The Economy and the Crisis of Confidence

The Economy and the Crisis of Confidence

The presidential election of 1976 was a contest between Republican incumbent Gerald Ford and Democrat Jimmy CarterA naval officer and farmer in Georgia who entered politics and became the thirty-ninth president of the United States after defeating Gerald Ford in the 1976 election. Carter’s presidency was marked by economic and international turmoil, and he left office after a landslide defeat to Ronald Reagan. While president, Carter maintained a reputation for diligence and honesty. Although many disagree about his record while in the Oval Office, there is widespread agreement that Carter has become the most successful former president in advancing a variety of important causes after leaving office. of Georgia. Ford had barely survived a challenge in the Republican primary from California’s Ronald Reagan, and few gave the president much of a chance to win reelection. Ford’s unpopularity began with his pardon of Nixon, even while many of Nixon’s aides were serving jail terms for crimes they had committed on behalf of their former boss. Ford then committed a number of blunders, such as mistakenly denying that Eastern Europe was dominated by the Soviet Union in a failed attempt to answer critics who were angered by the Helsinki Accords.

The biggest issue on voter’s minds in the fall of 1976 was the economy. Carter enjoyed a tremendous early lead as the economy had only worsened since Ford took office. Democrats portrayed Carter as a “Washington outsider,” a populist image that resonated among voters who had grown tired of the daily revelations of political corruption. Carter’s own desire for full disclosure almost destroyed this image when the candidate admitted that he had felt lust for women beyond his wife. Although many agreed that Carter was honest, the electorate was not impressed by either candidate. Only half of eligible voters even showed up to the polls. In the end, Carter won 297 votes in the Electoral College to Ford’s 240. The Democrats also won nearly two-thirds of Congress, giving Carter an opportunity to enact the legislation he promised would turn the economy around.

Carter began his presidency with high approval ratings, quickly delivering on promises to cut costs by reducing the perks he and his staff received and selling the presidential yacht. His symbolic decision to eschew the customary limousine ride and walk from the capitol to the White House on the day of his inauguration played like a scene from the Mr. Smith Goes to Washington. Like the protagonist in that 1940s film—an average citizen suddenly elevated to office—Carter’s good intentions and work ethic did not translate to legislative success. The president’s method of creating his own panels of experts to draft model legislation alienated key members of Congress because it excluded them from the decision-making process. Carter chastised Congress for failing to recognize that his experts were better equipped to draft policy, a message that further alienated the president from lawmakers.

Americans remained frustrated by continued economic stagnation and high gas prices during the Carter administration. In 1977, the trans-Alaskan pipeline was completed and the Department of Energy was created, but the energy crisis continued. Driving cars with smaller engines and lighter chassis were among many of the adjustments Americans made, yet the nation remained dependent on foreign oil. To make matters worse, the changes made by US automakers came only after foreign competitors entered the market. Chrysler would have been forced into bankruptcy had it not been for a federal bailout of $1.5 billion. Some Americans expressed resentment toward the Middle East and oil companies that had profited from America’s economic problems.

In many ways, Carter was better equipped to address these problems than any other president before him. He was an intelligent and detail-oriented workaholic who surrounded himself with experts. He responded to problems directly and avoided the empty platitudes that typified politicians. His speeches made use of scholarly reports and statistics he spent each night reading. And, like Carter himself, these speeches were incredibly forthright and detail oriented. Carter attempted to address each of the challenges he inherited from the energy crisis to deindustrialization, stagflation, budget deficits, and global conflicts including terrorism.

From the perspective of the president’s critics, each of these problems had only grown worse under Carter’s watch. Some accused the president of using a scattergun approach, trying many measures that actually contradicted one another. Carter’s varied attempts to control inflation included voluntary wage and price freezes, modifications of Federal Reserve policy, and reductions in government spending. Carter also deregulated trucking, railroad, and shipping industries by taking away federal controls for rates and fees in hopes of encouraging both competition and profitability.

Figure 12.20

President Carter and the shah of Iran together during an official state visit in November 1977. Just over one year later, the shah would be forced out of Iran and seek refuge in the United States. The result was another spike in oil prices and a hostage crisis that would last until the final day of Carter’s presidency.

Although many of President Carter’s initiatives received bipartisan support and some likely helped to prevent matters from becoming even worse, each of these decisions came with a political price. For example, Carter’s 1979 decision to reduce the money supply helped to reduce inflation, a practical long-term strategy supported by most economists. Carter recognized that years of simply printing more money to mask the country’s economic problems would have disastrous long-term consequences. In the near term, however, it reduced the money supply for businesses and consumers. It was a bitter pill, but one Carter decided could not wait. Unemployment jumped from 6 to 8 percent, while the sudden shortage of capital meant that even banks could not obtain loans for less than 15 percent. As the next presidential election approached, the country remained mired in a recession, and even those with steady jobs could not obtain loans for homes or cars with interest rates below 20 percent.

The recession peaked in mid-1979. Carter responded to the growing crisis by inviting various experts and local leaders to the presidential retreat at Camp David to discuss the problems their community faced and brainstorm possible responses. Carter then addressed the nation with a frank overview of the challenges that needed to be addressed. Most Americans initially valued the candor of the president’s July 1979 address in which he warned that a “crisis of confidence” had replaced the typical can-do attitude of Americans. Carter outlined areas in which the nation was declining, denounced the irresponsibility of those who allowed private and public debt to spiral out of control, and called on each citizen to accept his or her culpability for their nation’s ills. Americans were used to this sort of rhetoric about the threat of America’s decline from presidential candidates. But they had never heard such a message from a sitting president. For many, the talk seemed reminiscent of a tough coach’s halftime speech to his team, except that he ended the speech without offering a game plan or rousing call for victory.

A half-century of Democratic presidents from Franklin D. Roosevelt to John F. Kennedy had offered inspiring but often-ambiguous speeches in response to the crises of their days. Carter’s address contained none of this puffery, but it was also void of the reassurance the American people had come to expect from their president. Even worse, Carter’s speech failed to explain how he planned to correct the problems he outlined. Within days, even those who had praised Carter’s candor became defensive about the speech. Some even began to perceive it as an indictment of the American people. America was the greatest nation in the world, they exclaimed, precisely because of the very characteristics of hard work and thrift they felt the president had forgotten about. At this moment, one of the president’s advisers described the country as descending into “malaise.” Given the mood of the nation, it mattered little that Carter himself never used the word malaise in his speech. Fairly or not, Americans remembered the address as Carter’s “Malaise” speech. Despite the actual content of Carter’s message, the collective memory of Carter’s presidency began to be that of a leader who accepted the inevitability of the nation’s decline.