"Don't Just Stand There ..." Treasury Secretary William E. Simon and Fiscal Policy During Stagflation 1975-76‪.‬

There had not been a time as bad for the economy since the 1930s, and the newly-installed Ford administration was in a struggle to deal with it both politically, in the aftermath of the Nixon resignation, and economically, given that inflation as measured by the GDP deflator was 9 percent while GDP growth was -1.4 percent. Out of the energy czar's office came a new Secretary of the Treasury, W. E. Simon, with the personal energy and leadership abilities up to the challenge of a turnaround economic policy. In the months from mid-1974 to the end of the administration in early 1977, he was said by the New York Times to have won more admirers and enemies than most public officials accumulate in a lifetime [Shabecoff, 1976]. Russell Baker said that he assumed the role of Torquemada, protecting the faith by applications of pain, to New York City in its request for debt relief [Baker, 1975]. The New York Times editor called W. E. Simon the Cotton Mather of fiscal orthodoxy [New York Times, 1975]. Yet, President Ford at the W. E. Simon Memorial Service 25 years later said that, "the Bill Simon I knew was a man of absolutes: absolute integrity; absolute conviction; absolute candor. He never shied away from hard decisions" [Ford, 2000]. Here, I attempt to indicate how Secretary Simon's hard decisions crafted the Ford administration's remarkably different agenda at a turning point for business cycle policy in the mid-1970s. The period in which William E. Simon held the post of United States Secretary of the Treasury (May 1974-January 1977) was extraordinary because of the extremely poor performance of the domestic economy. The first half was marked by inflationary shocks in prices of energy, food products, and raw materials leading to the highest recorded increases in the CPI accompanied by a deep recession. The second half was dominated by slow recovery from the recession with continued high inflation. As the cabinet member with the lead position in formation and implementation of administration economic policy, Secretary Simon took an equally extraordinary approach in crafting the Ford response to these conditions.