In its obituary on the passing of Nobel economics laureate Paul Samuelson, who died on December 13, Michael Weinstein at the New York Times lavished well-deserved praise on the winner of the 1970 Nobel Prize in Economics for building "one of the world’s great centers of graduate education in economics" at MIT, but erred seriously in recounting his most visible public policy role. Also worth noting is how the Times headline at Samuelson's obit compares to those the paper accorded Milton Friedman and John Kenneth Galbraith upon their deaths. Friedman and Galbraith were also pioneering economists in their own right who passed away after living into their 90s during the final half of this decade:
Of the three, only the free market capitalism-championing Friedman, who like Samuelson but unlike Galbraith was a Nobel-winning economist, was deemed undeserving of being identified as a member of his chosen profession in his Times obit's headline.
More seriously, Weinstein rewrites history to give Samuelson significant credit for the prosperity of the 1960s where very little is due.
Here is how the Times reporter describes what led to the Kennedy-Johnson tax cuts of the 1960s (bold is mine):
After the 1960 election, he told the young president-elect that the nation was heading into a recession and that Kennedy should push through a tax cut to head it off. Kennedy was shocked.
“I’ve just campaigned on a platform of fiscal responsibility and balanced budgets and here you are telling me that the first thing I should do in office is to cut taxes?” Mr. Samuelson recalled, quoting the president.
Kennedy eventually accepted the professor’s advice and signaled his willingness to cut taxes, but he was assassinated before he could take action. His successor, Lyndon B. Johnson, carried out the plan, however, and the economy bounced back.
Not so fast, Mr. Weinstein.
Brian Domitrivic at Investors Business Daily fully retells the history (bolds are mine), including the real advice by a former Samuelson student that won the day (bolds are mine):
But the connection (to the economic prosperity of the 1960s) is unwarranted. JFK listened to Samuelson, but aside from enacting popular business tax credits, he did not take his advice. JFK did precisely the opposite of what Samuelson had counseled in the transition, and this decision is what sparked the boom..... Samuelson said the government should raise taxes and loosen money. The idea was that Federal Reserve easing would make businesses invest and employ workers, and tax hikes would siphon off any inflationary pressures caused by the loose money. Samuelson called his policy mix the "neo-classical synthesis."
JFK was puzzled by the advice. After all, the marginal rate of the income tax, at the astronomical level of 91%, had clearly been at the root of the Eisenhower sluggishness. ....
The U.S. already had the neo-classical synthesis, and it wasn't working. ....
The economy continued to teeter in 1961 and early 1962 as JFK considered this advice but enacted no policy. ....
JFK ordered his advisers to start taking suggestions from the business community, and a bombshell came from the Chamber of Commerce: a permanent 26% reduction in the marginal rate. Kennedy promptly indicated that this should become law, and it essentially did in the Revenue Act of 1964, which took the top rate down to 70% for good ....
The boom started just as JFK indicated that he was dumping the neo-classical synthesis for its opposite. Indeed, one of Samuelson's former MIT students, Robert Mundell, was at the time a young staffer at the International Monetary Fund and urging just that.
As Mundell wrote years later, in the wake of his own Nobel Prize, "at first (my advice) wasn't popular. This was because it recommended a complete reversal of the ... neo-classical synthesis."
.... Fortunately for the United States (and me), President Kennedy reversed the policy mix to that of tax cuts to spur growth in combination with tight money to protect (the dollar). The result was the longest expansion ever ... unmatched until the Reagan expansion of the 1980s."
Mundell would reiterate his ideas in the 1970s, under the name "supply-side economics," and see them implemented again the following decade.
The world lost its greatest Keynesian in Paul Samuelson last Sunday. But the historic runs of growth that the United States posted during his career did not derive from his economics.
Domitrovic's account refutes Weinstein's erroneous and deceptive narrative, which conveniently ignores what Samuelson actually recommended at crunch time.
Domitrovic also clearly and correctly identifies Kennedy, and then Johnson, as converted supply-siders. All the whining on the left about how "unfair" it is for those who advocate supply-side tax cuts to invoke their legacies won't change what they did, and its positive, economy-growing result -- nor will a deliberately misleading Times obituary.
Cross-posted at BizzyBlog.com.
