The Nixon Effect. Douglas E. Schoen
Federal Government. This is the wrong approach. This has been tried abroad, and it has failed. It is not the way we do things here in America. This kind of plan would threaten the quality of care provided by our whole health care system. The right way is one that builds on the strengths of the present system and one that does not destroy those strengths, one based on partnership, not paternalism. . . . Government has a great role to play, but we must always make sure that our doctors will be working for their patients and not for the Federal Government.54
One week later, on February 6, 1974, Nixon introduced the Comprehensive Health Insurance Plan (CHIP). Nixon’s plan, like subsequent plans that would be proposed by Bill Clinton, Barack Obama, and, in Massachusetts, Governor Mitt Romney, was built around private, employer-provided insurance. CHIP would penalize all but the smallest employers for failing to sponsor insurance for their employees—just as Obama’s plan does today—though it would also provide subsidies to small employers and the self-employed to help them cover these costs. Like the ACA, Nixon’s plan guaranteed coverage with no exclusions for preexisting preconditions. Nixon’s plan had generous coverage as well for mental illness, drug addiction, and alcoholism. But unlike Obama’s ACA, the Nixon plan contained no mandate—Americans would enter CHIP voluntarily. When they agreed to participate, they would get a health card that could be used like a credit card to pay for their services. (Bill Clinton copied this detail in 1993, when he pushed for national health insurance reform, and it did not go over well. Twenty years later, millions of Americans had developed more skeptical attitudes toward big government, and they saw the health card as a symbol of an overweening government.)
CHIP had three main parts: an expanded system of employer-provided health insurance, in which employers would pay 75 percent of premiums and employees would pay 25 percent; an improved Medicare program; and, for lower-income Americans or those with special occupations or health status, a new system, Assisted Health Insurance, which, for most services, would replace state-run Medicaid. Nixon felt strongly that the lower-income health insurance coverage benefits needed to be standardized nationally; Medicaid, by contrast, had benefits that varied state by state. To get CHIP started, Nixon envisioned a price tag of about $7 billion. If “promptly enacted by Congress,” Nixon said, CHIP would be fully operational by 1976.
The roots of these bold ideas could be found, once again, in Nixon’s upbringing. Not only had the struggles of his parents made him sympathetic to those who struggled to make ends meet but he had also seen how medical crises could wipe out a family’s savings and leave them in desperate circumstances—to say nothing of the human toll of the tragedy. Nixon lost two of his brothers to tuberculosis, an experience that stayed with him all his life. As an adult, he was heartened by the medical profession’s achievement in finding a cure for TB, and he pointed to it and other advances as examples of how government and private industry could work together on health care issues. His interest in the issue dated back to the beginning of his political career: in 1947, as a first-term congressman, he had proposed a system of national health care. “It was something personal for him,” said speechwriter Ray Price.55
Now, a quarter century later, Nixon stood before the Congress with a better-thought-out, more-comprehensive health care proposal than the one he had floated in 1971. Unfortunately, while his plan was better in 1974, his timing was worse. Watergate already hovered over everything.
“The wagons were not only circling, but they were heavily arming and out for blood,” Price remembered. “It was very difficult to get anything through at that point.”56
But it wasn’t just Watergate that brought CHIP down. As had happened with the FAP, Nixon faced opposition from both the Left and the Right on his health care plan—but given the Democrats’ edge in numbers in both houses of Congress, it was liberal opposition that really sank the program. In chapter 4, I’ll describe in detail why liberals blocked Nixon’s health care reform plans, which, as many have noted today, were far ahead of their time and retain relevance for today’s political debate.
It’s worth noting that Nixon, who is remembered in history as a foreign policy president, did not stop thinking about what might have been possible in health care, even during his postpresidency. In one of his final books, Seize the Moment, he wrote with remarkable prescience: “We need to work out a system that includes a greater emphasis on preventive care, sufficient public funding for health insurance for those who cannot afford it in the private sector, competition among healthcare providers and health insurance providers to keep down the costs of both, and decoupling the cost of healthcare from the cost of adding workers to the payroll.”57
An Inconsistent Economist
“Probably more new regulation was imposed on the economy during the Nixon administration than in any other presidency since the New Deal,” said Herbert Stein, chief economic adviser for presidents Nixon and Ford. It should be noted that Nixon was not especially interested in economics. He had no economic background, so he surrounded himself with experts who could help him make decisions without too much personal involvement. Most of his advisers were moderate-to-conservative Republicans, including Paul McCracken, Arthur Burns, Robert Mayo, and David Kennedy. Nixon took office just as America’s long economic boom was coming to an end. Throughout the 1960s, the economy had been robust and jobs plentiful. By 1968, though, the federal budget deficit had reached $25 billion, the highest level since the Second World War, and inflation was nearing 5 percent. Nixon believed that standard Republican solutions—tight monetary policy and spending cuts—wouldn’t do. As Stein noted, Nixon’s aim was “to be a conservative man with liberal policies.”58
Thus Nixon devised a four-phase “game plan.” In Game Plan I (1969), Nixon pursued a traditional conservative laissez-faire, tight-money approach. As a result, unemployment rose, as anticipated, but inflation continued to climb, as well. In 1970 and 1971, Nixon implemented Game Plan II, abruptly announcing, “I am now a Keynesian”59 and pursuing full employment. He embraced an expansionist monetary policy in the hope of stimulating the economy, possibly with an eye toward improving his electoral prospects for 1972. But Game Plan II proved equally ineffective.
Nixon made another radical departure with Game Plan III, announced in August 1971. Called the New Economic Policy, it aimed both to stimulate the economy and to cut inflation. The plan involved floating the dollar against gold for the first time, imposing a 10 percent import tax, restoring the investment tax credit, providing income tax relief, repealing the excise tax on automobiles, and imposing a ninety-day freeze on wage and price hikes. This last measure, never before done in peacetime, was particularly extreme.
Coming from a moderate Republican who supposedly favored the free market, the wage and price freezes were surprising. Even more oddly, the Democrats helped set the stage for many of these freezes by passing the Economic Stabilization Act of 1970, which granted the president unprecedented power to “stabilize prices, rents, wages, and salaries.”60 The Democrats never believed that Nixon would resort to these measures; they thought they could embarrass him, at no cost to themselves, by giving him tools that he would never use and then blaming him for not using them. But as he so often did, Nixon out-thought the Democrats, and they were forced to go along with his liberal, stimulative policies.
As the 1972 election neared, Nixon increased the fiscal stimulus, hoping to prime the economy and win over voters. By the final quarter of 1972, the economy was growing at a robust 11.6 percent. Nixon won reelection in a landslide. By 1973, however, when the administration finally lifted the price controls, inflation returned and the bill for his artificial overheating of the economy came due. Finally, Nixon implemented Game Plan IV, involving a return to the “old Nixon” of tight fiscal and monetary policies.
On the economy, in particular, the Nixon record has long been a sore spot for conservatives. Nixon’s economic policies were all over the map, ranging from traditional Republican approaches, to mainstream Democratic ones, to leftist wage and price controls, and finally back to traditional Republican measures. His economic apostasies alienated conservatives, as did his big-government focus in other areas.
Reviewing Nixon’s domestic policy record in full, as I did for a 2013 op-ed I wrote marking the centennial of his birth, I was struck by his willingness to inject government into