COVER STORY
He promises budget cuts and credit curbs, but more is needed
As Jimmy Carter stepped before the television cameras in the East Room of the White House last Friday, his task was not just to proclaim another new anti-inflation program but to calm a national alarm that had begun to border on panic. Inflation and interest rates, both topping 18%, are so far beyond anything that Americans have experienced in peacetime—and so far beyond anything that U.S. financial markets are set up to handle—as to inspire a contagion of fear. Usually confident businessmen and bankers have begun talking of Latin American-style hyperinflation, financial collapse, major bankruptcies, a drastic drop in the American standard of living.
For three weeks the White House struggled to develop a plan that would restore the public's confidence that the Government could bring the economy under control. It summoned business leaders and representatives of civic groups from all over the country, consulted daily with ever widening circles of influential Congressmen. There was talk of a televised presidential address to a joint session of Congress. But the dramatized search for an anti-inflation program proved slow and frustrating. Within the Administration, economists fretted endlessly over the pros and cons of various budget-balancing proposals. The President's aides finally canceled all plans for Carter to address Congress, which was reluctant to play host to what was bound to be an unpleasant message.
But the runaway prices and the increasing national anxiety demanded that the President say something, and make it substantive, and do it quickly. So on Friday afternoon, Jimmy Carter strode into the East Room, having carefully waited until half an hour after the major financial markets had closed in the East, to outline his plans to an invited group of 175 Government officials, congressional leaders and businessmen. His program had many details to be filled in, and his speech had been written hastily in the previous 24 hours. In fact, it was clapped together so hurriedly that one page of the final draft was left out of the copy that Carter took before the cameras, and he had to skip over three missing paragraphs of the official text.
But at least Carter had some specific measures to announce. His major goal: to balance the $612 billion budget for fiscal 1981, which begins Oct. 1. That would make it the first balanced budget since 1969, and only the second in the past 21 years.* His keynote: discipline—a word he repeated nine times.
Speaking earnestly and somberly, Carter opened by stating that "persistent high inflation threatens the economic security of our country," and that "this dangerous situation calls for urgent measures." He admitted in effect that the budget he submitted in January, which called for a deficit of $15.8 billion and which he termed at the tune "prudent and responsible," had become obsolete in only seven weeks. But the troubles had been building up for more than a decade, said Carter, and they could be traced largely to "our failure in Government, as individuals and as a society to live within our means." Glossing over his own record of rapidly rising spending and huge deficits, both of which contradicted his firm campaign pledges of 1976, he proclaimed his