Murray L. Weidenbaum, who as President Ronald Reagan’s first
chief economic adviser elevated government regulation of business to the
forefront of public policy debate, but resigned unhappy about the
administration’s budget-making, died on Thursday in St. Louis. He was 87.
His son, Jim, confirmed the death.
Mr. Weidenbaum, a Bronx-born economist, was fond of saying, “Don’t just stand
there, undo something.” And he did, beginning in 1981, when the newly
inaugurated Mr. Reagan appointed him chairman of the Council of Economic
Reducing the size of government and lightening its regulatory hold on the
private sector — including the banking, broadcasting and the food and drug
industries — became a large theme of the Reagan presidency, which began with
inflation still running in double digits and the economy heading into recession.
Deregulation, the White House believed, would help stimulate the economy by
reducing the government rules and restrictions that industries say hamper their
ability to expand and create jobs. But the policy’s critics feared that an
unfettered private sector could be dangerous to the economy and the public
At the heart of what came to be known as Reaganomics was the proposition that
the nation could be restored to economic health through fiscally stimulating tax
cuts — the essence of supply-side economic theory — and by restricting the money
supply to contain inflation. Critics of the administration called that
Mr. Weidenbaum, a wry and slightly rumpled figure who had long shuttled between
government and academic posts, previously at Washington University in St. Louis,
proved to be one of the administration’s least doctrinaire members, neither
full-throated supply-sider nor strict monetarist.
“I was sympathetic to both,” Mr. Weidenbaum said in a 2011 telephone interview
for this obituary. But neither side “thought I was one of them.”
He was also a prominent advocate of federal revenue-sharing, involving
no-strings payments to states and localities. As an assistant secretary of the
Treasury under President Richard M. Nixon, he had led a revenue-sharing
initiative, which was briefly effective. But he wound up helping President
Reagan dismantle the program when revenue sharing did not displace a
proliferation of separate grants and payments to state and local governments
voted for by Congress.
Though fiscally conservative, Mr. Weidenbaum was more moderate than some of his
peers in the White House. He was generally aligned with administration
pragmatists like the budget director, David A. Stockman, and the chief of staff,
James A. Baker III. They favored compromising with Democrats in Congress on
raising tax revenue and cutting military spending because of their concern about
Internal battles over budget deficits were a hallmark of the administration in
Mr. Weidenbaum, in the 2011 interview, said he left the administration after a
year and a half precisely because he was unhappy with the 1983 budget, and chose
to quit rather than defend it before Congress.
Stepping down in August 1982, a time when Mr. Reagan’s popularity had plummeted
and the country was sinking into a deep recession, Mr. Weidenbaum was replaced
by Martin S. Feldstein.
“After fighting the good fight, I quietly folded my tent and returned to St.
Louis,” Mr. Weidenbaum said.
But he left satisfied. In an Op-Ed article in The New York Times afterward, he
wrote that the administration had “achieved significant progress in carrying out
its economic recovery program” and that its deregulation efforts had been
“For the first time in decades, no new major regulatory activities were enacted
or promulgated,” he wrote. “In fact, many burdensome regulations were modified
Mr. Weidenbaum also expressed general satisfaction with the administration’s
policy in a 2005 memoir, “Advising Reagan: Making Economic Policy, 1981-82.”
“It seems clear that, on balance, Reaganomics was a success,” he wrote. “The
president’s policies had injected a new sense of realism into the decision
making in the private sector,” as both management and workers paid more
attention to controlling costs and raising productivity.
Murray Weidenbaum (the first syllable rhymes with “feed”) was born on Feb. 10,
1927, into a liberal Democratic household in the Bronx. He graduated from
Erasmus Hall High School in Brooklyn and the City College of New York, where he
was elected president of the student body on a platform of “Wine, Women and
Mr. Weidenbaum received a master’s degree from Columbia University, then joined
the New York State Department of Labor as a junior economist. At the time, like
his family, he held union-friendly views, and saw labor as the little guy at the
mercy of big business. But he grew disillusioned with the labor cause after
being assigned to a statistical analysis of a master contract for the Teamsters
union. His encounter with an independent trucker who had vainly sought to
negotiate on his own was a pivotal moment.
“The roles were reversed,” he said. “The little employer was dealing with the
Laid off under New York State’s “last in, first out” policy, he found work in
Washington at the Bureau of the Budget. During a leave to pursue doctoral work
at Princeton, he met Phyllis Green. They married in 1954.
Besides his son, Jim, he is survived by two daughters, Laurie Stark and Susan
Juster-Goldstein, and six grandchildren.
After marriage, he began a life characterized by the title of a 2009
autobiographical monograph, “Vignettes From a Peripatetic Professor,” moving
among academia, government, industry and research institutes in Washington and
Mr. Weidenbaum had an early, formative stint in the military industry. The
General Dynamics Corporation in Fort Worth hired him as an economist and had him
analyze the operations of the B-58 supersonic bomber. Moving to Boeing, in
Seattle, he developed forecasts of the military market.
The jobs exposed him to the numerous rules military contractors were subject to,
underscored by the full-time presence of inspectors stationed in the factories.
“There’s more government regulation of the defense industry than any other,” Mr.
Weidenbaum said in the 2011 interview, adding that complaints were seldom voiced
for fear of offending the main customer, the government itself.
After Boeing, he moved to the Stanford Research Institute in California to
continue studying the military industry.
That was followed by a turn in Washington as the staff director of President
Lyndon B. Johnson’s Council of Economic Advisers.
He moved to St. Louis in early 1975 when Washington University created the
Center for the Study of American Business and recruited him to be its first
director. He was there when Mr. Reagan lured him back to the White House.
Mr. Weidenbaum later served on boards and government commissions, including one
on clean air initiatives formed by President George H. W. Bush, and he continued
as director of the Washington University business institute. In 2001 it was
renamed the Weidenbaum Center on the Economy, Government and Public Policy.
The center gave him a platform from which to express his views on deficit
spending — “I conclude that deficits do not matter, but that Treasury borrowing
and money creation surely do” — and on military spending and other economic
matters. It also gave him an opportunity to display his dry sense of humor.
Speaking at the center’s annual policy conference in October 1982, he remarked,
“At a time when, alas, economist jokes are in vogue, I would like to add my
favorite wisecrack about our profession: If all the economists in the world were
laid end to end, it might be a good thing.”
A version of this article appears in print on March 22, 2014,
on page A22 of the New York edition with the headline:
Murray L. Weidenbaum, Reagan Economist, Dies at 87.
LONDON — AS bad as things in Washington are — the federal
government shutdown since Tuesday, the slim but real potential for a debt
default, a political system that seems increasingly ungovernable — they are
going to get much worse, for the United States and other advanced economies, in
the years ahead.
From the end of World War II to the brief interlude of prosperity after the cold
war, politicians could console themselves with the thought that rapid economic
growth would eventually rescue them from short-term fiscal transgressions. The
miracle of rising living standards encouraged rich countries increasingly to
live beyond their means, happy in the belief that healthy returns on their real
estate and investment portfolios would let them pay off debts, educate their
children and pay for their medical care and retirement. This was, it seemed, the
postwar generations’ collective destiny.
But the numbers no longer add up. Even before the Great Recession, rich
countries were seeing their tax revenues weaken, social expenditures rise,
government debts accumulate and creditors fret thanks to lower economic growth
We are reaching end times for Western affluence. Between 2000 and 2007, ahead of
the Great Recession, the United States economy grew at a meager average of about
2.4 percent a year — a full percentage point below the 3.4 percent average of
the 1980s and 1990s. From 2007 to 2012, annual growth amounted to just 0.8
percent. In Europe, as is well known, the situation is even worse. Both sides of
the North Atlantic have already succumbed to a Japan-style “lost decade.”
Surely this is only an extended cyclical dip, some policy makers say. Champions
of stimulus assert that another huge round of public spending or monetary easing
— maybe even a commitment to higher inflation and government borrowing — will
jump-start the engine. Proponents of austerity argue that only indiscriminate
deficit reduction, accompanied by reforming entitlement programs and slashing
regulations, will unleash the “animal spirits” necessary for a private-sector
Both sides are wrong. It’s now abundantly clear that forecasters have been too
optimistic, boldly projecting rates of growth that have failed to transpire.
The White House and Congress, unable to reach agreement in the face of a fiscal
black hole, have turned over the economic repair job to the Federal Reserve,
which has bought trillions of dollars in securities to keep interest rates low.
That has propped up the stock market but left many working Americans no better
off. Growth remains lackluster.
The end of the golden age cannot be explained by some technological reversal.
From iPad apps to shale gas, technology continues to advance. The underlying
reason for the stagnation is that a half-century of remarkable one-off
developments in the industrialized world will not be repeated.
First was the unleashing of global trade, after a period of protectionism and
isolationism between the world wars, enabling manufacturing to take off across
Western Europe, North America and East Asia. A boom that great is unlikely to be
repeated in advanced economies.
Second, financial innovations that first appeared in the 1920s, notably consumer
credit, spread in the postwar decades. Post-crisis, the pace of such borrowing
is muted, and likely to stay that way.
Third, social safety nets became widespread, reducing the need for households to
save for unforeseen emergencies. Those nets are fraying now, meaning that
consumers will have to save more for ever longer periods of retirement.
Fourth, reduced discrimination flooded the labor market with the pent-up human
capital of women. Women now make up a majority of the American labor force; that
proportion can rise only a little bit more, if at all.
Finally, the quality of education improved: in 1950, only 15 percent of American
men and 4 percent of American women between ages 20 and 24 were enrolled in
college. The proportions for both sexes are now over 30 percent, but with
graduates no longer guaranteed substantial wage increases, the costs of
education may come to outweigh the benefits.
These five factors induced, if not complacency, an assumption that economies
could expand forever.
Adam Smith discerned this back in 1776 in his “Wealth of Nations”: “It is in the
progressive state, while the society is advancing to the further acquisition,
rather than when it has acquired its full complement of riches, that the
condition of the labouring poor, of the great body of the people, seems to be
the happiest and the most comfortable. It is hard in the stationary, and
miserable in the declining state.”
The decades before the French Revolution saw an extraordinary increase in living
standards (alongside a huge increase in government debt). But in the late 1780s,
bad weather led to failed harvests and much higher food prices. Rising
expectations could no longer be met. We all know what happened next.
When the money runs out, a rising state, which Smith described as “cheerful,”
gives way to a declining, “melancholy” one: promises can no longer be met,
mistrust spreads and markets malfunction. Today, that’s particularly true for
societies where income inequality is high and where the current generation has,
in effect, borrowed from future ones.
In the face of stagnation, reform is essential. The euro zone is unlikely to
survive without the creation of a legitimate fiscal and banking union to match
the growing political union. But even if that happens, Southern Europe’s
sky-high debts will be largely indigestible. Will Angela Merkel’s Germany accept
a one-off debt restructuring that would impose losses on Northern European
creditors and taxpayers but preserve the euro zone? The alternatives —
disorderly defaults, higher inflation, a breakup of the common currency, the
dismantling of the postwar political project — seem worse.
In the United States, which ostensibly has the right institutions (if not the
political will) to deal with its economic problems, a potentially explosive
fiscal situation could be resolved through scurrilous means, but only by
threatening global financial and economic instability. Interest rates can be
held lower than the inflation rate, as the Fed has done. Or the government could
devalue the dollar, thereby hitting Asian and Arab creditors. Such “default by
stealth,” however, might threaten a crisis of confidence in the dollar, wiping
away the purchasing-power benefits Americans get from the dollar’s status as the
world’s reserve currency.
Not knowing who, ultimately, will lose as a consequence of our past excesses
helps explain America’s current strife. This is not an argument for immediate
and painful austerity, which isn’t working in Europe. It is, instead, a plea for
economic honesty, to recognize that promises made during good times can no
longer be easily kept.
That means a higher retirement age, more immigration to increase the working-age
population, less borrowing from abroad, less reliance on monetary policy that
creates unsustainable financial bubbles, a new social compact that doesn’t
cannibalize the young to feed the boomers, a tougher stance toward banks, a
further opening of world trade and, over the medium term, a commitment to
sustained deficit reduction.
In his “Future of an Illusion,” Sigmund Freud argued that the faithful clung to
God’s existence in the absence of evidence because the alternative — an empty
void — was so much worse. Modern beliefs about economic prospects are not so
different. Policy makers simply pray for a strong recovery. They opt for the
illusion because the reality is too bleak to bear. But as the current fiscal
crisis demonstrates, facing the pain will not be easy. And the waking up from
our collective illusions has barely begun.
Paul Krugman, a professor at Princeton University and an Op-Ed
page columnist for The New York Times, was awarded the Nobel Memorial Prize in
Economic Sciences on Monday.
“It’s been an extremely weird day, but weird in a positive way,” Mr. Krugman
said in an interview on his way to a Washington meeting for the Group of 30, an
international body from the public and private sectors that discusses
international economics. He said he was mostly “preoccupied with the hassles” of
trying to make all his scheduled meetings on Monday and answer a constantly
Mr. Krugman received the award for his work on international trade and economic
geography. In particular, the prize committee lauded his work for “having shown
the effects of economies of scale on trade patterns and on the location of
He has developed models that explain observed patterns of trade between
countries, as well as what goods are produced where and why. Traditional trade
theory assumes that countries are different and will exchange different kinds of
goods; Mr. Krugman’s theories have explained why worldwide trade is dominated by
a few countries that are similar to each other, and why some countries might
import the same kinds of goods that it exports.
“There was something very beautiful about the old existing trade theory and its
ability to capture the world in a surprisingly simple conceptual framework,” Mr.
Krugman said. “And then I realized that some of the new insights coming through
in industrial organization could be applied to international trade.”
Mr. Krugman wrote his dissertation, however, on international finance, and
credits his professor at M.I.T., Rudiger Dornbusch, with pushing him to study
“I went to visit him one snowy day in early 1978 and described to him what I’d
been thinking about,” Mr. Krugman said. “He turned to me and said, ‘You’ve got
to write about that.’ ”
Mr. Krugman has been an Op-Ed columnist at The New York Times since 1999.
“For economists, this is a validation but not news. We know what each other have
been up to,” Mr. Krugman said. “For readers of the column, maybe they will read
a little more carefully when I’m being economistic, or maybe have a little more
tolerance when I’m being boring.”
He said that he did not expect his critics to let him off any more easily
because of his new accolade, though.
“I think we’ve learned this when we see Joe Stiglitz writing,” Mr. Krugman said,
referring to the winner of the economics Nobel in 2001. “I haven’t noticed him
getting an easy time. People just say, ‘Sure, he’s a great Nobel laureate and
he’s very smart, but he still doesn’t know what he’s talking about in this
situation.’ I’m sure I’ll get the same thing.”
In 1991 Mr. Krugman received the John Bates Clark medal, a prize given every two
years to “that economist under 40 who is adjudged to have made a significant
contribution to economic knowledge.” He follows several Clark medal recipients
who have gone on to win a Nobel, including Mr. Stiglitz.
“To be absolutely, totally honest I thought this day might come someday, but I
was absolutely convinced it wasn’t going to be this day,” Mr. Krugman said. “I
know people who live their lives waiting for this call, and it’s not good for
the soul. So I put it out of my mind and stopped thinking about it.”
He said he did not participate in any of the economics Nobel betting pools , and
that he did not know which day the winner’s name would be released until a
colleague told him last week.
Mr. Krugman continues to teach at Princeton. This semester he is teaching a
small graduate-level course on international monetary policy and theory,
covering such timely subjects as international liquidity crises. In recent years
he has also taught courses on the welfare state and international trade, as well
as all-freshman seminars on various economic topics.
Monday’s award, the last of the six prizes, is not one of the original Nobels.
It was created in 1968 by the Swedish central bank in Alfred Nobel’s memory. Mr.
Krugman was the sole winner of the award this year, which includes a prize of
about $1.4 million.