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What prompted the turnabout? Earlier in the year, Nixon ruled out a tax cut as a means of restarting the economy. Over objections from his Council of Economic Advisers, headed by Paul McCracken, Nixon took the advice of George Shultz, chief of the Office of Management and Budget. Shultz thought that large doses of money from the Federal Reserve, presided over by Nixon's old economic mentor Arthur Burns, would be enough to get things moving. Besides, a tax cut would require a trek up to Capitol Hill, a humiliating concession that all was not well.
The Fed put more money into the economy, but Burns himself knew that it could do so only temporarily without having an inflationary effect. He went to see shrewd, conservative Wilbur Mills, whose word on economic matters is virtually law in the House. Mills agreed to promote an investment-credit bill, should one be needed. Burns also opened communications with John Connally, the Texas Democrat whom Nixon had just made Secretary of the Treasury.
But Shultz still had Nixon's ear. With Nixon's express approval, he proclaimed in April that no changes were contemplated in the Administration's approach. "Steady as she goes" was the watchword, said Shultz.
At first, Connally went along with the Shultz conclusions; then he started boning up on reports dealing with the nation's economic miseries. Urged on by two deputies—Paul Volcker, an expert in international monetary affairs, and Murray Weidenbaum, a specialist in the domestic economy—Connally soon found himself studying a package of proposals that contained the basic ingredients of the New Economic Policy. Early in July, Connally asked his staff for weekly memos on anything that was on their minds. "I wanted their opinions on where we are," he recalls, "on the President, the Congress, the economy, what should be done, anything." The recommendations he got included wage and price guidelines, freezes, tax cuts. A month ago, Weidenbaum began working out the details of a wage-price freeze; at the same time Volcker stepped up his study of the specifics of cutting the dollar loose from gold. More planning followed, though few of those doing the staff work were told that what they were handling was anything more than a contingency plan. Indeed, a contingency plan was all it was until the last minute, when the President was persuaded that he should act.
On short notice, Nixon summoned his key economic advisers to a climactic weekend gathering at Camp David, his
Catoctin Mountain retreat. Burns and McCracken were there; so were Shultz and his deputy, Caspar Weinburger, and the two Teutons who guard Nixon's gates, H.R. Haldeman and John Ehrlichman. Peter Peterson, a presidential aide for international economic affairs, joined the sessions. Volcker and Speechwriter Bill Safire sneaked across Washington to the Anacostia Naval Air Station, where they boarded a helicopter for Camp David. John Connally, who had no way of knowing that the pressure on the dollar would propel him into prominence so soon, had just gone to his Texas ranch for a vacation. He jetted hastily back, and when the first meeting began Friday afternoon, he sat at Nixon's right.
Remembered Weekend