Abstract
Discussions about Paul Samuelson’s involvement in the US government usually centre on his relationship with John F. Kennedy, this beginning when Kennedy was a senator, candidate for president, president-elect and continuing when he became president. However, evidence from Samuelson’s personal papers demonstrates that he gave economic advice to various presidential candidates and presidents. A potted history of the economic advice Samuelson gave to the Democratic Party is presented in this chapter, delineating the approaches that he took in order to get his hands dirty in the world of public policymaking. This together with some of his views on monetary policy suggests a much wider and richer contribution than has been previously assumed.
Research for this chapter was generously supported by a British Academy Small Research Grant. Any errors are my responsibility.
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Notes
- 1.
The focus in this chapter is mostly on the reporting of archival materials which may not be so well known to the interested reader. It does not endeavour to make any specific judgements about the relative success of Samuelson’s policy advice. Of course, Samuelson also engaged in extensive economic journalism, notably his Newsweek columns, where he would often articulate his views on various government policies and the performance of different US administrations. For some of Samuelson’s views on the role of the government in the economy and a debate he had with Milton Friedman on this question at Texas A&M University in 1980, see “The Economic Responsibility of Government” (25 March 1980, Box 119, Paul A. Samuelson Papers [hereafter PASP], Economists’ Papers Archive, David M. Rubenstein Rare Book & Manuscript Library, Duke University).
- 2.
A “Fact Sheet 2005” contained in Box 131 of PASP lists Samuelson’s extensive professional experience. His first position in government-related work was at the MIT Radiation Laboratory, 1944–1945, looking at secret military devices using high-frequency electronics.
- 3.
Although Samuelson was an influential adviser to Kennedy, he never held an official post in the administration and turned down an offer to be the head of the Council of Economic Advisers (CEA).
- 4.
Advising Kennedy was not the only involvement that Samuelson had with the administration. For instance, he was one of a number of senior economists who were appointed as advisers to the Department of Treasury in May 1961. This group, which was headed by Seymour Harris, also included James Duesenberry, Alvin Hansen, Charles Kindleberger, Richard Musgrave and Walter Salant, plus a host of others. Its main task was to advise on fiscal policy, debt policy, the balance of payments and the forecasting of business conditions.
- 5.
Samuelson also fed into the Kennedy team ideas from other economists that he thought were worth pursuing. One instance of this was a proposal on farming by Hendrik Houthakker, which Samuelson brought to Kennedy’s attention in June 1960 (see Samuelson to Kennedy, 22 June 1960, Box 43, Folder “Kennedy, J.F., 1958–2010 [2 of 2],” PASP).
- 6.
See Samuelson to Cox, undated, Box 43, Folder “Kennedy, J.F., 1958–2010 [2 of 2],” PASP.
- 7.
See “Desirable Tax Policy,” 15 November 1962, Box 44, Folder “Reports to Kennedy, 1960–1962,” PASP.
- 8.
Kennedy wanted a reduction in the top rate of personal income tax from 91% to 65%, although the latter number was subsequently revised to 70%. A proposed cut in corporation tax from 52% to 47% was also pushed through but with a change in the lower figure to 48%. The Republicans insisted on spending cuts as a condition for their support. This aside, the cuts were widely regarded as a success, helping to boost private income and capital investment, reducing unemployment and actually increasing federal revenues.
- 9.
Other luminaries on Samuelson’s list included Seymour Harris, Richard Musgrave, Robert Triffin, Theodore Schultz, Robert A. Gordon, Gardner Ackley, Charles Kindleberger, Walter Salant, James Duesenberry and Herbert Stein.
- 10.
For what it’s worth, the Economic Report of the President (EROP) 1964 reported the unemployment rate at an average of 5.1% for July–October 1962 (see EROP 1964: 230).
- 11.
Samuelson went public with his support for Kennedy on this issue in his Newsweek column of 3 September 1979, entitled “Kennedy’s Anti-Merger Initiative.”
- 12.
It is unclear if this was a speech delivered by Samuelson or was related to his published pieces on McGovern.
- 13.
See Box 123, “Economic Advice to President Clinton,” Folder “Economic Advice to President Clinton,” “Conference of Federal Judges, Washington, DC, 17 May 1993,” PASP.
- 14.
During Clinton’s presidency, Samuelson also gave his personal support to the effort to establish NAFTA in 1994 and was also involved in the effort to push through the Uruguay Round of GATT, which came into effect in January 1995 and which replaced GATT with the WTO.
- 15.
Samuelson reveals that he had in fact sounded out strict monetarist and Friedman acolyte, Beryl Sprinkel, for his views on the likely development of GNP in the second half of 1968, with Sprinkel projecting growth of $17–18 billion in both the third and fourth quarters, well above the standard forecast. Contrast this consultation with Sprinkel with Samuelson’s comment to The Wall Street Journal in 1984 that, “The day I become a monetarist is the day I have lost my marbles” (Samuelson quoted in Nelson 2005).
- 16.
Samuelson avoids the question of whether or not the long-run Phillips curve is vertical.
- 17.
For Samuelson’s later views on optimal monetary policy, see Samuelson (1993). In this testimony to the Senate Committee on Banking, Housing and Urban Affairs, he notes that, “After a dozen years of structural budget deficits and low private sector saving…economic history and economic science concur…that monetary policy rather than fiscal policy should be the major macroeconomics weapon for assuring a healthy 1993-1996 recovery and for restoring of the share of capital formation in the American economy” (ibid.: 1).
References
EROP. (1964) Council of Economic Advisers. Washington, DC, United States Government Printing Office.
Nelson, E. (2005) “Paul Samuelson and Monetary Analysis,” Economic SYNOPSES, 8. Federal Reserve Bank of St Louis. Available at https://files.stlouisfed.org/files/htdocs/publications/es/05/ES0508.pdf.
Samuelson, P.A. (1993, July 1) “Optimal Federal Reserve Policy for 1993–1994,” testimony of Paul A. Samuelson, MIT, before the Senate Committee on Banking, Housing and Urban Affair. Paul A. Samuelson Papers, Box 123, Economists’ Papers Archive, David M. Rubenstein Rare Book & Manuscript Library, Duke University.
Samuelson, P.A. and R.M. Solow. (1960) “Analytical Aspects of Anti-inflation Policy,” American Economic Review, 50: 177–194.
Tobin, J. (1982) “Paul A. Samuelson and Modern Economics,” Cowles Foundation Discussion Paper No. 616, Cowles Foundation for Research in Economics. New Haven, Yale University.
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Cord, R.A. (2019). Paul Samuelson, Government, and Monetary Policy: Some Evidence from the Archives. In: Cord, R., Anderson, R., Barnett, W. (eds) Paul Samuelson. Remaking Economics: Eminent Post-War Economists. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-56812-0_17
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