Inflation is not a new problem. Past presidents have dealt with it in different ways.
President Nixon, facing re-election in 1972, feared that rising inflation would mar his campaign. Rather than making the unpopular but more conservative move of raising interest rates, Nixon implemented wage and price controls. Wage and price controls were economic devices in the spirit of the liberal economic philosophy of John Maynard Keynes. Keynes taught that free markets are without self-balancing mechanisms and therefore need government policies to achieve economic stability. Richard Nixon, shocking conservatives, said, “I am now a Keynesian… We are all Keynesians now,”
“On Aug. 15, 1971, in a nationally televised address, Nixon announced,” “I am today ordering a freeze on all prices and wages throughout the United States.” Wages and prices would be frozen for 90 days. Any increase would have to be approved by the Price Commission Pay Board. The controls would be lifted after the 1972 election. “On Aug. 15, 1971, in a nationally televised address, Nixon announced, “I am today ordering a freeze on all prices and wages throughout the United States.” Wages and prices would be frozen for 90 days. Any increase would have to be approved by the Price Commission Pay Board. The controls would be lifted after the 1972 election.
In addition to the controls, Nixon proposed tax cuts and an additional tax on imported goods. Nixon hoped that the wage and price controls would create jobs, keep the cost of living from rising, and protect U.S. currency. The immediate response to Nixon’s plan was positive. The stock market rose, and the public supported the move by a wide margin. Nixon went on to win the 1972 presidential election in a landslide. However, in response to the U.S. economic moves- nicknamed ‘Nixon Shock’- foreign trading partners raised the value of their currencies. Nixonomics was considered the catalyst for the stagflation- the combination of inflation and slow economic growth- of the 1970s. In addition, the Organization of Petroleum Exporting Countries began raising the price of oil. Nixon’s wage and price controls got him through the 1972 election but created headaches for his successor, President Gerald Ford.
Sources
https://www.cato.org/commentary/remembering-nixons-wage-price-controls#
https://www.investopedia.com/terms/n/nixon-shock.asp
https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm
https://www.advisorperspectives.com/commentaries/2019/09/16/were-all-keynesians-now
https://newrepublic.com/article/162931/richard-nixon-changed-us-economic-policy-forever
https://reason.com/2022/02/03/price-controls-diaster-1970s-richard-nixon-joe-biden-economy/
Thanks, and a tip of the hat to Oliver F. Atkins for the image.
