Saulnier

Presentation of Dr. Raymond Saulnier,
Former Head of the Council of Economic Advisors

By Josh Kolchins

President Eisenhower applied the astute organizational abilities honed throughout his extensive military career to forging a strategic, tactical approach to fighting recessionary tendencies during his administration, stated Dr. Raymond J. Saulnier at an October 11, 2001 Eisenhower Institute luncheon discussion. This was the main theme of Dr. Saulnier's presentation on President Eisenhower's efforts to combat recession and their relevance to the current economic situation.

Dr. Saulnier served on the Council of Economic Advisors (CEA) throughout the Eisenhower Administration, and as its chairman from December 1956 through the end of President Eisenhower's second term. As CEA Chairman, Dr. Saulnier reported directly to the President and made frequent presentations on economic conditions at cabinet meetings and meetings of legislative leaders.

According to Dr. Saulnier, when President Eisenhower entered office, nobody was predicting a recession, including many key members of Eisenhower's economic team. However, Eisenhower had to deal with three separate recessions during his administration. "These cyclical periods of ups and downs are part of US economic history, a history of growth over the long pull...with fluctuations," he said. Understanding the role that these fluctuations play, he said, is important for crafting sound economic policy whether in 1956 or today.

The Timing of Policy and Presidential Discretion
Dr. Saulnier spoke about the importance the President placed on timing his economic initiatives given his reluctance to engage in a long-term spending program that would undermine the goals of the federal budget and the role of the tax system. For example, late in his second term, President Eisenhower saw the need for tax reform, but felt that conditions were not right for such measures. On multiple occasions, Eisenhower resisted calls to cut taxes to combat economic stagnation in the short-term because of the uncertain implications many said this would have on the tax base, and in 1953 even opposed a tax cut proposal by fellow Republican, Senator Robert Taft.

One of the ways that Eisenhower dealt with economic problems, according to Dr. Saulnier, was to determine the ways in which he could directly combat recession from the White House. By making use of his discretionary powers, for example, the President was able to compel the Federal Housing Authority to cut the price of down payments on federal mortgages, extend mortgage periods and include closing costs in mortgage loans. Given the effectiveness of these efforts to stimulate the economy, Dr. Saulnier expressed surprise that the current administration has not explored the possibility of using its discretionary powers during this period of economic slowdown.

Organizational Structure
In addition to substantive action, Dr. Saulnier explained that President Eisenhower placed great importance on his economic team's organizational structure. For example, by changing the structure of the CEA so that the Chairman reported directly to the president, Eisenhower created an efficient system for gathering timely economic information in order to make the best possible decision. In addition, the President sought to connect economic and national security issues through his Advisory Board on Economic Growth and Stabilization (ABEGS), which included the Chairman of the Council of Economic Advisors, Chairman of the Federal Reserve, and various members of the national security and defense establishment. Dr. Saulnier also recalled that Eisenhower insisted that the Chairman of the CEA attend any National Security Council meeting that involved matters of economic importance.

Final Reflections
Towards the end of his presentation, Dr. Saulnier was asked about his impressions of the President. He remarked that one of the things that struck him most when he was at the CEA was the remarkable skill President Eisenhower possessed for digesting volumes of technical information. In combating recession, Dr. Saulnier said that Eisenhower's ability to understand the facts combined with his patience, and with his confidence in the path he eventually chose, were the keys to the administration's ability to deal with recession. The President knew that there would never be a quick-fix: "President Eisenhower was very good at understanding the process of correcting imbalances, which takes time... he understood the length of the process."

In conclusion, Dr. Saulnier explained that the Eisenhower Administration was successful at fighting the periods of recession it faced because of President Eisenhower's direct involvement and because of his ability to organize the best team to give him the best options from which to choose. It was this sort of leadership that helped to make the Eisenhower era one of the most prosperous in American history.