What impact did the Reagan presidency have on the USA in the years 1981–96? Flashcards
What were Reagans 4 key aims (economics) (4)
-Lowering tax would encourage consumption and hard work
-Reduce the size/role of federal government, cutting $40 billion from the 1981/82 $740 billion budget, and eliminating the welfare state where possible
-Deregulation of state/federal government requirements would allow affluence to flourish
-Increase cold war defences
How did Reagan deregulate the economy/balance the budget (economics) (2,3,2)
-Regulation of industry/business cut 29%
-Reagan made sure to use his power to appoint people to regulatory boards such as the occupational health and safety administration, which would make pro business choices
-In 1983, Reagan inspired congress to ->
-Tax social security benefits
-Delay cost of living increases
-Increased defence spending from $157.5 billion in 1981 to $202.6 billion in 1989 led to the budget deficit soaring
-National debt tripled to $2.6 trillion, as borrowing increased from abroad from places such as Japan and Germany
What did Reagan cut in the 1981 budget, and how did he get support for this (economics) (3,5)
-Cuts were made in the funding of 212 federal programmes
-Most of these federal programmes aided the working poor, including food stamps and student loans
-$280 billion worth of individual and corporate tax cuts (ERTA)
-Reagan knew exactly what he wanted from the off, not confusing anyone
-Reagan worked well with the democrat congress, putting pressure on congressmen through TV ads, thus being able to get his policies through
-High poll ratings (68%) following a failed assassination attempt (march 1981) forced congress to work with him
-He put his full weight behind this budget, frequently appearing on TV
-Reagan made a hefty effort to get media support on his side
What is Reaganomics (economics) (2,5)
-Reaganomics aimed to control government spending, reduce government involvement and cut taxes
-Reaganomics focused on economic growth rather than low unemployment, favouring classical rather than Keynesian economics
-Lower tax = increased incomes = increased spending
-Increased spending = increased revenue = increased investment
-Increased investment = increased output
-Increased output = increased incomes/profit = increased tax revenue = decreased deficit
-Increased output = increased incomes = increased spending
What was some economic legislation passed in 1981 (economics) (2,2)
-August 13th 1981 = Economic Recovery Tax Act (ERTA)
-Reduced marginal income tax bands 23% over 3 years (70-50%, 14-11%), linked tax bands to inflation and offered other minor incentives
-August 13th 1981 = Omnibus Budget Reconciliation Act (OBRA)
-Made $35 billion worth of federal spending budget cuts, as well as tax cuts, although it was originally planned to be $45 billion
What was some of Reagans economics legislation from 1982-1986 (economics) (3,3,3)
-September 1982 = Tax Equity and Financial Responsibility Act (TEFRA)
-Made budget changes in response to the negative economic situation, tightening business tax rates
-Temporarily raised taxes on cigarettes and telephone services
-April 1986 = Consolidated Omnibus Budget Reconciliation Act (COBRA)
-Revised the budget in many minor ways, to save the government money and increase the size of the private sector
-Significantly, shifted the responsibility of many healthcare payments from the government to the employer
-October 1986 = Tax Reform Act (TRA)
-Revises the tax codes, reducing the number of brackets
-Supposed to close a lot of loopholes and ease pressure on poorer families
How did Reagans economic policies impact inflation, unemployment and personal wealth (economics) (2,2,4)
-Inflation fell from 13% in 1980 to 6.2% in 1982
-However, sharp rises in interest rates had negative impact on industries which relied on credit
-Unemployment rates went from 11% in 1981 to 7.5% in 1983 to 4.5% in 1989
-7 million new jobs were created
-Disinflation, tax cuts and deregulation made people richer, mostly the rich richer
-Average family income levels fell, returning to 1973 levels in 1987
-Wages stagnated, negatively affecting lower/middle classes
-Child poverty rates rose to levels exceeding the mid 60s
What were the pros and cons of Reagans policies to encourage saving and investment, and to reduce the deficit (economics) (4,4)
+Businesses began to recover and invest more
+Recovery from 1982 and 1987 recessions rapid, as people still lent/spent
-People lost all savings in the 1987 Savings and Loans crisis
-Higher deregulation lead to higher competition, leading firms to take higher risks
+Balanced budget following the 1991 collapse of the USSR
+Conservatives claimed it was a wartime deficit, worth it with the victory in the cold war
-Budget deficit rose, due to the cut taxes, even though supply side didn’t work and fewer welfare costs happened than anticipated
-Budget deficit grew increasingly funded by borrowing from abroad
What was Reagans economic legacy (economics) (2,5)
-When Bush took office in 1989, he faced a budget deficit which had tripled under Reagan
-Bush was forced to pass the 1990 Omnibus Budget Reconciliation act, cutting government expenditure and raising taxes
-Clinton was a third way politician, in which he and the Democratic Leadership Council aimed to win back while middle class voters
-Clinton raised taxes on the rich and cut spending on the poor
-By 1999, the 1992 $290 billion deficit had been turned to a $124 billion surplus
-The economy was booming, encouraged by low interest, unemployment and low regulation
-From 1981-96, the economy grew by 2.5% per annum, growing in all years bar 1991
How was 1930-1980 the era of big government, and why was Reagan’s election a turning point (big government) (4,4)
-From FDR to Reagan was the era of big government in US politics
-Government would be active to help the disadvantaged with healthy educational and equality issues
-In the 1950s, Eisenhower thought it unwise to oppose this idea
-In 1964, Barry Goldwaters aggressive approach to big government lead to his crushing defeat
-However, the rise of the new right and failings of the 70s paved the way for a new era of government
-The four previous presidents had failed, and there was increasing distrust within the presidency
-Reagan was as right wing as Goldwater, but more politically skilled
-Many felt alienated by the great society, rising welfare costs and affirmative action
What arguments are there for/against reducing big government (big government) (1,2,4)
-Reducing big government included reducing federal legislation, federal agencies, federal taxation and spending, as well as reducing supreme court rulings ad deregulating
+“For government is not the solution to our problem. Government is the problem”
+New federalism would lead to reduced state interference and regulation on state and local affairs, businesses and finances
-Government would have less control over businesses greed and expansion
-Less social welfare provided by government
-Less control over imports
-Less funding for state and local government projects
What were the successes of Reagan’s attempts to reduce big government (big government) (5)
-Reduced social security benefits
-Cuts made in the funding of 212 federal programmes, such as food stamps and student loans, most of which aided the working poor
-Slashed agency budgets, rendering them incapable of enforcing congresss’ regulations
-Reduced department for educatuion staff 25%, cut programmes and decreased education block grants to states 63%
-Devolved power to the states and appointed pro-deregulation people to regulatory boards (James G. Walt = secretary of the interior, opened up conservation lands to oil and timber companies)
What were the failings of Reagan’s attempts to reduce big government (big government) (5)
-Failed to abolish the department for education, which was established by Carter in 1979
-Civilian employment in the federal government rose 3%, partially due to Reagan’s defence build-up, where employment grew 15%
-Pensions and elderly aid, veteran benefits, school lunches and head start (free school breakfasts) left virtually intact
-Reagan deregulation S&L’s and allowing them to make risky investments in 1982 led to the S&L crisis and a $132 billion public payout, the largest financial scandal in US history
-Although Reagan was able to veto the $18 billion clean water act, Congress overrode his veto of the 1987 Water quality control act, which was basically the same thing
What were the positive and negative impacts of deregulation (big government) (4,4)
+Reduced the size/role of government by cutting taxes and programmes
+Halted new deal interventionism, in some cases reversing it
+Challenged assumptions about new deal thinking, and in some casesmany democrats changed their thinking (new democrats)
+Most presidents fail to make such meaningful policy change
-Did not demolish the welfare state, knew attacking social security/medicare would be political suicide
-Federal workforce demoralised and public infastructure started crumbling
-Left the budget debt in a state
-Mobilised the electorate against necessary tax
What did Reagan do in his early tenure to reduce big government (big government) (4,5)
In his first days: Reagan -
-Sacked a large number of white house staff
-Introduced a hiring freeze within the white house
-Ordered government departments to undertake a number of cost cutting measures, such as reducing travel costs 15%
-However, these did little in practice, and rather just appealed to the media
-In 1982, Reagan stated how since he came to power:
-He had cut federal regulation in half, removing 23,000 pages from federal registers
-Removed federal agencies and replaced them with private sector ones
-Help reduce the cost of fuel and petrol through deregulation
-However, Reagan failed to mention how the process of deregulation was started by Carter, through his deregulation of airlines and his trucking bills
What was some significant Reagan deregulation legislation (big government) (7)
-Jan 1981 = Executive order passed by Carter deregulating oil and fuel prices brought forward
-Sep 1982 = Bus regulatory reform act deregulated bus services
-Oct 1982 = Garn St Germain depository institution act deregulated Saving and Loan institutions, allowing them greater freedom to invest
-Feb 1983 = Deregulation of natural gas supplies
-March 1984 = Shipping act loosens regulation on US & foreign shipping
-Oct 1984 = Cable communications act deregulates cable communications
-Oct 1986 = Greater freedom allowed to those working in the trucking industry