The election of Jimmy Carter in 1976 brought a Democrat to the White House for the first time since 1969. Large Democratic majorities in Congress provided the new president with an opportunity to move aggressively on the legislative front. With the infighting of the early 1970s behind them, many Democrats hoped the Carter administration would update and expand the New Deal. But Carter won the presidency on a wave of post-Watergate disillusionment with government that did not translate into support for liberal ideas. Events outside Carter’s control helped discredit liberalism, but the president’s own policies also pushed national politics further to the right. In his 1978 State of the Union address, Carter lectured Americans that “[g]overnment cannot solve our problems…it cannot eliminate poverty, or provide a bountiful economy, or reduce inflation, or save our cities, or cure illiteracy, or provide energy.” The statement neatly captured the ideological transformation of the county. Rather than leading a resurgence of American liberalism, Carter became, as one historian put it, “the first president to govern in a post-New Deal framework.”

In its early days the Carter administration embraced several policies backed by liberals. It pushed an economic stimulus package containing $4 billion in public works, extended food stamp benefits to 2.5 million new recipients, enlarged the Earned Income Tax Credit for low-income households, and expanded the Nixon-era Comprehensive Employment and Training Act (CETA)­. But the White House quickly realized that Democratic control of Congress did not guarantee support for the administration’s left-leaning economic proposals. Many of the Democrats elected to Congress in the aftermath of Watergate were more moderate than their predecessors who had been catechized in the New Deal gospel. These conservative Democrats sometimes partnered with Congressional Republicans to oppose Carter, most notably in response to the administration’s proposal for a federal office of consumer protection.

At a deeper level, Carter’s own temperamental and philosophical conservatism hamstrung the administration. Early in his first term, Carter began to worry about the size of the federal deficit and killed a tax rebate he had proposed and Congressional Democrats had embraced. The president’s comprehensive national urban policy veered to the right by transferring many programs to state and local governments, relying on privatization, and endorsing voluntarism and self-help. Organized labor felt abandoned by Carter, who remained cool to several of their highest legislative priorities. The president offered tepid support for national health insurance proposal and declined to lobby aggressively for a package of modest labor law reforms. The business community rallied to defeat the latter measure, in what AFL-CIO chief George Meany described as “an attack by every anti-union group in America to kill the labor movement.” In 1977 and 1978 liberals Democrats rallied behind the Humphrey-Hawkins Full Employment and Training Act, which promised to achieve full employment through government planning. The bill aimed not only to guarantee a job to every American but also to re-unite the interracial, working-class Democratic coalition that had been fractured by deindustrialization and affirmative action. “We must create a climate of shared interests between the needs, the hopes, and the fears of the minorities, and the needs, the hopes, and the fears of the majority,” wrote Senator Hubert Humphrey, Lyndon Johnson’s vice president and the bill’s co-sponsor. Carter’s lack of enthusiasm for the proposal allowed conservatives from both parties to water down the bill to a purely symbolic gesture. Liberals, like labor leaders, came to regard the president as an unreliable ally.

Carter also came under fire from Republicans, especially the religious right. His administration incurred the wrath of evangelicals in 1978 when the Internal Revenue Service established new rules revoking the tax-exempt status of racially segregated, private Christian schools. The rules only strengthened a policy instituted by the Nixon administration; however, the religious right accused Carter of singling out Christian institutions. Republican activist Richard Viguerie described the IRS controversy as the “spark that ignited the religious right’s involvement in real politics.” Race sat just below the surface of the IRS fight. After all, many of the schools had been founded to circumvent court-ordered desegregation. But the IRS ruling allowed the New Right to rain down fire on big government interference while downplaying the practice of racial exclusion at the heart of the case.

While the IRS controversy flared, economic crises multiplied. Unemployment, which had fallen in Carter’s first years in office, rose above 7% by 1980. The rate of inflation averaged 11.3% in 1979, sending prices upward. In another bad omen, the iconic Chrysler Corporation appeared close to bankruptcy. The administration responded to these challenges in fundamentally conservative ways. First, Carter proposed a tax cut for the upper-middle class, which Congress passed in 1978. Second, the White House embraced a long-time goal of the conservative movement by deregulating the airline and trucking industries in 1978 and 1980, respectively. Third, Carter proposed balancing the federal budget—much to the dismay of liberals, who would have preferred that he use deficit spending to finance a new New Deal. Finally, to halt inflation, Carter turned to Paul Volcker, his appointee as Chair of the Federal Reserve. Volcker raised interest rates and tightened the money supply—policies designed to reduce inflation in the long run but which increased unemployment in the short run. Liberalism was on the run.

The “energy crisis” in particular brought out the Southern Baptist moralist in Carter. On July 15, 1979, the president delivered a nationally televised speech on energy policy in which he attributed the country’s economic woes to a “crisis of confidence.” Carter lamented that “too many of us now tend to worship self-indulgence and consumption.” The president’s push to reduce energy consumption was reasonable, and the country’s initial response to the speech was favorable. Yet Carter’s emphasis on discipline and sacrifice, his spiritual diagnosis for economic hardship, sidestepped deeper questions of large-scale economic change and downplayed the harsh toll of inflation on regular Americans.