Presidents and the Economy: Gerald Ford and the Recession of 1975
Gerald Ford became President of the United States on August 9, 1974, following the resignation of Richard Nixon in the wake of the Watergate scandal. While Ford had a reputation for integrity, he nonetheless found himself under considerable scrutiny from Congress as members of that body tried to convince voters that they were on the job making sure that Nixonian wrongdoing would not happen again. When Ford issued a pardon to Nixon a month later on September 8, a further blow was dealt to any goodwill that he might have enjoyed with Congress.
Ford was a traditional fiscal conservative Republican, at least that was his intent. But the federal budget ran a deficit every year that Ford was President, in part due to the programs of his predecessor and because of the economic times. Ford signed the Education for All Handicapped Children Act of 1975, which established special education throughout the United States. In doing so however, he was very concerned about how the program would be funded at a time when government spending was exceeding revenues. He struggled with reconciling these conflicting priorities, but according to a White House press release, Ford hadd "strong support for full educational opportunities for our handicapped children" in spite of his concerns about the cost of the program.
The economy became the focus of the Ford presidency as the country sank into the worst recession since the Great Depression four decades earlier. Ford became concerned about how to stop the rise in unemployment, which reached nine percent in May 1975. Like his successors Ronald Reagan and George W. Bush, Ford saw an answer in tax cuts. In January 1975, Ford proposed a 1-year tax reduction of $16 billion to stimulate economic growth, along with spending cuts to avoid inflation. These proposals drew criticism and accusations of flip-flopping. Ford had previously advocated a tax increase as the way to fight deficit spending.
Congress took a populist, but irresponsible approach. Congressional leadership proposed tax cuts of $22.8 billion, but without any corresponding spending cuts. In March 1975, Congress passed, and Ford signed into law, income tax rebates which corresponded with this plan, as part of the Tax Reduction Act of 1975. This resulted in a federal deficit of around $53 billion for the 1975 fiscal year and $73.7 billion for 1976.
Another tricky financial issue that Ford faced was the proposed bankruptcy of New York City in 1975. The city's mayor, Abraham Beame, lobbied for, but was unsuccessful in obtaining Ford's support for a federal bailout. The incident prompted the New York Daily News' famous headline "Ford to City: Drop Dead". Ford had said in a speech that he would veto any bill calling for a federal bail-out of New York City. But the following month, November 1975, Ford changed his stance and asked Congress to approve federal loans to New York City.
The poor economy and growing government debt hamstrung Ford in his bid to be elected President in 1976. He first faced a challenge from former Governor of California Ronald Reagan for his party's nomination. Ford's 1976 election campaign had the advantage that he was an incumbent president during several anniversary events held during the period leading up to the United States Bicentennial. Democratic nominee and former Georgia governor Jimmy Carter campaigned as an outsider and reformer, gaining support from voters dismayed by the Watergate scandal and Nixon pardon. After the Democratic National Convention, Carter held a huge 34-point lead over Ford in the polls. However, as the campaign continued, the race tightened, and, by election day, the polls showed the race as too close to call.
In the end, Carter won the election, receiving 50.1% of the popular vote and 297 electoral votes compared with 48.0% and 240 electoral votes for Ford. The election was close enough that had fewer than 25,000 votes shifted in Ohio and Wisconsin, Ford would have won the electoral vote with 276 votes to 261 for Carter. Though he lost, in the three months between the Republican National Convention and the election Ford managed to close what was once a 34-point Carter lead to a 2-point margin.
Ford was a traditional fiscal conservative Republican, at least that was his intent. But the federal budget ran a deficit every year that Ford was President, in part due to the programs of his predecessor and because of the economic times. Ford signed the Education for All Handicapped Children Act of 1975, which established special education throughout the United States. In doing so however, he was very concerned about how the program would be funded at a time when government spending was exceeding revenues. He struggled with reconciling these conflicting priorities, but according to a White House press release, Ford hadd "strong support for full educational opportunities for our handicapped children" in spite of his concerns about the cost of the program.
The economy became the focus of the Ford presidency as the country sank into the worst recession since the Great Depression four decades earlier. Ford became concerned about how to stop the rise in unemployment, which reached nine percent in May 1975. Like his successors Ronald Reagan and George W. Bush, Ford saw an answer in tax cuts. In January 1975, Ford proposed a 1-year tax reduction of $16 billion to stimulate economic growth, along with spending cuts to avoid inflation. These proposals drew criticism and accusations of flip-flopping. Ford had previously advocated a tax increase as the way to fight deficit spending.
Congress took a populist, but irresponsible approach. Congressional leadership proposed tax cuts of $22.8 billion, but without any corresponding spending cuts. In March 1975, Congress passed, and Ford signed into law, income tax rebates which corresponded with this plan, as part of the Tax Reduction Act of 1975. This resulted in a federal deficit of around $53 billion for the 1975 fiscal year and $73.7 billion for 1976.
Another tricky financial issue that Ford faced was the proposed bankruptcy of New York City in 1975. The city's mayor, Abraham Beame, lobbied for, but was unsuccessful in obtaining Ford's support for a federal bailout. The incident prompted the New York Daily News' famous headline "Ford to City: Drop Dead". Ford had said in a speech that he would veto any bill calling for a federal bail-out of New York City. But the following month, November 1975, Ford changed his stance and asked Congress to approve federal loans to New York City.
The poor economy and growing government debt hamstrung Ford in his bid to be elected President in 1976. He first faced a challenge from former Governor of California Ronald Reagan for his party's nomination. Ford's 1976 election campaign had the advantage that he was an incumbent president during several anniversary events held during the period leading up to the United States Bicentennial. Democratic nominee and former Georgia governor Jimmy Carter campaigned as an outsider and reformer, gaining support from voters dismayed by the Watergate scandal and Nixon pardon. After the Democratic National Convention, Carter held a huge 34-point lead over Ford in the polls. However, as the campaign continued, the race tightened, and, by election day, the polls showed the race as too close to call.
In the end, Carter won the election, receiving 50.1% of the popular vote and 297 electoral votes compared with 48.0% and 240 electoral votes for Ford. The election was close enough that had fewer than 25,000 votes shifted in Ohio and Wisconsin, Ford would have won the electoral vote with 276 votes to 261 for Carter. Though he lost, in the three months between the Republican National Convention and the election Ford managed to close what was once a 34-point Carter lead to a 2-point margin.