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.
Beware the October Surprise.
If the New Republic is right and the Pakistanis produce senior members of Al Quaida to the command of Washington, then all is in play.
If bin Ladin turns up dead or alive on 30th October, Bush will win. Regardless of how far down in the polls Bush is, I think that would turn it.
I would certainly encourage Mr. Dowd to continue with such predictions….
It makes getting “there” (if there is down 15 points) all the more easier, but no amount of spinning, ‘pre-planning’, or acting the part of an oracle makes recovering from that 15 point deficit any easier.
I occasionally enjoy taking a stroll down right-leaning blogs to gauge the right’s reaction to stories, events and what-not… and the reaction to Dowd’s comments have been more or the less the same as mine, though with a GOP face.
The wheels are truly coming off — we’re starting to get more and more of these “process stories”, these “inside baseball” type pieces focusing on the GOP side of the aisle that then become angry internal wrangling…. not unlike the Dem MO pre-primary season dating back to 2000.
The key is that the dem surrogates take items like Dowd’s analysis and run with it (piecemeal, of course)…..
“I think Matthew Dowd is absolutely correct — GWB is doomed to be down 15 points by August.”
Period.
That’s increased reluctance, of course, or decreased willingness…
Have convention bounces increased or decreased over the years? Is there any general trend? It seems to me that since a national party convention is essentially a show for TV, the fragmentation of the viewing audience, the decline of the broadcast networks, and the decreased reluctance to devote lots of time to this sort of thing would render them less relevant over the past decade or so.
“One post-Dem convention poll had Dukakis up 17 points; others had Dukakis up by less. The distinction is that George Bush Sr. was not the incumbent, he was the Vice President. The point made in the post is that no incumbent behind by that much has gone on to win.”
This is putting a tremendous amount of weight on the incumbency factor alone. Given that Bush was the VP, one would expect at least some of the incumbency effect to apply to him. Since there are so few cases anyway of Presidential elections, and fewer still of incumbent Presidents running, I wonder if the Dukakis vs Bush campaign is not at least as much relevant as the absence of any case in which an incumbent President is down by over 10% after the challenger’s convention and still wins.
“I suppose it’s all about the expectations game: predict some outlandish bad outcome for your candidate and then when it doesn’t occur claim things are going your way.”
Hannity (hey, I was driving home and nothing else was on) was doing just this tonight on his radio show. Only, he said the typical bounce from naming a VP was fifteen points — an odd manipualation of Dowd’s odd number. He went on to say that the failur of this 15 point bounce to occur is a clear sign of the public’s distaste for the ticket with “the numbers 1 and 4 liberals in the senate” on it.
AB
about whether “Dowd now believes Kerry is up by 8 points?”, it seems that article that you cited or Dowd’s email points out that the challenger gains ~7 and the incumbent loses 8. And he states that he believes that they are tied.
… should read “Kerry ahead 47 to 44”.
AP-Ipsos poll, with leaners, Mon – Wed: Bush ahead 46 to 45.
AP-Ipsos poll, with leaners, Tues – Wed: Kerry ahead 47 to 47.
http://2.004k.com/national/
One post-Dem convention poll had Dukakis up 17 points; others had Dukakis up by less.
The distinction is that George Bush Sr. was not the incumbent, he was the Vice President. The point made in the post is that no incumbent behind by that much has gone on to win.
One question I have: what was Dukakis’ lead over Bush I after the Dem convention?
I had the impression it was over 10%, maybe well over. Is this not true?
isn’t this just more of the “soft bigotry of low expectations?”
sounds to me like Dowd is trying to skew the CW that if Kerry doesn’t get that 15 point bounce, he’s toast. same thing they did to Gore in the last coup (I mean election).
The banality of american electoral politics:
40% R / 40% D are intransigent. Of the remaining 20%, half are split 50/50, hence the 45-45 poll results. The remaining 10% are in play and the last 3 months of the campaign, including the convention kabuki theater is for their benefit. Who the fuck are these people and why do they get to decide the fate of the country?
I wish someone would go through and catalog the predictions that Dowd has made. It seems he comes out with one of these every few months; usually in the right direction, but with a loaded dice to spin his guys way when it lands.
Ruy
I just came from seeing 3000 women pay money, get up at the crack of dawn to cheer on Kerry and Edwards here in NYC. Biggest event of its kind ever.
This huge level of enthusiasm is hard to square with the AP poll which is just now on the MSNBC home page which shows Bush ahead by 49-45. Poll taken Monday prior to the announcement and then Tuesday and Wednesday. How can that be?
And what is the agenda of the home page editor touting this poll when their own NBC poll shows Kerry ahead.
I hope you write about this. I think polls like the AP can be used to push poll public opinion and set up confusion about the electoral outcome.
I think people like you need to start defensive debunking.
What’s depressing is how mindless the media has been about repeating Dowd’s spin – without even stopping to think about, much less check, the facts.
That’s the great GOP advantage in this election: Their media strategy assumes that journalists are clueless, selfish oafs with the long-term memory of a sea sponge.
And what do you know – they’re right.
I agree with the last poster. There’s nothing scientific or historical about this. Dowd’s just trying to raise expactations knowing Kerry probably won’t get that high of a bounce, and then Dowd can go back to the press and say the bounce wasn’t as high as expected. However, i do enjoy Fabrizio uptight about Dowd’s comments…
Bounce numbers historically fall off at a rate of 1 to 2 points per week after the convention. Perhaps Dowd is figuring that by the time Bush gets his bounce (which I predict will be much less than normal) Kerry’s bounce will be gone or at least in reach.
Fact is that there is simply not room for a 15 point bounce for Kerry, not enough independents out there. This is an expectations game and Dowd wants Kerry’s 8 or 9 points to look enemic.
Has anyone attempted to get Dowd to answer the question “Where did you get the fifteen point number from?” I know it is hard to get a hold of some people, and the speculation is interesting, but maybe Dowd has something to back up the claim.
Ruy….we have a chat going on over at dKos. Might you fill us in on your polling methods? How do you find people to answer your polls? I’ll respost your response, if you should give one.
http://www.dailykos.com/story/2004/7/9/11533/48230