Jimmy Carter, Champion of Deregulation

The former president, who turns 100 Tuesday, gets too little credit for making America competitive again

By Phil Gramm. Excerpts:

"The Airlines Deregulation Act of 1978, the Motor Carrier Act of 1980 and the Staggers Rail Act of 1980 unleashed competition and spawned the invention and innovation that gave America the world’s most efficient transportation and distribution system. The cost of flying a mile declined by half and air travel became a mainstay of American life. The logistical cost of moving goods shrank as a share of gross domestic product by 50%. The leader of that effort, recently retired FedEx CEO Fred Smith, describes Mr. Carter’s “underappreciated leadership” as follows: “The reduction of logistics costs in the late 20th century was profound, largely unreported and underappreciated. These farsighted changes were the great achievement of the Carter presidency.”

The Carter administration began oil-price deregulation using its regulatory powers and set in place the gradual deregulation of natural-gas prices with the 1978 Natural Gas Policy Act. And while the deregulation of the communications industry was driven by technological change, court decisions, regulatory action and finally legislation, the Carter regulatory reform through the Federal Communications Commission made competition the driving force in the development of policy. Energy deregulation, championed by Mr. Carter and then by Ronald Reagan, produced abundant oil and gas supplies."

"Many scholars, judges, lawmakers and even regulatory-agency bureaucrats came to recognize that economic regulations from the Progressive Era were hurting consumers and hamstringing American producers. A young Senate staff lawyer, Stephen Breyer, urged Sen. Ted Kennedy to take up the consumers’ cause through regulatory reform. In Senate hearings, America heard how airfares were far cheaper on intrastate flights within California and Texas than they were on comparable routes under federal regulation. The latter typically flew half empty and only to federally approved destinations, often determined by politics rather than consumer demand.

In the 1960s, the focus of academic research shifted from market failure to regulatory failure, especially after the 1970 bankruptcy of Penn Central, when America’s largest railroad died from regulatory strangulation. Robert Bork led the effort to focus antitrust enforcement on consumer welfare. Without such a focus, it had become a license for government to control key segments of the American economy. Antitrust investigators in the government agencies that enforced these regulations and court rulings increasingly found that economic regulations themselves were “instruments of cartelization,” producing higher prices, poorer service and less innovation.

The dam broke when Civil Aeronautics Board Chairman Alfred Kahn, an avowed liberal and one of the most consequential economists of the 20th century, concluded that the most perfect regulatory system could never do as good a job as imperfect markets and therefore it was in the public interest to deregulate. Proclaiming the CAB a failure, Kahn demanded that he be fired and his agency eliminated.

But analysis based on hard facts showing that government policies harm the country are repeatedly crushed in Washington by the power of vested interest. It was Mr. Carter who took on the “Iron Triangle” of established business interests, unions and government and carried the political scars he suffered in defeating them."

"At every turn in trying to expand energy production and stop the inflation, he ran into the entrenched old guard of the Democratic Party, which wanted no part of a new competitive world or any fiscal restraint."

"In April 1979 Mr. Carter used his authority to accelerate the deregulation of oil prices, though its effect on production was muted when Congress adopted, and Mr. Carter signed, the punitive windfall-profits tax. But one act proved decisive: Mr. Carter appointed Paul Volcker to head the Federal Reserve."