Less than a month later, Martin, caricatured by the political cartoonist Herblock as a tightwad
with a stiff, high collar, said the prospect of a tax cut was causing “excessive optimism.”
“If the present euphoria should be translated by a tax cut in a real surge in the economy,” he warned Fed policy makers on Dec. 17, “the system
might be faced with the need for a change in the discount rate or some other drastic action to be taken at the first opportunity.”
By March 1964, Congress had passed the tax cut and the economy was cruising.
Joseph Califano, an aide (later a cabinet secretary under President Jimmy Carter), recalled Johnson’s “burning up the wires to Washington, asking one member of Congress after another, ‘How can I run the country
and the government if I have to read on a news-service ticker that Bill Martin is going to run his own economy?’”
Martin was summoned to explain why he had defied the president.
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Speaking to Fowler by phone, he made a historical reference going back nearly 150 years: the so-called Bank War when President Andrew Jackson whipped up a populist frenzy against Nicholas Biddle
and his Bank of the United States, a predecessor of the Federal Reserve.
“The function of the Federal Reserve,” he said, “is to take away the punch bowl just as the party is getting good.”
Johnson, the shrewd Texas lawmaker who had seemed out of sorts as Kennedy’s vice president, had no interest in slowing growth.