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.
I feel the same way as Drew. Steadfastness to the end. Emulate Kerry if you’re someone who sometimes has trouble being that way. I can’t imagine any poll result would have any effect on my level of effort. It might modify how I decide to try to help. People such as Ruy are going to help us all figure out what the poll results mean and therefore how, if at all, we need to modify what we’re doing accordingly. I’ll do as much as I can from now until November. No poll is going to change that one bit.
After finishing up a consultancy in ’92, I “interviewed” volunteer coordinators in a half dozen swing states. Ohio was able to offer me the most to do, so I ended up volunteering for C/G there. They were desperate for some kind of presence in a large county just north of Cinci, one of the most R in that state and one that because of its size they had to try to compete in. I went in for the last 5 weeks and coordinated the county effort. 90-100 hours/week, starting with no organization in place. We were leading in the polls most of the way in that state and then the weekend before the election B/Q pulls even. Did it effect anything we did that last week at the grassroots level? Hell no. With a whole lot of help from Perot, we cut the B/Q ’88 plurality in that county from 41,000 to 23,000, give or take. Impossible to say how much difference our ground campaign made relative to the TV ad campaign and all manner of other factors–who knows, maybe none. But we created a presence in a place that had had none five weeks before the election. We spent under $2000 in that county, what we were able to raise from sales of campaign paraphernalia, plus some loose change from Columbus.
There will be young people all around this country who will be doing similar things this time around.
Well, Drew, we might be able to ignore the polls for a week. But the media will not. There will be coverage. There will be analysis. And there will be headlines: “Complete failure”, “negative bounce”, “historic”- and so on. Which, I fear, will only aggravate the effect.
We need another poll to save us!! (Okay, okay, I’ll calm down now..)
_Where_ exactly did you post the new survey of Electoral College tracking/projection/prediction sites?
Sorry, it’s at:
http://unfutz.blogspot.com/2004/08/electoral-college-survey-81.html
I’m pretty much ignoring all polls until next week, exactly as I had planned to do before the convention. It’s still too early to measure the reaction. It’s amusing and yet sad to see people on either side hyperventilating over a single poll, or even a pair of polls. Return to your day jobs and watch the Kerry train continue to roll forward. There’ll be a bounce from the speech, and there’ll be a bounce from the debates too.
“Drudge has a new USAToday/Gallup poll that shows Kerry losing ground. according to their poll it’s now 50-46 in favor of BC04.
How can this possibly be?”
It is probably an outlier. Political polls use a 95% confidence interval which means that one out of twenty will be incorrect outside the MOE.
I write a bit more about this at the link below in my first installment on “understanding political polls.”
There miht not be a bounce that amounts to much. Andif there isn’t, I don’t think we should worry about it.
Right now there isn’t much flexibility possible. Most people have made a choice and most have chosen firmly. There aren’t many swing voters to cause a bounce.
I noticed that some Reublican talking head was predicting a big bounce–14 points or something like that. I was puzzled until I realized that the Repubs were trying to create a letdown. They wanted to generate the expectation of a big bounce so they could declare the convention and Kerry failures ifthe bounce was small or smallish.
The only thing that matters is that Kerry is ahead generally and seems to be building in the important battle ground states.
I think ,like so many of these so called experts say, that this country is so polorized that no one is changing their minds and the numbers will probably remain the same NO MATTER WHAT and that means terror attacks, Bin Laudin capture, good economy, or bad economy. Think about it, what would it take to change your minds.
I agree with you Robert. Kerry is managing to snatch defeat from the jaws of victory it seems. I still think the futures market is the most accurate barometer for the race. The CNN poll may be a confirmation of the futures market from Friday when Bush received a small bounce. The bottom line though is if the CNN poll and the futures market are accurate then Kerry I would say is not in a very good position. We still have the GOP convention to go. Then again this might be just one of those cycles where all the conventional wisdom gets turned upside down. If Kerry could get a negative bounce out of his convention then it is certainly possible that Bush could get the same outcome from his convention.
“How can this be?”
The answer is “Drudge”
PRINCETON, NJ — A new CNN/USA Today/Gallup survey, conducted on Friday and Saturday following the Democratic Convention in Boston, finds that the presidential race remains close, with President George W. Bush receiving 50% support among likely voters, and Massachusetts Sen. John Kerry 47%. Among the larger group of registered voters, Kerry leads 50% to 47%.
Drudge has a new USAToday/Gallup poll that shows Kerry losing ground. according to their poll it’s now 50-46 in favor of BC04.
How can this possibly be?
Not only Michael Moore but more significantly Kevin Phillips and CNN’s Carlos Watson believe turnout will be significantly higher this year, the latter opining that it could increase to 115 million up from 105..
Still the RV showed no change in the Gallup Poll.
Not a good poll…
About the CNN Poll…For one thing, if Michael Moore is right, a lot of new voters will vote for Kerry this year. That means that measures of so-called “likely” voters, usually based on if you’ve voted in the past, are inaccurate. In addition, the sample was in the 700 range for likely as opposed to the normal approximately 1000 registered voters sample and would have a margin of error of roughly plus or minus 4%. I just don’t see this poll as accurate, but if it is, this country deserves what Bush does to it, and it won’t be pretty.
We might also take into account the heinously irresponsible failure of the major broadcast networks to show responsibility to the public by showing the convention in it’s entirity instead of “Last Comic Standing”
How kind of you, Allan. But I bet you wouldn’t drop by so often if all you got here was just spin, would you? Let’s just wait and see what the next days will bring.
By the way: Take care. Tom Ridge just went from yellow to orange for stockbroker facilities.
And beerwulf, thanks for the encouragement. I’ve braced myself now. Really sorry, was just a temporary bout..
Politics isn’t a game for people who panic easily, Frenchfries. And Allan, there’s a difference between spin and analysis. My own feeling is that CNN’s poll is a low outlier. The standard wisdom (which I agree with) is that RV’s are a better gauge than LV’s because in late summer nobody really knows how likely they are to vote. There’s a reason PollKatz and Polling Report survey a lot of polls – differences in methodology, sampling errors, and so on tend to cancel each other out when you do a meta-analysis.
Any given poll is only a snapshot, and an imperfect one at that (which is why pollsters bother to compute MOE). Calm down and let’s get on with the election.
New York is going from yellow to orange alert. I see “The Little Boy That Cried Wolf” is at it again…………
Frenchfries,
Don’t worry. I’m sure Ruy will find a new and better way to spin these new numbers from CNN and i can’t wait to hear it.
Just saw new numbers on CNN – and they’re not good at all: They have Kerry up 50:47 among RVs – but DOWN 47:49 among LVs!
I’m just sort of panicking…
And withh the integrity and clarity that we have all come to expect from big media, Face the Nation’s grey-haired emcee (whatever his name is) just cited an unnamed poll, but probably the Newsweek one, as having shown a 4 point bounce for Kerry/Edwards. Naturally, he didn’t mention that half the poll was taken before Kerry’s speech.
That would have added nuance to the discussion, and Face the Nation wouldn’t want that. Too much for our little pointy heads to handle.
Dear Joe Zainea,
_Where_ exactly did you post the new survey of Electoral College tracking/projection/prediction sites?
-Nate
“unfutz” — the name of my weblog, not “unknown”
I thought that the corporate parent of the Washington Post owned Newsweek?
BTW, somewhat off topic, for those interested in the state of the Electoral College, I’ve posted a new survey of Electoral College tracking/projection/prediction sites here.
Kerry still leads. Of 24 sites surveyed, 16 show him winning, another 5 as ahead. Only 2 show Bush as winning, and one other shows him ahead.
I’ve said it here before, Newsweek/MSNBC and WAPO are tied together somehow in various arrangements related to news and opinion content sharing. Relatively new leadership at WAPO, I believe, has shifted that organization’s political stance to the right, taking Newsweek and MSNBC along with them.
The difference in WAPO’s editorial attitude is related to the Bush administration’s unrelenting hostility to any media outlet that doesn’t toe the mark they lay down. A news weekly that is denied access to senior administration officials is a publication headed for trouble.
Bush’s people don’t hesitate to flex their muscles and I believe much of what we have come to see as the media’s stupor, starting from the run up to the Iraq invasion, is related to fear of access denial.
In addition to the shoddy work on the post convention bounce, we can also see a reluctance on the part of Newsweek and other frightened outlets to inform the public on continuing American casualties being sustained in Iraq and Afghanistan.
One can only hope that as Kerry’s campaign gathers strength that the media will rediscover their spines and perhaps do a little reporting on the status of the Plame affair or the question of whether the recently indicted “Kenny Boy” Lay attended Cheney’s secret energy conference. One can only hope.
On top of everything else, the Newsweek article says that Kerry’s speech was on Friday night, when it was on late THURSDAY night, idiots!
Get SOMETHING right, will you please??
Ruy is probably right about Newsweek’s bounce analyis but a 52-44 lead still sounds pretty good to me in such a polarized race.
Forget about the Newsweek Poll. The good news is that their second day polling had Kerry up by 10. There will surely be a bounce in other polls but some of it will undoubtedly fade as the month goes on. However, if Kerry can maintain a gain of 2-3 points AFTER the Republican Convention he will be in great shape indeed! Let’s keep our fingers crossed and work, work, work as hard as possible registering voters in the batlleground states and warn the media that they better keep their facts straight or we will be on them like a cheap suit.
So far, so good.
I said this over at Daily Kos, but will repeat it here:
This isn’t an appropriate measure of post-convention bounce; the numbers released Monday, measuring three days of post-speech afterglow, will be the most accurate reading.
However…Newsweek has been releasing this Saturday poll for as many election cycles as I can remember, so we can at least compare it to previous editions. And the comparisons are very favorable for Kerry.
The last incumbent/challenger face-off was 1996. Dole got to within a few points of Clinton in the Saturday release, but never any closer.
The same thing happened in 1984 — Mondale closed the gap with Reagan, but it was his high-water mark.
I think we can say with certainty, challengers that don’t lead after their own conventions can go home right there.
Successful challengers, on the other hand — specifically Clinton, Reagan and Carter — have immediately run to measurable leads. And this one Kerry’s got is clearly well past margin-of-error. (It’s not as big as Clinton’s or Carter’s, but the Perot in-and-out exaggerated the former, and the ongoing Ford/Reagan nomination battle affected the latter)
Anyway, honestly, who gives a damn about the margin of the bounce? Look at the margin of the lead. There, Kerry’s in excellent shape.
And, my two cents on the GOP post-convention: I don’t care if Bush leaps up 6-8 points. If the result doesn’t put him above 50%, he’s going to lose.
People sometimes make this more complicated than it needs to be.
Absolutely right. And on top of the problems you mention there is the fact that the way-too-early poll of July 8-9 was taken right after Kerry named Edwards as his VP, so he was already enjoying a bounce from that. And that Edwards bounce had mostly faded by the time of the convention. I am happy to have the information given in the poll, but to pretend that it measures the convention bounce is outrageous.