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The economics of Gerald Ford

Hillary Wicai Dec 27, 2006

BOB MOON: It’s been a day for reflection by historians, recalling some of the tough trials of the Gerald Ford administration. Yesterday’s death of the country’s 38th president brings to mind all the serious — and in some cases, unprecedented — economic worries that he had to deal with three decades ago: rising unemployment, double-digit inflation — the highest since the Great Depression — the worst bear market on Wall Street since World War II, and oil supply fears that sparked long lines at gas stations.

Marketplace’s Hillary Wicai takes a look back.

HILLARY WICAI: Gerald R. Ford never aspired to be president. But Vice President Spiro Agnew resigned and Ford was appointed. Then Watergate, and Richard Nixon resigned. Just three days after being sworn in, President Ford addressed a joint session of Congress.

PRESIDENT FORD: Inflation is domestic enemy number one. To restore economic confidence, the government in Washington must provide some leadership. It does no good to blame the public for spending too much when the government is spending too much.

Ford called his program WIN, for Whip Inflation Now. He proposed a one-year surcharge on income taxes and a deep cut in federal spending. He vetoed more than 50 spending bills. But inflation and the recession grew worse and historian John Steele Gordon says Ford didn’t shy away from total honesty.

JOHN STEELE GORDON: He actually started one of his State of the Union addresses by saying the state of the Union is not good.

WIN just wasn’t enough. Robert Hormats was an economic adviser to President Ford.

ROBERT HORMATS: It was basically a pretty naive policy when you think about it. Particularly when you think what was actually required to deal with inflation.

It wasn’t until the Federal Reserve hiked interest rates after he left office that inflation came down.

Still, Ford is remembered as a steadying force in a tumultous time. He was MVP on the 1934 University of Michigan football team. Just the guy to manage a fumble like this country’s only presidential resignation, even though he couldn’t beat inflation.

In Washington, I’m Hillary Wicai for Marketplace.

MOON: And this final note on how closely Wall Street is following the planning for Gerald Ford’s funeral. . . .

The late President’s family will have the final say on those plans, of course. But, tentatively, services are set for Tuesday. And our business analyst David Johnson is here with some observations on how that could complicate business on Wall Street.

David, so why do you Wall Street types care about this?

DAVID JOHNSON: Well, you know, and I’m embarrassed that we do so much but that’s the first thing I thought about at 6 o’clock this morning. I said, you know, could the national day of mourning be as early as Friday? If so, the market can’t close on Friday.

Historically, the market closes in a national day of mourning when a President dies. But you can’t close on Friday because it’s the last day of the year. Everybody’s doing their last-minute 401k contributions and selling for tax losses and stuff like that. So, that’s out of the question. Tomorrow would be all right. But then you jump forward and the market’s going to be closed Saturday, Sunday and, of course, Monday for New Year’s. And then, if it were closed Tuesday, well the New York Stock Exchange and the markets hate to close for four consecutive days.

MOON: Has that happened before?

JOHNSON: Yeah, it has. It happened recently in 9/11 but, of course, you know, that wasn’t really planned. But the whole idea is that you have liquidity, you have access to your cash at any time you want it. And the markets don’t like to close for that many days. It’s an interesting dilemma.

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