Obama "to get the economy off the of bubble-and-bust cyle" (???)

I have some exciting news to report: the Obama administration plans to abolish the boom-and-bust economic cycle! Austan Goolsbee—member of the Council of Economic Advisors—matter of factly declared so much during an interview with CNBC's Erin Burnett:

In [President Obama's] budget, he is trying to design a framework to get the economy off of the bubble-and-bust cycle.

Perpetual economic growth—how exciting! Now, we need only address the minor point that we attempted this in the 1960s, and failed miserably.

President Johnson declared, "I do not believe recessions are inevitable." Why should he have? Arthur Okun—the chairman of his Council of Economic Advisors—wrote that "[r]ecessions are now considered to be fundamentally preventable, like airplane crashes and unlike hurricanes."

Keynesian economists believed they could sidestep the classic boom-and-bust business cycle by using brand new computer-driven economic models to outsmart natural market forces. Robert J. Samuelson explained their folly in The Great Inflation and Its Aftermath:

They could determine how far the economy was straying from "potential output." They could also predict recessions and inflation, it was believed. Thus, corrective policies could be adopted. If the economy was below full employment, it could be nudged up. If it were in an inflationary zone, it could be nudged down. With better information and theories, economics seemed a reliable form of social engineering.

Unfortunately, the Great Depression—a deflationary crisis—conditioned economists not to worry very much about inflation. This mental blindspot was politically fortuitous, because politicians preferred rising prices over declining employment. President Nixon acutely summarized the political sentiment: "When you start talking about inflation in the abstract, it is hard for people to understand. But when unemployment goes up on half of one percent, that's dynamite."

Combine (1) economists initially apathetic about inflation with (2) a population that doesn't understand inflation and (3) elects politicians who are willing to induce inflation in order to prevent a recession, and the result was the stagflationary quagmire of the 1970s.

Mr. Samuelson describes this through the perspective of Arthur Burns, the Fed chairman from 1970-1978:

Burns conceded [in 1979] that the Fed "had the power to abort inflation at its incipient stage fifteen years ago or at any later point." If inflation is too much money chasing too few goods, the Fed could have fought it by supplying less money. Indeed, the Fed had stepped "hard on the monetary brake" in 1966, 1969 and 1974, Burns said. Unfortunately, the initial effects were a slower economy and higher unemployment---cardinal sins in the new political climate. So each time the Fed had relented too quickly before inflation was broken, bowing to criticism from Congress and the administration.

Fed Chairman Paul Volcker and President Ronald Reagan eventually slayed the inflationary beast, but the price was the severe 1982-83 recession. This required a courageous Fed chairman determined to suffocate inflation by contracting the monetary supply, and an American president willing to provide the political support necessary for the Fed chairman to do his job.

That was what happened last time the political elites assured us they could end the boom-and-bust cycle. I can only imagine how it will work out this time around . . . .