Reagan, Bush and Neo-Conservatism

The 1980s

The Neo-Conservative Coalition Religious

conservatives decried loss of traditional Judeo-Christian moral consensus

Social conservatives resented paying for programs they disliked and that seemed not to work

Economic conservatives wanted a return to laissez-faire economics

1980 Election Results

Ronald Reagan

United Neo-Conservative coalition

Countered Carter’s talk of malaise with the rhetoric of relentless optimism

Optimism was basis for deregulation: if people are basically good, government controls are unnecessary

Supply-Side Economics

Lowering taxes encourages the wealthy to invest, creating more jobs

More poor are working, and therefore will spend & save more

Increased economic activity will generate more than enough revenue to cover cuts

Cuts in welfare programs necessary as incentive

Cutting Taxes

Economic Recovery Tax Act (1981) cut all income taxes 25% over 3 years Highest rate went from 70% to 50% Lowest rate went from 14% to 11% Corp., capital gains, gift & inheritance taxes also

cut Tax Reform Act (1986) simplified tax

structure & closed most loopholes Highest rate went from 50% to 28% Corp. rate reduced from 48% to 34% Income tax eliminated for 6 million working poor

Legislated Tax Changes by Congress & Ronald Reagan, 1981 – 1988 Tax Cuts Billions of

DollarsEconomic Recovery Tax Act of 1981 -264.4Interest and Dividends Tax Compliance Act of 1983

-1.8

Federal Employees’ Retirement System Act of 1986

-0.2

Tax Reform Act of 1986 -8.9Total cumulative tax cuts -275.3

Tax Increases Billions of Dollars

Tax Equity and Fiscal Responsibility Act of 1982

+57.3

Highway Revenue Act of 1982 +4.9Social Security Amendments of 1983

+24.6

Railroad Retirement Revenue Act of 1983

+1.2

Deficit Reduction Act of 1984 +25.4Consolidated Omnibus Budget Reconciliation Act of 1985

+2.9

Omnibus Budget Reconciliation Act of 1985

+2.4

Superfund Amendments and Reauthorization Act of 1986

+0.6

Continuing Resolution for 1987 +2.8Omnibus Budget Reconciliation Act of 1987

+8.6

Continuing Resolution for 1988 +2.0Total cumulative tax increases +132.7

  Source: Office of Management and Budget, Budget of the United States Government, Fiscal Year 1990 (Washington: U.S. Government Printing Office, 1989), p. 4-4.

The Rich Get Richer . . .

Growth of Single-Parent Families

Effects of “Reaganomics” Economic boom: GNP increased 25%

Federal Reserve lowered interest rates, increasing money supply

Inflation cut from 10.4% in 1981 to 3.7% in 1987

14.5 million jobs created, but mostly in lower-paying service sector

Junk-bond mergers followed by “down-sizing,” especially middle management

Many companies moved manufacturing overseas because of cheaper labor

Savings rate at all-time low of 4%, while consumer debt rose 9.5% per year

Job Creation, 1979 – 1987

Deficits & Deregulation

National debt rose from $935 billion to $2.7 trillion & budget deficits rose from $74 billion to $200 billion, 1981-89

Deregulation & lax enforcement backfired with Savings & Loan bailout in 1989 – est. $500 billion over 30 years

Oct. 19, 1987 stock market crash cost investors $1 trillion Average share price dropped 22.6% New Deal safeguards prevented Depression

U.S. National Debt, 1791 – 2011

Reagan’s Foreign Policy

Actually began under Carter, following Soviet invasion of Afghanistan & 1980 Olympic boycott

Military build-up intended to strengthen U.S. & bankrupt U.S.S.R. if it tried to keep up

Nuclear arsenal nowhere near all-time high of 1960s, howeverCopyright 1997, Prentice-Hall

U.S. & Soviet Nuclear Arsenals

Copyright 1997, Prentice-Hall

Reagan & Gorbachev

Mikhail Gorbachev (1985-91) introduced glasnost & perestroika to end totalitarianism & fulfill Marxist vision Glasnost = openness Perestroika =

restructuring 1987 INF Treaty

eliminates all intermediate-range nuclear missiles (4%)

Reagan & Gorbachev at 1985Summit in Geneva, Switz.

The End of the Cold War

Soviets withdrew troops from E. Europe in 1988

Soviet satellites revolted in 1989

Germany reunited in Oct. 1990

Soviet Union collapsed & dissolved in 1991

Yugoslavia also dissolved in 1991

Copyright 2000, Bedford/St. Martin’s

U.S. Involvement in theMiddle East since 1948

The Iran-Contra Scandal

Oct. 1983 bombing of Marine barracks in Beirut led Reagan to vow never to negotiate with terrorists

Boland Amendment (1984-86) outlawed funding of Contra rebels in Nicaragua

NSC Advisor Robert McFarlane & aide Oliver North began secret arms sales to Iran in exchange for Iranian pressure on Hezbollah to release Beirut hostages

North & new NSC Advisor John Poindexter diverted profits from arms sales to Contras Also solicited donations from Middle East countries &

private U.S. citizens Created “The Establishment” with Swiss bank accounts

& dummy corporations to launder money

Iran-Contra Scandal (cont.)

Exposed in fall 1986 Article published in Lebanese

magazine Pilot Eugene Hasenfus shot down &

captured by Sandinistas Tower Commission faulted

Reagan’s “lax management style” Reagan confessed, recanted, then

confessed again Diaries reveal his active involvement

Special Prosecutor Lawrence Walsh got convictions of Poindexter & North (latter overturned)

Pres. Bush’s Domestic Policy

Signed Clean Air Act (1990) into law, reducing pollution further

Signed Americans with Disabilities Act (1990) into law, securing legal right to public access & accommodations for disabled

Appointed Supreme Court Justices David Souter & Clarence Thomas

Broke “No New Taxes” pledge to negotiate deficit reduction package with Democratic Congress in 1990 – angered conservatives & cost him reelection

Bush’s Foreign Policy

Negotiated North American Free Trade Agreement (NAFTA) with Canadian Prime Minister Brian Mulroney (signed by Clinton & ratified by Senate in 1993)

Invaded Panama in Dec. 1989 to capture erstwhile ally Manuel Noriega to stand trial for drug trafficking

The First Iraq War (1991)

Saddam Hussein invaded & conquered Kuwait in Aug. 1990

Bush crafted coalition of European & Arab allies with UN support

Congress narrowly pre-authorized war

Air campaign began Jan. 16, 1991; ground campaign Feb. 24-28

Hussein not overthrown because allies opposed

350 American & 100,000 Iraqi deaths