This is the beginning of a section of my book, The Confiscation of American Prosperity The National Bureau of Economic Research Supply side economics was unique because the basic theory largely emerged from outside of the economics discipline. For the most part, economists do not wait for right wing activists to package a theory for them. They are perfectly capable of defending business interests on their own. These home grown theories have a more long lasting effect than the brief burst of supply side economics. In recent decades, no organization, not even Ely's American Economic Association, has been more influential in shaping the economics profession than the National Bureau of Economic Research. Thomas Edsall, a distinguished journalist who was surveying the changing political scene in 1984, concurred: "Perhaps the most prestigious of the institutions that have helped to push the economic debate to the right is the National Bureau of Economic Research" (Edsall 1984, p. 118). The original purpose of the National Bureau of Economic Research was entirely different. In 1920, the founders' objective was not to narrow economics down to a business friendly dogma. Instead, they intended "to conduct economic research effectively on a factual basis." They reasoned: "In these days of conflicting economic opinions and skillful propaganda, the interests of economic knowledge can best be served by the presentation and analysis of data, objectively collected and interpreted. Unless some guarantee of impartiality can be given, results will be viewed with distrust by many" (Mitchell 1936, p. 7). Toward this end, the Bureau aimed at discovering the truth by including as wide a range of people as possible, "from extreme conservative to extreme radical who should associate with them representatives of all the important organized interests in the country" (cited in Fabricant 1984). Within a few decades, however, the Bureau fell considerably short of its goal of inclusiveness. Although the noble idea behind the National Bureau of Economic Research to examine every aspect of economic knowledge would seem to exclude political involvement, only a few years after its creation, the Bureau began its collaboration with Herbert Hoover. The Bureau maintained a rather progressive perspective at the time, but as its political engagement became more institutionalized, its political leanings turned more conservative. Since 1945, two highly placed economists have almost continually dominated the Bureau. The first of these economists, Arthur F. Burns, a close friend and teacher of Milton Friedman, became Director of Research in 1945, where he remained until 1953, when President Eisenhower appointed him as head the Council of Economic Advisers. After three years, he returned to academia and then served as president of the Bureau for ten years. In 1969, President Nixon first appointed Burns as an economic counselor, and then one year later named him chairman of the Federal Reserve Board, where he served from 1970 to 1978. Incidentally, Burns was also the mentor of Alan Greenspan, a more famous leader of the Fed. Burns played a highly political role at the Fed. He used his powers to stimulate the economy to ensure Nixon's reelection, even though this action was certain to create both inflation and dangerous imbalances in the economy after the election. Later, Burns tried to explain why he had not managed to stem the inflationary tide in a famous lecture, melodramatically entitled, "The Anguish of Central Banking." In this central banker's retrospective equivalent of the Powell memo, Burns held the unruly behavior of the masses to be ultimately responsible: But the rapid rise in national affluence did not create a mood of contentment. On the contrary, the 1960s were years of social turmoil in the United States, as they were in other industrial democracies. In part, the unrest reflected discontent by blacks and other minorities with prevailing conditions of social discrimination and economic deprivation a discontent that erupted during the "hot summers" of the middle 1960s in burning and looting. In part, the social unrest reflected growing feelings of injustice by or on behalf of other groups the poor, the aged, the physically handicapped, ethnics, farmers, blue collar workers, women, and so forth. In part, the unrest reflected a growing rejection by middle class youth of prevailing institutions and cultural values. In part, it reflected the more or less sudden recognition by broad segments of the population that the economic reforms of the New Deal and the more recent rise in national affluence had left untouched problems in various areas of American life social, political, economic, and environmental. And interacting with all these sources of social disturbance were the heightening tensions associated with the Viet Nam War. [Burns 1979, p. 690] Burns endorsed Reagan's inconsistent promises during the 1980 campaign that the Republicans could raise defense spending, cut taxes, and still balance the budget. Later, he explained to Herbert Stein that he did so because "if you dissented from it, your whole usefulness in the organization was lost" (Judis 2000, p. 150). In 1977, the National Bureau of Economic Research turned to Martin Feldstein as its next president. To his credit, Feldstein was not one to construct abstract models with no connection to reality. However, his work is more openly ideological than that of the abstract model builders. Throughout his career, Feldstein has carefully constructed his models to make the case that government activities, such as the collection of taxes and especially the maintenance of Social Security, create destructive disincentives that weaken the economy. Feldstein carefully used the Bureau to further his own political agenda. Even Arthur Burns was moved to criticize the new turn of the Bureau. Burns maintained that the institution once confined itself to objective research, ignoring policy issues and acting as a check on Federal statistics, but he lamented that "work of that kind does not come across my desk from them anymore" (Golden 1980). A recent article in the monthly magazine of the International Monetary Fund referred to Feldstein's approach as "supply side lite" (Loungani 2004). Feldstein himself offers a different account, explaining: "I'm a true supply sider .... At the time, some of the extreme statements people were making were giving it a bad name" (Bernasek 2004). In short, Feldstein offered supply side policy recommendations, but with a patina of academic respectability. Feldstein first came to national attention in 1974, the same year that Arthur Laffer produced his famous napkin. Feldstein published a model that "proved" that Social Security caused enormous losses for the US economy. According to Feldstein, Social Security was reducing personal savings by 30 to 50 percent. He estimated that if Social Security had not existed, the stock of plant and equipment in the United States would have been as much as 50 percent larger and total personal income 20 percent greater than the level in 1971 (Feldstein 1974). Since Social Security had only been functioning 24 years at the end of the time period that his data covered, Feldstein's article implies that the present effect of Social Security on total personal income today would be far higher perhaps almost 50 percent since the program has had another 35 years at the time of this writing. Michael Perelman