At the same time that Carter struggled to come to grips with international problems, he also had to grapple with domestic ones, passed on to him by Ford. Unemployment, inflation, and the energy crisis topped the list. At first, slow economic growth and substantial unemployment seemed especially pressing, for 7.3 percent of the workforce did not have jobs when he took office, and the percentage jumped to 7.5 as a result of a severe winter that over-taxed the supplies of natural gas and oil. To stimulate the economy and supply more jobs, Carter proposed a $23 billion to $30 billion program for the next eighteen months. Although the program would increase spending on job-creating programs, it emphasized tax cuts in order to encourage businessmen to increase capital investments. Congress passed much of this economic stimulus package.
Before Congress acted and as economic growth accelerated and unemployment declined, Carter dropped a major feature of his economic program, a tax rebate; shifted his attention to inflation, which hovered around 7 percent; and strengthened his resistance to costly federal job programs and a higher level of spending on welfare. Rejecting price and wage controls, he made several anti-inflation proposals and promised to balance the budget by the end of his term. Yet, when the economy slowed, his concern about unemployment mounted, and he returned to plans for tax cuts. But inflation escalated in 1978, approaching the 1974 level, and Carter soon defined it as the nation's major problem, scaled down his tax-cut proposal, and tried to get prices under control by resisting proposals for increased government spending, promising a balanced budget sometime soon, and using verbal pressure—"jawboning"—to force corporations and unions to exercise restraint in price increases and wage demands. Although he relied heavily on the tested skills of Robert Strauss in the anti-inflation campaign, success eluded him. Spurred by sharp increases in the price of Middle Eastern oil, inflation soared well above 10 percent in 1979 and 1980, and Carter's new chair of the Federal Reserve Board, Paul Volcker, moved quickly to raise interest rates and reduce the money supply.
Carter's somewhat confusing course, influenced by difficulties in deciding whether unemployment or inflation was the greater problem, failed to satisfy the many groups in American life. Businessmen quickly lost confidence in his administration, troubled by divisions within it and by its proposals for tax reform and for higher taxes to protect Social Security. Corporate leaders also insisted that they did not have as much responsibility for inflation as jawboning implied; and conservatives, in and out of corporate ranks, insisted that government spending and deficits were responsible. Reflective of the decline in business confidence, the stock market dropped sharply several times.
Groups that had given Carter his victory in 1976 also grew unhappy with his performance. Union leaders, insistent that big business caused inflation and that workers were its victims, not its cause, lost some of their earlier confidence in the president when he endorsed a bill to facilitate organizing efforts but did not prevent a filibuster in the Senate from blocking passage. Furthermore, labor leaders joined liberals, most notably, Senator Edward Kennedy, in complaining that the administration was not doing enough to reduce unemployment, solve the problems of the poor, or establish national health insurance, and they demanded more government spending. To many of them, Carter seemed little more than a southern Ford. Farmers, dissatisfied with the prices they received for their products, protested against administration farm policies and forced Carter to accept higher price supports than he favored. Still further, many westerners in Congress rose up in anger when, in an effort to cut spending, Carter opposed water projects they favored, and they compelled the president to compromise on the issue.
Although black leaders had reasons to be pleased with Carter, including his support for affirmative action in the Bakke case, they objected to some features of his performance. Believing they deserved more influence in the White House, some reminded him that he would not be president if blacks had not voted for him in such large numbers, and charged that he was not paying enough attention to the problems of black Americans, especially the poorer ones. They joined with white liberals in insisting that everyone had a right to a job and that government must do more to increase the number available. To blacks, at least those who had not entered the middle class, unemployment rather than inflation was the most worrisome problem.