Congress rejected almost all of Ford’s proposals. The heavily Democratic, liberal-leaning majorities in the House and Senate, with strong ties to organized labor, gave a higher priority to attacking unemployment. The most ambitious Democratic plan was introduced in 1974 in the House by Augustus F. Hawkins and in the Senate by Hubert Humphrey (who was reelected to Congress after leaving the vice presidency). Their bill was a throwback to the New Deal and the original version of the Full Employment Act of 1946. Picking up Roosevelt’s 1944 proclamation of employment as a right, it called for the federal government to set a specific goal for full employment and use fiscal and monetary policy to try to achieve it. If those tools proved insufficient, it mandated the provision of a government-funded job for every adult seeking work.
Ford opposed the Humphrey-Hawkins bill, as did many Democratic economists, fearful that it would drive up inflation. In 1974, Ford did agree to fund 100,000 public-sector jobs through grants to local and state governments under the Comprehensive Employment and Training Act (CETA), passed the previous year to bring together various federal manpower programs. The next year he signed a tax reduction and rebate to stimulate the economy. But in early 1976, Ford vetoed a large public works program and other spending bills. Meanwhile, Humphrey-Hawkins failed to win passage, only becoming law in 1978, by which time—like the Full Employment bill on which it had been modeled—it had been gutted of its most meaningful provisions, including an enforceable public right to a job. By the time of the 1976 election, inflation had fallen to 5.7 percent from 11 percent in 1974, but unemployment remained high, approaching 8 percent.
Ford had no more success with his energy program than with his economic program. The solution to rising energy costs and oil shortages, Ford believed, lay in dismantling the complex web of federal regulations governing the oil and gas industries, including the system of price controls and federal allocations that Nixon had imposed on oil and petroleum products in 1971, which kept domestically produced oil below the world market price. The higher prices that would come with deregulation, Ford argued, would stimulate increased domestic oil production. But Congress found the prospect of sharply higher oil and gasoline prices politically unpalatable. A compromise energy law kept price controls in place until at least 1979, created a strategic petroleum reserve, and instituted a series of conservation measures including energy efficiency standards for appliances, legalizing right turns on red lights, and mandatory fuel economy standards for new cars and small trucks.
The End of Détente
The urgency of domestic matters during Ford’s presidency eclipsed foreign policy in public discourse. But in Congress, elite policy circles, and within his administration a sharp debate unfolded over the United States’ global standing and its relationship with the Soviet Union, as the 1975 communist victory in Vietnam and images of the chaotic evacuation of Saigon contributed to a widespread sense of national decline. In that debate lay the roots of an eventual return to expansive efforts to assert American power all over the world.
On taking office, Ford seemed inclined to continue the Nixon-Kissinger policy of détente. But by then, détente had begun to stall. Negotiating economic and arms control arrangements with the Soviet Union that would provide sufficient benefits to each party proved difficult, given the different situations of the two superpowers and rising opposition to détente within the United States.
In the mid-1970s, some leading conservatives began criticizing what they saw as the implicit assumption behind détente that declining U.S. military and economic power necessitated accommodations with onetime enemies ideologically and morally at odds with core American beliefs. In doing so, they rejected the conclusion of centrist leaders like Kissinger and later Jimmy Carter that in the light of the American defeat in Vietnam, Watergate, and changing global economic relations the United States could not and should not try to play the same dominant world role it once did. Critics of détente expressed skepticism about accords with the Soviet Union, seeking instead to rebuild American military power and assert core moral values in U.S. foreign policy, especially the defense of liberty. Inside the Ford administration, Secretary of Defense James Schlesinger, Chief of Staff Donald Rumsfeld, who in late 1975 replaced Schlesinger at the Pentagon, and Rumsfeld’s deputy, Richard Cheney, who succeeded him as chief of staff, ideologically and bureaucratically challenged Kissinger, whose near total control over foreign policy at the start of the Ford administration steadily eroded. Conservatives outside of the administration also pounded Kissinger and détente, most importantly Ronald Reagan, who was preparing to challenge Ford for the Republican nomination.
Republican critics of détente found allies among some liberals who had long been associated with the Democratic Party. In the early 1970s, a cluster of liberal intellectuals, political activists, and labor leaders, many with youthful roots in the socialist movement, began moving to the right, or, as they saw it, standing firm as the Democratic Party moved to the left. Domestic developments pushed some of them in a conservative direction, specifically their rejection of the New Left. Equally important, they opposed any softening toward the Soviet Union. Some of the most influential “neoconservatives” were Jews for whom the 1973 Middle East war and Palestinian terror tactics loomed large. Strongly committed to the defense of Israel, they reacted to criticism of the Jewish state by the Soviet Union and the political left at home by seeking allies on the right. Irving Kristol, Norman Podhoretz, Nathan Glazer, Midge Decter, and other neoconservative writers provided intellectual credibility and polemical ammunition for the attack on détente and skepticism of multilateralism. Daniel Patrick Moynihan, appointed ambassador to the United Nations by Ford in 1975, shook up the usually decorous world of diplomacy with attacks on what he believed to be the anti-Western and antidemocratic tilt of the UN and his unsuccessful fight against a resolution that declared that “Zionism is a form of racism and racial discrimination.”
Senator Henry Jackson, a Cold War liberal Democrat from Washington with strong ties to the AFL-CIO leadership, found an effective device to slow down détente in the issue of Jewish emigration from the Soviet Union. As part of the trade agreements Nixon negotiated, the United States promised to grant the Soviet Union most favored nation status, which would have lowered tariffs on imported Soviet goods. Jackson pushed forward a measure to deny such status unless the Soviet Union increased the number of Jews it allowed to emigrate. In response, Kissinger negotiated a compromise with the Soviets, but Jackson, who had presidential ambitions, scuttled it, leading the Soviet Union to tighten emigration restrictions and become more distrustful of American promises. U.S.-Soviet trade declined, and the movement toward a new arms control agreement stalled.
A wave of revolutions in the undeveloped world and the final push against colonial and white minority rule in Africa added to the growing tension between the United States and the Soviet Union. The revolutionary movements of the 1970s generally had only slight resemblance to orthodox communist parties, but by challenging the status quo, using left rhetoric, and in some cases taking aid from the Soviet Union they sparked enmity from American policymakers. Local wars became proxy conflicts between the United States and the Soviet Union. The largest clash took place in Angola, where rival groups fought to establish control after a coup led Portugal to give up its colonial empire. The United States provided covert aid to the factions it favored (which China and South Africa also assisted), while the Soviet Union and Cuba backed a rival group. The bloody civil war left one of the potentially richest nations on the continent in ruins.
By the 1976 election, détente had all but ended. A framework for a new strategic arms limitation agreement, which Ford negotiated on a trip to the Soviet Union, never led to a treaty, largely because of congressional opposition. Ford himself banished the term “détente” from the administration’s lexicon, recognizing that it had become toxic within the Republican Party. Even so, he faced a fusillade of criticism of
his foreign policy during his primary battle with Reagan, who accused him of tacitly accepting a Soviet sphere of influence in Eastern Europe (which by then had been in place for three decades) and planning to cede control of the Panama Canal to Panama (in talks over the future of the canal that had been going on since 1964). Ford just barely beat back Reagan’s effort to oust him but ended up accepting a conservative platform plank that criticized in everything but name his conduct of international relations.
Carter
Foreign policy did not help Ford in the 1976 general election, especially his blunder during one of the presidential debates—the first since 1960—when he said, “There is no Soviet domination of Eastern Europe.” His opponent, Jimmy Carter, claimed common cause with the Republican foreign policy plank, asserting, “Our country is not strong anymore; we’re not respected anymore.” But the election largely revolved around the poor state of the economy and public disgust with the political class.
Carter had the advantage of being almost completely unknown outside of his home state before the election season began. A onetime Navy officer who ran a family peanut business, he had limited political experience and none in Washington to tar him with a public fed up with their national leaders. Ford, by contrast, could not shake the residual political effect of Watergate and his pardon of Nixon nor overcome blame for the ongoing economic troubles and his inability to work with Congress.
The South proved the key to Carter’s victory. Eleven years after the 1965 Voting Rights Act, southern black voters had become a major electoral force, heavily aligned with the Democratic Party. Nationally, Carter captured more than 80 percent of the African American vote, with the percentage even higher in the South. Though southern white voters had begun drifting toward the Republican Party, Carter, as a southerner and professed born-again Christian (by far the most devout president of the twentieth century), also won a large part of the southern white vote, enabling him to carry the entire region except for Virginia. That, along with his capture of most of the large states in the Northeast and Midwest, put him in the White House.
Carter carried Ford’s effort to deflate the pomposity of the presidency to an extreme. Calling himself Jimmy rather than James, at his inauguration he wore a business suit and walked from the Capitol to the White House, rather than wearing a morning coat and riding in a limousine, the usual practice. Once president, he sold the presidential yacht, let himself be photographed wearing blue jeans and carrying his own luggage, and gave a televised speech in a cardigan, deliberate breaks with past notions of presidential demeanor.
Carter pushed further Ford’s effort to overcome the divisiveness of the Nixon years. He appointed more African Americans and women to significant federal posts than any president until that time and greatly expanded Ford’s program to pardon Vietnam-era draft resisters and draft evaders. Carter invited to his inaugural gala musicians, actors, dancers, comedians, and athletes who represented the full range of national culture, from Aretha Franklin and Paul Simon to James Dickey and John Wayne, including Muhammad Ali, who only ten years earlier had been stripped of his boxing championship and sentenced to jail for refusing induction into the Army because of his objections to the Vietnam War.
Carter’s political symbolism and rhetoric suggested that the days of American imperial ascendancy were over, and that it was probably for the best. In his inaugural address, he adopted a strikingly modest and somber tone, warning that “we cannot dwell upon remembered glory.” “We have learned,” he said, “that ‘more’ is not necessarily ‘better,’ that even our great nation has its recognized limits, and that we can neither answer all questions nor solve all problems.”
Carter’s presidency seemed to provide proof of the last contention, as so many of the nation’s problems appeared intractable. Carter had no better success than Ford in dealing with the stagflation that brought hardship to much of the country. Coming into office, Carter proposed a stimulus package along traditional Keynesian lines. As finally passed, it provided tax credits for job creation and expanded federal funding for public works, job training, and temporary public-sector employment. Carter invoked the New Deal’s Civilian Conservation Corps in calling for the expansion of CETA, which at its March 1978 peak provided jobs for three-quarters of a million unemployed or underemployed workers, by far the largest countercyclical government employment effort since the Great Depression.
But CETA proved to be the last gasp of the Democratic commitment to full employment through direct government job creation, an idea associated with the liberal-labor wing of the party to which Carter had only weak ties. More conservative than most Democrats in Congress, Carter soon retreated from making his top priority unemployment, which slowly fell over the course of 1977. Like Ford, he came to see inflation as a more serious threat to the economy. When Congress reauthorized CETA in 1978, job training rather than direct employment became its main focus. Meanwhile, Carter tried to check inflation through voluntary wage and price guidelines and cuts in federal spending.
Carter also moved away from the New Deal in his embrace of economic deregulation. Since the late nineteenth century, the federal government had imposed an expanding web of regulatory structures over business. In the years before Carter took office, a growing number of economists and political leaders—including Gerald Ford—had pushed for deregulating industry, arguing that overregulation contributed to inflation and economic stagnation. Carter agreed. Under the leadership of economist Alfred Kahn, his administration set out to slash regulations that set price floors and limited new entrants in a host of industries.
Deregulation created unusual political configurations. Many conservatives, committed to the idea of unrestrained capitalism, backed the idea, but so did many liberals, including Senator Ted Kennedy and reformer Ralph Nader, who believed that increased competition would benefit consumers. Some deregulators, including Kahn, quite consciously sought to weaken unions and lower labor costs in monopoly industries in the name of helping out less well-off workers and their families, who would benefit from jobs at new competitors and from lower consumer prices. “I’d love the Teamsters to be worse off,” said Kahn. “I’d love the automobile workers to be worse off.” Business divided. Many goods producers supported the deregulation of transportation, hoping to lower their shipping costs. Businesses and communities in areas with poor airline service hoped that more competition and new carriers would lead to better transportation links. But companies and unions protected by regulatory structures fought their dismantling, fearing a downward spiral of prices, profits, and wages. It was largely a rearguard action, as the Carter administration pushed through varying levels of deregulation in the airline, trucking, railroad, cable television, and savings bank industries.
Carter’s trade policy continued the pattern, begun early in the Cold War, of giving priority to national security concerns over domestic economic considerations. To help out allies also suffering from stagnation, as well as to fight inflation, the Carter administration took only modest steps to stop imported manufactured goods from eroding the position of domestic producers, even when, as in the case of the steel industry, foreign-made products were dumped onto U.S. markets at prices below production costs. More efficient, or at least lower-cost, foreign manufacturers started grabbing larger shares of the U.S. market, with steel imports rising 30 percent in the first eight months of 1978.
At least in the short run, deregulation and trade policy had little impact on inflation, since food, energy, and housing costs (including mortgage interest rates) accounted for most of the rise in the consumer price index during the Carter years. Carter’s modest anti-inflationary measures came nowhere near to balancing out the massive jump in crude oil prices that came in the wake of the 1979 Iranian Revolution, which helped push the inflation rate to 11.2 percent in 1979, the highest since 1947.
That year, the lead in fighting inflation moved from the White House to the Federal R
eserve System. Paul Volcker, whom Carter appointed chairman of the Fed, made stopping inflation his main goal, even if it took inducing a recession to achieve it. Rather than slowing the economy the usual way, by jacking up interest rates, Volcker used a different approach, having the Federal Reserve System tightly control the growth in the money supply, largely through increases in the requirements for bank reserves. In doing so, the Federal Reserve adopted the prescription of Milton Friedman and other monetarist economists who criticized Keynesianism and argued that the government should abandon trying to regulate the economy with fiscal tools and instead restrict its actions to adjustments in the supply of money.
The Fed, exempt as it was from democratic control, could do what no president or Congress could, deliberately set out to crash the economy and in the process create a sea of human misery in the service of creating price stability. But even it needed some fig leaf of protection from public wrath, which monetarism provided. Controlling the money supply seemed more a technical measure than directly pushing up interest rates, something the public more easily understood as a discretionary act.
The central bank restrictions on the money supply quickly impacted the economy. Interest rates shot up to extreme levels, approaching 20 percent. That in turn led to a sharp drop in consumer spending and, in the second quarter of 1980, the steepest fall of the GNP ever recorded. Yet inflation continued to rise. Meanwhile, increased imports and Volcker’s monetary policy led to a massive wave of layoffs and plant closings in the automobile and steel industries, the beginning of a decade of intense deindustrialization that would transform and hollow out the American economy. The economy had been redirected not through public discourse or legislative action but in the secretive boardroom of the Federal Reserve. Carter, who initially acquiesced with the Fed policy, began speaking out against it during the fall 1980 election, but by then it was too late to halt its downward push on the economy and on his own political fate.
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