inflation Gerald R. Ford - Congress and energy





Rather abruptly, it seemed, Republicans faced the first post-Watergate congressional elections without their newfound buoyancy. Instead of confidence that the past would be safely forgotten, the failure of their credibility loomed as a major problem. With few weeks remaining before November, it hardly seemed possible for the White House to rejuvenate itself by stemming the serious inflation, but nevertheless, that became the major target during the fall of 1974.

All indicators were discouraging: inflation was still in the double digits, unemployment was rising, and the gross national product was in decline. The auto industry was laying off tens of thousands of employees. During Ford's first month in office, the Dow-Jones Industrial Average dropped ninety-nine points, and it fell another fifty in the week after the Nixon pardon. Nations heavily dependent on oil, including the United States, were still reeling from the impact of the Organization of Petroleum Exporting Countries' (OPEC) control of the market. Nixon's proposed "Project Independence," which aimed at making the United States self-sufficient in the production of energy, had never gotten beyond the public relations stage, and prospects of much forward movement were gradually reduced when the supply of fuel returned to more nearly normal levels. A new strategy for coping with the energy situation suddenly seemed less urgent.

Ford's response to the economic difficulties evoked more ridicule than respect. On 8 October he went before the Congress with a program to combat inflation. He proposed a tight lid of $300 billion on the federal budget. To absorb excess purchasing power, he asked for a $5 billion surtax on corporations and on individuals in the higher income brackets. But the centerpiece was a "Whip Inflation Now" plan. Ford introduced it by the acronym WIN and said, "There is one point on which all advisers have agreed: We must whip inflation right now."

Ford thought inflation could be whipped by the simultaneous efforts of little people to inhibit pressure on prices. He advised volunteers in the WIN program to "take all you want but eat all you take." Each family should also make a one-hour "trash inventory" to find waste. Within little more than a week after he had introduced the idea, 101,420 citizens announced themselves as recruits by mailing WIN enlistment papers to the White House. By the end of the year, that number had doubled. Some 12 million WIN buttons were in production. All good intentions notwithstanding, the program was soon viewed as more of a public relations gimmick than a serious assault against inflation.

Ford did not have an easy time on Capitol Hill. The heavily Democratic Congress largely disregarded the Ford incumbency. Ford's tax surcharge went nowhere. Congressmen sensitive to Greek-American constituents persistently opposed his desire to continue military aid to Turkey in the face of Turkey's recent use of American arms to invade Cyprus. Ford's veto of a veterans' education bill was easily overridden. Despite another veto threat, Congress passed a bill regulating strip-mining, which Ford managed to pocket veto; the Congress had no opportunity to undo the president's action. Before the second session of the Ninety-third Congress came to an end, Ford had suffered more setbacks on Capitol Hill than any president since Harry Truman (with whom Ford liked to compare himself). In his first three months, he vetoed more bills than had Nixon in eighteen. Furthermore, according to the Congressional Quarterly , Ford won only 58.2 percent of the congressional votes on which he took a position, the lowest level of support for any first-year president since that publication had begun keeping records twenty-two years earlier.

The atmosphere created by continued inflation, economic malaise, impotence in the White House, and the uncertainty of what price the GOP would have to pay for Watergate led Democrats to call for the election of a "veto-proof" Congress in the 1974 elections. The real damage to the administration was in the House, where Democrats picked up 43 seats (plus 5 more in special elections) to bring their commanding total up to 291 seats in the Ninety-fourth Congress. A more emphatic result was the ability of the Democrats to take most of their new seats by winning districts with entrenched Republican incumbents. They also won Senate victories in four states and a fifth seat in a special election. Even more disturbing for the Republicans was their performance in the South, where, reversing the trend of recent years, they lost 10 House seats while winning only 2. Also contrary to prevailing perceptions of party growth, Republicans fared poorly in the suburbs. While Democrats fell short of achieving anything resembling the simplistic idea of a veto-proof Congress, the setback to Ford and his party was a dramatic reminder of the great distance to recovery. The locus of power was sufficiently removed from the White House to create a deadlock between Ford and the Ninety-fourth Congress. No issue was more central to this progress, and nothing else had as many implications for both the domestic economy and foreign policy, than energy.

For a year and a half, reaching well back into the Nixon administration, a three-point program had expressed administration policy: developing domestic energy resources, limiting domestic energy consumption, and forging "effective consumer-nation unity." None of the platitudes or vows implicit in something like Project Independence had yet been translated into action. There could not be much optimism when the nation was led by a "congressional president" and a legislature torn between regional and vested interests.

Unlike the crisis that began in 1973 with the oil embargo, the new situation stemmed from a glut on the market. No success had come from efforts to convince OPEC that high oil prices could wreck the international financial system and trigger a global economic recession. Instead, Libya, Kuwait, and Venezuela responded by curtailing output prices, and the Saudi oil minister, Sheik Ahmed Zaki Yamani, revealed that his government, which alone was responsible for 60 percent of OPEC's production, was raising its prices. The implications of the latest manifestation of OPEC's power hardly differed from its use of the embargo, and the situation was fraught with all the dangers of economic nationalism. The latest hard-line response from Washington sounded like brinkmanship and provoked speculation about a desperate resort to military action. In the United States, expressions of frustration inevitably yielded to the realization that the only reasonable alternative was reduced dependence on foreign oil.

But that was more easily said than done. It was easy to find agreement in principle for the notion of belt-tightening, but where would the burden fall most heavily? Further complicating the establishment of any consensus was the widespread suspicion that the major oil companies either had had a hand in creating the situation or were using the crisis to bolster their own profits. Calls for deregulation of petroleum products so that prices could be raised, further exploration of new domestic oil sources could be encouraged, and existing supplies could be conserved only brought more skepticism about motivations. The era that immediately followed the Vietnam War and the Watergate scandals was not the easiest time for a president of the United States to dispel doubts.

Ford's circumstances complicated the effort. First, his February proclamation to increase import fees on petroleum to $3 a barrel over a three-month period required a presidential veto when Congress passed a bill barring the imposition of the new taxes for ninety days. The veto stood, but that was less important than the spectacle of challenges flying back and forth between 1600 Pennsylvania Avenue and Capitol Hill. They became especially shrill when Ford coupled his energy proposals with criticism of congressional failure to act responsibly. The Democratic Senate majority whip, Robert Byrd of West Virginia, struck back by attacking the president's political legitimacy. "After all," said Byrd, "he doesn't have a national constituency, and his is an inherited Presidency, and it's unique in this regard. It doesn't have the national support that it should have."

It readily became clear that the Democrats themselves could not agree on what should be done. Obviously, there was no consensus on issues that pitted one region against the other; furthermore, as the Congressional Quarterly pointed out, "divided producer and consumer states had set oil, gas, coal, nuclear and hydroelectric advocates against each other." Others placed the blame squarely upon the White House for failing to provide national leadership. Congress later turned down two Ford proposals for phasing out the federal ceilings on the price of most domestic oil, and the president, in turn, vetoed bills that would have extended the life of those controls past 31 August 1975.

Finally, in December, Ford signaled the end of the debate by signing the Energy Policy and Conservation Act. "The measure was a compromise," Ford has written, "but half a loaf was better than none, and I decided to sign it." In doing so, Ford swallowed much of what he did not want, including a forty-month period to phase out government price controls on domestic oil and rolling back the price of domestic crude by about 12 percent per barrel. But Frank Zarb, who had replaced John Sawhill as "energy czar," felt it retained sufficient merits to be considered a start toward adoption of a federal energy policy.

That first session of the Ninety-fourth Congress was most notable for a series of confrontations between the administration and the legislature that had mixed results and was largely characterized by stalemate. The Democrats insisted on tax cuts accompanied by programs that they viewed as socially desirable and as potential stimulants for the economy: housing construction subsidies and make-work programs for the unemployed. Ford, repeatedly placing himself in the position of appearing indifferent about mitigating the plight of those who were most helpless, insisted that fighting inflation was the greater priority. This led to his veto of a Democratic bill to create more than a million jobs. Despite an unemployment rate of 9.2 percent, his veto was sustained. Finally, Ford had to make a mild retreat by agreeing on a modified jobs program. He later presented his own package for cutting taxes but linked it to a program for an equivalent reduction in spending.

Irritating some of his own people, especially Defense Secretary James R. Schlesinger, Ford went along with a defense appropriations bill that fell short of the Pentagon's original request by about $7 billion. In March, Ford retreated from his requested anti-inflationary tax increase and accepted a package proposed by the Democrats for a reduction retroactive to the start of 1975. Instead of emerging from the congressional session with a $16 billion one-shot tax rebate to counter the worsening recession, he had to be satisfied with a $22.8 billion tax reduction.

In all, during that session, the president vetoed seventeen bills. The Congress, despite the numerical advantage, was able to override only four. Underlining the philosophical differences between Ford and the Democrats, the overturned vetoes included such social welfare measures as health care funds, appropriations for education, and money for school lunches. The country had neither strong presidential leadership nor viable "Congressional government," which had been the hope of Democrats on Capitol Hill. Speaker Carl Albert finally conceded that Congress would be unable to enact "programs and policies that will return us to full employment, economic prosperity and durable social peace and progress."

What had begun with so much hope after Nixon's resignation yielded to frustration and hard times. Monthly unemployment figures continued to climb, reaching a peak of 9.2 percent by May. The twin forces of inflation and layoffs among such a large portion of the work force added up to the most discouraging figures for the economy since World War II.




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