We all know the story.
A U.S. senator from the Midwest announces a run for the presidency against a current president from Texas with low approval ratings. The country is engaged in an unpopular war. And college students are politically active.
I’m not referring to 2008 but rather 1968. The Midwest senator was Eugene McCarthy from Minnesota. The president from Texas was Lyndon Johnson. And the war was in Vietnam.
The difference between then and now: McCarthy lost and Obama won. McCarthy’s loss and Nixon’s escalation in Southeast Asia kept students engaged for a few more years until America exited the region in 1975. Then they turned to the Bee Gees and Donna Summer.
After Obama’s victory, he announced America’s exit from Iraq and established a timetable for withdrawal from Afghanistan. Students returned to Facebook and The Daily Show.
As Mark Twain once said, even if history doesn’t repeat itself, it does tend to rhyme.
But one thing is the same as 40 years ago: anemic employment and wage growth. In the 1970s, it was called “stagflation” — slow growth and inflation resulting from LBJ’s deficit spending and Nixon’s monetization of the national debt. In 2013, it’s called “underemployment,” with millions giving up the search for work even as the federal government tries to stimulate activity by running trillion-dollar deficits, and the Federal Reserve purchases $85 billion of debt each month.
Thirty years ago, vigorous growth returned after the Federal Reserve crushed inflation and Ronald Reagan’s tax cuts ignited investment and consumption. Most of us have heard of (and may even remember) Carter’s famous “malaise” speech in July 1979, in which he laid responsibility for America’s economic woes squarely at the feet of its consumer citizens, but it was his decisive action in the wake of that address that proved to have the biggest impact.
After requesting the resignations of five of his cabinet members, Carter appointed Paul Volcker to head the Federal Reserve as part of the subsequent shake-up. Carter’s move — he knew Volcker was going to tighten credit and raise interest rates — more or less assured his electoral defeat 15 months later. And still, he went ahead.
He also went ahead with several executive orders designed to combat inflation, including one that ended price controls on oil, a move credited with lowering gas prices and boosting U.S. economic growth in 1980s.
Today’s version of Carter’s courage and Reagan’s fuel would be to boost federal investment in infrastructure and research while rationalizing spending on Medicare, Social Security and defense. Whether the protagonist of that story will be President Obama or his successor remains to be seen. But if Jimmy could help fund America’s growth in the midst of seeking re-election, then surely Barack can attempt something in his second term that, while not precisely the same, at least starts to rhyme.