POLITICS

Pinkerton: Joe Biden, First Elected in the 1970s, Brings Back the 1970s

Joe Biden was first elected to public office in 1970, the same year that Georgia Governor Jimmy Carter was elected. Biden was elected as a senator from Delaware two years later, in 1972, and Carter was elected to the presidency four years later, in 1976, with Biden serving as a worker bee on his behalf.

As a result, Biden served in the Senate during Carter’s presidency in the late 1970s. Then, in 1980, as Carter was running for re-election, Biden appeared on national television at the Democratic National Convention, praising Carter.

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To put it another way, Biden should recall how life was during the Carter administration. He should also note that in 1980, Carter was defeated by Ronald Reagan in a landslide, losing 41 of 50 states, including Biden’s Delaware.

Given President Carter’s disastrous past, one would expect Vice President Biden to be wary of something that harkens back to the Carter years.

Biden’s plans, however, are strikingly similar to Carter’s in what is usually the most important thing for any president: economic policy. As we will see, Carter’s policies were not successful—in reality, they were a disaster—yet here comes Biden, following in Carter’s footsteps.

Perhaps he believes that few people in the United States recall the 1970s, and he is right. In reality, nearly two-thirds of Americans under the age of 50 are under the age of 50, which means they have little to no recollection of the decade’s major events.

As a result, the United States risks falling into the mental trap mentioned by philosopher George Santayana: “Those who cannot recall the past are doomed to repeat it.” Of course, the only way out of this bind is for us all to think about the past.

Those of us who recall the 1970s will be able to provide a refresher on the period’s economic history. Or, better yet, a tip from someone who has been there and done that about ineffective economic policies.

At the start of the 1970s, Keynesianism was the prevalent economic school of thought. The conservation of aggregate demand, or the overall willingness of the population to spend money, was a crucial variable for economic development, according to John Maynard Keynes (1883-1946). People couldn’t waste money unless they had it, of course. So, if they ran out of money, the government should print or borrow money and give it to people who would spend it, thus stimulating the economy, according to Keynes. And there you have it! People are satisfied because aggregate demand is sustained, the economy achieves its maximum productivity, and aggregate demand is maintained. That was the idea, at least.

N. Gregory Mankiw, an economist who wrote a popular economics textbook in the 1990s, explains:

President John F. Kennedy’s administration [1961-1963] was the first to use monetary policy to manipulate aggregate demand in order to drive the economy toward its potential production. For the next two decades, Kennedy’s ability to accept Keynes’ proposals transformed the nation’s approach to fiscal policy.


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However, too much market stimulation had a negative side effect: inflation. That is, if there is too much demand, or money, for too few goods, the prices of those goods will rise. Mankiw goes on to explain the effect of the 1960s wastrel aggregate-demand policy:

However, the inflation that accompanied it, along with other issues, would cause serious problems for the economy and macroeconomic policy in the 1970s.

Yes, America had a hangover from the previous decade’s spending binge in the 1970s. Free-spending policies in the 1960s—most notably, President Lyndon B. Johnson’s decision to combat the Vietnam War and the War on Poverty at the same time—caused the annual change in the Consumer Price Index to more than triple, from 1.7 percent in 1960 to 5.5 percent in 1969.

However, the inflation that accompanied it, along with other issues, would cause serious problems for the economy and macroeconomic policy in the 1970s.

Yes, America had a hangover from the previous decade’s spending binge in the 1970s. Free-spending policies in the 1960s—most notably, President Lyndon B. Johnson’s decision to combat the Vietnam War and the War on Poverty at the same time—caused the annual change in the Consumer Price Index to more than triple, from 1.7 percent in 1960 to 5.5 percent in 1969.

Even if it wasn’t easy to solve, such inflation was unreasonable. During the 1970s, three presidents from both parties—Republicans Richard Nixon and Gerald Ford, and Democrats Jimmy Carter and Jimmy Carter—tried all to curb inflation, from enforcing price caps to wearing lapel buttons to giving “malaise” speeches, but nothing succeeded.

To make it worse, the unemployment rate was rising at the same time, from 3.9 percent in January 1970 to a high of 9% in May 1975, and then to a still-too-high six percent by the end of 1979.

The unfortunate confluence of events, rising prices, and rising unemployment perplexed most economists.

Robert Mundell, who died on April 4th of this year at the age of 88, was another economist who took a different approach. Businesses, investors, and governments, according to Mundell, need predictable tight capital, not loose money, to make better financial decisions. The whole Keynesian concept of “fine-tuning” aggregate demand, according to Mundell, was a misnomer; the key was monetary stability.

Most of Laffer and Mundell’s professional contemporaries regarded their theories as heresy, to put it mildly. “Economists did not think in terms of changes in short-run aggregate supply,” Mankiw says. Keynesian economics was concerned with changes in aggregate demand rather than supply.”

Meanwhile, Jimmy Carter had to justify his failed economic record in the White House. Despite the fact that he was not a major spender, he defended demand-side economics as it devolved into stagflation. Carter, in reality, attacked Reagan’s supply-side tax-rate-cutting strategy during his 1980 re-election campaign. So, what do you think Carter’s better idea was? What was his economic strategy for a more prosperous second term? He remained silent.

Reagan, for one, was a true believer in the supply side, which he related to the fundamental values of hard work, creativity, and government restraint. And it was he, not Carter, who won the 1980 presidential election.

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Margaret Taylor

Experienced communications professional with 10 years of experience in international journalism.

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