Rick Perlstein – Jimmy Carter and the Origins of the Democratic Party Cult of Austerity

Rick Perlstein – Jimmy Carter and the Origins of the Democratic Party Cult of Austerity

[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]

11 thoughts on “Rick Perlstein – Jimmy Carter and the Origins of the Democratic Party Cult of Austerity

  1. So Carter was actually a republican in disguise, to the dismay of his own party sounds like every democrat president in modern history.

  2. I loved this talk, it was basically a deep-dive into the actual start if the neoliberal agenda from the Dems. Although Perlstein needs to read Nancy McClain's book "Democracy in Chains" which would answer his question of why politicians used inflation as a financial bogeyman to cut spending. Buchanan and conservatives in the 50's started to lay the groundwork for ideological reasoning of the conservative agenda, and inflation is nothing more than a tool to scare people into believing that more power in the hands private (moneyed interests) is more prudent than public (the masses). The same is happing now with the debate about the role of deficit spending. As that narrative became more popular, spread from the top (conservative leaders) and the bottom (conservative educational institutions) politicians began to cater to that general consensus. The Repubs were malicious in their intent because it furthered their agenda, but Dems were complicit thru their ignorance.

  3. The big military build-up, usually associated with Reagan, began under Jimmy Carter. And some of the de-regulation started then, too. Carter and Teddy Kennedy deregulated the airlines. 1:21:38 Elizabeth is not "so smart" to have avoided a Howard Dean swoon over her DNA. But she is a brilliant Senator, and that is where she is needed.

  4. The quandary around "why" did this happen seems answerable by one simple explanation. Ans: when business/corp enterprises were finally able to truly cross borders and go global, that also allowed them to not be accountable back home and get away with what they couldn't till then???

  5. As always, Blyth nails it – and in the very last frame. E. Warren…Really? Not in your dreams will a…ANY republican voter check the box next to her name. NEVER! Moreover, if Bernie picks her, it's game over from that very second on. Just say'n. P.S. E.W. is a fraud and an opportunist. VP? NEVER! Bets? In fact, it's a sure fire way to (once again) snatch defeat from the jaws of victory.

  6. Thomas Frank in "Listen Liberal" has the best explanation for why the transnational party of the Left in the USA has not learned the lesson that big government deficits are GOOD (provided spending is on social good purpose, not military build-up and Wall Street bailouts). The short answer is the Democrats deliberately chose to turn away from the working class and embrace a new professional class of elite school educated financiers and tech nerds, who knew nothing about the struggle of workers whose wages were stagnating all the while corporate finance and Silicon Valley were drowning in money, to the point of learning how to breath money.

  7. @49 min, Mark Blyth wash your mouth out! "…becasue you don't get to issue your own debt!" That's still conservative speak bro. Government does not issue debt, it issues money, pure and proper. If you mean Treasury bonds, then that's still not debt. Bonds are completely unnecessary, they are simply corporate welfare. Bonds serve one and only one purpose, which is to help the Fed meet It's overnight interest rate. Even if you (incorrectly) choose to think of bonds as debt, they are debt the government owes itself. So yeah, not really debt. Stop feeding in to the neoclassical econ myths even as you attempt to mock them. The US government can simply never be in debt in It's own currency.

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