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The Burglaries Were Never the Story

https://portside.org/2022-09-10/burglaries-were-never-story
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Author: Andrew Elrod
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Book Review

Garrett M. Graff. Watergate: A New History Avid Reader Press, 2022.

Jefferson Morley. Scorpions’ Dance: The President, the Spymaster, and Watergate. St. Martin’s Press, 2022.

IN 1951, C. VANN WOODWARD published a large volume on the transformation of the former Confederacy from its “Redemption” decades of the 1880s to the Jim Crow era of the late 1890s and 1900s. The Compromise of 1877, which had hitherto puzzled historians of the end of Reconstruction, became in Woodward’s telling a skeleton key to the patterns of national development at the end of the century and beyond. Prior historians had asked only narrow questions about the Compromise: had the promise of withdrawal of federal troops from the former Confederacy decided the election, or was it fraud? Woodward looked to the interests at play in the Congress, and found a concerted lobbying campaign by Tom Scott, President of the Pennsylvania Railroad, for the federal rescue of the Texas and Pacific truckline to the west coast, which had effectively gone bankrupt after the Panic of 1873. The removal of federal forces, Woodward found, were mere sweeteners to the promise of investment by Northern capital in the decimated former confederacy. All the Southern Democrats had to do was return to their Whiggish roots, deliver the Presidency to Rutherford B. Hayes, and vote for the Scott Plan. Along the seams of an emerging capitalist society, the business leaders of the South wrenched themselves from the tenant farmers, manumitted slaves, and embryonic urban proletariat to join in the construction of the Eastern manufacturing empire.1 What followed the inevitable allegations of fraud and corruption that dogged the electoral college was the Populism of the 1880s and 1890s, whose defeat saw the recrudescence of racism and white supremacy in the Jim Crow laws of the Progressive Era.

Turning points in history require distance to understand their full complexity. For Watergate, the initial arrests of which mark their fiftieth anniversary this summer, there is yet no similar judgment on the magnitude of Woodward’s telling in The Origins of the New South. The historical insights of one era have been lost to the journalistic instincts of another. Whereas we understand how a growing country in the late 19th century could be brought together by open collusion of business interests, we give little attention today to how changing commercial opportunities during the Vietnam War might have torn apart the political accommodations that followed World War II.  Watergate’s place in this history today is but a hairline fracture to the New Deal Order; a symbol rather than a decisive moment. This is a serious misinterpretation that leaves unexamined the universal business consensus behind Richard Nixon in both 1968 and 1972.

Watergate was nothing less than the visible manifestation of a hypogeal realignment. A basic continuity in American trade and financial policy has persisted ever since the Nixon–Ford Administrations. In foreign policy, the historian Bruce Cummings faithfully describes the period after Watergate as “Nixonism without Nixon.” Most potently for a present reacquainted with the discomforts of inflation, planned recessions and stagnation remain the preferred tool among policy experts for regulating growth since our trust in price freezes and direct controls on wages and prices has never recovered from the Nixon scandal. The narrowing of our understanding of the import of the investigations that followed the 1972 campaign to the quirky personality and outrageous private pronouncements of Richard Nixon himself leaves these legacies unexplained.

The break-in’s fiftieth anniversary marks a new occasion for taking stock. Alongside a fiftieth anniversary edition of Bob Woodward (no relation) and Carl Bernstein’s canonical account of the investigation at the Washington Post, Washington journalists Garrett M. Graff and Jefferson Morley each published their own updated investigations into the presidential entanglements of the early 1970s this year. Yet to the disappointed eye of the trained historian there is no semblance of a synthesis on the horizon: the basic contours of interpretation remain those set during the spectacle itself, in the Senate hearings and their exclusions. If there is debate about the subject of these books, it will unfold on those vintage terms of 1973 and 1974—the pliability of patriotic fervor and its tendency towards fascism; the roles of fear and vanity in political leadership; the importance of the CIA and its exact role in the burglary and the cover-up. In its narrow focus on process—the motions by which the 37th President violated civil liberties, extorted donors, lied to Congress, and obstructed justice—Watergate’s prevailing interpretation also invites an easy analytic leap to Donald Trump. The neat portability of this historical analogy obscures not only the historical significance of the Nixon helmsmanship at a critical moment of capitalist transformation, but our own understanding of economic interests today and their relationship to modern party politics. Woodward and Bernstein give this reductive interpretation of the present their own authorial imprimatur: “Both Nixon and Trump have been willing prisoners of their compulsions, to dominate, and to gain and hold political power through virtually any means.”

Yet the burglaries were never the story. Control of the executive branch remained critical at a moment of global shift: détente, the end of the gold-dollar standard, the rise of government economic planning across the global south and its threat to corporate autonomy at home, and the challenge to the material basis of organized labor’s power in the old manufacturing industries of the US Northeast and Midwest. The money from Nixon’s election campaigns that paid for the Plumbers was, after all, donated by blue-chip corporations, intent on ensuring their man remained at the wheel to steer the nation through the moment’s economic dislocations and the ascendant social pressures to transform the American welfare state into something more capable of ensuring stability on popular terms. For all this, the Democrats’ media spectacle failed to alter the course of economic development or fundamentally challenge the emerging social order—a historic failure for which the ablutions of impeachment hearings have never quite absolved American democracy.

TO TRULY UNDERSTAND the public appetite for scandal and the congressional persistence to pursue it during the Nixon Administration, one must begin with the tremendous social upheaval of the era and the public challenge to apprehend it. For seven years, the United States military, drafting men under longstanding cold war practice, had occupied the cities and airfields of South Vietnam: in 1968, over 500,000 American servicemen were stationed in the country. Public opposition to this war grew during the last year of Johnson’s Administration, but its nakedly colonial character intensified under his Republican successor. In May 1969, the New York Times revealed that the war in Vietnam had expanded to a war in Cambodia, a third country whose government was not party to the conflict.

The military escalation had, like all those before it, coincided with an increase in the cost of living for working-class Americans. During the Korean War, Congress had quickly granted wartime control powers to freeze and adjust prices, expand productive capacity, and allocate resources and labor. No such powers accompanied Johnson’s lackadaisical escalation of the war in Vietnam, and by the time Nixon entered office, inflation had continued for nearly four years. Rather than pursue the kind of mobilization planning that characterized past military booms—business opposition to which had cornered LBJ into allowing the inflation to unravel—Nixon chose to cut government spending on civilian programs and leave Johnson’s consumption and income taxes in place, while the Federal Reserve raised interest rates. The continuity in basic policy, as LBJ’s chief economist Arthur Okun wrote, was seamless.

These twin crises—of managing the stability of prices and employment at home while defending the corporate fiefdoms of American businessmen in foreign lands—shaped public perception of the global disorder and primed it against the Republicans in the 1970 midterms. Among the Democrats, representatives from the Northern industrial cities were demanding immediate wage-and-price controls and an increase in top-end taxes. The party expanded their majorities in both houses that November, and for a second time in early 1971 passed legislation authorizing the President to impose controls on wages and prices.

Caught between an inflation from below and an expanding public regulation of business from above, where was a centrist executive to turn? In August 1971, the President relented and ordered a ninety-day wage-price freeze, to be followed by a stabilization program timed with his election campaign. A decisive political swing came from the AFL-CIO, whose leaders were then engaged in a fratricidal war within their own Democratic Party over the Vietnamese intervention. Another came from the success of the price control program, which brought down inflation as employment recovered during 1972. And a third came from organized business, whose donations flowed in an unprecedented sixty-million-dollar torrent into the coffers of the Committee to Re-Elect the President (CREEP).

FOR A DECADE AFTER THE EVENT, the journalists and intellectuals of the New Left offered partial and alluring explanations of the 1972 election. Paul Sweezy and Harry Magdoff thought the post-election Congressional hearings an opportunity for capitalists to bring to a close the war jeopardizing the dollar, which Henry Kissinger insisted on prolonging; the editors of NACLA saw in CREEP a joint effort by Humphrey and Nixon, on behalf of Yankee imperialism, to stop McGovern’s brand of Midwest-Scandinavian social democracy; Carl Oglesby wrote of the “Yankee-Cowboy War” in Washington between Southern and Western oilmen and Eastern financiers; Kirkpatrick Sale wrote of the “Power Shift” signaled by the “Rise of the Southern Rim”; the editors of Ramparts surveyed the debate and found a common element in the growing power of “Big Brother and the Holding Company”—the national security state and monopoly capitalism.

For all the narcotic paranoia of counterculture, we know a remarkable amount from these books. And yet almost none of it gets reiterated in contemporary accounts of the period. Where should we place the sprawling corruptions revealed by the investigations, in the story of our national maturation from a commodity-exporting, tariff-protected, developing society to the technological and military center of a global empire? Our existing historiography of the “Rise of the Right” rarely accords Watergate this climacteric impact. Yet the financial interests revealed by the scandal betray a decisive conflict over national policy at a turning point in twentieth-century global history. Our understanding of political competition today should turn on this broader question of interpretation, as the course of history appears once again to be crashing against uncertain embankments.

Consider what we do know about the situation that produced the scandal. The complex of interests behind both the victorious election campaigns of 1968 and 1972 includes not only white-shoe law firms instrumental to the period’s wave of corporate mergers, and a new wing of the financial services industry (mutual funds); but also an older, Southern and Midwestern opposition to the nation’s New Deal labor laws. This opposition manifested as an open-shop movement that saw, through the era’s inflation, an interpretation of economic instability that has survived long past Nixon’s political career. What we should be talking about when we talk about Watergate includes:

These business relationships lie far afield from James McCord, E. Howard Hunt, and their careers with the CIA. Yet they are the pillars of the establishment that not only brought Nixon into the White House but kept him there atop the national security apparatus during the growing controversy of the expanding Indochina war. In 1968, Mitchell ran Nixon’s election campaign with the funds Stans raised, and in 1969 Nixon appointed Mitchell Attorney General. Leonard Garment, Thomas Evans, and John Sears—all of Mudge Rose—followed Nixon into the government.

At the Department of Justice, Mitchell swiftly oversaw a few choice decisions from the antitrust department, such as defending the billion-dollar merger of Bobst’s Warner-Lambert pharmaceutical company with Parke Davis & Company. When the Securities and Exchange Commission threatened to include mutual funds under its regulations on corporate acquisitions and capital structure, the Department of Justice filed a brief with Mudge Rose client Investors Diversified Services (a future property of American Express, IDS was then the largest mutual funds company in the world) favoring an exemption for the industry. When the Congress in 1969 attempted to end the tax exemption for state and municipal bonds—which non-union localities used to offer incentives for companies fleeing the union strongholds—Mitchell intervened, ensuring the Treasury Department attorneys would preserve the exemption for his favored asset class. El Paso Natural Gas, yet another Mudge Rose client, had spent nearly a decade fighting the Kennedy-Johnson Department of Justice over its pricing policies; in March 1969, the Mitchell-run DOJ announced it would no longer appeal the case in the courts.

And then there is the Penn Central collapse, probably the best-known example of the increasing corporate concentration and financial fragility at the peak of the Vietnam War boom. The Department of Justice had opposed the merger in 1966, but Lyndon Johnson and Walter Annenberg intervened in favor, and it was ultimately approved in 1968. Yet by 1970 the conglomerate was driven into bankruptcy with the recession the Nixon Administration induced to stem inflation. Senior Mudge Rose partner Randolph Guthrie arranged a bailout—Penn Central chairman Stuart Saunders told his board Mudge Rose was “close to” the White House and had “been influential” in negotiating government rescue—but the open corruption such a deal entailed was too much for even Nixon, who was then worried about the midterm elections. The firm filed for bankruptcy that summer, while the Federal Reserve, in a pattern soon to be repeated across the business cycles of recent history, prevented a generalized panic in the bond market with the offer of emergency rescue funds to banks for distressed firms.

In the lead-up to Nixon’s reinauguration, the administration hired Solomon Brothers’ senior partner William Simon as Deputy Secretary of the Treasury. A year prior, as Penn Central’s officers pleaded with the Cabinet for emergency loans, Congress had, at the President’s request, completed the semi-privatization of the post office—ending the old Post Office Department and creating the United States Postal Service, now partially dependent on private financing. To underwrite the first bond issue of $10 billion for the corporation, Postmaster General Winton Blount oversaw the hiring of Solomon Brothers, who in turn hired another firm to do the legal work of placing the issues: Mudge Rose.

While the revolving door might seem mundane, its revolution in the critical years of the Nixon Administration has a potent legacy. Blount, a construction executive, had overseen the growth of a non-union sector in commercial construction under the Associated Builders and Contractors (ABC), today the nation’s second-largest construction lobby. Jimmy Carter’s director of the OMB, Georgia attorney James McIntyre, took a job representing the ABC after the 1980 election. Donald Rumsfeld, Nixon’s director of the price control program, became Ford’s Chief of Staff and later Secretary of Defense in both the Ford and George W. Bush Administrations. Rumsfeld’s assistant and replacement was Richard Cheney. Simon’s libertarian influence survives today across the Republican Party apparatus, from the Heritage Foundation to Texas Senator Ted Cruz, whose 2015 campaign book A Time for Truth is named in homage to Simon’s 1978 manifesto.

This future of open-shop corporate capture in Washington was not obvious to the public during the early Nixon years, when the administration was preoccupied with political and financial reinforcement of a creaking business establishment. Those efforts laid the kindling that would engulf the White House after the election. In late 1971, for example, Mitchell was concerned with arranging bond on behalf of the financier Robert Vesco, director of the mutual fund Investors Over Seas Limited, who was jailed in Geneva for violating that countries’ fiduciary laws. In exchange, Vesco donated $200,000 to CREEP, while Mitchell and Stans prevailed on SEC Chairman William J. Casey to end the US investigation into Vesco’s mutual funds business.2 The post-election hearings would expose this corruption, but already in early 1972 the columnist Jack Anderson published a corporate memo detailing the payment of $400,000 to the Republican National Committee from International Telephone and Telegraph (ITT), after which the Department of Justice closed an antitrust investigation into one of the donor’s large acquisitions. The magnitude of Washington’s salability was by then straining the standards of respectability: Nixon’s Department of Justice was departing from decades of antitrust precedent to usher forth a new wave of super-conglomerates (the phrase “multinational corporation” was only then becoming popular), offering to rescue those that failed, while his political party’s national convention was being financed by a giant whose very legality was a product of DOJ discretion.3

BUT IF IT IS THE CASE that the tight employment and price controls of 1972 secured Nixon’s landslide, then what did rat-fucking Eugene McCarthy matter? If control of the economy is decisive in politics, then our attention must follow debates in Congress and within the regulatory agencies over actual economic management. Instead, we have narrowed our focus on the Watergate investigations at the precise moment when such debates were taking place—evacuating our political understanding of the complex of business interests that placed the President in power and substituting for it a morality play about executive overreach.

Economic stabilization structured the entire event. At a moment of national upheaval, it was control of the federal planning apparatus birthed by the New Deal and cold war that locked corporate America into the Committee to Re-Elect the President. The month of August 1971—when Haldeman approved Liddy and Hunt’s burglary of Ellsberg’s psychiatric records in Los Angeles—saw two other important decisions that shaped the course of the decade. First was the decision to control wages and prices to stop inflation. Second was the release of a memo by Justice Lewis Powell, written in response to the price-control announcement, warning of an “attack against the free enterprise system” and urging business political spending and organization.

Powell’s memo was prescient. While economic historians limit the realm of “politics” to the existence of controls and stimulus, the Nixon-Ford program for “decontrol” and austerity firmly asserted political interests through the restoration of private power in regulated markets. Self-serious liberals have taken the lesson of 1972 to mean that control over the economy should not rest with elections and popular policies, placing on the side of prudence the general interest of corporate executives in favor of growing unemployment in controlling inflation. This is less than a half truth, since the strategy for economic stabilization shifted sharply in the midst of the controls program. While the 1972 stabilization was celebrated, the 1973 relaxation of controls was deeply unpopular, and the ire directed at the administration during the Watergate hearings took place in the context of gasoline shortages and a rapidly accelerating inflation. Contemporaries understood what so infuriated the public was the way the controls had been used to protect business profits, allowing price increases but not wage increases. After re-election was secured, it took real intellectual work and popular persuasion to explain the accelerating inflation as the fault of excessive government spending and power of organized labor. To describe this as a return to “neutral” management of the economy, as we have done, blurs the very boundaries of politics and assumes as historical truth what was for contemporaries a shocking conception of the public interest.

Recognition of such politically contested control of the economy points away from the lessons of both economic historians and our current historiography. During the summer of 1973, just as the Watergate investigation revealed the existence of a presidential taping system, the Senate opened the first of a year-long set of hearings into the oil industry to investigate whether the shortages and price increases of petroleum, gasoline, and heating oil were deliberately exacerbated by the nation’s twenty-some large, vertically integrated oil corporations. By December, the Democrats were openly discussing the establishment of a public option in energy and an excess profits tax on oil. Treasury Secretary William Simons intervened at the FTC to stop the investigation of the oil majors, prevent congressional passage of the profits tax, and preserve the partial and dysfunctional regulation of oil price controls—without the establishment of a national oil corporation. Political control of the economy was decisive. But the Democratic Party, whose senior leaders divided over their New Dealish proposals, found unity instead in the Watergate hearings.

The explosion of rage and cynicism that burst forth after the 1972 presidential campaign was, ultimately, rooted in this historic bait-and-switch. Nixon had been re-elected on a promise of stability, but continuing the type of stability Nixon promised required not only police terror in the streets but greater expansion of government control of the economy, of public spending and taxes, and of integration of the conflicting interests at root of inflation into common management of social concerns. This was the very opposite of what business had sought in continued Republican Party control in Washington. The administration had no intention of pursuing such a planned economy. And popular support for such planning was complicated by the chasmic separation between the vibrant protest movement and its representatives in Washington. By the spring of 1974, as the law authorizing price controls neared expiration, the Senate Select Committee hearings had managed to displace the politics of inflation control with a sweeping expose of Washington corruption. To slow inflation, the nation had turned instead toward deliberate recession. The disgraced Nixon had “impounded” appropriated funds and cut vital public spending. Now the Federal Reserve raised interest rates to 12 percent, and when Nixon resigned in August, the nation was nine months into the deepest depression since before World War II.

CLEARING THE SMOKE of a national myth requires placing the enormous sums pouring into CREEP in the historical context of the evolution of American capitalism. While Garrett M. Graff, in his Watergate: A New History, fleetingly mentions the 1974 amendments to the Federal Election Campaign Act of 1971, passed in response to the Watergate revelations, he does not note how this statutory tightening was immediately scaled back by the Supreme Court in 1976 in Buckley v. Valeo—much less the role this precedent played in 2010’s Citizens United.

To his credit, Graff thoroughly recounts decisive events in the spiraling Nixon paranoia, and each pivotal decision in the investigation itself, such as Majority Leader Mansfield’s to hold the Watergate investigations in a new select committee under the conservative Democrat Sam Ervin, rather than in the Judiciary Committee where Ted Kennedy sat or in Government Operations Committee led by the opponent of the oil industry Henry Jackson. Likewise, in his new Scorpions’ Dance: The President, the Spymaster, and Watergate, Jefferson Morley assiduously reconstructs the known unknowns about the CIA’s involvement in the break-in and its coverup: we see Nixon invoking apparent knowledge about the Kennedy assassination, in his attempt to secure the agency’s compliance in stopping the FBI investigation; we see CIA Director Richard Helms lying, to an executive session of the select committee, that the Agency did not participate in the coup against Salvador Allende.

And both Morley and Graff mention the crash of Flight 553 in December 1972, the commercial jet carrying Dorothy Hunt (wife of E. Howard), on whose person was found $10,000 in cash for hush payments. But given their focus on the de-mythologizing the scandal, it is curious that neither seriously consider the then-published claims of the administration’s relationship to the flight—from the executives of Northern Natural Gas (the company which lost out to El Paso Natural Gas under Mitchell’s antitrust program) who were said to have died in the crash, to Nixon’s appointment, the day after the event, of Egil Krogh—Haldeman’s assistant—to Undersecretary of Transportation, which oversaw the National Transportation Safety Board charged with investigating the crash during 1973.

The corruption scandals of the 1970s began with exhortations to national unity and patriotism of a very different nature than those which ended the crisis of capitalism during the 1930s. Historians have all too readily brushed aside the upheaval and what it revealed about the fragile political order of a supposed Golden Age. In the century of depression and global war that separated the Gilded Age from the Nixon era, the nature of power in America had shifted: from the simpler remits of elections and legislation, through the mixed, military economy of the Cold War, power migrated to the foggier corners of administrative rulemaking and national intelligence, landing finally in a government historically unique in its servility to preserving and augmenting the fragile power of multinational capital. Perhaps the interpretation of the events in Washington during 1973-’74 that comes closest to capturing this shift in the national mood emerged not from an historian or journalist at all, but the filmmaker Robert Altman. His fictionalized one-man play Secret Honor portrays a drunken Nixon lamenting his sacrifice to a businessman’s cabal, the Committee of One-Hundred, which actually existed and played an instrumental role in Nixon’s red-baiting congressional campaigns of the 1940s (though no record exists of its participation in the White House twenty-five years later).

There is harsh dissonance between our instinctual understanding of Richard Nixon as the corrupt businessman’s President and our fixation on the Watergate break-ins as evidence of that corruption. For this we can thank the spectacle of the investigative hearings themselves, whose influence remains a historical problem in its own right. How did the centrism Nixon preached to such electoral success sour so rapidly? Why did the businessmen who lined up so loyally behind him in 1968 and 1972 turn so quickly against him? The break-ins offer few new answers to these historical questions. Whether any historians working today are inclined to ask is another matter.

  1. The Scott bill never became law; in October 1877 President Hayes, securely inaugurated, turned against the bill as too redolent of the railroad jobbing of the Grant Administration. But the promised removal of federal troops from the South had worked to break the Democratic Party filibuster in the House designed to pre-empt the decision of the Electoral Commission and the counting of the votes of the Electoral College. In February, the party split, and in April Hayes was inaugurated. Though the decision was decided by what Northerners called “Tom Scott’s Democrats” in the South, the southern railroad would ultimately be completed by Samuel Huntington. ↩

  2. Stans later told SEC investigator G. Bradford Cook that he, Stans, would recommend Cook to replace Casey as SEC chairman if he closed the investigation into Vesco. In early 1973, right after the election, Casey was hired into the State Department, and Cook became chairman of the SEC until the Watergate hearings brought the arrangement into the open. ↩

  3. What is most remarkable about the transformation of the United States since Watergate is how normal the corrupt campaign finance practices have become in the decades since. The world explored in the oeuvre of journalists like Jane Mayer or Jesse Eisenger can be seen, in its adolescence, in these stories about influence-buying in Nixon’s Department of Justice. ↩

Andrew Elrod holds a Ph.D. in history from the University of California, Santa Barbara and is a 2016 Washington Center for Equitable Growth grantee. Elrod, in the fall of 2021, completed his dissertation on the history of wage and price controls in the United States between 1940 and 1980. He works in the research department at UTLA, a 36,000-member public-sector labor union in Los Angeles.

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