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Posts Tagged ‘Jimmy Carter’

Even though I recently praised him for his support of transportation deregulation, Jimmy Carter is widely considered to be a failed, one-term president.

Most people think his reelection prospects were doomed because of high inflation.

I suspect, however, that he was most hurt by falling levels of real income. And when I write “real income,” I’m referring to income after adjusting for inflation.

If you peruse the historical data from Table A-2 in the Census Bureau’s most recent report on income and poverty, you’ll notice that median household income (in 2020 dollars) dropped by nearly $2,000 between 1978 and 1980.

In other words, Carter may have survived double-digit inflation if incomes rose even faster than prices.

But that’s not what happened. Instead, we got rising prices and falling real income. This “stagflation” is probably the reason Ronald Reagan was elected, and the rest is history.

Moreover, history may be repeating itself.

Here’s a recent story from the Washington Post. I’ve excerpted the key passages, but all you really need to do is read the headline.

…the World Bank warned… Not since the 1970s — when twin oil shocks sapped growth and lifted prices, giving rise to the malady known as “stagflation” — has the global economy faced such a challenge. …“The risk from stagflation is considerable…,” said David Malpass, president of the multilateral development institution in Washington… Investors also could take a beating from a repeat of ‘70s-style stagflation. The S&P 500 stock index, already down more than 13 percent this year, could lose an additional 20 percent or more, according to a recent client note from Bank of America.

The World Bank mostly focused on the risks for the global economy.

But we are already suffering from stagflation in the United States, according to the Bureau of Labor Statistics.

Simply stated, 2021 was a terrible year for household incomes and the first half of 2022 has been even worse.

And I strongly suspect this is why Joe Biden has terrible poll numbers.

Ironically, The big uptick in inflation isn’t even Joe Biden’s fault. The Federal Reserve deserves the blame, mostly for what it did in 2020 before Biden became president.

That being said, Biden reappointed Jerome Powell, the Chairman of the Fed’s Board of Governors. By rewarding Powell’s failure, Biden is now in no position to deflect blame.

P.S. Rising prices and falling income under Jimmy Carter gave us Ronald Reagan, so bad policy indirectly led to a good outcome. As of now, it’s unclear if there’s a new version of Reagan to rescue us from today’s version of stagflation.

P.P.S. For readers who are not old enough to have experienced America’s national rejuvenation under Reagan, you can click here, here, and here to see “the Gipper” in action.

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While specific examples can be very complex, the economic analysis of regulation is, at least in theory, quite simple.

Rules and red tape impose burdens that hinder economic activity, and this leads to higher costs for businesses and consumers.

These higher costs may be justified in some cases. That’s why it’s important to have high-quality cost-benefit analysis.

But in many cases, such analysis will show that regulation doesn’t make sense.

Fortunately, some presidents have understood that too much regulation is bad for prosperity.

Consider, for instance, the excellent track record of Jimmy Carter. We’ll start with an article by Norm Singleton for RealClearMarkets.

…deregulation was a major part of Carter’s economic agenda and one of the greatest aspects of his legacy.  It’s something that Carter and Reagan had in common, not something that set them apart. Carter—and other leading progressives at the time such as Ralph Nader—understood…Regulation frequently, if not always, benefits big businesses…at the expense of small businesses and most importantly, consumers. …the Civil Aeronautics Board (CAB), set airline routes, flight, schedules, and even prices. The result was 10 airlines enjoyed a de facto government-protected 90% of the air travel market: a monopoly with extra steps. This supposedly “pro-consumer” regulatory system made flying unaffordable for many Americans. Consequently, Carter signed the Airline Deregulation Act of 1978, ending the CAB’s power to control air travel. The result was new airlines entering the market offering lower prices and expanded routes. …Carter also pushed Congress to deregulate trucking and railroads.

Here are some details on the benefits of trucking deregulation, from a study by Andrew Crain published in the Journal on Telecommunication and High Tech Law.

The ICC was given jurisdiction over trucking companies and prevented competitive entry by rarely granting new trucking permits. The development of efficient trucks should have been a great boon to shippers. …ICC regulations, however, prevented truckers from offering those benefits to consumers. Trucking companies were forced to travel set routes at set prices. …During his presidential campaign, Carter promised to pursue deregulation. …Carter was good to his word. In 1979, he appointed three deregulation proponents to the ICC, Darius B. Gaskins, Marcus Alexis and Thomas Trantum. …In July 1980, Carter signed the Motor Carrier Act, which lifted most restrictions on entry, on the goods truckers could carry, and on the routes they could travel. …Rates fell, and trucking companies multiplied.

Jeremy Lott discusses Carter’s achievement on rail deregulation in a piece for the Washington Examiner.

The same regulatory regime had been in place since the Interstate Commerce Act of 1887, which regulated railroads…with price controls and mandates…. The elected official who took the lead on changing things is the person for whom the Staggers Act is named, Democratic Rep. Harley Staggers of West Virginia, then the chairman of the House Interstate and Foreign Commerce Committee. “The good thing about the Staggers Act is that it eliminated or greatly reduced federal regulation over most railroad operations that had been slowly killing the industry over decades. Freight railroads on life support were freed from rigid price controls and service mandates and quickly began to rebound, became profitable again, and U.S. freight railroads are once again the top-performing freight rail system in the world,” Marc Scribner…told the Washington Examiner. …”Over the past 40 years, rail traffic has doubled … rail rates are down more than 40% when adjusted for inflation … and recent years have been the safest on record,” the AAR said. 

And Ian Jefferies of the Association of American Railroads, in a column for the Wall Street Journal, explained how the industry has improved with less red tape.

…there was a time when both parties could agree on the benefit of…regulatory reform. The bipartisan Staggers Rail Act of 1980, passed by a Democratic Congress and signed by President Jimmy Carter, deregulated the freight railroad industry. …Previously, railroad rates and service were set by government, and carriers were often forced to provide service on lines lacking commercial viability. …The impact on railroads was predictable and disastrous. At one point, 1 in 5 rail miles was serviced by bankrupt railroads. …deregulation was chosen over nationalization, which would have cost taxpayers billions of dollars. …the Staggers Act not only improved service along the mainline network; it helped give birth to a short-line rail industry that today operates 50,000 miles of the 140,000-mile network that spans across the United States. …Since 1980, freight railroads have poured more than $710 billion of their own funds back into their operations. Average rail rates are 43% lower today than in 1981 when adjusted for inflation. This translates into at least $10 billion in annual savings for U.S. consumers.

Michael Derchin’s column in the Wall Street Journal notes how a retiring Supreme Court Justice played a key role in deregulating air travel.

Justice Breyer, who joined the Supreme Court in 1994 and plans to retire this summer, has cited his research for the Airline Deregulation Act as among his best and most significant work. …The late Sen. Edward M. Kennedy reached out to Mr. Breyer in 1975. Kennedy…saw deregulation as key to increasing competition and making air travel more affordable. Mr. Breyer, then a professor at Harvard Law School, worked with Kennedy… The Airline Deregulation Act of 1978 passed with bipartisan support and created a free market in the commercial airline industry. Government control of fares, routes and market entry for airlines was removed, and the Civil Aeronautics Board’s regulatory powers were phased out. …Since deregulation, average domestic round-trip real airfares have plunged about 60%, to $302 from $695. Load factors—the percentage of seats filled on each flight—stood at 84% just before the pandemic, compared with 55% before deregulation. In the early 1970s, 49% of U.S. adults had flown. In 2020 the share was 87%.

Here’s a chart showing how consumers have been big winners.

So what’s the bottom line?

As Phil Gramm and Mike Solon explained last year in the Wall Street Journal, the United States is still enjoying the fruits of Jimmy Carter’s deregulatory achievements.

Far from hurting consumers, as progressive myth alleges, deregulation of the U.S. transportation system unleashed a wave of invention and innovation that reduced logistical transportation cost—the cost of moving goods as a percentage of gross domestic product—by an astonishing 50% over 40 years. Airline fares were cut in half on a per mile basis, while air cargo surged from 5.4% of all shipments to 14.5% by 2012… In this Carter-Kennedy led reform, the duty of government was to protect the consumer from harm, not to protect the producer from competition. Without the productive energy released by deregulating airlines, trucking, railroads…, the U.S. might not have found its competitive legs as its postwar dominance in manufacturing ended in the late 1970s. The benefits of deregulation to this day continue to make possible powerful innovations that remake the world.

That’s the good news.

The bad news is that Joe Biden is hardly another Jimmy Carter.

P.S. Daniel Bier, in a column for the Foundation for Economic Education, points out that Carter even deserves credit for deregulating the beer market.

Carter’s most lasting legacy is as the Great Deregulator. Carter deregulated oil, trucking, railroads, airlines, and beer. …In 1978, the USA had just 44 domestic breweries. After deregulation, creativity and innovation flourished in the above-ground economy. Today, there are 1,400 American breweries. And home brewing for personal consumption is also now legal.

If you want to know more about beer deregulation, click here. If you want to know who makes a lot of money from beer sales, click here.

P.P.S. Jimmy Carter didn’t have a good record on fiscal issues, but he was more frugal than almost every Republican president over the past six decades (with Reagan being the obvious exception).

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Very clever.

The person who put together this video obviously had a lot of time on his hands, but he also deserves praise for coming up with something that is both amusing and eerily disturbing.

I came of age during the Carter years, and this video accurately captures the moralizing and hectoring tone of Carter’s speeches – and Obama’s speeches.

But watch at your own risk. If you have nightmares about the 1970s, don’t blame me.

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National Review captures a key difference between Reagan and Obama, writing that Reagan was willing to incur short-run political pain to make America healthier and stronger.  Obama, by contrast, has pursued the free-lunch Keynesian approach. Only time will tell whether Obama becomes another Jimmy Carter, but he certainly isn’t doing himself any favors by continuously pushing to expand the burden of government.

Both men faced seemingly intractable economic problems with no easy solution, but Reagan understood that curing the nation’s debilitating inflation was going to involve a good deal of short-term economic pain and political unpopularity, and he was prepared to endure that. By contrast, Obama has done everything in his power to avoid painful corrections — at great cost to future taxpayers.  It is increasingly evident that his policies have merely put off these corrections or dragged them out, and that we have not avoided them at all. Reagan’s willingness to accept painful and unpopular but necessary economic adjustments — and Obama’s lack of the same fortitude — is the essence of what separates the two men. …The blowback that resulted from Volcker’s decision to put the economy into a coma was swift and severe. The sharp recession that ensued once Volcker started shrinking the money supply prompted Democrats and Republicans alike to introduce legislation to rein in the Fed. But Reagan refused to back any such action or even criticize Volcker in public. In private, Reagan was candid about what needed to be done, according to the late Bob Novak’s reporting on the subject: “I’m afraid this country is just going to have to suffer two, three years of hard times to pay for the [inflationary] binge we’ve been on,” Reagan said. It is impossible to imagine Obama speaking such unpopular truths in public or in private after having so often expressed the opinion that a massive debt-fueled government-spending program would create millions of jobs and reconstruct an economy torn asunder by years of binging on debt. …his unpopular moves laid the groundwork for three decades of unprecedented economic expansion. So far, we have seen no evidence that Obama’s unpopular policies will pay those kinds of dividends. Like Reagan, Obama inherited an economy with structural problems requiring painful adjustments. Unlike Reagan, he has tried to put off those adjustments or cover them up with feel-good stimulus programs. Reaganomics worked. Obamanomics? Let’s just say it will be interesting to see how much longer those trend lines overlap.

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