A Monetary and Fiscal History of the United States, 1961–2021

by Alan S. Blinder

From the New York Times bestselling author, the fascinating story of U.S. economic policy from Kennedy to Biden--filled with lessons for today



In this book, Alan Blinder, one of the world's most influential economists and one of the field's best writers, draws on his deep firsthand experience to provide an authoritative account of sixty years of monetary and fiscal policy in the United States. Spanning twelve presidents, from John F. Kennedy to Joe Biden, and eight Federal Reserve chairs, from William McChesney Martin to Jerome Powell, this is an insider's story of macroeconomic policy that hasn't been told before--one that is a pleasure to read, and as interesting as it is important.

Focusing on the most significant developments and long-term changes, Blinder traces the highs and lows of monetary and fiscal policy, which have by turns cooperated and clashed through many recessions and several long booms over the past six decades. From the fiscal policy of Kennedy's New Frontier to Biden's responses to the pandemic, the book takes readers through the stagflation of the 1970s, the conquest of inflation under Jimmy Carter and Paul Volcker, the rise of Reaganomics, and the bubbles of the 2000s before bringing the story up through recent events--including the financial crisis, the Great Recession, and monetary policy during COVID-19.

A lively and concise narrative that is sure to become a classic, A Monetary and Fiscal History of the United States, 1961-2021 is filled with vital lessons for anyone who wants to better understand where the economy has been--and where it might be headed.

Genres: Economics, History, Finance, Nonfiction, Business, American, American History

432 pages, Hardcover

First published January 1, 2022

About the author

Alan Stuart Blinder is an American economist at Princeton University serving as the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs in the Economics Department, and vice chairman of The Observatory Group. He founded Princeton’s Griswold Center for Economic Policy Studies in 1990. Since 1978 he has been a Research Associate of the National Bureau of Economic Research. He is also a co-founder and a vice chairman of the Promontory Interfinancial Network, LLC. He is among the most influential economists in the world according to IDEAS/RePEc, and is "considered one of the great economic minds of his generation."

Blinder served on President Bill Clinton's Council of Economic Advisors (January 1993 - June 1994), and as the Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 to January 1996.

Reviews

[Ronald Gruner · Rating 5 out of 5]

Professor Blinder had two objectives in writing A Monetary and Fiscal History of the United States, 1961 – 2021. First, to write an accessible economic history rather than a theoretical tome often produced by academics. Second, to provide the definitive extension to A Monetary History of the United States, 1867 – 1960, the “monumental scholarly achievement” of Milton Friedman and Anna Schwartz. Blinder succeeded on both counts.

Blinder grounds his book by discussing the challenges, from the Vietnam War to the COVID pandemic, that each presidential administration faced starting with John Kennedy and ending after first year of Joe Biden’s presidency. All had an economic impact affecting inflation, unemployment, and economic growth. It fell to the Federal Reserve to manage monetary (the money supply) policy and Congress to manage fiscal (spending and taxation) policy. Blinder provides an honest, non-partisan accounting of how well his fellow economists met their challenges.

During the Nixon administration, for example, Fed Chairman Arthur Burns surrendered the Federal Reserve’s independence to Nixon’s political agenda. In 1980, Paul Volker had the courage to raise interest rates to unprecedented levels to break the inflationary spiral triggered by President Johnson’s “guns and butter” spending and the oil shocks a decade later. Twenty years later, Alan Greenspan, “a libertarian apostle of Ayn Rand,” turned “a blind eye” towards the reckless financial excesses developing within the derivatives markets believing sophisticated financiers were self-regulating – perhaps the most colossal economic policy mistake since the Great Depression.

Readers who managed to get through Econ 101 should have little trouble appreciating Blinder’s straightforward, often wry, writing. Blinder seldom uses terms most readers with a little economics knowledge would not understand. (One exception is Bagehot’s Dictum which will have many readers scurrying to Wikipedia). Surprisingly, Blinder never mentions Andrew Mellon, Treasury Secretary under Harding and Coolidge, and the father of modern supply-side economics which Mellon called “scientific taxation” in his 1924 book, Taxation: The People’s Business.

I’m guessing that A Monetary and Fiscal History of the United States, 1961 – 2021 will quickly become one of the classic works in economics. Fortunately, we non-economists can also appreciate Blinder’s fair and informative latest book.

[Joseph Campbell · Rating 4 out of 5]

About as lively as a book on monetary and fiscal history can be.

It isn't as dense as you might expect, and Blinder's writing is actually pretty good -- even if his jokes aren't always the best. Blinder certainly has a Keynesian perspective, but he is forthcoming about it, and moreover it's easy to distinguish which views in the book are more and less objective. The pacing is good -- the book doesn't drag. The level of detail is also very good. He does not throw equations at the reader (there are some but not many) so the presentation isn't formal but I also never felt like the treatment of the topics was superficial.

Overall I'd (unsurprisingly) recommend the book to someone who is interested in better understanding America's monetary and fiscal policy in the last half decade or so. Keep in mind that Blinder frequently delves into politics in the context of fiscal policy. This is a book about monetary and fiscal policy in practice, and not in theory. And it not solely about more recent Fed developments like quantitative easing. The treatment is broad which I appreciated, but those looking for more focused treatments of specific topics should probably read something else.

[Derek Jenkins · Rating 5 out of 5]

I read this book in short stretches over a long time. It is exactly what the title says. A monetary and fiscal history of the US, following the work of Friedman and Schwartz in their classic book on monetary policy in the US from 1857-1960.

He presents every monetary or fiscal policy move that took place at the federal level and the politics behind the scenes in a very readable way. The author was especially interested in the rise and fall of Keynesians and monetarists throughout the time period.

The book gets five stars because it gives you exactly what you expect and does it well. If you expect you’ll like this book, you’ll love it. If you aren’t interested in a history of monetary and fiscal policy, you won’t find anything else here.

[Mike Sanders · Rating 5 out of 5]

Great coverage and a relatively easy read for what is a very dry and dense topic. Quite neutrally done as well

[Scott DeAngelis · Rating 1 out of 5]

I was so excited to read this book. Having read several books that chronicled important historical events and people in finance, business, and government regulation during the 1900s such as Titan, House of Morgan, and More Money Than God- Blinder’s book seemed like an excellent opportunity to dive into the granular data that shaped the financial markets and economic history during the 20th century.

150 pages in, what I’ve gotten is a blatantly partisan piece because the author can’t help himself. It’s painstakingly obvious to the point that I can’t read the book without wasting double the mental energy to separate the BS and biased interpretations from accurate historical metrics. Monetary and Fiscal Policy is complicated enough without having to sift through blatant political bias that demonizes every advancement or success of one school of thought while vindicating and tailoring convenient excuses to explain away the failures of the other.

I really wanted to learn something from this book, and I can brush aside minor and even moderate examples of political leanings in an effort to learn from a veritable expert in their field. But save your time on this one if you want the truth rather than a cherry picked account from someone with a very obvious agenda whether they themselves are conscious of it or not.

[Chad Hogan · Rating 4 out of 5]

Based on first few chapters I was not sure if I was going to keep reading. There were a few equations that were over my head but really glad I stayed with it. In the first few chapters you're not sure who the ideal reader is because the author gets pretty clinical and technical but then goes back to clarifications or elaborations that seem more aimed at the layperson. At the end of each chapter there is a summary which is really helpful. The book is laid out chronologically which, to me, made the comprehension increasingly easier as you progressed and it approached more recent years (i.e. The Great Recession, COVID, etc.). The final chapter let me down because it never answered the question it posed as a subheading and which I was eagerly waiting for throughout the book - do budget deficit matter.

The author admits he is more of a left-leaning Keynesian but the book overall seemed fairly objective. Coming from this angle, there were perspectives offered that were new to me - I didn't agree with all of them. Coincidently, when I started reading I realized this author is the same author that had written my Econ text book in undergrad - one of the only books I kept.

[Spencer Cooke · Rating 3 out of 5]

This book has good info on the fiscal and monetary policy of the US post 1961 but is largely descriptive without any greater sense of place during those times in history.

The first half of the book covers the 40 years from 1961-2001 and the second half mainly focuses on the financial crashes of 2008 and 2020. Unfortunately, there are only brief mentions of what is going on geopolitically or in the greater US economy at any given time.

I find it ironic that the author praises Alan Greenspan for making correct monetary policy in the 90s by actually understanding what was happening in the economy but never attempts to explain what is going on in the economy at any given time in his book. In addition, the apathetic reference to dips in unemployment at various times in US history without any description of how absolutely devastating these changes were to millions of peoples lives is enough to make your blood boil.

[Vance Ginn · Rating 4 out of 5]

Blinder provides a thorough account of fiscal and monetary policy actions over time. This includes the expansive policies during the Great Recession and Great Lockdown. But there is a bias toward increasing government action when the history indicates government should have done less if anything.

[Preston · Rating 5 out of 5]

Unexpectedly entertaining and thoroughly informative. While political economy tends to be dismissed as uninteresting or non-empirical, the takeaway from this book is that it is the single most important driving force behind practical applications of macroeconomics in the real world. Blinder takes a sweeping view of economic policy since 1961 informed by the backdrop of politics, illustrating that it is not Keynesian economics that explicitly leads to inflation and deficits—it is bad policy and political choice.

[Julia · Rating 5 out of 5]

This is great—I am pleased to have read it for Fed Challenge.

[Ryan Mazzola · Rating 5 out of 5]

Comprehensive. I have critiques but Blinder had to fit so much information into this mamma jamma so it’s okay

[Owen Kadis]

The notion “that government could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment” (which the New Frontiersmen set at 4 percent) (Tobin 1974, 7); getting rid of “the taboo on deficit spending” (10); and seeking “to liberate monetary policy and to focus it squarely on the same macro-economic objectives that should guide fiscal policy” (11).
Exp: 18
As Hegel (1899, 6) had sagely observed, “What experience and history teaches us is that people and governments have never learned anything from history, or acted on principles deduced from it.”
Exp: 26
The Fed’s famous dual mandate for low inflation and low unemployment was not added to the Federal Reserve Act until 1977.
Exp: 27
Chair Martin’s famous aphorism: “The Federal Reserve … is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming
Exp: 27
William McChesney Martin (1906–1998) The Fed’s Longest-Serving Chair William McChesney “Bill” Martin, unlike most subsequent chairs of the Fed, had no degree in economics. From the Fed’s founding in 1913 through Martin’s era, U.S. presidents did not deem formal training in economics important to the job. Rather, they sought to appoint hard-money men (until Janet Yellen became chair in 2014 they were all men) with integrity and judgment. Martin was all these and more. You might even say he was born to the office: his father had served as president of the Federal Reserve Bank of St. Louis.
Exp: 29
Johnson’s economists argued that the coming surge in aggregate demand from defense spending could and should be countered, or at least mitigated, either by cutbacks in civilian spending or by tax increases. In the modern argot, the federal government should “pay for” the upsurge in military spending. But Johnson rejected spending cuts because they would have crimped his Great Society plans. For him, it would be guns and butter. In his words, “I was determined to be a leader of war and a leader of peace. I refused to let my critics push me into choosing one or the other. I wanted both” (Goodwin 1976, 283). The president also rejected tax increases because they would have made the costs of the Vietnam War much more visible to the voters and thereby undermined support for the war. So, in Okun’s words, “the economists in the administration watched with pain and frustration as fiscal
Exp: 30
Looser budgets and tighter money will generally produce higher real interest rates, hence a lower investment share in GDP and eventually a slower growth rate of potential GDP. This is precisely what happened in the 1965–1968 period. For example, the share of business investment in GDP fell from about 18 percent in 1966:1 to about 16 percent in 1967:2, and the CBO now estimates a sharp drop in potential GDP growth after 1968.18
Exp: 31
Keynesian economics came to U.S. fiscal policy in the New Frontier. Monetary policy was seen as subsidiary then, its main job being to “accommodate” the 1964–1965 tax cuts. And Federal Reserve independence was far from being a sacred cow. In fact, it was barely a sacred calf. What we might call a “soft landing” in 1965—at 4 percent unemployment and sub–2 percent inflation—was upset by the Vietnam buildup shortly thereafter. It was a classic case of excess demand, making the remedy clear: tighter monetary and fiscal policies. But both monetary and fiscal policy fell “behind the curve” in the fight against inflation, although the Fed did jack up interest rates substantially, thereby drawing the ire of President Johnson. As the 1960s drew to a close, the United States was entering a mild recession, but inflation was still the problem of the day. And Keynesian economics had been tagged, unjustly, with a reputation it would struggle to shake off for decades: it was allegedly inflationary.
Exp: 35
explicitly temporary income tax increases (or decreases for that matter) should pack less punch than permanent
Exp: 41
explicitly temporary income tax increases (or decreases for that matter) should pack less punch than permanent ones.
Exp: 41
Brunner described the core of the doctrine as comprising three propositions. “First, monetary impulses are a major factor accounting for variations in output, employment and prices. Second, movements in the money stock are the most reliable measure of the thrust of monetary impulses. Third, the behavior of the monetary authorities dominates movements in the money stock over business cycles” (Brunner 1968, 9).
Exp: 47
In his then-famous 1968 debate with Friedman, Walter Heller stated that “the issue is not whether money matters—we all grant that—but whether only money matters, as some Friedmanites, or perhaps I should say Friedmaniacs, would put it”
Exp: 47
To Milton Friedman, the remedy for the disease of inflation was simple: just slow down the growth rate of the money supply. Hence, the genesis of his famous k-percent rule for money growth, which predated the term monetarism by many years.
Exp: 50
The constant k was supposed to be the estimated growth rate of potential GDP plus the target rate of inflation—
Exp: 50
While monetarists insisted on the central importance of monetary policy, often denigrating fiscal policy, they were just as insistent that the Federal Reserve was committing grievous errors by targeting a short-term interest rate rather than the growth rate of (some measure of) the money supply. M, the monetarists argued, was a better control instrument than
Exp: 52
While monetarists insisted on the central importance of monetary policy, often denigrating fiscal policy, they were just as insistent that the Federal Reserve was committing grievous errors by targeting a short-term interest rate rather than the growth rate of (some measure of) the money supply. M, the monetarists argued, was a better control instrument than r.
Exp: 52
Finally, a 1977 amendment to the Federal Reserve Act directed the Fed to “maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Modern attention focuses on the last part of that instruction, the Fed’s so-called dual mandate. But reread the first ten words. Congress had enshrined a role for the Ms into law.19 Monetarism had (sort of) been endorsed by Congress.
Exp: 54
Interpreting the Phillips curve as a “menu of choice” became the central intellectual frame after the Samuelson-Solow article, at least among Keynesians.
Exp: 64
the conventional wisdom held that liberal Democrats preferred to ride up the Phillips curve toward lower unemployment and higher inflation, while conservative Republicans preferred to ride down the Phillips curve toward lower inflation and higher unemployment. Indeed, that became a hallmark distinguishing liberal from conservative macroeconomists.
Exp: 64
Milton Friedman’s presidential address to the American Economic Association in December 1967 received the most attention—immediately. He argued that the menu of choices allegedly offered by a negatively sloped Phillips curve was a mirage because it ignored the evolution of expected inflation. Once you took the adjustment of inflationary expectations into account, he argued, the only level of unemployment sustainable in the long run was its “natural rate,” which was “the level that would be ground out by the Walrasian system of general equilibrium equations” (Friedman 1968, 8). Most important, the natural rate of unemployment was impervious to monetary policy. (Friedman didn’t think or write much about fiscal policy.)
Exp: 65
Milton Friedman’s presidential address to the American Economic Association in December 1967 received the most attention—immediately. He argued that the menu of choices allegedly offered by a negatively sloped Phillips curve was a mirage because it ignored the evolution of expected inflation. Once you took the adjustment of inflationary expectations into account, he argued, the only level of unemployment sustainable in the long run was its “natural rate,” which was “the level that would be ground out by the Walrasian system of general equilibrium equations” (Friedman 1968, 8). Most important, the natural rate of unemployment was impervious to monetary policy. (Friedman didn’t think or write much about fiscal policy.) The mechanism was straightforward. If monetary policy pushed the unemployment rate (U) below its natural rate (U*), both inflation (π) and the rate of increase of money wages would start rising. If firms caught on to what was happening before workers did (his general presumption), then prices would rise faster than wages, so real wages would fall. Lower real wage costs would, in turn, motivate firms to boost employment, thereby pushing U below U* in the short run. Over time, however, workers would catch on, real wages would rise back to their equilibrium levels, firms would have no extra incentives to hire, and U would return to U*. The true menu of long-run choices, Friedman argued, consisted of the unique unemployment rate, U*, coupled with any rate of inflation policy makers chose. To wit, the long-run Phillips curve was vertical.
Exp: 65
Yet the old-fashioned Phillips curve did indeed fall apart later in the 1970s. Why? It was not for Lucas-Sargent reasons. It happened instead because severe adverse supply shocks wracked the United States and other economies. Adding supply-shock variables—food and energy shocks—patched the Phillips curve up quickly. But that’s a story for chapter 5.
Exp: 71
A. W. Phillips discovered his famous curve in 1958 in much the same way that Alexander Fleming had discovered penicillin thirty years earlier—serendipitously. But the curve stood up for decades and had profound effects on the way monetary and fiscal policy were conceptualized. Intellectually, the Phillips curve provided the missing link in the old-fashioned Keynesian model, the so-called inflation equation. In terms of policy, the curve was thought at first to offer decision makers a menu of choices for where the economy could sit in inflation-unemployment space. But Milton Friedman and Edmund Phelps argued persuasively that there could be no such menu in the long run. On basic theoretical grounds, money had to be neutral in the long run regardless of what estimated Phillips curves of the day seemed to say. Within a few years, empirically estimated Phillips curves using lagged inflation as proxies for expected inflation were agreeing with Friedman and Phelps’s theoretical proposition, although Sargent had argued that the coefficients on lagged inflation were irrelevant anyway. In any case, practical macroeconomic thinking soon congealed around the idea that policy makers could trade more inflation for less unemployment in the short run but not in the long run. That view remains largely intact today, although even a short-run Phillips curve is hard to find in U.S. data since the late 1990s.
Exp: 72
Recessions hurt incumbents.
Exp: 75
As a matter of positive (that is, descriptive) economics, one of the central tenets of Keynesian economics is that short-run fluctuations in real GDP are dominated by changes in aggregate demand, some of which emanate from monetary and fiscal policy.
Exp: 77
Due mostly to increases in government spending, the full-employment budget deficit rose by about 1 percent of GDP in 1971 and another 0.5 percent of GDP in 1972. The first Social Security checks reflecting a huge 20 percent increase in benefits engineered by Nixon arrived in retirees’ mailboxes in October 1972. Now, that’s timing! These generous checks were accompanied by a none-too-subtle covering letter stating that “your social security payment has been increased by 20 percent, starting with this month’s check, by a new statute enacted by the Congress and signed into law by President Nixon on July 1, 1972.”4 The checks must have brought smiles to the faces of many seniors—and votes to Republicans.
Exp: 78
The August 1971 Surprise That, in a nutshell, is precisely what Nixon did. Specifically, in a dramatic August 15, 1971, presidential address to the nation, he announced comprehensive wage-price controls, beginning with a startling ninety-day freeze on most wages and prices. It was America’s first and only experiment with economy-wide wage-price controls in peacetime.
Exp: 81
The August 1971 Surprise That, in a nutshell, is precisely what Nixon did. Specifically, in a dramatic August 15, 1971, presidential address to the nation, he announced comprehensive wage-price controls, beginning with a startling ninety-day freeze on most wages and prices. It was America’s first and only experiment with economy-wide wage-price controls in peacetime. Coming from a Republican president who had denounced price controls as “a scheme to socialize America” less than a month earlier (Abrams and Butkiewicz 2017, 64), the controls came as quite a shock. Furthermore, the “conservative” chair of the Fed supported this “socialist” policy intervention.7
Exp: 81
Thus, the two models agree that price controls reduced the annual inflation rate between August 1971 and February 1974 by roughly 1.5 percentage points on average.9 But they disagree sharply over how much decontrol raised inflation after that.
Exp: 82
The announcement of wage-price controls was not the only news President Nixon made on August 15, 1971. In fact, outside the United States it was not even the biggest news. Rather, the headline story around the world was that the United States was “temporarily” suspending the convertibility of the dollar into gold, thereby unilaterally ending the Bretton Woods system of fixed exchange rates. In truth, the United States had been running out of gold for years and was therefore nearing the end of its ability to peg the value of the dollar to the yellow metal in any case. With whatever remaining discipline from the Bretton Woods system thus removed—and there was not much left by 1971—the major countries of the world stumbled through a period of almost two years without quite knowing what to do about exchange rates. Eventually almost all of them turned to true—well, make that managed—floating in 1973.
Exp: 83
When the Bretton Woods system collapsed, those constraints on monetary policy all but disappeared.10 In fact, a number of economists have blamed the worldwide upsurge of inflation after 1973 on the end of Bretton Woods.11 The end of fixed exchange rates certainly played a role. But I am inclined to place much more weight on the supply shocks discussed in chapter 5. One reason is simple: if dollar depreciation leads to higher inflation in the United States, the corresponding currency appreciations of the currencies of America’s major trading partners should produce lower inflation there. But the 1970s surge in inflation was a worldwide phenomenon; it hit virtually every country, albeit in different amounts.12 Between August 1971 and August 1973, the CPI inflation rate rose from 3.4 percent to 8.1 percent in Canada, from 5.6 percent to 7.6 percent in France, and from 5.7 percent to 7.3 percent in Germany.
Exp: 84
The Great Reversal of 1973 Of the two main macro variables, inflation commanded center stage in 1973. After the 1972 election, the unemployment rate drifted slowly downward, making it less salient both economically and politically. But the inflation rate soared, from just 3.4 percent in the twelve months ending November 1972 (with price controls in effect) to a startling 8.3 percent in the twelve months ending November 1973, the highest inflation rate in the United States since 1951. With the election now in the rearview mirror, the Burns Fed reacted strongly to higher inflation, boosting the federal funds rate from 5.1 percent in November 1972 to 10.8 percent in September 1973. Dwell on that for a moment: the Fed’s main policy rate rose 570 basis points in just ten months. But inflation rose by 400 basis points over that same period, making the real tightening just 170 basis points.
Exp: 85
1973. Dwell on that for a moment: the Fed’s main policy rate rose 570 basis points in just ten months. But inflation rose by 400 basis points over
Exp: 85
Indeed, the very concept of the neutral real rate did not play a prominent role in the Fed’s vocabulary or its thinking back then.
Exp: 86
Food accounts for a much larger share of GDP (and of the CPI) than energy does, so food prices, when volatile, matter a great deal for headline inflation. Yet for the most part, macroeconomists seem to have forgotten about the food shocks, perhaps because they have not recurred since 1980. Future historians certainly should not forget about them.
Exp: 97
the most part, macroeconomists seem to have forgotten about the food shocks, perhaps because they have not recurred since 1980. Future historians certainly should not forget about them.
Exp: 97
One derives from a now-famous article by a promising young scholar at the time named Ben Bernanke (1983). He offered a hypothesis that could conceivably explain a large deleterious effect on output from OPEC I because no one knew what to make of this new phenomenon. Specifically, the huge uncertainties created by the oil shock and the subsequent puzzling stagflation may have
Exp: 101
One derives from a now-famous article by a promising young scholar at the time named Ben Bernanke (1983). He offered a hypothesis that could conceivably explain a large deleterious effect on output from OPEC I because no one knew what to make of this new phenomenon. Specifically, the huge uncertainties created by the oil shock and the subsequent puzzling stagflation may have led both business investors and purchasers of consumer durables to pause until the fog lifted. Notice that this hypothesis is about delaying spending, not reducing it forever. In a similar vein, the increased uncertainty may have induced consumers to hunker down and increase their precautionary saving (Kilian 2008), subsequently creating more wealth that they presumably spent—but later.
Exp: 101
The supply shock explanation of the inflation of the 1970s and 1980s holds up remarkably well to several decades of subsequent events, multiple data revisions,
Exp: 112
The supply shock explanation of the inflation of the 1970s and 1980s holds up remarkably well to several decades of subsequent events, multiple data revisions, and several new intellectual developments in macroeconomics. When you fill the simple conceptual framework with numbers,

[Paular Bear · Rating 3 out of 5]

As many of the reviews pointed out, this book was pretty biased, which is a shame. I really hoped for a clean view of the last 50 years of U.S. Fiscal history. hmmm I think that might be one of the most boring sentences I've ever written... I guess the older I get the more interesting these boring things become. I think my 2014 Goodreads YA book champion self would never believe this turn of events.

Anyways.... This was still incredibly enlightening, the tax cuts of the 60s, Nixon's abandonment of gold backing the dollar, the inflation of the 70s, Reaganomics, Clinton's war on the deficit, the GFC, and now our ballooning deficit.

[Isaac Chan · Rating 3 out of 5]

I’ve already read my fair share of modern US macroeconomic history so I wasn’t expecting too much here, but Blinder still managed to give me a pleasant surprise by skilfully blending both economic commentary and some intellectual history of macro, namely the Keynesian revolution, the neoclassical synthesis, Phillips curve, monetarism, and the rational expectations revolution & Lucas critique (surprisingly, no more after that. Have we made negligible progress since then? Lol. In the intro, Blinder blindly dismisses (see what I did there) topics like the FTPL and Ricardian Equivalence as having little bearing to actual policymaking). As we eagerly await the Fed’s 2025 framework review, these are clearly important themes to revisit.

One key theme that Blinder is trying to trace, is how monetary and fiscal policy intertwine. Perhaps unfortunately for economic objectivity, Blinder identifies that these decisions have historically been ad hoc, and economic ideas are usually mixed and matched to fit whatever agenda the current administration has in mind.

Most notably, as an ardent Keynesian, Blinder continually stresses how Keynesian econ has always been used asymmetrically – embrace fiscal stimulus during bad times! But of course, no one wants to commit political suicide contracting the economy fiscally during good times. Has Keynesianism even been truly adopted then, if fiscal authorities only use it one-sidedly?

Blinder makes an interesting claim that prior to the Kennedy administration, the developed world had not seen Keynesian policymaking. I’m not sure about this, and if it’s true, then I learned smtg new. Blinder says that fiscal stimulus had been employed b4 (famously in Roosevelt’s New Deal, ofc) but it was very small compared to the scale that the Kennedy administration deployed. Blinder also taught me that prior to Kennedy, the prevailing ideology was to balance the budget. Need more research into economic history to verify to what extent this claim is true.

Further on the link between monetary and fiscal policy, which of course implies the link between economists and politicians, it’s clearly very sobering to observe the declining influence of economists on policy. We started from a Kennedy CEA comprised of James Tobin, Kenneth Arrow, Paul Samuelson (who admittedly wasn’t directly involved) etc to a Trump administration championing either downright economically illiterate policies (tariffs, protectionism, mass deportations) or pseudo-econ (tax cuts that would ‘pay for themselves’ via Laffer curve logic). To me, after controlling for political realities e.g. populism and rent-seeking behaviour by political actors, that reflects a failure on economists’ part to 1) actually solve economic problems (which is their full-time job) and 2) listen to people’s concerns instead of circle-jerking with arcane language.

Because you can’t pin it all on Trump – the Biden administration was strongly anti-econ too. Economists have long been concerned about unsustainable fiscal deficits, yet the Democrats ran up deficits even further (and even allowed perhaps the stupidest pseudo-econ ideology in recent times – MMT – to infiltrate their ranks); economists agree on carbon taxes to address climate change yet the Democrats didn't incorporate that in their carbon bill. Not to mention the stupid Kamala 'price-gouging' and 'greedflation' narratives that she tried to push (and I suspect these narratives stem less from stupidity, more from populism - selling sensational stories that people want to hear). Economists need to learn to tell stories better, like Trump.

Some self-reflection is duly needed (which of course, is a very unoriginal thought, since the public, the investment industry, and most annoyingly, the heterodox folk, love to clown the econ profession). For example people consistently complained about the economy and cited inflation as their top concern leading up to the 2024 election, but economists, only fixating on macro data, insisted that the economy and prices were fine. That sort of behaviour can be myopic, and as we’ve seen, has political implications. And of course, some further analysis proved that the little man was right – people got poorer from inflation during the Biden years.

https://jzmazlish.substack.com/p/yes-...

And thus, a related theme that Blinder is keen on exploring is the academy influences policy and vice versa. Altho Blinder (as a Keynesian) spends pretty much the whole book perhaps unfairly bashing Bob Lucas and the rational expectations people, it does make you think – academics do have an uncanny ability to close their eyes to the real world sometimes. And I do agree with Blinder that thankfully real-world policymakers had the good sense to ignore the rational expectations revolution. It is fun to model rational expectations, being the mathematically elegant system that it is, but do we seriously expect real world markets to clear instantly? One becomes more cynical after one realizes how undistinguishable economic models are from ideology - Lucas's and Friedman's elaborate reasoning all cut down to anti-government and anti-finetuning at the end of the day. Where does the economics end and the ideology start?

Incidentally, I’m currently reading Hayek’s ‘The intellectuals and socialism’, where he warns against the capacity of ‘intellectuals’ in spreading appealing but ultimately wrong and dangerous ideas. So it’s interesting to think about why rational expectations nvr really took off in the end. Not to say that rational expectations was a dangerous idea, but it was probably unproductive. For example, Blinder says that the Lucas critique led to widespread 'econometric nihilism'.

Finally, Blinder took a rare L. Bro was Vice Chair of the Fed back in the 90s when Yellen and Bernanke were both still governors, but for some reason the careers of the latter 2 managed to fucking skyrocket whereas Blinder remained a prof. Awkward.

P.S. A very self-congratulatory book btw. Blinder never fails to remind us about his pErSoNaL iNvOlVeMeNt with economic policy in the 90s and how he's best buddies with Bernanke and Yellen. Bernanke could write a whole-ass memoir on his entire life story and how he saved the world during the GFC and still come across as less self-serving.

Edit: Lol just realised that this dude is the same Blinder as in the famous Oaxaca-Blinder decomposition.

[Jesse Young · Rating 3 out of 5]

This is a frustrating book at times -- the back half is a very satisfying political history of monetary policy since the 1980s. But it takes too long to get there! The book's first half is a real slog -- despite his pledge to avoid econ equations and the like, Blinder simply spends way too much time mired in impenetrable hard economics in an unedifying and annoying fashion. He does a surprisingly bad job of explaining trends in monetary thinking -- his effort to lay out rational expectations theory is in dire need of a better editor. Still, his prose is generally conversational and unpretentious -- which aids the book's better sections.

[George Alvares-Correa · Rating 4 out of 5]

I picked up this book because I wanted to gain some historical perspective on contemporary macroeconomic debates – e.g. central bank independence, budget deficits, the role of monetary vs fiscal policy in macroeconomic management, etc. I read Blinder’s book on the financial crisis while in university, and I recalled his writing to be lucid and edifying. This book also delivered on that front.

It is studded with facts that I didn’t know before: central bank independence only became widespread in the ‘90s, Nixon instituted price controls right after his second election (a Republican? Meddling with that omniscient free market? Egad!), stagflation seemed to rear its head for the first time in a big way only in the 70s, the US Treasury issued bonds denominated in foreign currencies (deutsche marks and Swiss francs) in the 70s, the Bank of England was part of the Treasury through Thatcher’s ministry, the Fed’s dual mandate only dates from ’77 (when maximum employment was added to inflation), the Fed used to target money supply (which nobody seems to really talk about anymore; people talk about the Fed funds rates/interest rates in general), there has been no Philips curve showing up in the data for some two decades now (and yet everyone still talks about full employment and low inflation as though you have to choose between the two)….the list goes on.

As suggested by the title of the book, some of the most interesting dynamics it touches upon are the interplay between monetary and fiscal policy, and how that’s changed over time. For example, which takes the lead in cooling down an overheating economy vs. revving up a flagging one? Well, even if Keynesian theory suggests that fiscal policy can do both, the political exposure of fiscal decisionmakers (e.g. Congress and the Executive) means that in practice it often seems to be fiscal policy that takes the lead in stimulating aggregate demand, and it’s often left to monetary policy to do economic dampening when necessary. I guess the exception would be Clinton + Greenspan (and perhaps Bush + Greenspan), when fiscal policy was drawn in tightly and monetary policy was pretty loose? A second example of the monetary/fiscal dynamic would be the at times extremely blurry boundary between the two, especially during the 2008 financial crisis. I recalled that the Fed did a lot of asset purchasing at the time, but I hadn’t quite appreciated the variety of assets that the Fed bought (on the secondary and even on the primary markets) or whose issuance it supported: commercial paper, student loans, credit card loans, auto loans, etc. Is vesting such awesome power in unelected technocrats, even if they’re successful, consonant with the principles of democratic governance? An interesting question to think about.

The overarching impression I was left with was of how circumstantial has been the development of monetary and fiscal policy in the US since ‘61, the product of unique circumstances (oil shocks in the 70s, IT productivity boosts in the 90s, the GFC and Coronavirus pandemic) and strong personalities (Volcker, Reagan, Greenspan. Did I say Volcker already?). Perhaps all history feels like that once you get close. After all’s said and done though, I’m not sure how many “lessons” are to be drawn from what ultimately feels like a surprisingly short/thin data set of one damn thing happening after another. Blinder seemed to agree with that sentiment at the beginning of his concluding chapter, but that didn’t stop him from trying to tie it all up in a bow (which felt a little weak compared to the other chapters, a bit like a plodding recitation).

Besides central bank independence. Boy, does that seem like a really good idea!

[Denis Bozic · Rating 3 out of 5]

If you are not an economist and you like to visualize characters and places as you read a book, even if it’s nonfiction, I suggest you do the following prior to reading Blinder’s book:

(1) Watch Charles Ferguson’s 2010 documentary Inside Job . The film is focused primarily on the 2007-2008 financial crisis, but many of the people mentioned in this book (including Bernanke, Greenspan, Volcker, etc.) appear in the film, Volcker is even interviewed, which really helps to put a face to the name and to get a sense of “character motivations.” It made reading Blinder’s book much easier.

(2) Read, or at least skim, Ben Bernanke’s (sister) book 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19. I read only a bit of it, but what I really liked about Bernanke’s writing was that it described the Fed chairs in great detail, giving them almost literary character qualities. This, in turn, also makes Blinder’s book easier to read because the key figures in the history of monetary policy happen to be the Fed chairs.

(3) I assume that most people will be familiar with the US presidents from 1960+, so visualizing the key figures in the history of fiscal policy should be easier. A quick refresh won’t hurt.

Overall, this is a good and comprehensive read, albeit too academic and technical at times. Blinder’s writing is unpretentious and accessible, so the book doesn’t feel alienating. I wish there was a “So what?” chapter at the end, however, especially on the topic of ballooning American national debt. Blinder’s thorough historical overview naturally leads to many questions about the future, none of which get answered in this book.

I personally didn’t mind Blinder’s obvious political preferences in his analyses of Democrat vs. Republican views on the economy. He calls this out clearly in the book intro, so it shouldn’t be a surprise. Plus, who would ever be able to cover 60 years of the US economy and not have a single hot take? That would be one big snoozefest.

[Sam McCarthy · Rating 4 out of 5]

I'd highly recommend A Monetary and Fiscal History of the United States, 1961-2021 for anyone curious about the great mystery that is central banking. Blinder really gave me everything I wanted out of this book. I didn't come away with very many fresh insights, but not in a bad way; the broad strokes of his narrative didn't necessarily surprise me and many of the more minute details went over my head.

In general, Blinder paints a fairly flattering portrait of the Fed, particularly under its last five chairs: Jerome Powell, Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volcker (the latter of whom receives fairly gushing praise from Blinder for his conquest of inflation in the late '70s and early '80s). According to Powell, the Fed's actions during the Great Recession and Covid – adhering to the Keynesian imperative of spurring aggregate demand during downturns – twice saved the world from total economic catastrophe. An economist and not a politician, Blinder looks less favorably upon American fiscal policies, although he gives due praise to Keynesian interventions like Obama's stimulus and the Trump/Biden Covid response. All in all, the winner in Blinder's view is not any particular President or Fed chair, but the economic doctrine of Keynesianism, which he credits for consistently saving the world from a recession like the deep and prolonged crisis of the 1930s.

I don't know enough about the topic to take issue with any of Blinder's history. However, I'd have liked for him to engage more critically with today's hot-button issues, like the doctrine of Modern Monetary Theory, the sources of present inflation, and the unprecedented expansion of the Federal Reserve's scope of responsibility over the past 15 years.

[Nick Crowley · Rating 4 out of 5]

A fine summary of the facts. Blinder suggests that the political acceptance of large deficits began with Reagan's tax cuts in the early 1980s. HW Bush's Budget Enforcement Act set the stage for Clinton-era budget surpluses. Bush II entered office amid debates about what to do with these surpluses--but they quickly evaporated amid Bush's tax cuts, two wars in the Middle East, and the expansion of Medicare, none of which was paid for. Then we had the Great Recession, with it's Keynsian stimulus efforts, followed by Trump's anti-Keynsian tax cuts, followed by the Pandemic... and now the national debt is 120% of GDP (compared to 50% in the year 2000), and the deficit is nearly 7% of GDP.

The book doesn't have much to say about the expansion of the Fed's balance sheet from $800 billion in 2006 to $9 trillion in 2021, or the tripling of M2 over the same timeframe. And so, I still don't know what consequences might arise from that.

I would have liked to have gotten more economics from this book, but I guess it's marketed as a history book, and that's what it is.

Several typos in my copy from the library.

[Derek (FoCoBuzz) · Rating 4 out of 5]

This is a high-level exploration of fiscal and monetary policy in the United States from 1961 through 2021. Alan Blinder has served in several key economic roles in the U.S. government and as a professor of economics at Princeton so he has strong economic credentials. If you like serious discussion of economic theory, application, and results you will enjoy this book. If you are more into pop economics, you should skip this one.

One should understand going in that Blinder is a devout Keynesian and tends to imply if not effectively state support for active government involvement in the economy. While he has worked in Democrat administrations and admits to leaning to the left, he does not come across as do so many abrasive political and economic commentators of today (looking at you, Paul Krugman). While I did not always agree with his perspective, I respect how he approaches history, economics, and politics with integrity and in a thoughtful manner. We could use more of this style in the political and economic discourse today.

[Niclas Küpper · Rating 4 out of 5]

The book is an accessible economic history of the past 60 years. He captures the most important developments in monetary and fiscal history, changing cultures around these ideas and the philosophical origins around various disagreements. For example he demonstrates the growing independence of the Federal Reserve System, changing attitudes around deficit spending and impacts of politics on both of these.

Blinder presents the history with clarity, but does not shy away from throwing in his own opinion on the matter, which is very Keynesian. As there exists a lot of confusion around this term he does us a favor by defining the term clearly right at the beginning.

He does all this with some dry academic humor thrown in here and there, making a surprisingly easy read. It is not quite 5 stars, but I don't think this is Blinder's fault. The topic just suffers naturally from a lack of golden threads – history is complicated and people are opportunistic. I reserve the right to revise this upward on a second read some time in the future.

[Justin Evans · Rating 5 out of 5]

Not sure I'm entirely on board, but Blinder makes some pretty esoteric stuff pretty accessible, and his basic thesis is compelling: Keynesianism never went away as a policy, only as a rhetorical trope. Some administrations did their Keynesing through the military, but said they weren't doing it at all; others through tax cuts, and said they weren't doing it at all; others through massive injections of cash. But they all Keynesed. He wants that to be true, but, still, it sure looks true.

Astonishingly, Blinder also finds time to talk about economic debates about this as well as the actual history, and even there he's quite clear, and as reasonable as you can be about people whose economic principles tend towards the 'I'm just describing human nature, we know it's human nature because of ibn Khaldun' or just scribbles on napkins side of the spectrum.

Not easy, but very worthwhile.

[Stephen Harrison · Rating 4 out of 5]

This book is a strong survey of how the US Government regulates the economy. The author is an eminent economist with an avowed Keynesian devotion. His main argument is that the two main ways the USG tweaks the economy (taxes and spending and controlling the money supply) are sometimes in conflict, but overall the fiscal side proves to be more important. He also looks at conflicts between good economics and good politics. Politics usually wins to the determent of the country.

This book meant for "layman" but still occasionally gets bogged down in details and formulas that are difficult to follow. The author's writing style is largely informal, despite the topic, and is very readable. I would definitely recommend it if you are interested in the politics surrounding the Fed, management of the national economy or how economic theories affect policy.

[Krishna Kumar · Rating 3 out of 5]

The book is mostly good, though I wonder how much important information is missing. For example, in the final section, the authors talk about inflation primarily in the context of the monetary and fiscal policies of the United States, without talking about the Russia-Ukraine war which drove up oil prices everywhere or how the supply chain issues related to Covid caused shortages and price hikes or how inflation happened everywhere, not just the United States. There was a side remark about Lawrence Summers' predictions which was more than just about inflation, but actually and wrongly about stagflation. There is a lot about deficits in the book, but few details about government debt and debt servicing costs.

[Kahscho · Rating 3 out of 5]

The book provides a good summary of the last 60 years of monetary and fiscal policy. The high points of the book are the chapters covering the Clinton administration (where the author served) and the responses to the 2008 financial crisis.

But keep in mind that this is 60 years through the lens of Keynesian economics. There is a heavy focus on short and medium term growth rates, while studiously avoiding long term models. While the author mentions Robert Solow and his work 22 times, the author avoids any discussion of the Solow growth model — or whether any of the past Keynesian (or monetarist) policies had any observable impacts on TFP.

If you are a Keynesian, this book is for you. If you are more interested in longer term economic impacts, this book comes up a bit short.

[Irasema · Rating 5 out of 5]

This type of book is exactly the perfect mix between the economic and the political views on monetary and fiscal policy in the US, especially for non-economist readers who are interested in macroeconomics.

Throughout the book, you can easily see that the tipping point of the book lies in the rise and fall of Keynesianism throughout 1960 – 2021. So, in MY PERSONAL OPINION, you can also see that Blinder has a deeply Keynesian perspective, so the book has less objectives views. But still, you can get the historical perspective.

I really appreciate the little summary of the life of the most prominent character of every chapter. My favorites were the Robert E. Rubin and the Janet Yellen ones.

[Andrew Chandler · Rating 3 out of 5]

Enjoyed it, thought I'm a little unsure of who this book is for. As someone who didn't know the difference between monetary and fiscal policy before I read it, many concepts covered were too challenging for me to grasp. Yet I feel that this historical account of the last 60 years might be too broad for many economists. In any case, I came out with a much better understanding of the different approaches used for monetary and fiscal policy in the United States.

I should be noted that Binder (who was on Clinton's Council of Economic Advisors) states early in the book that he is a liberal leaning Keynesian who is writing an unbiased bok, finds very little done correctly by Republican presidents, and very little done wrong by Democratic presidents and their appointments to the Federal Reserve. His history is one in which Keynesian economic policies have never failed (with the exception of a random "supply shock" here and there that will cause financial turmoil, regardless of what monetary and fiscal policies were tried.

And that's perhaps the central problem I have with Binder's interpretation of history. He seems to view economics as a hard science, not a soft one. The fact that there are so many different "schools" of economics which still exist is my evidence that one particular encompassing economic theory has not been shown to be accurate enough to eliminate the need for alternative theories, and its too early to say that economics is a hard science.

And Binders claim that Keynesian policies can't mitigate supply shocks because nothing can is akin to blaming the 4th floor of your house of cards as the problem that caused the house to fall, without ever considering that the house, as built, was always going to be unstable and sensitive to the slightest defect. But what do I know, I just learned the difference between fiscal and monetary policy.

[Liam Munro · Rating 3 out of 5]

I'm only giving this book 3 stars because I'm sure it's great for the intended audience. I rarely do this but I made it 80 pages in and had to stop. This is NOT a book for casual curiosity. I enjoy dense non-fiction, that isn't the problem here. I just think this book should be advertised for the audience of economics students and professionals, because the amount of information and economics theory he assumes you are already versed in is a LOT.

Again, I'm sure it's a great book if you know your economics equations and have a working historical context and vocabulary when it comes to the topic. And he does have a fun narrative style, of course. So 3 stars.

[Nate Campbell · Rating 5 out of 5]

Very good, honest and objective history of the modern American economy. In depth detail, and ties the narrative to academic economic schools and trends throughout this time period. Well worth reading. Really makes me appreciate the solid monetary policy leadership at the FED with Bernanke, Yellen, and Powell. Also high marks for Greenspan and Bob Rubin. Volcker of course is the GOAT. Does a good job of describing the tension between fiscal and monetary policy. Good analysis of tax cuts as a policy.

[Suria · Rating 5 out of 5]

Tremendous book. Full of detail, yet entirely relevant. Describes the political atmosphere at the time, which is necessary considering the fiscal decisions are difficult to separate from politics. Blinder is an ultra-Keynesian and his defense of Keynesian ideas throughout the book can detract. Nonetheless a great read. I would recommend reading this alongside Bernanke’s “21st century monetary policy” for a good understanding of monetary history of the last 60 years.