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Interview of John Auten Conducted by Robert L. Hetzel August 6, 2002 Robert L. Hetzel: I’ve got a wonderful little paragraph in Volcker’s Changing Fortunes where he talks about you. He says that he had brought you in as an academic. Is that right? Were you a professor before you joined the Treasury? John Auten: Rice University in Houston, Texas. I was probably, I don’t know, associate professor down there, something. I came up to Treasury as a consultant. Robert L. Hetzel: What years were you at Rice? John Auten: That would be 1952, probably, the first academic year down there, if memory serves me correctly. And I went up to Treasury—about 10 years, because I went up to Treasury in July of ’63 and I was on a sabbatical for one semester, at least. Robert L. Hetzel: Okay. This is neither here nor there, but I spent my… John Auten: No, go ahead. Robert L. Hetzel: I spent my freshman year at Rice University, 1962-1963. And then I transferred to the University of Chicago. The day I got there, August of ’62, it had been over 100 degrees for 37 days in a row. That’s one of my big memories of Rice. It was a very pleasant place. I liked it, but I was looking for a somewhat different environment. John Auten: It certainly wasn’t for everyone, that’s right. Robert L. Hetzel: Well, it wasn’t integrated then and it was primarily a technical— well, the really good students were the scientists and the engineers and at that time I thought I was interested in history. John Auten: Sure. Robert L. Hetzel: But it was a good year. So you went into the Treasury in fall of ’63? John Auten: July. Robert L. Hetzel: July. So Volcker, how were you recruited? He was involved in it? John Auten: Yeah. I had written a piece for Fortune Magazine. I don’t know just when, probably ’63, late ’62, early ’63. And I think it came to Roosa’s attention. He was the undersecretary. He probably got in touch with Volcker and said who is this guy down in Texas writing about exchange markets? And so, let’s see, I think maybe David Meiselman, subsequently a very good friend, got in touch with me probably at an American Economic’s Association meeting and I don’t know, then Volcker appeared on the scene, maybe flew up from Philadelphia or something. And then I went on down to Treasury and interviewed and I went back down to Rice and subsequent correspondence. And so then I decided to come up to Treasury as a consultant and did so in mid ’63. Robert L. Hetzel: And so they hired you as an expert on balance of payments issues? John Auten: Foreign exchange, yes. Robert L. Hetzel: And so were you involved in the various programs to deal with balance of payments, the specific programs, Buy American and then the Interest Equalization Tax and the various forms of degrees of capital controls and so on? Did you get involved in those specific programs? John Auten: Not in the programs, certainly not in their execution. When I went up to Treasury, the Interest Equalization Tax—memory is faulty—I think it may have been sent up to the Hill probably that same summer. I think maybe around mid ’63 and so I got involved in a medial sort of fashion, helping Volcker right at the very onset of my arrival at Treasury. Robert L. Hetzel: Did you notice a change in the Treasury when Fowler replaced Dillon? Was there a difference as far as you were concerned? John Auten: Not really, more continuity impressed me at the time. Robert L. Hetzel: In terms of balance of payments, the view was that the current account—well, I guess the deficit was primarily structural and it did seem like it would pass in time as European capital markets developed. That still seems pretty reasonable. The change came when the inflation rate picked-up in end of ’65 and ’66 and the US began inflating faster than its partners. Does that sound right to you? [00:05:17] John Auten: Oh, well, sure it—I don’t mean to sound critical in sort of push terms, but yeah. I guess one could say the same thing in a different way that in retrospect the degree and attention attached, let’s say, in ’62 and ’63 to the deficit struck me on arrival and certainly after being there a while as, if not excessive, certainly rather surprising to me as an academic. But Roosa and Dillon took it seriously. I don’t know how well that’s weathered academic -2- scrutiny, but yeah. The situation certainly deteriorated with Vietnam and the changing course of Fed policy and those sorts of things. Robert L. Hetzel: Why do you think they took it seriously? Did they think there could be a crisis and then people would stop buying dollars and there would be—the Bretton Woods system would collapse if it wasn’t managed and foreign central banks was up-taking dollars? John Auten: You know, I think the antecedents go back to the end of the late ‘50s and the behavior of the gold market and Roosa certainly came down from New York, joining the Kennedy administration. Concern. I guess, might be the term about the financial future of what was and remains the reserve currency country. And so whether for good or ill, it did take the balance of payment situation as fairly serious. Not immediately, but you know, as sort of a sign that policies needed to be changed to some degree. Of course, they couldn’t have much that they could do to the Treasury and Operation Twist. As you point out, the Interest Equalization Tax and it seems like almost an annual balance of payments program, you know, veering off and as the ‘60s progressed, into a variety of programs not only conducted the Treasury, probably always the Treasury we have some guidance, but over at Commerce and elsewhere throughout government. Robert L. Hetzel: Right. The Fed had guidelines for bank lending and the Commerce department. John Auten: Yes, yes. Robert L. Hetzel: Were you involved in the implementation of any of those programs or were you more an academic think tank, writing memos? John Auten: Yeah, more of that. I knew—organizationally I was not in the office of the assistant secretary for international affairs, or as we called it, OASIA, and functioned more as a staff person for Volcker. Robert L. Hetzel: So you were like a personal assistant to Volcker? John Auten: Oh, I was a visiting academic, I was a consultant and just sort of stayed around. But in the first instance, yeah, I wouldn’t have been involved in sort of the operational stuff. For example, the Interest Equalization Tax, after initial testimony, it was pretty much turned over to the lawyers and to a lesser degree, to the international people. But primarily off to the General Council and you know, set everything up, et cetera. Robert L. Hetzel: Early on, you may have been the one who told me this, or maybe Meiselman was the one that told me that Treasury felt it needed to build-up its economics department so that it could counter the council and that that didn’t turn out to be the case. John Auten: Yeah, that certainly was—well, Dillon of course, had been over at State and new the lay of the land in Washington and Roosa knew everybody and I think that -3- probably the two f them decided that Treasury did need to be strengthened institutionally, vis– à–vis, the council and state department as well. Robert L. Hetzel: But then the bright young economics that they brought in, I know Dewey Daane and the others, they pretty much left. Was it a lonely place that you were in? John Auten: No, Daane came in actually under Julian Baird at the late stages of the republican administration. And of course, they—he only left to go over as the governor of the Federal Reserve board somewhere there in the ‘60s when he and Seymour Harris were the candidates. And Daane was chosen. [00:10:24] Robert L. Hetzel: Right. John Auten: But the crowd that—whoever, either David or Howard were trying to— Meiselman was pretty early in there, and of course Allan Meltzer, John Carrington [phonetic], Sam Chase. Robert L. Hetzel: Right. John Auten: A variety of reasons that didn’t work out too well. Robert L. Hetzel: Did you have any contact with Seymour Harris? John Auten: Oh, yes, quite a bit. He was the sort of the Treasury true consultant, you know. He even managed the—we had meetings—yeah, you’re familiar with this, from the Fed. But we had big academic contention that would come in and offer advice solicited and non-solicited and Seymour Harris ran that operation. Robert L. Hetzel: Chairman Martin and Seymour Harris didn’t get along, at least Martin distrusted Harris. Do you think that was because of the latter’s views on Fed independence, that he didn’t think it was desirable? John Auten: I don’t know. They were just on sort of different wavelengths, weren’t they? I mean… Robert L. Hetzel: Well, sure. John Auten: Harris is a liberal democratic Keynesian, and a very likable guy down from Harvard, and Bill Martin was quite different and impressive in his own way. But no, they wouldn’t have been congenial on academic issues, although they both were very likable personalities in different ways. And I always thought the consultants were very useful to the Treasury, certainly. Probably—well, it would be in the—in the realm conjecture, but probably Dillon and Roosa thought the idea was a good one from the beginning and probably resonated over at the White House an you know, the variety of sort of non-extra economic reasons why -4- it was done. And I look back on it with some nostalgia and I think it’s too bad that it attenuated over the years and now the Fed has consultants at the Treasury, so far as I know— well, some are occasionally bring some people in. Robert L. Hetzel: Yeah. Volcker left in fall of ’65. Wasn’t he primarily concerned with domestic debt management before then? Or was he concerned with international issues? John Auten: No, he was sort of the debt management—I won’t say was a joke, but that’s something they’d do with their left hand, really. It was pretty—in pretty capable hands, really. Civil Service and that’s always been fairly strong contingent in Treasury. But just to save time, Volcker did everything, really as to [unintelligible 00:13:44] international. Sort of shepherded The Troika along under one wing and then the international stuff from the other. He was a jack of all trades, a master of sort of bureaucratic—attention to important issues and inattention to a whole range of others. Robert L. Hetzel: Do you have a sense of why he went back to—was it Chase Manhattan? John Auten: Probably he could speak directly to the issues and I’d only be guessing, but I don’t think he was pleased at all by sort of the general environment. You have to remember that Dillon had left. He had a great deal of respect for Fowler and Fowler had as much or more respect for Volcker. But that’s the era of Agnew and all sorts of problems and troubles down in Washington. I think Volcker just—or am I skipping ahead? I guess I am. He was in and out in the ‘60s, and hard to say just why he went back. I think he went back—he’d been there for quite a few years and the situation was changing. So maybe Chase just made him an offer he couldn’t refuse. I don’t know. [00:15:14] Robert L. Hetzel: So who did you work for in those years before Volcker came back in ’69? John Auten: Let’s see, what are we talking about? We’re talking about late ‘60s, aren’t we? Robert L. Hetzel: ’66, ’67, ’68. John Auten: Yeah. Robert L. Hetzel: What about the period… John Auten: Wasn’t assistant secretary for economic policy until the turn of administration. Murry Weidenbaum was first and that must have been a few years later. So I don’t know just what the organization chart would have looked like at the time. But I might have been—I had saw a lot—this would be Fred Deming [unintelligible 00:16:12] I guess must have been then, by that time, doing the under secretary’s job? -5- Robert L. Hetzel: Hm-hmmm [affirmative]. John Auten: And I worked pretty closely with Fowler and with an assistant secretary now passed from memory, but Bob Wallace who was sort of the—he worked for Senator Paul Douglas and was kind of the—sort of the political assistant secretary, very likable and able guy. He was—kind of worked in the economic area to some extent. Robert L. Hetzel: Do you have any recollections of March of 1968 when the United States went to the two-tier gold standard, when we stopped buying and selling gold on the private markets? Could that have been August 1971 also where we closed the gold window? What was the difference between then and the later period when we finally stopped buying gold altogether—selling gold? John Auten: I don’t have a very strong recollection of the ’68 episode. I guess it was probably an important step in the sequence, but I couldn’t, myself, place it with any confidence just off hand. Because it was, as you point out, the events a little later when cost push inflation combined with a lot of other things and led up to the events of mid 1971 that… Robert L. Hetzel: Yeah. Let me ask you about those events and Volcker coming back. I was very interested when I read your—this paragraph in Changing Fortunes where you came back with the estimate that the dollar might need to be devalued somewhere between 10% and 15%. That was the first number—that was the number that basically stayed around all through the—until the Smithsonian Accords, right? So there were subsequent studies, but apparently those other studies always came back pretty much to your number, right? Do you remember? John Auten: Yeah. I guess that probably was sort of a ballpark estimate at the time. Robert L. Hetzel: Do you remember any of the sequence of events presumably this was spring of ’71 when Volcker came to you and it was clear that the fallen US interest rates and Europe keeping its rates up was going to turn around the short-term capital flows, that it made our balance of payments look good in ’69 and ’70 and the markets would become nervous? Do you remember any of that sequence of events and did—was there ever a sense of kind of real concern or crisis that something—some disaster might happen? John Auten: Well, I suppose in a way it’s—I wouldn’t want to stretch the parallel too closely, but it reminds me in some ways as conflict over the ’62, ’63 concern over the balance of payments, which has many of the same actors there, Roosa no longer, but Volcker and just a belief that whatever risks that may have been minimal in the early ‘60s were more substantial in the early ‘70s. [00:20:30] I haven’t read—I haven’t thought about this in quite a while or even read back some of the fairly decent secondary recaps of those events, by now, for all I know, maybe even some books. Wasn’t there some suggestion that maybe the Brits wanted to… -6- Robert L. Hetzel: Well, this gets… John Auten: I think it’s hard to separate the sort of ordered quasi analytical stream of events leading up to the events of mid 1971 with everything that followed and price control and all sorts of stuff. I guess we had been sort of somewhat, say, maybe with not too much accuracy. We’d been kind of stuffing dollars into the exchange holdings of a lot of foreign countries, hadn’t we? Robert L. Hetzel: Hm-hmm [affirmative]. John Auten: One way or another deemed it essential, maybe it was. And sort of mixture, it seems to me, in financial economics and diplomacy and God knows what else. And whether or not the situation was truly unstable, it’s kind of hard to say. Looking back on it, I think—I might feel that sort of the cost push inflation of the time was somewhat exaggerated, given the clear excesses that occurred by the end of the decade. But it was sort of a dicey situation. Robert L. Hetzel: Volcker and the Treasury people like Weidenbaum favored price controls as part of the devaluation. Do you have any recollection of that? John Auten: I think my recollection is hazy, but yes, I think that’s probably accurate. Easily. Check with Murray. He’s likely to be more talkative than Volcker. Robert L. Hetzel: Check with whom? John Auten: Murray Weidenbaum. Robert L. Hetzel: Oh. Yeah, I haven’t not done that, but I will do that. John Auten: Yeah. He’s changed, no doubt, will be a pretty engaging guy and he’d probably—I don’t know what Volcker would probably cough a few times. You couldn’t get much out of Volcker, I don’t think. I don’t know. It’s hard to say. Robert L. Hetzel: With the benefit of hindsight, it doesn’t seem like this should have been a crisis period. So the dollar was overvalued, so the model was in spring of 1971, Germany and I don’t know, I guess Holland and a couple of other countries, floated their currencies and their currencies were revalued relative to the dollar. So there wasn’t a lot the US could do except… John Auten: Right. Well, that’s always been the case. That’s what struck me throughout that episode and even subsequently that for all practical purposes, our—I get into value judgements pretty quickly, but I never thought, the only reserve [unintelligible 00:23:57] tremendously [unintelligible 00:24:00] by and large an unquestioned advantage. But I never thought that we had the latitude for effective sort of unilateral reaction, which ’71 certainly signified. -7- Robert L. Hetzel: But where it became involved with politics was when Connally put everything together in a package of wage price controls and devaluation with the import surcharge. And then you had a club for forcing other countries to… John Auten: Right. Robert L. Hetzel: And speculators in the market knew they were going to be oneway bets that the dollar could only appreciate. So money flooded into Tokyo and I guess Germany was floating then, but into Paris. Connally then could package this altogether as job creation for labor. You had wage and price controls, which were really seen as wage controls for business, and then you had to give something to labor. So what you gave to labor was this job creation that was going to come out of a devaluation of the dollar and kind of labor, per se, liked the idea of the import surcharge and I think that’s—if it hadn’t been for that combination packaging by Connally, this closing of the gold window wouldn’t have been the dramatic event that it now seems. [00:25:40] John Auten: Sure. Well, Connally certainly was an influence and no shrinking violet by any standards. So the whole program had to get his active support. But I don’t think—I don’t know. It’d have to have been hidden in the corner of the room when I wasn’t, to be sure. But I don’t think it was anything that Connally forced down anyone’s throat. Robert L. Hetzel: Well, Nixon signed onto it. So that was… John Auten: Well, but that—see then that further removed anyone that had any influence. It is certainly true that without Connally in Treasury, that such a program would not have been carried through. That’s right. But I—we’d have to give Connally some credit for some of the political machinations. But the rest of it was—it goes back as I said, like a broken record maybe, it goes all the way back to Roosa and Doyle. Robert L. Hetzel: Do you have any recollections of the competitions that were going on at this point? Volcker of course was very much in favor of continuing Bretton Woods, but with a significant devaluation of the dollar, 15% or so that would deal with the balance of payments problems and he persuaded Connally to go along with him. But on the other side, you had George Shultz, I guess he was an OMB then, who wanted to move to a floating exchange rate system and then Connally was happy to let thing go along with the import surcharge and Kissinger became concerned about the foreign relations aspects of it. And so, Burns and Kissinger basically were competing with Connally for Nixon’s attention in terms of how quickly to settle the situation and what size of devaluation to accept. Do you remember any of those details? John Auten: Not very clearly. Certainly the beef in the Treasury was that everyone was pretty much just rushing to catch-up with the Treasury, I don’t know, bandwagon or steamroller or whatever. I don’t think, I couldn’t throw much light on that. -8- Robert L. Hetzel: What about the initial offer that Connally made and Volcker made in Rome and I guess it was early December of ’71 where they offered to raise the dollar price of gold and kind of meet the French demands at that time? Do you remember that and whether—how much latitude Connally had to kind of negotiate a solution? John Auten: No, I’m not too clear on that, certainly not. No. Robert L. Hetzel: Okay. Well, let’s go onto the George Shultz Treasury. Shultz had always favored floating exchange rates under Milton Friedman’s influence. John Auten: I never could figure out how that was consistent with the asymmetry noted before and consistent throughout the post-war period. Robert L. Hetzel: Well, that’s a good point. John Auten: But yeah, if you just let it float and you have—I never could grasp that scenario too clearly. Robert L. Hetzel: Yeah, well… John Auten: Certainly it’s got a major trajectory and a lot of [unintelligible 00:30:01]. But when you have an asymmetry, I never did understand how that would work. [00:30:08] Robert L. Hetzel: Well, that’s absolutely right and that’s missing from the discussions at the time. John Auten: Sure. Robert L. Hetzel: People like Friedman, I don’t think they… John Auten: Well, they had [unintelligible 00:30:26]—they were very powerful. You know, and who’s to say, it certainly wouldn’t be me, to say that you couldn’t—that gets pretty deep. I wouldn’t want to pontificate very much more in that area, except that it seems to be— what did Shultz do when he got into Treasury? It seems we ought to move on. He didn’t do anything along those lines, did he? Robert L. Hetzel: No. He helped organize a program for moving back toward fixed, but movable, exchange rates. There were lots and lots of discussion, papers and conferences, but nothing ever came of it. And presumably, he was happy with that, I would guess. He didn’t—it was just kind of one way of dealing with the pressures for going back to pegged exchange rates. John Auten: Sure. Robert L. Hetzel: But yeah. -9- John Auten: As far as, I guess, even somewhat prior there to, the fear of crawling— initial crawling pegs, some wider spreads, and a whole bunch of stuff that went back to probably Keynes Treatise on Money if not before. Then a… Robert L. Hetzel: Did you have a change in views about floating versus fixed exchange rates in the ‘70s? Did your own personal attitudes change? John Auten: Certainly everyone flirted with the idea of some kind of limited floating without—as my previous wanderings have suggested that I don’t think we ever tried to harmonize that with the dollar’s reserve currency position. But everyone I think wanted—felt there had to be a certain degree of freeing-up, hopefully in sort of an orderly fashion. But…Oh, where are we, stuck with George Shultz? Robert L. Hetzel: Well, let’s go onto the Carter administration and Blumenthal. Initially there was—it wasn’t clear who was speaking about the dollar. Who were the people you were working with at that time in the Treasury, and in particular, were you involved with any of the people who were pushing the idea of the Locomotive Strategy? John Auten: Well, I worked on the domestic side, by that time, with Dan Brill. Robert L. Hetzel: What was he like to work for? Because he had been at the Fed and then he left and then he came back in the Treasury. So I was—I always feel sort of bad that he died before I could talk to him. I was curious why he would have left the Fed, gone into the… John Auten: A lot of information, certainly as far as Blumenthal was concerned, he and Blumenthal were very close. Robert L. Hetzel: So you think Blumenthal relied on Brill for domestic advice. John Auten: Yes. Considerably. Now, you must understand—I don’t mean to lecture or anything like that… Robert L. Hetzel: Well, that’s the purpose. John Auten: The international side of Treasury organization, they would have been very strong through most of this period. Also, in the ‘70s when Volcker was there, because when he was in Treasury he ran—just to save time, I’ll just say he ran both the domestic and international sides, and that’s pretty much true. But after he leaves, and as we advance into the Carter years, there would have been a lot more influence from the international wing of Treasury, so to speak. So I wouldn’t want to suggest that, you know, it was apparent it was Jeff Brill and Blumenthal. But I don’t remember all the names and numbers at this distance. But the international side of Treasury probably was about as addicted to the Locomotive Approach, maybe even more so than Brill, who was a pretty hard headed guy and had a very useful cynical streak running through most anything. But he was certainly unquestionably Blumenthal’s guy on the domestic economy. - 10 - [00:35:26] Robert L. Hetzel: From a point of view of the economics, things come alive in the fall of ’78 because inflation begins to rise significantly. There’s a big depreciation of the dollar. Initially at least there’s a perception in foreign countries that the United States is welcoming the depreciation, but then it goes so far that it becomes a concern diplomatically. So there’s a rescue package organized for the dollar in the fall of ’78. John Auten: Yeah. Robert L. Hetzel: Would Brill have then had been the primary one, other than Blumenthal, behind that? John Auten: I think that’s more the international—that’s what I was laboring to— that would have been more the international side of Treasury. And I just don’t know. Brill certainly would have played some role in it, but that—you’d be much fresher on it than I am, but that—at the time it seemed significant and in retrospect even more significant as sort of the decisive turn. Whether it was a turn for the better, I don’t know. But a real turn for the Carter administration. Robert L. Hetzel: Yeah. Do you remember any of the… John Auten: [Unintelligible 00:36:56] probably more than… Robert L. Hetzel: Do you remember any of the names? John Auten: Embraced. Robert L. Hetzel: Yeah. Do you remember any of the names of people on the international side who would have been? John Auten: No. My memory is so hazy. Robert L. Hetzel: Sure. John Auten: I’m just not sure. Someone like John Petty would go way back, I think, to the early ‘70s. By the late ‘70s, it’s not entirely clear to me who would have been there. Robert L. Hetzel: Had Jack Bennett left by then? John Auten: I—possibly. Bennett was not on the international side. He was the domestic undersecretary and a very abled guy and a tireless advocate of floating, but appalled by a whole lot of things that went on inside the Treasury. Always highly regarded within Treasury by anyone that knew him. - 11 - Robert L. Hetzel: Was there a feeling that Blumenthal was a capable manager of difficult situations? Or was there a feeling that it was probably a good thing when he left the Treasury? John Auten: You know, opinions differ on that. It’s so easy to get into personalities, isn’t it? Where many times they’re just either the victim or the beneficiary of the situation in which they find themselves. Certainly Blumenthal was personally a pleasant guy. I don’t know that he was ideally suited for the job, but very few people are. Just not too much he could do. I don’t think he had a great deal of influence over across the street at the White House. He may have. How do I know? Not a very forceful individual, really. Robert L. Hetzel: Well, he had strong opinions, but he may not have been forceful as a bureaucrat. John Auten: Yeah, that’s right. Robert L. Hetzel: How about Miller? Did he—was there a clear difference when he came in? John Auten: Certainly in terms of personality. And of course, Miller has gotten such a bad press and I imagine memories of him still linger over at the Fed from some of the people. Personally, I thought Miller was much better suited to the disorderly and trying situation than Blumenthal had been. Certainly Miller could never be charged with overintellectualizing any of these issues. Very unusual person. [00:40:10] Let me just tell you a little anecdote that—something to do with Textron and bribery overseas and just a very untidy place for Miller. Robert L. Hetzel: Yeah I remember that. John Auten: And I remember he—Treasury has this big, ornate cash room and it was the biggest sort of open space in the building and the reporters filled the entire space. And Miller came in, pulled out the usual entourage or briefing books or protective shield and functionaries and they just faced the reporters all down and I won’t say he won. You could hardly win, but that man went out with his reputation pretty much intact, a rather unassuming person, but pretty tough. I don’t know, the more I stayed around Washington, the more highly it seemed to me those qualities were almost essential for, in some cases, survival in a figurative sense of the term. But Miller was certainly—I probably wouldn’t rank him very highly among Treasury secretaries, but I guess in a labored way, I’m saying he was an improvement over Blumenthal. Robert L. Hetzel: It must have seemed quite an extraordinary change to you to go from the Miller Treasury to the Regan Treasury, under President Reagan, with all the debates - 12 - and the sort of fighting over policy, tax cuts and supply side and so on. At the time, were you aware of these different groups that were kind of doing the fighting within the Treasury over policy? John Auten: You mean the incoming… Robert L. Hetzel: Yeah, in the Reagan administration. Yeah. What were you doing? John Auten: Yeah, I got to know the—knew his guys pretty well. Robert L. Hetzel: Weidenbaum came back at that point? John Auten: Yeah, but not at Treasury. He was over at the Council, I think, probably as chairman, if I recall correctly. Yeah, I think so, chairman of CEA. And we had some very interesting guys come in. The Assistant Secretary for Economic Policy, Paul Craig Roberts, I think a Deputy, Steve Entin, who’s still around town. You could even—if you’re interested in this period, you could—Entin runs something. I forget what it is. Institute for Research and The Economics of Taxation or something. He’s a very capable man, Chicago background, you might want to talk to him. Let’s see, we had Craig Roberts and Entin as one Deputy. Manual Johnson, another, turned up at the Fed later, didn’t he? Robert L. Hetzel: Yeah. John Auten: And Norman Ture, now deceased, came in as undersecretary for taxation; Beryl Sprinkel was undersecretary for monetary affairs for a time and then went over to the CEA and was chairman. Interesting crowd, beyond question. Robert L. Hetzel: How do you spell Entin’s last name? John Auten: E-N-T-I-N; Stephen. Robert L. Hetzel: Okay. John Auten: Before we ring-off, I’ve probably got his telephone number. It’ll save you some time, maybe. I’ve got it on a little electronic gizmo. Robert L. Hetzel: Okay, good. Sure. I’d like that. John Auten: I found that them all ... of course, Volcker would come back to the Fed in late ’79 say he was over there and think we had Don Regan. I don’t remember who the deputy was now. Frequently a non-job. It has been at various times, hardly when Larry Summers had it. Robert L. Hetzel: Yeah. - 13 - John Auten: That was a very—you’ll forgive me, but since we’re so far off the record, it doesn’t matter. I enjoyed that period much more than the decade that had preceded it. Hardly surprising I suppose, since everything went wrong in the ‘70s, from Watergate to the hostages in Iran and Jimmy Carter and—I don’t know, Reagan and the supply siders well I just put most of my judgemental faculties to the side and I kind of enjoyed the whole period, really. [00:45:19] Robert L. Hetzel: So you think history will be kind to President Reagan, that the country got its self confidence back, even though it’s not… John Auten: I’m not sure just where Reagan will be placed. You know, it’s pretty hard to tell. As the passage of time kind of—it certainly was an up-decade, how much was due to—well, who knows what when you’re talking about these big shifts and changes. But in the sort of the economic frame, but it’s rather strange. But even there—well, I don’t want to carry into where we need not go, but fiscal affairs and—well, they’d gotten into, you know, probably the form and timing of the tax cuts were ideal and marginal rates had gotten, you know, pretty absurdly high and when coupled with the inflation, you know. You know, there was—the situation was crying out for something to be done and the something that was done was ideal, at least something was done. I don’t know how much of that was due to the supply side of the Treasury, probably very little, indeed. It probably was more the disguised monetarism or monetarism and drag or something over at the Fed that really turned the situation around. Robert L. Hetzel: I hadn’t heard that expression before. It’s off the record. John Auten: No. Well, I hope… [END OF RECORDING] - 14 -
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