A swing of just under 12,000 votes in Delaware and Ohio and Gerald Ford would have beaten Jimmy Carter in 1976. Could Ford have done a better job dealing with the economy than President Carter? It may not seem like it would have been such a tall order, given that the Carter years were plagued by terrible stagflation. (The "misery index"–the unemployment rate plus the inflation rate–averaged a horrific 16.3 under Carter.)
But I'm not sure Ford would have been much of an improvement. He would have been dealt the same unlucky economic hand as Carter, primarily rising inflation caused by runaway spending in the 1960s and a feckless Federal Reserve response in the 1970s. Then there were a pair of OPEC oil shocks. Then add in a high-tax, high-regulation economy and you have a recipe for disaster.
Neither Carter nor Ford fully grasped the enormity of the economic challenges facing America, and neither anticipated the radical shift in economic policy needed to meet them. Carter's initial approach was to reduce inflation by attempting to balance the budget and by boosting employment through a skimpy $50 tax rebate. (He also assumed oil prices would eventually head lower after the 1973 oil shock, not expecting a second in 1979.)
But the Democrat-controlled Congress had other ideas, and Carter eventually signed off on a public works and urban spending "economic stimulus" program that led to bigger deficits. Later, Carter established a program of voluntary wage and price controls. But the misery index stayed high.
It's unlikely, of course, that President Ford would have done any better with Congress, and his policy proposals–had they been passed in some diluted form–would most likely have achieved little. The 1976 Republican platform contained a perfunctory call for "an end to deficit spending" and advocated a variety of tax code tweaks. Nothing particularly sweeping. No call for reducing the confiscatory 70 percent top marginal tax rate or for unleashing massive economic deregulation. And certainly no call for a tougher Fed to squeeze inflationary pressures and expectations out of the system.
"My guess is that the Federal Reserve did not as of the mid-1970s have a mandate to do whatever turned out to be necessary to curb inflation," Brad DeLong, an economist at the University of California-Berkeley, has written.
Indeed, DeLong guesses that Ford would have reappointed Fed Chairman Arthur Burns in 1978. Carter appointed Paul Volcker as Fed chairman in 1979 after G. William Miller, selected by Carter in 1978, resigned to become Treasury secretary. Volcker certainly felt he had a mandate to kill inflation. His policies are widely credited as a prime factor in dramatically bringing down price levels.
One could speculate, though, that Ford would have been in favor of the 1978 capital-gains tax cut. (Carter opposed the cut on "fairness" grounds and reluctantly signed it into law.) Ford advocated "liberalizing" capital-gains rules in his famous 1974 "Whip Inflation Now" speech, and the '76 GOP platform called for ending the double taxation of dividends. And while Carter is given credit for deregulating the nation's airlines, it was a plan whose seeds were sown during the Ford administration.
But those moves, while arguably necessary, were hardly sufficient, and it's hard to imagine how voters in 1980 could possibly have thought a full Ford term would have made them financially better off than they had been four years earlier.
Please send all questions and comments to jpethokoukis@usnews.com.
Reader Comments Read all comments (2)
Jim Jacobson of WI 12:49PM April 10, 2012
Jim of WI 8:48PM March 20, 2012