Penny Wise
what Barack Obama can learn from Jimmy Carter's mistake
2009-01-13
Brian Gilmore

It is often said that the U.S. can solve any financial crisis: just print more money. Of course, it is not so easy. Money is not just the costs of paper and ink; it has real ramifications for the economy globally. This is why Barack Obama’s billion dollar financial rescue plan is a crucial moment in his presidency.

Obama’s speech last week on the current financial crisis was forceful and direct. Obama spoke to Americans and wants them to pressure their representatives so they will act quickly and help him try to fix the economy. He urged no delay on an economic stimulus package that will fix the economy for the long term.

He referred to the current economic crisis as “unlike any we have seen in our lifetime,” and “a crisis that has only deepened over the past few weeks.” He stated that the government needs to act “boldly” to address the problem in order to create jobs, repair credit, re-establish trust, and to most of all, “to set a new course for this economy.” It was intense but cool.

At times, one felt like Obama was being almost too aggressive in tone in the speech. But it was just classic “bully pulpit” style Presidential work. It resonates back to the days of a President named James Earl Carter and a missed opportunity.

Back in 1976, Jimmy Carter was similar to Barack Obama. He was a breath of fresh air after the Watergate fiasco under Nixon, not to mention the madness of the war in Vietnam. And Carter, like Obama also inherited a pathetic economic situation. (Obama’s is far worse).

In 1975, unemployment had reached 8.5 percent and consumer prices jumped 14 percent in just a matter of months. There were tax reductions by President Gerald Ford that suggested a recovery but when GNP fell from 9.2 percent in the first quarter of 1976 to just 4.5 in the second quarter, Ford was political toast. The economy was in a tailspin.

Carter got elected partly because of that lousy economy and he immediately proposed a significant stimulus package to get the economy going again. The amount initially was $31 billion ($111 billion in 2007 dollars) for the same kinds of things that Obama is calling for: jobs, tax cuts, investment. Everyone thought it was a good thing.

But Carter, encouraged a little by improvements in the job market in 1977 made a critical mistake that Obama should heed. Carter changed his plans at the last minute and reduced his stimulus package by half including eliminating a proposed consumer tax cut. The economy tanked by 1978 and Carter never was able to get it under control. Republicans jumped all over Carter and Ronald Reagan surged into office in 1980.

If Barack Obama doesn’t show some improvement in the economy four years from now, he could wind up like Jimmy Carter -- one term and then an early retirement. This is why he had better not be cheap (or at least make the right moves) with his recovery.

Right now, Barack Obama looks like he knows the history. He is proposing a massive stimulus plan – a behemoth of what will likely be $500 to $800 billion or more. He wants to save 3-4 million jobs, reform financial lending practices, provide assistance to some states in fiscal trouble, and also to consumers who are still being burned by the housing crisis. It seems like it is overkill but who knows. Some think his plans don’t go far enough or do not do the right things. But no one, in fact, can honestly state what will happen.

On the other hand, maybe Jimmy Carter's outcome  says it all.

Brian Gilmore is a writer and attorney living in Washington, DC