President Jimmy Carter's economic legacy

0:01NPR

0:11So, it is Friday, and that means it is time for Indicators of the Week.

0:20I'm Jeff Guo, and this week, Planet Money, we are taking over. I'm here with fellow Planet Money host, Erica Barris. So happy to be here. Along with indicator friend of the show and host of the environmental podcast, Outside In, Nate Hedgie. Thanks for having me again. Good to see you. Today, we have three economic indicators focusing on the legacy of our late 39th president, Jimmy Carter. One term, but got a lot of stuff done. 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.

0:56That is all coming up after the break. This message comes from NPR sponsor Zendesk, introducing the next generation of AI agents built to deliver resolutions for everyone. With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30 % of interactions instantly, quickly giving your customers what they need. Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier. That's the Zendesk AI effect. Find out more at Zendesk.com. Okay, indicators of the week. So my indicator has to do with one very bold decision that President Carter made.

1:38A decision that would radically change the fate of the American economy and the discipline of macroeconomics itself. Is this the craft beer that you were talking about earlier? It's bigger than craft beer, believe it or not. Okay, and just to set the scene, right, this is the 1970s. This is, you know, it's the era of Watergate. The Vietnam War was coming to an end. Star Wars just came out. Disco was happening. You know, exciting times. Right, 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 most serious domestic problem.

2:16That 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. Right. Fighting inflation is supposed to be the Fed's job. 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.

2:57The guy's name is Paul Volcker. The infamous Paul Volcker. 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 going to be these painful consequences. And this this was a very bold thing for a first term president to say. Yeah, because that's not something you want to say when you're running for re-election.

3:34No, he was running for re-election 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 a while. Jimmy Carter did not end up getting re-elected. But this was also kind of the birth of the Fed as we know it today. this independent and powerful custodian of the economy. All right. So my indicator is six 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.

4:16Does anybody want to take any guesses on what those industries are? Railroads? Yeah, good. Railroads is one. Did he deregulate media? 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. Beer. There it is. Beer. So basically all the pillars of modern life. The most important things in the world. Yeah. 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.

5:03Huh. Yes. So economists thought that all this regulatory activity was contributed 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. Huh. He signed one, 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.

5:38There was a Communications Act that removed restrictions on things like long-distance phone service and, you know, did really important things for cable TV. 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. There was a puppy channel? Yes, there was a puppy channel back in the 90s. Was there a kitten channel? There was not a kitten channel. I mean, there could have been. I don't know. But I definitely remember the puppy channel. Failure of the free market. 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.

6:17And 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. I think joy is a little bit of a stretch for those beers. 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? Yeah. So my indicator of the week is one point three billion dollars.

6:56And 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? Jimmy Carter, maybe? Yes. OK. 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 Americans to turn down their thermostat during an oil crisis. How else is he going to stay warm? I know, exactly. I think he would have 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.

7:35And 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. Yeah, nobody's going to crank up the heat. 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.

8:13It'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. Wow. How do I know if I have one of those special windows? Look at your heating bill. Yeah. Are you spending a ton of money on your heating bill? Maybe take a look at your windows. And there's another thing, too. Even if you do have those windows, the metallic coating kind of starts to wear down every 10 to 15 years.

8:49So you don't have to buy new windows, but you can apply a new coating. Wait, is that true? Which is a lot cheaper than getting. That's true. Right. Yeah. Okay. One more thing to add to my maintenance list. Yeah. And it wasn't just windows. His legacy in terms of energy conservation is much broader, from more efficient appliances to solar panels. You all remember that he had solar panels on top of the White House? Oh, yeah, of course. Legendary. Ahead of his time. Yeah, and without this legacy, one nonprofit energy company estimates that energy consumption in the U.S. would be 60 percent higher and our carbon emissions would be 80 percent higher.

9:24Wow. Thanks. Thanks, Jimmy Carter. Thanks, Jimmy Carter. 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.