This is a question I’ve wondered myself lots of times.
Carter
did come into office with high approval ratings, despite the close election. They were about on par with Eisenhower or Kennedy’s early numbers, and significantly better than Reagan’s. He had big Democratic majorities in both houses of Congress, and a national environment that was flexible to change. He had a lot to work with.
But at the same time, there were enormous challenges that were hurled his way. So let’s take a look at Carter’s #1 challenge:
The Economy
By far the biggest issue of Carter’s presidency. During his re-election campaign, 58% of voters picked an economic issue as their biggest concern, and most of them chose inflation/high cost of living. Hard to get re-elected when people have those kinds of concerns.
So what’s the solution? This is where it gets tricky. Carter put Volcker in the head chair at the Fed in August 1979, and Volcker targeted inflation as the main problem. In the long run, this worked — by the end of Reagan’s first term, through setting high federal interest rates, Volcker got inflation down below 4%, whereas it was about 13% when he was appointed. In other words, a Carter appointee causes Reagan’s “Morning in America.”
So, that’s all it takes, right? Get Volcker in the Fed earlier and Carter gets the booming Reagan-style economy?
The problem with that is that Volcker’s policies also caused a recession, which plagued Reagan’s first two years, only letting up in time for his ‘84 reelection. In the Carter years, unemployment hovered around six percent most of the time, and jumped up a bit to 7.2% in 1980. In Reagan’s second year, it was almost 11% — leading to a big anti-Reagan backlash at the midterms.
Raising interest rates like Volcker did is going to reverse inflation but it’s also going to slow down the economy, leading to greater unemployment. Reagan’s good fortune was that the high unemployment rate of 1982 didn’t last til 1984, so he could go into reelection with low inflation, low prices, and improving employment numbers. Weirdly, unemployment was actually the same (about 7 and a half percent) during Reagan’s landslide victory in ‘84 as during Carter’s landslide loss in ‘80. But both low prices and the perception that the economy was improving (it was compared to earlier in his term) helped Reagan.
So the question is — can Volcker, appointed at the earliest in 1977, get inflation low without causing a recession or high unemployment by November 1980? I’m not an economist, so I can’t tell you for sure. If Carter’s at 1982 levels of unemployment, he’s toast. If Carter’s at 1984 or 1980 levels, with low prices instead of inflation, it’s possible. But he has to project the right image, I think.
Carter’s best pitch for a 1980 re-election campaign is basically Obama’s pitch from 2012: “I inherited a mess, but I’m doing my best, things are getting better, let’s not squander our progress, I’m more trustworthy than the other guy.” I think Carter tried to do that in 1980, but he didn’t have the results to show for it (unlike Obama 2012) and his style of leadership was too impersonal. The Crisis of Confidence speech is a sign of that. He struck at a nerve that really spoke to people — for a few days. People wanted to give him their support. But he went and fired his cabinet afterwards and nobody really understood why, and the Rose Garden strategy that was intended to make him look ‘presidential’ just made him look disconnected from the people.
Now, Fed policy and interest rates aside, what can Carter do to help the economy? I guess it depends on who you ask. Keynesians are gonna say he should’ve spent more, had a bigger stimulus, done public works projects (the Dems in Congress wanted that). Conservatives are gonna say he should’ve cut government spending and cut taxes on the rich. Reaganites are gonna say he should cut government spending on welfare but increase it on Pershing missiles. So pick your panacea!
