President Carter inherited an economy of declining productivity, high unemployment, high interest rates, and high inflation—called “stagflation” by economists. Oil shortages resulting from the Iran/Iraq War and rising prices at the gasoline pump increased the inflation rate in 1979 to 11.3 percent.

In late April 1979, divisions between the president and his economic policy makers gave the appearance of disarray in the administration. Following the lead of his secretary of the treasury, Carter initially favored raising interest rates to slow inflation and an overheating economy but changed his mind in response to complaints from the chairman of the Federal Reserve (his own appointee), who disputed the analysis of an overheated economy. This and other disagreements among Carter’s economic team raised doubts that the president could effectively deal with the nation’s economic problems.