Nixon vs. the Imaginary “Jewish Cabal”

The Federal Reserve is catnip to conspiracy theorists (just Google “Federal Reserve conspiracy” and see) but Richard Nixon may be the only political paranoid ever to form a conspiracy theory about a Fed Chairman whom he personally appointed.

In July 1971, dogged by rising unemployment and inflation, Nixon imagined the existence of a “Jewish cabal” involving Federal Reserve Chairman Arthur F. Burns and the Bureau of Labor Statistics. The President had expected favorable press coverage on July 2, 1971, when the Bureau of Labor Statistics announced a big drop in the unemployment rate from 6.2 to 5.6 percent. When Nixon learned that the front-page of Washington’s Evening Star said, “The Labor Department warned that the dip might have been caused by a statistical quirk,” he ordered an investigation to find out who was responsible, saying, “He’s got to be fired.”

A statistical quirk did cause the drop, and Nixon knew it. (CAUTION: The following contains math.) It was the result of the standard seasonal adjustment BLS makes to the unemployment rate. Summer vacation for students changes the employment picture dramatically. There’s a big influx of students into the job market in June and a big exodus in September. It has nothing to do with the health of the economy, what economists call the “underlying” job market. It’s just students starting and ending their summer jobs. Here’s the tricky part: BLS conducted its unemployment survey during “the regular survey week, defined to be the week including the 12th day of each month.” In other words, officials look at the calendar, see which week contains the 12th, and do the survey from Sunday to Saturday of that week. In June 1971, the 12th fell on a Saturday, so the survey came early in the month, June 6-12, before many students had started vacation. Since there were fewer students looking for jobs at the time, the unemployment rate was lower. If the 12th had fallen on a Sunday, then the survey week would have been June 12 to June 18, there would have been more students out of school looking for jobs, and the “seasonal adjustment” would not have made it look like there was a big drop in unemployment. In fact, when Office of Management and Budget Director George P. Shultz informed the President of the drop in unemployment two days earlier, he’d described it, in these exact words, as “a statistical quirk.”

“I understand statistical aberrations,” Nixon told White House Political Operative Charles W. “Chuck” Colson the day after the announcement. “Why didn’t they say there were statistical aberrations when it went up?”

Well, they did. The same kind of statistical quirk arose the previous September, when the students were leaving their summer jobs to head back to school. (Once again, the 12th had fallen on a Saturday, so the survey week was September 6-12.) In September 1970, there had been big jump in unemployment, from 5.1 to 5.5 percent, its highest point in six years. “But officials of the Bureau of Labor Statistics, traditionally insulated from the political arena, were quick to explain,” the Washington Post reported on its front page on Oct. 3, 1970, “that the big increase could be attributed in large part to a quirk in timing.” BLS had treated the big rise in unemployment the same way it treated the big drop. Newspapers had used the same word both times -- “quirk.”

This made no difference to Nixon, who focused his wrath on the assistant commissioner of labor statistics, Harold Goldstein. Nixon had been wanting to get rid of Goldstein for months. When unemployment fell two-tenths of a percent in January 1971, Goldstein said at the regular BLS briefing that the drop was “marginally significant.” The next month, Goldstein described another two-tenths drop as “sort of mixed,” and the administration cancelled the regular BLS briefings altogether. (Again, it didn’t matter that Goldstein had also made little of small rises in unemployment.)

“I think the one thing, Mr. President, that you should insist upon,” Colson said, “is that they reorganize that Bureau. Now, in the process of reorganizing it, I think we’ll get this guy’s resignation. And we’ll put in a politician. That’s what we ought to have in there.”

Nixon agreed and summoned Shultz and Labor Secretary James D. Hodgson into his office. “I want them to do it even-handed. And they’re not doing it that way,” Nixon said. “Every [press] release has been loaded against us. And deliberately.” The President asked for a plan.

“Well,” Shultz said, “I think the only kind of organization that would be sensible under these circumstances is a reorganization that separates Goldstein from the employment, uh, unemployment figures and gets him into something else entirely.” One of Shultz’s aides already thought BLS needed reorganizing.

Later, alone with Colson, Nixon said, “Well, listen, are they all Jews over there?”

“Every one of them,” Colson said. “Well, a couple of exceptions.”

“See my point?”

“You know goddamn well they’re out to kill us.”

Before lunch, Nixon gave his chief of staff an order. “Now, point: [White House Personnel Director Frederic V.] Malek is not Jewish.”

“No,” H.R. “Bob” Haldeman said.

“All right, I want a look at any sensitive areas around where Jews are involved, Bob. See, the Jews are all through the government, and we have got to get in those areas. We’ve got to get a man in charge who is not Jewish to control the Jewish . . . do you understand?

“I sure do.”

“The government is full of Jews,” Nixon said. “Second, most Jews are disloyal. You know what I mean? You have a [White House Consultant Leonard] Garment and a [National Security Adviser Henry A.] Kissinger and, frankly, a [White House Speechwriter William L.] Safire, and, by God, they’re exceptions. But, Bob, generally speaking, you can’t trust the bastards. They turn on you.”

It would be more accurate to say that Jews couldn’t trust Nixon, that he turned on them. On July 24, 1971, he mentioned that Colson had found out sixteen BLS officials were registered Democrats, only one a registered Republican. “The point that he did not get into that I want to know, Bob, how many were Jews?” Nixon asked. “There’s a Jewish cabal, you know, running through this, working with people like [Fed Chairman] Burns and the rest. And they all only talk to Jews.”

In reality, Burns was a Nixon man, the chief conservative economist on the White House staff in 1969 before Nixon nominated him to the Fed. Congress set up the Fed to be independent of politics, but that didn’t stop Burns from secretly assuring Nixon that he would use its power over the economy to reduce unemployment for his re-election year. The only official Burns was conspiring with was Richard Nixon.  

But the Fed chairman had incurred his patron’s displeasure. Nixon had wanted a conservative economist at the Fed, but grew angry when he got one. As unemployment rose to politically harmful levels, Nixon wanted the Fed to follow an “easy money” policy that would reduce interest rates, lowering the cost to business of borrowing money, expanding operations and hiring more employees. Burns, however, warned that this would fuel inflation. On the morning of Nixon’s “Jewish cabal” comment, the Times had run this front-page headline: “Burns Says Inflation Curb Is Making Scant Progress.”

“Now, what do you want to do with Arthur Burns?” Nixon asked Haldeman and Chief Domestic Policy Adviser John D. Ehrlichman that afternoon. “Raise his salary?” The President asked for a press leak suggesting that the President’s advisers had recommended increasing the membership of the Federal Reserve Board.

On July 28, the United Press International newswire ran an exclusive: “President Nixon is considering a proposal to double the size of the Federal Reserve Board, it was learned today. The suggestion, if put before Congress, could touch off a controversy rivaling President Franklin D. Roosevelt’s attempt to “pack” the Supreme Court.

“Administration officials also disclosed that Nixon rejected a request from Arthur F. Burns -- Chairman of the Federal Reserve Board -- for a 20,000 a year pay raise. Burns currently makes 42,500.

“Burns, however, denied he had ‘lobbied for an increase in salary.’ ”

Meanwhile, Haldeman tried to find out how many BLS employees were Jews. “What’s the status of your analysis of the BLS,” he wrote to Personnel Chief Malek on July 26, “specifically of the 21 key people? What is their demographic breakdown?”

Malek replied the next day. “We were able to obtain political affiliation checks on 35 of the 50 names listed on their organization chart.” There were 25 Democrats, 5 unregistered, 4 independents, and 1 Republican. “In addition, 13 out of the 35 fit the other demographic criterion that was discussed.” There was a handwritten note: “Most of these are at the top.”

Later that day, the President asked Ehrlichman, “Did you ever get the number of Jews that were in BLS?”

“I got their biographies yesterday. I’m having them analyzed,” Ehrlichman said. “Oh, the radio and the wires are full this morning that Arthur Burns wanted a salary increase.”

“I wonder where that came from,” Nixon said. “I’ll never forget Arthur sitting in here telling us a year ago there shouldn’t be a salary increase and that the Cabinet officers should give it back.”

Burns got smeared, but Goldstein got forced out. “Harold Goldstein will be moved to a routine, non-sensitive post in another part of BLS,” Malek reported to Haldeman on Sept. 8, 1971. “He has been told of this and will move quietly when the reorganization is announced.

“A sensitive and loyal Republican is also being recruited for the employment analysis function being vacated by Goldstein.”

Typically, when Richard Nixon told himself people were conspiring against him, it meant he was about to conspire against them.