What Impact did the Reagan Presidency have? - Topic 5.2 Flashcards
The extent to which 'big government' was reduced
How did Reagan reduce ‘big government’ in his first year in office?
Reagan saw deregulation as a key tool in reducing big government. In his 1982 State of the Union address, Reagan said he was already winning the fight against big government. He said that, since he came to power, the administration had:
- Cut federal regulations almost in half, removing 23,000 pages from the Federaal Register. This had 14,500 pages in 1960 and 87,000 when Reagan came to power
- Helped to bring down the cost of petrol and heating fuel by deregulation
- Created a federal strike force to combat government fraud and waste that had saved $2bn in six months
- Replaced federal agencies with private sector ones and federal employees with volunteers
What significant Reagan deregulation legislation was made under Reagan?
In his first year:
- 28th January 1981 - EO to deregulate oil and fuel prices passed by Carter to come into effect in October
- 29th January 1981 - EO to stop wage and price regulations
- 26th March 1981 - EO sets up the President’s Council on Integrity and Efficiency
- 8th April 1981 - EO setting up the PACF
- 17th July 1981 - Deregulation of controls on fuel prices
What significant Reagan deregulation legislation was made under Reagan?
In his first term:
- 20th September 1982 - BRRA deregulates bus services
- 15th October 1982 - Garn St. Germain DIA deregulates Savings and Loan institutions, allowing them to invest in many more ventures, including property speculation; it also allowed more freedom in their mortgage lending
- 26th February 1983 - Deregulation of natural gas supplies
- 20th March 1984 - Shipping Act loosens regulations on US and foreign shipping
- 30th October 1984 - Cable Communications Act deregulates cable communications
What significant Reagan deregulation legislation was made under Reagan?
In his second term:
- 22nd October 1986 - SFFDA allows greater freedom for people working with various trucking companies to ‘bundle’ part loads to be carried by one of them
- 23rd August 1988 - FTCA allows the president more rights in making trade treaties
What were the problems of removing controls?
When smaller companies were struggling, big companies could, and did, buy them out. During the 1980s, big companies expanded, while small, independent companies struggled. The period saw a rise in the number of conglomerates in the US. Businesses set their own standards of safety and set them lower than government regulators. Initially, deregulation brought lower prices through competition; however, as big businesses grew, it was more likely that several big businesses would ‘fix’ a price structure, so that they didn’t have to compete. Many businesses cut services provided or areas covered to maximise profit. In most cases, it was rural areas that suffered.
What was the Savings and Loan collapse?
Banks could offer high interest rates on savings. This was good for savers, but bad for struggling businesses and people with long-term loans. Banks and the newly regulated S&Ls competed for custom. Those who had savings, and who were able to understand the various offers, benefited most. S&Ls were run by people used to making safe investments. They made increasingly risky investments, lend at very low rates and offer high rates of savings to savers. Many S&Ls failed through incompetence. The Competitive Equality in Banking Act in 1987 was passed, providing money to cover the money lost by closed S&Ls. By 1988, S&Ls lost $10bn and then in 1989, the property market collapse, making the situation of all institutions that lent money even more difficult. Bush signed FIRREA, which bailed out some faling organisations, closed others and set up new federal regulators, costing $150bn.
Was ‘big government’ reduction clearly beneficial?
Reagan believed reducing ‘big government’ under New Federalist would benefit the US. New Federalism would produce less federal interference in state and local affairs, business, finance and all aspects of people’s lives. These measures sounded positive, especially to a nation less funding for state and local government projects and less regulation of business expansionism and greed, as well as less control over foreign imports and less social welfare for the most needy.
How was ‘big government’ reduced in the short term?
Reagan’s first days in office show how he could become focused on the small details of federal spending, while the rising deficit shows how he failed to control the overall rising debt. However, it was part of his media spin to use everyday images when he discussed change. Small-scale savings were more real to the public, in many ways, than cuts of $2bn. Equally media-focused was his discussion of deregulation as if it was something he had instigated. In fact, Carter had begun deregulation - by the time Reagan got to office, Carter had deregulation the airlines and drafted bills on deregulatign trucking, the railways and some areas of finance, including banks. However, he had also introduced more across-the-board regulations.
What were the effects of the policies on trade?
Big government could also be reduced by not intervening to affect markets: trade markets as well as the stockmarket. The balance of world trade shifted against the US, as the buying power of the $ weakened. Foreign imports were now cheaper, so imports rose. American companies lost business, particularly textiles. Some political economists said that cheaper foreign products were damaging the economy. They also complained the US was a global borrower for the first time, rather than the ‘world’s banker’. Even worse, American companies were being bought up by foreign ones. Supporters of Reagan argued that the rise of foreing imports was a good thing, because it gave consumers choice. They also argued that it made the US an attractive place for other countries to trade with and invest in. They pointed out the levels of Japanese investment in the US, saying it was bringing money into the country; ignoring the fact that many Japanese re-invested their profits, made in the US, in Japan.
To what extent was ‘big government’ reduced?
Big government was not reduced as much as Reagan hoped. Congress was a major roadblock. State and local governments were unwilling to take over areas of government and projects under federal control. Reagan didn’t introduce many new regulations.
When Bush came to power, people were less keen on deregulation and federal withdrawal from state and local affairs. Industry and banking deregulation had been running for long enough for people to see the negative effects. Deregulated businesses were more concerned with their own interests than public interests. Federal withdrawal from state and local programmes often meant the collapse of programmes through locak of funding. Some states and local areas suffered more than others; poor rural areas found themselves at the back of the queue for communications services, transport services and basic maintenance such as road repair.
