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Cambridge Business & Economics Conference 2013
Economics/Finance–History/Macroeconomic Policy
Macroeconomic Policy Lessons Learned and Admonitions Offered?--Experiments with
Nixonomics and Reaganomics in Addressing Recessions
By Frederick J. Augustyn, Jr., Ph D
Library of Congress
Social Sciences Section
101 Independence Ave., S.E.
Washington, D.C. 20540-4287
faug@loc.gov
augustynfrederick5@gmail.com
ABSTRACT
This paper is an analysis of some key aspects of economic policy initiatives attempted under the
presidencies of Richard Nixon (1969-1974) and Ronald Reagan (1981-1989.) The goal is to
generate discussion about two past macroeconomic policies in the United States and to suggest
what lessons can be gleaned and applied to current economic needs. The “Global Financial Crisis,
2007-2008" (as a Library of Congress subject heading terms it), otherwise called the Great
Recession, and deemed by many analysts the worst financial conundrum since the Great
Depression, has brought into question in industrial countries many of the economic assumptions
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of the last few decades. The global financial crisis which was recognized in September 2008 with
the failure, merger, and subsequent temporary government management of several large United
States-based financial firms and spread with the insolvency of additional companies, actions by
governments in Europe, and declining world-wide stock market prices, continues to challenge
those who would seek its solution, with or without the benefit of historical reflection.
Significantly, it has engendered a re-consideration of the economic ideas of John Maynard
Keynes, which in various forms were put into effect during the economic crisis of the 1930s by
the administration of Franklin Delano Roosevelt (1933-1945.) I am not aware of many
comprehensive, comparative analyses made of these two contrasting macroeconomic policies,
albeit within the same political party at the executive level (the Republican presidential
administrations of Nixon and Reagan.) This study presumably will contribute to the literature on
how (or how not) to manage the economy. In any case, governments must make economic
decisions, especially when they face economic downturns, as almost inevitably they will, as did
both of these administrations. Macroeconomic policy proposals figured in the 2012 U. S. election
cycle, though perhaps not as much as many had predicted.
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INTRODUCTION
Both supporters of a return to Keynesian influenced economic policy, such as Robert Sidles in
Keynes: The Return of the Master (New York: PublicAffairs, 2009) and opponents, notably
Hunter Lewis in Where Keynes Went Wrong And Why World Governments Keep Creating
Inflation, Bubbles, and Busts (Mount Jackson, VA: Axios Press, 2009) agree that this
economist’s ideas are once again palpable, even though he is physically not able to give advice.
Nixon is said to have famously altered Bismarck’s ironic remark “We are all Socialists now” to
his “We are all Keynesians now” (although surprisingly some attributed that statement to Milton
Friedman, who would have stated it unhappily.) The 37th president’s New Economic Program
was soon dubbed Nixonomics by the contemporary press especially; it appears, by columnists
such as Rowland Evans and Robert Novak and Leonard Silk. Reagan stated that “only by
reducing the growth of government can we increase the growth of the economy” and revenues
did increase during his administration. In contrast to Nixon, he preferred more unadulterated
free-market principles, called in his time supply-side, Laffer Curve style, disparaged as trickle
down economics, or more simply, termed Reaganomics (as popularized by radio personality Paul
Harvey.) His administration pursued privatization policies (with purportedly greater efficiency
countering public accountability.) I used librarians’ tools: historical online databases such as
those available for The Economist newspaper and ProQuest’s Historical Newspaper resource;
World Cat; H. W. Wilson’s Readers’ Guide Retrospective, and footnote.com. I also utilized
more traditional print archival sources on deposit at the Library of Congress in the attempt to
extract economic policy lessons from the past. Among these are the Alice Rivlin Papers,
Director of the Congressional Budget Office (1975-1983); the financial journalist Irving R.
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Levine Papers; the Jack Kemp Papers (recently processed and opened to the public); and those
accessible portions of the Donald Rumsfeld Papers’ finding aids (notably when he served as head
of the Cost of Living Council or the Economic Stabilization Program under Nixon.) I also
sought off-site assistance from the Nixon and Reagan presidential libraries under the National
Archives system.
METHODOLOGY
I used textual sources, both online and in print (in published and archival formats), to see how
both Nixon’s and Reagan’s macroeconomic policies were formulated, enacted, and assessed both
internally by participants and externally at the time by the public, the press, and other media and
retrospectively by scholars. Some references made since the onset of the Great Recession to
these earlier policies might indicate what lessons and warnings have been garnered.
OBJECTIVES AND TENTATIVE CONCLUSIONS
The popularity measured by frequency of appearance of the term Reaganomics over Nixonomics
is revealing and can lead to some conclusions. The Economist database (as of late 2010 and my
research continues) yielded 135 articles using Reaganomics and 7 using Nixonomics, although
527 articles used “Nixon and the economy.” Searching the Library of Congress Online Public
Access Catalog (OPAC) by keywords yields only 3 published books bearing Nixonomics either
in their titles or in their catalog records, but 55 with Reaganomics. One might guess that this in
part reflects the popularity as well of one president, both in his time and subsequently, over the
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other. But it might also account for simply how popular, colloquial expressions are increasingly
used both in the press and in scholarly literature. Arguably political discourse is becoming more
colloquial. The three Nixonomics books were contemporary; the fifty-five (so far) Reaganomics
books were both contemporary and retrospective. Expanding this to a World Cat search yields 2
more books using Nixonomics and 31 more utilizing Reaganomics plus a sound disc for
Reaganomic Blues (called Hard Times National Anthem.) Searching the ProQuest Historical
Newspaper database yields similar results. There were 219 documents found for Nixonomics
and 8023 documents found for Reaganomics. Use of the Reagan term for a type of
macroeconomic policy continued considerably after his administration, but not so for Nixon’s. I
also searched H W. Wilson’s Readers’ Guide Retrospective online and found 17 records for
Nixonomics and 92 for Reaganomics.
Although both achieved some successes, as many major economic programs do, generally
speaking Nixonomics was regarded as a failure both at the time and in retrospect, while
Reaganomics was much more successful. Paradoxically it appears that many current industrial
country governmental polices have been more akin to Nixonomics’ embrace of Keynesian
stimulus spending rather than to Reaganomics even though Reaganomics may have been the
more successful. Spending vs. austerity are still key debating points in industrial policy. Reasons
for these accomplishments and defeats, both perceived and real, should lead to a lively
discussion among those interested in learning from the recent past.
FIGURE 1
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THE NIXON ADMINISTRATION FROM A MACROECONOMIC POLICY
PERSPECTIVE
CHALLENGES–Inherited in 1969 a 3.5 percent unemployment rate and a 5 percent
inflation rate. By August 1971, the unemployment rate had risen to approximately 6
percent, while the inflation rate was 4.6 percent.
RESPONSES–Economic Stabilization Act of 1970–gave the president authority to stabilize
prices, rents, wages, and salaries.
TIME LINE–Examples
Repeal of the investment tax credit in 1969 and removal of the poorest from the tax rolls.
Tripartite Committee (1971) established.
“Nixon Shocks”–Announced on August 15, 1971 (ushering in the New Economic Policy)–no
more gold standard; wage and price freezes; cost-of-living council established.
Phase 1–August 15-November 13, 1971--90-day freeze on wages and prices administered by
the Office of Emergency Preparedness.
Phase 2–November 14, 1971- January 10, 1973--allowed limited wage and price increases.
Phase 3–January 11-August 12, 1973--Mostly voluntary controls during 1973, but with a
60-day price freeze (June 13-August 12, 1973.)
Phase 4–August 13, 1973-April 30, 1974--A price freeze followed by gradual decontrol–
Program ended in August 1974.
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FIGURE 2
PARTICIPANTS–
Burns, Arthur
Connally, John
Heller, Walter
Friedman, Milton
McCracken, Paul
Nixon, Richard
Peterson, Peter
Rumsfeld, Donald
Shultz, George
Solomon, Ezra
Stein, Herbert
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FIGURE 3
A SELECTED BIBLIOGRAPHY
Economic Stabilization Programs, 1971-1974 Records. RG 432. Richard M. Nixon Library,
Yorba Linda, CA.
Joseph Alsop and Stewart Alsop Papers, Manuscript Division, Library of Congress,
Washington DC
Jack Kemp Papers, Manuscript Division, Library of Congress, Washington DC.
Irving R. Levine Papers, Manuscript Division, Library of Congress, Washington DC.
Alice Rivlin Papers, Manuscript Division, Library of Congress, Washington DC.
Donald Rumsfeld Papers, Manuscript Division, Library of Congress, Washington DC.
Affolter, Oliver. Nixonomics: Okonomische und Politische Faktoren des Kurswechsels
vom August 1971 (St. Gallen, 1974.)
Allen, Gary. Nixonomics: The Economy Under Attack (Belmont, Mass.: American
Opinion, 1971.)
Alsop, Joseph. “Economy Is Critical Issue, But U.S. Mood Buoys Nixon,” The [Baltimore]
Sun, May 25, 1970, p. A11.
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-------. “Democrats Pinning ‘70 Hopes On What They Call ‘Nixonomics,” The Washington
Post, May 25, 1970, p. A23.
-------. “Nixon’s National Backing,” Los Angeles Times, May 26, 1970, p. A9.
Carvlin, Thomas. “O’Brien Raps Nixon Policy on Inflation,” Chicago Tribune, May 22,
1970.
Dowd, D. F. “Nixonomics,” Ramparts Magazine, v. 10 (November 1971), p. 13-16.
Ferrell, Robert H., ed. Inside the Nixon Administration: The Secret Diary of Arthur Burns,
1969-1974 (Lawrence: University of Kansas, 2010.)
Fischer, J. “Nixonomics,” Harper’s Magazine, v. 243 (November 1971), p. 10+
Friedman, Milton, et al., “Three Views of Nixonomics and Where It Leads,” [Interview],
Newsweek, v. 79 (January 31, 1972), p. 74-5.
“Heller Says ‘Nixonomics’ Is Working,” The Washington Post, March 8, 1970, p. 26.
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Jensen, Ralph. Let Me Say This About That: A Primer on Nixonomics (New York: Holt,
Rinehart, and Winston, 1972.)
Krugman, Paul. “China Goes to Nixon,” The New York Times, January 20, 2011.
“Legacy of Nixonomics,” Newsweek, v. 84 (August 19, 1974), p. 67.
Lekachman, R. “Nixonomics,” The New York Times Magazine (December 2, 1973), p. 323+
Matusow, Allen J. Nixon’s Economy: Booms, Busts, Dollars, and Votes. (Lawrence:
University Press of Kansas, 1998.)`
_______. “Economics, Politics, and the Limits of Presidential Power: The Case of Richard
Nixon.” New England Journal of History 56, no. 2-3 (1999-2000): 90-100.
McCracken, Paul W. “Economic Policy in the Nixon Years,” Presidential Studies
Quarterly 26, no. 1 (Winter 1996): 165-177.
“Nixonomics”: Heller Says U.S. is Peering into Gun Barrel of Recession, Christian Science
Monitor Oct 22, 1969, p. 1.
“Nixonomics Spreads Gloom Among Traders,” Business Week (November 20, 1971),
p. 78-9.
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Pfiffner, James P. The President, the Budget and Congress: Impoundment and the 1974
Budget Act (Boulder, Colo.: Westview, 1979.)
Porter, Frank C. “Economy to Rise–Nixon; Stocks Slump; ‘Recession’ Hit by Democrats
Nixon, Exchange Head Talk; Stocks Again Hit 7-Year Low,” The Washington Post, May
22, 1970, p. A1.
Reuss, H. S. “Democrat’s Critique of Nixonomics,” The New York Times Magazine (July
7, 1974), p. 10-11+
Rowen, Hobart. “‘Jawboning Nixonomics’: :Gumming to Death” Team Held Competent,”
The Washington Post Oct 21, 1969, p. A4.
Seeger, Murray. “Nixon Meets Exchange Chief, Tells confidence in Economy; Market
closing two Hours After Comment Is Off 11; Stocks Now Down 59 Since He Told of Good
Time to Buy,” Los Angeles Times , May 12, 1970, p. 1.
Silk, Leonard. Nixonomics: How the Dismal Science of Free Enterprise Became the Black
Art of Controls (New York: Praeger, 1972.)
-------. Nixonomics 2nd edition (New York: Praeger, 1973.)
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Shanahan, Eileen. “Nixon Says Budget Allows Easing of Monetary Policy; Nixon Feels a
Small Deficit Lets Credit Expand,” The New York Times, May 22, 1970, p. 1.
Stein, Herbert. Presidential Economics: The Making of Economic Policy from Roosevelt to
Reagan and Beyond. (New York: Simon and Schuster, 1984.)
Ulmer, M. J. “Non-Answer to Nixonomics,” The New Republic, v. 165 (December 11,
1971), p. 19-21.
Washington. American Enterprise Institute for Public Policy Research. The Economy and
Phase IV: An AEI Round Table Held on 19 July 1973 at the American Enterprise Institute
for Public Policy, Washington, DC, Paul W. McCracken, Moderator. (Washington, DC:
1973.)
Weber, Arnold R. In Pursuit of Price Stability: The Wage-Price Freeze of 1971
(Washington, DC: Brookings Institution, 1973.)
Wells, Wyatt C. Economist in an Uncertain World: Arthur F. Burns and the Federal
Reserve (New York: Columbia University Press, 1994.)
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FIGURE 4
THE REAGAN ADMINISTRATION FROM A MACROECONOMIC POLICY
PERSPECTIVE
CHALLENGES–To decrease government spending and lower taxes (in a perceived
revenue-neutral, bipartisan plan); end stagflation (rising unemployment and inflation.)
In November 1980, the unemployment rate was approximately 7.5 percent, while the
inflation rate was 12.6 percent.
RESPONSES--Created federal oil reserves to prevent short term crises from the rise in oil
prices; lowered oil windfall profits tax. Enacted: a lower marginal tax rate (from 70 to 28
percent); a simplified tax code; more deregulation of industry; reduced inflation (from 13.5
in 1980 to 4.1 percent in 1988.) Unemployment dropped, but the minimum wage did not
increase. Public spending increased, mostly for the Department of Defense; social spending
decreased. Borrowing increased, both at home and abroad, and the national debt rose from
$700 billion to $3 trillion. Income shifted toward higher brackets. Arguably, real median
family income grew, but real wages declined; the personal savings rate decreased; the
productivity rate increased. Immigrant workers were encouraged to come and stay.
TIME LINE–Examples
Economic Recovery Tax Act of 1981.
Tax Reform Act of 1986–broadened the tax base and reduced tax loopholes and exceptions.
Had an arguably negative effect on the Alternative Minimum Tax (AMT.)
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FIGURE 5
PARTICIPANTS –
Boskin, Michael
Feldstein, Martin
Greenspan, Alan
Kemp, Jack
Laffer, Arthur
Niskanen, William
Porter, Roger
Reagan, Ronald
Regan, Donald
Stockman, David
Volcker, Paul
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FIGURE 6
A SELECTED BIBLIOGRAPHY
Jack Kemp Papers, Manuscript Division, Library of Congress, Washington DC.
Donald Regan Papers, Manuscript Division, Library of Congress, Washington DC.
Ackerman, Frank. Reaganomics: Rhetoric vs. Reality (Boston: South End Press, 1982.)
Bethell, T. “Reaganomics Equals Carternomics,” National Review, v. 34 (November 12,
1982), p. 1398.
Bienkowski, Wojciech, Josef C. Brada and Mariusz-Jan Radlo, ed. Reaganomics Goes
Global: What Can the EU, Russia and Other Transition Counties Learn from the USA?
(Palgrave Macmillan, 2006.)
Boskin, Michael J. Reagan and the Economy: The Successes, Failures, and Unfinished
Agenda. (San Francisco: Institute for Contemporary Studies, 1987.)
Buckley, W. F. “Reaganomics Viewed From China,” National Review, v. 34 (November
12, 1982), p. 1436.
Campagna, Anthony. The Economy in the Reagan Years: The Economic Consequences of
the Reagan Administration. (Westport, Conn.: Greenwood Press, 1994.)
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Friedman, Benjamin. Day of Reckoning: The Consequences of American Economic Policy
Under Reagan and After. (New York: Random House, 1988.)
Gist, John R. “The Reagan Budget: A Significant Departure from the Past.” PS: Political
Science and Politics 14 (1981): 738-46.
Heller, Walter W. “Carteronomics versus Reaganomics,” Wall Street Journal, October 30,
1980, p. 30.
Hertzberg, H. W. “Reaganomics on the Reservation,” The New Republic, v. 187
(November 22, 1982), p. 15-17.
Hulten, Charles R. & Sawhill, Isabel V. The Legacy of Reaganomics: Prospects for LongTerm Growth. (Washington, DC: Urban Institute Press, 1984.)
Kamlet, Mark S., David C. Mowery & Su, Tsai-Tsu . “Upsetting National Priorities? The
Reagan Administration’s Budgetary Strategy.” American Political Science Review 82
(1988): 1293-1307.
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Kirkland, L. “An Alternative to Reaganomics” [AFL-CIO Economic Plan]. USA Today, v.
110 (May 1982), p. 18-21.
Laffer, Arthur B. “Reaganomics: What We Learned,” The Wall Street Journal, February
10, 2011.
Lowery, David. “The Keynesian and Political Determinants of Unbalanced Budgets: U.S.
Fiscal Policy from Eisenhower to Reagan.” American Journal of Political Science 29 (1985):
428-60.
Mills, Gregory B. Deficit Dilemma: Budget Policy in the Reagan Era. (Washington, DC:
Urban Institute Press, 1983.)
Rattner, Steven. “Definition of Reaganomics Is Still Being Thrashed Out: The Team Is the
Test and Then There’s Inflation,” New York Times, Nov 30, 1980.
“Reagan on Reaganomics: It’s Working,” U.S. News & World Report, v. 93 (October 11,
1982), p. 12.
Roberts, Paul Craig. “Reaganomics: A Change?” New York Times, Nov 9, 1980, p. E19.
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Rohatyn, F. G. “Alternatives to Reaganomics,” The New York Times Magazine
(December 5, 1982), p. 72+
Rowen, Hobart. “Reaganomics,” The Washington Post, July 17, 1980, p. A17.
Sloan, John W. The Reagan Effect: Economics and Presidential Leadership. (Lawrence:
University Press of Kansas, 1999.)
Stockman, David. The Triumph of Politics: How the Reagan Revolution
Failed (New York: Harper & Row, 1986.)
_______. The Great Deformation: The Corruption of Capitalism in America. (New York:
Public Affairs, 2013.)
“Reaganomics,” The [Baltimore] Sun, Sept 11, 1980, p. A16.
Mehtabdin, Khalid R. Reaganomics: Success and Failures. 1986.
Rowen, Hobart. “Carter’s Reaganomics,” The Washington Post, Sept 11, 1980, p. A19.
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United States. Congress. Joint Economic Committee. Subcommittee on Monetary and
Fiscal Policy. “Is Reagonomics Working?” Hearing Before the Subcommittee on Monetary
and Fiscal Policy of the Joint Economic Committee, Ninety-Seventh Congress, Second
Session, June 9, 1982.”
University of Notre Dame Rooney Center for the Study of American Democracy and the
Ronald Reagan Foundation. “Reagan Economic Policies Remembered,” Washington, D.C.
November 11, 2011.
Weidenbaum, Murray L. Rendezvous with Reality: The American Economy After
Reagan. (New York: Basic Books, 1988.)
Wilber, Charles K. Beyond Reaganomics: A Further Inquiry Into the Poverty of
Economics (Notre Dame: University of Notre Dame, 1990.)
Wilentz, Sean. The Age of Reagan: A History, 1974-2008. (New York: Harper, 2008.)
Yen, Paul T. K. Reaganomics, 1981-1988: A Chinese View (Flushing, N.Y.: Wah Keong
Book Co., 1989.)
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