Richard Nixon photo

Remarks on the CBS Radio Network: "To Make a Dollar Worth a Dollar"

October 23, 1968

Our country today is a nation of wealth, of power, and of paradox. We find our people affluent and afflicted—free and yet frustrated. Government is larger and more powerful than ever—and less effective. The people are more affluent than ever—and seem less fulfilled. We daily exceed the wildest dreams of our ancestors in productivity, wealth, and power. Yet we feel an undermining current of despair—as if the dreams were better than their achievement, or as if in the course of fulfilling our material dreams, we failed the American dream.

There is a lack that makes our leaders seem victims rather than masters of change. In an effort to increase our power over events, we have replaced our ancestral faith in free men and individual initiative with a new faith in government. But we have discovered an extraordinary paradox of bureaucracy: it renders powerless not only its subjects, but also its leaders. Thus, in making government bigger we find we are making both its master and beneficiaries smaller. In enlarging Washington we diminish America.

I believe that the frustration in the land is related to the over-centralization.

Tonight I want to discuss a major cause both of centralization and of frustration in the Great Society, namely, inflation of the currency and the cost of living. John Maynard Keynes once quoted Lenin as saying, "The best way to destroy the capitalist system is to debauch the currency." Keynes explained that:

"By a continuing process of inflation, government can confiscate, secretly
and unobserved, an important part of the wealth of their citizens . . ."

This is the danger we will face if current policies are pursued much longer. The continuing process of dollar debauchery is today robbing our citizens of their wealth and aggrandizing the power of Washington.

Inflation penalizes thrift and encourages speculation. Because it is a national and pervasive force—dramatically affecting individuals but beyond their power to influence—inflation is a source of frustration for all who lack great economic power.

What is inflation? Technically, it is an excess of money over goods in the economy. As a result the value of money goes down, your dollar buys less. In fact today the dollar has 17 cents less buying power than it had at the end of the Eisenhower Administration. Over the last three years alone inflation has totaled more than ten percent and in recent months has been proceeding at an annual pace of almost six percent.

The frustration caused by inflation is obvious. Any worker whose income is increasing annually by less than six percent finds his paycheck actually buys less each year. Because of rising taxes, in fact, he must average well over six percent in raises to improve his position. Since the average wage increase is now little more than six percent throughout the economy, the average American is losing money.

A great many Americans, however, are not "average". Depending on relatively low or fixed incomes, they find their situation has been getting worse. The chief impact of inflation falls on those with the least power to get more money. Inflation insidiously robs the old of their pensions, the small businessman of his savings, the laborer of his wages. Retirement funds saved 25 years ago are now worth only half as much in terms of buying power; the working man earns less today in real purchasing power than he did about three years ago. Inflation has, in fact, more than nullified any benefits of the celebrated Great Society programs.

It is not only the impoverished who are victimized. Inflation also hits with special force other key groups in the society: the farmer and the urban wage earner and homeowner.

Since farm marketing receipts have shown almost no improvement in recent years while farm costs soar, farmers find themselves in an ever tightening bind. The farmer has to buy his equipment on the inflated retail market but the prices of his goods in many cases have been going down. This pinch has helped to drive almost 5 million people off the farms since 1960.

With a great many of the people on the farms going to the cities, it is not encouraging that city dwellers suffer an equally frustrating and in some ways even more demoralizing predicament. People go to the cities largely to take advantage of economic and cultural opportunities there. Yet they find their higher wages eaten away by higher living costs. They invest their savings in a new home, and find it subjected to steadily increasing property taxes while its value is jeopardized by the general deterioration of the urban environment. Crime and delinquency, pollution and congestion, all converge on urban dwellers while their Federal taxes go up to pay for welfare and other programs that in some cases make the problems worse. They find their city repeatedly paralyzed by strikes among workers attempting to escape the blight of inflation and rising taxes. In the cities as on the farms it is a palsied prosperity that the present administration has produced.

The foreign impact of the Administration's inflation is no less severe. It has reduced our export growth by pricing American goods out of international markets. It has made foreign goods more competitive here, thus bringing a major surge of imports. The result has been a dramatic decline in the U.S. trade surplus and a chronic deficit in our balance of payments.

This decline in the U.S. trade and financial position has prompted foreigners to accumulate large dollar reserves, but doubting the stability of our currency, they have been turning dollars in for gold in ever increasing amounts. To stop the flow we were forced to stop freely selling our gold. Today our gold reserves are lower than at any time since the depression. Last year the U.S. had to turn to the International Monetary Fund for help in shoring up the dollar.

This crisis is not simply an American embarrassment, though it certainly was embarrassing for the Americans in Europe that day last March when European bankers would not accept dollars in exchange for local currency. The crisis of confidence in the dollar—which is in fact a crisis of confidence in our willingness to stop inflation—represents a dire threat to the world economic system and to our most important foreign policy goals. The dollar is more than the currency of American economic strength. It is also a fundamental medium of exchange for the entire free world. Continued erosion of faith in the dollar could destroy the expansion of world trade that has spurred the marvelous growth of the world's free economies.

The threat is clear. At the moment of our highest prosperity we also face the gravest dangers. If we continue on our present course, we could possibly cause a world economic depression.

Vietnam, of course, is part of the problem; our military frustrations in Asia agonize and perplex the entire society and strain the economy. But we should remember that inflation was accelerating in 1964 long before the massive expansion of our combat effort. The war is not an excuse for fiscal irresponsibility.

Another contributor to the frustration felt by many citizens is simply progress. Some modern technology requires institutions so large that little room seems left for the individual. But this problem is a mandate for a new commitment to humane technology; it is no excuse for despair. The major problem is the tendency of those in the present Administration to promise far more than they can deliver through government or pay for through taxes. In recent years Americans have often believed the promises and exchanged their own wealth and freedom for bureaucratic solutions to their problems. But the problems have remained, and the Administration has demanded still more Federal money and power.

Rather than relinquish programs that it regards as crucial to political success, the Administration has responded to public tax resistance by financing new programs through budgetary deficits. In fact the U.S. has not had a balanced budget since the last full fiscal year of the Eisenhower Administration. The total deficit since then and through the current fiscal year will have reached nearly $70 billion.

This is the cause of inflation and a major cause of our current frustration. The greatest irony is that inflation hurts the very people—the poor and aged —whom Great Society programs are designed to help. In fact inflation has hurt the impoverished far more than the War on Poverty has helped them. Inflation is a major help to only one agency in the society: the Bureau of Internal Revenue. For by moving Americans into higher tax brackets without enlarging their real income, inflation raises the percent of income going to taxes without officially increasing tax rates. Moreover, the present Administration has raised the Federal government's share of the average worker's paycheck not only by the recent ten percent surcharge, but also by another estimated 11 percent through the hidden tax of inflation.

The question today is whether we can afford four more years of these policies. My opponent once labeled himself a big spender, and he has made it absolutely clear that if elected, he plans a massive stepup in Federal spending programs. But he has not told us how he will pay for them.

This is a prescription for further inflation. I believe it is also a prescription for economic disaster.

For at a certain point in the inflation game—however much my opponent may wish it were not so—the intentions of government must give way to the laws of economics. As sure as a binge leads to a hangover, an inflationary boom, if pursued too long, leads to a deflationary bust and massive unemployment. Unless current policies are changed as a matter of highest urgency, we are all in for a dreadful headache in 1970 and beyond.

The excessive inflation which impends if present policies continue would cause major economic distortions that could be redressed in only two ways, equally catastrophic. The psychedelic economics of the present Administration can lead to the police economics of wage and price controls, or to a major recession with widespread unemployment, as the economy's way to bring itself back into balance. My opponent already has indicated his probable choice: wage and price controls. On August 5th, Secretary of Labor Willard Wirtz said that time may be running out for private wage and price decision-making. Vice President Humphrey recently issued a task force report that unless voluntary restraint was exercised by labor and management "a statutory approach will become unavoidable."

In the international arena the present Administration has already displayed a propensity for controls. Rather than make a serious attempt to put our finances in order when the crisis developed in our balance of payments, the Administration attempted first to restrict travel abroad and then in fact imposed controls on U.S. overseas investment and bank lending. This isolationist approach will ultimately hurt the American economy and foreign policy by reducing international trade and economic growth in the free world.

It is quite clear that in order to avoid a recession of the economy, my opponent is quite prepared to have a recession of our liberty. It never seems to occur to him that it would be preferable to avoid this dilemma altogether through adoption of responsible fiscal policy. Let no one imagine that police economics merely contracts the freedom of a few corporations; in order to control wages and prices, it would be necessary to embark on a road from which it is very hard to escape without major damage to the freedom of all.

I do not believe the American people should be forced to choose between unemployment and un-American controls. There is a further choice: the American way of responsible fiscal policy that allows the American people to be both affluent and free.

If I am elected I pledge that I will adopt this approach redressing the present imbalances without increasing unemployment or controls.

This does not mean a mechanical balancing of the budget every year. It means the intelligent balancing of the economy over the business cycle. It absolutely prohibits the use of Washington's fiscal powers to increase the Administration's political control—and it absolutely prohibits the use of inflation as a deceitful way to raise taxes without facing the people. I pledge that a Nixon Administration will not ask you to exchange your liberties for a spurious currency of promises. I promise only freedom and opportunity for all.

Walt Whitman once called our history an open road. Everything seemed possible for America on the frontier. Now in a sense we have come to the end of the open road. And at the end of the open road we do not find the promised land, we find the Great Society, and its bureaucracies have become the great roadblock.

It is time now to reopen the American way—return to the open road, where free men master change rather than passively await it. It is time to renew our dedication to the fundamental principles of the American economic miracle. We must maintain policies of fiscal order and responsibility. Only then can we assure freedom and peace.

APP NOTE: From section three of the volume "Nixon Speaks Out" titled, "For a Dynamic Economy".

Richard Nixon, Remarks on the CBS Radio Network: "To Make a Dollar Worth a Dollar" Online by Gerhard Peters and John T. Woolley, The American Presidency Project