Reaganomics: Shaping the 1980s Economy & Foreign Policy

1. Mr. Porter APUSH POWERPOINT CHAPTER 40 The 1980s and the Move Towards Conservatism

2. KEYS TO THE CHAPTER Supply Side Economics Military Build-up (restart cold war / stars wars) Reaganomics (contain gov’t welfare state) Iran Contra Scandal Mikhail Gorbachev (glasnost / perestrokia/Yelstin) Moral Majority China (Tiananmen Square) Bush 1 (Operation Desert Storm)

3. Reagan Denounced activist government Championed “common man” Worked to win over lower-middle-class whites Democrats by appealing to their sense of loss Argued for free-market capitalism, less government regulation, and hard-line anti-Soviet position on foreign policy Reassertion of traditional family values

4. Ronald Reagan

5. Carter: Gracious in defeat; Working for Habitat for Humanity and Nobel Prize

6. Changes in govt spending (1960 –80) Federal budget went from primarily national defense to entitlement programs Reagan is devoted to fiscal discipline and leaner federal government: end entitlement growth and spending “Government is not the solution to our problem. Government is the problem.”

7. The Aftermath of Reagan’s Assassination 3/30/1981

8. Reagan’s tax cuts (supply side economics) 25% across-the-board reductions in 3 years Reagan wins because of his skill on TV and the continued defection of the “boll weevils” (Southern Democrats) 1981 – Congress passed tax reforms Lowered individual tax rates Keeping budget under control and tax reduction would stimulate new investment

9. Theory of Supply-Side Economics

10. The Laffer Curve

11. 1981 – 1982 – deepest recession since 1930s but later in the 1980s economy will pick up Unemployment reached 11% by 1982 Businesses folded; bank failures occurred Automobile industry pummeled by Japanese Democrats argue Reagan’s tax and spending cuts hurt poor and favored the rich

12. Reason for the economic upturn late 1980s was not tax cuts but large military spending Put US deeply into debt Massive government borrowing led to high interest rates US transformed from world’s largest creditor to world’s largest debtor nation

13. Results of Increasing income inequality during the 1980s Reversal of long-term trend toward more equitable distribution of income Increasing squeeze on poor and middle class Large deficits make future expansion of social welfare programs almost impossible (forced to shrink gov’t programs)

14. The National Debt 1930 - 1999

15. Trickle-Down Theory in Reality

16. Reagan Renews the Cold War Reagan’s hard-line stance toward USSR Expansion of military spending Force USSR to spend lots of money to counter USA Reagan believed in negotiating with USSR from position of overwhelming strength SDI {Strategic Defense Initiative aka “Star Wars”}

17. Problems in Central America 1979 – Sandinistas overthrew dictator of Nicaragua Reagan accused Sandinistas of allowing Soviet base to attack US & claimed Nicaragua shipping arms to revolutionaries in El Salvador Secret aid (including the CIA mining harbors) to Nicaragua’s “contra” rebels (fighting the Sandinistas) October 1983 – US forces sent to Grenada, where communist coup had taken over country

18. A Group of U.S. supported Contra Special Forces on Patrol In a Remote Area of Northern Nicaragua, 1983

19. Bringing Democracy to Nicaragua

20. The 1984 election Reagan easily won the Republican nomination Riding high on prosperity and strong foreign policy Walter Mondale won Democratic nomination Congresswoman Geraldine Ferraro (NY) – first woman to run for vice president on national ticket Results Reagan won big

21. March 1985 – USSR installed new chairman of Communist party, Mikhail Gorbachev Announced 2 policies-lead to revolutionary changes “Glasnost” – “openness”, introduction of free speech and political liberties in USSR “Perestroika” – “restructuring” of economy by adopting some practices of capitalist West - like profit motive

22. Mikhail Gorbachev------------4 Summits with Reagan-----------Changes USSR away from Communist doctrine

23. 2 major foreign policy problems – and Reagan finds a way to link them together Continuing capture of US hostages by Muslim extremist groups in Lebanon Continuing power of Sandinistas in Nicaragua Reagan requested aid for contras, but US Congress refused

24. Linkage between hostages and Sandinistas 1985 – US secretly arranged arms sales to Iran In return, Iran would help get US hostages held by terrorists Money from payment of the arms was diverted to the contras Violation of law banning on military aid to contras Violation of Reagan’s repeated promise that he would never negotiate with terrorists November 1986 – news of the secret Iran-contra deal broke (Reagan initially denies knowledge)

25. Reagan Admits on T.V. That Staff Traded Arms for Hostages with Iran and Funneled Profits to theContras, March 1987

26. Religion and politics combined in favor of Republicans in 1980s 1979 – Reverend Jerry Falwell from Virginia founded the Moral Majority Against sexual permissiveness, abortion, feminism, gay rights “televangelists” used radio, direct-mail marketing, cable TV to reach huge audiences and raise millions Swaggert; Robertson; Jim and Tammy Baker

28. Protest at the Capitol in Favor of School Prayer Organized by the Moral Majority, 1984

29. Courts were Reagan’s chief weapon in “culture wars” Appointed almost 1/2 of all sitting judges Named 3 Supreme Court justices including Sandra Day O’Conner Court reduces impact of affirmative action 1992 – Planned Parenthood v. Casey States could restrict access to abortion as long as it did not place an “undue burden” on the woman But Bork nomination will fail in 1987

30. George H. Bush-----------Defeats Dukakis in 1988 on Reagan’s record

31. Communism falls and democracy begins in former communist block nations China Spring 1989 – pro-democracy demonstrators marched into Tiananmen Square in Beijing June 1989 Tanks rolled over demonstrators, machine-gunners killed hundreds US and world condemned the attack Bush insisted on keeping normal relations

32. A Sea of Student Protesters Gathers in Tiananmen Square on May 4, 1989, Demanding Greater Freedom of Speech and Democracy

33. Tank Man Blocks the Path of a Convoy Near Tiananmen Square

34. Former communist-controlled Eastern Europe falls in just a few months in 1989 August – Solidarity movement in Poland overthrew the communist government Communist governments then fell in Hungary, Czechoslovakia, East Germany, and Romania December 1989 – Berlin Wall torn down October 1990 – 2 Germanys reunited

35. Changes in the USSR: August 1991 – hard-line communists attempted coup of Gorbachev but failed USSR dissolved into separate republics Russia itself, led by Boris Yeltsin Governments ended communism and began democratic and free-market reforms December 1991 – Gorbachev resigned

36. Destruction in Panama after the US Invasion, 1989, to arrest President Manuel Noriega

37. The Persian Gulf Crisis August 2, 1990 – Iraq invaded Kuwait Needed Kuwait’s oil to pay its war bills (after fighting an 8-year war with Iran) Larger plan was control over entire Middle East, to control world’s oil supply US supplied Hussein with weapons and money during 1980s US knew he was a brutal dictator but he also opposed Iran so we helped him

38. Feb.1991 – “Operation Desert Storm” Land war in Iraq led by coalition forces through UN Lasted 4 days – the “hundred hour war” February 27, 1991 – Hussein accepted cease-fire and Kuwait was liberated Saddam Hussein remained in power Allies had agreed only to remove Iraq from Kuwait, not regime change

39. Gen. Norman Schwarzkopf Commander of Operation Desert Storm 1991

40. Bush and the “social issues” Had promised “Kindler and Gentler Nation” but: 1990 – Bush’s Department of Education challenged scholarships targeted to minorities promised to veto law that would make it easier to prove discrimination in hiring nominated Clarence Thomas to Supreme Court & hearing will lead to Anita Hill revelations.

41. Problems for Bush lead to Clinton victory “gender gap” Women more critical of Republicans and joined Democrats Economy Weak performance and relatively high (7%) unemployment Tax increase 1990 – Bush agreed to $133 billion in new taxes Violated his 1988 campaign pledge: “Read my lips—no new taxes.”