The Magazine


Ruining the Economy to Win an Election

Sep 21, 1998, Vol. 4, No. 02 • By DAVID FRUM
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Pour a couple drinks into a Republican above a certain age, turn the conversation to politics, and the odds are that sooner or later he will start to grumble about the bad rap Richard Nixon got. The wiretapping didn't start with Nixon, after all -- and what were people supposed to do in 1968 anyway? Vote for that blowhard Hubert Humphrey?

With Nixon's Economy: Booms, Busts, Dollars, & Votes, Allen Matusow has written a book that should put a halt to that sort of nostalgia. In lucid and vigorous language, Matusow exhaustively demonstrates that Nixon was directly responsible for the worst economic disasters to strike the United States since the Great Depression. In Matusow's telling, Nixon emerges as a politician of almost limitless cynicism. He never believed in the ruinous economic policies he adopted, but he was prepared to debauch the currency, shackle the free market, and up-end the world's trading system in order to buy himself eight years in the Oval Office. And in the end, his scheme backfired with almost Sophoclean tidiness: The economic catastrophe Nixon touched off to win the election of 1972 consumed him in 1974.

There's a moral here somewhere, and Matusow draws it out in a book that is richly researched, subtly argued, and stylishly written. It is one of the finest studies of presidential decision-making we have -- maybe the very finest -- and along the way it metes out overdue justice to the brave handful within the Nixon administration (George Shultz above all) who kept their heads, honored their principles, and served the nation well. Matusow breathes life into subjects as seemingly dreary as meat-import quotas and natural-gas regulation, reminding us that topics as arcane as these can determine the success or failure of a presidency.

When he took office in January 1969, Nixon inherited a mountain of troubles: a country torn by political controversy over a losing war started by his Democratic predecessors and a currency devalued by an inflation aggravated by that war. Daunting as those problems were, they were not beyond solution. After all, the administration that Nixon had served as vice president inherited exactly the same problems in January 1953. And President Eisenhower succeeded both in ending the Democrats' war and snuffing out the Democrats' inflation. In 1969, it's true, both the war and the inflation were worse -- but not impossibly worse.

Nixon did manage to extricate almost all U.S. ground forces from Indochina by the end of his third year in office without losing the war. In fact, the repulse of the North Vietnamese invasion of April 1972 seemed to confirm his hope that South Vietnamese ground forces backed by American money and airpower could defeat the Communist army. But the other half of his assignment -- righting the economy -- Nixon egregiously bungled.

The first order of business was to halt the inflation Kennedy and Johnson had stoked. By the end of 1968, the consumer price index was rising at more than 4 percent a year (up from only about 1 percent in 1961) and the rate of inflation was accelerating. At first, the administration heeded Milton Friedman's urgings and tried to cool the economy gradually. But the problem with gradualism is precisely that it is gradual. Nixon, who keenly felt the precariousness of his political position, wanted big and immediate results.

Nixon had won only 43 percent of the vote in 1968 and carried neither house of Congress with him -- the first elected president since Zachary Taylor to begin his administration with both branches of the legislature in the hands of the opposition. Even though Nixon believed that the Democrats had forfeited the confidence of the country on issues of war and peace and law and order, he feared that they still owned the pocketbook issues. So his hopes for creating a new political majority depended on a booming economy in 1970 and 1972. And by the end of 1969, it was clear that Friedmanism would not produce the boom he wanted in time to win him his elections.

In fact, by the end of 1969, the economy was slipping into recession -- the mildest recession of the postwar era, but still a recession. In November 1970, the Republicans picked up only one Senate seat (rather than the half-dozen for which Nixon had hoped) and lost eleven seats in the House. Nixon decided the time had come to try something new.