President Jimmy Carter's economic legacy

Summary

President Jimmy Carter's Economic Legacy: A Comprehensive Overview

In the January 3, 2025 episode of The Indicator from Planet Money, NPR hosts Jeff Guo and Erica Barris delve into the multifaceted economic legacy of the 39th President of the United States, Jimmy Carter. Joined by Nate Hedge, host of the environmental podcast Outside In, the discussion explores Carter's pivotal decisions that shaped modern macroeconomics, influenced key industries, and left a lasting impact on energy conservation.

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1. Inflation Control and the Rise of the Federal Reserve's Power

Bold Decisions Amidst Turbulent Times

President Carter assumed office during a period marked by significant economic challenges, notably the rampant inflation of the 1970s—a decade characterized by double-digit inflation rates. Unlike his predecessors, who employed half measures such as government price controls (a strategy deemed unsustainable by economists), Carter took decisive action to address inflation head-on.

Nomination of Paul Volcker: A Turning Point

At [03:42], Jeff Guo highlights Carter's nomination of Paul Volcker as the Chairman of the Federal Reserve in 1979. Volcker was unambiguously committed to curbing inflation, stating, "I'm going to be really tough on inflation. I'm going to want to raise interest rates a lot to cool down the economy." Carter's unwavering support for Volcker, despite the potential for economic pain and political backlash, was a pivotal moment. Guo remarks at [04:35], "He was running for reelection literally the next year. So it was maybe not the smartest move politically, but it ended up being the right move for the American economy."

Establishing the Fed's Independence

This partnership not only succeeded in taming inflation but also cemented the Federal Reserve's role as an independent and powerful custodian of the U.S. economy. Erica Barris emphasizes at [05:03], "This was also kind of the birth of the Fed as we know it today." The collaboration between Carter and Volcker marked a significant shift in macroeconomic policy, prioritizing long-term stability over short-term political gains.

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2. Deregulation of Six Key Industries

Transforming Modern Life Through Deregulation

Erica Barris introduces her indicator at [05:20], revealing that Carter's administration deregulated six major industries, a move whose effects are still felt today. These industries include:

1. Airlines
2. Trucking
3. Railroads
4. Air Cargo
5. Cable Television
6. Beer

Enhancing Competition and Consumer Choice

Under Carter, the deregulation acts dismantled stringent controls that previously limited competition and innovation. For example:

• Airline Deregulation Act: Allowed the emergence of new airlines, diverse routes, and fluctuating prices, fostering a more competitive market.

• Trucking and Railroads: Introduced competition in these sectors, leading to more efficient services and lower costs for consumers.

• Communications Act: Removed restrictions on long-distance phone services, paving the way for the explosion of cable TV channels, including niche offerings like MTV and the playful "puppy channel."

• Beer Deregulation: Legalized home brewing, igniting the craft beer revolution and the proliferation of diverse beer flavors, such as the ubiquitous pumpkin spice varieties.

At [07:31], Erica Barris notes, "They lowered rates, it offered consumers more choices, and ended up being another contributor to declining inflation."

Long-Term Economic Benefits

These deregulation efforts not only reduced prices and spurred innovation but also played a role in controlling inflation. By fostering competition, Carter's policies ensured that industries remained dynamic and responsive to consumer needs, laying the groundwork for sustained economic growth.

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3. Energy Conservation and Household Savings

Addressing the Energy Crisis

Nate Hedge presents his indicator at [07:51], highlighting the annual savings of $1.3 billion that Americans enjoy on household heating and cooling bills—a direct legacy of Carter's energy conservation initiatives.

Establishment of the Department of Energy

One of Carter's significant contributions was the creation of the Department of Energy (DOE), which focused on research and development to enhance energy efficiency. This led to innovations such as advanced window technologies designed to reduce energy loss.

Innovative Window Technologies

At [08:10], Hedge explains how the DOE collaborated with the Berkeley Lab to develop a metallic coating for windows. This coating, "thinner than a human hair," reflects heat back into homes during winter and deflects it away in summer, drastically improving thermal efficiency. Erica Barris adds at [09:00], "Look at your heating bill. Are you spending a ton of money on your heating bill?"

Widespread Adoption and Maintenance

Today, over 80% of residential homes in the U.S. are equipped with these energy-efficient windows, which can reduce energy loss by up to 50%. While the initial cost is slightly higher, the long-term savings on energy bills make them a worthwhile investment. Additionally, the longevity of the metallic coating ensures continued efficiency with periodic reapplication every 10 to 15 years.

Broader Energy Conservation Efforts

Carter's vision extended beyond windows. His administration promoted energy-efficient appliances, solar panel adoption, and even famously installed solar panels on the White House—"[...] solar panels on top of the White House? Oh, yeah, of course. Legendary." at [10:12]—a testament to his forward-thinking approach to sustainable energy.

Environmental and Economic Impact

Without Carter's energy policies, estimates suggest that U.S. energy consumption would be 60% higher and carbon emissions 80% greater today. This underscores the profound and lasting impact of his commitment to energy conservation.

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4. Concluding Insights on Carter's Economic Legacy

President Jimmy Carter's tenure was marked by bold and transformative economic policies that have left an indelible mark on the United States. From stabilizing the economy through decisive inflation control measures and empowering the Federal Reserve, to deregulating key industries to foster competition and consumer choice, Carter's initiatives were instrumental in shaping modern economic landscapes.

Moreover, his proactive stance on energy conservation not only addressed immediate crises but also laid the foundation for sustainable practices that benefit both the economy and the environment. The $1.3 billion annual savings on household energy bills is a testament to the enduring benefits of his policies.

While Carter faced political challenges, including losing his reelection bid, his economic legacy stands as a beacon of effective leadership and visionary policy-making. As Jeff Guo aptly summarizes at [10:27], "Thanks, Jimmy Carter." Indeed, Carter's contributions continue to resonate, illustrating the profound impact that presidential decisions can have on a nation's economic trajectory.

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Production Credits: This episode was produced by Corey Bridges with engineering by Gilly Moon, fact-checked by Cooper Katz McKim, and edited by Kate Kincannon. The Indicator is a production of NPR.

Transcript

[NPR Announcer]

Npr.

[Jeff Guo]

So it is Friday, and that means it is time for Indicators of the Week. I'm Jeff Guo, and this week Planet Money we are taking over. I'm here with fellow Planet Money host Erica Barris.

[Erica Barris]

So happy to be here along with.

[Jeff Guo]

Indicator, friend of the show and host of the environmental podcast Outside In, Nate Hedge.

[Nate Hedge]

Thanks for having me again.

[Jeff Guo]

Good to see ya.

[Erica Barris]

Today we have three economic indicators focusing on the legacy of our late 39th president, Jimmy Carter.

[Nate Hedge]

One term, but got a lot of stuff done.

[Jeff Guo]

So much stuff done. We're going to talk about inflation control and the power of the Fed. We're going to talk about energy consumption and household heating costs, airline prices and craft beers. That is all coming up after the break.

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[Jeff Guo]

So my indicator has to do with one very bold decision that President Carter made, a decision that would radically change the fate of the American economy and the discipline of macroeconomics itself.

[Nate Hedge]

Is this the craft beer that you were talking about earlier?

[Jeff Guo]

It's bigger than craft beer, believe it or not.

[Nate Hedge]

Okay.

[Jeff Guo]

And at the scene, right? This is the 1970s. This is. No, it's the era of Watergate. The Vietnam War was coming to an end.

[Nate Hedge]

Star wars just came out, disco was.

[Erica Barris]

Happening, you know, exciting times.

[Nate Hedge]

Right.

[Jeff Guo]

And it was also a very dramatic time for the economy because when Carter took office, the number one economic issue on people's minds, a more serious domestic problem, that problem is inflation. It was inflation. The 1970s was the era of double digit inflation. And okay, before Carter, the previous presidents, they'd kind of taken half measures to fight inflation. Nixon, for instance, he was a fan of government price controls, which any economist will tell you is not a long term solution to inflation.

[Erica Barris]

Right. Fighting inflation is supposed to be the Fed's job.

[Jeff Guo]

Exactly. That is the general consensus today. But back then, the Fed was a lot more timid about fighting inflation. But with Carter, that all changed because in 1979, Carter nominates this new guy to be Fed chairman. The guy's name is Paul Volcker.

[Erica Barris]

The infamous Paul Volcker.

[Jeff Guo]

Yeah. So when Carter nominates Volcker, Volcker's like, just to warn you, if I'm Fed chairman, I'm going to be really tough on inflation. I'm going to want to raise interest rates a lot to cool down the economy. It'll be painful. There might be a recession, people might lose their jobs. And to his credit, Carter says, fine, you handle the economy, you handle inflation. Even if there are gonna be these painful consequences. And this, this was a very bold thing for a first term president to say.

[Nate Hedge]

Yeah, because that's not something you wanna say when you're running for reelection.

[Jeff Guo]

No, like he was running for reelection literally the next year. So it was maybe not the smartest move politically, but it ended up being the right move for the American economy. As the story goes, Volcker did end up taming inflation. And yes, it was painful for while Jimmy Carter did not end up getting reelected. But this was also kind of the birth of the Fed as we know it today. This independent and powerful custodian of the economy.

[Erica Barris]

All right, so my indicator is 6 and is also related to Jimmy Carter's effort to control inflation. While he was president, he deregulated six big industries. We're still feeling all the effects of those today. Does anybody want to take any guesses on what those industries are?

[Jeff Guo]

Railroads.

[Erica Barris]

Yeah. Good. Railroads is one.

[Nate Hedge]

Did he deregulate media?

[Erica Barris]

Media was another one. Yep. So the six big industries we have airlines, trucking, rail or railroads, air cargo, cable tv and of course, beer.

[Nate Hedge]

Beer.

[Jeff Guo]

There it is, basically all the pillars.

[Erica Barris]

Of modern life, the most important things in the world. Yep. So when Carter took office in 1977, there were all these agencies that regulated things like interstate commerce and the airlines and telecommunications. And a big part of how they regulated was setting up these conditions for, like, trains and trucks and airlines, like, who could even use them, where they could go, even how much the airlines were able to charge for flights.

[Nate Hedge]

Huh?

[Erica Barris]

Yes. So economists thought that all this regulatory activity was a contributor to rising prices because there wasn't that much competition. Industries wouldn't innovate, they'd keep prices high. And that actually ended up benefiting the regulated industries and ended up hurting consumers.

[NPR Announcer]

Huh.

[Erica Barris]

He signed, won the airline deregulation act. And that is part of why we have all these new airlines. They can just kind of pop up and, you know, the routes can change and prices can vary so much. That wasn't really the case before he signed one to deregulate the trucking industry, another one to introduce competition in rail rates. There was a communications act that removed restrictions on things like long distance phone service and, you know, did really important things for cable. That's why we have, like, 500 channels. Like, MTV would not have existed otherwise. And the short lived puppy channel would not have existed otherwise.

[Nate Hedge]

There was a puppy channel?

[Erica Barris]

Yes, there was a puppy channel back in the 90s. Yeah.

[Jeff Guo]

Was there a kitten channel?

[Erica Barris]

There was not a kitten channel. I mean, there could have been. I don't know, but I definitely remember the puppy channel.

[Jeff Guo]

Failure of the free market.

[Erica Barris]

It's not too late. Not too late. There was also an act to deregulate air cargo, which is kind of a key to the way, like, our supply chains work today. And the last of these deregulatory acts was beer. He Jimmy Carter legalized home brewing, which led to, like, the craft beer revolution and the 8,000 pumpkin spice beers that we can all enjoy every year.

[Nate Hedge]

I think enjoy is a little bit of a stretch for those beers.

[Erica Barris]

It depends on who you are. All this allowed there to be all these new companies and products and markets. It lowered rates, it offered consumers more choices, and ended up being another contributor to declining inflation. So that was my indicator. It was six. Nate, what's yours?

[Nate Hedge]

Yeah. So my indicator of the week is $1.3 billion, and it's tied to cost savings and energy consumption. That's how much America saves every year on household heating and cooling bills. And you want to know why?

[Erica Barris]

Jimmy Carter? Maybe. Yes. Okay.

[Nate Hedge]

Big surprise. Jimmy Carter. So one of Carter's big pushes was energy conservation. Of course, he got ridiculed for wearing a cardigan and telling American to turn down their thermostat during an oil crisis.

[Erica Barris]

How else is he gonna stay warm?

[Nate Hedge]

I know exactly I think he would've been more well received now in this time than he was in the 70s wearing that cardigan. Anyways, he also created the Department of Energy during his administration, and this agency funded research and development into better windows, which is where that $1.3 billion comes in. Now. I'm sure all of us have lived in old drafty houses with old windows. Oh, yeah, and before the oil crisis, people didn't worry too much about cranking up the heat. Energy was cheap. But the energy crisis of the 70s, it changed all of that.

[Erica Barris]

Yeah, nobody's going to crank up the heat.

[Nate Hedge]

Yeah, exactly. We're keeping it at 55. Well, maybe 65. So back to the DOE's research and development. It wanted to focus on more efficient windows to keep heat in. They worked with the Berkeley lab to develop a special metallic coating. It's thinner than a human hair. That reflects heat back into the home in the winter and away from the home in the summer. Nowadays, more than 80% of all residential homes have these windows. They cost about 10 to 15% more than your regular windows, but they can reduce your energy loss by up to 50%. And of course, that cuts your energy bills as well.

[Jeff Guo]

Wow. How do I know if I have one of those special windows?

[Erica Barris]

Look at your heating bill.

[Nate Hedge]

Yeah, look at your heating bill. Are you spending a ton of money on your heating bill? Maybe. Take a look at your windows. And this is another thing, too. Even if you do have those windows, the metallic coating kind of starts to wear down every 10 to 15 years. So you gotta. You don't have to buy new windows, but you can, like, apply a new coating.

[Erica Barris]

Wait, is that true?

[Nate Hedge]

Cheaper than Giddin. That's true. Yeah.

[Erica Barris]

Okay.

[Jeff Guo]

One more thing to add to my to do list.

[Erica Barris]

Yeah.

[Nate Hedge]

And it wasn't just windows. His legacy in terms of energy conservation is much broader, from more efficient appliances to solar panels to. Do you remember that he had solar panels on top of the White House?

[Erica Barris]

Oh, yeah, of course. Legendary.

[Jeff Guo]

Ahead of his time.

[Nate Hedge]

Yeah. And without this legacy, one nonprofit energy company estimates that energy consumption in the US would be 60% higher and our carbon emissions would be 80% higher.

[Erica Barris]

Wow.

[Jeff Guo]

Thanks. Thanks, Jimmy Carter.

[Erica Barris]

Thanks, Jimmy Carter.

[Jeff Guo]

This episode was produced by Corey Bridges with engineering from Gilly Moon. It was fact checked by Cooper Katz McKim. Kate Kincannon is our editor. And the indicator is a production of NPR.

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