How much should a President personalize the management of the economy

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at:, or follow me on Twitter.


Peggny Noonan offers a bit of history:

It was 1961 and the new president, John F. Kennedy, had been trying to signal to big business that they could trust him.. His impulses were those of a moderate of his era: show budgetary constraint, keep costs and prices down, prevent inflation…..

That September Kennedy asked the industry to forgo a price increase. He asked the steelworkers union for wage demands… Early in 1962 his labor secretary, Arthur Goldberg, put together a deal. In the spring the union and the steel companies accepted it. Everyone understood the industry would not raise prices.

A few days later Roger Blough, chairman of the board of mighty U.S. Steel, asked to see the president. He handed him a four-page mimeographed statement announcing his company would raise steel prices $6 a ton. …
Soon Bethlehem Steel raised its prices. Other companies followed.

Now Kennedy was enraged. Accepting Blough’s decision would undo all his wage-price guideposts. It would also constitute a blow to the prestige of the presidency. And labor would never trust him again.

So he went to war. At a news conference the next day he called the steel companies’ actions “a wholly unjustifiable and irresponsible defiance of the public interest” by “a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility.” He implied they were unpatriotic in a time of national peril. …

Kennedy ordered the Defense Department to shift its steel purchases from U.S. Steel to companies that hadn’t raised prices. The Justice Department under Attorney General Robert Kennedy launched an antitrust investigation, summoned a federal grand jury, and sent FBI agents to the homes and offices of steel executives. There were rumors of threats of IRS investigations of expense accounts and hotel bills. (my emphasis)

Bethlehem Steel was the first to back down. A week after informing the president of the price increase, Roger Blough returned to the White House to surrender…

To which Cochrane replies:

No, Peggy. Crucially, he was wrong on the policy. No, we do not fight inflation by jawboning companies and unions not to raise prices. That does not “benefit the American people.” This isn’t fancy economics. Leaders from Emperor Diocletian to Nicolás Maduro have tried to quell inflation by muscling businesses — sending police to terrorize businessmen in their homes — not to raise prices, and it always ends with more muscle and more inflation — as Kennedy’s did.

He may have “thought” he was right. His Keynesian advisers had also forgotten lessons of two thousand years of history and thought jawboning an excellent idea. But this is precisely why we have a rule of law — so that leaders who “think” they are right about the proper level of steel prices cannot wreck the economy.

Just as Trump’s action is abjectly wrong on policy. For just as many thousands of years, leaders have been cutting Carrier-like deals, to just as contrary effect. It is our duty to say that, to undercut the political popularity that presidents can gain by counterproductive policies, especially when the means trample the rule of law.

“a Republicanism in new accord with the needs of the moment” is a Republicanism that works. And the point of “work” is not just to win the next election, or give people things that feel good but impoverish them. The need of the moment is leadership, to channel people’s well deserved anger into a productive direction.

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