The (Dis)United States

A Review of Fault Lines — A History of The United States Since 1974

Source: Shutterstock

50 years ago today, what had begun as a set of peaceful anti-war protests on the campus of Kent State University ended tragically with the National Guard firing on protesters, killing four and wounding nine others. In a set of events that seems to repeat ad-infinitum, the state used its monopoly on violence to murder and wound innocent Americans exercising their right to assembly and freedom of speech. But the nation was deeply divided across political lines in opinions about the event itself. As Richard Perloff notes:

Half a century later, America is arguably even more divided. A history of these turbulent decades and the fractured state of civil discourse has long been a favorite course of students at Princeton University titled “The United States since 1974.”

From the success of the class, Professors Kevin Kruse and Julian Zelizer authored Fault Lines — A History of the United States Since 1974. The end product is arguably one of the best accounts of modern American history. Published in January 2019, the book recounts the change in American dating back to the Nixon Administration all the way up to the Trump Administration. It’s about as current as anything could be from the pre-coronavirus era. In their own words:

At about 360 pages, the book offers a wide-range covering of a half century of American history. Without getting too in the weeds, I will share some of the major themes along with a bit of economic history lurking in the background that I feel has been unfairly glossed over — not by the authors in particular, but by society at large.

1970s — The “Decade of Disillusionment” (Lost Trust)

Source: Time Magazine

So begins the first chapter on the 1970s. Nixon’s Administration literally and figuratively seemed to represent the erosion of whatever trust in government Americans had left. Along with this came and increasing distrust in the strength of the economy. The growth and widely-shared prosperity from the post-World War II economy began to wain in the 1970s. The fragility of the overall system was exposed in the 1973 Oil Crisis and the decline of the American auto sector.

Source: Wikipedia

Enter President Jimmy Carter, who won the 1976 election with just 50.1% of the popular vote and 297 electoral votes (versus 240 electoral votes for Ford.) Carter walked into a divided and weakened nation and soon faced a number of further destabilizing events. A partial nuclear meltdown at Three Mile Island, the 1979 Iran Oil Shock, and the near collapse of Chrysler Corporation lead many to consider the 70s “the decade of disillusionment,” as Kruse and Zelizer noted:

The 1970s also were associated with a deepening of racial division in America. African Americans, Mexicans, and Latinos largely developed “nationalistic” identity cultural movements, which was also replicated by white ethnics. While these movements preserved the individual cultures of these groups, they eroded any remaining sense of a national identity and deepened the fault lines. So to did the movements in gender, sexuality, and shifting family values of the 70s. While many of these reforms were liberalizing, they stoked a counter-reaction on the right which viewed the reforms as an attack on their sense of “traditional America.”

1980s — Reagan Era & “The New Right” Emerges

Source: National Review

The 1980s began with the strengthening of the broader conservative movement that combined the religious right, traditional conservatives, and libertarian capitalists into a broad coalition termed “The New Right.” With innovative tactics like direct-mail campaigns, radio addresses, high spending super PACs, and the Heritage Foundation’s “Heritage Backgrounder” pamphlets, this coalition confronted head-on the previously liberal changes of the 60s and 70s. With initial victories, like the end of the Iran Hostage Crisis, the passing of Prop-13 tax reductions, the coalition seemed strong. But there was not broad approval for Reagan’s tax cut plan. It was only after surviving an attempted assassination that Reagan’s political standing rebounded. With Democrats hesitant to attack a President who survived an attempt on his life, the Economic Recovery Tax Act was able to pass.

Reagan’s “new right” soon found challenges on many fronts. Social Security had become the “third rail of politics” as Kirk O’Donnell famously quipped, and attempts to alter or gut it proved tantamount to political suicide. More importantly, the world at large was being rapidly changed with innovations in technology. The rise of 24 hour news on CNN, the use of VCR tapes, and early PC & cell phone technology were the roots of today’s fragmented media landscape. As Kruse and Zelizer note:

Making matters worse, the Reagan Administration essentially shot itself in the foot on numerous fronts. The Iran-Contra Affair led to a 16% drop in the President’s approval rating in a single month, the single largest drop in Gallup’s history of presidential polling. Although an amazing victory for world peace, the Fall of the Berlin Wall during the administration took away Americans’ common enemy (the Soviet Union) and allowed them to once again focus on hating each other. This was reflected in the strong protests against the Bork Nomination for Supreme Court and the divided views on the AIDS epidemic.

1990s — Rapid Disruption Driven by Technology

Source: ABC News

In both technological and political terms, the 90s were a decade of rapid disruptions and divide. President George H. W. Bush fully embraced the “culture wars” and lead a brutally negative campaign against Dukakis, who aided his own demise on numerous fronts. Bush was elected in an election marked by extraordinary apathy — with the lowest voter turnout since 1924. With Operation Desert Storm, the role of the media as a skeptical watch guard of democracy seemed to fade as the cable news networks benefitted as much (or more) than the government did thanks to 24 hour live-action war news and increased viewership.

The initial victory in foreign affairs was quickly swept up in domestic crises. The Anita Hall Testimony against then Supreme Court nominee Clarence Thomas became a partisan battle and the LAPD’s aggressive use of force on Rodney King led to the LA Riots of ’92. The end result of the riots was 63 deaths, 2,383 injuries, 12,111 arrests, and $700 billion of damage. The intervention of the California National Guard and U.S. Marines on home soil eventually stopped the violence, only to leave scars that still impact the country today.

Source: Wikipedia

President Clinton’s desire to remain a centrist was shattered by economic necessity and his inability to avoid the culture wars. From Don’t Ask Don’t Tell, to the Waco Siege to the rise of Talk Radio and Newt Gingrich’s “Contract with America,” the Clinton Administration faced a deeply dividend nation. This was further intensified by the rise of Fox News and the Drudge Report as well as the Monica Lewinsky Scandal and the ensuing Impeachment Trial. Meanwhile, despite the victory of the first balanced budget in decades, the 90s Dot Com Bubble bursting (partially a result of easy money and the “financialization of everything” created economic divisions. Wealth and income gains went almost exclusively to the top 1% while the 99% faced higher unemployment and a decline in real wages or effective purchasing power. This was reflected in terms of urban decay and the rapidly growing Prison Industrial Complex.

2000s — The Post 9/11 World and the War on Terror

Bush’s Impromptu “I CAN Hear You” Speech at Ground Zero (Source: U.S. News)

President George W. Bush’s Administration was almost singularly defined by the 9/11 Terrorist Attacks, as was the country and arguably the entire world. Bush initially seemed to replicate Reagan with his signature tax cuts — the largest in U.S. history — and strove to pursue a domestically-focused campaign of compassionate conservatism, but ultimately foreign policy took over the center stage. With the attacks on the nation came a drastic increase in executive power and an escalation to war in both Afghanistan and Iraq, mostly driven by the sociopathic and corrupt Vice President Dick Cheney, as has been well chronicled in the movie “VICE.”

Ignoring the recent history of the Soviet’s failure in Afghanistan, the U.S. embarked on a war that still rages on 19 years later (though with negative oil prices and the COVID-19 crisis, one does wonder how much longer it can last.) A faulty theory of Weapons of Mass Destruction (WMDs) led to the concurrent Iraq War, still ongoing 17 years later. The USA Patriot Act stripped away some of the remaining civil liberties domestically and the CIA’s enhanced interrogation policies contributed to the hatred of America worldwide for hypocrisy and extreme ethical failures. As Kruse and Zelizer note:

The 2000s saw the liberal movement regain its footing in the media with shows like the Colbert Report and the Daily Report as well as with the rise of online blogs. These critics of the administration had a field day over the Bush Administration’s abysmal failure to handle the aftermath of Hurricane Katrina. Additionally, during this time the administration began the infamous NSA PRISM program that unconstitutionally conducted mass surveillance on American citizens.

2010s —Partisanship and Dysfunctional Government

President Obama’s election saw the convergence of social media and politics. He walked into the 2008 recession, exposing the extreme fragility in our underlying economic system. In part thanks to the removal of Glass-Steagall, the entire economy was structurally unsound (more on that in a bit). The $700 Billion TARP Bill in response to the housing market crash was at the time the largest market intervention in U.S. history. Overall, the entire time Obama held office the Republican Party’s sole mission was basically to obstruct anything he proposed. “Scorched earth politics had become the norm,” as Kruse and Zelizer note. A drastic increase in use of filibusters, a refusal to fill Supreme Court vacancies, The Tea Party movement, and the debt ceiling debate fiasco represented the politics that we know today — where it is taken as a given that a partisan Congress is often unable to make even the simplest of decisions.

Source: Wikipedia

Leading up to the election of President Donald Trump, the Black Lives Matter movement, the rise of the “alt right” and the controversy over the Benghazi attacks and Clinton Emails were emblematic of a country that was as much at war with itself as it was against terrorism. Further advances in social media have so completely fractured the media environment that the line between what is “fact” and “fiction” has become blurred. People can increasingly find the answers and the opinions they are pre-conditioned to agree with and completely block out everyone else; any sense of shared reality has been eroded. Thus, through the political debates and controversies over The US-Mexico Border Wall, the Charlottesville Attack, the Immigration Ban, the firing of Comey, and the Impeachment Trials, many pundits argue that there increasingly appears to be “two Americas” — Red America and Blue America. As Kruse and Zelizer conclude with:

It’s uncanny to read that and know that it was published before the coronavirus epidemic. Obviously, the next chapter is completely going to be taken over by a focus on the virus and its devastating impact — especially economically. Overall, this review/summary has just scratched the surface of the book and I highly encourage all readers to grab a copy for yourself. But I also need to point out the economic history lurking in the background that appears to be wiped from our global consciousness. That is the history of Nixon’s Abandonment of the Gold Standard in 1971 and the fiat currency & modern monetary theory (MMT) system run amok that has completely destabilized the global economy and destroyed the purchasing power of the middle and lower classes.

While Kruse and Zeliver began in 1974, they really should be starting in 1971.

The year that Nixon took the United States off the Gold Standard set off a cascade of economic effects that has lead to extreme wealth inequality and economic fragility. While the academically-reinforced group think of Keynesianism has vilified anyone who dare challenge the mainstream narrative, data unequivocally shows that this failed experiment in monetary policy is at the core of the economic divisions in our country (and in the world) today.

I would also argue that much of the division in American politics which the authors have detailed stems from the inequality and systemic economic fragility that is directly attributable to Nixon’s decision in 1971 to abandon the Gold Standard.

Using some of the charts from Twitter users MrCoolBP and HeavilyArmedClown (hosts of the Bitcoin Echo Chamber podcast), which are aggregated at wtfhappenedin1971.com, a case can be made that Kruse and Zelizer should consider the impacts of the Nixon abandoning the Bretton Woods system.

Source: wtfhappenedin1971.com

Productivity and compensation grew in lockstep from around 1950 to 1970 and then experienced a drastic decoupling shortly after the U.S. abandoned the Gold Standard in 1971.

Source: wtfhappenedin1971.com

Similarly, gains in real family income were widely shared from 1950 to 1970 across the lower, middle, and upper classes but again experienced a drastic decoupling post 1971. Since then, the lion’s share of gains has gone to the 95th percentile.

Source: wtfhappenedin1971.com

Startlingly, relative stability of purchasing power seen in the Consumer Price Index (CPI) was seen for around 135 years, prior to WWI and the creation of the Federal Reserve. But from 1971 onwards, the CPI has dramatically increased at a scale and speed that is unprecedented in almost a century and a half preceding the abandonment of the Gold Standard.

Source: howmuch.net

Although this trend started long before 1971, since the creation of the Federal Reserve the dollar has lost approximately 96% of its value. Through the government’s decisions to continually print more and more currency, the savings and purchasing power of the general population have been destroyed in pursuit of “2% target inflation” deemed to be a victory in and of itself. Meanwhile, the extreme excesses created by fiat currency (only backed by government decree) and MMT — which argues that indefinite debt is not a problem — has lead to repeated government bailouts of corporate risk takers, or as Nassim Nicholas Taleb and Nic Carter have outlined, the result is “corporate socialism” and “embraced fragility.”

Conclusion — Absolutely Buy the Book

I would not have taken the time to write such a long review if I didn’t love this book. To be honest, I am seriously jealous of all the Princeton students who got to take the original class behind the book. Despite what I see as a missed opportunity to consider the abandonment of the Gold Standard and its impact on the economic and political divide in the country since the 70s, I still rate the book 9/10 as it is an exceptionally well-written account of modern American history. You should consider grabbing a copy for yourself.

Investor at MassVentures, BCO Board Member, & Stanford UIF Alum. Previously at Greenspring Associates & JKS Ventures. Elon ’18. | All opinions my own

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