I must say I enjoyed reading all three of the papers. I think they are all excellent, and all of them have a very important message to transmit.
Let me start by giving you my comments on the political business cycle. I believe there is such an entity as a political business cycle, and I believe that President Nixon made use of the political business cycle. But it would be too simple to just stop there and talk about what happened only in terms of a political business cycle. I think we have to talk more about the short run and the long run and the American public. The American public has no interest in dealing with the long run and has no interest in waiting for long-run solutions to problems. I think the American public is always interested in the short-run solutions, the quick fixes, the immediate fixes, and that puts a great deal of pressure on a president in terms of how the president has to act.
The public will not wait; they have to be satisfied now. If there is an environment of inflation, as there was when President Nixon took office, the response really is to stimulate the economy. If there is an environment of unemployment, and that was the case as President Nixon was approaching the reelection time, you really then have to stimulate the economy. If you are dealing with an environment where you have both inflation and unemployment (stagflation), our economic policies are not particularly good at all in dealing with both simultaneously. One possibility in this case is you stimulate the economy, but you fix prices so prices cannot increase. What President Nixon did was really an attempt to solve problems the way the American public wanted the problems solved.
I have to say that economists are also responsible for the political business cycle and this whole sense of short-run versus long-run. At the time that the Johnson Administration was winding up and the Nixon Administration was coming into office, I was in graduate school. During my graduate program we never really talked about major flaws in our economy; instead, we talked about the economy being solid, and we talked about the economy being sound. There were no longer major problems, and all we had to do was fine tune, and we fine tuned on a continuous basis. Well, if you then have a problem that affects the economy in terms of a depressed economy, fine tune a little bit. If you then have another problem, a different problem, fine tune a different way. When the election comes up, you are just fine tuning before the election. The election comes, and you will do some more fine tuning after the election. None of the problems were particularly profound problems the way economists viewed them, and you could always do a little bit of fine tuning; sometimes more, sometimes less, but you could rectify the situation. I believe what President Nixon did was appropriate and in response to the American public and in response to what the economists were saying. Besides, it was good politics for him, and I don't think there really is anything wrong with that. If you are standing for reelection, I