Kermit Gordon assumed the presidency of Brookings in 1967 as the national consensus unraveled. It became clear that prosperity alone could not solve the nation's problems and that military power could not necessarily be translated to world influence. But Gordon believed that tough minded analysis could shed useful light on national and international problems. He began a series of studies of program choices for the federal budget in 1969 entitled Setting National Priorities. Gordon insisted these studies not be a narrow critique of administration proposals but an examination of alternative policies within the spectrum of the possible. He supported the establishment of the Brookings Papers on Economic Activity that looked at issues of economic performance confronting policymakers. He also expanded the Foreign Policy Studies Program to include research in national security and defense. Gordon encouraged researchers to declare policy preferences in their work but insisted that work must be fair and balanced.

After the election of Richard Nixon to the presidency in 1968, the relationship between the Brookings Institution and the White House deteriorated. Kermit Gordon and many of the research staff had served in Democratic administrations, and some White House staff members saw the Institution's research as politically motivated. Despite this criticism, relations with executive agencies remained cordial. Throughout the 1970's, Brookings was offered more federal research contracts than it could handle.

It was a period when applied policy research flourished and when university social scientists were easily drawn to the study of practical problems. The Brookings Institution was the center of such work. However, the Institution's financial position began to deteriorate after the sharp stock market decline and inflationary surge of the early 1970's. Endowment revenue and foundation funding dipped, while annual expenditures remained the same.