Ford's Economic Record Belies His Reputation
Thursday, December 28, 2006
The economic policies of Gerald R. Ford are usually remembered as a joke. Soon after he took over as president, in August 1974, he tried to tame runaway price increases by urging Americans to wear round red lapel pins emblazoned with the initials WIN, for "whip inflation now."
That didn't work, of course, and the pins soon disappeared amid public ridicule.
But Ford didn't give up the fight against what was then called stagflation: a debilitating mix of rapid inflation, high unemployment and slow economic growth. In fact, before his 30-month administration ended, he discarded his original plans and cobbled together an unconventional set of programs that succeeded, at least for a while, in slowing the country's financial slide.
Among his economic policies, "what President Ford is most remembered for is the inflation campaign, which was kind of silly," said Alice M. Rivlin, a former vice chairman of the Federal Reserve Board and a director of The Washington Post Co. "But in the end, I think, he did quite well."
The U.S. economy was in sad shape when Ford replaced the disgraced Richard M. Nixon to become the nation's 38th president. Then it got worse. The economy fell into the steepest recession since World War II, coupled with an upward price spiral that was faster than at any time in modern memory.
Unemployment approached 9 percent, inflation ran at a 12 percent annual rate, and the gross domestic product was flat or declining. Energy prices, in particular, soared due to an oil shortage.
"The '70s were probably the most difficult decade in which to formulate economic policy," Rivlin recalled. "Economists don't know how to cope with inflation, slow growth and unemployment at the same time."
Initially, Ford believed that fiscal austerity, a tenet of his Republican Party, would solve the country's woes. He convened a summit called the Conference on Inflation, with economists and leaders of business and labor focusing on recommendations to slow price increases. He then proposed to cut federal spending and raise taxes and, for a short period, he embraced the idea of a voluntary wage-price freeze.
Ford also hoped to jawbone his way out of the crisis by going on national television in October 1974 and urging citizens to "make up a list of 10 ways you can save energy and fight inflation." In a separate speech to Congress, Ford declared that inflation was "public enemy number one" and asked Americans to wear the anti-inflation pins.
WIN was laughed into oblivion as a hollow gimmick, and Ford was forced to regroup. Under the tutelage of Alan Greenspan, then chairman of the Council of Economic Advisers and later Federal Reserve chairman, Ford was persuaded that the most pressing problems were unemployment and sluggish economic growth, not inflation.
As a result, Ford decided to accept exactly the opposite remedy that he prescribed at first. Under pressure from the Democratic-controlled Congress, he endorsed measures that increased spending and cut taxes rather than the other way around. The goal: to stimulate economic growth despite the danger, which he continued to battle with dozens of vetoes, that those actions might widen the federal budget deficit.
"When the chips were down, in the interest of providing stimulus, he agreed to a tax cut and other measures that helped the economy recover from the 1975 recession," said Charles L. Schultze, chairman of the Council of Economic Advisers under President Jimmy Carter. "He came around to realize that the economy would be better off with a stimulus than without one."