Nixon’s Economy: Booms, Busts, Dollars, and Votes

Published by H-Business@eh.net and EH.Net (August, 1998)

Allen J. Matusow. Nixon’s Economy: Booms, Busts, Dollars, and Votes.

Lawrence: University Press of Kansas, 1998. xii + 323 pp. Notes and index.

$35.00 (cloth), ISBN 0-7006-0888-5.

Reviewed for H-Business and EH.Net by David Stebenne ,

Ohio State University

Nixon’s Economic Policy:

Confused, Opportunistic and Unsuccessful

Scholars and journalists often give the Nixon presidency,

Watergate aside, a fairly positive review. The scandals

that drove Nixon and many of his closest advisors from office, the conventional

wisdom now holds, distract attention from their positive achievements, in the

realm of foreign policy especially. The keys to these successes, such accounts

tend to argue, we re Nixon’s vast knowledge of the political system,

based upon many years of experience before becoming president,

and his non-ideological flexibility. Allen Matusow’s new book about the Nixon

presidency’s handling of economic issues, both domestic and foreign, provides

a refreshing and persuasive challenge to that view of Nixon and his

administration.

In Nixon’s Economy: Booms, Busts, Dollars, and Votes, Matusow paints a

vivid picture of the intellectual confusion and crass opportunism that lay

behind

Nixon’s major economic policy initiatives. In the hands of another scholar

this could have been a fairly dry tale told in highly technical terms.

Matusow,

however, brings it alive with vivid and clear descriptions of the key decisions

and decision makers, based upon extensive research in the Nixon presidential

papers that was buttressed by journalistic and secondary sources.

At the center of the story is Nixon himself, and it is with respect to his

actions that this account is most interesting.

As Matusow makes clear, Nixon by the time he became president in January 1969

had been badly scarred by his setbacks in the late 1950s, traumas that greatly

influenced Nixon’s approach to economic policy as president. Eisenhower’s

decision to fight inflation in a moderate but firm fashion during the last

three years of his presidency was politically costly for the Republican party,

and especially for Nixon when he ran for president in 1960. Rather than blame

his vague, unconfident campaign and poor performance in the presidential

debates for his defeat that year, Nixon concluded that high unemployment, a

sluggish economy, and an alienated labor movement, all consequences of

Eisenhower’s anti-inflationary policies, were the key reasons for his very

narrow loss

to John F. Kennedy.

All of this began to matter in the realm of public policy once Nixon became

president. He clearly understood that fighting inflation in a moderate but

firm way had become vitally necessary by 1969, more so even than it had been a

decade earlier. And, at first, Nixon chose that path, as Matusow makes clear.

During 1969-70, Nixon and his key economic advisors,

Paul McCracken, who headed the Council of Economic Advisors,

Herbert Stein, McCracken’s successor, and Labor Secretary George Schultz,

pursued a course of gradual price and wage restraint.

But after the disappointing results of the 1970 off-year elections, Nixon began

to lose his nerve. Fearful of losing his bid for re-election, Nixon began to

push for inflationary policies in the summer of 1971. To implement this

change, he brought in a kindred spirit, former Texas governor John Connally, as

Treasury Secretary. These two men, with unwitting assistance from the Federal

Reserve Board, brought about inflationary policies that

helped Nixon win re-election, but made for an economic policy fiasco

thereafter.

What makes Matusow’s account especially attractive is his unwillingness to take

the simplistic tack of simply vilifying Nixon for this. The key reason for

Nixon’s loss of

nerve,

Matusow makes clear, was an inability (shared by many of his critics) to

understand how much economic conditions had changed since the 1950s. Keeping

prices fairly stable by the early 1970s required monetary and fiscal policies

that produced an unemployment rate significantly above the ’50s norm, so much

so that it would place incumbent officeholders in peril. As Matusow writes

with characteristic clarity, Nixon by the spring of 1971 “was producing a

success that looked like a failure” (p.

116).

A fairly secure and/or principled politician might have stayed the course, but

Nixon, as Matusow makes all too clear,

was neither.

Having devoted the first third of his book to explaining why Nixon abandoned

his inflation-fighting policies, Matusow devotes the remainder to the

disastrous results during 1973-74.

Disasters imply drama, and this account is no exception. The extraordinarily

high inflation and unemployment rates experienced during those years had

far-reaching and highly painful consequences

. Perhaps most tragically for Nixon, they seriously hurt the very people he

wanted most to help:

struggling middle class Americans living out in the heartland,

the people Nixon liked to call “the Silent Majority.”

Matusow’s book is not without flaws. His explanation of how and why the U.S.

economy changed during the 1960’s is disappointingly simplistic. A deeper

explanation of that change would have placed the behavior of Nixon and his

aides in a clearer context. The book also contains several typographical

errors, which this reader found distracting, and which a thoroughly

professional proofreader should have caught.

Despite these weaknesses, Nixon’s Economy is a fine book that makes an

important historiographical argument. Matusow’s book calls

into question the notion that Nixon’s administration should be judged, scandals

aside, in a favorable light. Matusow argues persuasively that in the realm of

economic policy,

arguably the most important of a president’s policies (and certainly so to most

voters), the Nixon presidency failed conspicuously, and in so doing opened the

door to more extreme and socially painful public policies during the 1980s.

This thesis is one that all serious students of Nixon’s presidency will have to

address in the years ahead.