"Address to the
Nation Outlining a New Economic Policy: 'The Challenge of Peace.' August 15,
1971". United States President Richard Nixon's
address to the nation announcing the "temporary" suspension of the
dollar's convertibility into gold. While the dollar had struggled throughout
most of the 1960s within the parity established at Bretton Woods, this crisis
marked the breakdown in the system. The closing of the gold window signified
the end of the Bretton Woods system.
I have addressed the Nation a number of times over the past
2 years on the problems of ending a war. Because of the progress we have
made toward achieving that goal, this Sunday evening is an appropriate time
for us to turn our attention to the challenges of peace.
America today has the best opportunity in this century to achieve two
of its greatest ideals: to bring about a full generation of peace, and to
create a new prosperity without war.
This not only requires bold leadership ready to take bold action
– it calls forth the greatness in a great people.
Prosperity without war requires action on three fronts: We must create
more and better jobs; we must stop the rise in the cost of living; we must
protect the dollar from the attacks of international money speculators.
We are going to take that action – not timidly, not
half-heartedly, and not in piecemeal fashion. We are going to move forward to
the new prosperity without war as befits a great people – all together,
and along a broad front.
The time has come for a new economic policy for the United States. Its
targets are unemployment, inflation, and international speculation. And this
is how we are going to attack those targets.
First, on the subject of jobs. We all know why we have an unemployment
problem. Two million workers have been released from the Armed Forces and defense plants because of our success in winding down the
war in Vietnam. Putting those people back to work is one of the challenges of
peace, and we have begun to make progress. Our unemployment rate today is
below the average of the 4 peacetime years of the 1960’s.
But we can and we must do better than that.
The time has come for American industry, which has produced more jobs
at higher real wages than any other industrial system in history, to embark
on a bold program of new investment in production for peace.
To give that system a powerful new stimulus, I shall ask the Congress,
when it reconvenes after its summer recess, to consider as its first priority
the enactment of the Job Development Act of 1971.
I will propose to provide the strongest short-term incentive in our
history to invest in new machinery and equipment that will create new jobs
for Americans: a 10 percent Job Development Credit for 1 year,
effective as of today, with a 5 percent credit after August 15,
1972. This tax credit for investment in new equipment will not only generate
new jobs; it will raise productivity; it will make our goods more competitive
in the years ahead.
Second, I will propose to repeal the 7 percent excise tax on
automobiles, effective today. This will mean a reduction in price of about
$200 per car. I shall insist that the American auto industry pass this
tax reduction on to the nearly 8 million customers who are buying
automobiles this year. Lower prices will mean that more people will be able
to afford new cars, and every additional 100,000 cars sold means
25,000 new jobs.
Third, I propose to speed up the personal income tax exemptions
scheduled for January 1, 1973, to January 1, 1972 – so that
taxpayers can deduct an extra $50 for each exemption 1 year earlier
than planned. This increase in consumer spending power will provide a strong
boost to the economy in general and to employment in particular.
The tax reductions I am recommending, together with this broad upturn
of the economy which has taken place in the first half of this year, will
move us strongly forward toward a goal this Nation has not reached since
1956, 15 years ago: prosperity with full employment in peacetime.
Looking to the future, I have directed the Secretary of the Treasury
to recommend to the Congress in January new tax proposals for stimulating
research and development of new industries and new techniques to help provide
the 20 million new jobs that America needs for the young people who will
be coming into the job market in the next decade.
To offset the loss of revenue from these tax cuts which directly
stimulate new jobs, I have ordered today a $4.7 billion cut in Federal
Tax cuts to stimulate employment must be matched by spending cuts to
restrain inflation. To check the rise in the cost of Government, I have
ordered a postponement of pay raises and a 5 percent cut in Government
I have ordered a 10 percent cut in foreign economic aid.
In addition, since the Congress has already delayed action on two of
the great initiatives of this Administration, I will ask Congress to amend my
proposals to postpone the implementation of revenue sharing for 3 months
and welfare reform for 1 year.
In this way, I am reordering our budget priorities so as to
concentrate more on achieving our goal of full employment.
The second indispensable element of the new prosperity is to stop the
rise in the cost of living.
One of the cruelest legacies of the
artificial prosperity produced by war is inflation. Inflation robs every
American, every one of you. The 20 million who are retired and living on
fixed incomes – they are particularly hard hit. Homemakers find it
harder than ever to balance the family budget. And 80 million American
wage earners have been on a treadmill. For example, in the 4 war years
between 1965 and 1969, your wage increases were completely eaten up by price
increases. Your paychecks were higher, but you were
no better off.
We have made progress against the rise in the cost of living. From the
high point of 6 percent a year in 1969, the rise in consumer prices has
been cut to 4 percent in the first half of 1971. But just as is the case
in our fight against unemployment, we can and must do better than that.
The time has come for decisive action – action that will break
the vicious circle of spiraling prices and costs.
I am today ordering a freeze on all prices and wages throughout the
United States for a period of 90 days. In addition, I call upon
corporations to extend the wage-price freeze to all dividends.
I have today appointed a Cost of Living Council within the Government.
I have directed this Council to work with leaders of labor
and business to set up the proper mechanism for achieving continued price and
wage stability after the 90-day freeze is over.
Let me emphasize two characteristics of this action: First, it is
temporary. To put the strong, vigorous American economy into a permanent
straitjacket would lock in unfairness; it would stifle the expansion of our
free enterprise system. And second, while the wage-price freeze will be
backed by Government sanctions, if necessary, it will not be accompanied by
the establishment of a huge price control bureaucracy. I am relying on the
voluntary cooperation of all Americans – each one of you: workers,
employers, consumers – to make this freeze work.
Working together, we will break the back of inflation, and we will do
it without the mandatory wage and price controls that crush economic and
indispensable element in building the new prosperity is closely related to
creating new jobs and halting inflation. We must protect the position of the
American dollar as a pillar of monetary stability around the world.
In the past
7 years, there has been an average of one international monetary crisis
every year. Now who gains from these crises? Not the workingman; not the
investor; not the real producers of wealth. The gainers are the international
money speculators. Because they thrive on crises, they help to create them.
weeks, the speculators have been waging an all-out war on the American
dollar. The strength of a nation’s currency is based on the strength of
that nation’s economy – and the American economy is by far the
strongest in the world. Accordingly, I have directed the Secretary of the
Treasury to take the action necessary to defend the dollar against the
directed Secretary Connally to suspend temporarily
the convertibility of the American dollar except in amounts and conditions
determined to be in the interest of monetary stability and in the best
interests of the United States.
Now, what is
this action – which is very technical – what does it mean for
Let me lay to
rest the bugaboo of what is called devaluation.
If you want to
buy a foreign car or take a trip abroad, market conditions may cause your
dollar to buy slightly less. But if you are among the overwhelming majority
of Americans who buy American-made products in America, your dollar will be
worth just as much tomorrow as it is today.
The effect of
this action, in other words, will be to stabilize the dollar.
action will not win us any friends among the international money traders. But
our primary concern is with the American workers, and with fair competition
around the world.
To our friends
abroad, including the many responsible members of the international banking
community who are dedicated to stability and the flow of trade, I give this
assurance: The United States has always been, and will continue to be, a
forward-looking and trustworthy trading partner. In full cooperation with the
International Monetary Fund and those who trade with us, we will press for
the necessary reforms to set up an urgently needed new international monetary
system. Stability and equal treatment is in everybody’s best interest.
I am determined that the American dollar must never again be a hostage in the
hands of international speculators.
I am taking
one further step to protect the dollar, to improve our balance of payments,
and to increase jobs for Americans. As a temporary measure, I am today
imposing an additional tax of 10 percent on goods imported into the
United States. This is a better solution for international trade than direct
controls on the amount of imports.
tax is a temporary action. It isn’t directed against any other country.
It is an action to make certain that American products will not be at a
disadvantage because of unfair exchange rates. When the unfair treatment is
ended, the import tax will end as well.
As a result of
these actions, the product of American labor will
be more competitive, and the unfair edge that some of our foreign competition
has will be removed. This is a major reason why our trade balance has eroded
over the past 15 years.
At the end of World War II the economies of the major industrial
nations of Europe and Asia were shattered. To help them
get on their feet and to protect their freedom, the United States has
provided over the past 25 years $143 billion in foreign aid. That
was the right thing for us to do.
Today, largely with our help, they have regained their vitality. They
have become our strong competitors, and we welcome their success. But now
that other nations are economically strong, the time has come for them to bear
their fair share of the burden of defending freedom around the world. The
time has come for exchange rates to be set straight and for the major nations
to compete as equals. There is no longer any need for the United States to
compete with one hand tied beyond her back.
The range of actions I have taken and proposed tonight – on the
job front, on the inflation front, on the monetary front – is the most
comprehensive new economic policy to be undertaken in this Nation in four
We are fortunate to live in a nation with an economic system capable
of producing for its people the highest standard of living in the world; a
system flexible enough to change its ways dramatically when circumstances
call for change; and, most important, a system resourceful enough to produce
prosperity with freedom and opportunity unmatched in the history of nations.
The purposes of the Government actions I have announced tonight are to
lay the basis for renewed confidence, to make it possible for us to compete
fairly with the rest of the world, to open the door to new prosperity.
But government, with all of its powers, does not hold the key to the
success of a people. That key, my fellow Americans, is in your hands.
A nation, like a person, has to have a certain inner drive in order to
succeed. In economic affairs, that inner drive is called the competitive
Every action I have taken tonight is designed to nurture and stimulate
that competitive spirit, to help us snap out of the self-doubt, the
self-disparagement that saps our energy and erodes our confidence in
Whether this Nation stays number one in the world’s economy or
resigns itself to second, third, or fourth place; whether we as a people have
faith in ourselves, or lose that faith; whether we hold fast to the strength
that makes peace and freedom possible in this world, or lose our grip –
all that depends on you, on your competitive spirit, your sense of personal
destiny, your pride in your country and in yourself.
We can be certain of this: As the threat of war recedes, the challenge
of peaceful competition in the world will greatly increase.
We welcome competition, because America is at
her greatest when she is called on to compete.
As there always have been in our history, there will be voices urging
us to shrink from that challenge of competition, to build a protective wall
around ourselves, to crawl into a shell as the rest of the world moves ahead.
Two hundred years ago a man wrote in his diary these words:
“Many thinking people believe America has seen its best days.”
That was written in 1775, just before the American Revolution – the
dawn of the most exciting era in the history of man. And today we hear the
echoes of those voices, preaching a gospel of gloom and defeat, saying the
same thing: “We have seen our best days.”
I say, let Americans reply: “Our best days lie ahead.”
As we move into a generation of peace, as we blaze the trail toward
the new prosperity, I say to every American: Let us raise our spirits. Let us
raise our sights. Let all of us contribute all we can to this great and good
country that has contributed so much to the progress of mankind.
Let us invest in our Nation’s future, and let us revitalize that
faith in ourselves that built a great nation in the past and that will shape
the world of the future.
Thank you and good evening.
August 15, 1971
Office of the Federal Register .
Richard Nixon, containing the public messages, speeches and statements of the
president - 1971. Washington: US Government Printing Office, 1972, p.