Herbert Stein, a key economic advisor in the Richard Nixon administration who was known for his nondoctrinaire approach to money policy, has died.
Stein died Wednesday of heart failure at a Washington hospital. He was 83.
Stein was one of the main architects of President Nixon's economic policy, which included wage and price controls imposed in 1971.
Although recommended to Nixon by Milton Friedman, a leading conservative economist, Stein considered himself a pragmatist first and foremost--or, as he once described himself, "a conservative's liberal and a liberal's conservative."
He often urged policymakers to examine the entire federal budget instead of focusing on the deficit, and was influential in the early 1940s as an advocate of the idea that budget deficits were not always bad.
The greater issue, he believed, was better allocation of the nation's total resources. Taking off on a remark by then-President George Bush that Americans had the will to spend but not the wallet, Stein said in 1989, "I think it is the other way around. We have the wallet but not the will."
Stein was born in Detroit, where his father was a machinist for Ford Motor Co. Just before the stock market crash in 1929, Stein and his family moved to New York. He later said the massive unemployment that gripped the nation during the Depression influenced his decision to study economics at Williams College in Massachusetts, which he attended on scholarship.
He completed graduate work in economics at the University of Chicago in 1938 (although he did not finish his dissertation and earn his doctorate until 1958) and began his Washington career as an economist for the Federal Deposit Insurance Corp.
As America prepared to enter World War II, Stein worked for the National Defense Advisory Commission and the War Production Board. In 1944 he was commissioned a Navy ensign and was loaned to the Office of War Mobilization and Reconversion.
The same year, when he was 28, he won a $25,000 prize in a nationwide contest sponsored by Pabst Brewing Co. for the best essay on how the nation could ensure full employment after the war.
The next year he joined the Committee for Economic Development, a think tank organized by influential businessmen during World War II. In 1947, he played an instrumental role in the group's development of the "full-employment budget," which proposed establishing government expenditures not on revenues actually anticipated but on what they would be in a flourishing economy.
The committee also helped persuade the business community to accept the heretical idea that government budget deficits were desirable under certain circumstances. When the idea was later adopted by the Kennedy, Johnson and Nixon administrations, it was seen as a victory in American policymaking for English economist John Maynard Keynes' theories.
Stein worked in a series of posts at the Committee for Economic Development for more than two decades. After a sabbatical at Stanford University's Center for Advanced Study in the Behavioral Sciences and a year as a senior fellow at the Brookings Institution, he was selected by presidential candidate Nixon in 1968 to write an analysis of federal budget problems. After Nixon's election, Stein was appointed to the president's three-member Council of Economic Advisors.
He had been a longtime proponent of free markets who regarded government manipulations such as price controls as inefficient and immoral. But in 1971, with the economy in trouble, he supported and helped design the Nixon administration's sudden and dramatic shift in economic policy--a 90-day freeze on wages and prices, a temporary 10% surcharge on imports and removal of the American dollar from the gold standard.
Nixon once said the reason he valued Stein's counsel was that "right or wrong, he always bit the bullet and took a stand." Soon after the new policy was announced, the president made Stein chairman of the Council of Economic Advisors.
In his 1984 book, "Presidential Economics: The Making of Economic Policy From Roosevelt to Reagan and Beyond," Stein looked back in wonder at what he called "the great paradox of the Nixon administration, and by its own standard, the great sin" of price controls.
In one of the book's more interesting asides, Stein revealed that during meetings at Camp David to discuss changing the administration's economic program, one of the final hurdles was deciding whether Nixon should risk alienating the television-watching public by preempting "Bonanza," then one of the top-rated shows, to announce the new policy. Price controls won; "Bonanza" fans lost.