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BURNS, ARTHUR F. 1904-

CHAIRMAN FEDERAL RESERVE BOARD

Government Technocrat

The 1960s and 1970s saw the rise of the government technocrat, who wielded great influence over the U.S. economy. Arthur Burns is a prime example of the species. Nonpartisan in the strictest sense, Burns served eight U.S. presidents—Dwight Eisenhower through Ronald Reagan—in various posts and became one of the most important influences in the post-World War II American economy.

Education

Burns was born in Stanislau, Austria, and immigrated as a child to Bayonne, New Jersey. An intellectually ambitious young man, Burns obtained a scholar-ship to Columbia University in 1921. He graduated in 1925 with both a B.A. and an M.A. in economics. He received his Ph.D. from Columbia in 1934, the same year his dissertation, Production Trends in the United States Since 1870, was published. In 1944 Burns returned to Columbia University as a professor. In 1948 he became the director of research at the National Bureau of Economic Research, becoming its president in 1957.

Eisenhower

In 1953 Burns became President Eisenhower's chief economic adviser, serving as the chairman of the Council of Economic Advisers. His views on taxes and spending were held in the highest regard, and he was given much credit for the 1955 economic miniboom. At the end of Eisenhower's first term in 1956, Burns re-signed his official position and returned to Columbia; he continued to advise Eisenhower on an unofficial basis. During the 1960 presidential campaign, Burns was part of the "Scholars," the academics advising Republican candidate, Vice-president Richard Nixon.

Kennedy and Johnson

Burns's association with Eisenhower and Nixon did not forestall his being named as an economic adviser to President John F. Kennedy. Burns took great exception to the deliberate running of budget deficits, a tendency he saw as becoming a dangerous new economic orthodoxy. He also was an advocate of reforming the tax code, which he saw as an inefficient "legacy of the Great Depression. After Kennedy's assassination in 1963, Burns became an important adviser to President Lyndon Johnson. In 1964 he proposed an annual tax cut, a move he claimed would insure economic growth and, ironically enough in light of developments during the 1980s, increase tax revenues.

Federal Reserve

In 1968 Burns again became an adviser on economics to Nixon during the presidential campaign. In January 1969, after Nixon's victory, Burns was named to be counselor to the president, a Cabinet-level post. Burns was instrumental, along with Daniel Patrick Moynihan, in developing Nixon's almost-liberal domestic policy. That position lasted only until October, when Burns was named as chairman of the Federal Reserve System. His oversight of the money supply put Burns at the very heart of the economy. Burns's philosophy as the U.S. central banker was to control the money supply to counteract the business cycle in order to forestall both high inflation and recession.

New Economic Policy

The Nixon administration was faced with increasing inflation, a product of what many economists assert was the overheating of the economy with spending for both the Vietnam War and President Johnson's Great Society social programs. In 1970 Burns suggested wage and price controls as a means to calm inflationary pressures. Nixon at first rejected Burns's prescription, but in 1971 the president instituted a phase program of controls and currency devaluation as part of his New Economic Policy. Burns advised Nixon closely on the details of the program, continuing his advisory role even while serving as an "independent" central banker.

The Problem of Timing

Burns's performance received mixed-to-negative reviews, mainly because his theory did not take into account the timing of the moves needed to keep the economy growing. As a result, Burns kept the money supply growing robustly from 1970 to 1973, only then restraining it. The recession of 1973-1974, brought on by the oil crisis, was accompanied by double-digit inflation.

Crisis Management

The turbulent economy of the 1970s gave Burns many opportunities to carry out the crisis management activities of the central banker. Two of the most important were the 1970 bankruptcy of the Penn Central Railroad and the 1975 loan default by New York City. In both cases Burns acted quickly to provide adequate liquidity to smooth the financial system through the crisis. Burns's easy manner and mainstream ideas about economic policy and nonideological approach to government enabled him to continue serving presi-dents Gerald Ford and Jimmy Carter as Federal Reserve chairman. In 1978 Burns was replaced as chairman by Paul Volcker. In 1981 he was appointed by President Ronald Reagan to be ambassador to West Germany.