RONALD REAGAN WON the 1980 presidential election for many reasons—energy woes, taxes and regulations, crises in Iran and Afghanistan, discomfort with the sexual revolution, a vague yet unmistakeable “crisis of confidence” that Reagan’s Democratic rival, President Jimmy Carter, infamously described in his 1979 “malaise” speech. But all that took second place to a single, highly specific metric: inflation.
By October 1979, Americans agreed by an overwhelming margin that inflation was the most important issue facing the country. A New York Times/CBS News poll found that 40 percent of the country named it as their top concern, more than twice the number that picked the next biggest concern, energy. That 40 percent figure arguably understated the public’s sense of alarm: Another 20 percent said inflation was an important problem (if not the most important), and 8 percent said the nation’s biggest issue was “the economy,” which could easily cover concerns about stagnant wages and rising prices. Even those who named “energy” were likely worried about supply constraints and spiraling costs.
It’s not hard to understand why Americans were so concerned. Inflation, as measured by the Consumer Price Index, hit 13.3 percent in 1979, its highest level in more than three decades. In 1980, that figure came in at an only-slightly-reduced 12.4 percent. All of this came in the context of a decade that saw dramatically slower overall economic growth than in the previous two decades, and a substantial reduction in typical family income, even as two-earner households became more common with the mass entry of women into the workforce. Inflation was eating into family earnings, to the point where some were making more on paper yet found themselves with reduced buying power.
American politicians had tried to control inflation before. The presidents and power brokers of the 1970s had tried price controls, public campaigns, pressure programs, blame games, and attempts to redefine basic economic terminology. The parties differed on the specifics, but both seemed to agree that the voting public and the private sector were to blame, not the bureaucrats and politicians in charge.
Inflation, in short, was a political problem, in the sense that it caused problems for politicians. But it wasn’t one America’s politicians knew how to solve.
On the contrary, America’s political class had spent the ’70s failing to fix inflation, or actively making it worse, often with policies designed to address other political and economic problems. That decade’s price hikes were prolonged and exacerbated by political decisions born of short-term thinking, outright cowardice, and technocratic hubris about policy makers’ ability to enact sweeping changes and manage the macro-economy.
Now, more than 40 years later, it’s (kind of, sort of) happening again.
WE WERE ALL KEYNESIANS THEN
INFLATION CAME TO a head as a political issue in 1980, but the story began more than a decade earlier. The spirit of that era was captured in a December 1965 cover story for , dedicated to the economist John touted the near-total domination of Keynes’ theories of macroeconomic management.
