Reagan Flashcards
Intro- political landscape
Public was hopeless about the mishandling of events from nixon and carter, they needed to trust the govt again. when reagan asked the public if they were happy they said no, he used this to his advantage.
1979 president carter referred to usa being in a malaise - indefinable discontent, 1979 poll said that parents thought their kids future will be worse than their own. , watergate only 30% people saw this.
carter argued that people were to pull together and get thru this which is why he lost, ppl preferred Reagan’s i can fix it.
reagans beliefs?
conservative christian, there was a significant christian coalition who supported him- opposed homosexuality and sex before marriage- reagan believed this too. he spoke out against abortion but made it clear that these were his personal beliefs.\
gave jobs to religious ppl, also tried to pass a law to ban abortion but opp in congress.
REAGANOMICS
similar to 1920’s
believed in reducing big govt - laissez faire
they were anti union, in 1981, 13,00 air traffic controllers went on strike and reagan called this illegal. threatened to fire them if they didnt go back in 48 hrs.- they got sacked.
both allowed big business corporations to be formed which later could be monopolised - the only business dealing in that matter which allowes them to set prices higher and deman more from suppliers bec no other business trying to buy from the suppliers.
allowed tax reduction- top level personal tax went from 70 to 25
believed in rugged individualism, wealth, financial speculation
reagonmics part 2 - reagans programme for economic recovery had 4 parts
- cutting federal deficit- accompanied by a budget bill and proposal to cut spending on domestic affairs. reagan wanted to take the 22 of Gross national product in 1981 to 19% in 1986.
put together too quick, errors, and it had 76billion of spending cuts which were unidentified. - personal and business tax reductions - Economic Recovery Tax act in 1981
- deregulation - no fed cont in industry
- planned cont of money supply - to keep inflation down.
plan for reform
usually bills would be discussed with congress and the budgets of diff departments would be considered however, at the first meeting, reagan wanted to present his whole bill policy through to 1984 and also present a tax bill called the Council of Economic Advsiors- which had no time to be planned.
effects of reagans economic policies- supply side theory
supply side theory: no govt intervention like roosevelt and other administrations had done. sst is one which postulates economic growth by decreasing taxes, regulation and allowing free trade.
swung into action as soon as, within 3 days of being president, he sacked white house workers and put a federal freeze on hiring. freeze on furniture too
told workers to cut down expenditure on travel by 15%
many execytive orders to set up advisory groups that reported to him ab cutting down big govt.
impact of 4 step programme
cuts came from grants set up under johnson’s great society where they helped society in terms of housing and slum clearance
some grants were for education and famillies with dependent children. - bad impact
getting the legisaltion passed
reupublican majority in hos and hor, only 26 democrats to pass legilation thus no problem.\
the omnibus reconcilliation act passed in 09/81 and reduced tax from 30 to 25% - democrats challeged this as a control matter
a reshaped bill was passed called the ERTA in 1981 which applied to all taz bands unlike before, cut marginal tax by 23% across 3 years highest tax fell from 70 to 50 and lowest fell from 14 yo 11.
impact of policies decreasing inflation
his policies main aim was to stop inflation - asked the federal reserve board to put a tighter hold on money supply. they did, however he didnt ask them to stop when unemplpyment rose thus it led to a sharp increase in interest rates,
hurt industries eg cars which bought on credit.
unemployment rose from 7.6% in 1981 to 9.1% in 1983 but inflation fell to 6.2% by a previous 13.5% in 1982
did policies encourage save and invest?
after the 1982 recession, people began doing well thus there was an increase in saving and investment. but reducing bg meant deregulation which allowed financial organisations to take drastic steps in making more customers. - unsafe - people began losing their money in late 1980s - stock market crash in 1987 - recovery fast cos frb said to banks to lend money to eachother.
did the policies reduce the deficit
it was his most biggest failure, the deficit increased from 59billion in 1980 to 208billion in 1983. because USA became a debtonation, borrowed money from overseas to make the tax cuts work. he failed to understand that his supply side theory would not work in hindsight.
he also increased defence spending - into miliary whereby previous govt focussed on human resources - 1980 - 28% of spending was to HR but in 1987 it was 22%. defence spending increased from 23 to 28.
to what extent was big govt successful following Reagan’s departure?
bush was elected and he promised to continue reagan’s policies but these policies became less popular as limitations were clear.
he raised taxes.
1992, bill clinton, democrat elected to wh- he was a new democrat - reagan’s policies had created problems and ppl were used to low taxes a return back to them would not be useful. his campaoign was increasing wealth, low inflation and increasing employment.
how was it reduced and thus successful
deregulation was his biggest tool for reducing BG. in 1982, he said in the state of union that he was accomploishing reduction of bg
since then - administration has cut down federal regulations in half, removing 23,000 in fed register. 47,500 when reagan came to power.
bring down cost of petrol thru dereg
replaced federal agencies with private sectors
created a federal strike to combat govt fraud ans waste that had saved 2b in 6 m
carter had began dereugulation of airlines before reagan came to office, it wasnt his idea.
problems of deregulation
bigger businesses expanded whilst smaller ones suffered, bec of the lack of help they struggled to make money hence bigger ones could buy them out. rise in conglomerates - businesses like general electric expanded into medical, gas etc. the safety and regulations were set lower to govt guidelines & their prices were lower too
bigger businesses cut services to maximise profit, and rural areas suffered
the savings and loan collapse
carter deregulated banks, which reagan applied to the savings and loans instit in 1983. bank restrictions eased and they allowed high interest rates on savings which was good for savers but bad for struggling businesses and ppl with loans.
good: for ppl who understood how to save
bad: for banks as they were ran by safe investors, before dereg they could give mortgage loans at a regulated interest rate- however after thy ehad to make risky investments and give them at lower prices]
they failed due to incompetence.
govt had to pass competitive equality in banking act 1987 to make up for the money loss.
