The economic issues which helped Jimmy Carter win the election (and ultimately led to his own defeat four years later) was the inability of the Ford administration to deal with hyperinflation together with high unemployment. This was a situation which economists had not seen before, and they were forced to coin a new phrase to define it: stagflation. President Gerald Ford made several unsuccessful attempts to rally support from the public, even instituting a program with the acronym WIN (whip inflation now.) His failure to bring inflation under control made him appear incompetent and cost him the support of the American public.
Politically, Mr. Ford's pardon of Richard Nixon, though well intentioned, ran contrary to opinions of a majority of the American public. Mr. Ford reasoned that the nation could not abide further turmoil as a result of the Watergate scandal:
As a result of certain acts or omissions occurring before his resignation from the Office of President, Richard Nixon has become liable to possible indictment and trial for offenses against the United States. Whether or not he shall be so prosecuted depends on findings of the appropriate grand jury and on the discretion of the authorized prosecutor. Should an indictment ensue, the accused shall then be entitled to a fair trial by an impartial jury, as guaranteed to every individual by the Constitution.
It is believed that a trial of Richard Nixon, if it became necessary, could not fairly begin until a year or more has elapsed. In the meantime, the tranquility to which this nation has been restored by the events of recent weeks could be irreparably lost by the prospects of bringing to trial a former President of the United States. The prospects of such trial will cause prolonged and divisive debate over the propriety of exposing to further punishment and degradation a man who has already paid the unprecedented penalty of relinquishing the highest elective office of the United States.
At the time, Jimmy Carter presented himself as an outsider who had no previous experience in Washington. He was perceived as honest and forthright at a time when many were sickened at the corruption which seemed to pervade Washington. Although Mr. Ford was also perceived as honest, he was also perceived as unable to deal with the nation's economic woes and as having made poor choices in issuing the Nixon Pardon. It was for this reason that Mr. Carter defeated Mr. Ford in the 1976 election.
Gerald Ford entered office burdened, to a great extent, by the political baggage of Watergate. Though Ford was not at all involved in the scandal, his pardon of Richard Nixon soon after assuming office was a deeply unpopular political move, seen by many as cronyism despite his own explanation that it was the best way for the nation to heal:
My conscience tells me clearly and certainly that I cannot prolong the bad dreams that continue to reopen a chapter that is closed. My conscience tells me that only I, as President, have the constitutional power to firmly shut and seal this book.
In the wake of the scandal, Carter's image as an honest, religiously upright, Washington outsider played a major role in his election by Americans sick of scandal. Other events, particularly the fall of Saigon in 1975, did little to convince Americans of Ford's political nous.
Yet perhaps more important was the persistent economic downturn, a holdover of the Nixon presidency, faced by the Ford Administration. During this period, the United States experienced "stagflation," persistently high unemployment rates made even worse by equally persistent inflation driven largely by rising oil costs. Ford and his economic advisors proved ineffective in dealing with the crisis, despite their campaign entitled "Whip Inflation Now" (WIN) and this played a major role in the election of Jimmy Carter. Carter would also suffer due to the economy, and by public perception that he was incapable of dealing with it.