Presidents Ford and CarterChapter 28

Economy of the 1970s

•Prosperity widespread after WWII in US

•Mid-1960s (Johnson Admin.)▫Widespread spending on Vietnam War and

Great Society▫Inflation occurs (loss of the value of money)

OPEC

•Organization of Petroleum Export Countries▫Mostly Arab nations▫1973: Arab-Israeli Conflict

Oil becomes political weapon Embargo on Israeli supporters

▫Raised price of crude oil by 70%, then another 130%

▫Crude Oil Price (by barrel) 1973: $3 1980: $30

Economic Stagnation at Home

•Aging US manufacturing plants

•1971: US imports > US exports▫First time since 1889

•Stagflation▫Nickname for a combination of inflation

with a stagnant economy and high unemployment

▫Economists confused

Economists Dilemma

•Spending to help end recession?▫Increases inflation

•Raising taxes to slow inflation?▫Recession continues

•Nixon’s decision: Control inflation▫Cut spending▫Raise taxes

Post-Nixon Economy• 1975: Unemployment approaching 9%

• Ford urges American changes▫Reduce dependency on oil/gas▫Raise interest rates

• Big changes under Ford▫Cut government spending▫Vetoed 50 bills▫Balance the budget▫Keep taxes low

Ford’s Foreign Policy

•Sec. of State Kissinger pursues détente with communist states

•Helsinki Accords:▫Borders of Eastern Europe accepted▫Soviets will uphold basic human rights

including migration Soviets did not follow agreement US turns against foreign policy

•Cambodians capture Mayaguez cargo ship▫Marines attack, 41 die

1976 Election• Ford

▫ Continued tax cuts▫ Continued economic

recovery programs▫ Bad public image

• Carter▫ Former GA Governor▫ Promises to restore

integrity to US▫ Promote energy

development▫ Tax Reforms▫ Welfare Reforms▫ Nationalized health care▫ “Outsider” in Washington

Electoral Vote: Carter 297Ford 240

The Carter Administration

•Priority #1: Fix the economy▫Increase Government Spending▫Cut Taxes

•Result: Inflation surge▫Ended tax cuts and vetoed spending

programs he proposed▫Reduce money supply and raise interest

rates•Result: Failed to stop inflation and

recession

Oil and Carter

•Foreign Oil Dependence▫Energy usage concerns▫Conserve Oil; Promote Coal and Renewable

Energy▫Create Department of Energy▫Deregulation of oil companies

Agreed to by Carter, but with “windfall tax”▫1979: Middle East instability causes fuel

shortage

Jimmy Carter’s Policies • Domestic Policy

▫ Energy concerns

▫ Inexperience and Outsider Status hurt relations with

Congress Blocked Proposals Didn’t Reach Out

▫ Public Polls show unease

• Foreign Policy

▫ Be honest with other nations

▫ Latin America Interventionist Panama Canal to

Panama after 60+ years

▫ USSR Human Rights Imprisonment of

Protesters Afghanistan Grain Embargo Boycotted Olympics

Carter and the Middle East•Camp David Accords

• Iranian relationship▫US Supported Shah

Oil Anti-USSR expansion

▫Iranian discontent with Shah Western reforms Repression

▫Shah forced to flee, new administration takes over

The New Iran• Ayatollah Khomeini takes

over▫Religious leader▫ Islamic republic

• Distrust of US• November 1979: US

Embassy taken over ▫52 Americans taken hostage▫Carter administration fails to

negotiate release▫April 1980: Rescue mission▫ January 20, 1981: Hostages

released after 444 days in captivity