In 1976, American voters registered their anger at Watergate, Richard Nixon, the Republican Party, and the Federal government generally by electing as President Jimmy Carter – with a term each in Georgia’s State Senate and Governor’s mansion and no experience of Washington D.C. whatsoever.
Carter frequently denounced “Washington” on the campaign trail and did little to discern between the city’s Republicans and Democrats. “All of them done stole my water,” George Wallace, who pioneered anti-Washington rhetoric, complained of both Ronald Reagan and Carter, “They’re drinking out of my dipper.” Challenging President Ford for the Republican nomination, Reagan warned that, in a country seething with anger at “Washington,” a man who had served in Congress for 24 years before appointment to the White House was at a significant handicap against the Georgia peanut farmer. So he was.
Carter was, too, a Democrat from an increasingly Republican region who had learned to trim his sails accordingly. “I stated during my campaign [for Georgia governor in 1970] that I was not in favor of doing away with the right-to-work law, and that is a position I still maintain,” he wrote in 1971. In 1976, he told union leaders:
I think that the major responsibility for repeal of 14-B rests with labor, and when you see if you can get it passed, I’ll co-operate…I would be glad to see 14-B, the right-to-work law repealed, but I think the major responsibility ought to fall on you.
This, he claimed, “has always been my position since 1970.” Many voters see him as “vague, two-faced, too political,” and Democratic “liberals” distrusted him. One reporter wrote that “old -time Democratic politicians greet him more often than not like a naturalized Martian rather than as a fellow soldier.” This culminated in Edward Kennedy challenging Carter in 1980.
If Carter could be ideologically supple, he was not a blank slate. Jules Witcover wrote that:
…Carter said, concerning his stated advocacy of full employment, that he was reluctant to use the public sector – the federal government and payroll – to provide jobs. Jobs should come out of the private sector; only as a very last resort should the government take up the slack…In contrast, the other Democrats were calling for aggressive use of the government as employer of those who could not be absorbed by the private sector.
Carter’s skepticism towards Federal jobs programs stemmed from a broader critique of the role of government. “We need patience and good will,” he told Congress in 1978:
…but we really need to realize that there is a limit to the role and the function of government. Government cannot solve our problems, it can’t set our goals, it cannot define our vision. Government cannot eliminate poverty or provide a bountiful economy or reduce inflation or save our cities or cure illiteracy or provide energy. And government cannot mandate goodness. Only a true partnership between government and the people can ever hope to reach these goals.
This was a break with the “liberalism” of “The Great Society.”
As recovery from the recession of 1974-1975 faded and the economy worsened, Carter largely rejected the Keynesian remedies of more money printing and government spending. Despite claiming ignorance of the causes of or remedies for rising inflation, he acted as though he did grasp that inflation was, in the popular formulation, “too much money chasing too few goods.”
If that was the problem, one half of the solution lay on the supply side by increasing the number of goods on which the money could be spent. To this end, Carter deregulated the airline, trucking, rail, and telephony industries. “These actions,” Susan Dudley writes, “allowed new entrants into the markets, increased efficiency, lowered prices, offered consumers more choices, and likely contributed to declining inflation.”
The other half of the solution lay on the demand side by reducing the amount of money. Carter appointed Paul Volcker chair of the Federal Reserve in 1978. “We needed a new approach,” Volcker wrote, “Put simply, we would control the quantity of money (the money supply) rather than the price of money (interest rates).” As money growth fell, interest rates soared. The economy shrank in 1980, and unemployment hit 7.2% but inflation would fall from 13.5% to 3.2% in 1983. By then, Carter was out of office and Reagan was cruising to a landslide reelection due to an economic boom thanks, in some small part, to Carter’s deregulatory and sound money policies.
The economic chaos of the 1970s forced even center left governments, like James Callaghan’s Labour government in Britain, to acknowledge the death of Keynesianism. The global shift towards economic freedom in the 1980s and 1990s was not the result of some nefarious ideological coup, but of a widespread realization that the alternative simply didn’t work. In some respects, Jimmy Carter was the first Reaganite.
John Phelan is an Economist at Center of the American Experiment.
