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.
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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.
Why can’t we get some better trolls? Bring back S Robinson!
Bush didn’t win the debates. He won the spin war afterwards.
After the first debate, the consensus from pundits and undecideds was that Gore had won.
But it wasn’t long before the RNC served up its talking points and the media started parroting them and suddenly things were back onto script (Gore is a big fat liar).
Dave,
I don’t underestimate Bush as a debater. He has a great advantage of having the bar always set low. Fortunately for Kerry, the same seems to be happening. I remember the last time Ted Kennedy debated during his re-elction. It seemed everyone was expecting a bumbling drunk to be on the stage. He went on to destroy his opponent, the now governor Mitt Romney I believe, by having a firm grasp of all of the issues. I don’t think either has an advantage on the “low bar” issue. Thinking about it, I guess it’s pretty sad when you don’t expect a lot from the leader of the free world!!
Re: The debates
The recent issue (jul/aug) Atlantic Monthly had a good article on the upcoming debates. They were calling it assymetrical warfare.
Basic points: Do not underestimate Bush. He has ‘beat’ a number of qualified opponents in debates – including Ann Richards and Al Gore – by staying on point, on message. Kerry wins debates by out-thinking his opponents and staying in control and command of everything going on.
A very worthwhile read.
Mara,
I’m sure that Bush’s people going to try and minimize the height issue by wanting them to sit, etc. But, one of the debate formats is going to be a town meeting style. That will mean, no podiums, or anything else for Bush to hide behind. Even in the other formats, they will meet at center stage both before and after the debate to shake hands. But, I’m sure that the Bushies are probably going to try and stop that too.
The good thing is, Kerry will overshadow him on the issues , as well.
Keith,
I remember reading about Kerry agreeing to something that would equalize the height gap – sitting down or allowing Bush to stand on a soap box, something. Wish I could remember where I read it. Anyone else hear about this? I am serious.
I have no worries about Kerry’s speech. Being originally from Massachusetts, I have seen him speak on a number of occasions. If they are purposely setting the bar low, it will look like he hits a home run. Where he’ll really take it to Bush will be in the debates. I remember the one when he was in a tough race for the Senate against, the then popular governor, Bill Weld. He is great in a debate format. Plus, he’ll tower over Bush physically. Never a bad thing when you’re trying to look “pesidential.”
Political pundits are like sports reporters — today’s game is always the most crucial..at least until tomorrow’s rolls around. It’s obviously helpful if a candidate gives a solid speech at the convention (and most, even such dullards as Gerry Ford and Mike Dukakis, have been proclaimed to have done so). But the effects are ephemeral, and the election in the end comes down to basics: how is the incumbent doing, and is the challenger minimally acceptable as alternative? By the standards of today’s thinking, Reagan was a spectacular flop at convention 1980, since he couldn’t establish a convincing lead against an incumbent with 40% approval. In that case, pundit conventional wisdom is that Reagan “made the sale” at the late debate with Carter (so I guess there’s more than one “last chance”), but even there, post-debate polls didn’t show an instant jump: the race was considered too close to call right up until the returns started flowing in. So maybe Reagan was always going to get the anti-Carter majority, and none of the rest mattered.
For Kerry’s future, there are far more important things than his speech — specifically, continuing news from Iraq, and the upcoming economics/jobs reports.
Agree that Kerry’s speech is of limited importance. Remember, Gore gave a fine speech at the 2K convention, but it didn’t seem to have much impact on election day. The October-November ad blitz and the debates will be more important.
Bob–if you feel confident that your political beliefs are correct, I recommend that you test them by reading “We’re Right, They’re Wrong” by James Carville. If you’re sure that your way of political thinking is really what it should be, then what’s stopping you? I read “See, I Told You So” by Rush Limbaugh, and I was not convinced. If it gets too tough, just read this exerpt:
http://pearly-abraham.tripod.com/htmls/james-right.html
There’s always “Had Enough?” but that’s a pretty long one–it’s James Carville writing a book about the Bush presidency.
Hey everybody, we’ll make him look stupid instead of struggling with difficult questions!!
Hey, I never said that I didn’t go to Public (government) school! 🙂
“will” should be “with”
See, the effects are showing already!
Thanks for bumping my IQ down a couple of notches will your post, Bob.
You know, it must be nice for Democratic Despots to have a bunch of mindless followers for ‘Crats to vote for them. Some of the crap that I heard slithering out of Clinton (x2) just amazed me. How do you people believe that stuff?
Don’t worry, I am not a Bush supporter either…he is waaaay too liberal. Yes, Bush is a liberal. Kind of harsh, but a liberal in sheeps clothing.
Does anybody realize that Kerry has no plan, except that he has a plan? Hows he gonna reduce debe? hows he going to provide socialized health care, without turning this nation into a socialist one? does anybody read the great philosopher historians??
But alas, seems that the only thing we learn from history, is that we don’t learn from history. And liberalism is just what the mindless clinton coolaid masses need.
Ruy, I would be interested in your coments on the latest ABC/Washington Post Poll showing Bush in the lead?
Good article. I agree. It’s too late for Kerry to attempt to reinvent himself. Besides, that would only play into the Republican’s referring to the convention as the “extreme makeover.”
I’m also tired of hearing all the pundits talk about how Clinton or Edwards might overshadow Kerry. I don’t think that’s the case at all. Everyone knows who the nominee is. They’re all building up Kerry. Quit making controversey where there is none.
If the ability to give a rousing speech was so important to the public in choosing a president, then Bush would be a political dead man.