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.
Perhap’s Obama’s infatuation with Reagan gives insight as to what his plans are as to how he will president as President. From Arthur Schlesinger Jr.’s History of Presidential Elections, 1789-1984:
Reagan’s political strength was similar to that of Dwight D. Eisenhower. It was a personal not a party, phenomenon. Without Reagan, the Republicans would be much weaker. The first major political event of the year, therefore, was Reagan’s decision to seek reelection despite his age. At 73, he was already the oldest man ever to serve in the White House. The Democrats dared not to make Reagan’s advanced age an issue; his evident physical vigor and unbroken record of good health made the fact of his age a matter for public admiration rather than concern. This admiration was bolstered by the presidents insouciant response to the shooting attempt on his life in March 1981. “I forgot to duck,” he joked to his wife. As he was about to undergo surgery for removal of the bullet, he’s wisecracked to the surgeons, ‘I hope you are all Republicans.’
If reporters noted that Reagan worked only five or six hours a day, spent long weekends at Camp David, and took frequent vacations, this too, was not circumstance the Democrats could easily convert into an issue. After President Carter’s long hours and studious work, and the earlier crises of the Nixon and Johnson years, Reagan had hung President Calvin Coolidge’s portrait in the Cabinet room as a symbol of his esteem for that Republican predecessor. Like Coolidge’s famous naps, Reagan’s relaxed approach to the Presidency was not only acceptable to the country but actually reassuring. It was as if the man at the top was signaling the nation that things were not as bad as the news media would have the public believe.
Reagan’s administrative style was not an accommodation to his advancing years. It was a continuation of the way he had governed California for eight years from 1967 to 1975. He viewed himself as a chairman of the board, rather than as an active executive. He delegated to senior aides most of his administrative power over appointments, legislation, the budget, and supervision of departments and agencies. He involved himself on a day-to-day basis in only a few issues. He was content to prove by broad policy direction and to serve as his administration’s most persuasive spokesman. A at the middle and upper levels of his administration, there were frequent struggles for power and for control of policy among Cabinet officers and factions of the White House staff. Rivals waged ideological and personal feuds through “leaks” to the press. These conflicts did the President no political harm; Reagan stayed above these battles, clearly unconcerned about any inefficiency or loss of morale that infighting might produce, and serenely confident of his ability to impose his will if and when he chose to do so. Since the huge expansion of the activities of the federal government had begun under Franklin Roosevelt a half-century earlier, no President had governed with such a loose rein.
Reagan was unfamiliar with the details or even the main issues in many disputes, both foreign and domestic. Indeed, the breath of his ignorance was sometimes startling. In October, 1983, for example, at a time when U.S.–Soviet arms control negotiations were breaking down, The New York Times reported that Reagan told a group of visitors that he had only recently learned that most of the Soviet nuclear deterrent force was in land-based rather than submarine-based missiles. Surprisingly this disclosure evoked relatively little public comment.
Like Eisenhower, but to an even greater extent, Reagan stayed politically popular by distancing himself in public from his own administration. Scandals occurred and controversies flared, but the President, not ever having involved himself closely with most of these appointees or the problems confronting them, was untouched.
Having been elected as an opponent of big government, Reagan said in his inaugural address government is not the solution to our problem. Government is the problem. Once in office, he continued in speeches around the country to attack Washington and the bureaucracy. He faltered to believe that he and his fellow citizens were allies against the government rather than that he had been chosen by them to direct the affairs of that government.
Reagan’s detached style of governing, his distancing himself from his own appointees and the career bureaucracy, and his blithe cheerfulness and impertubable optimism was central to the political problem faced by the Democrats in 1984. Reagan was dubbed “the Teflon President: nothing sticks to him.” It was significant that in the fourth year of his Presidency there were no anti-Reagan jokes of the kind that normally circulate about Presidents. There seemed to be no audience for them. Politicians of both parties reported that many constituents disagreed with the President’s policies, distrusted his intentions, or questioned his competence, and yet avowed that they liked him personally. Democrats in Congress and at the state level were consequently reluctant to mount against him the kind of sustained attacks that had weakened other recent Presidents.
This liking for Reagan did not have the firm foundation of respect for past accomplishments that undergirded a liking for Eisenhower in the 1950s. Nor was there the profound gratitude and loyalty from broad masses of people that Franklin D. Roosevelt’s innovative programs had evoked. Still less was Reagan a hero who inspired emulation and enthusiasm, particularly among younger voters, as John F. Kennedy did. The liking for Reagan was a reflection of his sunny disposition, a reciprocation of his positive approach. It also correlated closely with the trend of the economy.
If this is what we are ion for, I prefer to pass and prefer the Clinton gamble. Obama’s handlers are filled with “hasbeen” Democrats who would love to govern by committee!!!!! In my humble opinion, Obama is no JFK, RFK, and is being used as a poster child for evryon’es dream of a real capable African-American politician which he is average, and is a coriporation filled with deception. His hiuse and land deal, his arrogance, and lack of content in his speeches are indications of status que bunk.
Professor/Dr. Neil Garland-We Deserve Better Than Average Presidents
I don’t believe Jesse Jackson ran in 1992. I know he ran in 1984 and 1988. The only African-American I recall making a bid for the presidency was Doug Wilder and I’m not sure that he ever officially announced or made it to any caucuses or primaries.
“E.J. might have added another parallel: Bill Clinton’s trump card in the 1992 nominating contest was his overwhelming support among African-Americans.”
One problem with that analogy is that “overwhelming black support” is a “trump card” only if one is a white candidate………..otherwise, if the candidate is African-American, he runs the risk of being seen as just another Jesse Jackson-like candidate, having an African-American base with support from upscale, educated whites and the young…
If I recall, Bill Clinton didn’t “win” the African-American primary vote in 1992……….he just got more of it than any of the other white candidates…….the “winner” of the A-A vote was, of course, Reverend Jackson….
I’ll be interested in seeing how Obama’s voter demographics change (or don’t change)as he is perceived as getting more and more of the A-A vote…