1
Q
What immediate action did Reagan take after coming into the Presidency?
A
- Control government spending.
- Reduce government involvement.
- Cut taxes.
2
Q
What did Reagan do within 3 days of coming into Presidency?
A
- Sacked many White House staff members.
- Put a federal government hiring freeze in place.
- Told all departments there was a freeze in office furnishing and equipment.
- Cut their travel expenses by 15%.
- Used a series of executive orders to set up new advisory groups which reported directly to him on how to cut ‘big government’.
- However, the financial savings were small and advisory groups don’t make any changes.
3
Q
What did Reagan present to congress upon his first meeting with them in 1981?
A
- Reagan wanted to present his whole budget policy through to 1984 as a single bill.
- He also wanted to present a tax bill within the same session.
- His Council of Economic Advisors (CEA) had no time to follow the usual procedure meaning that Congress had to vote on the whole package of spending cuts.
4
Q
What did it mean for the administration now that Congress had to vote on the whole package of spending cuts?
A
- The Administration would have approval for all its measures and control over the timetable up to 1984.
5
Q
What was Reagan’s plan for economic recovery?
A
- Cutting the federal deficit.
- Personal and business tax reductions.
- Deregulation.
- Planned control of the money supply.
6
Q
What bill did Reagan put in place in order to cut the federal deficit and what was the issue with this?
A
- It was accompanied by a budget bill and a proposal for cuts on domestic spending.
- The plan was so hastily put together that it had a number of errors.
7
Q
What would accompany Reagan’s plan to reduce personal and business tax?
A
- Accompanied by the Economic Recovery Tax Act of 1981.
8
Q
What did Reagan plan to remove in order to deregulate?
A
- Remove federal control in industry, state and local government.
9
Q
What did Reagan intend to keep down in order to control the money supply?
A
- He wanted to keep inflation down while expanding the economy.
10
Q
How did Reagan get his budget legislation passed?
A
- Republican majority in the House of Representatives meant Reagan only needed to win the support of 26 Democrats.
- This made pushing through the budget and the tax easier.
- The senate passed the budget and it was sent to the House and was passed after some revision.
11
Q
What was the one change in Reagan’s tax legislation?
A
- The Senate passed it with only one change.
- It cut the tax reduction for personal tax from 30% to 25%.
12
Q
Why was getting the Tax legislation passed more of a challenge for Reagan?
A
- Democrats felt they had been manipulated over the budget and saw the tax bill as a fight over control of the house.
- Democrats made significant changes to the bill.
- White House offered tax concessions to some Democrats to try swing the vote.
- Democrats counter-offered incentives in areas they controlled.
- Process became an undignified scramble over concessions.
13
Q
What did the 1981 Economic Recovery Tax Act (ERTA) establish?
A
- Cut marginal tax by 23% over 3 years.
- Linked the tax bands to inflation.
- Applied to all tax bands (Those paying the highest tax benefitted the most).
- Business tax rates were reduced and various business tax breaks were offered, skewed to favour small businesses.
14
Q
What was the 1981 Omnibus Budget Reconciliation Act (ORA) and what did it propose?
A
- Proposes a variety of tax cuts that will take $35 billion out of federal spending.
- Initial bill presented to the White House proposed $45 billion-worth cuts.
15
Q
What was the 1981 Economic Recovery Act (ERTA)?
A
- Cuts marginal income tax by 23% over 3 years.
- Links tax bands to inflation and offers other incentives.
16
Q
What did the 1982 Tax Equity and Financial Responsibility Act (TEFRA) make changes to and what did it tighten up?
A
- Makes changes to the budget in response to the economic situation.
- Tightened up tax rules especially for businesses.
17
Q
What did the 1986 Consolidated Omnibus Budget Reconciliation Act (COBRA) do to the budget and where were costs moved to?
A
- Revises the budget in many minor ways to save the federal government money.
- Moves costs to state or private bodies (the most significant change shifts responsibility for healthcare payments from federal gov to employer).
18
Q
What was the 1986 Tax Reform Act?
A
- Revises the tax codes.
- Reduces the number of tax brackets.
- Supposed to close a lot of tax evasion loopholes and ease the pressure on poorer families.
19
Q
What were Reagan’s policies of tax cuts and money supply control intended to do?
A
- Stop inflation.
- Reduce unemployment.
- Increase personal wealth.
- Increase productivity.
- Encourage personal saving and investing.
- Encourage businesses and service providers to produce more.
- Wanted the federal deficit to fall.
20
Q
Did Reagan’s policies stop inflation and unemployment?
A
- While ORA & ERTA were going through Congress, Reagan also put pressure on the Federal Reserve Board (FRB) to place tighter restrictions on the money.
- The FRB placed even tighter restrictions than the White House demanded and when unemployment was high Reagan’s administration refused to lift restrictions.
21
Q
Did Reagan’s policies stop inflation and unemployment? NEGATIVES
A
- There was a conflict of interest between the FRB and the White House.
- Money supply being restricted too much runs the risk of deflation.
- Money supply restriction led to a sharp rise in inflation rates.
- Hurt industries that bought supplies on credit.
- Many businesses were badly hit.
- Reagan came into power in the middle of a recession.
22
Q
Did Reagan’s policies stop inflation and unemployment?
POSITIVES
—UNEMPLOYMENT GRAPH—
A
- Inflation began to fall.
- Went from 11.3% in 1979, to 13.5% in 1980, to 6.2% in 1982.
- By 1986 inflation had never reached double figures again and spent most of its time at under 5%.
23
Q
Did Reagan’s policies increase personal wealth?
A
- Everyone agrees that the tax cuts made people richer.
- Debate arises over which sectors of the population became rich.
- Some historians argue that the rich became richer and the poor did not, the cut in the tax bracket was the deepest for rich and therefore they benefitted the most.
- Other historians argue that the tax cuts hurt the rich the most and the poor the least and that the tax payment of the rich helped the revival of the economy.
24
Q
Did Reagan’s policies increase productivity?
A
- Yes.
- It increased from -0.1 output per worker per hour
25
Did Reagan's policies encourage people to save and invest?
- More people began to save and invest as the economy came out of recession.
- Increased competition led to problems as financial organisations took more risks to win customers.
- The personal savings and investment polices took place in an increasingly unsafe financial environment.
- Coming to a head in the late 1980s with people losing both savings and investments during a crisis in the savings & loans industry (that only government intervention stopped) and the 1987 Stockmarket crash.
- During the crash the FBR stepped in, encouraging banks to lend to each other and businesses and individual investors not to panic.
26
Did Reagan's polices reduce the deficit?
- The reduction of the deficit was one of Reagan's most notable failures.
- In 1980, it was $59 billion and paying it off cost 9% of federal spending.
- In 1983 the deficit was $208 billion, taking nearly 14% of federal spending in loan interest payments.
- The USA was also increasingly funded by borrowing abroad.
- For the first time the USA had become a significant borrowing nation.
- In 1980, HR took 28% of federal spending. By 1987, it was 22%. While defence spending rose from 23% to 28%.
27
What was the economy like after Reagan?
| George H.W. Bush
- George H.W. Bush promised to continue Reagan's policies.
- However, these policies had become less popular as their long term effects and limitations became clear.
- Bush had only just won the presidential election and support was lukewarm.
- The Democrats were back in control of both houses of congress which made life harder for Bush's administration.
- Bush was often forced to back down on promises (raising taxes despite promising in his campaign he would never do that).
28
What was the economy like after Reagan?
| Bill Clinton
- Despite being a democrat Clinton didn't swing back to old democratic policies.
- This was due to many voters strongly supporting low taxes.
- Clinton was a 'New Democrat' his campaign was economy focussed: low inflation, high employment, a reduced deficit and no tariffs to regulate business and trade.
- His nod to older Democrats was in increasing welfare and medical care and 'investing in people'.
29
What were Clinton's 3 memos used during his campaign?
- That he would address medical care.
- That he would bring change.
- 'The economy, stupid' which became a catchphrase inside, then widely outside, the campaign offices.
30
How was 'Big Government' reduction beneficial?
- New Federalism would produce less federal interference in state and local affairs, business, finance and all aspects of people's lives.
31
How was 'Big Government' reduction not beneficial?
Reduction could be interpreted as:
- Less funding for state and local government projects.
- Less regulation of business expansionism and greed.
- Less control over foreign imports.
- Less social welfare for the needy.
32
How was 'Big Government' reduced in the short term?
- Cut federal regulations almost in half, removing 23,000 pages from the Federal 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 saved $2 billion in 6 months.
- Replaced federal agencies with private sector ones and federal employees with volunteers.
33
What was significant about Reagan's first days in office?
- He could become focussed on the small details of federal spending, while the rising deficit shows how he failed to control the rising debt.
34
What was significant about Reagan's media presence?
- Used everyday images when discussing change.
- Small-scale savings were more real to the public than just of $2 billion.
- Discussed deregulation as if it was something he instigated (Carter started it - deregulating the airlines and drafted bills on deregulating trucking, the rail ways and some areas of finance.)
35
What problems arose from deregulation?
- When smaller companies were struggling, big companies could, and did buy them out.
- During the 80s big companies expanded while small, independent businesses struggled.
- There was a rise in conglomerates.
- Businesses set their own standards of safety and set them lower than government regulators.
- Initially deregulation brought lower prices through competition.
- Many businesses cut services in order to maximise profit.
36
What were the effects of the policies on trade?
| NEGATIVES
- The buying power of the dollar weakened meaning foreign imports became cheaper and imports rose.
- American companies lost business (Between 1980 & 1985 250 textile plants were forced to close and over 300,000 workers lost their jobs.)
- Some political economists said that foreign products were damaging the economy. Also suggested the USA was a global borrower as opposed to 'the worlds banker'.
- American companies were being bought up by foreign companies.
37
What were the effects of the policies on trade?
| POSITIVES
- Rise of foreign imports was a good thing as people had more choice.
- Foreign imports also made the USA an attractive place for other countries to trade and invest with.
- Rising levels of Japanese investment (ignores the fact that many Japanese re-invested their profits made in the USA back into Japan).
38
Was Big Government reduced?
| SUCCESSES
- Initially lower prices due to increased competition.
- More choice due to increased foreign imports.
- Increased trade and investments from foreign countries.
- High interest rates on savings.
- Few regulations passed by the government.
39
Was Big Government reduced?
| FAILURES
- Rise in conglomerates.
- Services cut to maximise profit.
- Increase in risky investments to keep up with bank (everyone makes risky investments).
- Bush forced to pass FIRREA in 1989 to try and save America from the Savings and Loans Crisis.
- Foreign imports become cheaper.
- Foreign profits were not invested in America.
- Congress blocked deregulation of environmental issues (Congress isn't fully supportive of Reagan and his ideas).
- Local governments unwilling to takeover.
- Previously federally funded agencies collapsed.
- Prices increase in the long term.
40
What was life like for the Poor during the Reagan presidency?
- Between 1981 & 1996 the situation of the poorest American families worsened considerably.
- Reagan made clear distinctions between 'deserving poor' and 'welfare scroungers'.
- Reagan repeatedly told the story of a Black woman in Chicago who was defrauding taxpayers out of hundreds of thousands of dollars a year by welfare fraud (A press search never found this woman).
- His OBRA finance cuts mainly targeted federal spending projects for the poorest.
- OBRA altered the Aid to Families with Dependent Children (AFDC) programme making fewer people eligible and capping payments.
41
What was the effect of Reagan's policies on welfare provision?
WORKFARE
- Reagan's administration was the first to state that claiming benefit was 'buying into dependency'.
- The administration wanted to change 'welfare' to 'workfare' requiring at least one working parent before it paid out family benefit.
42
What was the effect of Reagan's policies on welfare provision?
WORKFARE
- Reagan's administration was the first to state that claiming benefit was 'buying into dependency'.
- The administration wanted to change 'welfare' to 'workfare' requiring at least one working parent before it paid out family benefit.
- Despite government promises of childcare many single parents found childcare impossible to find, making it impossible for them to work.
- OBRA tightened up previous legislation that provided work projects tied to benefits for welfare claimants.
- Allowed states to make working on state projects an absolute requirement for welfare payments.
- By January 1987, 42 states ran work programmes, none of them made working on a programme a requirement for benefit, most required the claimants to be looking for work.
43
What was the effect of Reagan's policies on welfare provision?
SOCIAL HOUSING
- In 1970 there were almost 2.4 million low-income houses available to families that applied for them.
- By 1985 there were 3.7 million families who qualified for a low-income home but couldn't into one as there were none available.
- This was because Reagan's administration slashed federal funding for low-cost homes.
- In 1978 the federal government spent $32.2 billion on low-cost housing, by 1989 it was spending $9.2 billion.
- Consequently there was a significant rise in homelessness.
44
What was the effect of Reagan's policies on welfare provision?
HOMELESSNESS
- By the mid-80s Reagan's administration could no longer ignore the growing homelessness problem.
- 1987, Congress pushed through a bill giving some federal help to projects for the homeless.
- In 1984 funding was $300 million, in 1988 it was $1.6 billion.
- 1987 McKinney Act set up the Federal Emergency Management Food & Shelter programme to be run by the Federal Emergency Management Agency (FEMA).
45
What did FEMA do?
- Matched state grants to local homeless projects half-and-half and the state had to choose the project and put the funding in place before federal money was given.
- Set up a federal housing project for transitional housing (with the possibility of using under-used federal buildings).
- Gave emergency medical care to the homeless.
- Provided education for homeless children.
- Provided job training that favoured homeless veterans.
46
What was the 1982 Job Training Partnership Act?
- Shifts job training from federal hands to state and private schemes.
- Removes any need for trainers to have their incomes made up to the minimum wage.
47
What was the 1988 Family Support Act?
- A family is only eligible for benefits is at least one parent is working for at least 16hrs a week.
- Single parents are expected to finish education and undergo job training, the state to provide childcare.
48
What was the impact of Reagan's welfare polices on living and working conditions?
- Many federal regulations on working conditions were removed.
- In 1973, workers had, on average, 26 hours of leisure time a week. By 1987, it was 16 hours.
- People felt pressured to take work home in order to be the most productive person. (Reagan’s stress on productivity was emphasised by businesses).
- Harder for working mothers to hold anything but low-level jobs due to childcare demand. Many were persuaded into part-time or temporary contract work (These workers weren’t part of any benefits and only paid the hours worked).
- Young people became worse off than their elders had been as two-tier wage structures emerged (more experienced workers would get better pay and benefits for doing the same job as a recent hire)
49
What was the impact of Reagan's polices on minorities?
- Reagan’s desire to cut back on federal involvement meant that the administration was unwilling to extend civil rights legislation or push for affirmative action.
- First 6 months of Reagan’s presidency the Civil Rights division of the Justice Department fled 5 racial discrimination lawsuits compared to 24 under Nixon.
- In 1982 ‘The Crisis’ (NAACP magazine) pointed out that the Reagan administrations inaction was detrimental to all minority groups.
- Abandonment of busing students into various better schools came at the cost of Black and Hispanic Americans.
- 40% of funding for bilingual education was cut as it was ‘in the interests’ of Ethnic minorities to use English as soon as possible.
- Women’s rights floundered under Reagan who didn’t support the Civil Rights Act and spoke out against abortion.
- Disagreement over Reagan’s reaction to the AIDS epidemic: some have accused him of ignoring the epidemic until his friend died of AIDS. Others point out that he addressed meetings on the epidemic and that the administration provided funding for research in 1882.
- Many Black Americans often felt like they were apart of a ‘quota’ hire as opposed to being hired on skill alone.
- Black people felt increasingly less involved in the politics environment with the Cvil Rights Movement itself struggling to regain ground.
50
What was the impact of Reagan's polices on business and industry?
CHANGING BUSINESSES
- Reagan’s policies favoured big businesses.
- Big businesses profited from reduced federal regulation over wages, working hours and working conditions.
- Deregulation meant that they could buy up or merge with other businesses.
- In 1983 during a radio broadcast Reagan said his administration was helping small businesses with tax breaks (personal over corporate tax). However, he did admit that many small businesses had gone under in the 1981-1982 recession but said that 500,00 new businesses had been set up in each of those years.
- Reagan avoided the issue of the rising interest rates on long-term loans that many small businesses held; a key reason as to why they went under.
51
What was the impact of Reagan's polices on business and industry?
CHANGING FARMS
- Farming was badly affected by high interest rates and federal non-intervention.
- In the 1970s USA had supplied wheat to the USSR and encouraged farmers to expand (often with increasing loans) and grow wheat with wheat subsidies.
- After the USSR invaded Afghanistan in 1979 the USA stopped exporting wheat in protest. At the same time interest rates also rose as the money supply was tightened.
- Many smaller farms failed or were bought out by agri-businesses, or companies that didn’t farm at all.
- In 1980, 17% of farmers were getting 60% of the subsidy fund.
- In 1986, the National Save the Family Farm Coalition was set up by farmers themselves organised to try and highlight the plight of small family farms to the public.
- In 1983 about 500 farms were sold every month and Farmers were committing suicide at 4x the rate of any other workers. There were also incidents of farmers shooting the lenders who called in loans.
52
What was the impact of Reagan's polices on business and industry?
CHANGING PRODUCTION
- 1980s marked a shift in what the USA produced (Farming and older industries were doing badly against foreign imports which could be made more cheaply).
- Exports dropped with the change in the value of the dollar.
- Reagan administration wouldn’t impose tariffs on foreign imports.
- Towns and cities who relied on older industries for employment were hit badly.
- In Baltimore and Cleveland well over 20% of the population were living below the poverty line, and unemployment and poverty was impacting everyone, white and non-white.
- The lack of industry also impacted the industries that supplied the raw mistrials as demand had dropped.
- While older industries were failing, new industries were doing well.
- The Reagan administrations increased spending on the defence industry also accommodated the expansion of newer industries such as the computer industry.
- These newer technologies were placed in different parts of the country and had a significant impact on population and migration within the USA.
- Service industries were expanding.
53
What was the impact of Reagan's polices on business and industry?
BI-COASTAL BOOM
- Industries that did well in the 1980s created more employment and people were eager to move to the parts of the country where these industries were located.
- Fuelled a growth of suburbs in these areas
- In these areas, people felt like their lives were improving and so were more likely to vote for Reagan and, after him, Bush. For them, the Reagan administration policies had worked.
- 1987 California and the states on the East coast had 5.6% unemployment, compared to 7.8% across the rest of the country.
- These areas had almost 75% of all new businesses and 6% of new jobs.
54
How did the Presidency change under Reagan?
- He became president after Nixon and the Watergate scandal, Ford’s pardon of Nixon and Carter’s awkward management of the presidency.
- When Reagan came into presidency many Americans were distrustful of the government, many felt helpless as it didn’t matter who they voted for things would just carry on declining regardless.
55
To what extent did Reagan change the presidency?
| SIGNIFICANT CHANGE
- Placed higher emphasis on popularity with people as opposed to implementing his own views.
- Increased popularity of the Presidency under Reagan.
- Succeeded in getting his economic legislation passed.
- Listened to his advisors.
- Survived scandal (Nixon didn't survive Watergate)
56
To what extent did Reagan change the presidency?
| LIMITED CHANGE
- Clinton and Bush were both less popular than Reagan.
- Congress blocked much of Reagan's legislation as well as Bush's and Clinton's.
- Reagan had his own scandal (Iran-Contra Affair)
57
Why was getting the CEA to vote on his single bill budget policy a negative thing?
- His Council of Economic Advisors (CEA) had no time to follow the usual procedure.
- Meant Congress had to vote on the whole package of spending cuts.
58
What did Reagan's budget bill aim to reduce the deficit to?
- Budget bill aimed to reduce the deficit from 22% of GNP in 1981 to 19% in 1986.
59
What percent did the 1981 ERTA allow the highest income tax band rate to fall to?
- Fell from 70% to 50%.
60
What percent did the 1981 ERTA allow the lowest income tax band rate to fall to?
- Fell from 14% to 11%.
61
What did unemployment rates for this available to work rise by from 1980 to 1983?
- Unemployment rates went from 7.1% available for work in 1980 to a high of 9.6% in 1983.
62
Why had the USA, for the first time, become a borrowing nation?
- Partly due to Reagan's determination to cut taxes.
- Federal departments resisted cuts.
- Congress toned down many welfare cuts planned by the administration and increased defence spending.
America (BACKUP - NO REDUCTION)
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