David Warsh: Two heroes -- Volcker and Comey

Paul Volcker

James Comey

SOMERVILLE, Mass.

It’s difficult to explain heroics of the past to young leaders of the present day.  Circumstances change so swiftly, new perils mount with such sudden speed that what was required even forty years ago in terms of preparation, ingenuity, and courage may fail to impress – especially if it happens to involve monetary policy.

Former Federal Reserve Board Chairman Paul Volcker died recently at 92. In recognition of his passing, I read the superbly detailed “The Reform of October 1979: How It Happened and Why,’’ by David Lindsey, Athanasios Orphanides and Robert Rasche.  Their article was written for a conference of the Federal Reserve Bank of St. Louis on the twenty-fifth anniversary of a momentous change.

It was on a Saturday evening — Oct. 6, 1979 — that Volcker summoned reporters to the Fed, the first such press conference in the central bank’s history.  Volcker had recently been appointed to the job by President Jimmy Carter. The atmosphere in financial markets was one of crisis. A climactic meeting of the system’s policy-making Federal Open Market Committee had ended three hours before.

Volcker announced that, after decades of seeking to control inflation by manipulating the price of money, meaning the short-term interest rates it controlled itself, the Fed would henceforth begin targeting the quantity of money instead. After decades relying entirely on Keynesian doctrine, the Fed would capitulate to its monetarist critics and see what would happen. Whatever the change meant in theory, policy-makers knew that in practice they were tying their hands with respect to interest rates. Monetary stringency meant that market rates would move to heights that the FOMC never would have dared to have explicitly voted.

A crushing recession followed, complicated by much political byplay. To make a long and scary story short, market participants of all sorts gradually revised downward their expectations of future price increases. Convinced that the Fed’s governors would not relent, world markets began a financial asset boom.  By 1985 inflation had declined to 3.4 percent, from the 12 percent annual rate during Volcker’s first year on the job.

Meanwhile, the FOMC quietly gave up on the policy of seeking to manage “the money supply” and returned to targeting interest rates.  As Fed chairman Ben Bernanke would later explain, deregulation and financial innovation meant that they couldn’t get a handle on the behavior of the monetary aggregates, no matter which one they chose.

There are accounts of Volcker’s story for every taste and attention span. The best is William Silber’s narrative of his friend’s career, Volcker: The Triumph of Persistence (Bloomsbury, 2012). Stephen Axilrod’s Inside the Fed: Monetary Policy and its Management, Martin through Greenspan (MIT, 2011).  Volcker’s autobiography, Keeping at It: the Quest for Sound Money and Good Government (Public Affairs, 2018), written with Christine Harper, gives the fullest flavor of the man. For a short course, you can’t beat the obit in The New York Times.

I particularly admire The Great Inflation and Its Aftermath: The Past and Future of American Affluence, by Robert Samuelson (Random House, 2009), Samuelson covered the events of those years as a newspaper reporter and columnist, first for Newsweek, then for The Washington Post. He decided to write the book, he explained, because no one else had, or apparently would.  He began

History is what we say it is. If you asked a group of scholars to name the most important landmarks in the American story of the past half-century, they would some or all of the following: the war in Vietnam; the civil rights movement; the assassinations of John Kennedy, Robert Kennedy, and Martin Luther King, Jr.; Watergate and President Richard Nixon’s resignation; the sexual revolution; the invention of the computer chip; Ronald Reagan’s election in 1980; the end of the Cold War; the creation of the Internet; the emergence of AIDS; the terrorist attacks of September 11, 2001; and the two wars in Iraq (1991 and 2003).  Looking ahead, these scholars might include other developments: the rise of Japan as a major economic power in the 1970s and 1980s’ the emergence of China in the 1980s from its self-imposed isolation’ and the spread of nuclear weapons (to China, India, Pakistan, and others.) But missing from any list would be the rise and fall of double-digit US inflation. This would be a huge oversight.

Many of Volcker’s efforts after leaving office, in 1987 were devoted to improving the lot of public servants.  Instead, their standing has continued to degrade.  Especially striking therefore was the afterword for the paperback edition of Keeping at It, which he finished in September.  It appeared Friday as a column on the op-ed page of the Financial Times, under the headline “Paul Volcker’s Final Warning for America’’.

Increasingly, by design or not, there appears to be a movement to undermine Americans’ faith in our government and its policies and institutions. We’ve moved well beyond former President Ronald Reagan’s credo that ‘government is the problem.’ with its aim of reversing decades of government expansion.

Today we see something very different and far more sinister. Nihilistic forces are dismantling policies to protect our air, water, and climate. And they seek to discredit the pillars of our democracy: voting rights and fair elections, the rule of law, the free press, the separation of powers, the belief in science, and the concept of truth itself.

That brought the story forward to last week. As I listened, on a long drive, to congressional Republicans defend Donald Trump on a long drive, I thought about another civil servant, this one a hero of the present day.  It always seemed to me that Volcker’s attitude towards his job had something to do with his physical stature.  He was 6 feet 7 inches tall.  His seriousness may have derived in part from his height (and, of course, in part from his parents), but his authority stemmed from his seriousness. In the end being tall simply helped.

Similarly tall, and, as far as I can tell, similarly motivated, is former FBI Director James Comey. If Comey is not as slyly funny as was Volcker, he is at least as high-minded, or perhaps more, by as much as an inch – he is 6 feet 8 inches tall. He is also scrupulously honest (an undesirable trait in a central banker), yesterday acknowledging that the FBI had loaded the dice when they sought court permission to eavesdrop on former Trump campaign adviser Carter Page.

Today the battles of the Trump presidency present a complicated landscape.  In another forty years, though, my hunch is that it will be Comey who will be seen to have symbolically slain the dragon.

David Warsh, an economic historian and long-time columnist, is proprietor of Somerville-based economicprincipals.com, where column first appeared.

David Warsh: Robert Bartley's malign ghost at the GOP convention

There is no point in asking Donald Trump about his economists.  It hasn’t been that been that kind of a campaign.  In May the businessman reached out to Stephen Moore, of the Heritage Foundation, and CNBC television host Lawrence Kudlow, to help cut the $10 trillion cost of the tax cuts that he had proposed. Last week Moore and lawyer-turned-restaurateur Andy Puzder gave Trump a qualified endorsement in The Wall Street Journal: “A Trump Economy Beats Clinton’s.” Mark Skousen made the libertarian case against Trump here last spring.

If there is one man beside Trump himself whose spirit will inhabit the hall in Cleveland, at least metaphorically, it is Robert L. Bartley – not because Bartley himself approved of Trump – who knows if he did? – but because, as editor of the editorial page of The Wall Street  Journal,  Bartley spearheaded the creation of the say-anything, stop-at-nothing rules that ultimately led to Trump’s success in gaining the Republican Party’s nomination.

Bartley died in 2003. After taking over the editorial page in 1972, he became the most influential administrator of the rules of American public debate in the last third of the 20th Century. In that position, Bartley began the populist revolt that has since found its apotheosis in Trump.

Most influential journalistic umpire of an age?  How do you back a claim like that? Mainly by comparison, naturally -- in this case to the career of the most influential journalist of the middle third of the 20th Century, Walter Lippmann. As it happens, thanks to Craufurd Goodwin, of Duke University, dean of U.S. historians of economics we have a first-rate biography of Lippmann that concentrates on his role as a defender of market economics (Walter Lippmann, Public Economist (Harvard, 2014), as opposed to Ronald Steel’s Walter Lippmann and the American Century (1980).

Lippmann was the child of well-to-do German-Jewish parents, attended Harvard College, worked for Woodrow Wilson during World War I, was on friendly terms from then on with Franklin Roosevelt, John Maynard Keynes and Felix Frankfurter.  Bartley was the son of a professor of veterinary medicine, attended Iowa State University, and, as editor of the WSJ (as the editorial page editor was and still is called), became a friend of Robert Mundell, of Columbia University; Albert Wohlstetter, of RAND Corp.; Edward Teller, of the University of California, at Berkeley; and President Ronald Reagan.

Bartley was 34 when he was appointed to the job. He had voted for Lyndon Johnson over Barry Goldwater in 1964, but by the time that he spent a year in Washington, in 1971, he had become conservative, and, according to former WSJ reporter Robert Novak, by then a syndicated columnist, he was ostracized by liberal reporters there as a right-wing “kook.” Upon becoming editor he built a staff that eventually totaled fifty writers and editors, creating a universe of conservative opinion parallel to the news side of the paper.  Among those he hired was Jude Wanniski, a flamboyant reporter for The National Observer, a weekly newspaper published in those days by Dow Jones.

In a level-headed appreciation in Slate, in 2003, Jack Shafer described an experience that was widely shared during the 1970s:

“[W]hat attracted me to the page when I first started reading it in 1973, fishing it out of a trash can each night as I cleaned an office building, was Bartley’s allegiance to the classical liberal values of free markets and free speech. Back then, Bartley was a minority of one among editorial-page editors in hewing to those views, tilting against the neo-Swedish worldview of The Washington Post, New York Times, and Los Angeles Times editorial pages. So if Bartley overstated his case from time to time by shouting until his vocal chords hemorrhaged and his readers lost their hearing, well, that was OK by me.

“As a small-government libertarian, I never subscribed to the Journal edit page’s supply-side orthodoxy as formulated by Jude Wanniski, which didn’t seem to care about the growth of government as long as taxes got cut. Today, nearly everybody recognizes that the marginal tax rate of 70 percent when Ronald Reagan took office was at least twice as high as it should be. Cutting it down to 28 percent proved to be both a utilitarian and an individual boon. As economist Bruce Bartlett notes, the world took notice of the American tax revolution, and many nations followed our example to excellent effect. But back in the ’70s, when Galbraithism and Heilbronerism ruled, Bartley and his scriveners were the true intellectual radicals.

Wanniski introduced Bartley to a pair of refugees from the University of Chicago, Arthur Laffer and Mundell.  By 1975, Mundell was teaching international economics at Columbia. Wanniski described a “Mundell-Laffer hypothesis,” as revolutionary and mysterious as the prescriptions of Keynes 40 years before, all the more so for being confided in a series of restaurant lunches instead of conveyed as formal models in technical papers. The ideas eventually were encoded as WSJ  editorials and dubbed ‘supply-side’ economics: massive tax cuts that would pay for themselves by spurring growth.’’

Reagan won the presidency in 1980, and Bartley won a Pulitzer Prize for editorial writing. The editorial page had become immensely powerful, and has remained so.  Bartley told an interviewer in 1981, about the time Wanniski was fired for train-station-electioneering for a supply-side insurgent candidate, “Jude had a tremendous influence over the tone and direction of the page. He taught me the power of the outrageous.” Wanniski struck out on his own as a political consultant but remained close to the page. By 1982, Vermont Royster,  Bartley’s processor as editor, had joined the critics. Novak later quoted him:   “‘When I was writing editorials,’ said Royster, ‘I was always a little bit conscious of the possibility that I might be wrong. Bartley . . . is not conscious of the possibility that he is wrong.’  Yet Bartley’s page “exerted more influence than Royster’s ever attempted,” wrote Novak.

By the end of the 1980s, Bartley had won. George H. W. Bush had succeeded Reagan as president, but the WSJ  editorial page refused to take yes for an answer.  Bartley vigorously opposed Bush’s decision to seek modest tax increases to pay for war in the Persian Gulf to expel Iraq from Kuwait.  And when Bill Clinton defeated Bush, in 1992, the editorial page began a series of attacks on Clinton and his wife that ultimately sought to overturn election results with an impeachment trial.

I can pinpoint the day the page lost me altogether. It was March 18, 1993, with a famous editorial, whose title, “No Guardrails,” has since become a WSJ battle cry. A physician who performed abortions in Florida had been ambushed and killed by a protester in Florida. The editorialist, Daniel Henninger, wrote:

“[T]here really was a time in the United States when life seemed more settled, when emotions, both private and public, didn’t seem to run so continuously at breakneck speed, splattering one ungodly tragedy after another across the evening news. How did this happen to the United States? How, in T.S. Eliot’s phrase, did so many become undone?

“We think it is possible to identify the date when the U.S., or more precisely when many people within it, began to tip off the emotional tracks. A lot of people won’t like this date, because it makes their political culture culpable for what has happened. The date is August 1968, when the Democratic National Convention found itself sharing Chicago with the street fighters of the anti-Vietnam War movement.

“The real blame here does not lie with the mobs who fought bloody battles with the hysterical Chicago police. The larger responsibility falls on the intellectuals –university professors, politicians and journalistic commentators – who said then that the acts committed by the protesters were justified or explainable. That was the beginning. After Chicago, the justifications never really stopped. America had a new culture, for political action and personal living.

“With great rhetorical firepower, books, magazines, opinion columns and editorials defended each succeeding act of defiance – against the war, against university presidents, against corporate practices, against behavior codes, against dress codes, against virtually all agents of established authority.’’

There was something downright creepy about that editorial – like the moment in The Shining when a leering Jack Nicholson, peering over her shoulder, says to his wife, who has just discovered that his manuscript, on which he has been working obsessively, is repetitive nonsense, “How do you like it so far?”  Any relatively disinterested observer who lived through the 1970s, ’80s, and ’90s knew the extent to which those years had involved a calming down from the ’60s, of the restoration of rules of civility in the political realm, a process of equilibration.

From the short-lived administration of Gerald Ford to the zero-based budgeting and deregulation under Jimmy Carter, from disinflation under Paul Volcker to tax simplification and Social Security stabilization under Ronald Reagan, the signal events of those years constituted a retreat from the excesses of the ‘60s and a celebration of traditional values of order, credibility, ambition, and achievement. The one sphere in which pressure had continued from the Left was expansion of civil rights — of women, minorities, immigrants, gays, and specifically the rights of women to obtain abortions.  Which was, of course, exactly what the writer had in mind.

Shafer described the scorched-earth policies of those years:

“As many of Bartley’s ideas gained ascendancy, his page became shriller, unable to give Clinton proper credit for getting control of spending. There’s a thin line between hard-hitting opinion journalism and character assassination, a line that Bartley frequently erased. Instead of serving as a sophisticated and credible spokespage for classical liberalism—like The Economist—his page descended all too often into the dishonesty and hackery one associates with politicians.’’

By 2001, Bartley was ill.   He stepped down and began writing an occasional column.  The 9/11 destruction of the World Trade Center temporarily forced the WSJ from its offices around the corner. The editorial page soon began a relentless campaign for the invasion of Afghanistan and Iraq. Bartley died in December 2003, a week after receiving the Presidential Medal of Freedom.

I hope that Bartley will find as wise and good-natured a biographer as did Lippmann in Goodwin.  The rise of paleo-conservatives has been the subject of at least one good book, George Nash’s The Conservative Intellectual Movement in America since 1945 (1976), and is soon to have another, a long-awaited biography of William F. Buckley, by Sam Tanenhaus.  Peter Steinfels and Jacob Heilbrunn, have chronicled the rise of the neoconservatives: The Neoconservatives: The Men who are Changing America’s Politics (1979) and They Knew They Were Right: The Rise of the Neocons (2008). Populist conservatives were the subject of Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations (1994), by Paul Krugman.  If paleo-con Buckley’s National Review provided the starting place for the careers of George Will and Garry Wills; if neo-con Irving Kristol’s influence extended to Allan Bloom, Francis Fukuyama, and Dinesh d’Souza (and influenced the views of broadcast journalists such as John McLaughlin, Rush Limbaugh, and Glen Beck); then Bartley can be said to have furthered the careers of Wanniski, Michael Novak, George Gilder and Amity Shlaes. There’s plenty of material to work with there.

Is it fair to blame the chaos surrounding this year’s Republican nomination on Bob Bartley? Clearly I think so. No one in my lifetime systematically removed more of those guardrails, the norms governing good-faith political and economic discourse, than he. Trump is the downside of 40 years of WSJ ed page comment too often just like his: outrageous, sulfurous, and, all too often, half-baked.  Bartley is dead; long live Bartley: in his absence, the page was completely unable to steer the nomination toward a more viable candidate this year. The best that can be said is that its editorialists helped keep it away from Sen. Ted Cruz.

Paul Gigot, who succeeded Bartley in 2001, has steered a steady course, admitting more diverse opinion to its op-ed pages, coping with increasing disunity among the -cons mainly by proliferating columnists. Lee Lescaze, whom the WSJ hired from The Washington Post in 1989 and who founded its Weekend section, laid the foundation for a humane and sophisticated new wing of the paper before he died, in 1996.

Rupert Murdoch bought the paper from Dow Jones heirs in 2007. His sons, James and Lachlan, have their work cut out for them. Sometime in the next few years they must replace Gigot, 61, with an editor capable of restoring credible focus to a page that has become alternately ideological and diffuse. The decision of The New York Times in March to replace Andrew Rosenthal with James Bennett, hired back from The Atlantic, can only increase the pressure.

Two great heroes of the Republican Party in living memory were Dwight Eisenhower and Ronald Reagan. To lionize Reagan is not enough. Until the similarities of roles of both are understood, the Republican Party is not going to regain the White House.

David Warsh is proprietor of economicprincipals.com and a longtime financial journalist and economic historian. He, like the overseer of New England Diary, Robert Whitcomb, worked for The Wall Street Journal in the 1970s.