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THE CHAIRM AN OF THE
COUNCIL OF ECONOM IC ADVISERS
WA S H I N G T O N

January 27, 1963

iEMORAXTCtra PC.R. T H S FRSSIDIDNT
Subject:

Bill Martin

If there's still room for maneuver with Bill Martin, hero
are three points worth making with him:
That he sho-aid embrace the basic Presidential strategy lor
econo mic expansion, particularly as reflected in your taa
program, (His J E C testimony Friday is a good place to start.)
This strategy has three parta:
a.

Expand demand, markets for both consumer and invest­
ment goods --at the Business Council, Martia spoke
disparagingly of the " New Frontier economics” of
purchasing power, etc., according to both K ermit
Gordon and Kinder Staats. Zach concluded, independently,
that Martin hurt m or e than helped the cause of tax
reduction there. (Doug Dillon haa already opened this
subject with Martin. )

b.

Expand incentives for risk-taking and effort -- Martin's
all for this.

c.

Use monetary policy, as needed, for balance-of-payments
or price stability reasons, but don't offset the expan­
sionary effect of tax cuts. Your Economic Club speech
gave Martin lots of aid and comfort on the first part of
this, perhaps not enough emphasis on the second. He's
done pretty well so far, but m a y need some stiffening
at this point.

2.

Monetary policy coordination: Martin should consult with the
President and/or his major economic policy advisers before
making significant policy' changes -- he does a good deal of this
now with Treasury, but use of our "Quadriad" group for such
coordination would be appropriate.

3.

C lass C directors: Martin should use his influence to achieve
some leavening of the boards of directors of the 12 Federal
Reserve Banks by at least occasional appointment of New Frontier
types to "C lass C“ directorships -- e .g ., a Jim Tobin or Bob
Solow at the Boston Fed. One liberal or moderate intellectual
on each 9- man board really shouldn't threaten the foundations of
the Federal Reserve System.

When you do re-appoint Martin, we'll all need a stout defense
against Ms easy-money critics. The attached summary (prepared by
a CEA staff member to arm me for tomorrow's tilting with Douglas,
Patmah, Proxmire, and Reuss) may be useful in that connection.

Walter W Heller
.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102