Trending
Written by: Eugene Steuerle
Jimmy Carter’s death has led to much commentary offering a positive revision to popular but negative histories of the man and his presidency, not just his humanitarian efforts as an ex-president. I suggest the historical perspective on his presidency has been particularly confused by two items given too little attention.
First, his efforts to do right and willingness to take losses often increased expected societal returns, though not political returns to him. Second, he served in the transition from a three-decade period of extraordinary domestic spending increases and tax cuts that appeared almost “free”—what the French, in their turn, called Les Trente Glorieuses. Democrats, Republicans, and political parties in nearly all developed democracies have anguished ever since about budgetary pressure to recognize the costs, not just benefits, of their giveaway actions.
Yes, I know wanting to do good doesn’t mean that one necessarily achieves good, and Carter gets criticized heavily for his righteousness, failed legislative efforts, and blame for two crises over which he had limited control: energy and the taking of hostages in the Iranian embassy. But on average, trying to do good for the public helps create better policies. Compare that approach with policy efforts built mainly around “alternative facts,” winning the next election, and making sound bites that sound good.
Carter’s attitude led him to make calculated gambles from which most politicians run. In politics, a high expected positive return can lead to a negative one on which the press (and, today, social media) will pounce. Yet Carter took these gambles like a savvy investor would buy individual stocks, some of which would later fail. I suggest that his average return was pretty high.
Many others have noted these successes so that I will be brief here. His Camp David Accord brought now close to a half-century of peace between Israel and its most powerful neighbor, Egypt. He enacted the last major civil service reform, created the Education and Energy Departments, and initiated efforts to expand solar power. Carter, not Reagan, also led efforts to curtail excessive regulation, build up the military to compete with the Soviets, and end inflation. Paul Volcker informed Carter that, if appointed, his efforts to combat high inflation would increase interest rates and lead to an economic slowdown that would adversely affect Carter’s chances for reelection. Carter appointed him anyway.
I sometimes consider the Ford/Carter years together because 1974 marked a huge transition in modern U.S. fiscal history. That year, Watergate and President Nixon's resignation also saw the U.S. debt-to-GDP ratio hit its all-time low after World War II.
Consider the postwar period up to 1974 or soon afterward, which the historian Elliot Brownlee and I have defined as the Era of Easy Finance. Giveaways were numerous and big, but the debt-to-GDP ratio kept falling. During that time, almost all budget legislation involved domestic spending increases and tax cuts, yet the nation’s debt continued falling relative to its income. These giveaways weren’t free but essentially were paid for through such factors as a significant decline in the share of national income spent on defense and inflation-induced bracket creep in the income tax. If Congress had not enacted new tax cuts, bracket creep would have significantly added to average tax rates. Reagan’s tax cuts in 1981 provided demonstrable proof that the era of easy giveaways had ended.
Politicians find it much more pleasant to give away money than to take it away, to spend more rather than tax more. Presidents Ford and Carter were presidents who came along at a time when politicians could no longer legislatively give away money so easily without detrimental fiscal consequences.
Ford and Carter were both fiscal conservatives. Yes, they enacted tax cuts of about $20 billion annually in 1975, 1976, and 1978, but remember that high inflation was simultaneously increasing tax rates.
Both sitting presidents would then face significant challenges in the primaries: Ford in 1976 by Reagan, who effectively promised that tax cuts would pay for themselves; and Carter in 1980 by Senator Edward Kennedy, who, after effectively defeating Carter’s proposed expansion in health coverage, claimed that Carter wasn’t liberal enough. Reagan and Kennedy essentially promised what was impossible: a return to the pre-1974 world. The criticism of Carter as unable to deal with Congress broadly needs to be shared or reversed: Congress couldn’t deal with Carter and the new fiscal reality.
Fast forward to today, when our fiscal situation remains out of whack. Neither political party has figured out how to adapt to a world where domestic giveaways no longer appear free. At four percent of GDP today, defense isn’t going to decline by another ten percentage points of GDP, as it did after 1953, and no one seems to favor higher tax increases through bracket creep or any other means other than on the rich. Meanwhile, so many giveaways have already been built into the budget through automatic increases in entitlements and tax subsidies that even a modest deficit reduction wouldn’t be enough to stop the growth in our debt relative to GDP.
Success in controlling our budget likely requires a president willing to address our fiscal profligacy the way Jimmy Carter addressed our monetary profligacy. If he fails, he will be attacked as naïve, and if he succeeds, he likely will lose the next election.
Doing right and facing the facts can be politically costly, but nothing could be more necessary now.
Related: Kings and Their Retinue