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.
George Phillies wrote:
Perhaps the most important number, both nationally and in many states that Bush seems to be carrying, is that the first digit of his numbers is a “4”.
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Ah, through all the buzz, a statement of clarity.
Bush is losing and has been losing a long time. If polls are viewed generally for the past several months, there are only limited moments in which Bush has pierced the “50”, and that only if you actually believe those polls.
Sabato said two months ago it would take a miracle for Bush to win, and he was right.
Bush has lost the election. I’m sure their major game plan is still to steal it. Florida and Ohio are where they plan to try to steal it.
The undecideds cannot possibly break for the President. If they were going to support Bush they’d be in his column before now. He’s the known quantity. He’s been consistent for the last 4 years and also during the debates. Anyone who is really undecided at this point has already resisted being swayed by Bush for 4 years and the entire campaign. That’s why there are so few real undecideds. What Kerry had to do and did during the debates is show he’s capable of governing.
Late rapid drifts in the polls can be substantial.
This year, there is an additional complication relative to 2000 that may tend to bias the polls toward Bush relative to the election. In 2000, Bush, Gore and Nader were on the ballot in every (for Nader, almost every) state, Buchanan’s campaign did not catch fire in that conservatives largely were happy with Bush, and Browne’s campaign was ineffective for reasons I outlined in my book Funding Liberty (Third Millennium Press http://3mpub.com/~phillies if anyone is interested.)
This time, Nader is not even on the ballot in many states, so a poll that includes CA or TX voters and asks them if they will vote for Nader is just plain wrong. (and those wrong votes came in fair part from Kerry). This time, the Libertarian campaign (Michael Badnarik) is on and off polling around even with Kerry, is on the ballot in every state except NH and OK, and has a largely unified party and a campaign staff that is campaigning actively. (If that last bit sounds odd as something to mention, see my book.) The Peroutka campaign, with positions many Democrats will find a bit odd, is also firing on at least some cylinders. However, Peroutka and Nader are almost never polled except by Rasmussen. The Nader Peroutka Badnarik flaws may cost Kerry in the polls a percent of the vote, and may give Bush one percent that he will not have in reality.
However, if you are going to drop polls as outliers, you should keep a list of the outlier polls, lest you analyse yourself into rejecting all the good polls and keeping only the bad ones.
Perhaps the most important number, both nationally and in many states that Bush seems to be carrying, is that the first digit of his numbers is a “4”. That’s a losing number. Democrats should not lose heart, should heed the wise advice of the article on which we are commenting, and could consider reminding their conservative and small government friends about Mr Badnarik.
cl8y-
Typically undecideds break for the challenger. I’ve seen polls suggesting that the undecideds, by a large majority, favor a change and have views closer to Kerry’s.
Anything’s possible, of course, but I’m optimistic about them at this point. The Rove quote from Abramowitz, above, fits with this point of view.
What are the chances of Bush occupying the Gore role from 2000? All the poles are close, and many not to be trusted, so how do we know they won’t break for the President instead of for Kerry? Is there something from the internals that would indicate this?
And then there’s the reminder also to be mindful of LV/RV distinctions. I see that the new Newsweek poll is out. By LV’s, Kerry is down 6%. By RV, just 2%, and just 1% in head to head RV.
I’d be willing to bet it’s the 6% that hits the media…
Ruy does well to point out turbulence. Stay calm and focused all.
One question is: these are all examples of the polls UNDERestimating the Democrats’ strength. What about OVERestimations too? Like in 2002 and surely SOME states in 2000, n’est-ce pas?
I think all the polls this year are way off due to the under polling of the 18-30 year olds.
Considering the newly registered voters must be largely from this demographic and their reliance of cellular phones for (nearly) all their telecommunications, these voters will hold a huge surprise impact on this election.
I have two daughters, one 29 and one 25 and I can tell you there is a tremendous difference in their participatory interest.
The older one, going through high school while Reagan and Bush were in office, is pretty much ambivalent about politics.
The younger one, going through high school while Clinton was president, is very much involved and in tune with political activism.
The older one will not vote whereas the younger one is definitely voting for Kerry.
The youth vote will go strong and early for Kerry and this element is what all the major polls will miss.
This effect will become known as the “Cell-Phone Effect” but is really the “Clinton Youth Effect”.
I think la is correct in that the best idea at this juncture is to do the unthinkable- ignore the polls b/c they aren’t going to help one bit. Over on Daily Kos you have people fretting over every little shift inthe polls- ie, Kerry was up by 2 last week, and down by 1 this week, and vice versa, and they look at the negative one as gospel. I think as I have said in other places on here this all feels like a Rorshach’s test to me- people are seeing what they want to see. Right now I spy a tie of around 47 to 48 percent so what does that mean? The same as always and I will say it like a broken record convince everyone, their mama and grandmama to volunteer, to phonebank and drive up the GOTV.
How much did the late DUI revelation factor into the Gore last minute surge and variance from the polls? Rove estimated 1 million votes.
To what extent was Gore’s improvement over the last polls due to DUI and to what extent was it turnout or polling erro?
I read the description of the methodology on the Fairleigh Dickinson University poll (the one that now shows Kerry only 2 points ahead in New Jersey). There was no mention of any weighting procedure. If they don’t weight, it means that Kerry is almost certainly much stronger than the numbers indicate.
I agree that Zogby’s state polls are pretty suspect.(as other pollsters).
His national polls for the presidential race were dead on in 2000 and 1996. I think tthats why we all give his polls so much weight. I’m not all that concerned about the fact kerry is down 4 in the zogby poll now, these jumps happen, i fully suspect that in a few days the polls may show kerry up by 3 or 4.
That was a nice run-down of the wacko poll results from 2000 — I wasn’t aware of those (or I forgot in the horror of what subsequently happened). I am left wondering, however, if there were also poll results that showed Gore with healthy leads in states that he actually lost. Can you give us examples?
The reason I ask is that one conclusion that can be drawn from your interesting post (aside from: don’t believe every poll result) is that the 2000 polling results were uniformily skewed against Gore. Was that the case?
An excellent cautionary message. I am still a little fixated on these recent Zogby numbers, and I certainly accept your explanation for them. But my recollection is that he has pretty consistently shown the race a lot closer than many of the other polls have–for instance, the ABC/Post Poll (and certainly the Newsweek and Time polls right after the GOP convention). So I am puzzled that now, after the debates, when intuitively you would think Kerry had strengthened his position vis a vis, that suddenly Bush seems to have pulled into a fairly good lead. And on top of that, we have ABC/Post now showing the race just about dead even. So I guess my question would be: why has Zogby suddenly seem to have veered off the road?
Ruy raises a good point, which is that everyone is saying Zogby’s the best because of the way he called the last election. In fact there is plenty of evidence to indicate that Zogby polls are highly fallible. I think one of his recent polls had undecides at 25%, which is way over what every other poll is telling us. He also has Bush and Kerry essentially tied among young singles, undecides, you get the idea. I just think the best approach is to go with the average of all the polls, excluding outliers, and then add 1-2 points for the suspected Kerry undercount.
maybe we should get rid of polling on elections. they seem to be being used to try to exercise undue influence on the system.