A number of factors shaped the liberal policies of the Nixon administration. Democrats continued to control Congress, the Republican Party contained significant numbers of liberals and moderates, and Nixon saw political advantages in accepting some liberal programs, especially those promoted by grassroots movements that persisted into the 1970s. Serious economic problems also compelled new approaches, and although Nixon’s real passion lay in foreign policy, he was eager to establish a domestic legacy.

Under Nixon, government assistance programs such as Social Security, housing, and food stamps grew, and Congress enacted a new billion-dollar program that provided Pell grants for low-income students to attend college. Noting the disparity between what Nixon said and what he did, his speechwriter, the archconservative Pat Buchanan, grumbled, “Vigorously did we inveigh against the Great Society, enthusiastically did we fund it.”

Nixon also acted contrary to his anti-government rhetoric when economic crises and energy shortages induced him to increase the federal government’s power in the market-place. By 1970, both inflation and unemployment had surpassed 6 percent, an unprecedented combination dubbed “stagflation.” Domestic troubles were compounded by the decline of American dominance in the international economy. With Japan and Western Europe fully recovered from the devastation of World War II, foreign cars, electronic equipment, and other products now competed favorably with American goods. In 1971, for the first time in decades, the United States imported more than it exported. Because the amount of dollars in foreign hands exceeded U.S. gold reserves, the nation could no longer back up its currency with gold.

In 1971, Nixon abandoned the convertibility of dollars into gold and devalued the dollar to increase exports by making them cheaper. To protect domestic manufacturers, he imposed a 10 percent surcharge on most imports, and he froze wages and prices, thus enabling the government to stimulate the economy without fueling inflation. In the short run, these policies worked, and Nixon was resoundingly reelected in 1972. Yet by 1974, unemployment had crept back up and inflation soared.

Skyrocketing energy prices intensified stagflation. Throughout the post–World War II economic boom, abundant domestic oil deposits and access to cheap Middle Eastern oil had encouraged the building of large cars and skyscrapers with no concern for fuel efficiency. By the 1970s, the United States was consuming one-third of the world’s fuel resources.

In the fall of 1973, the United States faced its first energy crisis. Arab nations, furious at the administration’s support of Israel during the Yom Kippur War (see “Shoring Up U.S. Interests around the World” in chapter 29), cut off oil shipments to the United States. Long lines formed at gas stations, where prices had nearly doubled, and many homes were cold. In response, Nixon authorized temporary emergency measures allocating petroleum and establishing a national 55-mile-per-hour speed limit to save gasoline. The energy crisis eased, but the nation had yet to come to grips with its seemingly unquenchable demand for fuel and dependence on foreign oil.