The grim, gray, granite face of the Old Executive Office Building (EOB, later renamed the Eisenhower Executive Office Building) on the corner of 17th Street and Pennsylvania Avenue wasn't made any more welcoming by the stern gun-toting Secret Service guard who scrutinized my temporary access pass before letting me through the gate. Everything about the building's massive Victorian exterior, decorated with ornamental ironwork, exuded power and permanence. Built shortly after the Civil War to house the three cabinet departments focused on foreign affairs, the building now contained most of the Executive Office of the President, including my destination, the offices of the Council of Economic Advisers (CEA). The inside of the building was every bit as imposing as the outside, with nearly two miles of black-and-white-tiled corridors and eight monumental, curving granite staircases whose cantilevered construction made them appear to float. If one step were to break or be removed, the whole structure would collapse—a bit of knowledge that at first made my children afraid to use the stairs.
It was 1970, and I was inhaling this heady atmosphere on my first day as a senior staff economist with the CEA. I had actually visited the same offices a couple of years before, when President Johnson had invited a group of young economists to spend what had been billed as a day of informal, interactive meetings with members of his Executive Office, which included the CEA, but which had turned out to be a disappointing session of listening to these members describe their jobs and defend the president's economic policies. Now, though, I was going to settle into one of those offices for a year as an insider, albeit a very junior one, in the Executive Office of the President. That prospect was exciting enough; had I been told that this was only the first of several increasingly significant and visible jobs I would fill as a pioneering female policy maker, against a backdrop of mounting economic and political crises confronting the Nixon administration, I would have crossed my eyes in disbelief.
A few weeks earlier I had been invited by the CEA's chairman, professor Paul McCracken, to spend a year on his staff. One of the smallest government agencies, the CEA had been created after World War II to provide economic advice and analysis to the president. Whether under Democratic or Republican administrations, the economists at the council prided themselves on being defenders of economic logic and the long-run effects of policies against the more short-term views of government departments often dominated by political considerations or special interests. Because of this role, an apprenticeship at the CEA was an opportunity any rising young economist would jump at.
The nonpolitical nature of the job was a major selling point as I pondered McCracken's invitation. Although the chairman and the other two members of the CEA were always political appointees requiring Senate confirmation, these staff positions were deliberately nonpolitical. Senior staffers were generally young academic economists who had established scholarly reputations in their particular areas of specialization, as I had in international trade and finance. I saw myself as a moderate Republican in the mold of Dwight Eisenhower and Nelson Rockefeller, an economic conservative and social liberal on most issues. Above all, though, I prided myself on my political independence. I would have been put off if anyone had asked about my political views or affiliation as a prerequisite for the job, but no one did.
Even so, I had some qualms about joining the administration of Richard Nixon. In foreign policy, Nixon had long been known as an anticommunist hawk and had acquired a reputation as “tricky Dick” when he painted his opponent as a communist “fellow traveler” during his successful race for a Senate seat in California in 1950. Memories of Senator Joseph McCarthy's anticommunist witch hunt in the early 1950s, brought home to me by some of my father's mathematics colleagues as they sat in our living room recounting how they had been hounded out of their academic positions for refusing to sign the loyalty oath required of all public employees in California, were still vivid in my mind.
My worries on this score were offset, though, by Nixon's behavior during the first two years of his presidency. He had apparently become convinced early in his first term that there had to be some alternative to the horrors of mutually assured destruction (MAD) in our relations with the communist world. In line with this thinking, he signed the Nuclear Non-proliferation Treaty (NPT) in 1969 and, some months later, announced a US-Soviet accord on the scope of the first Strategic Arms Limitation Talks (SALT 1) and the end of the trade embargo against communist China, moves toward easing tensions that set the stage for his historic visits to both countries in 1972.
On the domestic front, the president had proposed dramatic policy innovations during his first two years in office, measures that coincided with my own views about good public policies. Two that he put forward in 1969, the Family Assistance Program, guaranteeing a minimum income to every American family, and revenue-sharing with the states, failed to pass the Congress but became templates for later, more successful efforts. Other measures he introduced became landmark pieces of legislation. These included the creation of the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, and the Occupational Safety and Health Administration. These Nixon initiatives, followed in 1972 by the Equal Employment Opportunity Act and the Consumer Product Safety Commission, added up to a program so progressive that, as former senator Bob Dole observed in a 2007 television retrospective on the Nixon presidency, “I doubt that Nixon could be nominated today under the Republican Party. He'd be perceived as too liberal, too moderate.”1
All in all, despite my earlier downbeat introduction to President Johnson's CEA and my initial concerns about the president whose White House staff I would be part of, I was tantalized by the chance to play a role, however modest, in the making of the nation's economic policies. But I worried that uprooting the family for a temporary assignment could threaten the delicate balance between work and family life that was never far from my thoughts.
As he had before, and would many times again, Bob reassured me that together we could figure out how to make the move work for all four of us. Each of us requested and received a year's sabbatical leave from the university, which Bob planned to spend doing research in the Library of Congress for a book on George Bernard Shaw. We rented a pleasant house in Montgomery County, Maryland, noted for the excellence of the public schools our kids would be attending. I knew I would be working long hours, but the flexibility of Bob's schedule, together with the fact that our housekeeper, Josephine Pierce, had volunteered to come with us, persuaded me that my more demanding responsibilities wouldn't disrupt Malcolm's and Laura's lives too much.
By September 1970, when I started my stint at the CEA, Richard Nixon was halfway through his first presidential term. By this time, the dark side of his personality—his secretiveness, his paranoia, his focus on political “enemies,” and his willingness to use a variety of methods, both legal and illegal, both petty and terrifying, to harass them—had taken deep root, although the public did not learn about most of its manifestations until much later. He ordered the secret bombing of Cambodia in 1969 and, despite his announcement of US troop reductions and the “Vietnamization” of the war (neither of which came to pass) that same year, followed up with ground attacks on the enemy sanctuaries in Cambodia that bombing had failed to eradicate.
As the war escalated, so did the protests against it. There were mass demonstrations and arrests in Washington; at one point, National Guard troops were billeted on the marble floors of the Old EOB. Their presence, unavoidable evidence of the war that was going on beneath our windows, made all of us eggheads who were trying not to think too much about it acutely uncomfortable, and not only because, without access to showers, the soldiers smelled. In my enthusiasm for my new job and the exciting policy world I now felt a part of, though, I focused much more on the goals and accomplishments of the administration in both the foreign and the domestic policy arenas than I did on the big dark blot: the escalation of the Vietnam War.
One of the reasons that we young economists serving as the CEA's senior staff were largely unruffled by the mounting tensions between the White House and the world outside was the personalities of the men we were working for, the three politically appointed council members. The chairman, Paul McCracken, was a longtime professor at the University of Michigan Business School, a highly regarded macroeconomist who had himself once served on the council's senior staff. A wisp of a man who looked as if he would blow away in a high wind, McCracken had the courage of a lion. Not only was he totally candid in the economic advice he gave the president, even when he knew it was unwelcome, but he was also fiercely protective of the staff economists who worked at the CEA. Unlike the members, we were not political appointees, and McCracken took the position that, as long as we broke no laws, our political views should be irrelevant in judging our job performance.
In at least one instance, his willingness to act on this principle was severely tested. Paul Courant, a junior staffer fresh from his PhD studies at Princeton, was playing a game of chicken with the Old EOB's security guards, the Secret Service. Every night the guards would tear the antiwar posters from the walls of Paul's office, and every morning Paul would put them up again. After this had gone on for a while, one of the president's minions ordered McCracken to summarily fire the miscreant. McCracken refused, and Paul Courant completed the term of his staff appointment. He eventually became a chaired professor, and for a time provost, at the University of Michigan and thus a colleague of Paul McCracken, whose courage in defending him the younger man never forgot.
Herbert Stein, a macroeconomist who had spent his entire career at a Washington, DC, think tank rather than a university, was the council member primarily responsible for macroeconomic issues. I soon longed to emulate his graceful writing style and the dry wit that contrasted sharply with his ponderous body, owlish expression, and drawling speech. McCracken was in many ways a father figure during my stint as a council staffer; Herb was more like a wise, lovable uncle.
The member in charge of international economic issues, and thus my immediate boss, was Hendrik Houthakker. A short, compact Dutchman with rapidly disappearing blond hair and clipped Dutch-accented speech, Henk looked and sounded every inch the Harvard professor that he was. He was the most ideologically rigid of the three members, firmly committed to the virtues of free markets and liberalized trade and unwilling to compromise for the sake of achieving consensus among different government agencies.
The atmosphere of the council was collegial; hierarchy had little impact on the lively economic conversations that went on more or less continuously. But the pace was much faster than I was used to; the time horizon of assignments was days or even hours rather than weeks or months, and the pressure undermined my self-confidence. One of my duties was to write a “Report to the President on International Finance,” for McCracken's signature, late every Friday afternoon. It was nothing more than a few factual paragraphs on what had transpired in the US balance of payments and foreign exchange markets during the week, but in my early days on the job I was unnerved by having only an hour or less in which to meet a very tight deadline.
At the end of my second or third week, feeling not only insecure but beset by conflicting loyalties because this task would keep me from getting to the rehearsal dinner before my brother's wedding in St. Louis, I burst into McCracken's office on the verge of tears and confessed that I wasn't sure I was up to the job. I missed the dinner, but McCracken's calm reassurance about my competence quickly restored my equanimity, setting up a mentoring relationship that proved critical in every one of my subsequent career moves. Like my real father, he made clear his expectations of me and his belief that I had the ability to succeed. But his expectations, which, unlike my father's, reinforced rather than threatened my own life plan, were all the more influential because they did not have to do battle with my rebellion. Now in his nineties, McCracken until recently came to his University of Michigan office several days each week, and I cannot see him without being reminded of the impact he has had on the course my life has taken.
My training as an economist was key to my work on the CEA staff. But what I had learned outside the classroom while I was growing up was just as important. My parents' backgrounds and the conversations around my father's dinner table had taught me how lives could be disrupted when countries' behavior toward each other turned hostile, and I had tried to promote peaceful relations, however naively, by joining the World Federalists during high school.
I brought both kinds of learning to bear on the two big issues that commanded most of my attention at the CEA. One was the buildup of congressional pressure for increased import protection, particularly against textiles from Japan, whose growing success was making textile manufacturers in the South feel increasing competitive heat. The administration, meanwhile, was trying to move forward on liberalizing trade while expanding a program of adjustment assistance for American workers and businesses adversely affected. True to my cosmopolitan upbringing, I entered the fray enthusiastically on the side of freer trade and more generous adjustment assistance and against restrictions on imports, and I shared the mood of triumph when protectionist legislation failed to pass.
The administration was also confronted with growing problems with the so-called Bretton Woods Agreement on exchange rates, that is, the value of one country's currency in terms of another's. Hammered out during negotiations led by the British and Americans during the waning days of World War II, this arrangement provided that other nations would, with rare exceptions, maintain a fixed relationship between their own currencies and the US dollar, while the United States agreed to convert dollars held by foreign governments into gold, when asked, at the fixed price of thirty-five dollars per ounce.
This system worked extremely well for a while; other countries' war-devastated economies recovered, and international trade and investment, gradually freed from the constraints of the Great Depression and World War II, expanded rapidly. But by the beginning of the 1960s, the system was coming under increasing strain, made inevitable by an inconsistency at the heart of the Bretton Woods system—a situation that troubled me, partly because I shared my father's passion for order in relationships among people and nations, as well as in the realm of ideas, and partly because it was causing tensions with European countries and Japan, our most important Cold War allies.
The problem was that as foreign holdings of dollars, created by a persistent and growing deficit in our balance of payments, became ever larger compared to our supply of gold, the US promise to redeem dollars for gold on demand grew less and less credible. As these concerns escalated during the 1960s, the United States imposed a variety of restrictions on outflows of capital to hold down our payments deficit. These measures, inherited from previous administrations, went against the free-market predilections of President Nixon, who had promised during his campaign to abolish them. But, with concerns about the US balance of payments deficit mounting, 1970 was clearly a poor time to try to make good on that promise. I understood the political constraints, but the economist in me found the situation very frustrating, and I was eager to be involved in finding a way out of it.
The opportunity came when I was invited to participate in a working group, chaired by Treasury Undersecretary Paul Volcker, that had a mandate from the president to make recommendations on US international monetary policy.2 The Volcker Group's discussions were focused on figuring out how to persuade other countries to implement two recommendations designed to alleviate the fundamental inconsistency that was threatening to destroy the Bretton Woods system. One was to make changes in exchange rates less difficult, smaller, and more frequent and, therefore, the whole process less disruptive. The second was to create a new type of “global money,” issued by the International Monetary Fund, which would enable countries to acquire increased reserves without relying on continuing US payments deficits. At the time, the United States won on the second proposal and lost on the first, but the changes came too little and too late to keep the Bretton Woods system from being blown apart a few months later.
Writing briefing memos and taking part in interagency discussions of these issues gave me an exhilarating sense that the lectures I had given in my international economics courses back at Pitt had leaped off the pages of my notes and come to life. The pieces I wrote for CEA members were penned in an informal, even breezy style that attested to the easy relationship I felt with my immediate superiors. In one memo to McCracken, describing the perverse effect on capital markets of various US moves to shore up our balance of payments, I concluded that maybe the opposite of benign neglect is indeed malignant concern!3
Much more formal were my drafts of shorter communications to the president or cabinet members, or written responses to questions posed by legislators in the course of various committee hearings. I soon discovered that McCracken or Houthakker were wont to send these memos forward, over their own signatures, more or less unchanged. Their demonstrated faith in me bolstered my self-confidence while at the same time deepening my sense of responsibility for the words I wrote. Writing memos to the president of the United States, even if they bore someone else's signature, gave me a heady sense that I really did have my finger on the pulse of world affairs. By Thanksgiving I, along with my senior staff colleagues, was spending ten or twelve hours a day drafting chapters of the Economic Report of the President, published annually at the end of January. Our efforts were so intense because this document reflected both why the CEA existed and what it had been doing during the preceding year. Because every word of the text had to pass the scrutiny of each government department or agency involved, it clarified and codified the administration's positions on issues that might otherwise have remained ambiguous. It also explained and defended the administration's views and actions on both domestic and international economic issues, first of all to the Congress but also to the interested public, or at least to the members of the press who digested and interpreted the material.
Although I came home every night exhausted, meeting the challenges posed by the report's purposes kept my adrenalin flowing. In drafting the chapter “The United States in the World Economy,” I drew on all the skills I had honed, while teaching wide-eyed freshmen and tired businessmen, of making complex issues clear to nonexpert audiences. And I enjoyed figuring out how to express the CEA's often controversial views in terms that would pass muster with the many different members of the executive branch, representing widely varied constituencies, who would have to sign off on the report before it was printed. Both my parents were gifted—in their professional if not their personal lives—at bridging opposing viewpoints. I had watched and learned and was delighted to have an opportunity to play this game of skill myself.
I deeply appreciated my superiors' faith in my judgment, but sometimes the results left me red faced with embarrassment. The worst such moment came after Henk Houthakker asked for my comments on a comprehensive review of the US position in the global economy. It had been put together by Peter G. Peterson, a hugely successful businessman who had just been appointed as the first executive director of the Council on International Economic Policy, created by the president “to assure coordination at the highest level of all aspects of our foreign economic policy and to provide consistency with domestic economic policy and basic foreign policy objectives.”4
Expecting that my observations would be seen only by Houthakker, I filled the margins with typically academic caustic notations, such as “nonsense” or “this guy is really paranoid.” Instead, he passed my unvarnished comments directly to Peterson, and I soon received a phone call in which a booming voice at the other end said, “Well, young lady, why don't you come down to my office and tell me what's wrong with my report?” Far from reprimanding me, he asked questions, listened patiently while I explained my concerns, and incorporated a number of them into the final version of the “Peterson Report,” which became a pathbreaking document. Widely circulated within the administration, it both explained and dramatized our weakening trade and competitive position, forcing policy makers to recognize for the first time that the global economic dominance the United States had enjoyed in the aftermath of World War II had begun to erode and that Japan was fast becoming an industrial power and economic competitor.5
Peterson moved on to become secretary of commerce, but his relationship with the president quickly soured and he left the administration, a departure immortalized by his remark that his loyalty had been questioned because “my calves are so fat that I couldn't click my heels.” From our mortifying first encounter, a friendship was born between Peterson and me that has lasted through the decades, as he has gone from triumph to triumph in the business and financial world. He has also become one of our most prescient and influential public intellectuals, persistent in warning the nation about the dangers created by our skyrocketing government deficits, a crusade he has institutionalized by establishing the Peterson Foundation with a billion dollars from the fortune he had reaped in the world of finance.
Despite the intensive efforts to avert it, the US balance of payments position worsened throughout the spring of 1971, as our payments deficit rose, other countries continued to accumulate dollars, and our gold losses increased. In response, Undersecretary Volcker prepared and passed on to Treasury Secretary John Connally a supersecret memorandum suggesting that “we should take the initiative and close off our gold sales as a prelude to a large exchange rate realignment and necessary reforms in the [international monetary] system. Moreover, those decisions should be combined with a price freeze and complementary fiscal and monetary policies at home to restrain inflation.”6 Secretary John Connally took these suggestions as his own, and, after several discussions with the president and George Shultz, director of the Office of Management and Budget, a supersecret meeting was held at the president's Camp David retreat over the weekend of August 13–15 to finalize these plans and put them into effect.
Although I was well aware of the deepening balance of payments crisis and the increasing disorder in foreign exchange markets, I knew nothing of these policy initiatives as my year at the CEA drew to a close. I finished my usual end-of-week memo from McCracken to the president on Friday, August 13, a date fraught with ominous symbolism I was much too busy to notice. On Sunday morning, as we were in the throes of organizing our return to Pittsburgh, I received a call from McCracken's special assistant, Sidney Jones. “Be sure and listen to the president's speech tonight,” he said. “He's really going to drop a bomb.” My seven-year-old daughter grew wide-eyed as I recounted this conversation to the family. “He's going to drop a bomb? Here?” she quavered, as she scuttled under the kitchen table.
The president's announcement of August 15 didn't kill anyone, but its impact was explosive. The New Economic Policy he laid out that night included an immediate suspension of gold payments, which effectively caused the value of the dollar to float, as well as a temporary 10 percent surcharge on imports and a 10 percent reduction in foreign aid. Measures on the domestic side included a ninety-day price freeze, to be followed by a Phase 2 wage-price control program to restrain inflation and maintain our credibility with foreign holders of dollars, along with various tax-cutting measures to stimulate output and employment.
Why did the situation justify such drastic policy moves on the domestic, as well as the international, front? Inflation was running at a rate of about 5 percent annually in 1969–71, higher than it had been since the early 1950s, and the depreciation of the dollar needed to improve our payments imbalance was sure to increase the upward push on prices. At the same time, the unemployment rate had risen to almost 6 percent. Together these developments had produced a “misery index” (the combined value of the inflation and unemployment rates) of about 10 percent, and the president was eager to see it come down before the 1972 election. But the measures aimed at stimulating output and employment would exert a further upward push on inflation. The political imperative to make progress on both parts of the misery index at once led the president, against the advice of his senior economists, to put his stamp of approval on Connally's proposal for wage-price controls, a system that, backed up by rationing of many essential household items, had worked reasonably successfully during World War II.
I knew instantly that these measures would have resounding effects on both the national and the global economies, as well as on our political relations with other countries. A day or two before I left the CEA at the end of August, I wrote a long, detailed memo to McCracken laying out some of the implications of them and various alternatives regarding the future of the international monetary system.
“Now that the future shape of the international monetary system has been opened up far wider than before by the President's actions of August 15,” I wrote, “the United States faces two sets of fundamental questions: the short-range ones focused on how (as well as when) to terminate the present state of suspended animation, and the long-range ones involved in defining the characteristics of the new world monetary order we would like to see take shape and, secondarily, in figuring out what course of action will maximize the probabilities of achieving it.”7
As I ruminated on these cosmic issues, I had no inkling that the drastic measures announced by the president on August 15 would have an equally dramatic impact on my own life and the lives of my family, as I found myself thrust into the forefront of efforts to answer the questions my memo had posed.
My speedy return from a brief stint of academic life back in Pittsburgh to the heady world of Washington policy making began with a press conference where, for the first time in my life, I was at center stage rather than in the audience. I blinked nervously in front of blinding spotlights, the only woman among the seven people that Donald Rumsfeld, the young and aggressive former congressman from Illinois who had been appointed executive director of the Cost of Living Council—the umbrella organization the president and Secretary Connally had placed at the apex of the pyramidal structure created to succeed the wage-price freeze—had just introduced as members of the nation's Price Commission. My male colleagues, all strangers to me, were two business school deans, a prominent African American lawyer, the retired heads of a leading business-information company and one of the Big Six accounting firms, and a former governor of Pennsylvania.
We were hardly a cross section of America, but a group whose collective wisdom and experience would, hopefully, command public respect and support. In his own retrospective book on the Price Commission, its chairman, Jack Grayson, gave a short, pithy description of each commissioner. Here, in its entirety, is his view of me: “Searcher for levers. Newspaper devourer. Economic Portia. Full employment of mind.”8 I took this summary as a compliment.
A few weeks before Don Rumsfeld's public introduction of the Price Commission, as Bob and I were returning to our classes and our children to their old schools and friends, the wage-price freeze was proving enormously popular with the American public, and political pundits hailed it as the opening shot in the 1972 presidential campaign. Strict adherence to the freeze was regarded as every citizen's patriotic duty; accounts of violators being brought to heel and forced to rescind illegal increases by means of the reports of irate fellow citizens provided grist for the media mill. New York City was forced to readjust its parking meters to pre-August 15 prices after it tried to reduce the parking time a dime would buy from two hours to one, and an inmate at the Stateville Penitentiary in Joliet, Illinois, filed suit in federal district court asking that the relevant authorities be held liable for the $125,000 “that prisoners…paid in unlawfully inflated prices” during the freeze.9
Despite the popularity of the freeze, those in charge of administering it knew that it could not be extended beyond the original ninety days without causing severe distortions and disruptions in an economy as complex and dynamic as ours. The public was acutely aware of the scheduled expiration date of November 13, and concern about what was to follow mounted as the weeks went by. Finally, in a speech on October 7, the president outlined the Phase 2 program he had mentioned but left undefined in his blockbuster announcement on August 15.
The two bodies charged with implementing the controls were a Price Commission, which “will develop yardsticks and will be empowered to restrain price and rent increases to the necessary minimum and to prevent windfall profits,” and a Pay Board “to stop inflationary wage and salary increases—the kind of increases that do not really benefit the workingman.”
The president stressed that these boards would have small staffs, unlike the huge Office of Price Administration during World War II. “Stabilization must be made to work,” he said, “not by an army of bureaucrats, but by an army of patriotic citizens in every walk of life.”10 This tension between the desire to avoid government micromanagement of the economy and the political imperative of meeting the announced goal of getting inflation down to a range of 2 to 3 percent by the end of 1972 was to bedevil the controls program throughout its life.
Late in October, just I was settling back into my teaching routine, I was asked if I would be willing to serve as one of the seven public members of the Price Commission. I was assured that it would be a part-time assignment and wouldn't require me to move back to Washington. Like most American economists, I had a natural antipathy toward direct government controls on the economy, believing that they were bound to cause serious distortions and produce unintended results. On the other hand, this experiment with economy-wide controls during peacetime would write a new chapter in the recurring tug-of-war between the American commitment to a market-led economy and political pressures for some kind of government intervention, and I was strongly tempted to be part of the action. In the end, I succumbed to a rationale that underpins more decisions than many of us would admit, telling myself that there would be a Price Commission with or without me, and if I was on it I could at least try to reduce the problems it caused for the economy.
The Price Commission first met a scant ten days before the expiration of the wage-price freeze, and we buckled down to designing standards, regulations, and procedures for a program whose ground rules both the president and Secretary Connally had deliberately left vague. We agreed that decisions would have to be made on a case-by-case basis, but it quickly became clear that such reviews would completely swamp a commission composed of part-timers. Bowing to practicality, we soon decided that the full commission would establish rules, definitions, and exceptions but delegate case-by-case decision making to either the senior staff or, in special cases, the commission's chairman.
Despite this delegation of authority, which subjected us to criticism from legislators, who accused us of shirking our responsibilities, we were overwhelmed. We had not anticipated the myriad questions of definition, coverage, exceptions, and adjustments that would arise in making decisions for an economy as complex as ours.
No sooner did we promulgate a decision than the need for exceptions or exemptions arose. And we had to be constantly alert to the law of unintended consequences, like the disappearance of chickens from supermarket shelves when farmers decided that buying chicken feed, a “raw material” whose price was not controlled, to nourish birds that would have to be sold at controlled prices was a losing proposition.
The seven of us struggled with these issues closeted in a small, stuffy, windowless room for long hours at a stretch. Yet we maintained an overall atmosphere of collegiality while wending our way through this thicket of decision making. Only occasionally did things become tense, as when Bob Lanzillotti, a scrappy, assertive economist who was dean of the University of Florida's business school, suggested that I recuse myself from a decision regarding IBM. Knowing that my father had been a consultant to the company and had sold it a couple of minor computer patents (he had insisted that the basic concept of the “von Neumann architecture” that underlay the new generation of computers, developed under the auspices of the US Army, belonged in the public domain), Lanzillotti assumed that I must own IBM stock. In fact, my father, to my later regret, had chosen to take payment in cash rather than stock, and I had never owned a single share of IBM.
Many of the Price Commission's votes were unanimous. Differences soon emerged, though, on how to weight the two sides of a difficult trade-off between making our program strict enough to meet the goal announced for Phase 2 and at the same time flexible enough to avoid severe disruptions. My own belief that the first rule of any government controls program should be to do the economy as little harm as possible put me firmly on the side of flexibility, but the group as a whole often broke three to three on decisions in which this trade-off was particularly crucial. Jack Grayson maintained the impartiality expected of a chairman during these discussions, but he did vote to break a tie when necessary, and almost always threw the decision in the direction I favored.
These arguments over pricing suddenly faded into insignificance in my mind when, soon after Christmas, I got a call from someone in the personnel office of the White House, asking me if I would be willing to be nominated as a member of the Council of Economic Advisers. I would be filling the vacancy created when Paul McCracken resigned at the end of 1971 to return to the University of Michigan and Herb Stein moved into the chairmanship. Without my knowing it, my appointment had been under discussion for several weeks, first suggested by McCracken and then formally put forward by Stein and George Shultz, still director of the Office of Management and Budget but soon to become secretary of the treasury.
Wow! Here I was being offered a chance to leap from the Price Commission's increasingly tedious wrangling over arcane details into a role that was focused on the big issues affecting the United States and even the global economies. Yet that call from the White House threw me into the most painful emotional turmoil of my adult life. Never before had professional opportunity collided so sharply and painfully with my commitment to my family. For someone as personally ambitious and eager to make a difference in the world of policy as I was, being a presidentially appointed member of the CEA charged with advising the president and reporting to the Congress on economic policy was literally my dream job. And its pull was even stronger because decisions on the wage-price control program and negotiations on the reform of the international monetary system, the two areas where I had the greatest interest and expertise, were sure to be front and center during 1972.
I returned to earth with a thud as I thought about the practical obstacles to my taking the job. Bob and I had just returned to the University of Pittsburgh from sabbatical leaves—normally granted once every seven years—and Malcolm and Laura had just returned to the schools and lives we had disrupted by taking them to Washington the year before. Although I would probably be granted another year off because of the prominence of the position I would fill, Bob was chairman of the English department, not a job from which he could take a leave of uncertain duration. After having expressed so volubly my anxieties about the progress of his career during the early years of our marriage, how could I now ask him to relinquish the chairmanship of a large department for an unpaid leave of absence? And, with children aged twelve and eight, the idea of being a commuting mother away from them most of the time was unthinkable.
No amount of agonizing resulted in a solution to my dilemma. So after crying into my pillow for several nights, beset by the fear that my father's dire predictions about the penalties I would pay for early marriage might be coming true, I told Bob one Friday that I would call the White House personnel office on Monday morning to express my regret at being unable to let my name be put forward. He was as torn as I was; he shared fully my delight at this tailor-made opportunity, and he knew how much I would be sacrificing if I turned it down. I would be giving up not only a year or two of full involvement in issues of national policy about which I cared deeply but also a stepping-stone to who knew what future career opportunities.
Years later Bob told me that he had already decided in his own mind that my career should take precedence over his in family decision making, and I'm still touched to the core by the depth of unselfishness this courageous decision entailed. But his efforts to find a workable compromise had so far come up as empty-handed as mine, and our discussion was cut short when he had to go off to chair the monthly Friday afternoon meeting of the English Department.
The resolution of our dilemma came from an unexpected source. Bob came home from the lengthy departmental meeting spluttering with anger and frustration. There was one particular professor in the department, an Australian named Jim Simmons, with greasy hair, bad teeth, and a strong body odor, who took pride in matching his behavior to his appearance, being as contrarian and unpleasant as possible in every situation. Apparently his talents had been in full swing that afternoon, turning the meeting into a shambles. After muttering imprecations against Simmons for several minutes, Bob said, “To hell with the chairmanship! Let's go to Washington.” Filled with gratitude and relief, I accepted the offer.
The White House logs preserved on the infamous Nixon audiotapes, which I read thirty-five years after the fact, summarize several discussions between him and his chief of staff, H. R. Haldeman, regarding my appointment.11 My appearance, my age (I was thirty-six, which would make me, at that time, the youngest person ever appointed to the council), my intelligence, my academic qualifications, my performance on the staff of the CEA and the Price Commission, and the breakthrough importance of appointing the first woman to this high position were all reviewed.12 There were also several references to my father, his brilliance as a mathematician, the comparison of him to Einstein, and his relationship with me.13
Someone on the White House staff had done a thorough job of research. Not only my father and me but also my husband and our children had come under scrutiny. Bob's first book, on a seventeenth-century playwright, was mentioned, in connection with the possibility of offering him a grant from the National Endowment for the Humanities (NEH), so that he could work on his current book (on George Bernard Shaw) while I was working at the council.14 Our children's intelligence was also up for discussion,15 as I had expressed an interest in their attending the highly regarded Sidwell Friends School in Washington. Haldeman voiced some misgivings about the “liberal intellectualism” he had observed at the school, where his son was a student, but said that he would nonetheless ask either Secretary of State William Rogers or his wife to call the school and put in a good word for the Whitman children's admission at midyear.16 No stone was left unturned, either with regard to what advantages I might bring to the administration or what wheels might have to be greased to enable me to come.
The NEH did indeed offer Bob a research grant, and either secretary Rogers or his wife called Sidwell Friends, which invited Malcolm to come in for an interview. But, as it turned out, the seventh grade was already a couple of pupils over the maximum, and the teachers were adamant in their refusal to add yet another. The headmaster was profusely apologetic, but the decision stood. When I later returned to teaching, my many foreign students were incredulous that a school head would have refused a request from the secretary of state at the behest of the teachers. My response, delivered with some pride, was “welcome to America.”
The president and Haldeman also discussed the public relations aspects of my appointment, with which they clearly intended to make as much hay as possible. Arrangements were being made for a press conference, along with a photo session, at which the president would announce my appointment, mentioning its significance and calling attention to the presence of other women at high levels in his administration.17 Details such as the timing of the announcement, who would be invited to attend, and the potential press coverage were all discussed.18 One of Haldeman's assistants even gave the president a cute story to tell about my father's response to a small boy who asked him a question about mathematics—Nixon the micromanager left nothing to chance.19
The upshot of this planning was that I was called on the afternoon of January 27 and asked to come to the White House at 10:00 a.m. the following morning for an announcement in the Oval Office. With almost no time to get ready, I planned to take a very early morning plane from Pittsburgh. But in the late afternoon snow began to fall more and more heavily, and by evening the airport was alternately open and closed. Bob and I grew increasingly worried as the evening wore on, until finally I said, “Why don't I take a Greyhound bus? They always get through, whatever the weather.”
A city long-distance bus terminal at 11:00 p.m. is never a prepossessing sight, but at least I felt secure that the four-hour trip to Washington would leave me plenty of time to spare, if not to catch much sleep. As it turned out, the bus to Washington was late pulling in; a woman traveling alone with her small child had just had an epileptic seizure. By the time an ambulance had been called and the woman and child taken away, the bus was even later, but there was still a comfortable cushion of time.
There was time, that is, until the bus broke down in the Allegheny Mountains, just halfway between Pittsburgh and Washington. None of the driver's ministrations, aided by would-be helpful passengers, could get it going again. At one point, a state policeman stopped by, lights flashing, to see what was happening. I thought about telling him of my predicament and asking for his help. But then, looking around at my fellow passengers, the soldiers in various stages of inebriation and the little old ladies with string bags, it occurred to me that if I tried to explain to the officer how important it was that I be on time for my meeting with the president of the United States in the Oval Office at ten o'clock that morning, he might well call another ambulance to haul me off to the nearest psychiatric ward. Eventually the bus sputtered to life and finished the trip. I arrived just in time to rush into the CEA offices to change from jeans into a dress and repair my disheveled hair and makeup. I was in the midst of these preparations when Herb Stein knocked on the door to tell me that the president had postponed the event until the next day. Oh, well, at least I could get some sleep.
When my meeting with the president did take place, he began a rather awkward conversation by commenting on my father, his genius, and his contributions to the nation. He added that, of course, what my father thought and wrote about was way over his head. I replied that he and I certainly had that in common. Only after this stilted little colloquy did the conversation turn to my own prospective appointment and my qualifications for it.
Although I knew nothing at that time about the White House planning that had preceded the president's announcement of my nomination, the fact that the press's interest was focused more on my gender than my qualifications became immediately apparent. Almost every article that came out of the press conference had the words “woman” or “first woman” in the headline. The president did have the grace to say that I had been chosen due to my “intellectual ability of the first magnitude,”20 and I was grateful for an editorial in the Detroit News, which opined that it was my qualifications, rather than my gender, that made me “an outstanding selection.”21
More typical, though, was the article in the Wall Street Journal, which began by stating, “President Nixon is trying another surprise weapon in his effort to enliven the economy—feminine charm,” and went on to describe me as “wearing an emerald-green, deeply slit skirt.”22 This condescending tone infuriated me, and soon after I joined the CEA I invited the reporter, Richard Janssen, to lunch to chide him for his handling of the story. He insisted he had only been trying to introduce a little levity but said ruefully that he had already been chastened by the angry reactions of several of his female colleagues in the Washington press corps. Janssen was an excellent reporter, and we ultimately became friends, but I never let him forget his sexist introduction of me to the Journal's readers.
I did get a chance during the press conference to make a few points of my own, although I was cautioned not to discuss my views on the wage-price controls or international economic policy before I went through the Senate hearings required for confirmation. I said pointedly that, although I was registered as a Republican, I regarded myself as “highly independent” in political matters, guided in voting by my views of individuals and/or the policies they espoused rather than by party affiliation. Asked for my views on the “women's lib” movement, I answered that I shared its goals but preferred to pursue them in less spectacular ways than did some of its leaders.23 “I don't want to contribute to the characterization of men as our enemies,” I explained. “I'm a strong proponent of the monogamous or nuclear family.”24
The note of ambivalence that crept into my expression of support was real. I've always chosen to be a reformer from inside the establishment rather than outside, to try to bring about change by means of persuasion and example rather than confrontation, an attitude that from time to time has exposed me to criticism and even, occasionally, my own later regret, as when I look back on my passivity during the civil rights movement. As I saw it, we were all trying to get to the same place, but by different paths.
One reporter commented accurately that I described myself as an economic problem solver rather than an intellectual bomb tosser, and that I was ambivalent about my sudden emergence into the spotlight: “On the one hand, she is delighted at the chance to move from the kitchen of the council into the living room, to become a policy maker rather than a staffer. But counterbalancing that joy is the fear that she is increasingly being pried apart from her family.” Then came the punch line: “She bridles at the thought of becoming the sex symbol of the Nixon Administration and, in fact, her tall good looks are more a cross between country wholesome and middle European than Hollywood-style sexy.”25
That description must have been a first for any presidential appointee, and I didn't know whether to be flattered or outraged. But I mused that my mother, whose expectations for her daughter's success had rested heavily on her efforts to imbue me with her own attractiveness and charm, at times without much hope of success, would see it as confirmation that her efforts had not been in vain.
Back in Pittsburgh there was another press conference, this one arranged by the university. The main local paper, the Pittsburgh Post-Gazette, sent a reporter from its women's page, rather than its economics section, to cover the event, and her interest appeared to be mainly in how I thought Laura's pet gerbils would survive the trip. I was furious at the insult, and Pitt's director of public relations later angrily told the paper's executive editor that if he ever again committed such a gaffe his reporters would no longer be invited to the university's news conferences.
Now that Bob, God bless him, had made it possible for me to join the CEA without tearing the family apart, settling the logistical details was a snap, freeing me to focus my attention on boning up for hearings before the Senate Banking Committee, the first and most crucial step in the Senate confirmation required for appointment to the CEA. William Proxmire, the Democratic senator from Wisconsin, began the session by asking my opinion about the progress of the Price Commission, from which I had resigned only two days before. Proxmire, a lean runner before jogging became fashionable, was famous for his annual list of Golden Fleece awards, bestowed on those research projects with the silliest-sounding titles that had received grants from the National Science Foundation (the sheep shorn of its golden fleece was presumably the American taxpayer), and I was afraid that he might exercise his sharp and sometimes unfair wit on me. I replied cautiously that the commission had “gotten off to a far better start than we dared to hope.”
Proxmire scolded me about the commission's lack of transparency and asked pointedly whether the other commissioners were ceding too much decision-making power to Chairman Grayson. I stoutly denied his allegation, insisting that I had been anything but “silently acquiescent” and explaining the rationale for some of my votes. He also pressed hard on whether I regarded 5 percent unemployment as “full employment,” making it clear that he certainly didn't. Neither did I, I replied; an unemployment rate of 5 percent and inflation in the 2 to 3 percent range stipulated in the guidelines for Phase 2 were merely interim goals; we expected to do better over the long term.
I enjoyed this interchange with a politician who had seriously educated himself on macroeconomics.26 But, to my chagrin, the gender issue reared its head again. Proxmire and Republican Edward Brooke of Massachusetts, the first black member of the Senate since Reconstruction days, got into a wrangle over whether the fact that I was a woman and a “housewife,” as well as an economist, was relevant to my appointment to the CEA. Aside from this perhaps inevitable but rather pointless argument, the hearing seemed like a brief PhD oral exam, serious and substantive but conducted with a civility that disappeared from the scene in the post-Watergate era and has yet to be recaptured.
The next step, after the full Senate had approved my appointment without discussion, was my swearing in, which, again, the president decided had enough public relations value to be worth attending personally. His presence was rewarded by a photograph that ran in several newspapers. showing me flanked by Nixon and my husband holding the Bible on which I had just taken the oath of office, with the president telling me in both voice and body language to “get those meat prices down.”
For once, I wasn't fazed by a remark that seemed to highlight my housewifely role. I was much too intent on wishing with all my heart and soul that my father could see me now. There I stood in the White House surrounded by the family that he had feared would obliterate my chances for professional success. And in the middle, with an arm around each of our children, was the president of the United States, who had just announced my appointment as one of his advisers on economic issues. As souvenirs, Bob, the children, and I each received signed copies of a photo of the four of us standing with the president, all staring into the camera, stiff and serious and a bit awed by our surroundings. Our children, long since grown, have hung this photo on their walls to amuse their friends. But to me it is a memento of the joyous occasion when my father's expectations and my own, which had clashed and come between us as he was dying, had finally converged.
When I walked into the familiar Old EOB on my first day back at the CEA, I had to shake myself to make sure this was real. Even though my new office was a scant dozen yards from the one I had vacated just seven months earlier, it was a new world. It wasn't exactly a corner office, but the intricate construction of the Old EOB gave it enormous windows on two sides, one looking out on 17th Street and the other on Pennsylvania Avenue. The eighteen-foot ceilings, handsome furnishings, and decorator touches created an impression of gracious elegance. Even the brass doorknobs on the heavy wooden doors were works of art, heavily embossed with designs of American eagles, with hinges embossed to complement them. I took a deep breath as it hit me: this unfamiliar grandeur was a symbol of my move from the “back office” to the “front office” of the CEA. My brief time on the Price Commission had been a dress rehearsal; now I would be squarely in the public eye representing the Nixon administration.
My office was only one of the perquisites that went along with my new job. These included the right to park on the narrow strip of concrete, gated at both ends, that ran between the White House and the Old EOB and a pass that allowed me to rush unchallenged by guards through the inner sanctum, the red-carpeted labyrinthian corridors of the White House itself, on numerous trips between my home base on its west side and the Treasury building on the east. I also had lunch privileges in the White House Mess (so-called because it was staffed by navy stewards), which provided gourmet meals at subsidized prices and also offered the opportunity for informal conversation with other members of the Executive Office of the President.
I really liked the camaraderie and sense of belonging these lunches gave me, but they also caused me embarrassment. Because I was one of two or three women with Mess privileges, I was recognized immediately by my fellow diners, who thereafter called me by name. But I have always been terrible at names, and after a couple of weeks I was too embarrassed to ask theirs. In several cases, it wasn't until I saw some of them on television, as participants in the unfolding Watergate scandal, that I was able to connect names with faces.
I took on my new role during a rare honeymoon period for the Nixon administration. Not only was Phase 2 of the price controls program both popular and apparently effective but the President was winning widespread plaudits for his overtures to our two main communist adversaries, China and the Soviet Union. In late February, between his announcement that he intended to appoint me to the CEA and my swearing in, he had made a historic trip to China, visiting three major cities and holding an unprecedented meeting with Chairman Mao Zedong and Premier Zhou Enlai. He followed this with a trip to Moscow in May, where he and General Secretary Leonid Breznhev signed both the SALT 1 (Strategic Arms Limitation) and ABM (Anti-Ballistic Missile) treaties.
Nixon's Moscow agreements represented a major step in restraining the two nations' rivalry in both offensive and defensive nuclear weapons, a competition in which the Russians had been gaining ground. The significance of his opening gesture toward China was less obvious but also critical in the long run. Had China become part of Russia's closed economic community rather than entering into trade and investment relationships with the West, the economic pressures that figured so prominently in the collapse of the Soviet Union might not have had the same impact. I dared to hope that “tricky Dick” was becoming a global statesman.
My CEA colleagues also made me feel comfortable in my new role. Herb Stein had become chairman and Henk Houthakker had been replaced by Ezra Solomon, a well-known professor of finance at the Stanford business school. Born in Burma to parents who endowed him with an exotic Burmese British Jewish heritage, Ezra had snapping black eyes, a round head, and a small, taut body. Physically, Herb and Ezra were in sharp contrast, the one as ponderous as the other was delicate, the one as drawling in speech as the other was staccato. But they had in common wise intelligence, dry wit, and a generosity of heart that made them ideal colleagues. I was also a fan of George Shultz, who became both secretary of the treasury and the president's “economic czar” soon after I joined the CEA. I did get annoyed with him, though, when he hatched a plan to have me visit a supermarket with the president and cast baleful eyes on a package of hamburger, a photo op designed to symbolize the president's sympathy for the difficulties rising food prices were causing the American housewife. “If you put me in that position, George, I'll quit,” I said, only half in jest, and the idea went no further.
Because I had so recently left the Price Commission, I quite naturally became a spokesperson for the administration on the wage-price control program as soon as I joined the CEA. In my early months there, it wasn't hard to take some pride in the way things were going. The price bulge that had immediately followed the end of the ninety-day freeze in November appeared to be slowing by March and April. In our testimony before the Joint Economic Committee in mid-April, Herb and I could truthfully list signs of progress, pointing out that the Phase I and Phase II programs had significantly reduced the rate of inflation, contributed to a more rapid rise of real (inflation-adjusted) wages, and led to an increase of over 1.8 million in the number of employed workers. We were careful to insert a note of cautions—“We cannot say we are sure that the system as it now exists will achieve our goal”—but our overall tone was both optimistic and determined.27
Even Walter Heller, the “dean” of Democratic economists who had chaired the CEA under presidents Kennedy and Johnson, acknowledged that he and I “were in substantial agreement that the economy would improve measurably during 1972.” Furthermore, he added, Phase II “is nudging wage and price increases down a little faster than natural forces would…After a very wobbly start, Phase II is shaping up.”28
While I was focused on restraining domestic prices as a member of the Price Commission, the international aspects of the president's New Economic Policy had set off a flurry of activity. The other industrialized countries had been caught off guard by his declaration of August 15, 1971, that the United States would simultaneously abrogate its commitment to convert foreign governments' dollar holdings into gold at thirty-five dollars an ounce and impose a temporary surcharge of 10 percent on imports until there was a positive shift of some thirteen billion dollars in the US basic balance of payments.29 Foreign leaders expressed outrage at these unilateral declarations. Privately, they acknowledged that their reactions were aggravated by the timing of the president's announcement, which had forced high government officials in Europe to cut short their cherished monthlong August vacations and rush back to their capitals. The stage was set for hard bargaining between Secretary Connally and his counterparts in Europe and Japan.
I had been deeply embroiled in the events that led up to the president's dramatic abrogation of the dollar's tie to gold when I was on the CEA staff, and I felt strongly about the urgency of moving to an international monetary system more responsive to the signals from foreign exchange markets than the one negotiated twenty-five years earlier at Bretton Woods. Now I was a full-fledged member of the Volcker Group, which was struggling to develop an American proposal for restructuring the international system.
The need to move forward on a proposal was urgent. The measures negotiated under the Smithsonian Agreement of December 1971, in which all participants made some adjustment in the value of their currencies—the United States by reducing the value of the dollar in terms of gold—weren't adequate to shrink the US current account deficit, downward pressure on the value of the dollar continued, and restrictions on international currency transactions were proliferating in Europe. I, along with others in the administration, had to defend American policy against accusations of “benign neglect” of the situation, and it was clear that there would be no progress until the United States put a proposal on the table.
The most significant structural changes embedded in the US proposal were to make the balance of payments adjustment process much more symmetrical than it had been under Bretton Woods. It would put as much pressure for adjustment on countries with chronic payments surpluses as on those with chronic deficits, whereas the old system had exerted pressure only on the latter. In the new system, furthermore, the US dollar, rather than serving as the currency whose value adjusted passively to eliminate inconsistencies in other countries' balance of payments goals, would be a currency much more like any other, meaning that the United States could now take active measures affecting its own exchange rate. It also meant, I warned, that with the United States no longer functioning as the shock absorber, payments balances would have to “add up” more rigorously than before, and there would have to be a conscious effort to achieve compatible balance of payments goals.30
When the Volcker Group's proposal was presented for international discussion, I cautioned that, although it was flexible, leaving plenty of room for discussion and amendment, it would be a mistake to treat it like a Chinese menu, combining some selections from column A with others from column B. The proposal, I insisted, was comprehensive and its parts highly interdependent, just like one of the elegantly curved staircases in the Old EOB, which would collapse along its entire length if one step were to break or be removed.31
The administration was doing battle at home, as well as abroad, to create an open and well-functioning global economy. It had been fighting congressional proposals to restrict imports when I left the CEA staff, and the battle was still in full swing when I returned. Seizing the initiative, the administration took the lead in starting up a seventh round of multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT). Its goals were not only to achieve reductions in both tariffs and nontariff barriers but also, by lowering them, to reduce the discriminatory effects of the European Communities' (EC's) preferential trade agreements with both its new members and its former African colonies. Given a chance to put into practice the classroom lectures I regularly gave on the advantages of both trade liberalization and the GATT principle of nondiscrimination, I dove enthusiastically into the preparations for these negotiations.
My interactions with the Washington representatives of the EC countries and Japan sometimes continued, on a more congenial basis, into our weekday evenings, when we were invited guests at dinners hosted by one of their embassies. These dinners, which always ended promptly by ten so that people could be at work early the following morning, generally featured formal dress and boringly predictable menus. Bob was convinced that there was a huge subterranean central kitchen somewhere under the city, whence filet mignon, roast potatoes, and tiny green peas were sent through a network of pneumatic tubes to various embassies throughout Washington.
Whatever the menu, the conversations at these dinners were always stimulating. Where else could one have the deputy director of the National Security Council on one side and the elegant Count Etienne Davignon—a leading figure in the evolution of both the North Atlantic Treaty Organization (NATO) and the European Economic Community—on the other? Nor were all the gatherings of official Washington so formal. Don and Joyce Rumsfeld, in those days the young, ambitious but not yet affluent parents of three young children, gave parties in the garden of their small Georgetown house at which many of the administration's leading lights could be found drinking beer and munching on increasingly soggy popcorn and potato chips.
I was astonished and angry to discover that the gender issue haunted our social, as well as my professional, life in Washington. Before I joined the CEA, I had encountered the separation of ladies and gentlemen after dinner only in the pages of nineteenth-century novels. But at my first official dinner, hosted by the European Union's ambassador in Washington in honor of the heads of Europe's most important central banks, I was dumbfounded when, following dessert, the ladies were invited to go upstairs to “powder their noses” while the gentlemen enjoyed brandy, cigars, and serious conversation in the living room. Even though I was one of the Nixon administration's most senior international economists, I found myself making small talk in an upstairs bedroom while my husband, the professor of English, listened to Arthur Burns, my old Columbia professor and now chairman of the Federal Reserve Board, discussing the relationships among the dollar, the mark, the franc, and the pound sterling with his European counterparts. The irony of the situation left me inwardly seething.
It was part of Washington lore that when Katharine Graham—owner of the Washington Post and a leading figure on President Nixon's “enemies list” for having stood firm on publishing the Pentagon Papers—found herself in a similar situation she simply rose from the table, called for her limousine, and went home. I knew I would never have the courage to do likewise. But, after that first humiliating experience, I did tell my secretary, when responding to such invitations, to ask directly whether it was the host's custom to separate men from women after dinner. If the answer was yes, she was to refuse the invitation and explain quite candidly why. So I never did get to dine at the British Embassy. Eventually, this antediluvian practice was abandoned. Mrs. Graham had won her battle, and I like to think that I was one of her foot soldiers.
By the time the Republican nominating convention was held in Miami in July of 1972, it was clear that the wage-price controls program, which was approaching the first anniversary of its announcement, would be a significant issue in the upcoming presidential campaign. Those of us in the administration took every opportunity to give the president's program credit for the fact that the economy was expanding and the unemployment rate steadily declining, while overall inflation appeared to be on track to reach the “interim goal” of 2 to 3 percent by the end of the year. The Democrats, on the other hand, could highlight the continuing increase in food prices, which had a particularly powerful impact on family budgets. It was no surprise, therefore, that the three council members were invited to attend the Republican convention and brief various groups there, including state delegations and the party platform's drafting committee.
Because protests against Nixon's escalation of the Vietnam War were in full swing across the country, we expected some heightened security at the convention. But the atmosphere of our Miami Beach hotel was that of an armed camp surrounded by enemy troops. Soon after we arrived, having gone for a swim and a walk on the beach, it took considerable argument to persuade the pistol-packing guards to let us back into our hotel because we had forgotten to wear our identifying dog tags. The next morning our bus to the convention center in Miami, even with a police escort, had to plow through a sea of furious faces, shaking fists, hurled epithets, and worse; one angry young man with an ice pick tried to puncture our tire but was quickly hauled off by the police. The center itself had become a fortress, ringed by two concentric circles of buses ringed end to end, with no space in between (I wondered how Miami's bus commuters were getting to work that day). The anger out there was as palpable as the whiffs of tear gas that seeped into our bus, and later into the convention hall itself.
President Nixon's nomination was unchallenged and therefore a foregone conclusion, so almost the entire convention program consisted of speeches of self-congratulation and discussions of how most effectively to attack the other side. It all culminated in the circuslike atmosphere of a screaming audience of supporters, their voices amplified by the acoustics of an enormous arena, its ceiling covered with thousands of red, white, and blue balloons, which were released onto the heads of the crowd in the evening's finale. The fury of the protesters outside was matched, in words though not in actions, by the scurrilous nature of the remarks made inside by the Republican faithful about Democrats, both individually and collectively.
The tone of these comments was utterly alien to me, and the more I listened the more I squirmed. I was a registered Republican and part of a Republican administration, but my voting patterns had always reflected a fiercely cherished political independence, and there was no way that I could regard a group that included many of my close friends as enemies. Political opponents and adversaries, yes, enemies, no. I vowed that if I were ever again asked to participate in such an ugly partisan event, I would find a polite way to say no.
During the fall of 1972, while the administration's economic policy makers were highlighting progress toward the year-end goals of the Economic Stabilization Program in public, internally we were focused on figuring out what should follow Phase 2. The upshot of intense discussions and a wide range of views on the future of controls was an announcement that they would continue, though in a substantially altered form. Phase 2 would be terminated in January of 1973 and the Pay Board and Price Commission disbanded. The standards for price and pay increases would remain the same as under Phase 2, but, with the exception of a couple of key industries, compliance would now be largely voluntary and self-administered.
In both the 1973 Economic Report of the President and subsequent testimony before the Joint Economic Committee, the CEA stressed that the revised system “still…sets forth precise standards for wage and price behavior consistent with the goal of a lower rate of inflation, and it maintains the ability of Government to compel compliance where voluntary behavior would be inconsistent with that goal.”32 It soon became clear, though, that the shift from Phase 2 to Phase 3 was widely regarded as effective decontrol; one major newspaper headline read “NIXON SCRAPS CONTROLS.” It didn't take long for the inflation suppressed by the freeze and Phase 2 to burst forth, accelerated by the emergence of classic demand-pull inflation as expansionary monetary and fiscal policy propelled the economy toward its capacity limits.
The 1973 Economic Report also attracted attention to an issue entirely new to its pages: the economic role of women. The reactions of both the public and the members of the Joint Economic Committee were predictable. On the positive side, the chapter was praised for highlighting the important role women play in the American economy and for emphasizing that women work outside the home for the same reasons as men,33 thus laying to rest the persistent notion that they work only for “pin money.”34 On the negative side, we were chastised that the tone of the discussion was one of laying out facts rather than explicitly advocating change, and that it did not include policy recommendations. But, despite what it didn't cover, that chapter signified official recognition of American women's growing role outside, as well as inside, the home, making me less of an oddity.
The underlying message of that chapter in the Economic Report—that women's work and working women should be taken seriously—was to my mind both welcome and long overdue. The gender issue continued to haunt my own interactions with the press. It was one thing to be called, accurately, “the chief public defender of the [wage-price control] policy” by Time magazine;35 it was quite another to read in Business Week, “A Nixon aide admits that the White House has a special reason for assigning the most junior Council of Economic Advisers member, as its spokesman at more and more TV press conferences: ‘She's pretty.’”36 A similar comment came from one of the Nixon administration's bitterest enemies, Nicholas von Hoffman, who in one of his columns called me the “Zsa Zsa Gabor of Economics,” thereby casting aspersions on my qualifications, my Hungarian parentage, and my role in the administration, all in a single sentence.37
The women of the Washington press corps also saw me as a symbol, both of women's aspirations and of the difficulties they encountered on the road to fulfilling them. At that time, female reporters were excluded from the annual White House correspondents' dinner, a high-profile affair attended by the president and other top-ranking officials. When Eileen Shanahan, an economics reporter for the New York Times and a pioneering fighter for equal rights for female newswomen, asked me to send a signal by refusing my invitation to the dinner, I didn't hesitate. Some years later she and her women colleagues were finally invited.
The drumbeat of references to my gender threatened to undermine my right to be taken seriously, a matter about which I had qualms from time to time in any case. It should have been reassuring to read in Parade magazine, “This wise young woman probably has more impact on American life than any other woman in or out of government.”38 On the other hand, when an article in Good Housekeeping asked the children of well-known women in various fields “What Does Mommy Do?” my eight-year-old daughter Laura replied, “She helps the President decide things—like if prices should go up or down—but I wonder if the President pays attention to her.”39 I often wondered too.
There was no doubt, though, that my job came with all kinds of extracurricular benefits for the four Whitmans, and, as I kept discovering them, I felt like a birthday child opening one surprise package after another. One of the perks was the right to request seats in the president's boxes at the Kennedy Center when they were available. This meant that we could attend concerts and plays at Washington's leading cultural venue not only without paying for tickets but in the very best seats in the house and with champagne always available from a small refrigerator in the anteroom.
Part of the fun was finding out when we arrived who else was sharing the box. Once, when we happened to take Malcolm along, he found himself seated next to Henry Kissinger, who, in his pompous but totally authoritative way, gave the mesmerized thirteen-year-old a glimpse into the world of geopolitics, as seen by its master. Years later I was reminded of Kissinger's monologue when I sat next to his brother Walter, a successful investment banker, at dinner. He and Henry, only a year older, had come to the United States at the same time. Why then, I asked him, did he speak unaccented English, while Henry still sounded as if he had just landed on our shores? “Well,” Walter replied, “I'm the Kissinger who listens.”
We could also sign up to spend a weekend or a week at one of several resort areas, originally built by various presidents as retreats where they could get away from the pressures of Washington but no longer used that way. One of these was Camp Hoover, the precursor of the current and more famous presidential retreat, Camp David. The camp in Virginia's Blue Ridge Mountains included miles of hiking trails amid magnificent scenery and was bifurcated by the clear, fast-flowing Rapidan River, famed for its abundance of trout. Neither Bob nor I had any interest in fishing, but we and the children reveled in the simple but comfortable lodgings, the deep woods, and the clear mountain air. The kids, who saw little enough of me during the work week in Washington, could have the undivided attention of both their parents as we spent uninterrupted weekends together.
The other government-owned facility available for our rare family vacations was a cottage high above Trunk Bay on the island of St. John in the American Virgin Islands. The cottage was simple enough, with two bedrooms, a living-dining room, and a large screened porch, But Trunk Bay, a two-minute walk down the hill, is possibly the most beautiful body of water surrounding the islands—a clear blue-green, bordered by a sparkling sand beach and with no other human beings visible where we sunned and swam. St. John could be reached only by small boat from neighboring St. Thomas, where we had to do our marketing for the week, since the only provisions available once we reached the cottage were the rudimentary offerings of a tiny store serving a nearby campground. We kept meals as simple as possible but delighted in an environment where the rum cost less than the Coca-Cola, and anyway tasted best when sipped from a coconut into which an entry hole had been pounded by a hammer and a large nail.
Sadly, neither the Trunk Bay cottage nor Camp Hoover is any longer available as a retreat for government officials or anyone else; both have been permanently closed, although Camp Hoover has been designated a National Historic Landmark and can be visited on day trips by tourists.
Bob, Malcolm, and Laura thoroughly enjoyed sharing in these once in a lifetime experiences that went along with my job. We all saw them for just what they were, though, experiences to be savored and remembered but never confused with our normal way of life, the one we would return to once my stint at the CEA was over. And these interludes could never completely overcome the nagging pangs of guilt I felt because the routine of everyday life in Washington posed more difficulties than glamour for the three of them.
Cut off from daily interaction with his colleagues, Bob had to contend with intellectual isolation as he worked on the draft of his book on Shaw, and I was too tired by the time I came home to serve as his educated layman critic, a role each of us normally served by reading and commenting on the other's writings. He also had to put up with silly questions at parties. “People are always asking Bob and me if we've exchanged doctorates,” I once said in exasperation, “as if God had decreed that women be interested exclusively in literature and men in economics.”40 At least I recognized and appreciated the strength of character that underlay our lifetime partnership. Obviously you have to be a strong person with a strong sense of yourself to put up with me, I told people curious about our relationship.41
Bob never expressed any concern about my behavior with any of the many men I worked and traveled with. His faith in my fidelity, which I took as another demonstration of his confidence in himself and our relationship, was entirely justified, but I did occasionally have to extricate myself from a potentially sticky situation. I remember in particular a wrestling match in the back of a Paris taxicab with a brilliant, usually delightful but thoroughly inebriated older man, a high official of the International Monetary Fund and a respected colleague in many international meetings. I never felt any threat to my personal safety, and the episode ended uneventfully. But I was thoroughly annoyed when, as inevitably occurred after such encounters, I ran into him the next morning, sober, embarrassed, and contrite, and it fell to me to reassure him that his behavior wouldn't stand in the way of our continuing to work together.
Because I was at work during most of their waking hours, Bob had to take on most of the responsibility for Malcolm and Laura's physical and emotional well-being; my half of our parenting partnership was definitely not pulling her oar. Bob had always been an engaged father, but now his efforts to go the extra mile sometimes took amusing turns. One hot July 9, his birthday, I was at a meeting in Paris and Malcolm was off at summer camp. Alone with Laura, he told her she could choose the location for his birthday dinner. I wonder how many fathers have celebrated their birthdays eating hamburgers with their eight-year-olds at Roy Rogers? I tried to make it up to him by bringing back a particularly elegant and outrageously expensive bottle of cognac from Paris as a birthday present.
Both of the children had to contend with having been uprooted more or less at a moment's notice and adjusting to a new school and new friends in the middle of the school year. For Laura, whose sunny disposition inclined her toward a generally cheerful view of the world, settling into her new school wasn't hard. She was, in fact, delighted with her child-friendly fourth-grade teacher and the inviting classroom, filled with lofts and nooks for reading or collaborating on projects, which he had built himself.
But for Malcolm, a serious, somewhat withdrawn loner who was wrestling with the stresses of early adolescence, having to adjust to a sudden shift from one environment to a totally different one for the third time in eighteen months was traumatic, much as my unexpected transfer from my mother's household to my father's, as stipulated by my parents' divorce agreement, had been when I was his age. We should have sensed what he was going through when his grades dropped from A to C and he came home from school nearly every afternoon gray in the face from a pounding headache. But, although we had him thoroughly checked for any physical cause of his symptoms, the notion that he might be suffering from what would now be called childhood depression never occurred to us. Many years later he told us that had been the unhappiest year of his life, and I still kick myself that we did not alleviate his misery by at least understanding what he was going through. From Malcolm's perspective, the balance between work and family life had been badly upset.
My second year at the council began promisingly enough. On January 27, the peace agreement that Henry Kissinger and Le Duc Tho, the representative of North Vietnam, had hammered out in Paris the preceding October was finally signed by all parties to the conflict. Although it did not bring about the “peace with honor” that Nixon had promised when he was first elected, it did end the United States' active participation in a war that by then had become almost universally unpopular.
On matters closer to home, the 1973 Economic Report of the President could still strike hopeful notes on the progress of the Economic Stabilization Program, the discussions of US proposals for international monetary reform, and the preparations for a new round of multilateral trade negotiations scheduled to begin in the fall of 1973. We warned, though, that further progress on inflation would require restraint in monetary and fiscal policy, in order to keep the nation's rapid economic expansion from exploding into a price-raising boom. The overall tone of the report, said Time, “could best be characterized as soberly glowing.”42
Things went downhill rather quickly on the economic front after that. We knew, and said publicly, that inflation control would be harder in 1973 than it was in 1972, because expansion was taking the economy closer to its capacity limits, and inflation did indeed speed up. I continued to explain bravely why we expected it to slow down substantially later in the year, but by the beginning of June, Democrats in Congress were beginning to clamor for the reimposition of a price freeze.43 The president had been listening to arguments, both pro and con, since mid-March. I had thought that the antifreeze side was winning; on June 4 I earnestly told the Journal of Commerce, “I have no doubt a freeze would be popular, at least in the beginning, but possibly it would be counterproductive in the long run…a freeze is not being actively considered.”
Corroborating Laura's doubts about whether he listened to me, the president announced a renewed price freeze on June 13. As Herb Stein recounted it, he and the president were discussing the pros and cons of a renewed freeze when Herb commented dubiously, “You can't step in the same river twice.” “Yes you can, if it's frozen,” the president shot back.44 The freeze was to last for sixty days, until new controls—Phase 4—could be put in place.
By mid-1973, inflationary pressures arising from a worldwide boom, a second devaluation of the dollar, and expansionary monetary and fiscal policies at home, along with weather-related crop failures abroad, combined to prevent the second price freeze from being as effective, even temporarily, as the first. In an interview shortly before I left the government in August, I gave my honest appraisal of the controls experiment, displaying “a highly ambivalent attitude toward the controls program.” The reporter wrote, “She makes no claim they have succeeded…in reducing the rate of inflation from what it would have been without any controls. But her ‘tentative’ judgment is that in a broader sense, the controls ‘have been helpful’ in fostering ‘a more favorable combination of inflation and real growth’…than would have occurred otherwise.”45
Along with the fading effectiveness of the wage-price controls, things were continuing to deteriorate on the international economic front, as the currency adjustments that had been implemented under the Smithsonian Agreement failed to have their desired effects. Although international discussions on the US proposals for international monetary reform were ongoing, little progress had been made when they were effectively overtaken by the economic turmoil created by the oil crisis instigated by the Organization of Petroleum Exporting Countries (OPEC) in 1973. Instead, several agreements formalized what had already occurred in practice: the legitimization of floating and a major reduction in the role of gold. The world's major currencies have been operating under a system—or what many observers have called a nonsystem—of “managed floating” ever since.
On the trade side, US policy was heavily influenced by the urgency of curbing domestic inflation, particularly for food and farm products. But when the measures taken to restrain these prices included embargoes on exports of soybeans and several other commodities, our anti-inflation policies worked at cross-purposes to efforts to reduce our payments deficit by expanding exports. I summed up the complexities of the situation we faced: when you're trying to keep prices up at the farm and down at the supermarket, while holding down the burden on the taxpayer and encouraging farm exports, it's a tall order with built-in conflicts.46
Problems were also building in an entirely different trade policy arena, namely, our relations with Japan. Partly in response to the 1971 “Peterson Report” (the one in which my marginal comments brought Peterson and me face-to-face for the first time), which highlighted the decline of the United States' competitive position and the rise of Japan's, twice-yearly consultations between the CEA and our counterparts in Japan's Economic Planning Agency (EPA) had begun in the spring of 1972.
Although the bilateral discussions were invariably well mannered (and lightened by visits to the theater and other entertainments paid for out of our own pockets because the CEA didn't have an entertainment budget), an ongoing wrangle over the appropriate value for the yen dominated the discussions. The Japanese insistence on keeping it ridiculously low, along with their reluctance to open their economy to increased imports, was a major contributor, we argued, to the large and persistent imbalances in trade between our two countries: their surpluses and our deficits. When I led the US delegation to the third CEA-EPA meeting, in Tokyo, we continued to insist that the Japanese should allow the yen to rise further, while they countered that they had already permitted “more than enough” in that respect.
The lines were hardening. Herb Stein ended a memo to the president at about the time of the CEA-EPA meetings by saying “This developing animosity…is dangerous” and urging that we “describe our international economic policies in terms which emphasize our basic common interests and not in terms of a horse race where if we win they lose.”47 But a horse race it was, to the American public. When pollsters asked Americans whether they would prefer to see 4 percent annual growth in the United States and 6 percent in Japan or 3 percent in each country, a majority chose the latter, in defiance of economic logic.
Once, finding myself on a plane next to Congressman John Dingell—a personal friend and a strong supporter of the US auto industry—I protested to him that a restriction he was backing on imports of double-sided galvanized steel from Japan would be hard on American car makers, who couldn't get it at home. His reply was basically, “I don't care if it causes us some pain, as long as it hurts those so-and-sos more.” The United States was finding the adjustment from being the world's sole economic superpower to being in a competitive race with a rising challenger hard to swallow.
If the presence of a female high-level government official occasionally created awkwardness at home, that was nothing compared to the discomfort it caused our Japanese hosts. Having a woman as head of a delegation was unsettling enough, but the fact that from time to time my subordinates would openly argue a point with me was more than the strictly hierarchical Japanese could fathom.
While interacting with our group in discussions was difficult, entertaining us within their rigid protocols was well-nigh impossible. Courtesy required that the chief of a delegation be entertained more extravagantly than the other members, but the elaborate rituals of the geisha house hardly seemed appropriate in my case. So, while my male colleagues were being plied with drink and entertained by beautiful young women, I was struggling to stay awake through interminable hours of Kabuki theater, whose language and gestures were both unintelligible to me. Our hosts rounded up several female professors so I wouldn't be the only woman at official dinners, but the culture gap was epitomized by an elderly vice minister who, unable to contain himself, blurted out, “But what does your husband think of all this?”
The Japanese attitude toward women in high places had changed very little when, some twenty years later, I attended a meeting of Japan's Keidanren, the nation's most prestigious business association. My fellow guest was Sylvia Ostry, a high-level Canadian civil servant who had been her prime minister's “Sherpa,” or senior adviser, in the protracted Uruguay Round of multilateral trade negotiations. Sylvia's brilliant mind and acid tongue were incongruously housed in a petite body, always swathed in the latest designer fashions. When we both had the temerity to argue with one of our hosts, he privately called us “pushy broads.” It was a label we repeated with smiles. With my mother's example always before me, I saw no contradiction in “pushy” and “feminine.”
Despite the fact that the performance of the American economy and our efforts to implement the administration's economic policy goals during the first half of 1973 gave me and my CEA colleagues plenty to be modest about, I managed to hang on to my optimism that I might help to promote a return of the United States to a position of world leadership, presenting a coherent view of an open world economy with maximum reliance on market forces. To me, such leadership was essential in the ongoing struggle for hearts and minds against Soviet communism; promoting it was my own way of carrying on the battle that my father had fought through his contributions to America's military supremacy. But I would soon be forced to face the fragility of these expectations, and my preoccupation with economic problems would seem more and more beside the point as I could no longer ignore the increasingly ominous rumblings of the earthquake that, when it exploded, would shake Washington, and the nation, to their very foundations.