Professor Paul McCracken turned 95 Dec. 29.
Conversation and Perspective with Professor Emeritus Paul McCracken
Professor emeritus discusses today’s economic turmoil and reflects on his experience working in the White House.
ANN ARBOR, Mich. — He has roamed the halls of both the White House and the Ross School. He’s advised several U.S. presidents and generations of future business leaders. He’s even been animated for a Doonesbury cartoon.
Paul McCracken arrived on campus in 1948, and in 2011 he still keeps regular office hours. He is the Edmund Ezra Day Distinguished University Professor Emeritus of Business Administration, Economics, and Public Policy. At 95, he is one of the school’s most treasured resources and can be seen almost daily dining in the Davidson Winter Garden. Stop to engage him in conversation and you may hear personal accounts of his time as chair of President Richard Nixon's Council of Economic Advisors. He also served in advisory roles to Presidents John Kennedy, Lyndon Johnson, and Gerald Ford. Prior to his arrival at Ross more than six decades ago, McCracken served as director of research at the Federal Reserve Bank of Minneapolis and worked as an economist in the U.S. Department of Commerce.
As he approached his birthday in late December, McCracken sat down with Dividend writer Terry Kosdrosky to weigh in on economics and public policy, both past and present.
You're out there in the Winter Garden talking to professors and students quite often. What do they want to talk about?
McCracken: In general, people are very much concerned about employment and jobs. You have to be very much interested in that sort of thing because that's the industry we’re in. It's understandable. People, particularly if they're at the tail end of their education, would like to know what they're going to face when they get out of school. On the whole, I'm impressed with the knowledge and the perception of our students.
How concerned should we be about the state of the economy?
McCracken: Not so worried that you can't sleep at night. It's understandable that you worry, especially if you're getting to the end of your work here. I have to remind people that if they're worried now, you should have been with me back in the Great Depression. I graduated from a little Quaker college (William Penn College in Oskaloosa, Iowa) and went back home to my father's farm. In mid-July, finally, I had an offer to teach English at a college in Kentucky (Berea College). As I look at the labor market today, I can understand how if you're looking for a job, it's a great worry until you get one. But life contains those things.
How do you think, in your time here, business education has changed?
McCracken: Probably the biggest change has been the growth of computers. At the time I graduated, if you had asked somebody what they thought of computers they would say, 'What are you talking about?' They just weren't around. The field is always changing. People have come along with great ideas. Some of the men I remember who were on the Council of Economic Advisors were knocking at the door of computers but not always knowing what to do with them. Now it's like the changing of the guard. It's the old school as it transfers to a new era.
Speaking of the Council of Economic Advisors, you were chairman of that body under President Richard Nixon. You and the president had a disagreement over price controls. Despite some of his own reservations and your recommendation against them, he enacted them. How did that dynamic work?
McCracken: Well, that kind of thing can happen. I thought price controls were a bad idea for a very simple reason. You couldn't look back into history and point to a success story. At the time, the president and Congress were involved in a battle in the political domain. Political battles are often more important to them than hard, solid data.
At the time, I remember Nixon had retained his home in California. Every so often, I would get a telephone call telling me the president's going to California for a long weekend. Well, there's a picture (in his office) of me in Air Force One. It's just one example of the president summoning me in order to go over some of these things during the flight to California. It doesn't matter what you had planned for the weekend, you just say, 'Yes, sir.'
The president understood the problem with price controls. But there was the difficulty that Congress was Democratic. That doesn't mean Democrats are evil and Republicans solid. It merely means that if the president belongs to one party and Congress another, there are going to be arguments. There is going to be playing for a stroke. That's politics. You can't blame a politician for looking at the political angle. His profession is political action and leadership. And, obviously, if you're going to be measured in terms of your political actions, you have to watch that.
If you had the current president's ear, what kind of advice would you give now?
McCracken: I'm tempted to say my first advice would be to myself: 'You have to get the hell out of here.' It's a tough arena, no doubt about that. I think I can say, by and large, that the economic advisors have acquitted themselves reasonably well. Bear in mind the president's going to be watching to make a decision that won't be politically negative. After all, that's his job. The remarkable thing is how often the president will want to know, 'What do you think of this action here?' and will stand up to a tough decision even though it is politically harmful.
When I was with Nixon, the president held off on wage and price controls for quite a while. I argued that it never has worked, even in war time and it was not war time. You can't blame a guy for not wanting to make a decision that can cost him in the next election.
As for the current president, I would have been glad to warn him, if he had asked me, about some things he'd want to watch. In your appointments, make sure they're grade A in terms of basic ability. This administration got started by trying to do too many great things and it got them in trouble. And it could have been predicted that it would get them in trouble. Somebody has to come along who doesn't want a plum job and tell him these things. I think he's probably coming along pretty well now.
What's it like serving in an advisory role to a president? How much is it like being a professor?
McCracken: To a substantial extent, it's the same. My advice to anyone going in as economic advisor is play it straight, whatever it is. If price control is the issue, play it straight. Has it ever really worked? And you have to answer that with a no. That's just an illustration. On the whole, I think presidents, without regard to party, have played it straight. You don't get to be president by being stupid.
How do you think the Fed and the current president have handled the financial crisis?
McCracken: I think they've handled it reasonably well. I've been a little concerned about what's happening within the Federal Reserve: the arguments as to whether we ought to go big or not. I think if I were a member of the Federal Reserve Board, I think, but I could be wrong, that I would vote not to go into this $600 billion purchase of government securities. But on the other hand, look at it from their point of view. They are facing a problem that has mystified a lot of people, including economic advisors. But I'm quite sure, if I were on the board, I would vote to hold off on that kind of thing.
I can think of an experience I haven't mentioned very much. I dropped in to see former President Eisenhower after he served his term as president. He was talking about how difficult it is to figure out what to do when one smart group says you ought to go this way and another smart group says you ought to go the opposite way. The remarkable thing is that governments work at all.
You've worked at the Fed as a researcher. Do they factor politics or public pressure into the decisions they make?
McCracken: I'm sure they do. They read the numbers and how the economy is bumping along. The people now at the Fed look kind of young to me. I can understand how the younger people start to get itchy. We're not getting along very well in what we ought to be doing. I can recall meeting with members of the Federal Reserve at other times with different problems.
One thing that's often said about Federal Reserve Chairman Ben Bernanke is he's a big student of the Great Depression and also has looked at the Japanese crisis of 20 years ago. Are those the right markers to consider in today's context?
McCracken: Yes. I have no quarrel with Bernanke. I think he's done a pretty good job. I wouldn't say I've watched him carefully and he hasn't made a single error. That won't occur. But I think he's done a pretty good job. And I think the administration has done a pretty good job, too. Managing a complicated thing like a modern economy is not easy.
Are things more complicated now than, say, under Kennedy or Nixon because of our wider international economic ties?
McCracken: Yes. I never met the new, young president but it's pretty clear that he has limitations in the field of economic policy. And if he were sitting here he'd probably say, 'I agree with you.' Name a president that didn't have problems of that sort. It may have been quite different but they had difficult policy problems. He has to make decisions within a political milieu that complicates things further. The remarkable thing is this doggone economy keeps moving along. We're talking about how it should be moving ahead one to two percent faster than it is. My gosh, you can't even see one to two percent. We'll get out of this.
Would you mind sharing another anecdote or two from your time in public service?
McCracken: Toward the end of his life, former President Eisenhower was at Walter Reed Army Hospital and I had been told not to pressure anyone to try to get in to see him. But I ran into somebody who said he would love to have me in for a visit. When I went to see him I was warned he wasn't well and that, in a few minutes, somebody would come to tell me that our time was up. So I went in. There's only one thing wrong with that story: Nobody ever came in to tell me my time was up. I was there so long, I started thinking, 'How the hell do I get out of here?' Nobody came. You can't tell the former president and the general of the great victory that you're awfully busy. So we kept talking. Then one of his aides finally came in. In any case, we had a great time. He had a connection to the University of Michigan. His brother attended school here and the former president had visited him several times.
Another one I remember: After Nixon won the election, but was not yet president, the press started guessing who was going to get what job and my name was mentioned as chairman of the Council of Economic Advisors. A guy who was with the Washington Post and I had become pretty well acquainted and he called me up and said, 'I hear your name mentioned frequently. Is it real?' I said, 'I have no idea. The president-elect hasn't yet talked to me. So I guess it's just fluff.' Literally the next day I had a telephone call from Nixon, the thrust of which was, 'Can you come to New York?' He was set up there at the time. When he asked me to take the job, I said I ought to at least take time to get home and talk to my wife about this. Nixon and I talked a while longer and he said, 'You know, I have a press conference coming up in about 20 minutes and I don't have anything to tell them. Why don't we just announce it?' What are you doing to do? So I said, 'Well, okay. I guess my wife can find out about it on the news.'
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