Archive for category Jimmy Carter

If Only We Had Listened Then

On July 15, 1979 President Carter returned from nearly two weeks at Camp David to give a speech that would be remembered as a highlight — and some might say a lowlight — of his Presidency.   The speech is often the subject of such caricature that it gets remembered as far different than it was.   Called the “crisis of confidence” speech, it got morphed into the “malaise” speech (though Carter never used the term) and was trashed by his opponents, both Ted Kennedy and Ronald Reagan.

At the time of the speech it was well received.   His approval ratings jumped from 25% to 35% in the week afterwards.   In that speech he said America was at a cross roads.   He painted two visions of the path forward:

We are at a turning point in our history. There are two paths to choose. One is a path I’ve warned about tonight, the path that leads to fragmentation and self-interest. Down that road lies a mistaken idea of freedom, the right to grasp for ourselves some advantage over others. That path would be one of constant conflict between narrow interests ending in chaos and immobility. It is a certain route to failure.

All the traditions of our past, all the lessons of our heritage, all the promises of our future point to another path, the path of common purpose and the restoration of American values. That path leads to true freedom for our Nation and ourselves. We can take the first steps down that path as we begin to solve our energy problem.

The first path was one with a mistaken notion of freedom as being all about self-interest and distrust of community.   That path would lead, he warned, to crass materialism, narrow self-interest, and an unsustainable economy.   It would be a rejection of the values that made America great in favor of individual pursuit of people trying to get whatever they could, looking out only for their own bottom line, and justifying any injustices with a claim that if the market provided that result, it must be OK.   As Carter warned:

“In a nation that was proud of hard work, strong families, close-knit communities and our faith in God, 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 discovered that owning things and consuming things does not satisfy our longing for meaning.

The second path was one leading to energy independence, a focus on alternative energies, and a renewal of the American community.   For Carter this was a moral issue.   America’s future depends on the American people putting values ahead of greed, and coming together to face a world where we had become susceptible to oil shocks, facing economic uncertainty and realizing that the government couldn’t solve America’s problems.   He called the country to come together and take a long range vision of what is needed, avoiding the temptation to turn to cheap and illusory solutions.

If you don’t want to watch the speech, you can read it here.

Instead the US choose to follow another path, put forward by Ronald Reagan who defeated Carter in 1980 and promised Americans they could, as the beer commercial said “have it all.”

Reagan’s vision was seductive.   First of all, Reagan was a good man and people trusted him.   He clearly believed what he said.   He also was telling Americans what they wanted to hear.   The problems we face aren’t ones of values and the need for difficult choices.   All we need to do is cut taxes and let the American people shine and we’ll be that “shining city on the hill” once again.

When Reagan came into office he removed the solar panels Carter had installed on the White House.    He cut taxes.   The economy grew.   But yet, it was indeed an illusion.    The economy would have grown no matter who had been elected, deep oil price cuts injected massive amounts of money into the economy.   The recession that was so bad in 1980 had been induced by Paul Volcker’s monetary policies; once inflation was tamed, that and lower oil prices were a certain path to ending the recession.

But Reagan and the Democrats — this was a bi-partisan illusion — then engaged in a massive build up of debt.   US government debt to GDP ratio went from 30% to 60% in the 1980s.   That hyperstimulated the economy and started us down the road of having an unsustainable debt-based consumer economy.   Consumer debt started to rise too.    Total debt (private and public) had tended to hover around 150%.   In the 80s that debt zoomed up to over 250%.   The economic boom associated to Reagan was simply a country charging on its credit card, going into debt, and thinking things must be good because they could buy so much stuff.

Of course this continued.   Government debt growth slowed in the 90s, but private and consumer debt kept soaring.   Debt and low taxes on the wealthy produced not jobs via trickle down economics, but bubbles as investors chased the dream of “something for nothing.”   Americans both left and right thought that the good times would last forever, even as debt mounted to nearly 400% of GDP overall (public and private).

Now we’re in a crisis of massive debt, fears of long term energy crises, and no clear way to get back on the path of sustainability.    It’s led to wars and our political system, once the envy of the world, seems defined by partisan pundits who too often see compromise as something for only the weak.   Given that the US system can only run via compromise, it’s a path towards political stagnation and fragmentation at a time when we need to come together.

If we had listened to Carter in 1979 and saw the country’s problems as rooted in a weakening of the core values of community and sacrifice in favor of consumption and greed, we might now be in a much better place with a far better future.    Yet we didn’t.   But we can still learn from Carter’s words.   Our problems are primarily about values and ethics, not about economics and policy.   Focus there first and come together as a country true to our core principles — values shared by the left and the right — and we can start to rebuild the American dream.

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Getting Real about Ronald Reagan

Former President Ronald Reagan’s name gets bandied about as either a mythic hero for the GOP or a dottering old bogeyman for many Democrats.   The reality, of course, is that he was neither, and the fallacies of both the left and right can be shown by looking at two especially misguided myths about Reagan.   The first is that Reagan’s economic policies brought the US a period of economic growth and prosperity, proving that smaller government works best, and the second is that Reagan shifted US foreign policy to be tougher on the Soviets, thereby hastening the end of the Cold War.   Both myths are dead wrong.

The truth about Reaganomics:   Ronald Reagan and the Democrats in Congress had an implicit deal:  taxes would be cut and spending would increase.   This meant that the economic boom in the 80s was built on debt.    The debt to GDP ratio went from 30% when Reagan took office to just under 60% when he left.   Given that the GDP grew during that time, this is a doubling of debt.    That is a stimulus package that puts Obama’s 2009 effort to shame.  If you double your debt it’s not hard to have an economic boom — but it was built on a house of cards.   Moreover, oil prices decreased dramatically during this time frame, meaning that the government stimulus of the economy was augmented by declining oil prices.

Simply: the supposed prosperity of the 80s was an illusion.   It was the functional equivalent of any one of us taking out credit and living very well for awhile.   It feels good while it lasts, but when it ends you’re left with debt.   It was unnecessary too — falling oil prices would have stimulated the economy naturally.   Moreover, this is the time frame when the US went from having a current account surplus (being a net investor in the world, with trade in balance) to a current account deficit (mostly a trade deficit).   We shifted from producing as much as we consumed to consuming more than we produce — with credit coming mostly from overseas.  This was the start of the great crisis we’re now enduring.

Yet Reagan doesn’t deserve all the blame.  The Congressional Democrats and Republicans found this path easy in the short term.  Just as Reagan didn’t veto spending (indeed, his administration famously said budget deficits don’t matter — something Dick Cheney would repeat in 2005), both parties of Congress found the ‘cut taxes, increase spending’ formula politically convenient.   This was a bi-partisan effort.

Still, the fact is that Reaganomics was a myth.   Government grew massively, debt grew, and so did spending.   All the 80s proved was that if you increase debt you can stimulate the economy.   We knew that already.

The truth about the end of the Cold War.   When the Soviets invaded Afghanistan in December 1979 President Carter announced a massive shift in US policy.    This included an increase in defense spending which he projected to be at higher levels than actually occurred under Reagan.   Moreover the Carter doctrine, announced on January 23, 1980, made it clear that the US would, for lack of a better term, fight a war for oil.   Keeping the flow of Persian Gulf oil going was made a primary national interest.

The shift of policy towards the Soviets was bi-partisan, with Reagan continuing the policies Carter put in place.   He did increase the amount of aid to the Afghan “freedom fighters,” something Carter didn’t want to do because he wasn’t sure it made sense to get in bed with Islamic extremists.  Reagan also shifted US policy in Nicaragua, supporting the Contras trying to overthrow the Sandinista government (Carter hoped to win the Sandinistas over).   Still, those changes did not lead to the collapse of the USSR.

The Soviet Union, stymied by a lack of leadership from 1981 to 1985, as Yuri Andropov and Konstantin Chernenko were both ill and ineffective in each of their brief tenures, imploded from within.   In Eastern Europe the crisis was worse, and by 1989 Hungarian and Polish Communists started a path to undo communism out of economic necessity.   Regardless of what US foreign policy would have been in the 80s, communism was collapsing and could not be saved.   Communism was an utter and completely failure on its own terms.

However, if Reagan didn’t cause the end of Communism, he also doesn’t get enough credit for helping assure Gorbachev could succeed.   As I noted in an earlier post about the two of them, Reagan should get credit for recognizing that Gorbachev was the real thing and acting in ways that helped him stay in power.   In 1986 the US military build up halted, as US defense spending stopped rising (in real terms).   In 1987 Reagan and Gorbachev signed the treaty eliminating intermediate nuclear missiles from Europe after the Soviet military concluded that SDI (the Strategic Defense Initiative designed to try to protect US strategic missiles from Soviet attack) was not a threat.

At that time, Reagan’s most vocal credits were from the right wing of his party.   Few remember how Reagan was attacked for ‘going soft,’ with some on the right claiming that Weinberger and Shultz weren’t letting “Reagan be Reagan.” Others thought Reagan was being fooled by Gorbachev who was just a slicker and more effective Communist.   True to his principles, Reagan shifted from a hard line to a helpful line when he saw that Soviet reform was real and a chance existed for Communism to either reform and die from within — a war wasn’t necessary.

This wisdom and insight of Reagan gets lost if one focuses on the myth of Reagan’s toughness somehow bringing down the USSR.   Many on the left attack Reagan as a hard core war monger whose approach was disproven by Gorbachev’s ability to push change.   In reality, Reagan and Gorbachev were a team, each needing the other.

In the fog of historical amnesia, Reagan’s rhetoric has become reality for most, both right and left.   Few realize that the 80s saw a doubling of US debt, with massive deficits during a boom — something that makes no economic sense.   Few realize that Reagan’s wisdom was not in standing tough against the Soviets (Carter started that policy) but shifting course after correctly understanding that Gorbachev was the real thing.   The ideological rhetoric used by Reagan covers up the fact that at base he was a pragmatist and a deal maker, someone who had the notion that he could reach an agreement with just about anyone.   He’d start with a tough sounding stance, but then negotiate.   People remember the former and forget the latter.

Historical reality shows that almost all Presidents and leaders are far more complex than the myths that survive.   Nuance, complexity and paradoxical information gets swept away in favor of a packaged simple narrative.   But it can be dangerous; those who say they want to be like Reagan on the economy don’t realize that means embracing more debt and economic stimulus.   Those who focus on Reagan’s alleged toughness don’t see his ability to shift when an opponent appears willing to embrace change.   Those who focus on Reagan as principled miss that he was also extremely pragmatic.    And as far as  I’m concerned the real Reagan was a far better President than the mythic Reagan ever could have been.

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Carter the Prophet

“In a nation that was proud of hard work, strong families, close-knit communities and our faith in God, 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 discovered that owning things and consuming things does not satisfy our longing for meaning.

It has been called a speech that should have changed history.   Thirty years ago President Jimmy Carter gave what at the time seemed a successful speech.   He noted that the problems the country was facing — an energy crisis, an economic recession, and a question of confidence after a failed foreign policy venture in Vietnam and the Watergate scandal that brought down President Nixon — required a national renewal of purpose.  The speech was inspirational, but later pilloried for as the “malaise” speech, contrasting Carter’s supposed pessimism with Ronald Reagan’s optimism.

Carter had the fate of any prophet of doom — he was quickly pushed aside by the optimists who said nothing is wrong, we can keep moving onward and upward!  And within years, as oil prices dropped (ending the concern about dependence on foreign oil — at least for awhile) and the economy rebounded (albeit through increased debt and foreign goods from abroad), Carter’s warning was forgotten.  President Reagan took the solar panels off the White House and dismissed Carter’s call for a national renewal, including Carter’s claim that we had become overly materialistic and risked severe consequences if we didn’t change our ways.

Carter was prophetic.   Even though he wasn’t able to follow through and bring the change needed, in part due to actions of his administration, in part because of the nature of American capitalism, his speech rings true today.

In that speech, Carter offered a course of action the country should now reconsider:

First of all, we must face the truth, and then we can change our course. We simply must have faith in each other, faith in our ability to govern ourselves, and faith in the future of this Nation. Restoring that faith and that confidence to America is now the most important task we face. It is a true challenge of this generation of Americans.

….

We are at a turning point in our history. There are two paths to choose. One is a path I’ve warned about tonight, the path that leads to fragmentation and self-interest. Down that road lies a mistaken idea of freedom, the right to grasp for ourselves some advantage over others. That path would be one of constant conflict between narrow interests ending in chaos and immobility. It is a certain route to failure.

All the traditions of our past, all the lessons of our heritage, all the promises of our future point to another path, the path of common purpose and the restoration of American values. That path leads to true freedom for our Nation and ourselves. We can take the first steps down that path as we begin to solve our energy problem.

(Read the whole speech)

Carter left office in 1981 with very low approval ratings.  The country had fallen into recession after the oil spike in 1979, Americans had been held as hostages in Iran at the US embassy for over 400 days, as our former ally had become a foe with the overthrow of the Shah.

1979 stands as a pivotal year, with the Iranian revolution in January, and the Soviet invasion of Afghanistan in December.   The decline in the ability of the US to use military power to shape events had been shown in Vietnam, and it appeared that the hegemony of the post-war era was over, America was in decline.  Carter offered a way out.   He called for a massive effort to develop alternative sources of energy and move towards energy independence.  He called for a “rebirth” of the national spirit.  Instead, the country embraced the superficial but seductive optimism of Ronald Reagan.

The journalist Walter Lippmann once talked about what came to be known as the “Lippmann gap,” the gap between national commitments and the ability to follow through on them.   Carter was essentially saying that we were suffering from that kind of gap, and would have to pull together and work as a community to set things right.   Ronald Reagan effectively dismissed the idea of there being a gap, and we embraced the “you can have it all” mentality.

In 1979 our total debt was 30% of GDP, about $640 billion.  Our budget deficit that year was $28 billion.   Now we have total debt of $12 trillion, and a deficit of over a trillion dollars.   In 1979 we had the capacity to change course, we were in relatively good economic shape fundamentally, but needed to react to growing economic imbalances caused by a new trend of increased global interdependence — what would later be called globalization.   Oil prices fell dramatically in the early eighties, and that gave us the chance to balance economic health with a concerted effort to keep our economy productive (e.g., save the steel industry, invest in infrastructure) and achieve energy independence.   It would not have been easy, we’d have had to deal with some lean years in terms of economic growth and spending, but we’d arguably have been able to create a sustainable and environmentally friendly long term economic future.

Instead, we partied!   Run up the debt!   Consume, consume, consume!   Bigger cars, more stuff, and stay close to the Saudi royal family so they supply the cheap oil.    Yup, those were a fun thirty years.   We enjoyed a bubble economy where it seemed easy to get rich, stock market increases promised everyone an early and wealthy retirement, and cheap credit with low (observable) inflation that made it seem like there were no dark clouds on the horizon.   We therefore didn’t save for a rainy day (US saving rates reached zero in 2006), and entered a series of wars to boot (Grenada, Panama, Iraq, Bosnia, Kosovo, Afghanistan, and Iraq again).

So here we stand, the problems of 1979 didn’t go away, we just hid them by consuming and borrowing, making wars and losing clout, responding to crisis much like the old Roman Empire did — refusing to confront the need for real change until too late.  In 1979 the decline could have been turned around.  President Obama claims we still can — but he has to claim that, doesn’t he?   Perhaps we can, but the price will be higher, and the pain (real pain of people out of work, earning less, losing homes, not being able to pay for college, having stresses that tear apart families — not just metaphorical pain) more intense than if only we had listened 30 years ago.

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