NIXONOMICS the Economy Under Attack

NIXONOMICS The Economy Under Attack

Gary Allen, a graduate of Stanford Uni every day President Johnson put off the versity and one of the nation's top necessary reduction in federal spending authorities on civil turmoil and the New "he places in greaterjeopardy the entire in Left, is author of Communist Revolution ternational monetary structure." Broad In The Streets, and of the explosive best casting over C.B.S, radio on April 25, seller, Richard Nixon: The Man Behind 1968 , Mr. Nixon claimed that "only by The Mask, just released by Western cutting the federal budget can we avert an Islands. Mr. Allen, a former instructor of economic disaster .. .." In Dallas on Octo both history and English, is active in ber 11, 1968 , he declared that "America anti-Communist and other humanitarian cannot afford four years of Hubert Hum causes. Now a film writer, author, and phrey in the White House," because Hum journalist, he is a Contributing Editor phrey pushed for programs which would to AMERICAN OPINION. Gary Allen is have caused "a spending spree that would also nationally celebrated as a lecturer. have bankrupted this nation." A related theme of the Nixon cam • THE term "Nixonornics" was coined by paign was that the taxpayers' money was Democrat National Chairman Larry O'Bri being thrown down every socialist rathole en during the 1970 Congressional cam imaginable. In his acceptance speech at paign. O'Brien, as witty as he is Irish, ob the Republican National Convention, the served that under "Nixonomics" things inspired Candidate Nixon declared: "It is that are supposed to go up (like the stock time to quit pouring billions of dollars market and productivity) tend to go down, into programs that have failed. We are on and things that are supposed to go down the wrong road - it is time to take a new (like prices and unemployment) tend to road . ..." In a formal position paper on rise. It may seem hypocritical for one so in the economy, he proclaimed: timately connected with the Kennedy and Johnson Administrations to raise the mat The entire budget needs exhaus ter of mishandling of the economy, but tive review .... Some programs such things are to be expected in partisan . .. must accept less than maxi politics. What is surprising is that there is mum funding; 'non-essentials ... an uncomfortable amount of truth in must await easier times; every ma O'Brien's epigram. jor program . .. must be scoured The story of "Nixonomics" did not for economies. begin with the establishment of the Nix on Economic Policy on August 15, 1971, Such promises seemed a lifesaver to mil but goes back to the 1968 campaign in lions of Americans awash to their ears in which Mr. Nixon again and again attacked the taxes required to float the Great Socie the profligate spending ofthe Johnson Ad ty. These millions believed Richard Nixon ministration . Candidate Nixon forecast ec . meant what he said. They had faith in his onomic ruin if government spending were personal integrity. And they elected him not slashed to the marrow, He claimed that President of the United States.

NOVEMBER, 1971 49 Once secure in the White House, how billion. Before the year was out, the ever, President Nixon was beset by a most "bare bones" had been fleshed out to amazing lapse of memory. According to $200 billion .What had been deno unced columnist Charles Bartlett , the New Fron as profligate spending under L.B.J. was tier and Great Societ y had expanded the now said to be tightfisted frugality. number of domestic spending programs The following year , fiscal 197I , Mr. from 40 to an astounding 473. Republi Nixon introduced a $202 billion Budget, cans had resisted the addition of every and beefed it up to a fantastic $210 one of those 433 welfare schemes. Yet , billion before the end of the year. Then , soon after the election, word was leaked for fiscal 1972, he announced his conver from the Nixon headquarters that the sion to the fiscal philosophy of the Great Society, the much-denounced War Fabian Socialist John Maynard Keynes on Poverty and all, was to be preserved. and the federal Budget flitted skyward to " Liberal" columnist Roscoe Drummond an unbelievable $230 billion. For fiscal announced with delight : 1973, estimates indicate a Nixon Budget of from $250 to $275 billion . The most significant political To put this horror story in some kind fact of the hour is now so evident it of perspective it should be remembere d can't be seriously disputed: tha t President Harry Truman, who inher President Richard M. Nixon is a ited all of the New Deal programs and the "secret liberal. " serious problems of post-War adjustment, . .. Nixon is already proving spent only $65 billion during his last year himself a liberal-in-action if not a in office. Nine years later, Dwight Eisen liberal-in-theory - and this is what hower's 1960 Budget was but $76 billion. counts. The President's current $230 billion ex The evidence: travaganza is even $80 billion more than Lyndon Johnson initiated and Mr. Nixon claimed L.B.J . should have Congress approved the largest vol been spending in 1967. ume of social legislation of any A billion dollars amounts to approxi president in history, A nd Nixon mately five dollars for every man , worn prepares to carry forward every an, and child in th e United States. This major Johnson measure. . . . year's share of the federal Budget for a Nixon is not proposing to dis typical family of fou r is $4,600. The mantle them. He is proposing to largest portion of that comes from "hid build on them and his goal is to den taxes" paid by corp orati ons and make sure they achieve their pur businesses, which are in turn passed on to pose more effectively. the consum er in the price he pays for goods and services. Under "Nixonornics" Lyndon Johnson's 1967 Budget - at federal spending has increased a stagger the height of the Vietnam War - was a ing $47 billion during the first three years bloated $ 158 billion , which at the time of the Nixon Administration, with the seemed astronomical. While on the pri result that an American family of four is mary trail, Mr. Nixon had claimed that if paying $940 a year more in direct and that amount were not sliced by $ 10 indirect taxes than it did under the billion, the country would face fiscal profligate Lyndon Johnson . When it disaster. In 1968 , Johnson fatt ened th e comes to spending the publi c's money, Budget to a staggering $183 billion. For Mr. Nixon makes L.B.J . look like the fiscal 1969, however, Richard Nixon in Piker of th e Pedernales. And if President troduced what was astonishingly de Nixon's 1973 reelection Budget can be scribed as a "bare bones" Budget of $192 held to $250 billion , which is unlikely, it 50 AMERICAN OPINION Inflation is caused by the government inflating the money supply with defi cit-backed paper dollars, driving up prices and forcing demands for wage increases. When money must be backed by gold, such inflation cannot occur. But our gold supply has been poured into the hands of internation al bankers. We have so little left that it has been necessary to admit bank ruptcy and suspend international convertibility of the American dollar to gold. At the root of these disasters - a repudiated dollar and exploding inflation - are the Nixon deficits. In three years, Mr. Nixon made the profligate Lyndon Johnson look like the Pinchpenny of the Pedernales by "LOOKS LIKE ACINCH" running up deficits totaling a stupen dous $66.7 billion. Interest on the national debt, now $21.2 billion a year and the third-largest Budget ex penditure, is rocketing out of sight even as deficit spending is used to destroy our money by inflation. Mr. Nixon has responded by a dictatorial " temporary" freeze on our wages and prices, but goes on spending wild ly. In the last three years Nixonom ics has cost the ave rage family of four some $8,620. If Richard Nixon is allowed to continue h is attack on the economy, it could cost every thing we have - including our liberty.

NOVEMBER, 1971 51 will still cost our typical family an extra pay during the past few years to offset at $400 - for a total added cost of the least partially the terrible increase in the vaunted "Nixonomics" amounting to cost of living. But , in most cases, Ameri $1,340. By 1972, Nixon will have raised cans are running on a treadmill. U.S. the cost of running the federal govern News & World R eport for May 17, 1971, ment by thirty percent. provides some figures: But remember, we could not have afforded four years of Hubert Humphrey. Consider what has happened to Unfortunately, that added $1,340 is the typical worker in industry: Be not all that "Nixonomics" has cost the tween 1965 and early 1971, his average family. As government spending pay, on average, rose from $95 a has ballooned, so has the cost of living. week to $124, a gain of $29. But During the initial three years of the inflation trimmed that increase to Nixon Administration the cost of living $2.72 in "real" buying power. has jumped approximately eighteen per Employers have been caught in cent. This is sometimes called the "infla the same sort of squeeze. Soaring tion tax," once described by Richard costs - and sluggish sales in the Nixon as the "cruelest tax of all." If our past couple of years - have average family breadwinner is earning chopp ed profit marginsto the lowest $10 ,000 a year, his inflation tax is $600 level since World War II. per year, or $1 ,800 during the first three years of "Nixonomics." And if Mr. Aver We must also keep in mind that there age had $10,000 in savings or insuran ce are millions of Americans living on fixed policies, Mr. Nixon's scheme has caused it incomes, such as retirement pay and to shrink in pur chasing power to annuities, who have been devastated by $8,200.* the spiraling cost of living. Many of these Let us now examine the total cost of people have as a result been forced to three years of "Nixonomics" to the fam throw themselves on the mercy of Big ily of four. The total increase in direct Government - further increasing the and indirect taxes over those paid under power of an Administration which, as we the profligate Mr. Johnson amounts to shall see, was responsible for the in $1,820. (Remember, this will rise steepl y creasing cost of living in the first place. in 1973 as the Nixon Budget leaps from The stubborn persisten ce of the wage $230 billion to at least $250 billion - a price spiral was one of the major reasons figure which will cost the family of four for President Nixon's institution of th e another $400.) To this $1,820 we must ninety-day wage-price freeze. add the " inflation tax" of $ 1,800 and the Polls show that an exasperated public loss in the value of savings/insurance of has supported the temporary freeze , large another $1,800, bringing the three-year ly out of frustration over ever-climbing total cost of the new "Nixonomics" to prices. Joseph Kraft , a member of the Mr. Average to the startling total of Establishment Insiders' Council on For $5,420.Based on the same figures, the eign Relations, writes that "inflation four-year cost of "Nixonomics" will .. . can only be curtailed by joint re reach $8,620 per family of four. straint on the part of business and labor ." Most families have had some raise in This is typical of the line now being promoted by the " Liberal" media. And, *In 1969, 1970, and 1971 - thanks to the though it is widely believed , it is utter massive Nixon deficits - inflation has robbed Americans of $180 billion of their savings in nonsense .Blaming the wage-price spiral banks and insurance policies. Aren't yo u glad on business and labor is like blaming wet you voted for the Conservative Mr. Nixon ? streets for causing rain. Yet virtually

52 AMERICAN OPINION • .Ii. .t . " j f

(L to RI Wage-price enforcer George Lincoln; Chairman Paul McCracken of Council of Economic Ad visors; the President; Budget boss George Shultz; and, Arn old Webber of Cost of Living Council. every public figure now uses the terms money. When the auction begins, you "inflation" and "wage-price spiral" inter have the $100 you originally had in your changeably. If Conservatives are ever to wallet, plus the new $100 in deficit put the blocks to these monetary charla Federal Reserve currency, to bid for what tans, they must first create public under is being offered for sale. standing of the difference between "infla But what happens is that you and the tion" and the "wage-price spiral." others now bid more money for the The fact is that inflation is an increase goods available than you would have (or in the money supply - simply put, an could have) before, thus raising prices. inflation of the supply of dollars in You aren't any bett er off than you were, circulation. The new deficit -based money and the people who did not receive the injected into the economy by government fiat cash from the bureaucrat are worse takes on value only by reducing the off because they cannot compete as well purchasing power of all other money in the bidding. already in circulation. Actually, our economy is nothing but The effects of this new deficit money a vast auction in which millions of buyers are easily understood if you will imagine and sellers are every day submitting bids that you are atan auction. In your wallet and offering goods and services. As the you have $100 with which to bid for the supply of money is inflated by distribu limite d number of items for sale.Before tion of deficit dollars from the federal the day's bidding begins, a bureaucrat printing presses the bids for goods , wages, from the Federal Reserve System charges and services must rise. It is the increase in into the barn and announces to the crowd the money supply which causes the wage that he is going to provide nearly every price spiral. So, if one wants to stop the one present with $100 in new money. wage-price spiral, it is necessary to stop in Naturally, everyone is -jubilant - except flating the money supply. It wou ld be im those few who did not receive the new possible to have a wage-price spiral without

NOVEMBER, 1971 53 sufficient amo unt s of new money to pay The inflation we have at the for it, just as it wou ld be otherwise impossi start ofthe Seventies was caused by ble for all the people at our hypothetical heavy deficit spending in the Six auction to spend $200 each when they ties. In the past decade, the Federal had come with only $100. Government spent more than it Easy as these concepts are to under took in - $57 billion more. These stand, practically no one understands deficits caused prices to rise 25 them. Otherwise, the politicians and Es percent in a decade. tablishment pundits who defend wage and price controls as the cure for what During his campaign for the Presi they mistakenly refer to as inflat ion dency, Mr. Nixon attacked Lyndo n John would be laughed off the stage.One son for failing "to cut deficit spending begins to untangle the created confusion which is the cause of our present infla about our economic crisis the minute one tion." Budget deficits, he said, "lie at the realizes that infla tion - increasing the heart of o ur troubles." For his own part , money sup ply - can only be caused by he renounced any "massive step -up" in the deficit-based excesses of government federal spending programs, calling it "a and the government-regulated bankin g prescription for eco nomic disaster." Be system. fore the 196 8 election, when Richard Our main economic problem is money Nixon called inflat ion " the cruelest tax of pollution, and Richard Nixon has become all," he said "i t quietly picks your pock the prin cipal polluter. Mr. Nixon pollutes et , steals yo ur savings, robs yo ur pay the money, as did his recent predecessors, check. To check inflation the government by running vast deficits in the federal must cut down on unnecessary federal Budget. Deficits must be financed by spending . .. ." borrowing, which the government does So Richard Nixon knows what he is by selling bonds. When these bonds are doing to us, but he does it anyway. Mr. bought by the Federal Reserve System or Nixon's 1970 Budget plummeted $13.1 the commercial banks, as most of them billion in the red. For fiscal 1971 , he are, they are used as reserves to back the promised a balanced Budget. In intro creation of the new fiat money. A bank ducing it to Congress he announced that can put up a government bond as a he was keeping his promise, boasting: " I reserve with a Federal Reserve Bank and pledged to the American people that I use it as the basis for the creation of new would submit a balanced budget for money amounting up to six times the 1971." And he proclaimed: "The surp lus face value of the bo nd . The .Federal for 1971 , an estimated $1.3 billion, will Reserve refers to these in its han dbook as serve both to stem persistent inflationary "high powered dollars." You bet they pressures and to relieve hard-pressed fi are. That is the problem. It is these "high nancial markets." He added: "We must powered dollars" which inflate our cur balance our Federal budget so that Amer- / rency . And, as their existence requires ican families will have a better chan ce to federa l deficit, such inflation is inevitable balance their family budgets." without a balanced Budget. That year the Nixon deficit reach ed a Despite wha t he is curre ntly saying for crushing $25.6 billion , an " error in calcu public consumption, Richard Nixon does lation" of almost $27 billion . understand the difference between infla On January 27, 1969, Mr. Nixon had tion and the wage-price spira l. And he said: " I do not go along with the sugges knows tha t deficit spending by govern tion that inflation can be effectively ment is the cause of our current crisis.On controlled by exhorting labor and man January 27,1970, he declared: agement and industry to follow certain 54 AMERICAN OPINION guidelines." But by December 10, 1970, sane? Certainly. But the "New Econ o he was declaring: "I consider that at the mists" who created the Nixon policies time I made the first statement it would that landed us in the current mess claim it have been improper for me as President is absolutely sound. of the United States to urge labor and John Chamberla in in his nationally management to restrain their prices and syndicated column of February 6, 1971, wage demands at the time the govern revealed the ironic parentage of Richard ment was the majo r culprit in contribu Nixon 's phony Full Employment Budget: ting to inflation. But now that govern ment has done its part in ho lding down The de facto economic gray emi the budget in a restrictive monetary nence of the Republican party is, policy, now it is time for labor and believe it or not, none oth er than management to quit betting on inflation Walter Heller, who was chairman of and to start helping to fight inflation." the President's Council of Econom Since that time the deficit has increased ic Advisors under the Democrats. one hundred percent. This will be disputed by the Because of the influx of deficit dolla rs Nixon administration, but the truth the cost of living continued to rise during is that the idea of th e 'lull 1970. So did unemployment. As U.S. employment budget" (so-called be News & World R eport observed: "A cause it is supposed to come into major switch in Administration policy is balance through rising tax collec taking hold ... . Inflation is now calcu tions when unemploym ent narrows lated as less of a calamity than recession. " to 4 percent) is his own patented So America had come full circle from the nostrum. He has been peddling it beginning of the Johnson inflation, for years . ... through a weak attempt by Nixon at So it will come to pass that J. holding the monetary line by squeezing Kenneth Galbraith, who thinks the credit, back to massive defici t spending. Democratic party of Humphrey and Always image conscious, and fully Muskie is too stodgy and respect aware that the President's defic its were able to pass muster in Harvard driving inflation into the ionosphere, the Square, will be the de facto eco Nixonites now dispensed with the old nomic gray eminence of the next fashioned (and very embarrassing) task of phase of Republican policy. Gal figuring deficits based on what the gov braith has been peddling price and ernment collected in taxe s less what the wage controls in articles and government spent. "Deficits" wou ld be speeches for years. calculated on wha t the government theo No, it wouldn't work. But the retically would have collected in taxes if 'lull' employment budget " that instead of six percent unempl oyment Nixon has taken from the Heller there were "full emp loyment," which is arsenal of ideas drives inexorably calculated as an economy with only four toward the Galbraith "cure." perce nt unemp loyment. Mr. Nixon calls this a "Full Employ ment Budget," and it If Demo crat Walter Heller is father of is a fraud so tra nsparent as to embarrass a the "Full Employment Budget ," its un carnival pitchman. It is as if yo u were to nat ural grandfather is the notorious John say to yourself: "I am making $ 10,000 Maynard Keynes . While the current batch this year . If I worked weekends at a of economists tries to disguise Keyne s as a second jo b, I wou ld be making $12,500. "capitalist economist" who only wanted Therefore it is perfectly all right to go in to save the system from itself, Keynes debt and spend $12,500 this year." In- made no bones about what his system

NO VEMBER , 1971 55 was designed to do, openly bragging that duced a $230 billion Budget , described its adoption would mean the "euthanasia by the Wall Street Journal as a "bl ock of capitalism." An ardent Fabian Social buster." It called for a planned deficit of ist, he was not only a sex pervert of the $11.6 billion . In announcing his scheme worst sort ,* bu t boasted as early as the President claimed: "The full employ February 22, 1918 , of "being a bolshe ment budget is in the nature of a self vik." Lenin praised him before the Sec fulfilling prophecy: By operating as if we ond Congress of the Communist Intern a were at full employment, we will help to tional as being "more striking and more bring about that full employment." Even instructive" than any of his homegrown Keynes would have blushed . Communist revolutionaries. Commenting on the "new" Nixon and Whether Keynes' motive was the ha his Full Employment Budget, Establish tred for normal society so common in sex ment spokesman James Reston observed pervert s, or his devotion to the cause of in the New York Times: the Fabian Socialists, is unimp ortant. What he did was to devise a system in Washington doesn't quite know which it was claimed that inflation by what to make of all this. He swal deficit spending could produce perpetual lowed Lord Keyn es in one gulp. He prosperity. Keynes knew exactly what he announced the biggest budget defi was prop osing. As he had observed : cit of the century as if it were the first article in the Republican cate By a continuing process of infla chism, and he embraced most of tion governments can confiscate, the old Democratic economic devils secretly unobserved, an important like long-lost buddies. part of the wealth of their citi zens . . . . There is no subtler, no In his column of February 3, 1971 , surer means of overthrowing the Reston cheered: existing basis of society than to debauch the currency . The process The Nixon budget is so complex, engages all the hidden forces of eco so unlike the Nixon of the past, so nomic law on the side of destruction un-Republican that it defies ration and does it in a manner which not al analysis . ... The Nixon budget one man in a million is able to diag is more planned, has more welfare nose. in it, and has a bigger predicted deficit than any other budget of Yet, early in 1971, President Nixon this century. confided to newsman Howard K. Smith that he is "now a Keynesian in econom Within months, Nixondom was admit ics." The flabbergasted Smith later com ting that its planned $11.6 billion deficit mented: "That's a little like a Christian would escalate to $18.6 billion . But even Crusader saying: all things considered, I that proved a monumental understate think Mohammed was right." Nixon was ment. The latest estimates are that the now making it formal : He had joined the 1972 fiscal Budget will run something Revolution. like $28 billion in the hole. This adds up In February 1971 , Mr. Nixon intro- to a grand total of $66.7 billion in deficits for Nixon's first three years in "If your stomach will take it , see his letters to office. According to the Wall Street Jour his "l over," Lytton Strachey, in L ytton nal, Richard Nixon's 1971-1972 efforts Strachey, A Critical Biography, by Micheal Hol yr o yd ; Holt, Rinehart and Winst on, New seem assured "of registering the largest York, 1968, two vol umes. two-year deficit total since World War

NOVEMBER, 1971 57 II." And it is the Nixon deficits which are the win column. The Nixon "Game Plan" responsible for the wage-price spiral. was described as follows by the editors of In 1968, the federal debt of the Time magazine: United States was $347 billion. The so-called Legal Debt Limit (a laughable There would be no mandatory concept since Congress raises it almost controls, no strong-arm interference every year) now stands at $435 billion, a with labor negotiations, no messing ceiling Secretary of the Treasury John with the free market. Instead the Connally says can last only until the Administration would rely on clas middle of 1972. In other words, the sic economic remedies. holding national debt will have increased by an down its own budget spending incredible $88 billion during the first while relying on the independent Administration of the man who ran for Federal Reserve Board to hold back the Presidency on the basis that he was the supply of money and credit. more tightfisted than Scrooge. America's That kind of "Nixonomics" was taxpayers and their descendents will be supposed to slow the economy paying the price for a century. briefly and decisively brake the Not surprisingly, the cost of interest price spiral. After that, the Admin on the exploding national debt is also on istration could again rev up business the increase. In 1960 the tab for interest by increasing its own spending and on that debt was $9 billion. This year it is perhaps even cutting taxes. $2 I .2 billion, and the third largest item in Things did not work out that the Budget, trailing only welfare and way. The economy tumbled into a national defense. The $21.2 billion being long, though mild recession. paid this year as interest is enough money to have run our federal government for Things did not work out that way the first 118 years of our history. This because the "Game Plan," contrary to interest payment, alone, is more than the what Time would have you believe, was total federal Budget for any single year not followed. As we have seen, the up to World War II. Supporters of the Nixonites neither restri cted federal Nixonomics attempt to dismiss the im spending nor balanced the Budget. And portance of this terrible expense with the the Federal Reserve System, after initially wave of a limp wrist , dropping the hoary restricting credit, began spewing out bo cliche that there is nothing to worry gus billions in an attempt to stimulate the about because we owe the national debt economy. During the first six months of to ourselves. 1971, "The Fed" manufactured deficit How much of that $21.2 billion in money at an astounding rate. A rate interest did y ou receive? which would over a year inflate the As Congressman John Rarick told the currency by twelve percent. The Federal House on February 18, 1971: "It is Reserve Bank of St. Louis called this estimated that only 11.6 percent [of the expansion the "most rapid for any six federal debt] is owed to the small inves month period since World War II." tor in the form of savings bonds in small Throughout 1970 and the summer of amounts. The preponderant bulk of it is 1971, the Nixonites claimed that the owed to the international bankers and Game Plan was working. However , it was financiers." And they are running up the obvious that they were whistling past the score beyond belief. graveyard . Statistics on unemployment, During the 1968 election campaign, the cost of living, production, the balance Candid ate Nixon said he was confident of payments, and profits belied their that he could put the economy back in statements. Time declared that pressure s

NOVl:.MBER , 1971 59 began building on the President to re Free prices and wages are the quire labor leaders, politicians, and heart of our economic system; we businessmen to "d o something." Mr. should not stop them from working Nixon has been very clever about wait even to cure an inflationary fever. I ing for such " pressures" to justify each do not intend to impose wage and of his Leftward moves. He had promis ed price controls which would substi over and over again th at he would never, tut e new, growing and more vexa never, ever impose wage and price con tious problems for the problems of tr ols on America. On June 17, 1970 , he inflation. Neither do I intend to declared: rely upon an elaborate facade that seems to be wage and price controls Now, here is what I will not do. but is not. I will not take this nation down the road of wage and price controls, The first trial b alloon from the Nixon however politically expedient that ranks appeared in statements by Federal may seem Controls and rationing Reserve Board Chairman Arthur Burns, may seem like an easy way out, but for many years a close personal advisor to they are really an easy way in - to Mr. Nixon and a Nixon appointee. Dr. more trouble, to the explosion that Burns began by openly calling for an follows when you try to clamp a lid "incomes policy ," a euphemism for wage on a rising head of steam without and price controls. He told Congress on turning down the fire. ... July twenty-third of this year: "1 wish I Wage and price controls only could report that we are making substan postpone a day of reckoning. And tial progress in dampening down the in so doing, they rob every Ameri inflationary spiral. I cannot do so .. .. can of a very important part of his The rules of economics are not working freedom. Nor am I starting to use in quite the way they used to." controls in disguise. By this I mean Certainly Dr. Burns knew this was the kind of policy whereby govern pure balderdash. The rules had not been ment makes executive pronounce followed and the printing presses were ments to enforce guidelines in an working overtime to produce inflationary attempt to dictate specific prices deficit money. As the Wall Street Journal and wages without authority of said of the Burns statement : ."The old law. This is not the time for the rules of economics still work, when Congress to play politics with infla they're applied, and the government tion by passing legislation granting won 't help by dreaming up new ones ." the President standby powers to Rumors were now planted that Dr. impose wage and price controis. Burns was feuding over establishment of The Congress knows I will not wage and price controls with the Presi impose controls because they dent's other economic advisors, particular would do more harm than good. ly Chairman Paul McCracken of the Coun (Republican Battle Line, Septem cil of Economic Advisors, and Director ber ,I971.) George Shultz of the Office of Manage ment and Budget. McCracken was parti cu In a report to Congress in February larly outspoken, declaring that "the corn 1971, the President reiterated what he mon image ofwage-price control is entirely said was his unalterable opposition to wrong: The image that a little band of dedi wage and price controls. In language that cated , objective , analytical men in Wash could not have been plainer, Mr. Nixon ington would keep a few heads of powerful announced: corporations and unions from exploiting

NOVEMBER , 1971 61 'us.' The fact is that it is 'us' who would be, While the "Liberal" newspa pers and and would have to be, controIled. And the slick magazines were heaping praise on control would not be managed by Moses the President for his "bold" and "cour or Buddha, or Galbraith (at least not ageous" and "decisive" moves, none forever), but by the same kind of people pointed out the most important fact of who run and operate all the other agen all: That it was Nixon's own policies of cies in Washington. That is to say they blockbuster Budgets and enormous defi would be political and bureaucratic." cits which were at the core of the Then suddenly, in a complete reversal problem his New Economic Policy was of his Game Plan, the President took to supposed to solve. national television on the night of Au Nixon was, however, praised as a gust fifteenth and announced: (1) A political genius for having put the Demo ninety-day freeze on prices and wages. crats on the spot, ' with all but one (2) A ten percent cut in foreign eco potential Presidential opponent offering nomic aid. (3) A ten percent surtax on delighted praise. In the Wall Street Jour most imports.* (4) Suspension of the nal of August 17, 1971 , Richard Otten "doIlar convertibility" in agreement with observed : the LM.F. (5) A 4.7 million cut in federa l spending. (6) A forthcoming five President Nixon's far-ranging percent cut in government personnel. economic package dramatically (7) A list of requests for Congressional pulls the rug out from under his action on taxes and tax exemptions. Democratic critics . ... And, (8) a postponement in attempts There's certainly no doubt that to pass his multi-billion-dollar Family the President's sudden moves have Assistance Plan and Revenue Sharing lef t his political opposition strand proposals. ed and gasping for air. Mr. Nixon The "Liberal" media had a field day bought just about every item on the praising the President for "doing some shopping list of the top Democratic thing." J ust as it had when Mr. Nixon presidential contenders and their announced that he was traveling to Red economic advisers. ... China, the media boys worked overtime to create the appearance of popular sup Ott en then quoted an unnamed "presi port. Newsweek praised the economic dentiallieutenant" as declar ing: takeover as the "boldest departure" of his Presidency and maintained: " ... Mr. It 's going to be pretty hard for Nixon's new game plan also seemed to the other fellows to say that all the mark a turning point in American politics things they've been urging us to do - a clear signal that even under the for weeks and months are now Republicans the government would be suddenly evil. They can say it's too inter vening ever more vigorously in the late, perhaps, but they can't even marketplace from now on." say it's too little. It goes beyond what most of them have been sug -The surcha rge will not be levied aga inst goo ds gesting. imported fr om most Communist nat ions. It applies to goods co ming fr om countries th at have th e tr ad e stat us of "most favor ed nation ." It is as if F.D.R. had "pulled the rug" Yu go slavia , Poland, and Romania are th e only from under Hitler by announcing himself Co m m unist nati on s so d esign at ed . Imports a Nation al Socialist and damning the fro m t he U.S.S .R., Red China, Czecho -Slovakia, Eas t Germany, Hungary, Bulgar ia , and ot her Jews. Co m m unist nations are exem p t from th e sur Ernest Conine of the Los Angeles charge. Times put it another way, observing:

NOVEMBER, 19 71 63 If you're an ambitious Democrat ... Mr. Nixon gravely assured trying to build a case against the us, we have a crisis on our hands reelection of a Republican Presi one which can be met by cutting dent, what do you do when the taxes, freezing wages and prices agile fellow in the White House and, in effect, devaluing the dollar keeps stealing your stuff ? in relation to other major cur Norman Thomas, the perennial rencies. The very steps, in short, Socialist presidential candidate of which his Democratic critics have bygone years, is said to have com been demanding that he take. plained during the 1930s that he Meanwhile, leading Democrats couldn 't get anywhere because Pres are lef t with the uneasy feeling that ident Franklin D. Roosevelt kept there is literally nothing they can adopting major portions of the propose which the man in the Socialist platform. White House may not end up re Today's Democratic strategists peating back to the country as are beginning to appreciate how Republicangospel. Thomas felt. Mr. Nixon 's actions in winding Even the announced postponement of down the war, however, have not the Family Assistance and Revenue only gone beyond the Democratic Sharing programs by "from three months campaign promises of 1968. They to one year" was not a concession to have also gone beyond the much Conservatives, but a face-saving maneuver more dovish minority plank engi designed to cover the fact that those neered by the McGovern and Me measures were for the moment too radi Carthy fo rces at the Democratic cal to get by both the House and Senate. convention. And that move was related to his promise You could have knocked them to cut federal spending, which was al [the Democrats] over with a chop ready running some $3 billion ahead of stick when Mr. Nixon rather smugly his incredible $230 Budget. Syndicated announced on nationwide TV that columnist OJ. Bruckner says even the he would go to Peking. Until and supposed cut in the Budget was "an act unless he falls on his face, there which is primarily a bookkeeping device went another Democratic plank. that will not affect real spending in the TIle Republican President has current fiscal year." also been a surprisingly elusive tar The President's promise to slice spend get when it comes to social pro ing for foreign aid, while it has enormous grams. public appeal, is equ ally phony. Long a Strip away the Republican label, champion of bigger foreign aid spending, for example, and his welfare reform Mr. Nixon has in fact increased such program is plainly plagiarized from spending since entering office. The fact is Democratic proposals for a guaran that the actual foreign aid budget is far teed annual income - or negative more than the $3.2 billion to which the income tax - for the poor. President referred . Congressman Otto Similarly , Democratic assaults Passman's investigations show that for on the President 's revenue-sharing eign aid now totals a whopping $13.5 program would be more credible if billion , hidd en in twenty-seven Budget it were not for the fact that so categories. The President said nothing of many Democratic politicians and 'cutting the real foreign aid bud get. intellectuals have been proposing The promised five percent cut in gov the same thing for years. ernment personnel is anot her plank of the

NOVEMBER, 1971 65 New Economic Policy which has been of having the income of literally cheered by some Conservatives. The fact everyone in the country controlled is that the federa l payro ll is up from by a government agency. . .. $17 .1 billion to $29.2 billion since 1965 - the last $5 billion of the jump coming The following week McCracken was since Nixon's inauguration. There is no claiming that the New Economic Policy quest ion that millions of dispensable would produce a $15 billion jump in the bureaucrats could be eliminated by economy and 500 ,000 additional jobs. If phasing out their jobs , bu t it is far more totalitarian controls can produce such a likely that any reduction in the federa l jump in prosperity, one wonders why the payro ll will be more than offset by socialist countries of the world requ ire so staffing bureaus to enforce the New much foreign aid from the United States. Socialism which Mr. Nixon promises after Honest historians and economists real his wage and price controls are "relaxed" ize the consequences of wage and price in late November. controls all too well. One government The economy may well be helped by control beget s another, which begets the proposed ten percent investment tax another, which beget s another, until a credit and repealing the surcharge on once-free economy is completely regi automobiles, but to cut revenues in the mented. At a meeting on April 24, 1970, face of vast deficits can only produce economist Milton Friedman emphasized further inflation. the futility of the freeze mechanism: As Republican Battle Line observed , while a few meaningless concessions were We have two thousand years of made to the traditional Republican phi history on this, aside from the losoph y , the big prize of wage and price economic analysis, and there is not contro ls went to the Left . a documented case in which wage Even so, a Gallup Pol1 showed that and price controls ever had any seventy-three percent of Americans ap significant effect on inflation. prove what the President has done . Busi nessmen in overwhelming numbers saw Housewives who expect grocery prices the controls as a magic amulet to assure to level off as a result of President insta nt cure. Richard Nixon 's earlier ad Nixon's freeze have a disapp ointment mission that such controls "rob every ahead of them. A survey of advertised American of a very important part of his prices shows that the cost of food rose at freedom" seems to have been totally least as rapidly in the controlled era of forgotten . There was practically no 1941 to 1946 as in the non-controlled grousing about the fact that the freeze period of 1966-1971. From 1940 to did not apply to government spending, 1945, the greater portion of the period taxes, and welfare payments. under wartime wage-price controls, the Not surprisingly, the Nixon Admin index went up twenty-eight percent. istra tion had no problem with the flip From 1965 to mid-I970, a non-con flop in rhetoric. For example, economic trolled inflationary period, the index rose advisor Paul McCracken had declared a twenty-three percent. The freeze during week before the freeze: World War II was no more successful with wages tha n it was with prices generally. General price and wage control Despite the controls, average hourly would be a serious threat to individu wages of pro duction workers were in al freedom. It is amazing that the flated in the perio d fro m 1940 to 1945 press, so jealous ofits own freedom, by 54.5 percent. does not recognize the implications While controls have always failed to

NOVEMBER , 1971 67 hold down prices, the y create real chaos falsifies these signals, and so dis in the economy. As Arnold Weber , Exec torts and disrupts production. utive Director of the fede ral Cost of Living Council, admitted in August : What happens when wage and price controls are fastened on an economy for The textb ooks all say how com an extended period of time? Human plicated the American economy is. beings, being innovative so uls, find ways In the last 48 hours I have found to beat the system. Workers receive raises out how true that is. The govern through real or created promotions. Man ment must now concern itself with ufacturers raise the price of their prod everything from the pork-belly ucts by cheapening the quality, changing market to titanium. discounts, or abolishing services. As Dr. Milton Friedman observes : "Even 60 ,000 Economist Henry Hazlitt observes of bureaucrats backed by 300,000 volun the theory of wage and price can trol: teers plus widespread patriotism were unable during World War II to cope with It assumes a sort of economic the ingenuity of millions of people in omniscience on the part of the finding ways to get around price and price-fixers, who are apparently wage controls that conflicted with their presumed to know just what 10 individual sense of justice." million different prices, rents, sala Eventually, if the controls are not ries, and wages, and 50 trillion removed , shortages develop and are fol cross-relationships between them, lowed by what the bureaucrats call a ought to be. It assumes that the "Black Market." Actually, in a dictator prices and wages on any given day ship the only free market is the Black (say August 14, 1971), and their Market. cross-relationships, are just about The ninety-day price and wage freeze where they should have been . . .. was presented as " voluntary," yet it is The advocates of wage and price enforced by court injunctions and fines fixing forget that regardless of the up to $5,000 for each violation - all by price "level" (which is a statistical Executive Order. fiction), individual prices on any When th e President insti tuted his given day or moment - as can be freeze, he did so und er the authority of seen in every stock or commodity the Economic Stabilization Act of 1970. market - are fluctuating and in When that bill was passed , Mr. Nixon transition. claimed he was opposed to it but (sur prise!) he signed it anyway, declaring: "I Wages and prices are not just arbitrary have previously indicated that I did not figures as totalitarian "Liberals" imagine. intend to exercise such authority if it Mr. Hazlitt explains: were given me." Later, inconveniently, he changed his mind . But when the President Wages and prices have work to named the Office of Emergency Prepared do. T71 ey are signals to producers, ness to execute his freeze , he went much sellers, buy ers and consumers con farther and declared a "national emergen cerning which products or services cy," invoking an Executive Order which are profitable and which unprofit Conservatives have feared for years might able, which are in undersupply and be used to convert the country int o a which in oversupply, where produc dictatorship. As Ken Clawson observed in tion should be increased and where the Los Angeles Times of Sept ember 9, reduced. Price-fixing destroys or 1971 :

NOVEMBER, 19 71 69 Wh en President Nixon estab by declaring a sta te of emergency. Ac lished a wage-price freeze last cording to EO 11490: "A nation al emer month, he did so under special gency may be defined as an unforeseen powers that are among those grant combinat ion of circumstan ces, capable of ed by more than 200 laws giving affecting parts of or th e whole of the him virtually unlimited prerogatives nation's posture, which calls for immedi anytime he feels the nation is in a ate action by the nation."This definition crisis situation. In a sense, he filled is elastic enough to be applied to any: out and cashed one of a pocketful thing from a strike at Disneyland to an of blank checks provided Presidents invasion from Mars. of the United States over the last The Office of Emergency Planning generation. (O.E.P.) is administering the freeze through ten regional headquarters. The Some of thes e Executive Orders date creation of the se ten provinces, or "fed back to 1933, with powers grabbed under eral regions ," has scarcely been men the guise of ending the Depression. tioned in th e news media, but they date Othe rs were added during World War II. back to that Executive Order of 1969. As Clawson reports: As John Fischer observed in Harper's for November 1970 : ". . . on May 2 1, 1969, No President has given the slight [President Nixon] announced th e es est indication of terminating the tablishment of ten feder al regions.. .. national emergency and relinquish To the astonishment of many of his ing his special powers, even though aides , and some key permanent civil most officials of the executive servants, this order provoked little polit i branch will admit that conditions cal flak - presumabl y because he made of the depression, World War II, his move so soon after taking offi ce, and and the cold war are hardly applica so quietly that the opposition never got ble now. So the blank checks re organized." main. ** * These regions go a long way towards Six Presidents - four Democrats abolishing the traditional balance of and two Republicans - have kept powers between the federal government the national emergency and its on one hand , and state and local govern special powers alive . . .. ment on the other. Yet President Nixon established thes e provinces in the name of Although most Constitutional authori decentralizing power. And he had them ties believe these Executive Orders are ready when his plans called for a federal extra-legal, they delegate enough power takeover of the wage-price features of the to the Chief Executive to establi sh an economy. The escalation to dictatorship . absolute dictatorship which abrogates all had begun. Constitutionally guaranteed liberties . Newsweek rep orted in its issue of Originally the Executive Orders under September 6, 1971 : which the President acted to put the Office of Emergency Planning in charge .. . already OEP has begun to of the free economy had been justified as extend its tentacles. To free its own a part of Defense Planning. But when Mr. personnel to focus their attention Nixon signed EO 11490 and published it on monitoring the enforcement of in the Federal Register in 1969 , giving it the freeze, the JOB-man agency last the force of law, the phrase became week enlisted 2,000 Int ernal Reve Emergency Planning. The President could nue Service agents and 3,000 em now become an absolute dictator simply ployees of the Agriculture Stabiliza-

NOV/:,MBER. 1971 71 tion and Conservation Service to And there are reportedly five thousand handle public-contact chores. labor contracts awaiting the end of the freeze. Conservatives will hardly be cheered When the jack-in-the-box pops up and when they learn that General George says "bleep," Mr. Nixon will have his Lincoln, top gun at the O.E.P. , is a excuse for fastening more-permanent con member of the Establishment Insiders' trols on the American people. He will Council on Foreign Relations. A Rhodes continue to pay lip service to the Free Scholar, he was one of General George Enterprise system even as he continues to Marshall's top planners during World War lay the socialist grid. "Liberal" economic II. And Newsweek informs us that Gen columnist Sylvia Porter, who greets the eral Lincoln was gleeful at his new oppor controls with obvious glee, predicts: tunity. "I'm very happy," he told a visitor. "Do you want a job?" Despite the We entered a new economic era fact that the President has described in the U.S. on August 15, when himself as eager to avoid establishing President Nixon at last abandoned another giant bureaucracy, Lincoln has his increasingly dangerous negative developed a contingency plan calling for wage-price policies, announced a 13,000 enforcers. 90-day freeze and embarked on a Mr. Nixon has promised that the hunt for the inflation curbs that freeze will end on November fifteenth. will be acceptable and workable But he said at the same time: thereafter. Not in the foreseeable future will our economy be as free ... there will be a strong, effec as it was in the weeks leading up to tive follow-up program . .. . Phase that fateful Sunday evening. 2 will be strong. It will be effec tive .. .. Second it will require the U.S. News & World Report has re cooperation of labor and manage vealed that the board chairman of one ment .. .. But third, and this is "major U.S. corporation" received this vitally important, it will have teeth memo from one of his economic consul in it. You cannot have jawboning tants: "Our business system is in for a that is effective without teeth . permanent change as a result of President Nixon's economic program. There will be Does this sound to you as if the freeze no 'after the freeze' in our lifetime. will be terminated? Here is Mr. Nixon at Instead, I foresee ' permanent economic his Machiavellian best, simultaneously and financial guidelines in some form." promising cold fire and hot ice. We are As the Wall Street Journal's Richard obviously going to have. wage and price Janssen put it: "Phase 2 may be forever." controls that will be called something else Janssen continued: "And even 10 years - something General Lincoln's 13,000 may not see an end to intense interven enforcers will understand. tion. 'We aren't designing a program for Between now and the 1972 election, permanent control' of the economy in Mr. Nixon's every decision will be gov sists a [Nixon] strategist, but the word erned by political expendiency. And he 'permanent' is his escape clause. For he knows that if the controls are temporar adds: 'I don't know how much shorter ily lifted in mid-November it will be like than infinity' the period of restraints will releasing the compressed spring in a have to be." jack-in-the-box. The raises in wages and This freeze is the first step, predicted prices which have been stifled over the former Johnson economist Otto Eckstain. ninety-days will be instituted all at once . "Who's kiddingwhom. Why else is every-

NOVEMBER, 1971 73 body in Washington frantically studying problems were not improving, tho ugh the tho se old OPA manuals?" Nixonites pretended not to be concerned. Why else indeed! George Shultz told the Society of Ameri So a Republican President is sounding can Business Writers: "Some people seem the death knell of the Free Enterprise to think that we should virtually place system. Had a Democrat tried to do such the balance of payments at the top level a thing, Republican Congressmen and of priorities ... . that is an attitude that Senators would have deno unced the New doesn't seem acceptable to me." Shultz Economic Policy for what it is - a major described the Administration's attitude step towards tyranny. But, when one of towards the b.o.p, as one of "benign their own moves to become the tyrant, neglect." We were in essence exporting nearly everyone is silent. We must have part of our inflation to Europe. This Party loyalty you know. attitude induced Europeans to trade their That portion of the New Economic dollars for gold, nearly exhausting our Policy which applies a ten percent surtax supply. Central banks were told by Amer on imports and cuts the dollar loose from ican officials that any run on our re gold may turn out to be especially impor maining gold would force the government tant, as both features are closely connec to suspend convertibility. Apparently, by ted with Mr. Nixon's call for establish the middle of August, the demand could ment of a new world monetary system. no longer be ignored. With our gold The ten percent surtax will restrict im nearly gone the governme nt closed the ports and, theoretically, protect Ameri gold window. can business. If so, this could be very What finally triggered it? Financial good for Mr. Nixon politically. That is, analyst Harry Schultz of London reports until the scheme invites retaliation arid a source inside the American Government precipitates a trade war. The fact is that informs him that $7 billion in U.S. bonds the surtax is merely a cosmetic job for held by European countries are now the one real cause of our balance of payable in gold at $35 an ounce; Schultz payments and trade problems. Once says the gold window had to be closed again, the real culprit is inflation, which because there was but a dwindling $3 has priced American products out of billion left with which to meet payments. world markets. If this is true, and Schultz claims his More shrouded in mystery are the source is beyond reproach, then the U.S. consequences of cutting the dollar free has practically no gold with which to from gold. This move was probably meet the demand to convert outstanding forced on the President by the fact that dollars in foreign hands, even if the because of inflation the European central decision to revalue were made tomorrow. banks were suffering an acute case of This means that Mr. Nixon's money dollar indigestion. Approximately $60 managers have already sold the farm to billions were sloshing around in Europe in the Insiders of international banking. the form of Eurodollars (American dol All of which could explain why Presi lars which wound up overseas as a result dent Nixon has not moved to protect of our adverse balance of payments). America by devaluing the dollar in terms Every one of those dollars was theoreti of gold from $35 an ounce to, say, $100 cally convertible into gold by the U.S. an ounce . Instead, he has chosen to let Treasury at the rate of $35 an ounce.But unbacked and overvalued paper dollars the Treasury had only $10 billion in gold float against the other currencies of the with which to meet these potential de world in the hope that other nations mands. will upvalue their currencies against the Meanwhile the balance of payments dollar.

NOVEMBER , 1971 75 A strong possibility exists that the union leaders no longer represented the European bankers could establish a workers, but the government, and made Common Market dollar backed by gold to sure the workers didn't cause any prob compete against the American dollar lems. It is not without meaning that Mr. backed by the printing presses. The next Nixon says he plans to bring labor leaders step from such a regional currency would into his wage and price control commis be a world currency issued by a World sion (whatever it may be called) under Government. The American public might Phase 2. be propagandized into joining such a Richard Nixon once correctly ob World Government on the ground that a served that "Permanent wage and price world currency would end the interna controls would stifle the American econ tional monetary chaos ruining the U.S. omy, its dynamic, its productivity, and economy. And Mr. Nixon, as the New would be, I think, a mortal blow to the York Times ' James Reston is constantly United States as a first-class economic reminding us, has as a primary goal the power." He also indicated that wage establishment of a "new world order." As price controls produce a giant bureau recently as August 6, 1971, the President cracy, shortages, rationing, and Black spoke to a U.N. assembly of the "artifi Markets, yet do not stop inflation. Now ciality of political boundaries," which he he has instituted just such controls. said are now "obsolete." Why? Because Richard Nixon knows Regardless of what happens in the vital they are an important step toward an international monetary situation, there all-powerful central government. Any can be little doubt that we are headed for time you have an all-powerful central more inflation, socialism, and regimenta government, you have fascism-socialism. tion at home. Professor Medford Evans And we can take Professor John Ken calls it the New Fascism. He may be right . neth Galbraith's word for it that under While A.F.L.-C.1.0. President George Nixonomics, "the name of the game is Meany has said some foolish things about socialism." the New Economic Policy, he was right Mr. Nixon hopes that the carrot fea on target when he noted: ''We might as tures in his New Economic Policy will well go to Hitler's system, or Musso produce one last hurrah in the economy, lini's .. . . If you go down that road, if and that the stick will not have to be you have wage controls by government, applied until after election day. It is quite you're going to have everything con possible that the inflation produced by trolled by government." In 1938, Arthur his "Full Employment Budget ," com H. Steiner observed of Fascism in his bined with the short-term effects of the book Government In Fascist Italy : "The import surtax and the possibility that most important [Fascist] Party organ is Eurodollars may be spent on U.S. goods the Permanent Committee for Price Con and commodities now that they cannot trol ... [which] is admirably equipped to be exchanged for gold, could create the maintain scrutiny over all aspects and temporary illusion of prosperity between phases of corporative and economic now and November 1972. At least this is activity. " what the President is banking on. Elec One must remember that Hitler mod tion day 1972 will be his judgment day. eled his economy after Mussolini, and And ours. both were (like Mr. Nixon) great admirers My friends, if you have been waiting of John Maynard Keynes . until the moment was critical to get into According to Professor Steiner, under the fight for America with every scrap the Fascist system unionism was "made and bone and sinew of your being, be practically compulsory." Except the advised that The Time Is Now! •• 76