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LETTER TO THE EDITOR: Inflation And Elections

Inflation And Elections

Dear editor:

The late economist John Kenneth Galbraith once lamented that he didn’t realize the president of the United States was responsible for price stability. Joe Biden now knows what Professor Galbraith was talking about.

For the first time since 1980 inflation will play a significant role in determining who will be sworn in as president on the Capital steps on January 20, 2025.

In 1976 Jimmy Carter popularized a metric called the “Misery Index”. It consisted of adding the inflation rate and the unemployment rate together to gauge the relative strength of the US economy. It would come back to haunt Carter in 1980 as the economy had gone from bad to worse.

The 1970s was a decade characterized by high inflation rates and stagnant productivity gains. By 1968 the “guns and butter” economy of LBJ’s Great Society began to see significant inflation creeping into the economy although underlying growth remained strong.

Richard Nixon narrowly defeated Hubert Humphrey in 1968 and to the surprise of many, Nixon put his imprimatur on many of the Great Society programs Republicans so reviled and thought inflationary. Medicare was here to stay.

As inflation picked up in 1971, President Nixon imposed wage and price controls on the economy. Hardly consistent with the free-market principles so revered in Republican circles. “We are all Keynesians now” or something like that was the law of the land according to Milton Friedman, Nixon’s right-hand man on all things economic.

The OPEC oil embargo of 1973 took a huge toll on the US economy and inflation ran into the double digits. The inflation rate was 8.7% in 1973. 12.3% in 1974.

By 1975 the inflation rate had cooled to 6.9% but what was troubling was the fact 1974 and 1975 were recession years and economists were puzzled by what seemed to be contradictory economic circumstances. They called it “stagflation”.

By 1976 inflation had cooled to 4.9% and strong growth had returned to the US economy as President Ford sought reelection. Jobs had not returned yet to the US economy and with Watergate still looming over the political landscape and a damaging primary challenge from the Republican right in the form of Ronald Reagan, Ford couldn’t hold on. Jimmy Carter was now the president.

What role did inflation play in Ford’s defeat? Probably some. Although inflation was declining it was cumulatively very high in the years running up to the presidential election.

On a Firing Line episode taped two days after the 1976 presidential election William F. Buckley, Richard Reeves and Joseph Kraft discussed the dynamics surrounding Jimmy Carter’s narrow victory. Reeves and Kraft were liberals and were surprisingly unenthusiastic about Jimmy Carter.

They both thought the elevated inflation rate had played just a minor role in Carter’s victory. The high unemployment rate did not seem to hurt Gerald Ford all that much.

In early October of 1976 the Republicans decided to make the major issue in the election one of character and fitness to lead and Ford dramatically narrowed the gap but couldn’t get past the pardoning of Richard Nixon which badly hurt him but retrospectively seems like the right decision. Even Bob Woodward and Carl Bernstein now concede the pardon was the right move.

Joseph Kraft pointed out the in high unemployment states such as California, Michigan and New Jersy President Ford prevailed on election day.

Both Reeves and Kraft surprisingly thought the inflation issue helped Ford and didn’t hurt him. Many voters saw the Democrats as the party of big government and spending.

Despite the success of the Democrats in the 1976 presidential and congressional elections both Kraft and Reeves thought Jimmy Carter was unprepared to be president.

They voiced concerns about his relative lack of experience in foreign affairs. People may also find it interesting that George McGovern, the Democrats’ 1972 presidential nominee, supported Gerald Ford in 1976.

In 1980 inflation played a significant role in Jimmy Carter’s defeat for reelection. What causes inflation? It’s no simple matter. Joseph Stiglitz, the Nobel prize-winning economist believes much of the current inflation can be traced to breakdowns in the supply chain as a result of the pandemic.
Another person noted for his understanding of free markets postulated the following: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

That quote is from Adam Smith in the Wealth of Nations. Smith thought inflation was inherent to capitalistic systems.

Well one thing is certain. If two people show up to be sworn in as president on January 20, 2025 we’ll know that the inflation situation hasn’t been resolved. Inflation is a big problem for the Democrats.

 

Dave Pilliod

Swanton, OH

Dave Pilliod is a former Swanton Village councilman.

The post LETTER TO THE EDITOR: Inflation And Elections first appeared on The Village Reporter.


Source: The Village Reporter

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