American Empire

by Joshua Freeman

  Like Ford, Carter did no better with energy than with the economy. Between the end of the 1973 Arab oil boycott and the Iranian Revolution four years later, oil prices stabilized and the energy issue receded from public attention. Nonetheless, Carter made it one of his top priorities, recognizing the danger of dependence on foreign oil and the limits on fossil fuel supplies. The Carter administration crafted a complex, comprehensive energy program, designed to reduce consumption, encourage conservation, lessen dependence on foreign oil, and promote the development of renewable sources of energy, to be accomplished through the partial decontrol of oil and gas prices, subsidies, tax measures, and regulatory action.

  The prolonged fight in Congress that followed reflected conflicting ideas for a national energy policy, Carter’s ineptitude in dealing with Congress, and the difficulty of governance in an era of fragmented power. Energy issues pitted political factions, economic interests, and regions against one another. Decontrolling oil and gas prices would bring huge profits to energy companies and the regions where they were located, while hurting energy consumers and regions that imported oil and gas, especially the Northeast, where oil heating made homeowners particularly vulnerable to price hikes. Carter proposed various tax schemes to recycle revenue from higher oil prices back to consumers and to encourage conservation, but these raised opposition from those who would bear them.

  Powerful oil and gas interests played a large role in the congressional handling of energy, but a mobilized public, now conditioned to direct action to promote its views, played a role too, especially in opposing nuclear power. In May 1977, 1,414 protestors were arrested at the site of a proposed nuclear plant in Seabrook, New Hampshire. Taking a page from the civil rights movement, many refused bail, forcing authorities to hold them in armories around the state. Meanwhile, the proliferation of committees and subcommittees in Congress provided many entry points for lobbyists and interests. It took a year and a half for Carter to get an energy law, stripped of many of his proposals, including tax provisions designed to reduce consumption.

  Within months, energy emerged as a major issue again, when the revolution in Iran led to a near complete halt of its oil exports and OPEC took advantage of the tight market to drive up the price of crude oil. With gasoline lines and shortages spreading across the country and tempers flaring, Carter used existing authority to phase out controls on oil prices, while proposing a windfall profits tax, which Congress eventually passed. But consumers bore the brunt of the burden of the transition toward higher energy costs, as they watched the pump price of gasoline more than double in three years. By the time Carter left office, the percent of the GDP devoted to energy spending exceeded 13 percent, up from 8 percent at the beginning of the decade.

  The gasoline lines and shortages in the summer of 1979 occasioned one of the most notable presidential addresses of the post–World War II epoch. Carter had planned to give a national address on energy policy but at the last minute canceled it, instead traveling to the presidential retreat at Camp David. There he spent six days meeting with a stream of politicians, academics, religious and labor leaders, and businessmen about the economy, energy, the state of the nation, and his own administration. With the nation wondering just what the president could possibly be up to, Carter then delivered his postponed address to a huge radio and television audience.

  “The true problems of our Nation,” Carter told his listeners, “are much deeper . . . than gasoline lines or energy shortages, deeper even than inflation or recession.” Rather, the nation suffered “a crisis of confidence . . . growing doubt about the meaning of our own lives and the loss of a unity of purpose for our nation.” “In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God,” Carter continued, “too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve . . . learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.”

  After deftly analyzing what he called “the crisis of the American spirit,” Carter proposed no strategy to overcome it, no broad program to meet the problems he identified. Instead he itemized his new energy proposals. That reinforced what so many people found inadequate in Carter, a technocratic obsession with detail while lacking a political sense of how to institute large-scale change. Carter followed up his speech by firing five cabinet officers, a gesture that seemed irrelevant if, as he argued, America’s problems were deeply rooted in its culture of self-interest. Carter proclaimed in his speech that “all the legislation in the world can’t fix what’s wrong with America,” yet he offered nothing that could—and proved pretty poor at getting legislation passed to boot.

  From Human Rights to Renewed Cold War

  In foreign affairs, Carter pursued many of the same themes as he did domestically. At times he seemed to believe that American power inevitably was declining in an age of proliferating nuclear weapons, third world economic development, and social revolution. Rather than defending the status quo, in some situations Carter supported a controlled liquidation of American dominance, seeking to ally with or at least avoid open conflict with ascending forces for social change.

  Early in his administration, Carter pushed hard and successfully for Senate ratification of treaties ceding control over the Panama Canal and the Canal Zone to Panama, culminating a long process of removing a sore point in U.S. relations with Latin America. When the left-wing Sandinista National Liberation Front led a revolution against Nicaraguan dictator Anastasio Somoza Debayle, a longtime American ally, Carter maneuvered unsuccessfully for the installation of a moderate-led government but, in a break from past practice, refrained from open or covert military action to check radical change.

  Carter’s policies were animated in part by his desire to make a “commitment to human rights . . . a fundamental tenet” in how the United States acted. In moralizing foreign policy, Carter joined the neoconservatives in sharp criticism of the lack of political freedom in the Soviet Union and Eastern Europe. Unlike the conservative moralists, he also attacked the abuses of human rights by anticommunist authoritarian regimes that in the past could count on U.S. backing. Carter reduced or ended aid to countries like Chile, Argentina, and Uruguay that were engaged in murderous campaigns against left-wing dissidents. But he only went so far, continuing to support regimes engaged in human rights abuses when he perceived their opponents as fundamentally threatening U.S. interests and trying, unsuccessfully, to stop the Mariel boatlift from Cuba, in which Castro suddenly allowed the disaffected to leave the island.

  Carter’s human rights agenda complicated his effort to achieve further arms control agreements with the Soviet Union. His embrace of Soviet dissidents and criticism of human rights violations in the Soviet bloc, along with his desire for deep cuts in strategic weapons, made negotiating a new Strategic Arms Limitation Treaty, SALT II, a long, difficult process. When the Soviet Union sent troops into Afghanistan in 1979 to try to keep in power a pro-Soviet regime facing a tribal and religious rebellion, Carter swiftly adopted what amounted to a renewed hard-line Cold War stance. He imposed an embargo on grain sales to the Soviet Union; forced American athletes to boycott the 1980 Moscow Olympics; withdrew the SALT II treaty from consideration by the Senate; increased covert action against left-wing governments in Asia and Africa; and accelerated the increase in military spending that he had already begun.

  The sharpness of Carter’s actions reflected a sense of threat that came from events in Iran as much as Afghanistan. In the years after 1953, when the United States had helped restore the shah to power, Iran had become an increasingly important ally. But the close U.S. ties to the shah proved detrimental as opposition to the modernizing but undemocratic and sometimes brutal Iranian regime gathered strength. In early 1979, the shah left Iran in the face of growing strikes and demonstrations, paving the way for exiled M
uslim cleric Ayatollah Ruhollah Mussaui Khomeini, who helped inspire the uprising, to return.

  The Carter administration, largely operating within the intellectual framework of the Cold War and with a flawed view of Iranian society derived from the shah and his American backers, found itself at a loss as to how to deal with a cataclysmic social shift that did not resemble other post-Enlightenment revolutions. The United States made no effort to again return the shah to power, but Carter gave in to pressure from Henry Kissinger and other powerful friends of the former Iranian leader to allow him into the country for cancer treatment. In reaction, on November 4, 1979, radical Islamist students took over the U.S. embassy in Tehran and seized more than fifty hostages with backing from Khomeini, who used the crisis to consolidate his power at the expense of secular and left-wing rivals.

  For the next fourteen months, Carter tried one measure after another to get the hostages released, from freezing Iranian assets in the United States to attempting to begin negotiations to breaking diplomatic relations, without success. In April 1980, he tried to use military force to free them, but that failed too, when helicopters on the mission suffered mechanical problems. Ultimately, the shah’s death, the outbreak of war between Iran and Iraq, and the U.S. presidential election set the stage for a resolution of the crisis. The Iranians, eager for funds for their war and perhaps concerned with what might happen if Reagan got elected president, finally negotiated an arrangement with the Carter administration in which the hostages were released—just after Carter left office—in return for unfreezing Iranian assets in the United States.

  The Soviet invasion of Afghanistan, the Iranian Revolution, and the hostage crisis vividly demonstrated the changed circumstances the United States faced in the Near East. It no longer could depend on allies and surrogates, like Britain and Iran, to protect its interests in the region, on which it had become increasingly dependent for oil. It would have to act on its own. In his 1980 State of the Union address, Carter declared, “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.” Thus began a military buildup in the Gulf region, the declared possibility and eventual actuality of direct U.S. military intervention, and the recommitment to a path of development dependent on cheap, plentiful oil. Yet in spite of his bellicose language and military buildup, Carter suffered politically from keeping the hostages at the forefront of his foreign policy while proving unable to get them home, and from the failed rescue effort that seemed to confirm the impotence and ineptitude of the American military in what looked like an increasingly dangerous and hostile world.

  Limiting Government

  The inability of Washington to solve big problems the nation faced allowed efforts to limit the size and functions of government to gain momentum. Some of the push came from business interests that sought to circumvent democratic channels, where their power had become constrained. Some of it came from grassroots activists, as upset by the cost of government as by what it did.

  The Ford and Carter regimes took modest steps back from the New Deal–Great Society conception of state function. But a much more frontal attack on the idea of the welfare state took place in cities and states hit hard by the recession of the mid-1970s. Municipalities found themselves facing greater needs for social services at the very moment when their tax bases were deteriorating as a result of the economic downturn, deindustrialization, and suburbanization. Efforts to hold down the costs of municipal employee wages and benefits led to labor conflict and disruptive strikes, including a 1974 walkout by Baltimore police, the first significant law enforcement strike since 1919. In New York and Cleveland, bankers and conservative politicians took advantage of severe fiscal problems to attack social democratic policies and populist politics.

  New York City had provided a national model for an expansive, liberal notion of government in the decades after World War II. Government services included a large, free university system; a large public hospital system; a large mass transit system; public housing projects with over a half million residents; and a large, relatively generous welfare system. In addition, the city had tens of thousands of apartments in nonprofit cooperative housing projects and extensive nonprofit health insurance programs. In effect, a kind of municipal social democracy had been built.

  But New York’s large public sector, welfare costs, and Medicaid expenses proved financially unsustainable on a municipal basis. During the late 1960s and early 1970s, the city ran up massive debt as the cost of the services it provided outstripped its revenues. During the winter of 1974–75, the market for New York City bonds collapsed when investors grew fearful that the city would be unable to repay what it had borrowed.

  For some financiers and conservative politicians, including Gerald Ford and his secretary of the treasury, William Simon, a former bond trader who had helped New York build up its debt, the city’s fiscal woes provided an opportunity for an attack on the welfare state and public employee unions. New York’s plight confirmed their conviction that liberal attitudes and government programs threatened the economic and moral health of the nation. Many conservatives shared Simon’s beleaguered sense that capitalism and the market were in imminent danger from growing government regulation, welfare-state measures, transfers of wealth, and an intellectual elite committed to social democracy or socialism.

  New York State and the federal government came up with a series of jerry-built plans to refinance New York City’s debt, allowing it to remain technically solvent. But as a condition for refunding, federal officials and business leaders appointed by the state’s Democratic governor to new oversight and finance agencies demanded that the city lay off tens of thousands of workers, defer wage increases called for by union contracts, start charging tuition at its university system, cut municipal services, raise transit fares, and reform budgeting and fiscal procedures. In doing so, the coalition of financiers and politicians that all but preempted control over New York City from its local elected leaders showed that the unthinkable could be done, or at least partially accomplished: the half-century-long movement toward expanded state function and social entitlements could be reversed. Conservatives did not transform New York as fully as they hoped. They failed in their efforts to eliminate rent control—a holdover from World War II price controls—or radically reduce municipal worker pay and benefits, as the labor movement and community groups mobilized mass resistance. But they succeeded in ratcheting down public expectations of what government would provide and forcing austerity on New York’s working class. With public services slashed in the middle of a severe recession, New York became a grim place to live. Streets grew filthy, roads literally crumbled, crime shot up, subways broke down frequently, libraries opened only a few days a week, and schools crammed children into overcrowded classrooms and eliminated art, music, and sports.

  In Cleveland, a clash between local business leaders and a liberal city government led to an actual default, though short-lived. Cleveland’s mayor, Dennis Kucinich, elected in 1977 as a populist (when only thirty-one years old), made good on his campaign promise to end tax abatements for businesses. He also refused to sell Cleveland’s small municipal-owned electric company to a much larger commercial utility seeking to eliminate its rival. Financial claims by the utility against the city deeply strained its budget. Local bankers told Kucinich they would not roll over short-term city debt unless he agreed to sell the city-owned system. When Kucinich stood his ground, Cleveland became the first major city since the Great Depression to default on its debt. Kucinich rallied public support and won a referendum backing the retention of the power company and raising income taxes to enable the city to become solvent. But enough damage had been done to pave the way for Kucinich’s ouster in the November 1979 election by Republican George Voinovich.

  In Californi
a, government cutbacks came as a result of a tax revolt. In 1953, the average American family paid less than 12 percent of its income in federal, state, and local taxes, but by 1977 that had risen to over 22 percent. Much of the rise, especially in the 1970s, stemmed not from explicit legislative decisions but from the impact of inflation. Inflation pushed families into higher tax brackets for their federal income taxes and in some cases for state income taxes too. It also drove up property taxes, especially in places like California, where a booming real estate market combined with the general inflationary climate to balloon the value of houses. As assessments soared, so did the property taxes based on them.

  Episodic protests against high property taxes had taken place in various parts of California during the 1950s and 1960s, with limited success. But changed conditions during the 1970s created more fertile ground. With rising taxes, a stagnant economy, and soaring prices pressing family budgets, the antitax sentiment built into the DNA of the nation heated up. The accumulation by the California state government of a $4 billion surplus rubbed salt into wounds, making the growing tax burden seem unnecessary.

  In 1978, Howard Jarvis, a veteran antitax campaigner, got a tax reduction referendum measure, Proposition 13, put on the ballot. It called for capping local real estate taxes at 1 percent of assessed value, scaling back assessments to their 1975–76 level, and, except at the time of sales, limiting increases in assessments to 2 percent a year. It also mandated a two-thirds majority in the legislature to raise state taxes and two-thirds voter approval to raise local taxes. Using populist rhetoric, Jarvis, who had close ties to Los Angeles–area apartment building owners, orchestrated a well-funded campaign in support of the measure.