Double-digit inflation, double-digit interest rates, and high unemployment were the main reasons President Jimmy Carter lost political viability in 1979-80. American popular political and journalistic culture holds a president responsible for the state of the economy even though he has limited influence on it.
A frequently more powerful influence on the economy than the president is the politically-independent Federal Reserve System. Paul Volcker, chairman of the FED in the late 1970s and early 1980s, watched as inflation rose to 11.3% in 1979 and mortgage rates for home loans skyrocket to the high teens. Volcker decided that whipping double-digit inflation was critically important to the health of the nation, and he was willing to let unemployment rise to double digits in order to halt the inflationary cycle. He was even willing to let the country fall into a deep recession, which it did from 1979 to 1983.
Volcker's theory worked. The United States has not experienced significant inflation since the early 1980s.
His policies were instrumental in creating the mythology of Jimmy Carter as a failed president, and three years later, of Ronald Reagan as an economic miracle-worker, who got credit for breaking the back of inflation and creating "morning in America" again, a time of economic growth in which risk-takers and entrepreneurs could realize the American dream.
National Public Radio examined "How FED Chairman Paul Volcker Tamed Inflation, Maybe For Good."
Could inflation have been conquered more slowly, without putting so many people in unemployment lines? Possibly, but would consumer behavior and psychology have changed so permanently?
Bill Silber, author of Volcker: The Triumph of Persistance, addressed these and other economic questions that make you realize how our perceptions of political leaders as successes or failures are often the result of forces beyond their control.