Nixonomics refers to the economic policies implemented during the presidency of Richard Nixon (1969–1974). The term is a portmanteau of "Nixon" and "economics," coined by the media and economists to describe the administration's approach to addressing high inflation, rising unemployment, and balance-of-payments deficits inherited from the previous administration.
Key components of Nixonomics included:
- New Economic Policy (NEP) / "Nixon Shock" (August 1971): A series of emergency measures announced on August 15, 1971, including:
- Wage and Price Controls: A 90-day freeze on wages, prices, and rents (Phase I), followed by mandatory guidelines administered by the Pay Board and Price Commission (Phases II–IV).
- Closure of the Gold Window: Suspension of the convertibility of the US dollar into gold for foreign governments, effectively ending the Bretton Woods system of fixed exchange rates.
- Import Surcharge: A temporary 10% tariff on dutiable imports to pressure trading partners to revalue their currencies.
- Fiscal Policy: The administration pursued expansionary fiscal policies, including tax cuts and increased government spending (particularly on defense and revenue sharing), to combat rising unemployment.
- Monetary Policy: Under Federal Reserve Chairman Arthur Burns, monetary policy remained accommodative to support growth, a stance critics later argued fueled inflationary pressures.
- Revenue Sharing: Enactment of the State and Local Fiscal Assistance Act of 1972, distributing federal tax revenues to state and local governments with few strings attached.
Outcomes and Historical Assessment In the short term, the 1971 measures boosted domestic popularity and contributed to a strong economic recovery leading into the 1972 re-election campaign. Inflation temporarily subsided under controls. However, the suppression of prices created distortions and shortages. Following the removal of controls (Phase IV, 1973), pent-up inflationary pressures erupted, exacerbated by the 1973 oil crisis and expansive monetary policy. The period is generally characterized by economists as "stagflation"—simultaneous high inflation and high unemployment—which challenged the prevailing Keynesian consensus and shaped subsequent macroeconomic theory and policy.
