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.

At the beginning of 1970, Nixon had installed his old friend Arthur Burns as chairman of the Federal Reserve. Matusow is a vivid portraitist, and his portrayal of Burns is damning. He regards Burns as perhaps the most nakedly partisan chairman ever to lead the Fed and probably the most incompetent. Burns had more or less promised Nixon that he would, if appointed, flood the economy with whatever liquidity it took to elect Republicans in 1970 and '72. Once he got the job, however, he hesitated. Burns understood perfectly well how inflationary Nixon's monetary policy would be. He would only proceed, he decided, if Nixon restrained prices directly. Burns had actually begun to flirt with controls in the fall of 1969; he declared himself openly in a speech to an audience of bankers in May 1970. At the time, Nixon still held to the free-market faith. But over the following months, he and his advisers would gradually succumb to Burns's demand.

One powerful motive for surrender was the disintegrating international position of the dollar. Theoretically, one dollar was worth 1/35 of an ounce of gold in 1970, just as it had been in the 1940s, '50s, and '60s. But as the United States printed up ever more green-tinted paper, it became ever more glaringly obvious that the dollar was worth a lot less. There was no danger that Americans would start showing up at Fort Knox demanding to trade dollars for gold at the $ 35 price -- in those days, it was a very serious crime for U.S. citizens to own monetary gold -- but there was nothing to stop foreigners from doing it. America's gold reserves were shrinking month by month as the real purchasing power of the dollar plunged below its legal exchange rate. And as the dollar became ever more overvalued, American exports suffered and imports surged. In 1971, the United States posted its first merchandise trade deficit since 1893.

By 1971, Nixon was looking for solutions to three problems: the trade balance, the dollar crisis, and Arthur Burns's reluctance to print the money needed for a boom unless Nixon produced some sort of price controls. With the help of his evil genius, Treasury secretary John Connally, he convinced himself in August that he had found them. On August 15, 1971, Nixon announced the most stunning turnabout in American economic policy since 1933. He froze wages and prices for ninety days, imposed a 10 percent surcharge on all imports, and refused any longer to exchange gold for dollars at the $ 35 rate.

In the short term, the plan worked. A delighted Arthur Burns started the printing presses rolling at the Mint, and Nixon got his 1972 boom -- and 61 percent of the vote. What he also got, however, was double-digit inflation in 1973-74, an energy shortage, the collapse of the international monetary system, and the worst economic slump since 1940. The president would have to resort to ever more desperate and extreme methods to contain the disaster he had triggered: a fantastic national scheme of centralized control over energy supplies (Nixon himself compared energy czar William Simon to Albert Speer -- and meant it, as only Nixon would, as a compliment); more price controls culminating in a second freeze in 1973; and endless rounds of negotiations to try to relink the dollar to the Japanese yen and the German mark at more realistic levels. It all failed miserably. The Watergate scandal struck a White House already politically crippled by economic disaster.

It took a decade for the United States to recover from Nixon's misadministration. Ronald Reagan accepted a fierce two-year recession to squeeze out the inflation Nixon had fed and abolished the price controls that had made the energy shortage possible. He slowed the growth in domestic spending that Nixon had tolerated and cut the tax rates that Nixon's inflation had made so onerous. By the mid-1980s, the value of the dollar had stabilized at home and abroad and the economy was again growing without inflation. It was a breathtaking, if imperfect, achievement. And at every step along the way, Reagan was accused -- often by economists who had abetted the Nixon debacle -- of ideological fanaticism, of rigidity, of refusing to heed the wise counsel of the sensible center.

Nothing quite equals the scorn of self-described "practical men" for advocates of free markets. The free marketeers, the practical men complain, are zealots who fail to reckon with the world as it really is. Free trade, solid money, balanced budgets, low and loophole-free tax rates: These might all be good in theory. But in practice, the hardheaded leader must be willing to jettison ideology to get the job done. And no politician ever took as much pride in his practicality as Richard Nixon. Again and again, Matusow quotes him chiding free marketeers by telling them, "There are no votes in it."

Nixon, however, was wrong. His clever flexibility proved spectacularly impractical both for the country and for himself. Reagan's free-market dogmatism turned out to be the most pragmatic policy of them all.

David Frum is a contributing editor to THE WEEKLY STANDARD.

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