Economic Crisis and the Reagan Revolution

Oil Crisis Yom Kippur War Oil Crisis Auto makers in trouble Imported 33% of our oil OPEC (Organization of Petroleum Exporting Countries) – embargo Impact 1974 – embargo lifted when Israel withdrew from occupied territory Auto makers in trouble

Ford’s Presidency OPEC continues to limit exports, driving prices up, creating shortages Chief issue: inflation – prices go up and value of dollar decreases WIN (Whip Inflation Now)

Carter Adminstration Energy alternatives failed Causes of Economic downturn energy shortage Companies got big and did not respond well to changing technology Stagflation Spending on social programs increased creating a 72 billion dollar deficit by 1980. Top tax bracket 70% Discussed lowering taxes, but doesn’t do anything Energy alternatives failed

American Concerns American Concerns… Reagan pitched Social change Loss of American power and influence in world Reagan pitched Conservative ideas Big government is the problem, not the solution

Why Reagan Wins People dissatisfied w/ Ford/Carter presidencies Return of values from evangelical Christians Moral Majority – challenge abortion, feminist movement, sex education in schools Middle class/working class – did not approve of tax increases of 60s/70s Reagan’s primary goals stimulate the sagging economy cutting both government programs and taxes

Supply Side Economics Lower taxes = more money in pockets More money in pockets = increased spending/investing increased spending/investing = economic growth economic growth = more earnings for Americans

Reaganomics Reduce Growth of Government spending. Reduce Income Tax and Capital Gains Tax. Top tax bracket – 28% Reduce Government regulation. Control the money supply to reduce inflation IRAs Deficit spending Opponents called it “voodoo economics”

Stagflation Defeated Broke cycle of stagflation, how? Increased interest rates – less borrowing Inflation dropped (helped by falling oil prices) Unemployment reached 10% Growth started in 1983 Unemployment dropped to 5.3% Tax cuts and military spending increased the deficit and shot down goal of balanced budget

The Great Communicator Compelling speaker mixture of folksy wisdom, empathy, and concern while taking humorous digs at his opponents. “we need to cut social programs to save the good ones” He will make cuts to Aid to Families with Dependent Children (AFDC), food stamps, rent subsidies, job training programs, and Medicaid Survived assassination attempt in 1981 helped his popularity Congress passed his Economic Recovery Tax Act

Deregulation & Unions Reagan deregulated industry, financial services, Professional Air Traffic Controllers Organization (PATCO) 12,000 striking ATC fired by Reagan Saw a more hard line attitude towards unions.

Culture - Yuppies Hippies were the youth of 1970s who reflected the culture Yuppies were the youth of 1980s who reflected the culture