Recession Continues

Published: 1980
Play Audio Archive Story - UPI
Viewing monitors inside the control room at CBS studios here May 31, 1980 as President Carter taped Face the Nation to be aired on June 1. Carter later told reporters that the Nation's recession is more severe that his administration had thought it would be. (UPI Photo/Larry Rubenstein/Files)

Nick Charles: Just as the hostage crisis was a carry over from 1979 to 1980, so were the problems of the US economy. The Carter administration fighting to control the inflationary spiral announced an anti-inflation program on March 14, which called for $13 billion cut in Federal spending. The Federal Reserve Board also applied pressure to help the runaway economy by imposing restrictions that sent the cost of credit soaring. President Carter was trying to prove to the nation that he was serious about breaking the country's inflationary fever.

Mike Aulabaugh reports the move came at a time the bond markets were under dramatic decline and the stock market was as wobbly as a new born colt. The dollar was taking a beating and gold prices when into orbit.

Mike Aulabaugh: If any one government agency dominated the year 1980 it was the Federal Reserve. Its game plan to beat inflation, make money so expensive no one would borrow it and the results were dramatic. The prime rate making a record leap out of the teams to proportions of previously only grace Banana Republics. The housing and auto industries, linchpins of the economy falling into shambles as consumers already hard hit by inflation refused to buy or simply could not buy. Then the Domino Theory came into play as factories produced less and less while inventories rose to the roof more and more people were laid off. Unemployment soared, corporate profits hit a quarter-century low in the second quarter.

GNP the sum of the nation's goods and services dropped a dramatic 9.6%. And then came the cooling of the economy and inflation as well, interest rates dropping sharply back into the 10 and 11% range. The consumer began to spend again as their expectations for the future hit a two year high.

As a result companies like Chrysler itself rescued from extinction by billions in government backed loans began to push production ahead on their fuel efficient key cars. Unfortunately the Fed deciding at the same time that the money supply was overheating and began to push interest rates up once again leaving companies like Chrysler screaming that the Fed's frenetic scrambling was making any kind of financial planning impossible. The same could be said for housing which doubled-dipped in a direct line with mortgage rates which hit a sky high 16%. At that rate the National Association of Home Builders estimating that only 5% of Americans could afford to buy a home.

The feeling of frustration and fury over the economic situation was one that Americans carried to the polls with them and they dumped incumbent Jimmy Carter with a vengeance and handed incoming GOP President Ronald Reagan a mandate to make America great again. Not an easy accomplishment from an economic standpoint as the year drew to a close the prime rate once again sky high and heading higher. The economic recovery with a fragile underpinnings of the auto and housing industry in shambles was itself in serious trouble the country finding itself ending the year and almost the same way it began sliding into a recession.

But hoping a man named Reagan could somehow put it altogether once again. This is Mike Aulabaugh reporting.

Nick Charles: You are listening to Recap 80, and we will continue after this message.

Nick Charles: Decisions by the OPEC countries to raise oil prices again and again had American motorists thinking small. They weren't getting as far they used to on a gallon of gasoline and were paying more. So they started buying up the smaller fuel-efficient cars like Dotson, Toyota and Honda, and as you might imagine the sales sky rocketed.

The only problem was these were imports, all from Japan, and the American car manufacturers already fighting sagging sales saw the handwriting on the wall. The writing that had been imprinted in 1973 during the Arab oil embargo produced small fuel-efficient cars because that's where the demand is and the figures were proving it. So Detroit rushed out the sub-compacts to try and head up but had become over-powering competition from the Japanese.

In October the US Census Bureau reported the medium income of family rose more than 11.5%, but it meant little since inflation rose at 11.3%. Unemployment was also on the rise and the interest rates soared to a point where private homes were now completely out of reach of many perspective home buyers.

You didn't have to be a political expert to know that the hostage drama and the unimproved US economy was too trying on the patience of most Americans. They gave up on Jimmy Carter and looked to the Republican Party for help.