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.
Thanks, Steady and cmac, for saying what’s been on my mind for some time.
There are days when I think I must be insane:
How can I look at the available information and conclude that it indicates Bush did not win this election, when so few others look at the same information and come to the same conclusion?
Given the fact that he didn’t win the 2000 election, either, and that questions have been raised about the 2002 midterm elections that, as far as I can tell, have not been resolved, what does this say about our country?
Is democracy finished?
Has Jeb Bush already been selected as our 44th president?
If my worst suspicions are true, then what is the endgame? How far does it have to go before we can talk openly about whether or not it’s happened?
Maybe I’ve missed it but noone seems to be talking about the increasing number of absentee voters. I was at a conference with Warren Miskofsky in July where he acknowledged that as absentee voting increases, at some point exit polling will become meaningless. You can’t interview someone who isn’t there.
I suspect they’ve tried to adjust the numbers by creating another poll of early voters but the margins of error in that type of poll have got to be off the wall.
It’s not hard to explain why Bush supporters were more reluctant to talk to the exit pollers—–a significant proportion of them were aware that support for the president was viewed as intellectually indefensible by the elites of the society and these Bush supporters cared about the opinion of those elites. So they stayed in the closet. I certainly did all I could in Minneapolis to make clear my contempt for any brain that could believe George Bush was a viable choice for president.
As you have been showing all week, a significant number of Bush supporters already supposedly diapprove of him and his policies in opinion polls. Would that they could have thought clearly on Nov. 2!
Occam’s Razor.
It’s so obvious. The exit polls were correct. It’s interesting to watch so many otherwise-sensible people twist themselves into pretzel shapes to avoid acknowledging this. If we continue to ignore it, though, how much hope is there for the future of our democracy?
Thank you for asking exactly the right questions about the E/M exit poll report.
As someone who remembers from my teen years of early political awareness the first uses of exit polling to call races (from about 1970 on) with virtually no tabulated votes in, I have been extremely dubious about the E/M excuses that for some reason air-dropped from nowhere into the 2004 race, exit polling has suddenly become unable to execute its most fundamental logistics competently.
I’ve always been a pretty sober and moderate person politically (thus my screen name), e.g., pissed at McCarthy for not supporting Humphrey in the 1968 general, working for Ed Muskie over McGovern, Hart over Mondale, etc., and was a politically appointee in the Clinton Administration, but in this election I’ve had to go with Emerson that “Some circumstantial evidence is very strong, as when you find a trout in the milk.” When we can see repeated overt manipulation by avowedly partisan Secretaries of State and Boards of Elections, I don’t see anything implausible about covert manipulation of vote aggregators by avowedly partisan private corporations with the motive, means, and opportunity to do so. I know you, Mystery Pollster, and many other strong Democrats disagree, and I respect that, but the trout are starting to overflow the pitcher.
Think about your prior post, “How Did We Wind Up With Bush?” and the several earlier others here about the lack of any significant bump up in Bush’s approval rating or his major policies despite his election. I also found Bush’s national margin odd in that while Kerry’s margin in the states he won seemed to mirror pretty closely the average of the last state-by-state pre-election polls, Bush’s margins in many states (e.g. MO, TN, AR, NC) seemed to go from 2-5% in the last pre-election polls to 12-15% in the actual voting. Of course these were not “battleground” states so no one was going to be looking very closely at why., and I’ve never heard a plausible explanation or even serious examination.
I fully appreciate and agree with the critiques of Kerry’s campaign from the standpoint of his unwillingness (or persuasion by loser consultants not) to do an effective and forceful Clinton-type rapid response effort against seven months of relentless Bush lies about him, and the failure to learn from Gore’s campaign how much harder but more necessary the corporate media’s stenographic flacking for Bush would make such a response. So it’s clearly not implausible that Kerry lost.
But the polls continue to make it awfully hard to explain November 2 as a genuine and meaningful statement of national opinion. So again, I especially appreciate your asking these questions and urge you to pursue answers. Without more transparency and greater public access to the mechanics of the voting process proper, exit polling is the only check we have on the integrity of the vote. If never-radical 50-somethings like me are starting to question the mechanics of the consent of the governed, it deserves at least this level of continuing scrutiny.