Who are Obama’s Air Traffic Controllers?
One of the things I remember about the beginning of the Reagan administration — yes, I’m old enough to remember very well — was the abrupt change in tone from the Carter administration.
Suddenly, the country’s leadership seemed capable of saying “no.”
One of the first important constituencies to find that out were the air traffic controllers. When they went out on strike in 1981, Reagan summarily fired them. The move was unpopular, but it very likely was the turning point in the fight against wage inflation, which was then spiraling out of control. (Of course, Reagan’s first “no” was to negotiating with Iran over the release of U.S. hostages.)
The other turning point was Fed Reserve Chairman Paul Volcker’s decision to raise interest rates to over 14% (this was the monetary policy equivalent of “No”). Volcker made the move in the face of almost incredible political pressure, and the immediate result was the worst recession — at least until now — since The Great Depression.
However, within a year, inflation was vanquished, and the stage was set for two decades of unmatched prosperity (and yes, every expansion sows the seeds of its own demise).
The contrast between President Reagan then and President Obama now is striking.
So far, at least, no one seems to have been told “no.” Not Detroit, not AIG creditors, and certainly not Wall Street (assuming there’s a difference between it and AIG creditors).
As Reagan demonstrated, it’s a lot easier to say “yes” once you’ve credibly said “no,” then to get tough once you’re pegged as being weak. The best example of the latter problem would be . . . the Carter administration.
P.S.: of course, Reagan’s other big “no” was to detente with the former Soviet Union.