'Steady As You Go' Still Good Policy for Uncertain Times: Echoes

Forty years ago this month, President Richard Nixon sharply shifted hiseconomic policy in an interventionist direction with deleterious economicresults that continued for a decade and provide lessons for today.

On August 15, 1971, Nixon announced a freeze on wages and prices. This actionpaved the way for a series of monetary and fiscal policy interventions thateventually led to double-digit unemployment, double-digit inflation and double-digit interest rates. Had he stayed the course, rather than shift policy, the1970s would probably have been a decade of strong employment growth with lowinflation and low unemployment, much as we eventually saw in the 1980s and1990s.