Then Everything Changed

by Jeff Greenfield

  It was, as author John Hersey described after spending a week of almost continuous close-hand observation of the President, “almost as if he were letting decisions happen to him.”

  Yes, Ford was returning to office under the most politically difficult circumstances any President had ever faced. However, even if President Ford had been gifted with a Republican Congress eager to do his bidding . . . if he had been blessed with the vision to make clear what that bidding was . . . if he had won a clear plurality of the popular vote . . . it still would have made no more than a marginal difference. As Senator Sam Ervin of North Carolina noted, in one of those down-home folk-wisdom observations for which the Harvard Law School graduate was famous, “Jerry Ford was caught in the barn when thirty years of chickens came home to roost.”

  FOR A GENERATION, post-World War II Americans had been living under what seemed like laws of nature:—Life grew steadily richer, or at least more comfortable, year by year. In the 1950s, the real income of the average American leapt by 37 percent. Through the 1960s, it grew by 34 percent; and those increased incomes enabled these Americans to enjoy the explosion of consumer wonders once the restraints of wartime ended: televisions, air conditioners, refrigerator-freezers, washer-dryers.

  —This ever-increasing affluence was powered by the unbroken economic growth of what was the unchallenged dominant world economy. From the end of World War II through 1970, the U.S. economy grew by an average of 5 percent every year, and the U.S. economy, the only one not ravaged by World War II, was permanently preeminent. “Made in the USA” was a powerful selling point; “Made in Japan” was a joke.

  —The value of what the average American saved was insured by a stable, gold-backed U.S. dollar, relatively untouched by the inflation that had ravaged countries from Germany to China. The federal budget, too, was a model of prudence, under Democrats and Republicans. The two decades of the 1950s and 1960s saw budget deficits that averaged barely $5 billion a year.

  —The federal government was, if not a partner, then at least an ally in raising the comfort level and the upward mobility of Americans. The GI Bill of Rights had sent millions of veterans to college, making middle-class men and women out of working-class boys and girls. Subsidized mortgages had put this generation into suburban homes, and a massive interstate highway system had linked their work to their homes, enabling them to enjoy the fruits of their labor in comfort undreamed of by their younger selves during the Depression and the war. It was the kind of assistance that persuaded millions that the sentence: “I’m from the government and I’m here to help” was not the most terrifying sentence in the English language.

  —And each of these certainties combined to form one overarching certainty: If life had become better for us than it was for our parents, life for our children would be better than it had been for us.

  By the late 1970s, every one of those certainties had been knocked into a cocked hat.

  No one could say for sure when it had started, or where it had come from, for there was no one source; it was a series of assaults, from disparate sources without and within.

  Part of it was the series of shock waves that were not economic at root: the assassinations, the war in Vietnam, the crimes that drove a sitting President and Vice President from office, the spread of racial and generational violence, the cultural upheavals that upended a long-established sense of how life was to be lived, how the young should behave, how safe our streets were supposed to be.

  Part of it was the hidden cost of the Vietnam War, not in lives but in dollars. President Johnson had sought to win that war on the cheap, neither divulging its real cost nor asking Americans to pay that cost with taxes. It was, therefore, “paid” for with cheaper dollars, and the first real contagion of inflation had begun.

  The massive American aid to its defeated enemies, and its decimated allies, had created a more prosperous world beyond America’s borders, and those nations had begun to compete for the natural resources—coal, oil, minerals, foods—that were the stuff of affluence. With that competition, the price of these essentials began to rise. Worse (for America at least), these nations began to offer cheaper, better products that were once our exclusive domain. Radio and televisions, appliances of all sorts, began to flood into our ports—even automobiles, the ultimate symbol of American affluence and mobility, began to sport odd names: Toyota, Honda, Volkswagen. And as these imports arrived, good-paying jobs for the skilled and unskilled began to depart. There was more bad news from abroad: The dollars that flowed into Paris, Bonn, Zurich, and Tokyo turned into a flood that investors increasingly sought to turn into the gold that they backed. So threatened was Washington by the potential run on the dollar that in April 1971, President Nixon took the United States off the gold standard. Currencies were cut loose from their mooring, and the prices of foreign goods, from coffees to automobiles, soared. The only way to appeal to dollar-wary investors was with sharply higher interest rates, which meant that at home, auto loans, mortgages, and cheap credit began to disappear.

  And when the international oil cartel struck at the United States for its pro-Israel policies by quadrupling the price of oil in late 1973, the blow was felt everywhere: not just in the massive inconvenience and lost hours waiting in gas lines but in the hundreds of billions of dollars added to the cost of everything from a gallon of gas to a tank of heating oil to the plastics and synthetics in homes and clothes. If modern America had, in effect, been built on a foundation of cheap, abundant petrochemicals, how secure was that foundation if cheap, abundant petrochemicals were a thing of the past?

  All of these ills had afflicted America by 1976, and Gerald Ford’s response in the two and a half years he spent filling Nixon’s second term offered no indication that he grasped the dimensions of what was ailing the American economy. Still, Gerald Ford had managed to retain the Presidency, even if it was the most unconvincing win since Rutherford B. Hayes’s “stolen election of 1876.” It was a testament to his amiable, unthreatening personality, and testament as well to a nagging sense of doubt about the little-known Georgia ex-governor.

  It was, further, testament to the tactical skill of Ford’s reelection team, which had managed to convince just enough voters that they were, indeed, “feeling good about America.” When Gerald Ford rose on January 20, 1977, and stood where no one expected him to be standing, he tried to reinforce that message.

  “I will say frankly that the American people delivered a divided message last November,” he said, with a smile. “But there is no doubt that this January, we are united in our confidence that the next hundred years will see a strong, prosperous, united America. Just as the divisions of war abroad, and a Constitutional crisis at home, are behind us, so will the partisan divisions of last year yield to a common effort on behalf of opportunity, security, and a better life for our children.” Unfortunately, Ford’s attempt at rhetorical flight, an enterprise always fraught with peril, was victimized by a passing exchange at an Inaugural celebration the night before with Michigan Congressman Guy VanderJagt, who had a reputation as a riveting public speaker. VanderJagt offered Ford one of his most surefire lines, which the President interpolated into his address without informing any of his advisors.

  “My fellow Americans,” Ford’s Inaugural concluded, “if there are any among us who doubt this great nation’s capacity to master whatever challenges it faces, let them remember this simple truth: American ends in . . . I-CAN!”

  (“That is undoubtedly true,” said ABC commentator George Will. “On the other hand, ‘Pelican’ also ends in I-CAN.”)

  Ford tried again two weeks later in his State of the Union speech to a joint session of Congress, with a dramatic gesture intended to symbolize his appeal for bipartisanship.

  “I am here, Mr. Speaker, with an open mind—and an outstretched hand.” And he turned to face the newly installed Speaker of the House, Tip O’Neill; unfortunately, having turned to his left and instead of his right, the President found himself extendi
ng his right hand to Vice President Bob Dole, whose right hand was permanently disabled by a World War II injury.

  What became clear within a few months was that even the most finely honed rhetoric, the most masterful political stagecraft, could not save the second Ford administration from disaster. The White House and Cabinet were exercises in dissonance; Treasury Secretary Bill Simon and chief economic advisor Alan Greenspan urged draconian measures to curtail inflation, while Ford’s political team warned of the dire consequences of major budget cuts. The overwhelmingly Democratic Congress pushed to expand Medicare, Medicaid, aid to education, and tried to ease the pain of inflation by building in automatic increases in Social Security and other entitlements (food stamps, which cost the Treasury $13 million in 1961, cost more than $12 billion when Ford’s term ended). And the world beyond America’s borders, increasingly affluent, with currencies increasingly valuable against the no-longer-invincible dollar, was driving up the cost of . . . everything.

  Tens of millions of Americans, who could remember the days when they would shake their heads at inflation-ravaged nations and take comfort in the dollar that was “good as gold,” now began to feel the impact viscerally. With inflation hitting 10 percent or more, their savings would lose half their value in five years; the $400-a-year college education of earlier days had become a $7,000-a-year burden, without counting room and board. The 37-cent gallon of gasoline at the start of the 70s would hit $1.60 by decade’s end.

  True to his instincts, Jerry Ford tried once again to convince Americans to meet inflation by changing their behavior. In a speech from the Oval Office, Ford sat in front of a fireplace rather than behind his desk, and wore a cable-knit cardigan sweater as he talked of “fighting the oil cartel with your thermostat,” and invoked the days when “Mom and Dad would put a few dollars a week into their Christmas Club account at the bank.” What Americans were actually doing with their money was what people do when their money begins to lose value: They began to spend it faster.

  “‘Never buy what you can’t afford’ was the admonition of our parents,” wrote Paine Webber economist Christopher Rupkey in the New York Times. “Today, the sentiment has been changed to: ‘You can’t afford not to buy it.’ ” And why not? Thanks to the booming business of credit cards, a consumer could buy the big-screen TV, the cutting-edge stereo, the nuclear-powered barbecue grill with a flick of the VISA card, and pay it off with cheaper dollars down the line. In 1975, Ford’s first full year in office, American consumers had borrowed $167 billion; by 1979, they were borrowing $315 billion.

  And when it came time to pay the money back . . . several million of them found that their jobs had disappeared. Astonishingly, the United States found itself with an economy where the price of everything was spiraling upward, while the economy itself was sputtering.

  The automobile industry, which had powered and symbolized America’s postwar industrial supremacy, was staggering under the accumulated weight of years of complacency. Years of declining quality, higher prices, and a preference for oversized gas-guzzlers had led to hard times in the early 1970s, when the Arab oil embargo had made the fuel-efficient Nissans and Toyotas attractive to the American buyer. All through the second half of the 1970s, the auto industry was still trying to recover the lost jobs, some 200,000 of them since the decade began. When Americans turned away from cars made here, it wasn’t just autoworkers who were laid off; so were the men and women who made steel, tires, windshields, brake linings, upholstery, car radios. When the Saudi squeeze hit in 1979, the American economy was hit in its most vulnerable spot, just as the U.S. auto industry was recovering from the effects of the first embargo back in 1973. Americans had begun to turn away from the smaller, fuel-efficient imports, back to the oversized gas-guzzlers of earlier times. When Ford displayed its models for the 1980 year, an executive proclaimed: “Welcome to the year of the Whopper.” Now the nightmare began all over again. California took the first hit in May; by June, Florida was running dry. By summer, the gas panic went national, sometimes with fatal results. In Brooklyn, a motorist died in a shoot-out when he tried to cut into a blocks-long line. On weekends that summer, anywhere from half to 90 percent of New York’s gas stations were shut for the weekend.

  By autumn, Ford was projecting losses of a billion dollars for the coming year; 250,000 cars were cut from its production schedule; seven plants were closed; and from River Rouge to Rawsonville, tens of thousands of workers, from the unskilled floor sweepers to the skilled diemakers and die casters to middle managers, were laid off. And once again, what afflicted the auto industry also afflicted steel, glass, rubber, electronics, travel, finance. With similar hard times coming to construction, apparel, and appliances, the economy of the richest nation on earth staggered; by decade’s end, the government reported a 5.5 percent drop in median family income: the worst ever recorded.

  (It wasn’t just the statistics that revealed what was happening. In 1978, writer-producer Norman Lear ordered up a drastic change in the plot line of The Jeffersons. Successful entrepreneur George Jefferson lost his dry-cleaning business and was forced to move to the Chicago projects where James and Florida Evans lived, and the show was retitled Hard Times.)

  By April 1979, pollster Pat Caddell, who’d worked for both McGovern and Carter, sent a memo to friends and colleagues that declared: “America is a nation deep in crisis . . . a crisis of confidence marked by a dwindling faith in the future. . . . It is the natural result of historical forces and events which have been in motion for twenty years. This crisis threatens the political and social fabric of the nation.”

  From the second term’s first days, Ford was taking incoming political fire from all sides on the economy. In the first nine months of 1977, the Democratic Congress passed laws mandating emergency public works programs, wage and price controls, extended unemployment benefits; Ford vetoed all of them. The White House sent to the Hill legislation that trimmed Social Security and Medicare increases; Speaker O’Neill and Senate Majority Leader Robert Byrd held a press conference at which they unceremoniously dumped the White House Emergency Budget Message into a wastebasket. Organized labor, its members watching their paychecks and savings eroded by the cost of living, staged strikes in both the public and private sectors, and when the government did mange to reach agreement with the U.S. Postal Service union, AFL-CIO Chief George Meany successfully urged the rank and file to reject the contract.

  If President Ford was looking for support from within the ranks of his party, he was looking in vain. For one thing, Republicans were hopelessly divided. Deficit hawks like Alan Greenspan urged deep cuts in spending—the same medicine he’d prescribed just before the 1976 election, when unemployment was running at 8 percent. (“The damn fool almost cost us the election!” Chief of Staff Dick Cheney thundered at a White House senior staff meeting. “Maybe next week he’ll try to sell us on privatizing Social Security!”) The Federal Reserve Board chair, Arthur Burns, was acutely aware of the political implications of interest rates: He’d obliged President Nixon with easy credit to help him win reelection in 1972, and he firmly believed any tightening of credit that would drive unemployment too high was politically unsustainable. So the Fed essentially did . . . nothing.

  And within the ranks of the conservative movement, a new doctrine was emerging, courtesy of economist Art Laffer, who argued that deep cuts in marginal tax rates could spur economic growth and therefore increase government revenues. Congressman Jack Kemp, former star quarterback for the Buffalo Bills and San Diego Chargers, was a forceful advocate for tax cuts, an idea that horrified more traditional conservatives. (“Maybe,” President Ford said, “it was Jack who played football once too often without a helmet.”) The problem was, this “supply side” idea had found favor with the single most significant voice in the Republican Party; and that voice was growing increasingly critical, on just about every important dilemma the Ford administration was facing.

  THE RIFT BETWEEN Gerald Ford and Ronald Reagan had n
ever really healed after their battle for the nomination in 1976. Reagan had campaigned that fall, but he had pointedly endorsed the party and its platform, rarely if ever invoking the name of the President. He had assumed until the very last days that Ford would lose to Jimmy Carter, thus enabling him to campaign in 1980 against a Democratic incumbent. And the Reagan team, it turned out, had done its part to help ensure that outcome. At a dinner of his inner circle in their Pacific Palisades home just after the President’s surprise election, Nancy asked how many of them had voted for Ford; only three hands went up. (When President Ford heard of this episode, he turned to Stu Spencer and said, “Let’s tuck that one way in the ‘payback’ file.”) Ford’s full term brought no sign of improved relations.

  “When did the trouble start?” Press Secretary Ron Nessen asked rhetorically. “I’d say about five minutes after the President left the Inaugural platform.”

  Ford put it this way to a biographer:

  “Reagan was right behind me—knife in hand.”

  When the administration concluded treaty negotiations to turn the Panama Canal over to the Panamanians, Reagan repeated his objections from his 1976 primary fight: “We bought it; we built it; it’s ours; and we should keep it.” When Washington and Moscow signed the SALT II agreement, providing modest cutbacks in the nuclear arsenals of the two nations, Reagan condemned it as “a dangerous exercise in wishful thinking about the intentions of our sworn adversary.” When Ford renewed his support for the floundering Equal Rights Amendment, Reagan warned of “opening the door to platoons of federal bureaucrats, burdening businesses with rules and regulations that will harm both men and women.” The only reason Reagan turned his fire away from Washington in 1978 was to campaign for Proposition 13 in California, the provision that slammed a lid on property tax increases. Even then, when the measure passed by a 2-1 margin in the spring of 1978, Reagan told a victory party, “We made one mistake—we should have had Prop 13 apply nationwide!” “Run, Ronnie, Run!” the crowd chanted at him, and he nodded: “You just may get your wish in two years!”