2 - Setting the Scene: The United States in 1980  pp. 44-59

Setting the Scene: The United States in 1980

By Dean Baker

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In the summer of 1979, President Jimmy Carter gave the country what came to be known as his “malaise” speech, in which he decried the selfishness of the American people. He warned that the country faced tough times ahead, most immediately from the energy crisis that had sent oil prices soaring and led to long lines at gas stations. He implored the country to be prepared to share in sacrifice as he set forth an agenda for energy conservation and the development of alternative sources of energy.

These were not the words the country wanted to hear. President Carter's approval rating sank to new lows, rivaling those of President Nixon just before he was forced to resign after being implicated in the Watergate scandal. Things did not get much better for President Carter in the year and a half leading up to the 1980 election. A close U.S. ally in Nicaragua was overthrown by a popular uprising. The U.S. embassy was seized in Iran and the staff taken hostage. A carefully planned rescue mission ended with a helicopter crash in the Iranian desert the following year.

Domestically, oil prices continued to rise, pushing inflation to levels not seen since data had been kept. The Federal Reserve Board responded by raising interest rates to unprecedented levels. The rise is interest rates had a mitigating effect on inflation, but it also sent the economy into a recession in the spring of 1980. This was not a good backdrop for a president running for reelection.

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