The Extent To Which 'Big Government' Was Reduced, 1981-1996 Flashcards
New Federalism
The policy of turning over the control of some federal programs to state and local governments
How did Reagan see reducing ‘big government’ as benefitting the USA?
New Federalism would produce less federal interference in state and local affairs, business, finance and all aspects of people’s lives
How was reducing ‘big government’ seen as something negative? (5)
- Less funding for state and local government projects
- Less regulation of business expansionism
- Greedy
- Less control over foreign imports
- Less social welfare for the most needy
How many pages were removed from the Federal Register?
23,000 pages
How many pages did the Federal Register have in 1960 and when Reagan came into power?
1960 - 14,500
1981 - 87,000
What did Reagan state the administration had achieved against ‘big government’? (4)
- Cut federal regulations almost in half
- Helped to bring down the cost of petrol and heating fuel by deregulation
- Created a federal strike force to combat government fraud and waste
- Replaced federal agencies with private sector ones and federal employees with volunteers
How much money did Reagan save by creating a federal strike force to combat government fraud?
$2 billion in six months
Big vs small companies during deregulation:
Whilst big companies expanded, smaller independent companies struggled.
What happened to the smaller companies that struggled during the 1980s?
Big companies bought them out leading to a rise in the number of conglomerates
Conglomerates:
An organisation that controls several businesses of different types
Big businesses during deregulation: (4)
- Bought out smaller companies
- Businesses set their own standards of safety (physical and financial)
- ‘Fixed’ a price structure, so that they did not have to compete
- Cut services provided to maximise profits
What occurred when banking restrictions were lifted?
Banks could offer high interest rates on savings
How were high interest rates good and bad for people?
- Good for savers
- Bad for struggling businesses and people with long-term loans
What did banks and S&Ls compete for?
Custom
How was banks and S&Ls competing beneficial for some?
Those who had savings, and who were able to understand the various offers benefited the most.
Before deregulation, how did S&Ls run? (2)
- Run by people used to making safe investments
- Mostly provided mortgage loans at a regulated rate of interest
How did S&Ls operate after they started to compete with banks? (4)
- Made increasingly risky investments
- Lend at very low rates
- Offered high rates of savings to savers
- Many failed through incompetence
What did the government pass as a result of the failure of S&Ls?
Competitive Equality Banking Act
When was the Competitive Equality Banking Act passed?
1987
What did the Competitive Equality Banking Act provide? (2)
- Provided money to cover the money lost by closed S&Ls
- Was not enough
How many dollars had S&Ls lost by 1988?
$10 billion
What happened as a result of the losses of S&Ls in 1989?
Property market collapsed
What did Bush sign in 1989?
Financial Institutions Reform Recovery and Enforcement Act (FIRREA)
What did FIRREA do?
Bailed out some failing organisations, closed others and set up new federal regulators
How much did FIRREA cost?
$150 billion
How did the buying power of the dollar decreasing affect the US? (2)
- Foreign imports became cheaper, so imports of foreign goods rose
- American companies lost business
What industry was affected the worst by the reduction of the US dollar?
Textile industry
How many textile plants were forced to close between 1980 and 1985?
250 textile plants
How many workers lost their jobs in the textile industry between 1980 and 1985?
over 300,000 workers
Supporters of Reagan on the rise in foreign imports:
- Gave consumers more choice and argued that it made the USA an attractive place for other countries to trade and invest in
- Japanese investment was bringing money in the country and ignoring the fact that many Japanese re-invested their profits, made in the USA, in Japan
What good did Japan increase sales in the USA?
Cars
What did Reagan fail to abolish from the Carter administration?
The Department of Education
What did Reagan reduce the staff of the Department of Education by?
25%
What did Reagan decrease education block grants of the Department of Education to the states by?
63%
What did civilian employment in the federal government increase by?
3%
Why did employment in the federal government increae?
Due to Reagan’s emphasis on building up the national defence
How much did civilian employment grow by in the national defence?
11.5%
Reagan on benefits:
Reduced the level of benefits such as Aid to Families with Dependant Children (AFDC)
How many children lived under the poverty line in 1984?
Roughly 13 million children
How many federal programs had been cut?
212
Social security Benefits:
Were cut BUT increase payroll taxes that funded Social security
What act did Reagan veto that got overrode by Congress?
$18 billion Clean Water Act
What did Congress pass after Reagan attempted to veto the Clean Water Act?
1987 Water Quality Control Act
What amount bailout did S&L’s need?
$132 billion - the costliest financial scandal in US history
