Financial Crisis and the Prophecy of Jimmy Carter

No prophet is accepted in his own country, and so it is with Jimmy Carter. He warned of the financial and political crises now crashing down around us. America rejected that prophecy and it became the greediest of times, the most profligate of times. It was the era of Ronald Reagan.

In 1979, Carter recognized that our country was headed in the wrong direction. In a most basic act on democracy, he went to the people and asked them what they saw the problem to be. The people told him that "we are confronted with a moral and a spiritual crisis" that was more important even than the crippling stagflation of the time. They said "we are ready to experiment ... deal with the energy problem on a war footing ... the moral equivalent of war, Mr. President, don't issue us BB guns."

Paycheck Americans were asking him for a bold action program. They were ready to sacrifice, to give our country direction and specifically to do something about the imported inflation and unemployment that came with energy dependence.

Carter put all of this in a speech that has been denigrated as the "Malaise Speech." If you go back and read it, you will see it is good economics, a lot of honest politics and a brilliant piece of rhetoric.

That speech finishes up with a bold call to an explicit and detailed national energy plan. It set goals: “never use more foreign oil than we did in 1977... cut our dependence on foreign oil by one half by the end of the next decade ... 20 percent of our energy coming from solar power by the year 2000." It proposed an institutional structure: "an energy security Corp.... this nation's first solar bank... an energy mobilization board and authority for mandatory conservation." If only we had done it!

That plan could have been written yesterday and would make brilliant good sense to implement tomorrow. It offers exactly the kind of call to redemptive politics and corrective economics that 80 percent of the people are calling for when they say we are going in the wrong direction and need change.

That speech was well received because the people were ready. But in the end the speech failed.

It failed because pundits, pollsters and lobbyists realized it was a threat to the status quo. It was an action plan, not a complaint. Carter never used the word malaise; that's a media term. It is their word and their condemnation which is remembered in history.

Yet Carter was still able to establish the beginning of a national energy policy. Between 1979 and 1983, America reduced oil imports by 50 percent.

Reagan was elected and, symbolically, took the solar panels off the roof of the White House to show the energy crisis was, along with the Carter administration, over. Now we know how foolish that was.

America began its long period of denial. Reagan called it "Morning in America" but it was actually the misguiding light of unbridled consumption and corrupting debt.

Reagan and Bush I and II thought we could spend our way out of any problem. Vice President Cheney justified trillions of dollars in fiscal deficits with: "Reagan proved deficits don't matter." Instead of savings and investment, we had tax cuts and crony capitalism, with huge defense spending to counter a collapsing communism.

This was the time of trade and fiscal deficits, the stagnation of wages, the seeds of the stock market and housing bubbles, and the privatizing or outsourcing of everything including our military.

The age of foolishness introduced us to those Young Republicans who are now so famous: Jack Abramoff, Ralph Reed and Grover Norquist and their seniors and mentors Karl Rove, Tom Delay and Newt Gingrich. These are the Reaganites who teach that government can do no right and they will run the government to prove it - with the results you would expect and we are now suffering.

If we had listened to Carter when the problems were manageable, we would not now be near financial and economic melt down. But the winners write history and in this case that included labeling Jimmy Carter as confused and ineffectual.

The extraordinary, and extralegal, bailouts by the Federal Reserve are not really comprehensible even to the bankers. But be assured that it was the deregulation of our financial system that enticed, or to use the Republican word "incentivized", people to bid up stocks to irrationally exuberant levels and to make "liar" loans to people they knew were fabricating income and assets.

But the era of Reagan is ending and this too shall pass. Your 401(k) may never be the same but we will resurrect the virtues of thrift, family and community that Jimmy Carter so represented.