All the talk of renewed inflation brought back some terrible memories for me, and I wrote about them at New York:
When I was a freshman college debater at Emory University in the fall of 1970, the national debate topic was not Vietnam, but the desirability of wage and price controls. Little did we know that just months ahead a Republican president would impose a wage-price freeze, long the anti-inflationary prescription of the left wing of the Democratic Party. But the surprise known in financial circles as the “Nixon shock,” nearly a half-century ago (on August 15, 1971) showed how pervasive the fear of inflation — running at just over 5 percent in 1970 — had become.
That’s ancient history now, even to those of us who remember the double-digit inflation of the late 1970s, and the particularly horrid scourge of “stagflation” (high inflation and unemployment simultaneously). Inflation seems to have been tamed by wise monetary policies. The periodic warnings from 21st-century conservatives that low interest rates and federal budget deficits would create inflation didn’t much bother me. It was like hearing an old priest chant a forgotten litany in a lost language — just one among many ritualistic arguments for the tight credit and reactionary social policies these people favored instinctively as a sort of class self-defense posture.
The
current surge in consumer prices doesn’t necessarily change that picture; the current post-pandemic (we hope) economic environment was sure to produce a spike in wages and prices that cannot be projected into a future where something approaching normalcy will surely return (though the real-estate bubble is indeed troubling). But now I am beginning to hear echoes of the inflation panics of the not-so-distant past, which make me tremble.
Like Tim Noah, I suspect there may be a generational lapse in understanding the politics of inflation:
“I don’t care to be condescended to by a bunch of Gen Xers and Millennials about my ’70s-bred fear of inflation. It feels too much like the condescension we Boomers directed toward Depression babies whenever they warned us that we were playing with fire in deregulating the financial markets. Poor dears, we thought, traumatized for life by the 1929 crash and one-third of a nation ill-housed, ill-clad, ill-nourished.
“The Depression babies turned out to be right, of course.”
Noah makes it clear he’s not arguing inflation per se is bad for the economy. It is, however, bad for progressive politics, and not just because “stagflation” probably killed the Carter presidency and ushered in the Reagan era far more than the Iranian hostage crisis or other better-remembered Democratic foibles. The deflationary economic strategies of the 1980s weren’t called “austerity,” but rather a corrective for undisciplined policies that fed wage and price spirals which in turned hammered the value of savings, the living standards of those on fixed incomes, and the political case for federal domestic spending.
Most lethally for progressivism, the conservative supply-side tax-cutting when combined with inflationary fears can create enormous pressure for public disinvestment and the shredding of safety nets (which is why reactionaries happily labeled the intended result “starving the beast”). We are still living with some of the long-term consequences of anti-inflationary backlash. As Noah points out, California’s Proposition 13 ballot initiative in 1978 and similar “tax revolts” were a by-product of price spirals that boosted tax assessments on property and income alike.
But sometimes lost in an examination of the right’s exploitation of inflation fears is the abiding fact that the left has no clear prescription for dealing with it, either, other than by denying its existence or significance (sometimes rightly, sometimes wrongly). Ironically, that was made most evident by the supposedly illiberal Richard Nixon’s surprising use of the great liberal instrument for taming inflation.
The veteran ex-conservative economic and political analyst Bruce Bartlett has penned an exceptional explainer on the background and consequences of the “Nixon shock,” particularly its international dimensions, and the role played by Treasury Secretary John Connally, who like his boss and ally Nixon was more focused on short-term politics than on long-term economic realities. What’s clear is that Nixon was convinced a recession induced by the Eisenhower administration and its Federal Reserve Board appointees designed to kill inflationary pressures also killed his 1960 presidential candidacy. As prices spiked in 1970, he was terrified the same thing could happen in 1972.
Nixon had inherited (and temporarily extended) an income-tax surcharge from LBJ that was designed to pay for the skyrocketing costs of the Vietnam War, but its effects were limited. So with his signature televised bombshell reveal (the one he deployed a month earlier to announce his trip to China), amid great secrecy, Nixon rolled out a combo platter of initiatives to fight inflation and international economic instability. They included a suspension of fixed currency exchange rates and the convertibility of the dollar to gold (to head off a raid on gold supplies triggered by a British demand for a major conversion); an import surcharge (to prevent a worsening of the trade balance); and most significantly for most Americans, a 90-day freeze on wages and prices to be followed by an indefinite period of controls by federal panels.
As political theater, Nixon’s speech announcing a “new economic policy” was, well, Nixonian. He began with dessert: an assortment of tax breaks and job-creation incentives balanced by mostly unspecified spending cuts; only then did he mention the wage-price freeze. After promising to “break the vicious circle of spiraling prices and costs,” Nixon moved on to his international proposals, which he downplayed as “very technical,” while assuring viewers that “if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.”
Nixon’s wage and price controls were initially very popular (as polls had told the White House they would be) and did indeed hold down inflation through the reelection year of 1972, when Nixon won his famous landslide reelection over poor George McGovern, in part by goosing federal appropriations to create a mini-boom. By then the administration had moved on to a more discretionary system for regulating wage and price increases, which generated rumors of employers currying favor with generous donations to CREEP (the Committee to Reelect the President), the notoriously corrupt operation heavily complicit in the Watergate scandals that brought down the Nixon presidency. Between the suppressed and eventually unleashed inflationary pressures and the oil-price shock Nixon’s international economic policies helped create, the country paid a very high economic price for the brief respite from inflation the wage-price freeze earned him. He sowed the wind with even greater inflation, and his successors Gerald Ford (whose feckless “Whip Inflation Now” campaign was widely mocked) and Jimmy Carter reaped the whirlwind.
Before you dismiss these events from 50 years ago as irrelevant, consider how much Nixon’s short-sighted approach sounds like something President Donald Trump might have done if inflation had became a political problem during his tenure (or in, God help us, a future term). Indeed, any president mulling Nixon’s choice of recession-inducing fiscal or monetary policies might be tempted to resort to the easy-to-understand, if dangerous, strategy of wage and price controls in which the pain is mostly back-loaded, particularly in or near an election year. Old folks remember how it preceded Nixon’s landslide 1972 win, followed by a decade of economic pain and multiple decades of political misery for progressives.
McGreevey won’t make a difference one way or the other. It’s a funny state. Tends to go Republican for Governor (Keane, Whitman), but also goes Dem (Florio, McGreevey). The tendency is to be unhappy when the Gov is Dem and content with the Repub Gov. But the legislature trends Dem and national elections, I think, trend Dem. Went for Nixon, like everyone else. Not sure where it went with the Reagan and Bush I years. But went for Clinton and Gore. Both Senators are Dem (Corzine and Lautenberg). I think it will go Dem this time. That’s my ear to the street sense talking.
To compare the various polls, go to:
http://www.fastpolitics.com then scroll down the right side column to Polling Report and you’ll see them all. It’s a great site. This morning Kerry was ahead in four polls, Bush in two, and they tied in one. :))) Most encouraging.
Isn’t McGreevey becoming more popular (or at least less hated) in Jersey? Will that keep on through November?
Rasmussen has Kerry up by 5 points in Florida as of May 20. It was tied the previous week.
Don’t worry about those California and NJ polls. Kerry has to be up by more than a point in California if you accept that Kerry is even or slightly ahead nationwide. The New Jersey poll may be reflecting some unpopularity with Governor McGreevy but New Jersey should be there in November for us. As for Rasmussen his last poll in 2000 had Bush beating Gore 49-40. So don’t take his poll too seriously.
Trent,
The news Faux News/Opinion Dynamics poll has Bush up in the swing states. They have the 3-way race 40-40-3, but Bush up 43-37 in 16 battleground states.
Consider the source, but also consider that Bush gets only 43% in battleground states in this obviously slanred poll.
So what poll was that blond Republican bimbo on ‘Crossfire’ bragging about tonight when she said Bush is ahead in the swing states?
Gropenator is not helping Bush because he is riding high right now. Plus the gropenaror will be going to trail in UK for sexual harrasment shortly.
CA is safe , period. Only a san andreas earthquake can shake loose CA for Bush.
News just in that Kerry may not accept Democratic Party’s nomination at the convention. Acceptance will be delayed to permit Kerry spending donated campaign funds, without limitation, just like Bush. This would put him in sync with Bush on the expenditure limits of the $75 million in public funds.
Presumably, Kerry’s formal acceptance of the nomination would be in Sept. about the same time as Bush’s. One of Kerry’s aides explained to the media that they have no intention of fighting with on hand tied behind their back. Way to go Kerry!
RE: California polls — thanks to the several explanatory posts above, I have now relaxed enough to slip a sliver of lime in my Corona Extra and start enjoying my weekend. Much obliged.
“Why does the Rasmussen poll consistently show better data for Bush than most of the other polls?”
Because Scott Rasmussen is a Republican. And the poll is a CRAP poll anyway.
Yeah, getting back to NJ, no worries here either. Went for Gore strong in 2000. Major job losses in the tech industry since then. Fed dollars bypass us in a big way with the Bush regime and Republican Congress. This state is not going Republican in 2004. Only problem we could run into is McGreevey, Dem governor, is unpopular and viewed as corrupt by many, which could hurt Dem chances in many ways. But I don’t think McGreevey has big enough “negative coattails” to help Bush.
JTBLA, Thanks for your post. I do remember that Calif. poll in 2000 that had Bush within 2, which turned out to be way off the mark.
As a Calif. resident I can guarantee that Bush has NO chance to win out here. That poll is out of whack with others that show Kerry up 10+, including a recent LA Times poll. In 2000 there was a late poll that showed Bush within 2 of Gore and people freaked. Gore won the state easily.
I don’t know what CA poll people are referring to, but let’s remember DR’s consistent arguments about the incumbent’s approval rating being more important than horse-race numbers at this point. Then, with that in mind, take a look at this story from early April:
http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/04/06/MNGPO616OS1.DTL
“A new poll shows President Bush’s approval ratings in California have plummeted, even in the state’s most GOP-dominated conservative areas.”
“With the Iraq war taking a difficult turn and questions raised at home about the administration’s terrorism policy, the poll by the Survey and Policy Research Institute at San Jose State University released Monday puts Bush’s state approval ratings at just 38 percent, while 50 percent disapprove.”
“That’s a dramatic change from the start of the year, when 49 percent of Californians approved of the job the president was doing, and 40 percent disapproved.”
Also keep in mind that this poll was from almost two months ago, just as the deadliest month for Americans in the entire Iraq conflict was beginning, and before the prison abuse scandal. I’m gonna go out on a limb and say that Bush’s approval ratings in CA haven’t improved since then.
Though I think the independent voters are important. I really think that bringing out the base will be most important.
Isn’t even the Groppenfurer distancing himself from Bush in Cali?
I believe there’s only one poll that has Kerry’s lead in California at just a point. Don’t worry; there’s no way Bush will win that state. You can take that to the bank.
Interesting and VERY encouraging. Remember, the Bushies have spent the vast majority of their campaign funds so far in the battleground states. This is the best they can do. The news won’t get better from Iraq, and the general opinion around my household (for what it’s worth) is that things will get worse there after the make-believe power handover. I do not celebrate that, but I do read the tea leaves that arise from it.
Don’t worry about NJ. I’m here. I got your back.
These data are largely good news, but I echo the previously stated concerns about California, and add New Jersey to that. Further: given the power structure and the loose definition of democratic rights there, Florida should not be considered in play. By hook or, more likely, by crook, Bush will end up with its electoral votes.
I’ve wondered about California myself. With such a majority of Deocratic voter registration, this state should be the Dem’s to keep for a long time. I took the 2000 election numbers and looked at the states where W has pretty much done himself in that are swing states and came up with Kerry winning the election with 292 electoral votes. This assumes that the voting machine are not rigged for Bush. Ohio should be a slam dunk for Kerry, as should Michigan, New Hampshire, and even West Virginia. Nevada should be Blue this time as Nevadans should start to glow from nuclear waste in the Yucca Mountains very soon. With all the scandal (especially the NEW torture pictures on top of the old ones), Plamegate (something I think is a major issue and should be more public this summer), deficits and spending, this guy should be sent to Gitmo for retirement.
That data is encouraging, but here’s what I want to know (and I haven’t yet seen this addressed elsewhere): Why is Kerry only up by ONE point in the recent California polls? Shouldn’t that be a slam dunk, double-digit lead for him? Is he in trouble there, possibly because of Schwarzenegger’s successes? Is it possible that he could LOSE California? Is California really in play for this election, or are these poll results an aberration? I’d love to hear from someone who has some insights into this issue.
Why does the Rasmussen poll consistently show better data for Bush than most of the other polls?