[MUSIC PLAYING]
Well hello, and
welcome everybody
to another of our Rhodes events.
Trying to pack in as many as
possible before they dismantle
this building and shuttle it
across the road into new digs.
And when you're putting
together a list at short notice,
because I was only appointed
in July, you have to say, OK,
how do you have some impact
events that people might
actually want to --
You're trying to
signal to the community
not just the usual
suspects, et cetera.
And this is one of the people
who immediately sprung to mind.
Rick Perlstein is probably
my favorite historian.
I have to say that.
And one book in
particular, which is
called The Invisible
Bridge, which
has this amazing,
incredible book which
takes Reagan as this
figure who was incredible,
as I say, long and wrong
for his time in the 60s.
And then he walks you through
the 1970s, and the politics
and turmoil of that decade,
and then every now and again
you go back to Reagan
as a kind of figure.
And then he's slightly
less out of time.
And then by the time you get
to the end of the decade,
it's almost as if the whole
world has swung to him.
He hasn't changed at all.
Thus the invisible bridge.
So I wanted to know
what happened next,
so I wrote to Rick
and said, you want
to come up and give a talk?
And he said, yeah,
because I'm actually
working on the kind
of prequel and then
what happens afterwards.
Because at the same time
that Reagan was ascendant,
there was this guy Jimmy Carter.
And what we forget at
the time was that Carter
was fantastically popular,
united the Democratic Party,
wasn't tainted by Watergate.
There was a whole politics
there for the Democratic Party
to really be reborn
and become powerful.
And they completely blew it.
And you know anybody
who's spent time--
and I've been here
nearly 30 years--
I mean the refrain is
the Democrats never miss
an opportunity to
miss an opportunity.
So I'm interested in the
original story as to how
they missed an opportunity.
And I think that's what we're
going to get some of now.
As is normal, what we'll do
is rick will talk for a while.
Then we will chat for a while.
And then we'll bring
everybody else in
and we'll go from there.
Thank you.
Well Mark, maybe
we'll discover that
what your noble countrymen
Winston Churchill said
about the United States will
be true about the Democratic
Party, which is that they always
do the right thing once they
exhaust every other opportunity.
Once every single opportunity,
other opportunities
being exhausted, they
will do the right thing.
So we'll see.
After you.
I'm going to give
a presentation.
I'm going to read, and a lot
of this is based on, yes,
the book I'm working on
now, which is going to cover
the years from 1976 to 1980.
And it's going to be
called Reaganland,
and of course, that
ends with Ronald Reagan
being elected president.
And not incidentally,
Jimmy Carter
being un-elected president.
So in May of 1979, the
chairman of Jimmy Carter's
brand-new presidential
reelection committee
gave a speech in
which he said, we
haven't done one thing in
this administration that
has gotten us votes.
He was bragging.
From the beginning, Jimmy
Carter's political calling card
had always been his
promise, as he put it
in a famous speech he would
deliver six weeks later on what
he called America "the American
people's crisis of confidence,"
that he would deliver honest
answers, not easy answers.
The soul of Carter's
dour truth telling
was that after decades
of American abundance,
the American people now
had to make do with less
from their government.
He was hardly the first
Democrat to say so.
There was Senator William
Proxmire of Wisconsin,
chairman of the Congressional
Joint Economic Committee
and a former investment
banker, who a 1972 New Republic
profile marveled "seemed
to invite a taxpayer revolt
against government itself."
There were the Watergate babies
swept into office in 1974,
many of them representing
traditionally
Republican suburbs, whose
leader, Gary Hart, flayed,
quote, "Eleanor
Roosevelt Democrats
who cling to the Roosevelt
model long after it
ceased to relate to reality."
There was Michael
Dukakis, who was
elevated to the Massachusetts
State House in 1979.
The UPI analyzed his
successful campaign,
"The Democrats were
the conservatives.
Michael S. Dukakis of the New
Deal and Great Society Party
said he was going to run
the state like a bank."
There was Governor Jerry
Brown of California,
the only candidate to beat Jimmy
Carter in a Democratic primary
in 1976.
In December, CBS
News ran an expose
on a series of accidental
deaths in California's
decrepit mental hospitals.
Doctors blamed not just
Ronald Reagan's budget cuts--
he had been the previous
governor-- but Jerry Brown's.
Here was how Brown
answered his critics.
And I queued up a
little video that I took
at the Vanderbilt news archive.
So Luke, you can run
that first video.
No, no.
No, not that one.
The one where
that's from Google.
[VIDEO PLAYBACK]
- [INAUDIBLE] just
three months ago.
Society does have limits.
Whether it be schools or
highways or mental hospitals,
there is a limit.
Can you put the volume up?
- Are we going to invest
massive sums of money in--
OK, go back to the start
and have the volume.
That's great.
Go back.
- --my job to [INAUDIBLE]
those hard choices.
And I tell you.
417.
478.
- [INAUDIBLE] common sense.
And every group
wants a little more.
And it's my job--
--three months ago.
Society does have limits.
Remember, people dying
in mental hospitals.
- --highways and
mental hospitals.
There is a limit.
And I have elected to
invest massive sums of money
when ordinary citizens
are finding it very
hard to meet their own goals.
And it's my job to try to
make those hard choices.
And I try to be
compassionate, but also
to have a certain
amount of common sense.
And every group
wants a little more.
And it's my job to give
them a little less.
[END VIDEO PLAYBACK]
Thanks.
When Bill Clinton declared in
his 1996 State of the Union
address that "the era of
big government is over,"
it was treated as
some fresh new thing.
It was actually a
stale old thing.
People have forgotten the
presidency of Jimmy Carter,
for instance, who had declared
in his 1978 State of the Union,
"Government cannot
solve our problems.
It can't set our goals.
It cannot define our vision.
Government cannot
eliminate poverty,
or provide a bountiful
economy, or reduce inflation,
or save our cities, or cure
illiteracy, or provide energy."
In 1976, he had campaigned on
turning welfare into workfare,
slashing government bureaucracy,
and almost obsessively
on balancing the budget.
He said to a
historian, "I wish you
could have seen the stricken
expressions on the faces
of those Democratic
leaders when I talked
about balancing the budget.
That wasn't the kind of
thing a Democratic president
was supposed to do."
"When it came to economics,"
he said, "all they knew about
was stimulus and Great
Society programs."
His first announced appointment
was a conservative Georgia
banker as director of Office
of Management and Budget.
Because he inherited a
slowing GDP growth and a 7.8%
unemployment rate his
economists begged him
to propose a stimulus package.
Reluctantly, he put
forward one $31.2 billion,
anchored by a $50 one-time
rebate for all taxpayers.
By comparison, in
inflation-adjusted dollars,
Barack Obama's 2009 stimulus
was about 10 times that.
Then, at the slightest
sign of an economic uptick,
Carter withdrew the plan.
His next fiscal
move was announcing
a hit list of 80
public works projects
he wished to see canceled.
One of them was the massive
central Arizona Project.
Congressman Morris
Udall of Arizona
said that without it,
Tucson and Phoenix are
going to dry up and blow away.
In between, Carter delivered
his first famous fireside
chat, in which he donned
a mustard-colored cardigan
sweater, preempted
Charlie's Angels,
and addressed a problem that
the American people did not even
know was a problem.
He began by observing
that a home heating oil
shortage in the Northeast
during a record cold winter
wasn't an anomaly but a symptom
of a dangerous new structural
problem.
Then he said-- and if you
could show the Jimmy Carter
video at 4:14
[VIDEO PLAYBACK]
- Let us face the fact that the
energy shortage is [INAUDIBLE]..
There is no way we
can solve it quickly,
but if we all cooperate
and make more sacrifices,
if we learn to live
thriftily remember
the importance of
helping our neighbors,
then we can find ways
to adjust and to make
our society more efficient
and our own lives more
enjoyable and productive.
Utility companies must
promote conservation and not
consumption.
All the natural gas companies
must be honest with all of us
about their reserves
and profits.
We will find out the difference
between real shortages
and artificial ones.
We ask private
companies to sacrifice,
just as private
citizens must do.
All of us must look--
[END PLAYBACK]
He says-- you can stop.
I'll say what he says.
He says everyone has to
turn their thermostats down
to 65 degrees, 55
degrees at night,
which he later made
a federal order.
So this part of Carter's
austerity instincts,
as we know, was prophetic.
Until 1973, except
during World War II,
there really was no
conception of energy
as something susceptible
to shortages.
In the 1960s,
government officials
predicted domestic fuel
reserves were quote,
"adequate to satisfy
expected requirements
for the remainder of the century
at costs near present levels."
Then of course, in
the fall of 1973,
when the Arab members of the
Organization of the Petroleum
Exporting Countries began
embargoing oil to the US
to punish America's support
of Israel, for months,
gas lines stretched for
hours and for blocks.
Then, almost before it
began, the crisis was over.
In fact, between then and
Carter's fireside chat,
the price of petroleum fell.
Americans, including
many senators,
decided the shortage had been
a temporary inconvenience
staged by greedy oil companies.
They had to wait until 1979
and the Iranian revolution
to learn how vulnerable
America's energy supply truly
was.
But the on thing, the 1977
response, that conspiracy
theory, attested to
was the difficulty
a society built
upon the expectation
of eternal abundance had
with wrapping its mind
around the concept of scarcity.
It is not too much to say
that Jimmy Carter considered
his most important
project as president
to teach the American people
the imperative of doing so.
When it came to energy,
this inclination was noble,
but Carter, also with an
equally urgent passion,
preached governmental
scarcity, and this was tragic.
As this guy demonstrated
in Austerity:
The History of a
Dangerous Idea, the notion
that government can make
nations more prosperous
by spending less on public
goods has never worked.
And in Jimmy
Carter's case, I will
argue it profoundly contributed
to the long-term diminishment
of the political prospects
of his own Democratic Party.
One of the promises in the party
platform Jimmy Carter ran on
was the passage of the
Full Employment Bill,
introduced in 1974 by Senator
Hubert Humphrey of Minnesota,
and Representaive Augustus
Hawkins of South Central Los
Angeles.
Carter accepted this
with greatest reluctance
as the price he
had to pay to win
the loyalty of party liberals.
If passed in its original
form Humphrey-Hawkins
would have installed a form
of Democratic socialism
within the bosom of
the American state.
It would have required
the Federal Reserve
to use monetary policy to
produce an unemployment
rate of 3% or less within 18
months at prevailing wages.
Should the Fed fail, the law
required the federal government
to directly provide
citizens jobs
and give citizens the power
to sue the federal government
for failing to do so.
Prospects for
congressional passage
looked good in 1975, when
the unemployment rate was 9%
and the Democrats welcomed the
prospect of making President
Ford look like a grinch
going into an election year
if he vetoed it.
Then, in the spring of 1976,
with unemployment steadily
trending downward, what
business we called a who's who
of liberal economists
weighed in to call the plan
a recipe for inflation.
Legislative progress stalled.
The version the house
reconsidered in 1978
was severely watered down.
It's requirement of
public jobs became
a mere goal of working towards
4% unemployment, not 3%.
But in five years, you said 18
months, by relying in quote,
"primarily on
private enterprise".
Some predicted Carter
might veto even that.
Inflation was now the
administration's obsession.
By spring of 1978, it was 6.8%.
It was accompanied by
a stubbornly high 6.4
unemployment rate.
The dreaded
combination previously
believed impossible among
Keynesian economists
known as stagflation.
What had caused this?
How could policymakers solve it?
Even now economists
debating the question
are no closer to a consensus
than they were then.
I'll list some explanations,
saving one for later.
One, most agree it had something
to do with Lyndon Johnson's
refusal to raise taxes to
pay for the Vietnam War
while simultaneously increasing
spending for his Great Society.
Two Richard Nixon played
a role in August of 1971,
facing a stubborn recession and
an upcoming re-election fight.
He ordered a radical
package of economic reforms
that included a 90 day freeze
on wages and prices, which
he extended for three years.
When wage and price
controls finally ceased,
prices gushed forth like water
held back by a failed dam.
OPEC was crucial.
The price of a barrel of crude
actually declined in real
dollars between 1950 and
1973 when it was $3.60.
Now it was $25.10.
America's first trade imbalance
since the 19th century
might have contributed, but
in complicated ways not well
understood.
So did the increased
international currency
speculation that followed
Nixon taking America
off the gold standard.
So did declining
productivity, but whether this
was a cause or
effect of inflation
was not understood
and remains a mystery.
The coming of age of the
children of the post-war baby
boom might have thrown some
sort of previous equilibrium out
of whack.
And it also seems
intuitive to me
that the explosion of
consumer debt contributed.
Between 1944 1976 while
the US population grew 44%,
credit card debt
increased 1,300%.
One in five consumers never
paid off their balance in full.
It surely became
easier for producers
to raise prices when people
could charge things now and not
pay for them later.
And finally, wages were being
bid up by a tight labor market.
In conclusion, the great
inflation of the 1970s
was bafflingly complicated.
What's more, it would have
defied easy policy solution,
even if economists had
been able to figure it out
because none of
these developments
were bells that
could be un-rung.
You couldn't un-baby
boom the baby boom.
There was, however,
another explanation
for what caused the
great inflation.
It was the conservative, or
if you prefer, neoliberal one.
When conservatives
cited it, they
didn't call it a
contributing factor.
They said it was the only
cost inflation everywhere
and at all times.
It was simple, inflation
was caused by governments
spending too much.
And this was easy to
un-ring, just take away
government's credit card.
Consider the words of the
most eloquent spokesmen
for this theory,
the former governor
of California then
preparing to run
for the presidency in 1980--
as Ronald Reagan put it
in a 1976 radio commentary
praising Milton Friedman
for his new Nobel Prize,
inflation occurs when the growth
of the nation's money supply
outstrips the growth and
the nation's productivity.
The federal government controls
the nation's money supply
and is therefore the
primary source of inflation.
In truth, inflation
is simply another tax
imposed by Washington in
the name of easy money.
Washington taxed the
citizenry with easy money
in order to buy short
term votes via goodies
paid for from an artificially
inflated federal treasury.
What Reagan called, quote,
"the direct responsibility
of a spendthrift
democratic controlled
Congress that has been
unwilling to discipline itself
to live within our means.
There hasn't been a day
in the last two decades
when they couldn't have curbed
the spending and the inflation.
And in so doing,
reduce unemployment
if they wanted to."
Now here is the important
turn for our argument.
Jimmy Carter agreed.
Whenever he made a public
statement about inflation
he attributed its causes to
excessive government spending.
What's more, you will
search Carter's statements
high and low for reflection
about the painful long term
political consequences
of this conviction.
Prior to the age of
stagflation, the glory
of Keynesianism
for the Democrats
was that public
spending that it called
for to guard against downturns
in the economic cycle
had the political virtue of
making the Democratic Party be
the bestower of gifts
voted from the public purse
to a grateful citizenry.
Gifts like dams.
As anguished conservatives
complained every time
they lost an election,
nobody shoots Santa Claus.
But Jimmy Carter relished
shooting Santa Claus.
And by the 1978 campaign
season, as the inflation rate
approached 9%, the consequences
for the Democratic coalition
were becoming
everywhere apparent.
As again and again,
Carter stepped
on the toes of candidates
who weren't reading
from the austerity script.
At one stop, he campaigned
for North Carolina's
populist insurance
Commissioner, John Ingram,
whom Democrats had chosen to
run against senator Jesse Helms.
Ingram had won the nomination
in a extraordinary upset
against a conservative banker
who had been J.F.K's Commerce
Secretary.
Ingram campaigned for the
nomination as Santa Claus,
almost literally.
He handed out gold
colored campaign tokens
and promised if you
elect me as your senator,
this will be money
in your pocket.
The banker he ran against,
his name was Luther Hodges,
countered that his
business expertise
would help fight inflation
by persuading the government
to spend less.
In choosing Ingram,
in other words,
the democratic voters
of North Carolina
had issued the most
stinging possible rebuke
to the new fashionable
politics of austerity.
In the general election,
campaign against Helms, Ingram
naturally uttered not a word
against excessive government
spending.
Jimmy Carter then
landed in North Carolina
late in September and told the
attendees at a Ingram campaign
event that they had
to vote Democrat
to quote, "get the government's
nose out of the people's
business."
He immediately
returned to Washington
and vetoed a $2.4 billion public
works bill, observing, quote,
"there are no
problems more serious
in our country than inflation."
The 300 word veto statement used
the word inflation six times.
By then the
Humphrey-Hawkins bill
had been loaded up in the Senate
with so many weaking amendments
written by an aggressive young
first term Republican senator
that it became nicknamed the
Humphrey-Hawkins Hatch bill.
Know that guy, Orrin Hatch?
Still, Carter wanted to
veto it as inflationary.
His chief policy advisor
Stuart Eisenstadt
persuaded him to
sign it by insisting
it was quote, "one
of the few bills
we have in which we
are clearly aligned
with our major
constituencies labor
and the minority community."
Ted Kennedy still intended to
support Carter for re-election.
Some of you may know that he
eventually ran against Carter.
But he wrote in his memoir,
"my commitments buckled a bit
in the fall of 1978 when
some friends of mine
inside the administration leaked
to me some portion of Carter's
proposed budget requests.
It was clear than the name
of harnessing inflation,
the President intended to
starve some important domestic
programs that mattered
a great deal to me."
That was around the
time the White House
brought in a group
of black legislators
to discuss turning out black
voters for the election.
Representatives John
Conyers and Ron Dellums
got into a shouting
match with Walter Mondale
over the administration's
prioritizing of inflation
over the crisis of black
unemployment, which
was running at 20%.
The following weekend the
Congressional Black Caucus
held a banquet
that was so big it
had to be spread over
the ballrooms of two
separate hotels joined
by closed circuit TV.
Carter covered his
back by pointing
to the button on his
jacket reading justice
through jobs pass
Humphrey-Hawkins.
He brought down the house with
a rollicking call and response
speech.
Then however, came
a presentation
by the esteemed political
economists Steveland Morris.
You probably know him better by
his stage name, Stevie Wonder.
He gave the post
a banquet concert.
He started noodling
on his electric piano
and talking about what the
Humphrey-Hawkins bill started
out as, what it looked like
now, and Carter's claim that it
remained a strong jobs bill.
He concluded his little
speech, "I call bullshit."
He brought down the house.
A few weeks later,
the 95th Congress
adjourned with about a
two-to-one democratic majority.
This is how the Washington Post
described its accomplishments.
An overwhelmingly
democratic Congress
had increased social
security taxes.
It had willingly voted large
increases in defense spending
but shied away from expensive
debt domestic initiatives
and concentrated on cutting
the federal budget deficit.
It passed the tax reform
that included $3.5 billion
in corporate tax
cuts, a $2.1 billion
in cut and tax
capital gains taxes,
socked it to lower income
taxpayers by eliminating
the deductibility of
state and local taxes,
and blended in a series of
narrow interest amendments
that would benefit specific
countries and industries,
including a provision
of granting a tax
break to the heirs of
the Gallo wine estate.
It gave oil companies a natural
gas price for their regulation
bill they fought
unsuccessfully for for 25 years
and rejected virtually
every proposal put forward
by organized labor.
All in all, the post concluded
the American business class
clearly displaced the agenda
of social and economic issues
that has dominated congressional
politics since the inauguration
of the New Deal 45 years ago.
Carter then signed
their tax bill,
which let a millionaire
who lived off investments
to pay a lower tax rate than
a salaried worker earning
a medium income and gave
the upper half of taxpayers
79% of its benefits.
He returned to the
road to campaign
for democratic candidates.
One of his stops
was Minnesota where
it enraged him to learn
that some Democrats were
reluctant to campaign
for the winner
of the primary for the late
Hubert Humphrey's seat.
He was a businessman
named Donald short.
His main campaign
promises to work
for an immediate 50% across
the board income tax cut,
in contrast to the
Republicans Kemp-Roth tax
cut, which would only cut
taxes 30% over three years.
Carter then wrote in his diary,
"this is one group of Democrats
with whom I feel uncomfortable.
They have a commitment to
political suicide in order
to prove some far left
philosophical point.
It is really disgusting."
He returned home and
delivered on television
what he called a frank
talk with you tonight
about our most serious
domestic problem.
That was inflation, which
was now running at 8.9%.
Here's how he promised
he would fight it.
He would, quote, "redouble our
efforts to put competition back
into the free enterprise
system by cutting away
the regulatory thicket
that has grown up around us
and is giving our free
enterprise system a chance
to grow up in its first place."
I must have gotten that wrong.
He would slash federal hiring.
He said, "I don't have all
the answers, nobody does."
But part of the
answer he said was
that Americans would have
to make do with less.
He said he would, quote,
"oppose any further reductions
in federal income taxes."
He implored all
employers in the country
to limit total wage increases
to a maximum of 7% per year.
He promised to redouble our
efforts to put competition back
into the American--
the regulatory thicket.
He concluded by insisting
whether our efforts are
successful will finally
depend on you as much as me.
Reducing the
deficit will require
difficult and
unpleasant decisions.
We must face a time
of national austerity.
Hard choices are necessary if
we want to avoid consequences
that are even worse.
The 1978 off year elections
that followed two weeks later--
Carter, he's vetoing
public works.
He's saying, I'm not going
to give you a tax cut.
He's saying, the Democrat
party can't give you anything,
vote for us.
We're the best yet for
movement conservatives.
In his first newspaper
column after the voting,
Ronald Reagan gave a
shrewd analysis as to why.
Quote, "for democratic
politicians long used
to harvesting
votes by dispensing
nearly unlimited amounts
of middle class tax dollars
the new reality is going
to be hard to get used to.
No one has yet
explained satisfactorily
how a politician can be a
fiscal conservative and liberal
about paternalistic social
programs at the same time.
No wonder there were some
sweaty democratic [INAUDIBLE]
the other night."
A Democrat-- oh, Watergate
baby, by the way--
Tom Foley of Washington
said much the same thing
a few months later.
Tight budgets strain
all the natural fault
lines of the Democratic Party.
The pressure will
intensify as we approach
the presidential election
year and each group
starts pressing its claims.
Note something about
that formulation,
it takes for granted
that Democrats
who endorse traditional
Keynesian spending
were not serving the
public interest in broader
national prosperity.
They were following an outmoded
political habit frustrated
by the fact that the pie that
they were used to dividing
was shrinking.
Now as you may know,
this was the period
when conservatives devised
the fiscally dubious,
but politically
brilliant strategy that
liberated the Republican Party
from the albatross of austerity
politics, the scam known
as supply side economics.
In brief, the claim
was that slashing
individual and corporate
taxes across the board
would spur such
dynamism in the economy
that like a miracle of
the loaves and fishes,
revenues to the federal treasury
would actually increase,
so voters would never
have to miss out
on any of the goodies
originally bestowed
upon them by Democrats.
In 1976, the Wall Street
Journal writer Jude Winninski
had labeled this his two
Santa clauses theory.
The first Santa Claus was the
Democrats, the one that nobody
shot, a role that they
had abandoned when they
started acting like Scrooge.
This opened the field,
Winninski argued,
for the Republicans to become
the new Santa Claus, the gift
being tax cuts.
Ronald Reagan became the
theory's biggest booster.
Would it work as economics?
Another leading supply side
advocate, Irving Kristol,
later admitted in a Wall
Street Journal article
that he had no idea.
This debate can get very--
this debate can get
very confusing at times,
as any debate on economics
is likely to be, he said.
But it is politics that is the
real issue here, not economics.
He said that both the
massive increase in defense
spending that Reagan
was calling for
and the Camp Rock
tax cut might indeed
create massive budget deficits.
But he said, quote,
"the neoconservative
is willing to leave
these problems to be
coped with by the
liberal interregnums.
He wants to shape the future and
will leave it to it's opponents
to tidy up afterwards."
Here's the story of how one
democratic candidate in 1978,
Colorado senator Floyd
Haskell who was a tax lawyer,
responded to his opponent's
advocacy of supply side
economics.
Haskell, who advocated a
balanced budget amendment
to the Constitution, compared
to his opponent representative
William Armstrong to
Pappy "Pass the Biscuits"
O'Daniel, the Texas populist
when the 1941 Senate
special election against Lyndon
Johnson promised voters $40
every Monday.
He would order the hillbilly
band he traveled with
to launch into a tune
every time someone asks
how he would pay for it.
He was kind of the basis
of that great movie
A Face in the Crowd.
A reporter pointed
out that O'Daniel
had beaten Lyndon Johnson.
Is that so, Haskell responded?
I didn't know that.
Haskell lost in
November by 20 points.
Then, as is well-known in
the summer of 1979 thanks
to a series of unlikely
accidents and events
that were almost
comical, Jimmy Carter
ended up nominating as
his Federal Reserve Chair
one of the nation's most
aggressive inflation
hawks, Paul Volcker.
That fall the Federal
Reserve Board,
swallowing doubts and acting
as William Greider narrates
in his classic volume,
Secrets of the Temple--
How the Federal Reserve
runs the Country largely out
of fear of threats from Germany
that they would withdraw
support from the dollar,
instituted a Milton Friedman
style monetary shock.
The American economy was
soon veritably drenched
in Democrat directed
fiscal prudence.
Here was the result,
inflation accelerated.
By 1980, April of
1980, it was 14.7%.
And then, after two years
of holding steady at 6%,
unemployment by July
of 1980 was 7.8%.
In the crucial swing state of
Michigan, it was well over 12%.
Then, naturally,
austerity having failed,
the cry was heard
across the land
that the only thing
that could possibly help
was more austerity.
In February, the
Washington Post thundered
that if President Carter wants
to move fast in inflation,
he only has one lever that
will make much difference.
He will have to start
cutting his, budget rapidly
and severely, not
only next year's
budget, but the current one.
The New York Times, that
ever judicious grey lady,
observed that nobody any longer
knows for sure how to slow
inflation, but that radical
budget cuts were necessary
anyway.
And that even if the economy
unexpectedly roared back
to health and produced a
surplus, it should be retained.
In March, Newsweek
exalted, however
it's achieved a balanced
budget would have
almost magical significance.
Citibank's chief economist
said the budget has raised
inflationary expectations
more than anything,
so cutting federal
spending is exactly what
we need to restore
confidence and cut
those high expectations.
That's interesting.
That language cut
high expectations.
Democrats joined the chorus.
Representative
Richard Gephardt said
when you have bank
account executives come in
and say we're getting
close to bank lines,
people get frightened.
If ever there was a
time in recent history
to balance the
budget, this is it.
What a moral hazard,
you're a banker
you just go to a
politician and say
we're going to have bank lines.
Senate majority
leader Robert Byrd
called the leaders
of both houses
together for 46
hours of negotiations
to put forward a slate
of radical budget cuts
so we can all walk
the plank together.
The next week, Carter
proposed billions
in roughly equal spending
cuts and revenue increases
and there was tax increases,
which joined the Federal
Reserve credit limits
in a coordinated attack
to intentionally spur
a mild recession.
To make a long story
short, a very ably
told by Aaron Wildavsky
and Joseph White
in their 1989 book, The Deficit
in the Public Interest--
the Search for
Responsible Budgeting
in the 1980s,
consumer borrowing,
not only stopped growing,
but turned negative.
The economy, which had
already begun to falter
fell off the cliff.
Just in time, one did need
to add, for election season.
The most famous line in Ronald
Reagan's acceptance speech
took on the Democrats--
Luke, can you get
that last clip ready--
ethic of austerity head on.
Can you the-- did I see-- do
you see any motion in there?
Yep.
OK.
[VIDEO PLAYBACK]
- They tell us they've done
the most that could humanly
be done.
They say that the United States
has had its day in the sun.
That our nation has
passed its zenith.
They expect you to
tell your children
that the American people
no longer have the will
to cope with their
problems, that the future
will be one of sacrificing
few opportunities.
My fellow citizens, I
utterly reject that view.
[APPLAUSE]
The American people--
the American people,
the most generous on earth, who
created the highest standard
of living, are not going
to accept the notion
that we can only make a
better world for others
by moving backward ourselves.
And those who believe
we can have no business
leading this nation.
[END PLAYBACK]
Cut it off.
By the way, in Jimmy
Carter's acceptance speech
he got Hubert
Humphrey's name wrong.
His middle name
was Hubert Horatio
Humphrey and Carter gaffed it.
He said Hubert
Hornblower Humphrey--
the guilty conscience
for selling him out.
So he says-- yeah, he
says the American people,
the most generous
on earth, are not
going to accept
the notion that we
can make a better
world for others
by moving backwards ourselves.
They could not
accept that, plainly.
Reagan won in a landslide.
There are lots of reasons
Jimmy Carter lost, of course.
Posterity reminds us, however,
that a big part of the story
was the loss of the so-called
Reagan Democrats in states
like Michigan.
The quarter before the
presidential election,
all of the car companies
lost hundreds and millions
of dollars.
As we know, a lot of the reason
for that was racial attitudes.
Perhaps another
contributing factor
was that they were not stupid.
Maybe they saw
that the Democrats
were shooting Santa Claus.
What were the political
consequences of that austerity?
According to the CBS New
York Times exit poll,
the three most important
issues for voters
named by 33%, 24%,
and 21% respectively
were inflation in the economy,
jobs and unemployment,
and balancing the
federal budget.
Those who named balancing the
budget as the most important
in making their decision
favored Reagan by 65% to 27%.
They believe what Ronald Reagan
also said at that convention
that Carter was the head of a
government which has utterly
refused to live
within its means.
None of a democratic
president's austerity obsession,
nor his demonstrated success
in reducing budget deficits,
had rubbed off on voters at all.
It never does.
Four years later,
Ronald Reagan won
in an even bigger
landslide, this time saying
in his acceptance speech that
he had cured an inflation that
was quote, "a deliberate
part of the Democrats'
official economic policy
needed, they said,
to maintain prosperity."
He scourged Carter for burdening
Americans with 20% interest
rates, even though
that was not his doing,
but that of the independent
Federal Reserve chairman, Paul
Volcker, in a policy that Ronald
Reagan by reappointing Volcker
implicitly endorsed.
He won against the
Democrat, Walter Mondale,
who he labeled Vice
President Malaise,
and whom in his own
acceptance speech
that summer promised a
policy of austerity too.
Four years later, the
man who became governor
of Massachusetts by promising
to run the state like a bank
became the Democrat's nominee,
Michael Dukakis, and lost.
Four years after
that, the nominee
won by promising to be
a new kind of Democrat
and ending welfare as
we know it, but only
hung on for his reelection
largely because of his promise
to save Medicare from the
depredations of a Republican
Congress.
This was Bill Clinton's version
of the North Carolina insurance
commissioner who gave
away the gold tokens
that he promised to be
money in your pockets.
Barack Obama chose to
stock his economic cabinet
full of investment
bankers, princelings
of austerity, everyone.
Nancy Pelosi, even
now, has promised
that if the American people
elect a Democratic Congress
next month, they
will be rewarded
by instituting a
PAYGO rule to ban
deficit spending by Congress.
It won't make a difference.
Republicans will bequeath
democratic president's
massive deficits, just like
Irving Kristol recommended.
Because as Dick Cheney
told George W. Bush,
Ronald Reagan proved that
deficits don't matter.
Republicans will continue to
bray, as Ronald Reagan did
in 1976, that for Democrats
to warn against inflation
is like getting a lecture
on fire prevention
from Mrs. O'Leary's cow.
And pundits will continue to
write what Joe Norsara did
in the New York Times in 2013
when Republicans shut down
the government.
The fault was with quote,
"those banana Republicans".
But only because,
quote, "a party
controlled by its
most extreme faction
will ultimately be forced
back to the center."
The Democrats learned that
when Walter Mondale was
losing to Ronald Reagan
and Michael Dukakis
lost to George Bush.
And unless this baleful
pattern of 40 years breaks,
each new democratic presidential
nominee or president
will try to roll that same mossy
old austerity rock up the hill
and will get bonked by a gang
of pundits hurling it back.
But the tragic figure
won't be the columnist
who's just doing
his job as assigned
by America's ideological
fates, but that Democrat
who tries, confident
in his or her belief,
that this time as politics
and as policy, austerity
will finally work.
Thank you.
[CLAPPING]
Well, that was
hopeful and happy.
So I'm just going to do a
couple of set up questions just
to get us going and
then just walk around
and hand them my coat,
like I usually do.
So the first one is this, and we
spoke about this a little bit.
[INAUDIBLE] want to
bring it out here.
So the simplest explanation
for that whole period is--
I'll put my Marxist hat on and
say it was a crisis of profits.
So you have inflation.
Once you have inflation
run in a let's say 7%,
you need to have an 8% real,
real return on investment
to make 1%.
So if you used to a
world in which you've
got 3% or 4% growth
and 2% or 3% inflation,
you used to basically
contract for 5%.
Over a very short period
of time that disappears
and you're basically
burning money.
So investment falls,
that's why you also
get a fall in employment
because productivity
falls at the same time
as you have inflation.
So I can blame the whole
thing on an investor strike,
and then I want to say
Jimmy Carter basically
is the tool of
capitalists interest.
But none of what
you have told me
and none of what
you've written actually
tells me that that's true.
What's actually
going on is a person
who's seriously disconnected
from democratic policy elites
their conversations, who
really comes at it with a very
moralistic attitude, but an
actual real Baptist attitude.
And really does believe
that it's the same thing,
a family can't spend
more than it means.
The government is the same.
Why doesn't everybody
understand this?
So it's the morals
rather than the Marxism
that's driving this story.
Is that right?
I think that's a really
interesting perspective.
And it does--
I do feel like I--
in this book I'm working
on kind of have to go back
to the drawing board about why.
There was the statistic I stuck
in there, why in the exit polls
33% of Americans
said that inflation
was their most important
reason for choosing
who they did for president?
I mean, sure it sucks they have
to pay more for something one
year to the next.
You know, coffee, for
example, was like 50--
inflation for
coffee was like 50%.
Right, I mean, but
I mean, 10% really,
it's like our car costs $10,000
one year and $11,000 next year.
I mean, that's not really
the end of the world.
There were some really
ugly things that happened.
For example, home prices
skyrocketed in California,
as they are now.
The property tax system was
unfair for technical reasons.
And people were paying
50% 60%, 70%, 100% more
in property taxes
one year to the next.
But as Mark points
out to me, that
wasn't counted in
inflation indexes.
So why did people, as a
matter of kind of populism,
consider inflation
such a terrible thing?
After all, most Americans
didn't own bonds.
The most of their income
wasn't investment income.
And one of the things
Mark pointed out to me
was actually inflation
is good for homeowners.
Because it eats away
the value of the debt.
Yeah, that's right.
If you--
The debt is cheaper.
That's why the baby boomers have
big houses, because in 1970 you
signed a thirty year contract
at 4% and inflation goes to 12.
By 1980, 40% of the
value of your house
has been eaten by the bank.
Right.
So there was a huge payoff
dependent on the assets
that you held to actually
sitting through an inflation.
The notion that everyone lost is
a really great political story,
but it simply wasn't true.
So it's one of these many,
many instances in which people
quote unquote, vote against
their economic interests,
right?
In fact, relatively
speaking, it makes
them better off
relationally to rich people.
So what's going on?
I think it's really
interesting to think
about it in cultural terms.
You know, people
did talk about what
happens when you
can't make plans,
you can't sort of
expand your business.
But I think much as
kind of the deficit
becomes sort of a signifier
for bad economics now,
I think inflation becomes a
signifier for bad economics
then.
If only 10%-- even an
unemployment rate of 10%
means 90% of people
are employed.
And I think in the
case of Jimmy Carter,
it's kind of a puzzle to me.
Yes, it's true,
this is a guy who
grew up on kind of a farm
stand in which they rendered
their own soap and
tanned their own hides
and did their own
black-smithing.
And he said in his
memoir, that it was much
like a farm 2000 years ago.
And he would talk
about consumption
as something that was very
unsatisfying to the soul.
He would talk about
the ennui of affluence.
So yes, he had a kind of
austerian temperament.
But it doesn't explain
to me why someone
like Stuart Eisenstadt,
who I quoted,
who had been one of Hubert
Humphrey's economists
was so scared of
inflation as he was.
He reveals in his memoir
that came out this year,
he wanted to do more austerity.
He thinks they should
have done more austerity.
That was the answer.
It doesn't explain to me why
all these liberal economists
in the spring of 1976 become
so convinced that a government
jobs program would
be inflationary.
And I don't have good
answers for that.
I mean, that's one of
the reasons I'm here.
I want to learn from
Mark about why people who
didn't necessarily have a
stake, as the Marxists put it,
in the state as
kind of the ruling
committee of the bourgeoisie.
It's really easy.
And I write in my book--
I write in my book about how the
business class became radically
activists and spent millions
and millions and millions
and millions and
millions of dollars
on very aggressive
and very deceptive
public relations campaigns
against regulation,
against liberal fiscal
policy for tax cuts, right?
But it wouldn't have--
like any propaganda
campaign, it wouldn't
take unless it touched
some kind of nerve.
And I don't have a
good answer about why
it touched that kind of nerve.
So I look forward to
further conversations
with Mark about that.
Just one more from me before
I pass around the mic.
So Carter puts
this on the table.
The Democrats, in a
sense, get locked into it.
But it fails spectacularly.
That's what you just told us.
It completely fails.
And then Reagan comes in
and basically says, well,
we'll do a defense
build up on tax cuts.
And then I don't really
care about anything
because it will just
take care of itself.
And you end up with
a huge deficit.
At the same time, you've
got 20% interest rates.
You have a massive recession.
And you do get this
massive disinflation.
You then have the opening
up of the financial sector.
You've got a pent up
demand for credit.
That's the morning
in America story.
That has nothing to do
with increasing revenues.
It's basically financialization.
Also de-regulated banking.
Yeah, no, absolute--
yes, exactly.
That was '78 when that started.
So the point is deficits
are the name of the game,
but it gets into the mid-1980s,
the democratic strategy
is the twin deficits,
right, beat up on deficits.
And then Clinton comes
in and the first thing
is he wants to do a stimulus.
Then it's suddenly no,
I have to do deficits.
So as you say, they've been
doing this for forty years.
Why don't they learn?
It's not a complex thing.
It's really not.
I mean, I think--
It's a losing hand.
It's like if we were
playing poker, right,
and you just kept coming up with
two pair, I'd just kill you.
That's how this works.
Luckily they are learning.
I mean, it's-- we're facing a
different Democratic Party than
we were one year ago, two years
ago, certainly five years ago.
I mean, Democratic
Socialists are
getting elected to Congress.
Nancy Pelosi is on her way out.
And-- but why haven't
they learned, right?
I mean, I think a lot of it does
suggest that it's ideological.
I mean, they're talking
to investment bankers who
are the ones who are telling
them how the world works,
even as they themselves, as
someone like Alan Greenspan
or--
who's our guy?
Bernanke?
Yeah, all those guys.
Well, no, the Democrats.
You know, like the
Citibank guy, Rubin.
They're saying, oh wait,
oh wait, we were wrong.
This isn't working after all.
I mean, Greenspan made
a remarkable mea culpa.
He thought markets
were efficient.
It turns out they're
not efficient.
Oops, sorry, right?
So those are the guys
they're talking to,
and why are they
talking with those guys?
That's because those are the
guys who signed the checks.
Goldman Sachs.
So it does come down to
the instrumentalist view
of politics at the
end of the day?
Well yeah, yeah.
And I think there's some really
good propaganda about oh, well,
I balance my family's
finances, why
can't the government do that?
Because you don't get
to issue your own debt.
Well, and also then
you get into of course
a Brit is going to ask that
question because they don't
understand America's
ordeal of slavery and race,
in which basically
the American people do
see liberal fiscal policy as
a way to distribute income
to people who are seen as
undesirable and not as American
as they.
So that's the real kind
of puzzle of Americanism
and that sort of ideology
of entrepreneurialism,
and individualism, and the
idea that every American who
is not a millionaire
thinks that they're
going to be a millionaire.
And all those strange things
that make America America.
And you can give a
brief for individuals.
You know, Sweden didn't
invent bluegrass or jazz.
But it's one of
those crazy things
that is both inexplicable,
but also deeply rooted.
Who wants to go first?
Check this is
working, yes it is.
This keeps dropping
out, these things
keep dropping out all the time.
Hi Rick, Robert Self.
Hey.
Should I just not
even speak into it?
Just try.
Yeah no, that's OK.
You might know that Carter's
teleprompter went out
during his 1980 speech, too.
And also that Ted Kennedy gave
the best anti-Carter campaign
speech ever given at the
Democratic Convention.
So this is great stuff, and I'm
super excited about the book.
And I would never
dispute that there's
a difference between the Great
Society and era of limits,
if nothing else as a metaphor
for government to be sure.
And I think you've
outlined not just Carter's,
but the late '70s democratic
party's austerity pretty nicely
and the way in which
we've had 40 years since.
But I wonder if it's
worth, in your thinking,
going actually back
40 years earlier
to see how constrained
democratic Keynesianism always
was.
And again, I don't mean
to say that there's not
a break in the '70s,
but arguably the biggest
Keynesian moments in
the post-war period come
under first a
Republican President
Eisenhower and the highway
bill, which is a Democratic
Congress but a Republican
president, and then
military Keynesianism.
There's never really a
true Keynesian consensus
despite what Nixon says, right?
In the '70s.
And I just wonder if that's
not worth putting on the table
to contextualize
Carter a little bit.
Because it's not
as if the Democrats
are just throwing money around
for decades before the '70s.
Right.
Yeah, I would love to know
and learn more about that.
I mean, one thing
that really struck me
in reading Judith Stein's
Pivotal Decade, which
talks about democratic
political economy
and really is very forcefully
critical of the Democrats
always being in the
pocket of finance capital
just about forever.
She points out that basically
Democrats in the Kennedy
administration basically gave
away America's manufacturing
advantage.
Like basically wrote
trade deals and rules
and passed laws
and treaties that
allowed American factories
to open up in tax
advantage ways in Europe.
And basically a technology
transfer to Japan.
All these things for various
kind of Cold War geostrategic
reasons, but with
really no sense
of political consequences.
So that's a slightly
different way
in which the Democrats were not
always what we think they are.
Kennedy and Johnson
both were on tax cuts.
Right, and Kennedy and Johnson.
Although you know they were--
to be fair, they were
progressive tax cuts.
They weren't across the
board 30% for everybody.
And I'd love to know more about
what like an Adlai Stevenson
thought about the
idea of spending.
And Lyndon Johnson, when
he took over in 1964,
said to his budget
advisers, unless you
get this budget
under $100 billion
you're not going to pee a drop.
He said like when
he was designing
the war on poverty, no doles.
And even the
Federal Housing Bill
was written by Robert
Taft, Mr. Republican,
the big conservative.
And yet, yes, this idea that
Democrats are always the people
spending like drunken sailors.
Now on the other
hand, I mentioned
Jimmy Carter's going after
the 80 water projects, right?
There's a great book about
water politics in America
called Cadillac
Desert, a classic book.
And he was so Jimmy Carter.
He was Mr. Detail
oriented and when
he wanted to reform
the tax code,
he literally read like all
10,000 pages of the tax code.
In between his election
and his inauguration,
he also read the entire Army
Corps of Engineers planning
documents.
And a lot of the projects
were absolutely crazy.
I mean, there was just
like a zillion dollar
dam that would serve
like one farm in Nevada.
So a lot of this stuff
was very boondoggly.
But that's not really
Keynesianism, either.
The Democratic Party,
the more you look at it,
the more complicated it is.
I just got back
from my last trip
before this was to
Vanderbilt where
I lectured about
the part of my book
which is about the
Christian right.
And I went to this wonderful
place, the Vanderbilt News
Archive, where you can watch
all the network news broadcasts.
That's why I bootleged--
don't tell anyone
that you saw that Jerry Brown
thing because the networks are
very proprietary about
this kind of stuff.
But I bootlegged
all these videos
and took notes on videos.
And one of the
things I learned was
there was an expose
of Russell Long--
senator Russell Long-- who was
the head of the Senate Finance
Committee, the guys who
wrote the tax bills.
And I hadn't realized--
I knew he was Huey
Long's son, but I
hadn't realized that
he owned hundreds
of millions of dollars
worth of oil leases offshore
and onshore.
And that they had basically kind
of been stolen from the state
by his dad.
And he was writing
tax bills and he was
in charge of the energy bill.
So here's this
Democratic Party in which
one of the most
powerful members of it
is Trumpian in his levels of
just intrinsic corruption.
But then you also have--
I was getting all pedantic
with one of the staffers
about Claiborne Pell, the
great Democratic Rhode Island
senator who said,
we'll just give money
to anyone who wants
to go to college.
Which clearly, I mean, we can
talk about higher education
Keynesianism, which was a
big part of what happened
in California, what
turned California
into this middle class utopia
under Jerry Brown's dad, Pat
Brown, and which Reagan
ended by instituting tuition
for the first time
in California.
So yeah, also a wonderful
thing to look at, too.
Sort of two partially
related questions going back
to the moralism issue.
I mean, I'm wondering,
the Jerry Brown thing,
there's a kind of
anti-consumerism, hippie--
This is the guy--
I mean, for those
who don't know,
Jerry Brown slept on a
mattress in an apartment,
he drove a Plymouth.
Right.
So I'm wondering,
is there a link
in this first round of
austerity between sort
of anti-consumerism
and hippieism
that gets this Baptist version
that's worth thinking about?
Absolutely.
I mean, I think a big
part of it-- yeah.
And the second part
of it is related
to that, which is
you might think
that if you were
anti-consumerist,
you'd be attracted to the one
tax the federal government
doesn't have in America,
which is a value added tax.
And I'm wondering
whether there was
any discussion about
the value added tax
as a possibility of
fixing the fiscal wagon.
Because that might have had
another set of consequences.
That's an interesting question.
I haven't seen it, but I'm sure
there were-- there's probably
a book to be written about
all the planning that
went into Jimmy Carter's
original tax package, which
basically was
completely transformed
into a Republican supply
side tax package because
of this freight
train about tax cuts.
I would look at Stuart
Eizenstat's memoir, which
is about 800 pages
long, which would
have something about that.
I can't think of
any talk about that.
I think that-- well, Jimmy
Carter never had a problem with
doing these kind of kludgey sort
of Rube Goldberg things where--
I would say, well,
he would understand
that sales taxes are
regressive, but he
would have had no problem
instituting a regressive tax
and then having credits
on the back end.
That's what they did for energy.
So I don't have a
good answer for that.
But as far as the
hippie part, yeah, I
think it's really interesting
that basically this stuff was
associated with liberalism.
It was associated with
a liberalism that was--
I call it hairshirt
patriotism, invisible bridge.
That people just love the idea
of sacrifice and doing more
with less, and
that was definitely
an ethic in California.
Jerry Brown was very popular.
And William Proxmire, you
know, not exactly a hippie,
but he was famous for
having these shabby suits,
and jogging down the
streets of Washington.
And the Watergate
babies, there's
a book the David Broder
out with in the middle
of the '70s profiling a bunch
of the new voices in Washington.
And it's very clear that
this generation of Democrats
was a Kennedy generation.
And quite idealistic.
And they weren't sellouts.
William Steiger
wasn't a sellout.
He was the Republican who
basically wrote the bill
to lower the capital gains tax.
These people saw themselves
as doing the greatest
good for the greatest number.
They were very convinced by
basically corporate lobbyists
who told them this was
a route to prosperity.
But at the same
time, culturally I
think the kind of glittering
plastic ticky tacky
kind of Levittown society
was very unpopular.
And a lot of that came
through the Nader strain
in the Democratic Party, which
was incredibly, incredibly
successful.
One of the things
I enjoyed writing
about the most in
this manuscript
was hopefully reviving
the reputation
of why Nader was great.
And all the lives you saved.
Things like ERISA
protecting pensions.
Or the guy who
Orrin Hatch beat was
this guy named Frank Moss
who no one remembers.
He was the guy who banned
cigarette smoking advertising,
he was the guy who made
warranties federally protected.
The Federal Trade
Commission-- there's
this guy named
Michael Pertschuk, who
was kind of a household
name for a brief period
because he was
Carter's FTC chair.
He was a Nader guy.
He did amazing stuff.
And the business
coalition crushed him.
But this idea that you
were protecting the public
from rapacious capitalists
was part of this liberalism,
but Keynesianism was not.
And part of the problem was
cultural because Keynesianism,
the idea of basically
shoving money
into the hands of middle
class people, that
was George Meanu, that
was Hubert Humphrey.
That was the guys who had taken
over the Democratic Party.
That was Mayor Daley.
Mayor Daley was
the great builder.
He just was-- the
state bird in Illinois
was the construction crane.
So that was kind of seen as--
almost has the cultural
savor of building
giant airports in Vietnam.
[INAUDIBLE]
And why should we make--
that was, you know,
at its worst, sure.
And the idea that the white
working class was racist,
and pro-war, and all the rest.
So there's definitely
a lot of that going on.
And the bad guys were
very shrewd and canny
in taking advantage of that.
I'm going to walk us over
here, but with a thought which
is we haven't mentioned
organized labor.
Well, I just mentioned
that they were basically
seen as the dinosaurs.
Right, but also the
incredibly corrupt dinosaurs.
I mean, as someone who came
over here in the late-- well,
I didn't come over
in the late '70s,
came of age in the
late '70s politically.
And then come over here
in the '90s, the way
that Americans talk about
unions and completely contrast
to what you experience even
in Britain, which is hardly
Germany or Sweden.
So there was this notion that
labor was inherently corrupt,
and that was the other side
of the government trough.
So if that was what Keynesianism
was, then it was game over.
And that was never
what Keynesianism was.
That's right.
And you know there's this
fascinating character who
is endlessly fascinating
in the Carter White
House, Pat Caddell who actually
wasn't a staffer in the White
House.
He started his own company
with clients like Saudi Arabia
and Exxon, and kind of
advised for the politics--
for the president on the side.
Wrote half the malaise speech.
And basically there's
this fascinating moment
in which basically business and
labor get together and agree
on a labor law
reform bill that will
punish companies who violate
labor law more strictly.
And then basically
[INAUDIBLE] changes his mind
and has the biggest PAC money
driven lobbying campaign
in history to that point.
While this was going
on, Pat Caddell
does a poll in which
he's all over the media
talking about it,
like 70% of Americans
think labor unions
are all corrupt.
And Jimmy Carter did
not lobby for this bill,
he didn't care about this bill.
So labor was really--
it was very uncool.
It was Hubert Humphrey.
When Gary Hart--
Gary Hart.
So I can answer your
question about the hippies.
Gary Hart had been George
McGovern's campaign manager.
By 1974 when he's
running for the Senate,
he is literally running
against the New Deal.
Also as an environmentalist,
also as a limits guy,
and he's the guy who says we're
not a bunch of little Hubert
Humphreys.
Hubert Humphrey is like that
cigar chomping fat labor boss
guy.
Hi, thanks for a
fascinating talk,
and with every comment
it's harder for me
to formulate a question
because everybody's
talking about elements of--
I guess my basic question
is, it takes a lot of people
to make this kind of shift.
I mean, Jimmy Carter
didn't do it alone.
I think you were reading
from a New York Times
article about what a Democratic
Congress in 1978 had passed.
A bill-- the Washington Post.
So there were a lot
of Democrats on board
with what Cartier
was doing, and you've
described cultural shifts,
and you've described some--
Well, they hated Carter,
and were all sort
of for austerity
for other reasons.
OK.
Well, it just seemed
like basically why--
I know that maybe this is the
basic question we keep asking,
but why this big shift?
You can understand why Reagan
and people on the right
wanted to do the
shift, I get that.
And Jimmy Carter
had this background,
and he had these
values, OK, that's fine.
And some other
Democrats went along
with that for their own
reasons and everything.
But you were talking
about labor unions,
and you brought up
the labor union issue.
Maybe Hubert Humphrey is uncool,
and maybe a lot of Americans
think unions are
bad, and they vote
against their own economic
interests, and all that.
But if you're a white working
class person in the Rust Belt,
unions have some-- or
in that era especially,
they had some value for you.
Like going to negotiate a
better contract for you.
Even if you don't like black
people, don't you want yours?
If you're against the idea of a
big government giving money to,
quote, "undeserving people,"
however you define that,
still why are you going to all
of a sudden go over to Reagan?
I mean, in 1980?
Well, read the book.
I can't wait.
Like there's a great
movie, Paul Schrader
wrote it, the guy who
wrote Taxi Driver.
It's called-- what's it called?
Blue Collar.
Blue Collar, right.
And it's one of the first movies
that Richard Pryor was in.
It's about three guys
who rob their union
because they're just being
robbed by their union anyway.
And it just gets to the idea
that the unions are just
one more asshole boss who's
telling you what to do.
Reagan is really important
at this because first of all,
Reagan was very
canny rhetorically.
He would say, I was
a union president.
I'm a union member now.
And he also had been
the ideological trainee
of the guy at General Electric
in the '50s where he worked
as spokesman whose job it
was to sell the workers of GE
on the idea that the union
was ripping them off.
So this is a guy who
pioneered focus groups.
There was lots of rhetoric.
There was basically state
of the art propaganda.
So that's one reason.
The racial thing you can look
at the famous Stanley Greenberg
polls from 1984 in Macomb
County in which he just
finds basically the
most feral racism
in the suburbs of Detroit.
And these are guys who are very
close to the bone economically.
It's the Archie Bunker stuff.
You should read
Jefferson Cowie's book,
Stayin Alive, the Last Days
of the American Working Class.
He talks about a guy who--
there was a an autoworker
who the New York Times
would visit every four years--
'72, '76 and '80--
who eventually
voted for Ronald Reagan.
Just lots of wonderful
work about this.
But just the idea that
unions weren't any help.
They weren't keeping
the factories open.
They weren't closing
the factories.
Although the propaganda
was that they
were closing the factories.
It's these ridiculous wage
demands that they were making.
So yeah, in a lot of ways
that's the big mystery.
And it's kind of groping
towards an explanation.
Can I give you this one?
Why is it also a fact that
union density is going down?
And also at any
point in our history,
most of US working people were
not unionized anyway, right?
So you had that in addition to--
So yes, it's easy to
divide the working class.
These union guys are
not your friends,
they're the people
who are basically--
instead of saying I
want that too, they're
saying, don't want them to
have it if I don't have it.
And there's a book on Mark's
shelf, classic amazing book,
it came out in 1983, called
The New Politics of Inequality
by the Washington Post, then
Baltimore Sun's Thomas Edsall.
And he was the first guy to
actually go into the NLRB
statistics and saying, wow,
corporations every year
in the '70s are challenging
like 50% more union elections.
And yes, they see their
profits going down.
And they are fighting
for their profits.
And stuff that's
going on culturally.
It's interesting.
People do talk
about this culture
that corporations used to
be happy with, whatever,
a 5% profit rate.
Well, you're pointing out that
their profits are being eaten
up by inflation,
so of course they
want double digit profits,
which means tighter labor
margins and all the rest.
But yes, the labor law
reform fight in 1970
was really fascinating.
Because it was basically
like, to quote another movie,
I talk about a lot of
movies in my books--
Norma Ray was about a
real factory, JP Stephens,
that was basically just
firing union organizers left
and right.
And they were the first
people to say, well,
we'll get fined $50,000
by the NLRB, great.
That costs us less
than a union would.
And this labor law bill was
written to kind of punish
people in ways that had
teeth for doing things that
were already against the law.
And you would say, why
would a corporation that
has good relations with
their union want this?
Well again, everything is
becoming more zero sum.
I say in the book that
basically business
was becoming a class for itself
instead of a class in itself.
It was becoming class
conscious in a way
that it hadn't been before.
All this literature
like the Edsalls,
and corporate lobbying--
oh, this actually gets to why
was there this backlash that
made austerity attractive?
One of the things was during
the '60s, the expectations
and the kind of assumptions of
abundance were so over-the-top.
And this is-- in a
way, it's kind of--
Flying cars.
Yeah.
Well in a way, it's kind of like
this cross ideological thing.
I mean, whether you are a hippie
who believes that you can have
a commune where everyone is just
having drugs and having sex all
the time and not working
or you're saying,
let's go over to
the moon by 1969,
or you're Lyndon Johnson
lighting the White House
Christmas tree in
1964 and saying
this is the most hopeful
time since Christ
was born in Bethlehem,
or saying we're
going to cure heart disease.
It's just like this
idea that America
is this great cornucopia
that's going to last forever.
That's setting
people up for trauma.
Once people realized they were
kind of sold a bill of goods.
That's kind of what I'm
getting at under the guts
of the story is people were
just being like, wow, America--
I've been told America is one
thing, it turns out it's not.
So for a guy whose
factory is shutting down--
Let's make it great again.
Let's make it great again.
That was Reagan's
original slogan in 1980
until he fired his ad man.
That's actually a very
good segue for the question
that I want to ask,
which I hope won't
be too unwelcome
because it does require
talking about the president.
[INAUDIBLE] to that.
And I hope also--
if you addressed this in
your opening comments,
I apologize for missing them.
But I am wondering about how
this history reads differently
in light of the last two years,
and about whether or not some
of the let's call
them revelations
for some significant portion
of the American pundit class
that economic
anxiety is actually
about something else, or about
the corruption and venality
of certain segments of the
American political class,
et cetera.
If re-reading the late
1970s and early 1980s
in the age of Trump,
what kind of new things
come to light that you
think you're seeing by doing
this history at this moment?
I wrote a magazine article
about that in the New York Times
Magazine about how Trump
changes the way people are
thinking about and writing about
the history of conservatism.
One way I think it's changed
for me in this project
is stuff I would have been like,
oh, those guys are extremist
kooks, they're not really an
important part of the story.
I'm much more willing
to include them.
Because they're obviously
part of the genealogy.
And one of the things
I've specifically realized
and I haven't quite pulled
it all together yet,
and I will in a part that
I haven't yet written
is the Ku Klux
Klan is everywhere.
There's Klansman that wins
a democratic nomination
for a congressional
seat in Michigan
gets like 35% of the vote,
which was more than--
a Republican, I mean.
One wins as a Republican
in Detroit suburbs
and gets like 10%
more of the vote
than a Republican got last time.
There's a Democrat who wins
as a klansman in a primary
in like a California suburb.
There's the Greensboro
massacre in 1979
in which klansmen get into
a fight with Communists
and shoot five Communists.
I mean, just these
little things.
There's like the guy
who shot Larry Flynt,
it turns out that he also
was shooting a black men
and interracial couples.
This is just kind
of float to the top
that I wouldn't really have
thought about or noticed
before.
You know how the
Klan most famously
became an issue in
that Ronald Reagan got
the endorsement of the Klan
and said their platform is just
like ours, and then he is kind
of getting whacked about this.
And he claims that Jimmy
Carter started his campaign
in the birthplace of
the Ku Klux Klan, which
turns out to not be true.
So suddenly there's
this little kerfuffle
going on for like a week
about the Ku Klux Klan
in the campaign.
So I would have probably
just not fully considered
that particularly important.
But it looks more important now.
I had a question about
a comment that Reagan
makes during his acceptance
speech at the RNC in 1980.
He says at some
point in the clip
that you played that contrary
to what Carter would have us
believe, we don't have
to tighten our belts
so that people in
other countries
can get ahead or
something to that effect?
I think you might have misheard.
Heard I'm not sure he said that.
I don't think-- and
that's interesting, too,
in a lot of ways.
Another thing I write about
that's a little different
is, I mean, I really
emphasize how nasty, and evil,
and hateful the Christian
right was, and kind of almost
genocidal in their
thinking about gays.
But one thing about
Reagan that I emphasize
is that he was extremely
generous in his rhetoric
and talk about immigrants.
He loved immigrants.
He loved the idea
that people would want
to come to the United States.
And this is a very kind of like
Austrian kind of James Buchanan
kind of thing, but he also
wants a North American
union between Mexico,
and Canada, and America.
He literally says open borders.
So part of this
is just free flow
of bodies and goods for a
completely libertarian reason.
But he wraps it up in
very high minded rhetoric.
So I don't think he
would have said--
he talked about the
rest of the world.
I found it.
OK good, thanks.
My fellow citizens, I
utterly reject that view.
The American people,
the most generous
on Earth, who created the
highest standard of living,
are not going to accept
the notion that we can only
make a better world for others
by moving backwards ourselves.
OK, yes, that was--
that would have been a
reference to something
like the Panama Canal Treaty,
which he saw as giving away--
his rhetoric more
aggressive in 1976.
But that was in 1978, and
he was against it, too.
The idea that we
were basically-- it
was the equivalent of
giving away Alaska.
And he did say that
Jimmy Carter was
going around the world
apologizing for America.
So that was
definitely a reference
to a certain kind
of breast beating
kind of jingoistic
nationalism, definitely.
That basically part of the thing
that Jimmy Carter was doing
was not only was he saying
we have to make do with less,
but we have to be nicer
to the rest of the world.
And one of the things that's
interesting about-- we
haven't talked about this huge
issue in the 1980 campaign
which was Iran and the hostages.
And one of the things was
there's this really incorrect
taken for granted the notion
that Carter was really
hurt by the hostages.
He was really hurt by
the rescue failing.
But if you actually
look at the exit polls,
people who considered Iran
the most important issue
were actually more for
Carter than for Reagan.
And the reason was
because Reagan--
it was basically kind
of assumed since he
said Vietnam was a noble cause
that he would just bomb Iran.
And people were scared shitless
about that who were really
scared about Reagan.
And that's one of
the reasons why
this one debate they had
five days before the election
in which all of
Carter's aides thought,
oh my God, this doddering
old man is going
to like sound Barry Goldwater
and terrify everyone
was so important.
Because Reagan sounded
sensible and calm
even as he basically dissembled
in very obvious ways.
And the Carter people
thought about it
kind of like a
high school debate
contest where people had points
and were right and wrong.
So when Jimmy Carter
said, no, he really
did say that he wanted-- that
Medicare would turn America
into a socialist hellhole,
and Reagan said, there
you go again.
Because he claimed, oh, he just
wanted a better Medicare bill.
The Carter people were
like, we won, he's lying.
The media's going
to fact check him.
That sounds familiar.
But oh, it was so
frustrating reading it
like the major media
discourse about Carter
was that he had
suddenly turned mean.
And what they meant
by mean was he
was saying Reagan is lying, why
aren't you talking about this?
Fascinating.
It seems like just a
comment and a question.
So the comment is
like it seems like you
have a great book about the
KKK as economic actors trying
to fight for the
wages of whiteness.
Oh, that was just a comment,
but I actually have a question.
If you want to answer
that, that's great,
but I do have a question.
So the Klan tripled in the '70s.
Someone should write a
book about the '70s Klan.
Yeah, because we think
about their earlier period.
But anyway, the question
is, is this really
presentist or futurist which
is like, what advice would you
give Elizabeth Warren
based on everything
that you've researched?
Just keep on doing what
you're doing, yeah.
I mean, she's so
smart and so sure--
I mean given everything, right?
I mean, all the challenges, the
cultural challenges, et cetera,
what sort of talking
points should she use?
One of the interesting
things about Elizabeth Warren
is she reminds me of-- you
know, we think about the '60s,
and we think of Tom Hayden, we
think of Martin Luther King,
we think of Malcolm
X, and we think
of all this dramatic stuff.
But you know, the Claiborne
Pells and the Frank Mosses,
and she really reminds me of a
1960s senator in that she says
here's a pressing
policy problem, here's
a major omnibus landmark
bill that would fix it.
Like no one talks
about it because we're
too busy talking about
what we're talking about.
But she just dropped
this massive bill
meant to solve America's
housing crisis.
Both segregated
housing, undersupply
of housing with all
these kind of tax
credits incentives
to open up housing
in places like California.
So yes, that's great.
[INAUDIBLE]
I think that the way Beto
O'Rourke is so good at doing
this simultaneously
maintaining--
and Michelle Goldberg just had a
really good column about this--
maintaining this
very high toned,
uniting, Obama-like
rhetoric, but also
has these very-- like he is very
much there is no red America,
no blue America.
That's not his line, but
that's the kind of speech
he gives while offering
these very progressive policy
solutions and doing gutsy things
like saying black lives matter,
their right to take
a knee, and I'm not
going to criticize that.
So I think that Obama has
shown, and Beto O'Rourke has
shown with his very
strong performance
so far that yeah,
a very high minded,
kind of optimistic
rhetoric works
pretty well from the Democrats.
And can squeak out enough
people in tough times
if you back it with what
seems like a credible economic
agenda, which Obama seemed to
do on the campaign trail in 2008
before he turned
over his cabinet
to the investment bankers.
But let me rain on the
parade just because I can.
So in the last generals,
Senator Clinton
lost all men of all
classes and all races
by 12 percentage points.
That's never happened before.
And Elizabeth Warren is a
pointy headed Harvard professor.
How do you sell that?
So is Ted Cruz.
He's a pointy headed whatever
law school he went to,
you know?
I think that she talks about
her Great Plains upbringing,
and she talks the way she does.
And when she is very good at
communicating to and about very
ordinary people.
And things change.
It's like white races
voted for Obama in 2008.
They didn't vote for
Hillary Clinton in 2016.
Hillary Clinton does
culturally present as kind
of an aloof, arrogant,
east coast pointy headed
intellectual in a way that
I don't think Elizabeth
Warren does quite as much.
Do you think she'll say
the words balanced budget?
I don't see it.
I mean, are there signs that
she kind of buys that nonsense?
You know, it's like
every Democrat has
their own sort of skill, right?
And she's an economics-- she's a
professor of political economy.
One that is very good
at communicating,
as Charles Walker was,
big economic issues
in ideologically potent ways.
So maybe she'll be the
one to break the spell.
Probably a good place to end it.
Elizabeth saves us from 40
years of democratic creptitude
on budgets.
Yes, nice.
Thank you very much,
Rick Perlstein.
[APPLAUSE]
