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Twelve Economics as Moral Theory: Volckernomics, Reaganomics, and the Balanced Budget Amendment

1. We remember a dinner with Frank Levy, professor at the University of Maryland and author of Dollars and Dreams: The Changing American Income Distribution (New York: Russell Sage Foundation, 1987), at which he pointed out that, when "productivity" became a big issue in the late 1970s, many causes of slow productivity growth were suggested. They included OPEC, a younger and thus less productive work force as the baby boom entered it, greater government regulation, the uncertainties created by inflation, and many other suspects. By 1985, trends on virtually all the supposed causes were much better, but productivity growth had not improved. [BACK]

2. Charles Alexander, "Oh, What a Beautiful Rally!" Time, August 30, 1982, pp. 19-20. [BACK]

3. Ibid., and Charles Alexander, "Wall Street's Super Streak," Time, September 6, 1982, pp. 38-41, provided good, if rather breathless, accounts of the rally. Basic statistics can be found in the Council of Economic Advisers, Economic Indicators, monthly summary of economic statistics. [BACK]

4. Alexander, "Wall Street's Super Streak." [BACK]

5. Alexander, "Oh, What a Beautiful Rally!" [BACK]

6. Ibid. [BACK]

7. Merrill Shiels et al., "A Break in Interest Rates," Newsweek, August 30, 1982, pp. 16-19; John Greenwald, "Spotlight on the Consumer," Time, June 7, 1982, pp. 54-56; and John Greenwald, "Come On Big Spender," Time, June 28, 1982, pp. 48-49. [BACK]

8. On July 6 the Organisation for Economic Co-Operation and Development "sharply scaled back its forecast for the world economy" and predicted unemployment in the world's major industrialized nations would reach nine percent in 1983, with U.S. unemployment at 10.25 percent. Steven Rattner, "O.E.C.D. Is Gloomier on Growth," New York Times, July 7, 1982, pp. D1, D13. [BACK]

9. "Executives are fearful of renewed inflation," Business Week, August 9, 1982, p. 10. [BACK]

10. "Adam Smith," Paper Money (New York: Dell Publishing, 1982), p. 206. "Smith," George J. W. Goodman, in a highly readable style, provides an extensive recounting of much of the history that follows. By now the international debt crisis may have generated as much literature as the American budget travails. [BACK]

11. Alexander L. Taylor III, "The Wobbly World of Banking," Time, September 6, 1982, pp. 52-53. [BACK]

12. The growing liquidity and debt worries had already begun to affect the economy. They contributed, for example, to the strength of the dollar relative to the German mark. See Treasury and Federal Reserve Exchange Operations, in Federal Reserve Bulletin 68, no. 10 (October 1982), p. 585. [BACK]

13. Smith, Paper Money, pp. 310-11. [BACK]

14. In testimony to Congress July 28, 1982; March 8, 1983, and as reported in the minutes of the meeting of the Federal Open Market Committee held on July 2, 1982. [BACK]

15. Alexander, "Oh, What a Beautiful Rally!" [BACK]

16. Testimony before the House Budget Committee, March 8, 1983, pp. 86-87. [BACK]

17. Paul Blustein, "Monetary Zeal: How Federal Reserve Under Volcker Finally Slowed Down Inflation," Wall Street Journal, December 7, 1982, pp. 1, 16-17. [BACK]

18. Data from Council of Economic Advisers, Economic Indicators, various months. [BACK]

19. H. Erich Heinemann, "Record U.S. Borrowing Raising Fears on Credit," New York Times, Dec. 7, 1982, pp. D1, D4. [BACK]

20. Greider's reporting in Secrets of the Temple documents the Fed's actions and intentions thoroughly. [BACK]

21. Federal Reserve Bulletin 69, no. 3 (March 1983), p. 132. [BACK]

22. House Budget Committee hearing, March 8, 1983, pp. 117-18. [BACK]

23. David Vogel, "Why Businessmen Distrust Their State: The Political Consciousness of American Corporate Executives," British Journal of Political Science 8, Part 1 (January 1978), pp. 45-78. [BACK]

24. "'No Confidence' for Reaganomics," March 29, 1982, p. 40; "Support erodes for the business tax cuts," April 12, 1982, p. 18; and "Executives are fearful of renewed inflation," August 9, 1982, p. 10; all in Business Week. [BACK]

25. Alexander L. Taylor III, "The Long Gray Line," Time, May 17, 1982, pp. 54-55. [BACK]

26. "Washington Outlook: Why the GOP is Wooing Labor," edited by Lee Walczak, Business Week, April 26, 1982, p. 139. [BACK]

27. Stockman, Triumph of Politics, pp. 131, 382-83, 145-47, 155. [BACK]

28. Transcript in New York Times, July 29, 1982, p. A18. [BACK]

29. See, for instance, Daniel Walker Howe, The Political Culture of the American Whigs (Chicago: University of Chicago Press, 1979). [BACK]

30. See Aaron Wildavsky, "The Runaway Convention, or Proving a Preposterous Negative," paper prepared for the Taxpayers' Foundation, 1983. [BACK]

31. See U.S. Congress. House. Committee on Rules."Item Veto: State Experience and Its Application to the Federal Situation." 99th Cong., 2d sess., 1986. Committee Print. [BACK]

32. Congressional Record, October 1, 1982, H8264, quoted by Representative Peter Rodino (D-N.J.). [BACK]

33. Mark Starr et al., "Business vs. Reagan," Newsweek, March 29, 1982, p. 21. [BACK]

34. "Making Amends," Time, April 12, 1982, p. 19. [BACK]

35. Transcript in New York Times, April 30, 1982, p. A16. [BACK]

36. "Amendment Drive Now in High Gear," New York Times, July 13, 1982, p. A17. [BACK]

37. James R. Jones, "A Cowardly Out for Reaganomics," editorial, New York Times, August 8, 1982, Section 3, p. 2. [BACK]

38. The president's endorsement, and Alaska's support, changed the stakes at the state level. A convention might actually happen, so doubts about its wisdom suddenly became relevant. State legislators also had to consider what the federal government would cut if the amendment were passed; grants to state governments clearly would be high on the list. Missouri legislators adjourned on May 2 without considering the call for a convention. Legislators in Iowa began an attempt to reverse that state's endorsements. New York Times, May 3, 1982, p. A16; and Howell Raines, "President Seeking Counties' Support," July 14, 1982, p. A18. [BACK]

39. CQA 1982, p. 394. [BACK]

40. Congressional Record, October 1, 1982, pp. H8256-7. [BACK]

41. Ibid., p. H8257. [BACK]

42. Ibid., p. H8262. [BACK]

43. Ibid., p. H8263. [BACK]

44. Ibid., p. H8265. [BACK]

45. Ibid., p. H8266. [BACK]

46. Ibid., pp. H8271-72. [BACK]

47. Ibid., p. H8329. [BACK]

48. Edward Cowan, "Washington Watch," New York Times, November 18, 1982, p. D2. [BACK]


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