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Monday, September 10, 2018

‘Resistance’ Inside an Administration Is Not New or Special

Subversive behavior within an administration is nothing new.

I was traveling yesterday and so it wasn’t until this morning that I had a chance to read, reread, and think about “I Am Part of the Resistance Inside the Trump Administration,” the New York Times’ anonymous op-ed by a Trump administration official. In what follows, I will take the NYT at its word that the editors know who the official is.

I’ve also read various commentaries by people on all sides of this issue—those who think it’s great, those who think it’s cowardly, those who think the author is a traitorous member of the Deep State, etc.

Now that I’ve had time to digest it, here’s my thought.  Are you ready?

Big whoop.

I worked as a senior economist at the Council of Economic Advisers in the Reagan administration for two years, from August 1982 to July 1984. I saw federal employees undercut their bosses.

It Happens at Low Levels

One of my issues, when I was the senior economist for energy, August 1983 to July 1984, was price controls on oil and gasoline. In January 1981, his first month in power, President Reagan, who had run against price controls, ended them. He used his executive power, granted to him under a 1980 phase-out law, to end price controls immediately rather than wait until they would have ended in October of that year.

“Allen, some of your staffers in this room are, contrary to your wishes, undercutting the case against price controls.”

One thing I learned quickly in my job is that ideas, whether good or bad, seldom go away. In this case, it was a bad one. There will always be someone in the bureaucracy who wants to return to the bad policy or implement the bad policy that was effectively argued against. Some people at the State Department had written a short piece that was wishy-washy on the issue: No, we shouldn’t reimpose price controls unless the price gets too high (with, of course, no indication of what “too high” is, how we would know it’s too high, or why the argument against price controls loses its force when the price would otherwise go above X).

With the full support of my two bosses—CEA chair Martin Feldstein and CEA member Bill Niskanen—I argued orally and in written form against these State Department employees. Their big boss was Undersecretary of State for Economic Affairs W. Allen Wallis. Allen and I had become friends in 1976 when I was a young assistant professor at the University of Rochester and he was Chancellor at the U. of R. I suspect that these employees of his didn’t know that. Allen had made clear his own opposition to price controls.

So, there was a big meeting at the State Department, chaired by Allen, to discuss these issues. There were at least four State Dept. staffers, three Department of Energy people, one OMB guy, one Treasury guy, and I. The OMB and Treasury guys were on board with me. The DOE people were wishy-washy a la the State Department people. I had already been in the federal government long enough to know that you don’t call out people in front of their boss. But I had also been there long enough to know that that was exactly the right thing to do.

“Yes, David, I do oppose price controls, and if some of you are undercutting that, you need to stop.”

So when I had my chance I said, “Allen, some of your staffers in this room are, contrary to your wishes, undercutting the case against price controls by holding out the possibility that if the price goes high enough, controls should be reimposed. I thought you would want to know that.”

Notice that I didn’t call him “Mr. Secretary” as was par for the course. If I hadn’t been friends with him, I would have. But I knew that he could handle being called Allen, and I knew that my calling him by his first name would signal to these staffers that we had a personal relationship.

It worked. Some of the State Department staffers looked shocked. But, more important, Allen’s eyes twinkled as he said, “Yes, David, I do oppose price controls, and if some of you are undercutting that, you need to stop.”

(As should be obvious, I’m recalling a conversation from over 34 years ago and so these are almost certainly not the exact words either he or I used.)

They did stop—for a while. That conversation took place in the spring of 1984 and I left in July. What are the odds that they reverted to their old ways? Pretty high.

It Happens at High Levels

Now, the case above is one of regular Civil Service employees and they’re hard to fire. What about political appointees?

Marty, though, kept up his push for higher taxes quite visibly in interviews with various media people.

Take the case of my boss, Martin Feldstein. In December 1982, when Marty had been there for 3 months, he had a meeting about the budget deficit with Treasury Secretary Don Regan, presidential assistant Dick Darman, and a few other high-level Reagan administration officials. They agreed that if the deficit didn’t come down below a certain level by a certain time, the Reagan administration should push for higher taxes. From what I gather from reports about the meeting published in the Wall Street Journal and elsewhere, Marty argued strongly for this view. And they persuaded Reagan who went along with it despite his instincts.

Then the recovery started. Various players who had been at that meeting apparently came to the view that the push for higher taxes had been overcome by events. Marty, though, kept up his push for higher taxes quite visibly in interviews with various media people, including a friend of mine from Fortune, Rik Kirkland.

By the time the Economic Report of the President came out in February 1984, the economy was booming, an election was coming, and neither the President nor any of his closest advisers wanted tax increases, and they definitely didn’t want to talk about them. But Marty did. Treasury Secretary Regan said publicly that people in Congress should throw our report in the wastebasket.

But did he understand that he was saying something that the President and his advisors wanted him not to say? Yes.

The fact that he wasn’t disciplined by the White House for that remark was taken by pretty much everyone as an indicator that the White House was trying to send Marty a message. As further evidence, we didn’t get our annual photo-op meeting with the President after the Economic Report came out.

Was Marty literally undercutting the President’s policies? No, because there had never been a formal repudiation of the tax-increase idea. But did he understand that he was saying something that the President and his advisors wanted him not to say? Unless Marty was very dense—and my money is on his not being dense—then yes.

And don’t get me started on James Baker, at the time the President’s chief of staff. When I gave a C-SPAN talk at the National Press Club in 1993, I noticed in the lobby a huge tribute by the National Press Club to Jim Baker. I’m told that Baker was master of the leak and that those leaks often made him look good and Reagan look bad. Do I know that? No, I don’t. That’s why you shouldn’t get me started. I would have to do a lot more research.

It Happens All the Time

Finally, when I worked in both the Nixon and Reagan administrations, I never had the idea that I should blindly follow my boss if I thought my boss was wrong. Here’s an amusing story I told in my obit for University of Chicago economist Yale Brozen.

A memorial note on Yale Brozen is not complete without a reference to his sense of humor, his passion, and his humanity. Yale was a man who liked a good laugh and who cared passionately about his work because he cared about people. I remember the first time I met him, while I was a junior economist in the Nixon White House in the summer of 1973. One of my UCLA professors, George Hilton, was in town and had organized a dinner to which he invited Yale, Ross Eckert (since deceased), and me. We had a great time, laughing about the Washington absurdities we were seeing all around us and exchanging information about how, like McGruff the crime dog, we could take our little bite out of government. At that dinner, Yale encouraged me a lot, as did Hilton, to push for transportation deregulation. Of course, that was also Watergate summer, when the hearings on the scandal were capturing the whole town’s attention and Nixon was stonewalling Congress’s attempt to make him cough up crucial information. It was also price-control summer, when Nixon’s hated economic program (hated by everyone at that dinner, at least) was causing serious shortages of gasoline and many other goods, including with poetic justice, steak in the White House mess. Toward the end of the evening, Eckert, who was also working in the Nixon administration, announced, “Well, gentlemen, I’m leaving. I’ve got to get up early in the morning and work for my President.”

I decided to take a chance. “I’d better leave, too,” I announced, grinning. “I’ve got to get up even earlier to work against my President.” Yale laughed spontaneously and his eyes twinkled.

P.S. Michael Ledeen gives a similar take here on how common it is for government employees, including political appointees, to go against their bosses’ wishes.

Reprinted from the Library of Economics and Liberty.

  • David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at