Reagan's economic policy (new directions)

Question 1

when was Ronald Reagan elected?

Answer 1

1980

Question 2

what RR upbringing like?

Answer 2

• born in 1911,
• into a struggling family in Illinois
• was an actor in Hollywood and a sportscaster

Question 3

what motivated RR to become a strong republican politician?

Answer 3

• 91% of his income was taxed

Question 4

when was he elected governor of California?

Answer 4

1967-74

Question 5

what did Ronald Reagan believe in?

Answer 5

• supply side economics = low tax and deregulation to stimulate growth.

Question 6

what areas did RR want cuts in?

Answer 6

• “big government”
• crime
• welfare
• tax

Question 7

what did RR persuade congress to do in 1981 ?

Answer 7

reduce the budget of 212 federal programmes most of which had aided the working poor.

Question 8

what type of programmes did RR cut to stop dependency?

Answer 8

• Aid to families with dependent children ( of the 13 million living bellow the poverty line in 1984 many of them were the offspring of mothers who heavily relied on AFDC

Question 9

what did conservatives believe about AFDC?

Answer 9

• it encouraged promiscuity and breaking up of the traditional family.

Question 10

who did RR 1981 tax cuts benefit and who did they not?

Answer 10

• benefited the rich

- “revenue enhancements” = subsequent tax rises hit the poorest the hardest.

Question 11

what was the consequence of RR’s tax policies?

Answer 11

• increased the gap between the rich and the poor
• the average income of the poorest decreased by $1,300 a year
• the number of homeless people increased from 200,000 to 400,000

Question 12

what happened to the economy in the years 1981-83?

Answer 12

• double digit inflation
• unemployment rose to 10% (50% in the rust belt)
• average fam income plummeted
• mid-west and north which was previously booming in industry was now in decline (RUST BELT).

Question 13

what were Reagan’s industry policies like?

Answer 13

• pro business

- anti labour

Question 14

which policy further increased the gap between the rich and the poor?

Answer 14

• opposing of the min wage

- he obstructed congressional attempts to increase it

Question 15

how did RR feel about unions and what is an example of how he dealt with them?

Answer 15

• he was hostile towards them
• 1981 12,000 air traffic controllers went on strike despite this going against the law
• RR fired them all.

Question 16

how did people react to RR actions with the 1981 air stirkes?

Answer 16

• conservatives were impressed
• liberals were horrified
• no one really expected it

Question 17

what was a reason for the number of strikes plummeting?

Answer 17

• anti-union legislation which RR put in place

Question 18

what did RR to make it harder for businesses to be sued on the basis of discrimination?

Answer 18

• he appointed 400 conservatives to the Judiciary

- this made it harder for women, disabled, elderly and minorities to sue businesses based on employment discrimination.

Question 19

what did RR believe the economy would benefit from?

Answer 19

• deregulation of business and industry

Question 20

example of how RR deregulated?

Answer 20

• cut staff regulatory agencies by 25%

Question 21

what was the problem with cutting deregulatory agencies?

Answer 21

• he failed to distinguish between economic regulations and regulations that protected the environment and health and safety.
• therefore there was a 50% of prosecutions for illegal disposal of hazardous waste consequently impacting the environment.

Question 22

how were RR regulatory agency appointee’s biased?

Answer 22

• he made sure that they made decisions in favour of businesses and against labour
• so workers had less protection against accidents or bad working conditions

Question 23

did RR experience any backlash from congress?

Answer 23

• yes
• e.g. he wanted to cut benefits for early retirees bur backed down after he faced an almost unanimous outcry from congress.
• they were unco-operative over his many attempts to reduce the size of the federal government
• he vetoed the Clean water act saying it was too expensive and congress overrode this veto of the virtually identical 1987 Quality control act

Question 24

examples of areas RR did not touch due to it potentially causing public resistance ?

Answer 24

• most Americans valued social security, medicare and veterans’ benefits therefore RR left them completely intact.

Question 25

how did RR economic policies benefit workers and the family?

Answer 25

• his massive defence expenditure brought wealth to regions with defence and aerospace industries such as the west coast.
• inflation fell from 13.5% to 4.7% between 1980-1988
• unemployment fell from 7% to 5.2% in the same period
• 16 million new jobs were created

Question 26

what was RR 1986 tax reform?

Answer 26

• simplified tax codes
• tax reform bill 1986 increased taxes for corporations, - - lowered top rate tax from 50% to 28%
• and raised bottom rate tax from 11% to 15%

Question 27

what did Reagan’s tax cuts and defence expenditure consequently lead to?

Answer 27

• a budget deficit which would go on to cause great problems for future Workers and families.

Question 28

why did RR fail to balance his budget?

Answer 28

• although he wanted to decrease expenditure
• his tax cuts, decrease in federal gov and defence spending skyrocketed.
• he said “defence is not a budget item”
• expenditure increased on federal government from $699.1 billion in 1980 to $859.3 billion in 1987
• his budget deficit was over 5 times that of his predecessors.

Question 29

what did the unbalanced budget prompt congress to pass?

Answer 29

• Balanced Budget and Emergency Deficits controls act 1985 = which tried to ensure future balanced budgets through spending cuts.

Question 30

although RR was largely a cause of the economic problems it wasn’t just his fault, what indicates this?

Answer 30

• polls confirmed that majority of Americans did not want to reduce spending on social programmes such as medicare and social security
• American consumers naturally wanted to buy cheap imported goods rather than domestic products which contributed to a growing trade deficit.

Question 31

during the mid-80’s USA went from being the worlds largest creditor nations to what?

Answer 31

• the worlds largest debtor nation
• they began with a positive trade balance but as the decade went on this quickly developed into a negative one
• many felt that the gov should do something about the trade deficit.

Question 32

how did RR deal with the trade deficit?

Answer 32

• he asked Japan to voluntarily limit their exports to the UK in 1981
• they responded by opening manufacturing plants in the UK creating employment
• they also imposed a 25% tariff on imported trucks.

Question 33

what was RR legacy?

Answer 33

• made some American’s feel better about their country
• he did little about mounting trade deficit
• dramatically increased national debt
• his policies on taxation, welfare and educations had negative effects on workers and fam life
• further generations would have to pay for his policies
• he created a new public philosophy that it was undesirable to increase welfare

Question 34

what was GB presidential campaign based on?

Answer 34

• contradictory promises he pledged a decrease in the $2.7 trillion deficit
• promised no new taxes
• however once he was elected he agreed with congress that taxes must rise

Question 35

why was bush’s decision to raise taxes highly significant?

Answer 35

• it signalled belief that the gov had spent beyond its means
• demonstrated how politicians made promises they couldn’t keep.
• tax rises caused many voters to reject bush.