Carter Gets a Bad Rap

The Reagan revolution that began in the 1980s came to fruition due to the recession of the 1970s. The recession was caused by stagflation, which is when both unemployment and inflation rise simultaneously. (Just as an aside this temporarily ended the Keynesian revolution, which did not think rising unemployment and inflation was possible.)  For whatever reason President Carter is usually cited as responsible for the economic woes of the 1970s. In reality it was not his policies that caused the stagflation nor did it begin under his watch.



















These two graphs show both inflation and unemployment spiked at the same time, around 1974 and 1975, over a year before Mr. Carter even set foot in office. Further the stagflation was caused by policies put in place by President Nixon.  It was caused by too much expansionary monetary policy; in other words practicing too much Keynesian economics when it is not necessary.   Although Mr. Carter did not greatly improve the economy he tends to receive undeserved credit for causing the problem in the first place.


6 thoughts on “Carter Gets a Bad Rap

  1. Carter and liberals were rightly tagged with the blame for the misery they created in the late 70’s. This was the only time in our history when a new econonmic measure was created to demonstrate how bad things were – the Misery Index.

    To place blame on Nixon is totally off base. There are 3 Branches of government. The President is only one Branch. Most power is in congress where the Democratics had control of both the House and the Senate from 1953 thru 1980. It wasn’t 1980 when Reagan won and the GOP took slight control of the Senate that the Keynesian madness was stopped and we turned things around.

    The 80’s showed great growth but the Dems used a Reagan Iran-contra scandal in 1986 to gain control of the Senate again (the Dems never lost the house in 1980). So again from `1987 thru 1994 the Dems controlled both the House and the Senate and we went back into recession. Then in 1994 the GOP finally took control of both the Senate and the House and we balanced budgets and had great economic growth in the late 90’s.

    The GOP had control of both the Senate and House from 1995 thru 2006 where we survived the 911 attack and still had overall economic growth. The Dems have now had control of the Senate and House since 2007 and what have we had – the worse economy since the Great Depression.

    I don’t worry to much about who is in the White House. The real power is in the Senate and House where Dems have had their way since the late 40’s. So we have had 6 decades of their Keynesian theory and it has gotten us a huge debt that no one knows how to address.

    By the way – why has the Reid Controlled Senate not passed a budget in 3 years? Maybe you can write an article on how a trillion dollar business can run without a budget? It is the law and Reid and his Dems in the Senate are in violation of the law.

    • Just a few comments. First, the Misery index is determined by inflation and unemployment. So the “misery” Carter caused was due to the previous presidency when inflation and unemployment increased simultaneously. And just a little fact-checking the misery index was created in the 1960s and can be applied to any time period.

      Second, and more generally the idea liberal policies have created the mess were in is off base. During the 1950s and 1960s we had strong economic growth and low unemployment all the while the top marginal tax rate was close to 80 percent. It was in 1970s when the economy began to slump and although the President may not be as powerful as Congress he is the ultimate decision make. In this case that role was held by a Republican. Further, as you know many southern “Democrats” during this time were by all accounts Republicans. Not to say Republicans were in total control, but they did have influence in both the executive and legislative branch.

      Third, it is incredibly unfair to blame Democrats for this most recent financial crisis. The Democrats took the House and Senate in 2007 and the crash happened in 2008. It is hard to believe the main drivers of the crash, the housing bubble, sub-prime mortgagees, an unregulated derivative market and over-leveraged banks all occurred in those 2 years of Democratic control. The more likely culprit is the de-regulation of the banks in 1980’s by Reagan and yes the Repeal of Glass-Steagall by Clinton.

      Finally, I do not understand why Republicans blame the Democrats for the burgeoning national debt. It was under Reagan and the Republicans when the trend of paying down the World War !! debt was stopped and for the first time in decades government increased spending during peace time. That’s correct Reagan and the Republicans increased government spending and increased the national debt. Then when Bush Jr. took office we began two wars and for the first time in decades Bush and the Republicans decreased taxes during war time losing billions of dollars in revenue. So is it any wonder the debt has gone up so much? Republicans blame Obama for this debt and although he has increased it, it was only done out of necessity. Non partisan organizations have said the Obama stimulus package have created/saved 3.6 millions jobs. And the auto bailout and has now put GM back on top of auto industry.

      • The Misery Index didn’t become a discussion point until the 1970’s because that is when it peaked during Carter’s tenure.

        The 1950’s and 1960’s were a time when the rest of the world was still rebuilding from World War II. So basically the US had no competitiion on the world stage. So the impact of the 80% tax rate was minimum. Try those rates now with the current global economy and watch the US economy dry up with more businesses moving overseas to more favarable tax rates. Also if the Dems of the 70’s were so pro GOP I wonder who worked so hard to force Nixon out of office.

        Reagan increased spending but it wasn’t peace time. He spent the money to win the Cold War which was a great investment. Bush Jr. spent the money to win two wars after 911. Another good investment. The only difference is that the Dems don’t believe there was ever a Cold War or a War on Terror. That is a dangerous position.

        Obama decided to increase spending and the debt and he hasn’t produced any results. He is following the Keynesian model which works well with limited Global competition like in the 50’s and 60’s. It is an outdated model.

        We need to cut tax rates in all areas individual, corporate, and capital gains. That will bring investment back home and create more jobs. More jobs mean more tax revenues. Dems cannot understand that you can reduce tax rates and actually increase tax revenue which should be their goal. However, that doesn’t fit their strategy of class warfare.

        You are correct that the seeds of the current crisis happened many years ago. However, I find it interesting that each financial crisis we have had since the 1970’s had Dems in control and we came out of when at least some control moved to the GOP. The 1970’s were recovered by Reagan and the GOP Senate. The recession of the early 1990’s turned around when Clinton lost both chambers in 1994. Now we have another financial crisis. Lets hope in 2012 the Senate turns GOP and the GOP keeps the House. Then even if Obama wins we might have chance to finally recover.

      • I don’t think any Democrat wants to raise the tax rate up to 80 percent. We merely want it back to the Clinton rates of 39 percent. The argument that you can increase tax revenue by lowering taxes just doesn’t hold up to the facts. Regardless of who you want to give credit too the budget was balanced in the 90’s in large part because of an increase in taxes.

        I think we may have common ground in lower corporate taxes. I’ve actually said that before in my blog. And you do not hear Democrats wanting to raise the corporate tax rate it is more about closing loopholes. I assume this also means you are in favor of Obama’s plan to provide tax breaks to corporations who work to keep jobs in the country.

        Also, the Keynesian model is not outdated. Keynes did not just advocate higher taxes. He believed there was a so called ‘sweet spot’ where tax revenues will be maximized without being a deterrent to business. In economics this is now known as the Laffer Curve. In reality we have not had a president not practice Keynesian economics. And I disagree Obama’s policies have not done any good. He came into office losing 750,000 jobs a month and in less than a year and a half in office he reversed that trend. The economy, albeit moving slowly, is getting better. And he has been able to do that with Republicans who for the past 2 years have rejected anything he proposes.

        Democrats do not believe there is not a war on terror, but they do believe the focus should not have been Iraq. After all we did not find any weapons of mass destruction. Believing the Iraq war was a good investment is surely a minority view. And it has been Obama who has won these wars not Republicans. He also helped end a war in Libya without sending a singe soldier there.

        Finally, I dislike this platform by Republicans claiming raising tax rates back to the 90s rate is somehow class warfare. As I have written before how is raising taxes on the rich class warfare while raising taxes on middle and lower class individuals and lowering taxes on wealthy individuals (every GOP candidate’s tax plan) not class warfare? One plan uses demand side economics while the other uses supply side. It’s not class warfare, thats merely a talking point created by Congressional Republicans.

  2. The budget was balanced in the 90’s when the GOP controlled both chambers and held Clinton’s feet to fire on spending. So with less government spending there was more room for private growth. Everyone was working which brought in a large amount of tax revenue. Raising the tax rate to 39% will have little impact on solving the real problems in our country which is excess spending. That type of tax increase while it makes the left feel good, won’t even move the needle on the large defict spending Obama proposed this week in his budget. Also, why won’t Reid’s Senate pass a budget. It has been 3 years now.

    Regarding the corporate tax rate. We should get rid of it entirely. Make it zero. That will make the U.S. much more competive in Global economy and provide an incentive to bring the jobs back home. Unemployment will drop to 2% or 3% and tax revenue will soar.

    Obama said if we followed his Stimulas plan unemployment won’t go above 8%. Well that theory didn’t work. Also, Obama has had control of the Senate for his entire term and the GOP only has had control of one chamber the House for 1 year (not 2 years). So the first 2 years Obama had total control and nothing improved. So how has the GOP stopped him without control. So if history is any indication – if the GOP can take back the Senate and keep the house in 2012, we can finally count on a great recovery like we had in 1980 and 1994.

    GOP would support lowering taxes for all. No taxes should go up on anyone especially now when the economy is still struggling. The Dems just want to demonize hard working successful people under the banner of everyone should pay their fair share. They are not interested in solving the deficit and debt issues because the tax increase they propose will not solve the problem.

    Also, I find it interesting the Obama takes credit for ending 2 wars by continue the tactics and strategies that Bush put in place. The same strategies that he said he would end during the 2008 campaign. I guess Bush wasn’t so wrong – was he?

    • Since this discussion has turned away from the point of my original post this will be my last response. I just want to make one point. The fact is taxes (income, corporate and capital gains) have been decreasing for decades now and are currently at historical lows. However, the national debt has been increasing all these years. You can argue that it is because of too much government spending crowding out the private sector. The problem is the crowding out theory has never been proved. In fact Nobel Prize winning economist Paul Krugman calls it a zombie theory because no matter how many times it has been disproved people still put it forward as fact.

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