1970s versus 201Xs

The kids wearing plaid pants and striped shirts with long hair watching the “Brady Bunch”, “Adam-12” and “Emergency” are the men and women running our government today. It seems these “kids” have no recollection of the politics or monetary policy of the 1970s, instead only remembering the Bicentennial, bell bottom jeans, and Nerf footballs. A careful examination will show a decade that suffered an energy crisis causing an immediate recession. The same happened in 2008 when oil prices rose rapidly to $147/bbl driving our economy over a cliff to financial Armageddon. Nixon removed the Gold standard in 1971, and the Federal Reserve enacted new monetary policies to bring recovery. No radical method helped Nixon or Ford, and a hopeless Democrat was elected; promising prosperity and unable to deliver as we added the word “stagflation” to our vocabulary. As America entered the 1980s, after seven years of lackluster growth interest rates rose rapidly crushing the housing recovery. I remember my own parents struggling with 18% rates, job loss, and our manufacturing shift overseas as Chrysler sought a bailout and American’s learned “Made in Japan” meant quality compared to our union produced assembly lines.

For ten years inflation was high, reaching 13.5% in 1980 and unemployment soared above 10%, but like today the same policies were held: Federal spending never slowed, and tax increases for the rich were proposed. Gold prices accelerated and fueled speculation the end was near and the economy would not survive. Talk of wind mills, solar panels, energy conservation, and self-sufficiency abounded. Reviewing newspapers from the early 1980’s it is easy to spot Tip O’Neill’s 100-plus Democrat majority was adding to federal spending faster than the revenues received, not unlike the recent Pelosi dynasty. I found one article stating for every 1% increase in unemployment Federal spending deficits increased by $25-40 billion during the 1982 recession because unemployment drives down revenue and causes government to spend more.

Many argue the cornucopianism of Ronald Reagan saved the economy through supply-side tax cuts. I would argue a direct correlation should be made between recovery and oil prices as the UK's discoveries of North Sea oil increased supply and probably fueled the recovery of the 1980’s and 1990’s. The 1970’s are remembered for Disco and parties, instead we should truly understand the damage of failed economic policies. We are three years into the current economic decline and the kids I knew now run Congress; I would offer 1970’s history provides more answers than the academic speculation used today.