Give Peace A Chance: The Presidency of Eugene McCarthy

But of course, this hadn’t been the first time Richard Nixon had sworn off politics for good…


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Richard Nixon, while leaving for the Caribbean, does his signature 'victory' pose.

Is Nixon going to become alt!Reagan in the 1980s

Third time is a charm after all.
 
Is Nixon going to become alt!Reagan in the 1980s

Third time is a charm after all.

That could be a good idea. Nixon as the unifying figure of the GOP out of a presumedly troubling 1970’s would be a stroke of genius. A figure of the old days and two losses which could help him (what if we elected him instead of Kennedy or McCarthy would be a question people ask.) he would be a good candidate.
 
Chapter Eleven - You Can't Buy Me Love
“A tax loophole is something that benefits the other guy. If it benefits you its tax reform. Likewise, when price controls are put in place, its stabilizing the economy, but you better watch out for socialism when the gentlemen across the aisle go about it.”

  • Secretary of Treasury Russell Long on the McCarthy Freeze

With the Midterms over, the Democrats had a clear majority in Congress, but McCarthy’s raison d’etre, ending the Vietnam War (or at least ending American military involvement), had already been achieved. Going into the second half of his term, McCarthy naturally decided to focus more on domestic policy. In particular, he intended to amp up civil rights progression and expanding his Crusade Against Poverty, much to the chagrin of the more conservative members of his cabinet and party.

1971 would also be the year McCarthy would attempt to get the country’s finances under control.

In 1971, the unemployment rate in the United States was around six percent, while inflation was at 5.84% and growing. Throughout Johnson’s term, one of the subtler problems that had haunted him had been inflation. Because of the increase of the global money supply that came with the expanding economies of Western Europe following the Second World War and Marshall Plan, inflation had been steadily rising in the United States, with its dollar and economy tied to the global market (more on that later). Not only that, but Johnson’s heavy spending in the Vietnam War, and the War on Poverty had further exacerbated inflation with a glut of federal spending pouring into the market, and was only made worse by Johnson’s refusal to raise taxes to fund them, instead relying on printing more money into circulation to cover the costs. Eventually, the House Ways and Means Chairman, Wilbur Mills, had cracked the whip on Johnson, but he only prevented an increase of spending rather than shrinking it.


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Chairman of the House Ways and Means Committee Wilbur Mills: a sometime ally and occasional nuisance of the McCarthy Administration. Fiscally conservative, Mills was willing to approve of increased government spending only under certain circumstances.


Going into the McCarthy Administration, spending had more or less stayed the same in the first half of 1969, but as McCarthy slashed funding to the Vietnam War, it seemed that inflation would finally decrease. And, while inflation did go down for about a year (from mid-1969 to late-1970), it then began to plateau, then started to climb again. McCarthy’s rerouting of most of the previous Vietnam spending into his domestic initiatives and the Crusade Against Poverty (most notably in his Farmer Advancement Act) had started a rise in inflation once more, along with the growing instability of the Capitalist world’s international finance system.

Established after the Second World War, the Bretton Woods System tied the international market and exchange rates to the US dollar, which was, in turn, backed by the gold standard. This had allowed the Americans to partially control the flow of all currency, as well as maintain the security of the international market following the Second World War, with most of Europe’s economic capabilities in wreckage. However, with Western Europe’s economy having recovered, many saw the Bretton Woods System as highly restrictive and blatantly pro-American in how it handled the market. For the US government to ‘gain’ one million dollars, they simply had to print one million US dollars and release them into circulation, as backed by their country’s gold standard; Any other country would have to actually produce one million US dollars’ worth of product and release them to the market before being able to ‘cash in’ their one US million dollars worth of product (converted from the local currency) in exchange for one million US dollars’ worth of gold.

As Europe became more and more dissatisfied with Bretton Woods, more and more countries were threatening to, or were in the process of, leave the system (most notably, France). Those that stayed, more frequently requested transfers of gold. While the US could take the hit for small demands of gold from big countries or from smaller demands from smaller countries, it was one of the quirks of economics that everyone knew that if every country called in their allotment of gold (which Bretton Woods technically allowed them all to do at any time) there wouldn’t be nearly enough US bullion to go around, and global finance would collapse. No one actually did this, because then global finance would collapse.

The system was held together by everyone’s willing ignorance of the amount of gold that physically existed on Earth.

Because of the high inflation, the US dollar had become overvalued in Bretton Woods, while the West German mark, the Japanese yen, and other currencies had become undervalued, making a revaluation of currency essential. The lopsided value that currently existed made German and Japanese products cheaper on the international market (therefore, undervalued countries like West Germany and Japan didn’t want to revalue) which could eventually result in higher unemployment in the US as employers go overseas, leading to an American recession, and in turn a global recession, as everyone's economies were tied to the American one.

On the other hand, bias of the Bretton Woods system in favour of the United States made the system lose membership of economically powerful nations in Europe, and the high inflation of the US dollar encouraged countries dissatisfied with the system (but unwilling to leave it) to more frequently ‘cash in’ their gold, which in turn could lead to a run on gold and an international market crash.

McCarthy decided to meet with his financial advisors and cabinet to decide what had to be done to ‘fix’ the economy and world finance. Although McCarthy had previously been an economics professor with continued beliefs in "distributive justice," he had no strong beliefs on the methods of international trade. The Chairman of the Federal Reserve, Andrew Brimmer [1], advised coming to an agreement with other countries to revalue their currencies, putting a temporary freeze on prices and wages, raising taxes to combat inflation, and repegging the currencies once they had been revalued. Brimmer’s position was supported by Secretary of Treasury Russell Long, but he was concerned that raising taxes after freeing up so much money from Vietnam would be too unpopular, and instead advised a mild cut in spending. Secretary of Labor Ralph Yarborough agreed with Brimmer and Long, as did Secretary of Housing and Urban Development Walter Mondale, but he too cautioned increasing taxes. Ways and Means Chairman Wilbur Mills supported the 'Brimmer Plan,' and encouraged raising taxes and dropping spending to further combat inflation.


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Secretary of Treasury Russell Long (left) discussing the proposed 'McCarthy Freeze' with Ways and Means Chairman Wilbur Mills (right) and financial adviser Laurence Woodworth (centre).

On the other side of the debate, was a proposition to do away with the gold standard and the Breton Woods System entirely, and reformat international finance with a post-gold standard currency revaluing. This position was held by Vice President John Connally, Under-Secretary of the Treasury for International Monetary Affairs Paul Volcker, and Secretary of Commerce Albert Gore Sr, who also supported the price and wage freeze, while the most conservative members of the McCarthy Administration, namely Secretary of Transportation Claude Brinegar and Director of the National Economic Council J. Howard Marshall, supported dropping the gold standard and leaving out the price and wage freeze afterward. The Invisible Hand of the free market would sort it all out, after all.


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Vice President John Connally (right) with international financier Renaldo Ossalo (left). Connally was openly opposed to keeping the gold standard, and looked for allies in the banking community to support his position.


Ultimately siding with the progressives and Bretton Woods supporters, McCarthy decided to keep the gold standard, and implement Brimmer’s plan for financial reform [2]. Shortly afterward, Long met with bankers and international financiers to hash out an acceptable negotiation of the revaluation of the world’s currencies [3]. Long wasn't able to keep West Germany in the negotiations, and they would leave the Bretton Woods System later that year along with Switzerland, but Japan was kept on board, and the world's currencies were revalued. With McCarthy’s wage and price freezes, and the value of dollars to gold re-pegged, inflation saw an initial sharp decline, and the confidence in the gold standard was restored, with less countries asking to ‘cash in’ gold, and for lower amounts. However, McCarthy neither raised taxes, nor cut spending to give long-term sustainability to the program. Following the stabilization of the market, Congress was convinced enough of their financial security to once more raise the debt ceiling of the United States. Even many conservative members of Congress and the Cabinet approved, with notable exceptions being Wilbur Mills, John Conally, and Representative H.R. Gross of Iowa [4].

The initial reaction in the press and in opinion polls of McCarthy's handling of a potential financial crisis was highly positive, and he would enjoy a post-Midterm boost in the polls that would last until late 1971.

President McCarthy had given a good long look at the situation, and decided that instead of cutting through the Gordian Knot, it was probably best to leave it be. Bretton Woods had served the country well, and it would continue to do so. For the time being at least.


“It's our currency, but the world’s problem.”

  • Vice President John Connally on the Bretton Woods System

[1] IOTL, Richard Nixon appointed Arthur Burns as the Chairman of the Federal Reserve. McCarthy has appointed the economist, Democrat, and civil rights activist Andrew F. Brimmer instead.

[2] Quite possible the most significant butterfly since the PoD, the gold standard has remained in place for now, and the Nixon Shock or its equivalent McCarthy Shock has not occured.

[3] IOTL, Secretary of Treasury John Connally held the same meeting, but naturally negotiated it in a post-gold standard economy. In both the OTL and ITTL, West Germany left the Bretton Woods System in 1971.

[4] IOTL, Connally supported the raising of the debt ceiling.
 
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Wow great update and Greta TL I love the way that you go into detail about certain issues (such as the agriculture bill or the gold standard) that you don’t find in other TL’s just really great work! Will you continue this after McCarthy’s presidency?
 
Wow great update and Greta TL I love the way that you go into detail about certain issues (such as the agriculture bill or the gold standard) that you don’t find in other TL’s just really great work! Will you continue this after McCarthy’s presidency?
Thanks! A recurring flaw I've noticed in a lot of TLs and Alternate History is that the writer gets rapped up in the broad strokes of history and in foreign policy, and tend to describe only briefly the domestic policy of whoever has been elected (which is the main reason people vote!). This is even true of some of my favourites, such as Down the Road to Defeat.

McCarthy
, for its part, has roughly been in the format of two chapters for every year, while going into detail to understand what McCarthy is actually doing for Americans as President of the United States. So far, foreign policy and world events have taken a bit of a backseat, but that's in part because the butterflies have yet to travel beyond the United States and Vietnam. But maybe I speak too soon, considering the next chapter is on South-East Asia and the Bangladesh Liberation War.

I will likely continue after McCarthy's presidency. I've got the next three Presidents lined up, with an idea of the ones after, so really the length of the TL will be more of a matter of my possible time commitment than a lack of ideas.
 
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The refusal to raise taxes is going to bite him hard later, isn't it? Unless he isn't in power anymore when it starts being a problem.
 
Bretton Woods stays alive Yaaaaaaas Not gonna lie, did not expect that in a McCarthy Presidency
I'm glad I'm keeping the twists fresh (if you can call international finance a 'fresh twist'), but maybe it's prudent not to get too excited. After all, Bretton Woods had the reliability of a house of cards made of sand by the time Nixon axed it.

The next chapter will be coming out tomorrow. It was intended for today, but I had to go out of town, and didn't have much time to work on it. 'Til then, adieu.
 
I'm glad I'm keeping the twists fresh (if you can call international finance a 'fresh twist'), but maybe it's prudent not to get too excited. After all, Bretton Woods had the reliability of a house of cards made of sand by the time Nixon axed it.

The next chapter will be coming out tomorrow. It was intended for today, but I had to go out of town, and didn't have much time to work on it. 'Til then, adieu.

True Bretton Woods was collapsing at the time. It is difficult o preserve , especially as other nations continue to try to seek full employment and don't care about inflation.

Also could we have "only McCarthy could save the Gold Standard" as his "going to China moment"? Haha

Hope your having fun.
 
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