On the September 16 edition of MSNBC's Hardball, host Chris Matthews misleadingly suggested that concern over inflation is the sole province of Republican policymakers. He described it as the "number-one bugaboo" of Republicans and asserted, by contrast, "Democrats live with inflation. Jimmy Carter had it. He didn't care that much." But Matthews, who worked in the Carter White House for four years, should know about Carter's efforts to curb inflation. He should know that, as part of those efforts, Carter appointed Paul Volcker as Federal Reserve chairman; ultimately, control of inflation was achieved with Volcker at the helm. And Matthews apparently overlooked President Clinton's reappointment in 1996 and 2000 of current Federal Reserve Chairman Alan Greenspan, who, like Volcker, is known for his focus on controlling inflation.
Carter announced the appointment of Volcker, a former president of the Federal Reserve Bank of New York, on July 25, 1979. According to a Washington Post article the following day, Carter said that Volcker "shares my determination to vigorously pursue the battle against inflation at home and to ensure the strength and stability of the dollar abroad."
An August 1, 1979, Associated Press article reported that Volcker identified inflation as the nation's number-one problem during his hearing before the Senate Banking Committee, which approved his nomination unanimously. The business community responded to Volcker's nomination with "euphoric approval" regarding him "as the right man to lead, at last, an all-out effort to fight inflation," according to an August 21, 1979, AP article.
Soon after his appointment, Volcker tightened the money supply and raised interest rates, which halted job growth nationwide and created a recession. Volcker argued that this approach would lower prices and wage demands, thereby depriving the system of inflationary expectations. By 1983, the Federal Reserve System led by Volcker had "engineered a decline in the inflation rate to about 5%," as noted in a report for the Carnegie-Rochester Conference on Public Policy. Some economists and political commentators have since credited Carter for the economic expansion that followed. In an August 31, 1997, article for Slate.com, editor Jacob Weisberg argued that Carter "deserves considerable credit for choosing Paul Volcker in 1979. Since Volcker was committed to taming inflation even at the cost of putting the economy into a recession just before the 1980 election, Carter was committing honorable suicide by picking him." National Association of Realtors chief economist James F. Smith echoed this sentiment in a December 18, 1999, Philadelphia Inquirer article. "If you want to give any credit, give it to President Jimmy Carter, who took the first step in the right direction in the 1970s by appointing Paul Volcker as Fed chairman," Smith was quoted as saying. "Volcker started it, and Greenspan has carried on."
The Los Angeles Times included both Volcker and Greenspan, who was appointed by President Reagan in 1987, in its list of the "50 People Who Most Influenced Business This Century," billing them both as "inflation tamers" [Los Angeles Times, 10/25/99]. Following his election in 1992, Clinton and his economic team heeded Greenspan's advice and announced a five-year deficit reduction plan during Clinton's first State of the Union address -- a strategy devised to both address the deficits created under the Reagan administration and curb inflation going forward. Bob Woodward wrote in a November 12, 2000, Washington Post article titled "Behind the Boom" that the proposal went on to pass Congress and stimulate an unprecedented era of economic expansion coupled with minimal inflation:
In August, Clinton's deficit-reduction plan passed Congress by the narrowest possible margins, 218 to 216 in the House, and 51 to 50 in the Senate, with Vice President Gore breaking the tie. Not a single Republican had voted for the plan, which cut $ 500 billion from the deficit over the next four years by increasing taxes and cutting some federal spending. The only real Republican support had come from Alan Greenspan.
Clinton reappointed Greenspan in 1996 and 2000. In a 2000 paper titled "Anatomy of Clintonomics," Robert Pollin, co-director of the University of Massachussetts Amherst's Political Economy Research Institute, noted that the rate of inflation under Clinton was "kept down to the lowest range levels of the Kennedy/Johnson years." The average rate of inflation during the Clinton presidency was 2.6 percent.*
From the September 16 edition of MSNBC's Hardball with Chris Matthews:
MATTHEWS: OK. Let's talk something I grew up with, which is worries about inflation in this country. The number-one bugaboo for Republican officeholders since the time I was born and paid attention to politics was inflation. Democrats live with inflation. Jimmy Carter had it. He didn't care that much. Republicans hate inflation, because it takes money away from people who have it and gives it to people who don't. That's what inflation does. It basically reduces amount of the money you're holding, the credit you're holding, and it reduces your debt.
* This figure was calculated by averaging the Consumer Price Index (All Urban Consumers) "average-to-average" annual percent changes between 1993 and 2000.