policy - The Black Vault

THE BDM CORPORATION
E. NIXON ADMINISTRATION ECONOMIC POLICIES AND THE VIETNAM WAR
1. An Overview, 1968-1972
The Nixon Administration came to office determined to provide a
conservative antidote for the US's economic problems, wanting, in particular,
to bring inflation under control and reduce government invelvement a~t
all levels of economic activity. Not surprisingly, though, the administration's
actual economic policies reflected little of the clarity and
simplicity of these goals, with Nixon announcing three different economic
"A"game plans" between 1969 and 1971. While each of these changes in
economic policy accomplished certain limited goals, each also had negative
long-term effects. 33/
Nixon's Game Plan I (196q-1970) was designed to counter inflation,
which in 1968 had reached the "unbearable" level of 4.6 percent,
reduce the growth rate of federal outlays for domestic programs, and, more
gener-ally, reduce federal activism in economic affairs. The problem, as it
turned out, was that these deflationary policies took hold at the same time
as the following other measures began to have a dampening effect on
economic activity:
(1) The tax surcharge imposed by Johnson in mid 1968 began to cut
into consumer spending, as it had been designed to do.
(2) The Federal Reserve Board, combatting the same inflation as
Nixon, raised its discount rate in 1969 to 6 percent. In another
development designed to counter inflationary pressures, the prime
lending rate rose to an unprecedented 8.2 percent.
(3) With the beginning of troop withdrawal from Vietnam, the administration
cut overall defense spending $8.6 billion for fiscal year
1970.
(4) The cutback in defense spending resulting from the war's winding
down contributed to a 20 percent reduction in the overall backlog
of industrial orders while bringing about cuts in defenseindustry
jobs.
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