This article is adapted from The Rebels: Elizabeth Warren, Bernie Sanders, Alexandria Ocasio-Cortez, and the Struggle for a New American Politics by Joshua Green.
Thank you for this excellent treatise on President Carter’s backfired efforts at tax reform. If I’d ever known about them, I’d long forgotten (though, to be fair, I was only 15 when he was elected).
About the only thing I think I can add is that from a social issue perspective, 1978 was ground zero for the National Conservative Political Action Committee (NCPAC, and pronounced “NICK-pak”) founded by the usual suspects and presaged Ronald Saint Reagan’s 1980 electoral college landslide. 
Between them and what, the next year, would become former segregationist Jerry Falwell’s so-called Moral Majority, one can easily see the two halves of the “economic anxiety” and Christianist Nationalist wings of the Republican’t Party w/ which we’re still dealing today.
These events were a step toward where we are now, but I can’t agree it led directly to today’s mess. Citizens United sealed the deal and accelerated the whole mess. It was the framework to building the separation of society and the .01% that removed the opportunities for today’s generations.
I’m old, I remember the Medicare recipients chasing Sen. Dan Rostenkowski down the snowbanked street, threatening bodily harm with their crutches in 1987. He went back and did a somewhat better thing.
“Beginning in 1978, Democrats, over Jimmy Carter’s objection, embraced Wall Street’s idea that encouraging “capital formation” was the surest way to revive the moribund economy and set America on a path to broad prosperity.”
Yes, but no small part in this transition is that the revolving door of politics/private sector now made many Dems going through that door much, much richer; and they really liked that. Their personal prosperity (to hell with broad prosperity) helped drive them further to the top 5% where they wanted to be. To this day most productivity gains since 1978 have not gone to workers in wages (see flat wage rates) but to capital as wealth. Nobody is very surprised. The resulting wealth gap is skewing our politics badly.
This article contains many useful facts about a major inflection point in American politics.
Its political history is, however, complete trash.
Carter did not run as a populist. He ran as a southern businessman, a "different kind of Democrat. A southern who was not a racist, who understood the motives of populism, embraced them, but was not defined by them.
Corporatist control of the Democratic Party did not begin as a reaction to Carter and populism. The Democratic coalition was a weird amalgamation of southern racists and northern liberals. The racists accepted the New Deal because it was good for the economic interests of their poorer voters. The liberals lived for the New Deal and accepted Wall Street money because they knew the New Deal was good for the economy. (This amalgamation was roughly analogous to the pre-Trump Republicans with their Wall Street financing and their racist voting strength.)
Wall Street dominated the Democratic Party for the quarter century before Carter even as it preferred the GOP. The conservative wing of the party got its Vietnam War (and Cold-War spending as well) and the rest of the party got guns-and-butter stimulus. Which Wall Street liked as well.
“Capital formation” was the rallying cry of conservative economics going back to Calvin Coolidge. The truth is: Government policies never affect capital formation; tax policies never affect business investment.
Businesses put money into capital investment because people are buying more of their product than they can produce. Period.
I would like to thank TPM for giving me this peek at this book. You saved me the cost of purchasing it.
My memory of Carter’s presidency are influenced by my proximity to organized labor. They had, of course supported Carter, but at some point their views changed from support to the belief Carter lacked leadership to succeed. There definitely was disappointment.
When Reagan won in 1980, labor believed, correctly, that progress and success in growth and power of organized labor was over.
My recollections are from conversations among labor union leaders, not from a position I held.
Another loss from Carter’s loss was support of public education.
He most certainly did not. Ahistoric drivel.
I saw the whole thing. “To be to the right of Carter is to be a Republican.” - William F. Buckley, 1978. And by the summer of 1978, or a mere 18 months into his presidency, Carter had lost the support of the Democratic party. By then the party preferred Ted Kennedy by a staggering 2-to-1 margin. Look, I admire the man, but whose fault was that?
In '76 I worked for Carter’s campaign in Vermont, and to this day certainly believe him to be a good man; the greatest former president by a country mile. I continue contribute to the Carter Foundation. Inconvenient facts are nonetheless facts.
I am old enough that I was in a major strike, against a large chemicals manufacturer, that began a couple weeks after the 1978 midterms and targeted both the corporation’s health and safety practices and, explicitly, Carter’s economic policies. As a union activist at the time, I recall that we didn’t see Carter as a friend of unions, of workers, or of continuation of ‘New Dealing.’ He was for us a new type of Democrat, and we were quite wary of him.
In retrospect, I have a great deal of respect for the guy and, if I had had a chance to choose such a thing, he’d be the president in my lifetime I’d most want to have a long dinner with. But that’s hindsight, and partly on account of his post White House activities.
So I very much agree with your comment, I think you’ve placed Carter in his time better than this quite interesting piece.
It seems that ESPN-Disney was giving its on-air personalities fake Emmy Awards!! When you are rich, they let you do anything.
the 2008 financial crisis would be a strong contender. It was the point at which America broke down, political consensus went up in smoke, and long-standing assumptions about how society should be organized, and for whose benefit, came under scrutiny.
And the Obama administration did nothing to make the criminals who created and profited from the mess face justice. I voted for Obama twice, but he could be a complete coward. Heads should have rolled down Wall Street.
What? No mention of Iran Hostages?
The article is setting the stage for a single, transformational event in late 1978 in Carter’s Presidency and the overall subject of the book is the new Progressive movement, represented by Elizabeth Warren, Bernie Sanders and Alexandria Ocasio Cortez, so I’m not really sure how the Iran hostages would fit into that story.
The Iranian Hostage crisis was the pivotal point at which the Reagan Campaign was able to do vastly illegal things to win the 1980 election. Because they got away with it, it encouraged the reassertion of GOP dirty tricksters up until today.
Wise statement right there
That would have been the Iran Hostage Crisis, without it there would have been no Regan
Powell Memo?
Capital formation is all well and good, but if all it does is feed on itself and allow for massive accumulation of capital into the hands of a precious few to buy bigger yachts, and more luxury cars and a new pair of expensive wool/silk/whatever socks every day, gold plated toilets and all the vast panoply of grotesque excess cretins like trump and lapierre and the rest bugger in, well, it’s neither well nor good.
If it builds better factories, more efficient factories, better power grid, innovation that makes life better, health research to solves cancer and diabetes and macular degeneration, that eradicates poverty and illiteracy, that gives us a better and faster and easier internet and puts humanity on the Moon and Mars and really opens up the sciences to all, stops global climate change in its tracks and saves the coral reefs and the elephants and giraffes and the rain forests, then it is indeed well and good.
No. Even before his first year was out, we could see Carter was a one-termer. Less than a year after that Carter had lost the support of the Democratic Party. You’re not going to win reelection if your party is that disenchanted with you. Any Republican nominee would have beaten him.
This article forgets about another event in 1978–Proposition 13 in California which ignited the Laffer 33 1/3% tax cut movement that Republicans totally embraced in 1978. Prop 13 echoed all over the country with Republicans endlessly saying people were overtaxed.
This will also shift power in America…
It’s coming!