Miller Center

American President

A Reference Resource

Economic Policy

Consulting Editor: David Shreve

Miller Center of Public Affairs, University of Virginia

The coordination of economic policy -- in both its domestic and international dimensions -- is a challenge that has vexed Presidents for several decades. While professional economists advised some early twentieth century Presidents, and economic outcomes have preoccupied most modern Presidents, little relevant data with which to guide policy decisions was available until the 1940s. Official estimates of unemployment rates, for example, were not made available until the Census Bureau developed consistent definitions of the "employed" and "unemployed" in 1942. The Great Depression of the 1930s, the fear that the end of World War II would augur an economic decline similar to that which had followed World War I (from 1918-21), and the rapidly spreading influence of John Maynard Keynes -- who counseled compensatory fiscal and monetary policies as the antidote to business "cycles" in his 1936 General Theory of Employment, Interest, and Money -- made much more proximate and constant the previously arm's-length and ad hoc relationships between Presidents, professional economists, and discrete economic policy decisions. What began as an increasing reliance on social scientists in general -- during and just after World War I, and continuing with Herbert Hoover's notable interest in data collection and business surveys while both commerce secretary and President -- coalesced after World War II around Pentagon-financed data collection and analysis and the elevation of professional economists and economic policy advice.

This fundamental shift was perhaps best symbolized by the Employment Act of 1946, which decreed in its Section 2 "that it is the continuing policy and responsibility of the federal government . . . to promote maximum employment, production, and purchasing power." Reported initially as the Full Employment Act of 1945, this legislation had emerged from the Banking and Currency Committee with an even bolder, far less equivocal mandate: that the federal government "has the responsibility to assure continuing full employment . . . sufficient employment opportunities for all Americans," and that it shall provide "such volume of federal investment and expenditure as may be needed . . . to assure continuing full employment." Though these declarations were removed from the bill's final version in favor of the much more malleable Section 2 mandate cited above, the 1946 Act also created the Council of Economic Advisers, required that the President submit an annual economic report, and also required that this report be introduced at hearings of the Joint Economic Committee -- all provisions that dramatically enlarged federal economic policy debates and the role of American Presidents in the nation's economic affairs.

After an initial period of relative obscurity in which its first chairman, Edwin Nourse, shied away from both policy advocacy and public testimony, the three-member Council of Economic Advisers became a political lightning rod under Nourse's successor, the fiery New Dealer, Leon Keyserling. Thereafter, partly in reaction to Keyserling's unabashed liberalism and willingness to engage matters of political economy, it came perilously close to extinction in the early days of the Eisenhower administration. Eisenhower's first CEA chairman, Arthur Burns, likely saved it from this fate by stressing -- like Nourse -- apolitical, "scientific" analysis but also by publicizing his respect for colleagues with widely divergent political and theoretical viewpoints. Not until President-elect John Kennedy asked Harvard law professor Archibald Cox to "send down some good economists," however, did the Council of Economic Advisers become an integral part of presidential economic policymaking. "Today's talk of an intellectual revolution' and a new economics,' noted the recently retired CEA chair Walter Heller in 1966, "arises not out of startling discoveries of new economic truths but out of swift and progressive weaving of modern economics into the fabric of national thinking and policy." Under Kennedy and Lyndon Johnson, CEA members and staff economists -- which included future Nobel laureates James Tobin, Robert Solow, and Kenneth Arrow -- were asked to provide a regular stream of technical and political advice. Under Johnson, CEA influence likely reached its apogee; its memos numbered approximately fifteen to twenty per week, all actively solicited by LBJ and hailed as models for the kind of concise, informative memos he expected from all assistants and cabinet officers.

The onset of stagflation in the 1970s, the vexing productivity collapse of the same decade, the confused reading of that era's widespread profit squeeze, and, to some extent, President Nixon's lack of confidence in his own economic advisers, blunted the ascending reputation of White House economists. These dynamics also led many skeptics to conclude that Presidents had much more responsibility than control when it came to the nation's economy. They also launched an era in which the sources of economic advice to Presidents became much more numerous and varied, but also somewhat less influential. Once again, Congress appeared ready to dissolve the Council of Economic Advisers; the House Appropriations Committee passed a bill calling for its elimination, only to see the legislation fail on the House floor. The newly minted Congressional Budget Office and the "independent" Federal Reserve system now appeared to wield as much influence over economic policy and the nation's economy as did the President of the United States. Moreover, despite no decrease in the number of governmental interventions in the marketplace (and perhaps a substantial increase), the idea of unfettered markets regained favor as the role and influence of any one actor -- including the President -- became much more difficult to discern. Such a development served at least in part as a self-fulfilling prophesy by which presidential influence on the economy -- arguably still quite powerful -- became even less well-understood.

The CEA has survived over the past twenty years and continues to publish the President's annual report on the economy. But Presidents have also created and used White House staff units variously titled the "Economic Policy Board," the "Economic Policy Council," and the "National Economic Council." In 1993, by Executive Order 12835, President Clinton established the National Economic Council, the latest of these various entities, and President George W. Bush continued it.

While the "Council" is formally and technically a cabinet committee with the President (in his absence the vice president) as the chair, the noun "Council" is somewhat of a misnomer; the policy work on important domestic economic policy issues is done by the White House staff unit itself. The National Economic Council staff draws upon contributions from the relevant departments and agencies, but from its perch in the White House superintends the intricate interagency coordination which is always involved and closely manages the presentations to the President. In the formal White House organizational scheme, the "National Economic Council" is part of the "Office of Policy Development," along with the Domestic Policy Council and the Office of National AIDS Policy.

Because economic policy affairs also include sensitive international/national security issues such as trade, foreign assistance, and limitations on the sales of strategic items such as advanced computers or digital machine tools, specialists in these critical areas also play a prominent role in the making of presidential economic policy. True for much of the twentieth century, this has been especially noticeable since the onset of the Cold War in the late 1940s and since President Kennedy's establishment in 1962 of the Office of the Special Trade Representative, first occupied by former secretary of state Christian Herter. Though the latter office was launched with the passage of the 1962 Trade Expansion Act and was charged ostensibly with the oversight and encouragement of free trade, the economic policies influenced significantly by national security specialists have expanded well beyond the still important issues of international trade. Offices in the Department of State such as the assistant secretary for economic affairs, the assistant to the undersecretary for international business, and the coordinator of international labor affairs have reflected, however intermittently, the role played by significant parts of the nation's foreign affairs bureaucracy in providing economic policy advice to the President. Most recently, in the George W. Bush administration, important questions in these fields have fallen increasingly into the hands of national security advisers rather than those specialists charged with general or specific economic policy advice. To this end, President Bush established a special office within his National Security Council staff: a deputy assistant to the President for international economic affairs (and deputy national security adviser).

As the international monetary arrangements established at the 1944 Bretton Woods conference became increasingly fragile -- constructed as they were on a U.S guarantee to exchange overseas dollar holdings for gold at $35 per ounce, in an era of widespread dollar accumulation -- the undersecretary of the treasury for monetary affairs (now split into the offices of the undersecretary for international affairs and the undersecretary for domestic finance) also became an important presidential adviser. Robert Roosa, appointed to this position during the Kennedy administration when the international balance of payments first became a well-publicized issue, was perhaps the first of these undersecretaries to pay attention to and to inform the activities of foreign central banks. As much independent actors as policy advisers, these undersecretaries and their American colleagues at the International Monetary Fund and the World Bank continued to play an active role advising Presidents on international economic affairs, even after the early 1970's return to floating exchange rates and the closing of the gold "window" by which the U.S. government had underwritten dollar holdings in foreign central banks. Now concerned more with potentially destabilizing currency speculation and excessively rapid capital flows, these officials remain important advisers to American Presidents.

General Works

The American Assembly, Columbia University. The Economy and the President: 1980 and Beyond. Englewood Cliffs, NJ: Prentice-Hall, 1980.

Bernstein, Michael A. A Perilous Progress: Economists and Public Purpose in Twentieth Century America. Princeton, NJ: Princeton University Press, 2001.

Hargrove, Erwin, and Morley, Samuel A., eds. The President and the Council of Economic Advisers: Interviews with CEA Chairmen. Boulder, CO: Westview Press, 1984.

Heller, Walter. New Dimensions of Political Economy. New York: Norton, 1966.

Norton, Hugh S. The Quest for Economic Stability: Roosevelt to Reagan. Columbia, University of South Carolina Press, 1977.

Okun, Arthur M. The Political Economy of Prosperity. Washington, DC: Brookings Institution Press, 1970.

_________. Economics for Policymaking: Selected Essays of Arthur M. Okun, edited by Joseph A. Pechman. Cambridge, MA: MIT Press, 1983.

Porter, Roger. Presidential Decision Making: The Economic Policy Board. New York: Cambridge University Press, 1980.

Rowen, Hobart. Self-Inflicted Wounds: From LBJ's Guns and Butter to Reagan's Voodoo Economics. New York: Times Books, Random House, 1994.

Spulber, Nicholas. Managing the American Economy From Roosevelt to Reagan. Bloomington: Indiana University Press, 1989.

Stein, Herbert. Presidential Economics: The Making of Economic Policy from Roosevelt to Reagan and Beyond. New York: Simon and Schuster, 1984.

Fiscal Policy

Berman, Larry. The Office of Management and Budget and the Presidency, 1921-1979. Princeton, NJ: Princeton University Press, 1979.

W. Elliot Brownlee, ed. Funding the Modern American State, 1941-1995: The Rise and Fall of the Era of Easy Finance. New York: Cambridge University Press, 1996.

Meyer, Annette. Evolution of United States Budgeting: Changing Fiscal and Financial Concepts. New York: Greenwood Press, 1989.

Monetary Policy

Greider, William. Secrets of the Temple: How the Federal Reserve Runs the Country. New York: Simon and Schuster, 1987.

Kettl, Donald F. Leadership at the Fed. New Haven, CT: Yale University Press, 1986.

Maisel, Sherman J. Managing the Dollar. New York: Norton, 1973.

International Monetary Policy and Trade

Aliber, Robert Z. The New International Money Game. Chicago: University of Chicago, 2003.

Bordo, Michael D., and Barry Eichengreen, eds. A Retrospective on the Bretton Woods System. Chicago: University of Chicago Press, 1993.

Microeconomic Policy

Goodwin, Craufurd D. Exhortations and Controls: The Search for a Wage-price Policy, 1945-1971. Washington, D.C.: Brookings Institution, 1975.

Shultz, George P., and Robert Z. Aliber, eds. Guidelines, Informal Controls, and the Marketplace: Policy Choices in a Full Employment Economy. Chicago: University of Chicago Press, 1966.

Studies of Specific Presidents and Administrations

Anderson, James E., and Jared Hazleton. Managing Macroeconomic Policy: The Johnson Presidency. Austin: University of Texas Press, 1984.

Brownlee, W. Elliot, and Hugh Davis Graham, eds. The Reagan Presidency: Pragmatic Conservatism and Its Legacies. Lawrence, KS: University Press of Kansas, 2003.

Galbraith, John Kenneth, and McCracken, Paul W. Reaganomics: Meaning, Means, and Ends. New York: Free Press, 1983.

Hamby, Alonzo L., ed. Harry S. Truman and the Fair Deal. Lexington, MA: Heath, 1974.

Harris, Seymour E. The Economics of the Kennedy Years and a Look Ahead. New York: Harper and Row, 1964.

Hawley, Ellis W. The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence. New York: Fordham University Press, 1995.

Matusow, Allen J. Nixon's Economy: Booms, Busts, Dollars, and Votes. Lawrence: University Press of Kansas, 1998.

Morgan, Iwan W. Eisenhower Versus the Spenders': The Eisenhower Administration, The Democrats, and the Budget, 1953-1960. New York: St. Martin's, 1990.

Rowen, Hobart. The Free Enterprisers: Kennedy, Johnson and the Business Establishment. New York: Putnam, 1964.

Sloan, John. The Reagan Effect: Economics and Presidential Leadership. Lawrence: University Press of Kansas, 1999.

Stiglitz, Joseph E. The Roaring Nineties: A New History of the World's Most Prosperous Decade. New York: Norton, 2003.

Woodward, Bob. The Agenda: Inside the Clinton White House. New York: Simon and Schuster, 1994.

Oral Histories (* denotes on-line availability)

Herbert Hoover Library

  • Charles F. Adams
  • Morton Blumenthal
  • Charles Dewey
  • Henry Hazlitt
  • Raymond Moley
  • Marshall Tuthill
  • Walter Wyatt

Franklin D. Roosevelt Library

  • Rexford Tugwell

Harry S. Truman Library

  • Henry Fowler*
  • Leon Keyserling*
  • Charles Kindleberger*
  • J. Burke Knapp*
  • Edwin Nourse
  • Walter Salant
  • Harold Seidman
  • John Snyder*
  • Frank Southard
  • The Truman White House*
    Charles Murphy
    Richard Neustadt
    David Stowe
    James Webb
  • James Webb

Dwight D. Eisenhower Library

  • Eugene Black
  • Harold Boechstenstein
  • Arthur Burns
  • Grover Ensley
  • Neil Jacoby
  • Robert Merriam
  • Don Paarlberg
  • Robert Roosa
  • Raymond Saulnier
  • Elmer Staats

John F. Kennedy Library

  • Mortimer Caplin
  • Council of Economic Advisers (joint interview)
    Gardner Ackley
    Kermit Gordon
    Walter Heller
    Joseph Pechman
    Paul Samuelson (unofficial adviser)
    James Tobin
  • C. Douglas Dillon
  • C. Douglas Dillon and Robert Roosa
  • Paul Rand Dixon
  • Kermit Gordon
  • Seymour Harris
  • Luther Hodges
  • Barbara Ward Jackson
  • Frederick Kappel
  • Richard Lester
  • Lee Loevinger
  • Wilbur Mills
  • Elmer Staats
  • Thomas Watson

Lyndon B. Johnson Library

  • Gardner Ackley
  • Joseph Barr
  • Roger Blough
  • William Chartener
  • John Connor
  • Donald Cook
  • Frederick Deming
  • Henry Fowler
  • Walter Heller
  • Leon Keyserling
  • Mary Keyserling
  • Wilbur Mills*
  • Arthur Okun
  • Joseph Pechman
  • James Reynolds
  • Stanley Ruttenberg
  • C.R. Smith
  • Alexander Trowbridge

Nixon Presidential Materials

  • Roy Ash

Gerald Ford Library

  • Arthur Burns
  • Alan Greenspan
  • Paul McCracken
  • Peter Peterson
  • Roger Porter
  • John Robson
  • William Seidman
  • Charls Walker

Jimmy Carter Library (Miller Center Jimmy Carter Project)

  • Stuart Eizenstat*
  • Alfred Kahn
  • Bert Lance
  • Ray Marshall
  • Charles Schultze