BERYL W. SPRINKEL, 85
Beryl W. Sprinkel, 85; Reagan Administration Economist Foresaw '87 Market Crash
Saturday, August 29, 2009
Beryl W. Sprinkel, 85, an economist who served as chairman of the Council of Economic Advisers during the Reagan administration and who helped guide the administration's response to the October 1987 stock market crash, died Aug. 22 at a nursing home in Beecher, Ill. He had Lambert-Eaton myasthenic syndrome, a rare neuromuscular disease.
Dr. Sprinkel, protege of conservative economic guru Milton Friedman, taught economics at the University of Chicago and was executive vice president and economic adviser at the Harris Trust and Savings Bank in Chicago for nearly 30 years.
He joined the administration of President Ronald Reagan in 1981 as undersecretary of the Treasury for monetary affairs, where he was Treasury Secretary Donald T. Regan's principal negotiator on issues of Third World debt and the financing of the International Monetary Fund and other international lending agencies. He also played a role in encouraging the Japanese to open their capital markets to American investment.
In 1985, Dr. Sprinkel was named chairman of the Council of Economic Advisers, after seven months of uncertainty over the council's future. The former chairman, Martin S. Feldstein, frequently questioned Reagan administration economic policies and had a fractious relationship with Regan, who later became the president's chief of staff.
Reagan had considered dismantling the council by the time Dr. Sprinkel took over.
At the time of his appointment, The Washington Post described Dr. Sprinkel in an editorial supporting the nomination as "a man of an earnest and dogmatic turn of mind, best known for his active membership in the monetarist school of economic theory. His thoughts on the subject are familiar ones, but vigorously expressed."
As a monetarist, Dr. Sprinkel believed that excessive growth of the nation's money supply was the primary cause of inflation and that expansion of the money supply ought to equal the growth of the overall economy. His views often put him at odds with the administration's advocates of supply-side economics, a belief that tax cuts would lead to widespread financial prosperity.
In 1987, Dr. Sprinkel was a contender to succeed Paul Volcker as chairman of the Federal Reserve Board, but the job went to Alan Greenspan. Dr. Sprinkel announced his resignation as council chairman afterward, but Reagan rejected it in the wake of the stock market crash. He also elevated Dr. Sprinkel's post to Cabinet-level status.
Robert Genetski, an economist who worked with Dr. Sprinkel in Chicago, recalled that Dr. Sprinkel had been warning in the months leading up to the 1987 crash that the Federal Reserve's monetary policy was setting the stage for a financial crisis, but some administration officials disregarded him. According to Genetski, Reagan told Dr. Sprinkel that he appreciated his advice and wanted him to stay around.
As Dr. Sprinkel and other administration economists, under the leadership of Treasury Secretary James A. Baker III, worked on several fronts to avert total economic meltdown, at least one Cabinet member suggested that the markets be closed for a day. Dr. Sprinkel responded to that idea with an earthy retort. The markets stayed open.
"That's the kind of guy he was," Genetski said. "Once he said it, everyone knew where he stood."
As Reagan's presidency came to an end the next year, Dr. Sprinkel defended the administration's economic record. In an interview with The Post, he pointed to a decline in inflation, the number of jobs created and the low unemployment rate. "I'm rather pleased with the results," he said.