Working Paper #2011-05 – The Political Business Cycle: New Evidence from the Nixon Tapes

The Political Business Cycle: New Evidence from the Nixon Tapes

by Burton A. Abrams and James L. Butkiewicz

Abstract

Drawing from the personal tape recordings made during the presidency of Richard Nixon, we uncover and report in this paper new evidence that Nixon manipulated Arthur Burns and the Federal Reserve Bank into creating a political business cycle that helped secure Nixon’s reelection victory in 1972. Nixon understood the risks that his desired monetary policy imposed, but chose to trade longer-term economic costs to the economy for his own short-term political benefit.

JEL Codes: E5; E3; E58

Keywords:  Monetary Policy; Political Business Cycle.