Back in the 50s, when I went to Harvard, they were still giving a “Gentleman’s C” to students in some courses for showing up and doing the basic work, but I think the inflation started back then, or certainly in the 60s.
Kerry's GPA at Yale was very similar to Bush's and probably for the same reason--both were heavily involved in extra-curricular activities and having fun, rather than doing the best they could in their courses. Of course the media never drew the conclusion that Kerry was dumb.
My guess would be that grade inflation exploded with the advent of affirmative action.