I spent "more rime talking to the White House than to his wife and children." I'm afraid there was some truth in that...
Gerald Ford simply viewed the pardon as the right thing to do, so he did it, with a full realization of the likely political and historical consequences. By pardoning Nixon, President Ford sacrificed any potential honeymoon" he may have had with Congress. Additionally, some pundits in the press had convinced themselves that there was some sort of "deal" between Presidents Nixon and Ford—an utterly absurd hypothesis that some know-nothing prognosticators continue to advance.
Regardless, with the congressional elections looming, many Republican politicians were running scared in the wake of Watergate. Compounding their election-year jitters, the economy was in a dither:
the longest recession since World War II unemployment above 6 percent, and projected to rise even higher by November; inflation running at a disastrous 12 percent. More than any other issue, the battle against inflation defined the basic theme of the Ford years vis-—-vis the Nixon administration.
President Nixon, the pragmatist, had accepted as sound, and inevitable, the mixed private and public economic system that had prevailed since the New Deal. Although he thought the system was susceptible to abuse when liberals were in control—as it surely is— Richard Nixon believed firmly that the mixed economy could succeed beautifully under prudent administration.
President Ford, in contrast, was convinced that a mixed economy was inherently predisposed to waves of inflation tempered only by the troughs of recession.
Consequently, the Ford administration proceeded from the assumption that what was needed was not simply responsible management, but a return to the principles—economic as well as social— on which the country was founded. [This might have been good for America, but it was not good politics]
President Ford, who had considered becoming an economist when he was in college but turned to law, had a firm grasp on the economic and political intricacies of the federal budget, a result no doubt of having served many years on the House Appropriations Committee. He enjoyed fitting together the various pieces of an economic puzzle as much as Henry Kissinger enjoyed calculating international strategy.
In place of President Nixon's economic policy team—which included the secretary of the treasury, the chairman of the Council of Economic Advisers, and the director of the Office of Management and Budget—President Ford established an economic policy board based on a model designed by Bill Seidman, who had been economic adviser to Ford when he was vice president.
The board consisted of all cabinet members (with the exception of the attorney general and secretary of defense) and met about four times annually. The policy-shaping body was an executive committee that included the secretary of the treasury, the director of OMB, the executive director of the Council on International Economic Policy, and Bill Seidman. The committee was eventually expanded to include Henry Kissinger, as secretary of state, and Rogers Morton, as secretary of commerce.
President Ford had, in my opinion, assembled perhaps the best team of economic advisers in history, and certainly one that worked together in harmony. Typical was the relationship between myself and Bill Seidman.
L. William Seidman, a successful businessman from Michigan, was brought in as an assistant to then Vice President Ford in February 1974. Upon Ford's ascension to the presidency, Seidman was named assistant to the president for economic affairs and executive director of the Economic Policy Board. President Ford wanted both of us to be actively involved in establishing economic policy, an idea sure to result in a power struggle if the people involved were inclined to engage in sophomoric turf battles. He assumed, correctly, that neither Bill Seidman nor I could be bothered with such petty internal politics.
Bill suggested that we set up what was the economic policy board, with me as chairman and him as executive director. It was a new and different kind of arrangement and the successor to the economic board which, under President Nixon, had not been very effective. We met almost daily in the Roosevelt Room, which is directly across the hall from the Oval Office, and played an ongoing and critical role in formulating the president's economic policies.
L. William Seidman, May 11, 1994
Bill was the opposite of the type of person you normally find in government. He was not only willing to make a decision, he was eager to make a decision—and the faster he could make it, the better. He took a real leadership position and was always ahead of almost everybody... No one ever questioned that he was working very hard and that he wanted to do a great job. He was, in my view, probably the most effective secretary of the treasury we've had in modern times. Simon was a very effective spokesman for economic policy.
President Ford was under relentless pressure from members of his own party to loosen the money supply and boost federal spending to create jobs—a solution that was obviously a stopgap and irresponsible, and one that would saddle the nation with even greater problems in the future.
The president asked my advice and that of Alan Greenspan, chairman of the Council of Economic Advisers; Jim Lynn, head of the OMB; and Fed chairman Arthur Burns. Unanimously, we implored President Ford to reject the rallying cry. The nation had a bitter pill to swallow for the inflationary policies of the past, and a spoonful of sugar was not going to make it go down any easier.
"Mr. President," I said, "don't try to cure the economy with the very methods that have wrecked it. If we can't finally control inflation, we won't have much of an economy left to argue about."
We reminded the president that while nobody likes the results of inflation, everyone loves what causes it. Americans love the spending, the creation of money and purchasing power. They love government spending programs, but those programs lead to massive deficits—so we create more money to finance even larger deficits. We urged President Ford to put the government on a diet and to adopt policies to promote savings, investment, and increased productivity. We noted that, in the long run, increased productivity would mean more goods and services at cheaper prices and, consequently, more jobs.
President Ford, always a true portrait of political courage, listened intently and made a decision, a sound decision for the nation, if not so good for the shortsighted interests of politicians. He fully understood that good economics is frequently bad politics, and that there could be no overnight cure for an economic crisis that had been evolving for decades. Gerald Ford was not about to jeopardize the economic health of the nation to salvage a few congressional seats.
The economy could not, and did not, turn around in time for the election, and the Democrats swept the 1974 congressional elections, winning huge "veto proof" majorities comprised partially of abrasive young liberals. (The "veto proof" majorities were disorganized and weakly led, thus the new Congress was more of an irritant than a force; President Ford vetoed sixty-six bills, and fifty-four of his vetoes stuck.) We lost forty-three members in the House of Representatives, three senators, and four governors.
Since I was the most vociferous spokesman for the Ford administration's economic policies—and the GOP was eager to shield the president, who would shortly face the electorate himself, and feared a reverse coattail effect—I took the blame, gladly, and continued to advocate controversial but necessary positions. I urged deregulation of businesses, even those that liked regulations, such as the airline industry, opposed tax cuts and budget deficits, and battled with the State Department over international controls of world trade in commodities.
In the press, I immediately became "the controversial William E. Simon." In some Washington political establishment circles, I was sneeringly referred to as "William the Terrible." Columnists said I was simplistic and inflexible on matters of domestic policy, and that I bungled international affairs while wreaking havoc in the Department of Treasury. Commentators opined that I possessed a 'hydrofoil mind' that zips along at 90 mph, but barely breaks the surface. There were perpetual rumors and "news" leaks that I was leaving the cabinet, although I had no intention of doing so.
"If I were the president," I told columnist Tom Braden of the Washington Post, "I'd get rid of Bill Simon about next May, because by that time he'll be so bloody that Gerald Ford will get credit for let- ring him go."
I was amazed at the news interest in me, a cabinet member, and stunned when Playboy magazine asked for an interview. A "playboy," I most assuredly am not.
PITERJ. OGMBENL, PLAYBOY MAGAZINI, PLJBLISHF.D MAY 1975
My first meeting with Simon was late in the afternoon of the day after Christmas. When l walked into his office, I saw him standing behind his desk, staring intently at a paper in his hand. He stood seemingly frozen in that position for almost a minute before he noticed me. Later, when we were talking, he seemed similarly intent when he answered my questions. Discipline and concentration are what make this man tick, and I suspect these quantities hate been the keys to this noneconomist's ability to learn and function in this most complex assignment.
Simon is a believer, and his faith in the American system of private enterprise seems almost unlimited. "Government is a menace," he says, asserting that the country would be much better off if businesses were permitted to operate unfettered in the market place... Simon seems to relish being "in the center of the storm" and there is no doubt that is where he is. I think he feels a strong sense of loyalty to Ford and neither man would stand to gain if the treasury secretary and the president were to come to a parting of the ways before Congress had acted on the administration's economic proposals. How long Simon will stay—or survive—in office is anybody's guess. I suspect that the key to his tenure will be how well—or, indeed, whether—he can continue to defend, in public, presidential proposals that run so contrary to his own personal philosophy and preferences.
Back in his Wall Street years, Simon swam every day and played an occasional round of golf or set of tennis. Formerly a surfing enthusiast, he once took his wife on a South Pacific odyssey in search of the "perfect wave." But his present thirteen and fourteen hour workdays at Treasury leave him no time for such activities. He's up before dawn and at work until at least 8 p.m.: at the office be is constantly in tnotion. While others are being seen lunching at the Sans Souci and other Washington bistros, this workaholic is gulping down a sandwich, Coke, and fruit at a desk piled high with papers. Food is of such little importance that he sometimes eats the same kind of sandwich day after day for months at a time [I agree. Food is of little importance, and I always eat what is most convenient]. (He recently switched from liverwurst and Swiss to barn salad.)
Toward the end of 1974, I publicly characterized the projected deficit in the new Ford budget as "horrendous." [What would he think of today's budget deficits?] We'd had budget deficits for a decade and a half, and the proposed 1975 budget would have raised the federal debt ceiling to $604 billion from $465 billion. I believed strongly that the nation needed to begin immediately following more prudent and responsible fiscal policies, and said so. [not good politics...]
There is a finite pool of savings in the United States, and that pool exists not only in the pockets of individuals but in our savings and loan associations, our savings banks, our commercial banks, life insurance companies, pension funds, and so on. From that pool of money businesses large and small get the resources needed to grow, to increase productivity, to spur home building, and to provide the American people with goods and services. However, as the federal government continued to grow, creating agencies and bureaucracies and preempting many of the functions of the free market, its demand on this limited pool of savings grew as well.
Now, when the United States government, which has the highest credit rating in the world, moves into the capital market, it moves in at the head of the line and preempts investment money from all other borrowers. Who gets hurt? At first, it's the housing industry and small businesses. But as the effect of government borrowing works its way down the ladder, it begins to prevent some of the better-rated corporations from raising money.
I was adamant that we needed to reverse that process which had exerted such tremendous and unnatural upward pressure on interest rates. My message was simple: We have to stop this. NOW!
President Ford understood my concerns, and took no offense at my position or outspokenness. But presidential aide Donald Rumsfeld hit the roof and accused me of "betraying" the president [I never like Donald Rumsfeld], an outrageous allegation. I never would, never could, and never did betray President Ford. Such disloyalty is unthinkable and I was deeply offended.
Immediately after Don and I had it out, the influential Commercial and Financial Chronicle reported that my resignation had been accepted and that I would be leaving shortly. When I refused to take hint, leaks went out to Helen Thomas of United Press International (IJP1) and columnist Joseph Kraft, who happily passed along the "good economic news" that "Simon is on his way out." Columns overflowed with conjecture, quoting high level "White House sources," without attribution, claiming that if I didn't resign I would be fired at any moment.
I told the press that rumors of my resignation constituted "the most ridiculous speculation I have ever seen in my life" and reaffirmed my commitment to stay as long as the president wished, but the stories, fueled by leaks, persisted. Obviously, someone was trying to force my hand.
"If they get me, they get me," I told Carol late one night. "But at least I'll know I was right."
The leaking and back biting quickly grew tiresome, and there were days when my secret thoughts drifted back to our quiet and happy times in New Jersey, when I wondered if maybe it wouldn't be best for the Simons to go home. Although my goals were partially unfulfilled, we had accomplished a great deal, and by and large both my family and I had benefited from our time in Washington. There's something to be said, though, for knowing when it's time to move on, and for a brief period I entertained thoughts that my rime had come.
However, President Ford boosted my spirits considerably when, on his own initiative, he publicly declared his unwavering support for me.
"Bill Simon," the president announced, "is my secretary of the treasury, and he will stay in that job."
In any case, the rumor mongering stopped abruptly after Charlie Bartlett, a syndicated columnist for a number of Chicago-based newspapers, implicated Don Rumsfeld [Again, I am not a huge fan of Rumsfeld]. While that battle was past, there were other pressing challenges and I channeled my energies toward the problems at hand—both domestic and foreign.
CHARLES BARTLETT, SYNDICATED COLUMNIST, AUGUST 1, 1994
I was very concerned when these stories started appearing, mostly in the New York Times, but also in other papers, saying that Ford was tired of Simon and would like to get rid of him, that he wanted him out. I felt there was something funny going on and I made inquiries among my colleagues in the newspaper business and learned that the rumors were coming out of Don Rumsfeld's office in the White House. We all knew he was restless and looking for a cabinet post. Rumsfeld had two positions he could go for—one was Defense and the other was Treasury. I wrote in my column that Simon was being undermined by Rumsfeld, by his people anyhow, with the purpose of creating an opening in the cabinet for Rumsfeld. I called Rumsfeld— I had known him for a long time—and I said, "Runmy, this does not look good to me." He listened and said, "All right. This will stop immediately. It has gone too far."
I said, "You've got to do more than that, because you've really undercut Simon. He's got to go next week and sell the tax bill to the Ways and Means Committee, and you've really done a job on him." Then, I called Bill at home, and he was in a low mood. "Carol and I have been talking and maybe it would be smart to go back to New Jersey," he said. I said, "If you wait fifteen minutes, you may change your mind." Sure enough, he did get a call from Rumsfeld very shortly.
... Back in the U.S.A., however, our problems were mounting in early 1975. High inflation sapped confidence and we were in the worst recession since the Depression.
In his 1975 State of the Union address, President Ford reported:
"The state of the union is not good." The president proposed a $16 billion tax cut ($12 billion in individual income taxes and $4 billion in business taxes).
Although I am usually a strong proponent of cutting taxes, at that point I felt a general tax cut would fuel the fires of inflation without really putting more spendable income into the hands of consumers. Industry was already operating at full capacity and, therefore, was incapable of producing more goods. Consequently, a tax cut would simply mean too much money chasing too few goods, which would only mean an increase in prices.
I argued strenuously chat the $305 billion budget which President Ford inherited from President Nixon should be cut by up to $10 billion, and maintained, against my usual instincts, that a tax cut would be irresponsible at that point.
PRESIDENT FORD, October 25, 1994
Bill Simon... didn't agree with our tax cut proposals. But typically of Bill, when the decision was made, Bill, publicly and other wise, supported it. That is one thing I realty admired and respected Bill for, in a cabinet meeting, he never hesitated to speak his mind. He had a strong agenda, which he felt very strongly about. He didn't like to compromise because he thought lie was right. Bill lad strong convictions and he stood by them. You can imagine sitting there and hearing Bill talk about economics and Kissinger talking about foreign policy and its relationship to economics. That was really a great debate! Bill would fight like hell for whatever his views were in a cabinet meeting or an Economic Council meeting, but if he lost he would join the team and be supportive. That's the sign of, I think, a good public servant. I think Bill was a bit of fresh air in Washington....
Bill had a problem with the press... They knew he was smart. They knew he was honest. They knew he had firm convictions. But the press basically did' t agree with his philosophical views, so instead of giving him an even-handed treatment, subjectively they wrote in their own views and in many cases were critical of Bill.
Bill never made any real effort to cozy up to the press. That's not Bill's nature. The Washington White House press corps, they think they are God, and the only way you can maybe mitigate their . . . outright antagonism, is to try to be a friend. That doesn't guarantee you get a headline or a good story, but at least it may help. To my knowledge, Bill never made any real effort that way, and sometimes that exacerbates the way they treat you. He got a bad press, and it was too darned bad, in my opinion.
By the spring of 1975, our efforts were beginning to pay off; inflation dropped below 8 percent, still much too high, but incredible progress nonetheless. Some strangulatory regulations had been rescinded, although too many remained. The president maintained a valiant fight with the overwhelmingly Democratic Congress on spending, and vetoed dozens of bills—including politically expedient but unwise legislation for housing, education, day care, and labor.
Throughout the summer of 1975, I was perpetually summoned to Capital Hill to defend my proposals and ideals against increasingly strident attacks.
Walter Heller once suggested that reporters who cover economic affairs should be required to take a basic course in economics, and to pass it. I would suggest a similar requirement for members of Congress. [AGREED]
Congress displayed little interest in rolling back the size of government or making a real effort at tax reform, although the idea of tax breaks was appealing to the politicians, as well as the concept of providing make-work civil service jobs.
President Ford, acutely aware of the political realities, asked Congress to pass a $16 billion tax reduction, which he hoped would stimulate the economy and get people back to work. Congress instead approved a cut of $22.8 billion. Congressman Barber B. Conabic, a Republican from rural Alexander, New York, urged President Ford to veto the measure; Arthur Burns, Alan Greenspan, and Jim Lynn were urging him to sign it. [Arthur Burns was Chairman of the Federal Reserve. Alan Greenspan became Chairman of the Federal Reserve later.]