On assuming office in 1977, President Carter inherited an economy that was slowly emerging from a recession. He had severely criticized former President Ford for his failures to control inflation and relieve unemployment, but after four years of the Carter presidency, both inflation and unemployment were considerably worse than at the time of his inauguration. The annual inflation rate rose from 4.8% in 1976 to 6.8% in 1977, 9% in 1978, 11% in 1979, and hovered around 12% at the time of the 1980 election campaign. Although Carter had pledged to eliminate federal deficits, the deficit for the fiscal year 1979 totaled $27.7 billion, and that for 1980 was nearly $59 billion. With approximately 8 million people out of work, the unemployment rate had leveled off to a nationwide average of about 7.7% by the time of the election campaign, but it was considerably higher in some industrial states.
Carter also faced a drastic erosion of the value of the U.S. dollar in the international money markets, and many analysts blamed the decline on a large and persistent trade deficit, much of it a result of U.S. dependence on foreign oil. The president warned that Americans were wasting too much energy, that domestic supplies of oil and natural gas were running out, and that foreign supplies of petroleum were subject to embargoes by the producing nations, principally by members of the Organization of Petroleum Exporting Countries (OPEC). In mid-1979, in the wake of widespread shortages of gasoline, Carter advanced a long-term program designed to solve the energy problem. He proposed a limit on imported oil, gradual price decontrol on domestically produced oil, a stringent program of conservation, and development of alternative sources of energy such as solar, nuclear, and geothermal power, oil and gas from shale and coal, and synthetic fuels. In what was probably his most significant domestic legislative accomplishment, he was able to get a significant portion of his energy program through Congress.
Other domestic accomplishments included approval of the Carter plan to overhaul the civil-service system, making it easier to fire incompetents; creation of new departments of education and energy; deregulation of the airlines to stimulate competition and lower fares; and environmental efforts that included passage of a law preserving vast wilderness areas of Alaska.
Carter was not successful in gaining support for his national health-insurance bill or his proposals for welfare reform and controls on hospital costs. He was unsuccessful also in gaining congressional approval of plans to consolidate natural-resource agencies within the Department of the Interior and expanded economic development units in the Department of Housing and Urban Development. Also, Congress did not favorably receive his tax-reform proposals.