Obama's the first Democrat to face down rising gas prices in an election year since Carter. But he has advantages his unfortunate predecessor didn't.
Cars line up for gasoline during the 1979 fuel shortage / Image: Wikipedia
Gas prices are up, and there's a Democrat in the Oval Office seeking reelection. What year is it?
For Politico, 2012 is 1980 all over again, and the newspaper is now pondering whether President Obama will end up "owning" high gas prices much the way Jimmy Carter did by the end of his term in the White House.
It's certainly possible that, as fuel costs inevitably rise in the coming months, enough cash-strapped voters will start casting blame on the president to cripple his reelection chances. You never know. But economically, comparing Carter's dire predicament, which he notoriously mishandled, with Obama's is silly, in part because you can't look at gas prices in a vacuum. The late 1970s were an economic nightmare in which fuel costs were one of several scourges. Today, we're looking at a strengthening recovery that's better equipped to withstand a bit of pain at the pump.
Here are four big reasons to ignore those Carter comparisons:
No. 1: The U.S. isn't in a fight to the death with inflation
If there's a single graph that captures the misery of America's economy in the 1970s and early 1980s, it's the one below. That blue line? It's the non-core inflation rate, which includes the cost of goods like food and energy which get left out of other measures. Notice that in late 1978, when the Iranian revolution helped send oil prices soaring, prices were already rising at more than 7 percent a year. U.S. policy makers had been trying and failing to slay inflation for most of the decade, and the sudden shock of high oil prices helped set the rate completely out of control. Expensive crude made gas, as well as consumer goods, more expensive. That sent workers bargaining for higher wages, which made prices to rise further. Presto chango: an inflationary spiral.
But it got worse. Federal Reserve Chairman Paul Volcker's early, haphazard attempts to slow down runaway prices and save the value of the dollar led to sky high interest rates, which sent the economy tumbling into recession by the summer of 1980 -- right in the middle of Carter's re-election campaign. By July, unemployment topped out at 7.9 percent (it eventually dropped back to 7.1 percent by November).
Today, inflation is just about dead last on America's list of potential economic problems. Workers also aren't in much of a position to bargain for higher pay based on their weekly gas tab. So high gas prices aren't going to lead to the same terrifying wage-price spiral that, along with some clumsy tinkering by the Fed, demolished the economy under Carter.
No. 2: We don't have ridiculous regulations on selling gas
The long lines of drivers waiting outside gas stations for a chance to fill up might be the iconic image of Carter-era economic malaise. But the gas shortages that yielded those lines weren't a direct result of high prices. Rather, they were the produced of an ill-designed system of price and distribution controls, which led gas stations to sell off what limited fuel they had on a first-come-first-serve basis, then close up shop early. To get a sense of how horribly the government's regulation distorted the market for gasoline, check out this 1979 paper from the Brookings Institute. Among their myriad unintended consequences, the controls actually made it more profitable for refineries to stash away gasoline supplies and sell them at a later date, even if there was an immediate shortage. Thankfully, those kinds of regulations went out of style along with disco.
No. 3: Iran (probably) isn't going to stop selling oil
One of the eeriest similarities between today and the Carter era is the role Iran is playing in sending up gas prices. Then, it was fallout from the Iranian revolution. Today, it's uncertainty generated by U.S. and European attempts to stop Tehran's nuclear program. But there are big, gaping differences between the challenges of of 33 years ago and today.
In December of 1978, following the revolution, Iran's new leaders halted all oil shipments (they resumed a small amount the following March). At the time, the country was the world's second largest oil exporter. The market panicked, and the price of crude increased 150 percent over the coming year. Gasoline prices followed, jumping 55 percent in six months.
The current confrontation between Iran and the West is scary, yes. But unless it erupts into outright war, chances are we won't see similar supply disruptions compared to what happened in 1979. The U.S. has levied sanctions on Tehran aimed at limiting it's ability to sell oil. But as I wrote yesterday, they're not intended to take all of their crude off the market. Iran, for its part, is reportedly so desperate to to sell oil that it's offering barter deals.
No. 4: We're used to high gas prices
There's no question about it: When oil prices rise rapidly, they can hurt the economy. But when it comes to determining just how bad the damage will be, it's important to look at where oil prices have been in the recent past. James Hamilton, a professor at the University of California, San Diego, has come up with a formula for doing this that I call the rule of three. He's found that when oil prices quickly spike to a new three-year high, they can cause a damaging shock to the economy. That's because both businesses and consumers suddenly have to rapidly adjust their budgets, and often drastically cut spending. The rule of three is not a hard and fast law, but more a decent rule of thumb. It happens to describe what happened in 1979 fairly well. At the time, the only frame of reference anybody had for an oil crisis was the 1973 OPEC embargo. Nobody expected a repeat.
While oil prices are rising pretty quickly today, they're still close to where they reached during the Libyan revolution last year. They could go higher -- I'm not going to try and predict -- but at this point, even if it's painful, most Americans have an idea of how to cope with higher fuel costs. Back in 1979, it was still relatively new and frightening. Today, it's old hat.
The class divide is already toxic, and is fast becoming unbridgeable. You’re probably part of the problem.
1. The Aristocracy Is Dead …
For about a week every year in my childhood, I was a member of one of America’s fading aristocracies. Sometimes around Christmas, more often on the Fourth of July, my family would take up residence at one of my grandparents’ country clubs in Chicago, Palm Beach, or Asheville, North Carolina. The breakfast buffets were magnificent, and Grandfather was a jovial host, always ready with a familiar story, rarely missing an opportunity for gentle instruction on proper club etiquette. At the age of 11 or 12, I gathered from him, between his puffs of cigar smoke, that we owed our weeks of plenty to Great-Grandfather, Colonel Robert W. Stewart, a Rough Rider with Teddy Roosevelt who made his fortune as the chairman of Standard Oil of Indiana in the 1920s. I was also given to understand that, for reasons traceable to some ancient and incomprehensible dispute, the Rockefellers were the mortal enemies of our clan.
When so many students have outstanding grades and test scores, schools have to get creative about triaging applicants.
For generations, two numbers have signaled whether a student could hope to get into a top college: his or her standardized test score and his or her grade-point average.
In the past 15 years, though, these lodestars have come to mean less and less. The SAT has been redesigned twice in that time, making it difficult for admissions officers to assess, for instance, whether last year’s uptick in average scores was the result of better students or just a different test. What’s more, half of American teenagers now graduate high school with an A average, according to a recent study. With application numbers at record highs, highly selective colleges are forced to make impossible choices, assigning a fixed number of slots to a growing pool of students who, each year, are harder to differentiate using these two long-standing metrics.
The president’s unpredictability once worked to his advantage—but now, it is producing a mounting list of foreign-policy failures.
“Gradually and then suddenly.” That was how one of Ernest Hemingway’s characters described the process of going bankrupt. The phrase applies vividly to the accumulating failures of President Trump’s foreign-policy initiatives.
Donald Trump entered office with more scope for initiative in foreign policy than any of his recent predecessors.
In his campaign for president, Trump had disparaged almost every element of the past 70 years of U.S. global leadership: NATO, free trade, European integration, support for democracy, the Iraq War, the Iran deal, suspicion of Russia, outreach to China. Trump’s election jolted almost every government into a frantic effort to understand what to expect. Other countries’ uncertainty enhanced Trump’s relative power—and so, perversely, did Trump’s policy ignorance and obnoxious behavior. After eight years under the accommodating Barack Obama, the United States suddenly turned a menacing face to the world. In the short run, that menace frightened other states into attempted appeasement of this unpredictable new president.
In one of the loveliest scenes of Book Club, the newest addition to the Diane Keaton oeuvre, our beloved matriarch sits across from her dashing pilot paramour (Andy Garcia) as the two dine with the hilariously CGI-ed Santa Monica sunset behind them. Their banter is sweet, the current between them electric even though the recently widowed Diane had been apprehensive about returning to the world of dating. When the pilot asks Diane about her first kiss, she becomes suddenly transfixed.
As Diane stares off into the distance, she breathily recalls the moment she shared with a boy named Terry Sanders, who kissed her with passion and urgency even though neither knew what they were doing. Diane seems to blush with her whole body as she tells the story, fluttering her hands upto her own face as she describes the way Terry held it in his awkward, passionate grip. The pilot watches Diane with awe, eventually joking that he wishes he had been kissed by Terry Sanders. Diane smiles, returning once again to the man in front of her.
I could only have seen it there, on the waxed hardwood floor of my elementary-school auditorium, because I was young then, barely 7 years old, and cable had not yet come to the city, and if it had, my father would not have believed in it. Yes, it had to have happened like this, like folk wisdom, because when I think of that era, I do not think of MTV, but of the futile attempt to stay awake and navigate the yawning whiteness of Friday Night Videos, and I remember that there were no VCRs among us then, and so it would have had to have been there that I saw it, in the auditorium that adjoined the cafeteria, where after the daily serving of tater tots and chocolate milk, a curtain divider was pulled back and all the kids stormed the stage. And I would have been there among them, awkwardly uprocking, or worming in place, or stiffly snaking, or back-spinning like a broken rotor, and I would have looked up and seen a kid, slightly older, facing me, smiling to himself, then moving across the floor by popping up alternating heels, gliding in reverse, walking on the moon.
Several new studies suggest yogurt might reduce inflammation—a process linked to different types of diseases.
A couple years ago, I was taking a swim with my very pregnant friend when I asked her if it was hard to keep straight all of the doctors’ health recommendations for expectant mothers.
Not really. For practically every symptom, she said, their recommendations were roughly the same: “Take a walk, eat a yogurt.”
It was another example of the Cult of Yogurt. Even though some varieties have more sugar than a Twinkie, perhaps no other man-made food is so often recommended by medical professionals—and to treat such a wide variety of ailments.
Whenever I’ve been prescribed antibiotics, I’ve always been told to eat a yogurt so that the antibiotics don’t eat up all the “good” bacteria in my system and leave me with a yeast infection. (Recently, I interviewed a doctor who suggested this is bogus; there’s no way for the yogurt cultures to make it all the way down there.)
The interplay between the two helps explain the confusion whirling around the North Korea summit.
Why did the Trump administration cancel its much-hyped nuclear summit with North Korea? And why the confusing semi-backtrack the following day, in which Trump embraced North Korea’s “warm and productive statement” regretting the cancellation, and left the door open to a meeting he’d ditched barely 24 hours before? The answer lies in the toxic interplay between Donald Trump’s instincts and John Bolton’s. Each man’s foreign-policy views are dangerous enough in and of themselves. Put them together and you have the perfect cocktail for the decimation of American power.
Bolton is a Manichean in the tradition of his hero, Barry Goldwater. He has spent his career depicting America’s adversaries—the Soviet Union, Cuba, Saddam Hussein’s Iraq, and these days, Iran and North Korea—as evil. He denies that they have any legitimate security concerns. He abhors compromise. He demands maximum American economic, political and, if necessary, military pressure. He basic negotiating posture is: Once you give in on everything, then we’ll start talking.
Human technology is responsible for more loss from fire than any other cause. But reducing fire’s impact will require changes to how people live, not just to the infrastructure that lets them do so.
In October 2017, 250 square miles burned in Northern California, destroying 6,000 homes and businesses and killing 44 people. For now, the cause of these fires has not been determined. The private utility company Pacific Gas and Electric, known to Californians as PG&E, is under investigation. Total damage for the Northern California wildfires comes to $9 billion. PG&E has started stockpiling cash.
In California, this is a familiar story. Three years ago, in February of 2015, one-third of the houses in my remote neighborhood in Eastern California burned down. Here, before the fire, 100 houses lay scattered across the leeward flank of the Sierra Nevada mountains. The people who live here spend their time walking steep roads, listening to crickets, chasing mule deer out of the garden, and looking over a desert valley below. Days after the fire, my neighbor, Cassie, wasn’t doing any of these things. Instead, she stood inside her smoking foundation. Tall and easygoing with freckles on her nose, Cassie had come home from college that winter to sift rubble with her mom and dad. Under different circumstances, we might have hiked together or skated frozen ponds. I used to carpool with her family to school, and I remember her house, wooden and gorgeous and overlooking a ravine from which flames later rose.
“Bird hunting” has become a pastime and a side hustle for teens and young professionals, but for some it’s a cutthroat business.
Every afternoon around 4 p.m., when school lets out, Brandon, an 18-year-old high-school senior in Los Angeles who asked to be referred to only by his first name, goes “Bird hunting.” He heads for his minivan and, on the drive home, he’ll swing through convenient neighborhoods, picking up about 13 Bird electric scooters along the way, tossing them into the back of his car.
“I have a whole system,” he says. “I’ll go home, put the 13 I initially caught on the chargers. They’ll charge for about three hours until around 7 or 8 p.m.”—when Bird makes more scooters available for charger pickup. “Then I’ll go back out.”
Over the course of the next few hours, Brandon loops around his Santa Monica, California, neighborhood collecting as many scooters as possible. He brings back his bounty and, as his parents sleep, neatly sets them up to charge in batches overnight.
If the Cuban Missile Crisis is any indication, today’s leaders may be dangerously misinformed about the nuclear crisis.
When President Donald Trump canceled his June summit with North Korean leader Kim Jong Un, he told him in a letter that the past few days of “tremendous anger and open hostility” had made it “inappropriate” for the two to meet and discuss denuclearization. “You talk about your nuclear capabilities,” Trump wrote, “but ours are so massive and powerful that I pray to God they will never have to be used.” The language echoed a January tweet in which the president wrote, “I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!”
The North issued a statement in short order emphasizing a willingness to “sit down with the United States any time, in any format, to resolve the problems.” Yet it’s getting harder to see how Trump and Kim can make the mutual accommodations necessary for diplomacy to succeed. In fact, beneath the surface, the current situation resembles the prelude to the Cuban Missile Crisis in 1962, which historical research continues to show was much more dangerous than anyone knew at the time. If the Trump-Kim summit stays canceled, and saber-rattling returns as the dominant mode of communication, the odds of military crisis will rise dramatically. And, as the Cuba experience shows, once begun, a military crisis involving nuclear weapons will almost inevitably bring lots of surprises—ones that could make the shocking twists and turns of the summit buildup look pedestrian by comparison.