Statement on "The Economics of Stagnation: A Study of the Republican Years, 1969-1976"
When Richard Nixon entered the White House in January 1969, he inherited an economy which, while not without its problems, had just completed a year of full employment and modest price stability. Unemployment for 1968 stood at 2.8 million workers, amounting to 3.6 percent of the labor force, while inflation averaged 4.7 percent. The federal budget for the fiscal year then in progress was in surplus.
The following study documents the economic record of Richard Nixon and Gerald Ford in the ensuing 8 years—it is a case study of a record of consistent and costly economic mismanagement. The record of the Nixon-Ford years includes:
(1) A rate (7.9 percent) and level (7.5 million) of unemployment today which is higher than at any other time between the Great Depression and the inauguration of Gerald Ford.
(2) A level of unemployment today which is 50 percent greater than it was when Mr. Ford took office 2 years ago (with an additional 2 1/2 million workers unemployed) and more than 2 1/2 times as high as it was in 1968.
(1) The highest average rate of inflation for any administration in over 50 years.
(2) A rate of inflation today (6 percent) which is higher than at any time between the Korean War and the inauguration of Richard Nixon.
(3) A 1968 dollar which is now worth 61 cents.
Deficits and Debt:
(1) A deficit for the fiscal year just ended ($65 billion) which is the largest in our history and which exceeds the deficits for all the Kennedy-Johnson years put together ($54 billion).
(2) An increase in the public debt under the Nixon-Ford Administration ($281 billion) which is greater than the total public debt incurred under all Presidents during the preceding 192 years of our history ($279.5 billion).
A decline in the real value of the average worker's weekly paycheck from $103.39 in 1968 to $102.94 today.
(1) A slower rate of economic growth (2.3 percent per year) than under any other administration since the Great Depression.
(2) An actual decline in real GNP during 1974 and 1975, each of Mr. Ford's first two years in office.
The Misery Index:
An average Misery Index (which combines the rates of inflation and unemployment) of almost 16 percent for Mr. Ford, the highest for any President in more than 50 years.
The Economic Recovery:
An economic recovery under Mr. Ford in which unemployment (7.9 percent), inflation (6 percent), and deficit spending ($65 billion for the fiscal year just ended) are greater than at any time between the Korean War and the inauguration of Richard Nixon, and in which private non-farm employment is lower today (64.2 million workers) than it was in August 1974 (64.5 million).
The High Cost of Unemployment:
Record levels of unemployment and undercapacity which have cost the American people hundreds of billions of dollars in lost income ($200 billion for the current year alone) and the Federal Treasury tens of billions in lost tax revenues and increased welfare payments ($16 billion for each percentage point of unemployment above 4 percent).
The highest interest rates since the Civil War.
(1) New private housing starts which are lower today (1,387,000 units) than they were in 1968 (1,500,000 units).
(2) A $16,000 increase in the average price of a new home from $30,000 in 1968 to $46,000 today.
(3) 17 percent unemployment among construction workers.
More Americans living in poverty (24.2 million) in 1974 (the latest date for which poverty figures are available) than in 1969 (24.1 million), as compared to a 15 million reduction in the number of Americans living in poverty during the Kennedy-Johnson years.
Real corporate profits which are lower today ($98 billion, constituting 7.8 percent of real GNP) than they were in 1968 ($99 billion, constituting 9J6 percent of real GNP).
Business Plant Utilization:
A manufacturing utilization rate which is 73 percent today, compared to 88 percent in 1968, and which is a lower rate of utilization than under any President since the 1930's.
(1) Stock prices which are about the same today as they were eight years ago.
(2) A significant decline in the price-earnings valuation of most stocks.
The first yearly deficits in our balance of trade since the Great Depression.
The rate (7.9 percent) and the level (7.5 million) of unemployment are higher today than under any other President since the Great Depression. The level of unemployment is 50 percent greater today than it was when Mr. Ford took office two years ago, with an additional 2 1/2 million workers unemployed, and more than 2 1/2 times as high as it was in 1968.
1. As of August 1976, the unemployment rate was 7.9 percent; more than 7.5 million workers were unemployed. The unemployment rate for all black workers was 13.6 percent, the unemployment rate for all teenagers in the labor force was 20 percent (with 40 percent of black teenagers in the labor force unemployed), and the unemployment rate for construction workers was 17 percent.
2. Unemployment increased in each of the past three months, from 7.3 percent of the labor force in May to 7.9 percent in August. There are 606,(XX) more workers out of jobs today than there were in May.
3. There are actually fewer workers employed in private non-farm jobs today (64.2 million) than there were two years ago (64.5 million).
4. When Mr. Ford took office in August 1974, the unemployment rate was 5 1/2 percent, with almost 5 million workers unemployed. Unemployment accelerated rapidly, while Mr. Ford was proposing a tax increase to Congress. By May 1975, less than one year after Mr. Ford took office, the unemployment rate had reached its post-Depression high of 8.9 percent and more than 8.2 million workers were unemployed. In less than one year, from August 1974 to May 1975, unemployment had climbed from 5 million to more than 8.2 million, an increase of more than 60 percent.
5. Average levels of unemployment in excess of 7 million translate into unemployment at some time during the year for over 20 million Americans. It has been estimated that 60 to 75 million people in 1975 were members of families in which someone was unemployed.
6. Even these record rates understate the true extent of unemployment in the country—for the unemployment statistics do not include workers who have given up trying to find a job and workers who have settled for part-time employment because they have been unable to find full-time jobs. If these two groups were counted among the unemployed, the overall unemployment rate would approach 10 percent and almost 10 million people would be counted as unemployed.
7. The unemployment rate was 3.6 percent for 1968, with 2.8 million workers unemployed. The unemployment rate averaged less than 5 percent during the Kennedy-Johnson years.
The rate of inflation today (6 percent) is higher than it was at any time between the Korean War and the inauguration of Richard Nixon. The 1968 dollar is now worth 61 cents.
1. The 1968 dollar is now worth 61 cents and the 1968 food dollar is now worth 57 cents.
2. The average rate of inflation of 6 1/2 percent during the Nixon-Ford years exceeds the average rate for every other administration since Woodrow Wilson.
3. The 12.2 percent inflation for 1974 was twice as high as the annual rate for any years since the Korean War (excluding the 8.8 percent inflation of 1973).
4. Food prices increased 20.1 percent in 1973 (which was greater than the combined price increases for food during the entire Kennedy-Johnson Administration) and 12.2 percent in 1974.
5. Inflation averaged 2.2 percent per year during the Kennedy-Johnson Administration. Food prices increased at the annual rate of 2.3 percent.
The Misery Index
The combination of unemployment and inflation under Mr. Ford has been greater than for any other President in more than 50 years.
1. The Misery Index is calculated by adding the rate of unemployment and the rate of inflation—the higher the total, the worse off you are.
2. The combined rates of unemployment and inflation have averaged almost 16 percent under Mr. Ford, the highest average Misery Index for any President since Woodrow Wilson.
3. The Index averaged about 11 percent under Mr. Nixon and 7 percent during the Kennedy-Johnson years.
Deficits and Debt
Mr. Ford's budgets will account for the largest single deficit and more than one-third of the public debt incurred during our 200 year history. The increase in the public debt during the Nixon-Ford years will be greater than the total public debt incurred under all other Presidents in our history.
1. The $65 billion deficit for the fiscal year just ended (FY 1976) is the largest in our history and exceeds the deficits for all the Kennedy-Johnson years put together ($54 billion).
2. The combined Nixon-Ford deficits of $243 billion (including the deficit projected by Mr. Ford under his current budget) are almost as great as the combined deficits for all Presidents in our history ($295 billion). If the peak war year of 1943 is excluded, the Nixon-Ford deficits exceed total of all other deficits, in war as well as peace, in our entire history.
3. The publicly held federal debt will have increased $281 billion under the Nixon-Ford Administration budgets, $214 billion of which will have been accounted for by Mr. Ford. The outstanding public debt at the end of the 192 year period preceding the Nixon-Ford Administration was $279.5 billion. Accordingly, the Nixon-Ford budgets will account for more than one-half, and Mr. Ford's budgets for more than one-third, of the total $560 billion public debt incurred over our entire history.
4. The interest charges on the $281 billion of additional public debt will amount to $19.7 billion per year (at an assumed interest rate of 7 percent); this amounts to an annual charge which will continue indefinitely of more than $350 for every family in the country.
The real value3 of the average worker's weekly paycheck is less today than it was in 1968.
1. In 1968 the average American worker made $103.39 a week (in real terms, adjusted for inflation). Today the real value of that paycheck is $102.94 a week.
2. Under the Kennedy-Johnson Administration, average real weekly earnings increased from $90.95 in 1960 to $103.39 in 1968, an increase of almost 14 percent.
The economy has grown at a slower rate during the Nixon-Ford Administration than under any other administration since the 1930's. Real GNP actually declined during each erf Mr. Ford's first two years in office.
1. Real GNP (in 1972 dollars) has grown at a rate of about 2.3 percent during the past 8 years.
2. Real GNP actually declined (about 2 percent) in each of 1974 and 1975. The declines were greater than those for any other year since the end of World War II.
3. Real GNP grew at an annual rate of approximately 4.4 percent during the Kennedy-Johnson years.
The Economic Recovery
During the present economic recovery, unemployment, inflation, and deficit spending are greater than at any time between the Korean War and the inauguration of Richard Nixon.
1. The unemployment rate today (7.9 percent) is higher than at any time between the Great Depression and the inauguration of Gerald Ford. Unemployment has increased by 600,000 workers during the past three months, with the unemployment rate moving from 7.3 percent in May to 7.9 percent in August.
2. The inflation rate today (6 percent) is higher than at any time under Presidents Eisenhower, Kennedy or Johnson.
3. The economy is producing at least $200 billion less today than it would at full employment. That loss of production and income amounts to $3,600 a year for every American family.
4. Deficit spending and debt are at an all-time high.
The High Cost of Unemployment
The record levels of unemployment and undercapacity during the past 8 years have cost the American people hundreds of billions of dollars in lost income and the Federal Treasury tens of billions in lost tax revenues and increased welfare payments.
1. The gap between our current national output and what we could produce at full employment is at least $200 billion. That loss of production and income amounts to $3,600 for every American family.
2. The cumulative gap under the Nixon-Ford Administration is more than 6 times as great as for the Kennedy-Johnson years, which amounts to a net loss in excess of $500 billion.
3. Every additional percentage point in unemployment costs the Federal Treasury an estimated $16 billion—$14 billion in lost tax revenues and $2 billion in legally mandated food stamps, unemployment insurance, and other support programs. Accordingly, had the economy been operating at a level of 4 percent unemployment during the past year, substantially all of Mr. Ford's record $65 billion deficit would have been eliminated.
Under the Nixon-Ford Administration, interest rates have reached their highest levels since the Civil War.
1. Interest rates for triple A bonds issued by our strongest corporations have averaged almost 8 percent under the Nixon-Ford Administration, compared to less than 5 percent during the Kennedy-Johnson years. Less credit worthy corporations have had to pay much higher rates or been unable to borrow long term at all.
2. Short-term interest rates on bank loans to businesses have increased from an average of 5J4 percent under the Kennedy-Johnson Administration to 8 percent during the Nixon-Ford years.
3. Interest rates on new home mortgages have moved from an average of less than 6 percent under Presidents Kennedy and Johnson to 8J6 percent under Presidents Nixon and Ford (and are presently about 9 percent).
The rate of new housing starts is lower today than it was in 1968. The average cost of a new home has increased from $30,000 in 1968 to $46,000 today. The rate of unemployment among construction workers is 17 percent.
1.The number of new private housing units started is lower today (1,387,000 units as of July) than it was in 1968 (1,500,000 units).
2. The explanation for this decline in the housing sector may be found in a stagnant economy and record high interest rates and housing prices. Interest rates on new home mortgages have moved from an average of less than 6 percent during the Kennedy-Johnson years to an average of about 8 1/2 percent under the Nixon-Ford Administration (and are presently about 9 percent). The average cost of a new home has moved from $30,000 in 1968 to $46,000 today, and the monthly mortgage payment has gone from $154 to $288.
3. Unemployment among construction workers is 17 percent.
During the Kennedy-Johnson years, there was a substantial reduction in the number of Americans living in poverty. Today there are more Americans living in poverty than there were in 1969.
1. In 1960 almost 40 million Americans were living on incomes below the official poverty level. By 1968 this number had been reduced to 25 million, a reduction in excess of 35 percent.
2. By 1969 the number of Americans living in poverty was approximately 24.1 million. By 1974 (the most recent date for which poverty figures are available) slightly more than 24.2 million Americans were still living in poverty.
3. It is expected that the 1975 data, when released, will show a sizable further increase in the number of Americans living below the poverty level.
Real corporate profits (adjusted for inflation) are lower today than they were in 1968.
1. Real corporate profits were $99 billion in 1968 (9J4 percent of real GNP) and had declined to $81 billion by 1975 (6.8 percent of real GNP). As of the second quarter of 1976 (the latest date for which statistics are available), real corporate profits were running at the annual rate of $98 billion (7.8 percent of real GNP).
2. Real corporate profits have averaged about 7.3 percent of real GNP under Presidents Nixon and Ford.
3. Real corporate profits grew at an annual rate of 5 percent during the Kennedy-Johnson years and averaged about 9.8 percent of real GNP.
Business Plan Utilization
There is more unused manufacturing capacity in the economy today than under any other President since the 1930's.
1. Today the economy is operating at 73 percent manufacturing capacity, as compared to 88 percent in 1968.
2. During the Kennedy-Johnson years, the economy averaged 85 percent utilization of manufacturing capacity. Under Presidents Nixon and Ford, the average has fallen to less than 80 percent. The difference has meant hundreds of billions of dollars in lost production and income.
The Stock Market
Common stock prices are about the same today as they were in 1968. There has been a serious decline in equity financing.
1. Standard & Poor's index of 500 Common Stocks has increased about three-fourths of 1 percent a year under the Nixon-Ford Administration. The index actually declined about 13 percent between 1968 and 1975.
2. Standard & Poor's index increased almost 10 percent a year during the Kennedy-Johnson Administration.
3. In the 1960's, the stock market valued most stocks at 15 to 20 times earnings. Now, largely due to the economic stagnation and low profitability of recent years, most stock prices are less than 10 times earnings. That, combined with an exodus of the small investor from the market, has resulted in a serious decline in equity financing.
Under the Nixon-Ford Administration, the United States ran its first deficits in the balance of trade since the Great Depression. Imports have exceeded exports in three out of the past five years and 1976 is expected to be another deficit year.
1. In 1971 the United States experienced its first annual deficit ($2.2 billion) in the balance of trade since the Great Depression. Deficits of $6.4 billion in 1972 and $5.2 billion in 1974 have followed. Imports are running ahead of exports again this year.
2. The overall eight year record of the Nixon-Ford Administration will show a net deficit in our balance of trade.
3. We ran a trade surplus averaging $4.5 billion per year under Presidents Kennedy and Johnson.
Jimmy Carter, Statement on "The Economics of Stagnation: A Study of the Republican Years, 1969-1976" Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/347539