History of the United States (1980–91)
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The history of the United States from 1980 until 1991 includes the last year of the Soviet Union. Plagued by the Iran hostage crisis, runaway inflation, and mounting domestic opposition, Carter lost the 1980 presidential election to Republican Reagan.
In his first term, Reagan introduced expansionary fiscal policies aimed at stimulating the American economy after a recession in 1981 and 1982, including oil deregulation policies which led to the 1980s oil glut. He met with Soviet leader Mikhail Gorbachev in four summit conferences, culminating with the signing of the INF Treaty. These actions accelerated the end of the Cold War, which occurred in 1989-91, as typified by the collapse of communism both in Eastern Europe, and in the Soviet Union, and in numerous Third World clients. The economy was in recession in 1981-83, but recovered and grew sharply after that.
The largest scandal of the years was the Iran-Contra affair, wherein The Reagan Administration sold weapons to Iran, and used the money for CIA aid to pro-American guerrilla Contras in left-leaning Nicaragua. The upshot was that the actions were legal, but President Reagan was embarrassed when Congress revealed how little control he had over the details of his foreign-policy.
- Changing demographics and the growth of the Sun Belt 1
Reagan Revolution 2
- Rejection of U.S./Soviet détente 2.1
- Ronald Reagan and the elections of 1980 2.2
Reagan administration 3
- Reaganomics and the 1981 federal budget 3.1
- The recession of 1982 3.2
- Rising Deficits 3.3
Reagan and the world 3.4
- Foreign policy: Third World 3.4.1
- The end of the Cold War 3.4.2
George H. W. Bush administration 4
- Foreign affairs 4.1
- Economics 4.2
- See also 5
- Notes 6
Further reading 7
- Historiography 7.1
- External links 8
Changing demographics and the growth of the Sun Belt
A widely discussed demographic phenomenon of the 1970s was the rise of the "Sun Belt", the Southwest, Southeast, and especially Florida and California (surpassing New York as the nation's most populous state in 1964). By 1980, the population of the Sun Belt had risen to exceed that of the industrial regions of the Northeast and Midwest—the Rust Belt which steadily lost industry, and have little population growth. The rise of the Sun Belt was the culmination of changes that began in American society starting in the 1950s, as cheap air travel, automobiles, the interstate system, and the advent of air conditioning all spurred a mass migration south and west. Young, working-age Americans and affluent retirees all flocked to the Sun Belt.
The rise of the Sun Belt has been producing a change in the nation's political climate, strengthening conservatism. The boom mentality in this growing region conflicted sharply with the concerns of the Rust Belt, a deteriorating region burdened by labor unions, high taxes, and populated mainly by those either unable or unwilling to move elsewhere, particularly minority groups and senior citizens. The Northeast and Midwest have remained more committed to social programs and more interested in regulated growth than the wide-open, sprawling states of the South and West. Electoral trends in the regions reflect this divergence—the Northeast and Midwest have been increasingly voting for Democratic candidates in federal, state and local elections while the South and West are now the solid base for the Republican Party.
As manufacturing industry gradually moved out of its traditional centers in the Northeast and Midwest, joblessness and poverty increased. The liberal response, typified by Mayor John Lindsay of New York City Was to dramatically increase welfare services and education, as well as public employment and public salaries, at a time when the tax base was shrinking. New York City barely averted bankruptcy in 1975; it was rescued using state and federal money, along with strict state control of its budget.
Meanwhile, conservatives, based in the suburbs, the rural areas, and the Sunbelt railed against what they identified as the failures of liberal social programs, As well as their enormous expenses. This was a potent theme in the 1980 presidential race and the 1994 mid-term elections, when the GOP captured the House of Representatives after 40 years of Democratic control.
The liberal leaders of the 1960s, characteristic of the era of the Great Society and the civil rights movement, gave way to conservative urban politicians in the 1970s across the country, such as New York City's Mayor, Ed Koch, a conservative Democrat.
Rejection of U.S./Soviet détente
The 1970s inflicted damaging blows to the American self-confidence. The Vietnam War and the Watergate scandal shattered confidence in the presidency. International frustrations, including the fall of South Vietnam in 1975, the Iran hostage crisis in 1979, the Soviet intervention in Afghanistan, the growth of international terrorism, and the acceleration of the arms race raised fears over the country's ability to control international affairs. The energy crisis, high unemployment, and very high inflation and escalating interest rates made economic planning difficult and raised fundamental questions over the future of American prosperity.
American "malaise", a term that caught on following Carter's 1979 "crisis of confidence speech", in the late 1970s and early 1980s was not unfounded as the nation seemed to be losing its self-confidence.
Under the rule of Leonid Brezhnev the Soviet economy was falling behind—it was decades behind in computers, for example—and was kept alive because of lucrative oil exports. Meanwhile détente with the Soviets collapsed as the communists made gains across the Third World. Most dramatic was the victory in Vietnam in 1975 when North Vietnam invaded and conquered South Vietnam; American forces were involved only to rescue American supporters. Nearly a million refugees fled; most who survived came to the U.S. Other Communist movements, backed by Moscow or Beijing, were spreading rapidly across Africa, Southeast Asia, and Latin America. And the Soviet Union seemed committed to the Brezhnev Doctrine, ending the 1970s by sending troops to Afghanistan in a move roundly denounced by the West and Muslim countries.
Reacting to all these perceptions of American decline internationally and domestically, a group of academics, journalists, politicians, and policymakers, labeled by many as "new conservatives" or "Henry "Scoop" Jackson, a Democrat, but they later aligned themselves with Ronald Reagan and the Republicans, who promised to confront pro-Soviet Communist expansion. Generally they were anti-communist Democrats and opposed to the welfare programs of the Great Society. But their main targets were the old policies of containment of communism and Détente with the Soviet Union. They wanted rollback and the peaceful end of the Communist threat rather than aimless negotiations, diplomacy, and arms control.
Led by Norman Podhoretz, the neoconservatives attacked the foreign policy orthodoxy in the Cold War as "appeasement", an allusion to Neville Chamberlain's negotiations at Munich in 1938. They regarded concessions to relatively weak enemies of the United States as "appeasement" of "evil", attacked détente, opposed most-favored nation trade status for the Soviet Union, and supported unilateral American intervention in the Third World as a means of boosting U.S. leverage over international affairs. Before the election of Reagan, the neoconservatives, gaining in influence, sought to stem the antiwar sentiments caused by the U.S. defeats in Vietnam and the massive casualties in Southeast Asia that the war induced.
During the 1970s, Jeane Kirkpatrick, a political scientist and later U.S. Ambassador to the United Nations under Ronald Reagan, increasingly criticized the Democratic Party. Kirkpatrick became a convert to the ideas of the new conservatism of once liberal Democratic academics. She drew a distinction between authoritarian dictators, who she believed were capable of embracing democracy and who were, not coincidentally, allies of the United States, and Communist totalitarian dictators, who she viewed as unyielding and incapable of change.
The 1980s thus began on a thoroughly grim note. Gripped by the worst economy since the 1930s, the automobile and steel industries in serious trouble, the ongoing Iranian Hostage Crisis, and the US seemingly unable to respond to growing Soviet adventurism around the globe, it came as a small measure of good feeling when the US Olympic hockey team defeated their Soviet counterparts in the Miracle on Ice.
Ronald Reagan and the elections of 1980
Conservative sentiment was growing, in part due to a disgust at the excesses of the Sexual Revolution and the failure of liberal policies such as the War on Poverty to deliver on their promises. President
- Ehrman, John. "The Age of Reagan? Three Questions for Future Research," Journal of the Historical Society, March 2011, Vol. 11 Issue 1, pp 111–131 online
- Busch, Andrew E.; "Ronald Reagan and the Defeat of the Soviet Empire" in Presidential Studies Quarterly. Vol: 27. Issue: 3. 1997. pp 451–66. in JSTOR
- Campagna; Anthony S. The Economy in the Reagan Years: The Economic Consequences of the Reagan Administrations Greenwood Press. 1994
- Collins, Robert M. Transforming America: Politics and Culture During the Reagan Years, (Columbia University Press; 320 pages; 2007).
- Dunlap, Riley E., and Angela G. Mertig, eds. American environmentalism: The US environmental movement, 1970-1990 (2014)
- Ehrman, John. The Eighties: America in the Age of Reagan. (2005)
- Ferguson Thomas, and Joel Rogers, Right Turn: The Decline of the Democrats and the Future of American Politics 1986.
- Hayward, Steven F. The Age of Reagan: The Conservative Counterrevolution: 1980-1989 (2010) detailed narrative from conservative perspective
- Johns, Andrew L. ed. A Companion to Ronald Reagan (2015), 34 essays by scholars emphasizing historiography excerpt and text search
- Kyvig, David. ed. Reagan and the World (1990), scholarly essays on foreign policy
- Levy, Peter B. Encyclopedia of the Reagan-Bush Years (1996), short articles
- Martin, Bradford. The Other Eighties: A Secret History of America in the Age of Reagan (Hill & Wang; 2011) 242 pages; emphasis on efforts by the political left
- Patterson, James T. Restless Giant: The United States from Watergate to Bush vs. Gore. (2005), standard scholarly synthesis.
- Pemberton, William E. Exit with Honor: The Life and Presidency of Ronald Reagan (1998) short biography by historian
- Rossinow, Doug. The Reagan Era: A History of the 1980s (Columbia University Press, 2015)
- Schmertz, Eric J. et al. eds. Ronald Reagan's America 2 Volumes (1997) articles by scholars and officeholders
- Schmertz, Eric J. et al. eds. Ronald Reagan and the World (1997) articles by scholars and officeholders
- Wilentz, Sean. The Age of Reagan: A History, 1974-2008 (2008) detailed narrative by liberal historian
- David Wilson, and Jared Wouters. "Spatiality and growth discourse: the restructuring of America's rust belt cities." Journal of Urban Affairs (2003) 25#2 pp: 123-138.
- Carl Abbott, The new urban America: growth and politics in Sunbelt cities. (1981).
- Darren Dochuk, From Bible Belt to Sunbelt: Plain-Folk Religion, Grassroots Politics, and the Rise of Evangelical Conservatism (2010)
- James Salt, "Sunbelt capital and conservative political realignment in the 1970s and 1980s." Critical Sociology 16.2-3 (1989): 145-163.
- Seymour P. Lachman and Robert Polner, The Man Who Saved New York: Hugh Carey and the Great Fiscal Crisis (2010) p 142
- Martin Shefter, Political crisis/fiscal crisis: The collapse and revival of New York City (1992)
- Gary C. Jacobson, "The 1994 House elections in perspective." Political Science Quarterly (1996): 203-223. in JSTOR
- Jonathan M. Soffer, Ed Koch and the Rebuilding of New York City (2010)
- Laura Kalman, Right Star Rising: A New Politics, 1974-1980 (2010)
- Jesús Velasco, Neoconservatives in U.S. Foreign Policy under Ronald Reagan and George W. Bush: Voices behind the Throne (2010)
- Pat E. Harrison, Jeane Kirkpatrick (1991)
- Andrew Busch, Reagan's Victory: The Presidential Election of 1980 And the Rise of the Right (2005)
- David Farber, The rise and fall of modern American conservatism: a short history (2010) p. 208
- Michael A. Genovese, Encyclopedia of the American Presidency (2010) p. 419
- David Henry, "Book Reviews," Journal of American History (Dec. 2009) volume 96 #3 pp 933-4
- William E. Pemberton, Exit with honor: the life and presidency of Ronald Reagan (1998) pp. 92, 116
- Earl M. Maltz, ed. Rehnquist Justice: Understanding the Court Dynamic (2003)
- The Unfinished Journey: America Since World War II by William H. Chafe
- Livin' On A Prayer: Shmoop Music Guide. Shmoop University.
- (U.S. Marine Corps, 1987) onlineU.S. Marines in Lebanon, 1982-1984Benis M. Frank, .
- Richard W. Stewart, "Operation Urgent Fury: The Invasion Of Grenada, October 1983" (Center for Military History, 2008)
- Stanley Meisler, United Nations: the first fifty years (1995) p. 219
- Melvyn P. Leffler, "The Foreign Policies of the George W. Bush Administration: Memoirs, History, Legacy," Diplomatic History (2013): dht013.
Initially, Bush inherited an economy that continued the strong rally that had begun in the final months of 1982. However, the Federal Reserve continued with restrictive monetary policy, limiting economic growth in the late 1980s. When the 1990 oil price shock hit in mid-1990, consumer spending contracted and the economy entered recession. Unlike the early 1980s recession, the recession beginning in 1990 was relatively mild. Some of the hardest hit cities were in California and the Northeast, while much of the South was less affected.
In 1989, the invasion of Panama took place and Manuel Noriega was captured and put on trial. The main foreign-policy development was forming a large-scale coalition, with United nations support, to end Iraq's invasion of Kuwait. At the end of the short-successful war in 1991, Bush's popularity soared to unprecedented levels. As the nation turned its attention to domestic policies, his Popularity went steadily downward until he was defeated for reelection in 1992.
Reagan's vice-president Democratic Massachusetts governor Michael Dukakis by an electoral landslide in the 1988 election. The campaign was marked by numerous blunders by Dukakis, including most famously a campaign ad featuring Dukakis in an M1 Abrams tank.
George H. W. Bush administration
- "This is an ambitious undertaking, the most successful examples of which are post–World War II Germany, Italy and Japan. In those cases, the US Army helped transform militaristic dictatorships into pillars of liberal democracy—one of the most significant developments of the twentieth century." 
- "aims to instill democracy in lands that have known tyranny, in the hope that doing so will short-circuit terrorism, military aggression, and weapons proliferation."
Max Boot, another influential contemporary commentator on U.S. policy, argues that the very ambitious goals of the U.S. in the post–Cold War period
- the United States has, among other things, attempted or been perceived as attempting more or less unilaterally to do the following: pressure other countries to adopt American values and practices regarding human rights and democracy; prevent other countries from acquiring military capabilities that could counter American conventional superiority; enforce American law extra-territorially in other societies; grade countries according to their adherence to American standards on human rights, drugs, terrorism, nuclear proliferation, missile proliferation, and now religious freedom; apply sanctions against countries that do not meet American standards on these issues; promote American corporate interests under the slogans of free trade and open markets [NAFTA and GATT being the main examples of the free trade policy initiatives of the 1990s]; shape World Bank and International Monetary Fund policies to serve those same corporate interests; intervene in local conflicts in which it has relatively little direct interest; ... ; promote American arms sales abroad while attempting to prevent comparable sales by other countries; force out one U.N. secretary-general and dictate the appointment of his successor; expand NATO initially to include Poland, Hungary, and the Czech Republic and no one else; undertake military action against Iraq and later maintain harsh economic sanctions against the regime; and categorize certain countries as 'rogue states,' excluding them from global institutions....1
The U.S. often made moves to economically sanction countries which were said to be sponsoring terrorism, engaging in the proliferation of weapons of mass destruction or committing serious human rights abuses. There was sometimes a consensus for these moves, such as with the U.S. and European embargoes imposed on arms sales to China after its violent suppression of the Tiananmen Square protests of 1989, as well as for the UN Security Council's imposition of sanctions on Iraq after its invasion of Kuwait. Support for other unilateral sanctions however, such as the ones levied on Iran and Cuba, were limited, leading Congress to impose measures intended to punish foreign companies which violated the terms of the U.S.'s own laws.
Since the end of the Cold War, the U.S. has sought to revitalize Cold War institutional structures, especially NATO, as well as multilateral institutions such as the International Monetary Fund and World Bank through which it promotes economic reforms around the globe. NATO was set to expand initially to Hungary, Poland, and the Czech Republic and has since moved further eastward. In addition, U.S. policy placed a special emphasis on the neoliberal "Washington Consensus", manifesting in the North American Free Trade Agreement (NAFTA), which went into effect in 1994.
Nationalist agitation in the Baltic States for independence led to first Lithuania and then the other two states, Estonia and Latvia, declaring independence from the Soviet Union. On December 26, 1991, the USSR was officially disbanded, breaking up into fifteen constituent parts. The Cold War was over, and the vacuum left by the collapse of governments such as in Yugoslavia and Somalia revealed or reopened other animosities concealed by decades of authoritarian rule. While there was a certain reluctance among the U.S. public, and even within the government, to get involved in localized conflicts in which there was little or no direct U.S. interest at stake, these crises served as a basis for the renewal of Western alliances while communism was becoming less relevant. To this effect, President Bill Clinton would declare in his inaugural address: "Today, as an old order passes, the new world is more free but less stable. Communism's collapse has called forth old animosities and new dangers. Clearly America must continue to lead the world we did so much to make."
These developments undercut the rationale for providing support to such repressive governments as those in new world order... freer from the threat of terror, stronger in the pursuit of justice, and more secure in the quest for peace. An era in which the nations of the world, East and West, North and South, can prosper and live in harmony."
During the Eastern European Warsaw Pact began to collapse in rapid succession. The "fall of the Berlin Wall" was seen as a symbol of the fall of the Eastern European Communist governments in 1989. U.S.-Soviet relations had greatly improved in the latter half of the decade, with the signing of the Intermediate-Range Nuclear Forces Treaty (INF) in 1987 and the withdrawal of Soviet forces from Afghanistan as well as Cuban forces from Angola.
Focused on perestroika, Gorbachev struggled to boost production of consumer goods, which would be impossible given the twin burdens of the Cold War arms race on one hand, and the provision of large sums of foreign and military aid, which the socialist allies had grown to expect, on the other. Under Gorbachev, Soviet policymakers increasingly accepted Reagan administration warnings that the U.S. would make the arms race a huge burden for them. The Soviets were already spending massive amounts on defense, and developing a counterpart to SDI was far more than their economy could handle. The result in the Soviet Union was a dual approach of concessions to the United States and economic restructuring (perestroika) and democratization (glasnost) domestically, which eventually made it impossible for Gorbachev to reassert central control. Reaganite hawks have since argued that pressures stemming from increased U.S. defense spending was an additional impetus for reform.
East-West tensions eased rapidly after the rise of Mikhail Gorbachev. After the deaths of three elderly Soviet leaders in a row since 1982, the Politburo elected Gorbachev Soviet Communist Party chief in 1985, marking the rise of a new generation of leadership. Under Gorbachev, relatively young reform-oriented technocrats rapidly consolidated power, providing new momentum for political and economic liberalization, and the impetus for cultivating warmer relations and trade with the West.
There was a growing body of evidence that the Soviet Union, which three generations of Americans had been conditioned to believe was an undefeatable colossus, was really a paper tiger. During 1981, the US Navy conducted a series of exercises in the Arctic Ocean a few miles from the Soviet coast and went completely undetected, proving the deficiency of the latter's radar and detection capabilities.
While the Soviets had enjoyed great achievements on the international stage before Reagan entered office in 1981, such as the unification of their socialist ally, Vietnam, in 1976, and a string of socialist revolutions in Southeast Asia, Latin America, and Africa, the country's strengthening ties with Third World nations in the 1960s and 1970s only masked its weakness. The Soviet economy suffered severe structural problems and started suffering from an increased stagnation in the 1970s. Documents being circulated in the Kremlin in 1980, when Carter was still president, expressed the bleak view that Moscow ultimately could not win the technological or ideological battle with the US.
The Reagan administration adopted a hard-line stance toward the USSR. Early in his first term, the president attacked the rival superpower as the "evil empire". While it was Jimmy Carter who had officially ended the policy of détente following Soviet intervention in Afghanistan, East-West tensions in the early 1980s reached levels not seen since the Cuban Missile Crisis. The Strategic Defense Initiative (SDI) was born out of the worsening U.S.-Soviet relations of the Reagan Era. Popularly dubbed "Star Wars" at the time, SDI was a multi-billion dollar research project for a missile defense system that could shoot down incoming Soviet missiles and eliminate the need for mutually assured destruction.
The end of the Cold War
Reagan was sharply critical of the United Nations, once the darling of liberals. He repudiated its repudiation of its corruption, inefficiency and anti-Americanism. In 1985-7 the U.S. withdrew from UNESCO, which had failed in its cultural missions, and began to deliberately withhold its UN dues. American policymakers considered this tactic an effective tool for asserting influence in the UN. When the UN and UNESCO mended their ways, the US returned and paid its dues.
Reagan also expressed opposition to the Vietnamese-installed Communist regime of Heng Samrin (and later, Hun Sen) in Cambodia, which had ousted the genocidal Khmer Rouge regime after Vietnam invaded the country. The administration approved military and humanitarian aid to the republican KPNLF and royalist Funcinpec insurgents. The Reagan administration also supported continued UN recognition of the Coalition Government of Democratic Kampuchea (a tripartite rebel alliance of the KPNLF, Funcinpec, and the Khmer Rouge) over the Vietnamese-backed People's Republic of Kampuchea regime. Reagan also continued American support for the autocratic Philippine President Ferdinand Marcos, an ardent anti-Communist. In a 1984 presidential debate sponsored by the League of Women Voters, he explained his administration's support of Marcos by stating, "I know there are things there in the Philippines that do not look good to us from the standpoint right now of democratic rights, but what is the alternative? It is a large communist movement" , referring to active Communist guerrillas operating in the Philippines at the time. The U.S. also had significant strategic military interests in the Philippines, knowing that Marcos's government would not tamper with agreements to maintain U.S. naval bases in the country. Marcos was later ousted in 1986 by the mostly peaceful People Power movement, led by Corazón Aquino.
In Afghanistan, Reagan massively stepped up military and humanitarian aid for mujahideen fighters against the Soviet proxy government there, providing them with Stinger anti-aircraft missiles. U.S. allies Saudi Arabia and Pakistan also provided the rebels with significant assistance. General Secretary Mikhail Gorbachev reduced and eventually ended his country's commitment to Afghanistan as Soviet troops there were bogged down in guerrilla war.
In sub-Saharan Africa, the Reagan administration, with help from apartheid South Africa, also attempted to topple the substantially Cuban and Soviet-backed Marxist–Leninist FRELIMO and MPLA dictatorships of Mozambique and Angola, respectively, during those countries' civil wars. The administration intervened on the side of insurgent groups RENAMO in Mozambique and UNITA in Angola, supplying each group with covert military and humanitarian aid.
In 1982 the CIA, with assistance from the Argentine national intelligence agency, organized and financed right-wing paramilitaries in Nicaragua, known as the Contras. The tracing of secret funds for this scheme led to the revelations of the Iran-Contra Affair. In 1985 Reagan authorized the sale of arms in Iran in an unsuccessful effort to free U.S. hostages in Lebanon; he later professed ignorance that subordinates were illegally diverting the proceeds to the Contras, a matter for which Marine Lieutenant Colonel Oliver North, an aide to National Security Advisor John M. Poindexter, took much of the blame. Reagan's approval ratings plummeted in 1986 as a result of the scandal, and many Americans began to seriously question his judgement. While the president's popularity improved in his final two years, he would never again enjoy the support he had had in 1985. Predictably, the Democrats regained control of Congress in the 1986 midterm elections. Oliver North meanwhile achieved a brief celebrity status in 1987 during his testimonies before Congress.
The Reagan administration also supplied funds and weapons to heavily militarily-influenced governments in El Salvador beginning in 1980 and Honduras, and to a lesser extent in Guatemala, which was ruled by right-wing military autocrat General Efraín Ríos Montt from 1982-83. It reversed ex-President Jimmy Carter's official condemnation of the Argentine junta for human rights abuses and allowed the CIA to collaborate with Argentine intelligence in funding the Contras. Central America was the administration's primary concern, especially El Salvador and Nicaragua, where the Sandinista revolution brought down the formerly U.S.-backed Somoza family rule. The two countries had been historically dominated by multinational corporations and wealthy landowning oligarchs while most of their population remained in poverty; as a result, predominantly Marxist revolutionary leaders had won increasing support from the peasantry in both nations.
Reagan launched an air strike against Libya after it was found to have connections to a bombing in Berlin which killed two American soldiers.
In Eugenia Charles of Dominica officially called on the United States for protection. In a short campaign launched Oct. 25, fought primarily against armed Cuban construction workers, the US military invaded and took control, and democracy was restored to Grenada.
The Sabra and Shatila Massacre, which provoked a political crisis in Israel and international embarrassment, U.S. forces moved into Beirut to encourage Israeli withdrawal. Previously, the administration stood by Israel's invasion of Lebanon in mid-1982 to maintain the support of Israel on one hand, but also to quell the influence of Israel's pro-Soviet enemy Syria in Lebanon. However, U.S. intervention in the multi-sided Lebanese civil war had disastrous consequences. On October 23, 1983, the Marine Barracks Bombing killed 241 American troops. Shortly afterward, the U.S. withdrew its remaining 1600 soldiers.
Reagan's foreign policy was generally considered more successful and well thought out than his domestic. He favored a hawkish approach to the Cold War, especially in the Third World arena of superpower competition. In the wake of the Vietnam debacle, however, Americans were increasingly skeptical of bearing the economic and financial cost of large troop commitments. The administration sought to overcome this by backing the relatively cheap strategy of specially trained counterinsurgencies or "low-intensity conflicts" rather than large-scale campaigns like Korea and Vietnam, which were enormously costly both in money and human life.
With Reagan's promises to restore the nation's military strength, the 1980s saw massive increases in military spending, amounting to about $1.6 trillion over five years. A new arms race would develop as superpower relations deteriorated to a level not seen since the Kennedy Administration a generation earlier.
Foreign policy: Third World
Reagan and the world
Reagan asked Congress for a line-item veto which would allow him to lower the deficits by cutting spending that he thought was wasteful, but he did not receive it. He also called for a balanced budget amendment which would mandate that the federal government spends no more money than it takes in, which never materialized.
The enormous deficits were in large measure holdovers from Lyndon Johnson's commitment to both "guns and butter" (the Vietnam War and the Great Society) and the growing competition from other G7 nations after their postwar reconstruction, but it was the Reagan administration that chose to let the deficits develop.
The U.S. balance of trade grew increasingly unfavorable; the trade deficit grew from $20 billion to well over $100 billion. Thus, American industries such as automobiles and steel, faced renewed competition abroad and within the domestic market as well. The auto industry was given breathing space after the Reagan administration imposed voluntary import restraints on Japanese manufacturers (allowing them to sell a maximum of 1.3 million vehicles in the US per year) and imposed a 25% tariff on all imported trucks (a lighter 3% tariff was put on passenger cars). The Japanese responded by opening assembly plants in the US to get around this, and in doing so were able to say that they were providing Americans with jobs. The VIR was repealed in 1985 after auto sales were booming again, but the tariffs remain in effect to this day. With the event of CAFE regulations, small cars came to dominate in the 1980s, and much like with electronics, Japanese makes bested American ones in terms of build quality and technical sophistication.
Perhaps more alarmingly, Reagan-era deficits were keeping the U.S. dollar overvalued. With such a high demand for dollars (due in large measure to government borrowing), the dollar achieved an alarming strength against other major currencies. As the dollar soared in value, so American exports became increasingly uncompetitive, with Japan as the leading beneficiary. The high value of the dollar made it difficult for foreigners to buy American goods and encouraged Americans to buy imports, coming at a high price to the industrial export sector. Steel and other heavy industries declined due to excessive demands by labor unions and outdated technology that made them unable to compete with Japanese imports. The consumer electronics industry (which had begun declining in the 1970s) was one of the worst victims of dumping and other unfair Japanese trade practices. American consumer electronics also suffered from poor quality and a relative lack of technical innovation compared to Japanese electronics, in part because the Cold War had caused most American scientific and engineering effort to go into the defense sector rather than the consumer one. By the end of the decade, it had virtually ceased to exist. On the bright side, the upstart computer industry flourished during the 1980s.
The deficits were keeping interest rates, although lower than the 20% peak levels earlier in the administration due to a respite in the administration's tight money policies, high and threatening to push them higher. The government was thus forced to borrow so much money to pay its bills that it was driving up the price of borrowing. Although supply-siders promised increased investment as a result of top-rate and corporate tax cuts, growth and investment suffered for now in the context of high interest rates. In October 1987, a sudden and alarming stock market crash took place, but the Federal Reserve responded by increasing the money supply and averted what could have been another Great Depression.
Since U.S. saving rates were very low (roughly one-third of Japan's,) the deficit was mostly covered by borrowing from abroad, turning the United States within a few years from the world's greatest creditor nation to the world's greatest debtor. Not only was this damaging to America's status, it was also a profound shift in the postwar international financial system, which had relied on the export of U.S. capital. In addition, the media and entertainment industry during the 1980s glamorized the stock market and financial sector (e.g. the 1987 movie Wall Street), causing many young people to pursue careers as brokers, investors, or bankers instead of manufacturing and making it unlikely that any of the lost industrial base would be restored any time soon.
In this context, the deficit rose from $60 billion in 1980 to a peak of $220 billion in 1986 (well over 5% of GDP). Over this period, national debt more than doubled from $749 billion to $1,746 billion.
The 1981 tax cuts, one of the largest in U.S. history, also eroded the revenue base of the federal government in the short-term. The massive increase in military spending (about $1.6 trillion over five years) far exceeded cuts in social spending, despite wrenching impact of such cuts spending geared toward some of the poorest segments of society. Even so, by the end of 1985, funding for domestic programs had been cut nearly as far as Congress could tolerate.
Following the economic recovery that began in 1983, the medium-term fiscal effect of Reaganomics was a soaring budget deficit as spending continually exceeded revenue due to tax cuts and increased defense spending. Military budgets rose while tax revenues, despite having increased as compared to the stagnant late 1970s and early 1980s, failed to make up for the spiraling cost.
By the middle of 1983, unemployment fell from 11 percent in 1982 to 8.2 percent. GDP growth was 3.3 percent, the highest since the mid-1970s. Inflation was below 5 percent. When the economy recovered, Ronald Reagan declared it was Morning in America. Housing starts boomed, the automobile industry recovered its vitality, and consumer spending achieved new heights. Blue-collar workers were, however, mostly left behind in the economic boom years of the Reagan Administration, and the old factory jobs that had once offered high wages to even unskilled workers no longer existed.
Unemployment reached a peak of 11% in late 1982, after which recovery began. A factor in the recovery from the worst periods of 1982-83 was the radical drop in oil prices due to increased production levels of the mid-1980s, which ended inflationary pressures on fuel prices. The virtual collapse of the OPEC cartel enabled the administration to alter its tight money policies, to the consternation of conservative monetarist economists, who began pressing for a reduction of interest rates and an expansion of the money supply, in effect subordinating concern about inflation (which now seemed under control) to concern about unemployment and declining investment.
Reagan allowed the Federal Reserve to drastically reduce the money supply to cure inflation, but it resulted in the recession deepening temporarily. His approval ratings plummeted in the worst months of the recession of 1982. Democrats swept the mid-term elections, making up for their losses in the previous election cycle. At the time, critics often accused Reagan of being out of touch. His Budget Director David Stockman, an ardent fiscal conservative, wrote, "I knew the Reagan Revolution was impossible--it was a metaphor with no anchor in political and economic reality."
By early 1982, Reagan's economic program was beset with difficulties as the recession that had begun in 1979 continued. In the short term, the effect of Reaganomics was a soaring budget deficit. Government borrowing, along with the tightening of the money supply, resulted in sky high interest rates (briefly hovering around 20 percent) and a serious recession with 10-percent unemployment in 1982. Some regions of the "Rust Belt" (the industrial Midwest and Northeast) descended into virtual depression conditions as steel mills and other industries closed. Many family farms in the Midwest and elsewhere were ruined by high interest rates and sold off to large agribusinesses.
The recession of 1982
Budget Director David Stockman raced to put Reagan's program through Congress within the administration's deadline of forty days. Stockman had no doubt that spending cuts were needed, and slashed expenditures across the board (with the exception of defense expenditures) by some $40 billion; and when figures did not add up, he resorted to the "magic asterisk"—which signified "future savings to be identified". He would later say that the program was rushed through too quickly and not given enough thought. Appeals from constituencies threatened by the loss of social services were ineffectual; the budget cuts passed through the Congress with relative ease.
Reagan's 1981 economic legislation, however, was a mixture of rival programs to satisfy all his conservative constituencies (monetarists, cold warriors, middle-class swing voters, and the affluent). Monetarists were placated by tight controls of the money supply; cold warriors, especially neoconservatives like Kirkpatrick, won large increases in the defense budget; wealthy taxpayers won sweeping three-year tax rate reductions on both individual (marginal rates would eventually come down to 50% from 70%) and corporate taxes; and the middle class saw that its pensions and entitlements would not be targeted. Reagan declared spending cuts for the Social Security budget, which accounted for almost half of government spending, off limits due to fears over an electoral backlash, but the administration was hard pressed to explain how his program of sweeping tax cuts and large defense spending would not increase the deficit.
Ronald Reagan promised an economic revival that would affect all sectors of the population. He proposed to achieve this goal by cutting taxes and reducing the size and scope of federal programs. Critics of his plan charged that the tax cuts would reduce revenues, leading to large federal deficits, which would lead in turn to higher interest rates, stifling any economic benefits. Reagan and his supporters, drawing on the theories of supply-side economics, claimed that the tax cuts would increase revenues through economic growth, allowing the federal government to balance its budget for the first time since 1969.
Reaganomics and the 1981 federal budget
Reagan stunned the nation by appointing the first woman to the Supreme Court, Sandra Day O'Connor in 1981. He promoted conservative leader William Rehnquist to Chief Justice in 1986, with arch-conservative Antonin Scalia taking Rehnquist's slot. His fourth appointment in 1987 proved controversial, as the initial choice had to withdraw (he smoked marijuana in college), and the Senate rejected Robert Bork. Reagan finally won approval for Anthony Kennedy.
On March 30, 1981, Reagan was shot in Washington by a disturbed nonpolitical man. He recovered fully, with opponents silenced in the meanwhile.
Reagan's approach to the presidency was somewhat of a departure from his predecessors; he delegated a great deal of work to his subordinates, letting them handle most of the government's day-to-day affairs. As an executive, Reagan framed broad themes and made a strong personal connection to voters. He used very strong aides especially chief of staff James Baker (Ford's campaign manager), and Michael Deaver as deputy chief of staff, and Edwin Meese as White House counsel, as well as David Stockman at the Bureau of the Budget and his own campaign manager Bill Casey at the CIA.
After years of unstinting praise from the right, and unrelenting criticism from the left, historian David Henry lines finds that by 2010 a consensus had emerged among scholars that Reagan revived conservatism and turned the nation to the right by demonstrating a "pragmatic conservatism" that promoted ideology within the constraints imposed by the divided political system. Furthermore, says Henry, the consensus agrees that he revived faith in the presidency and American self-confidence, and contributed critically to ending the Cold War.
Reagan won a landslide victory with 489 votes in the electoral college to Carter's 49. Republicans defeated twelve Democratic senators to regain control of the Senate for the first time in 25 years. Reagan received 43,904,153 votes in the election (50.7% of total votes cast), and Carter, 35,483,883 (41.0%). John Anderson won 5,720,060 (6.6%) popular votes.
A third-party candidacy by Representative John B. Anderson of Illinois, a moderate Republican, did poorly. The major issues of the campaign were the economic stagflation, threats to national security, the Iranian hostage crisis, and the general malaise that seemed to indicate America's great days were over. Carter seemed unable to control inflation and had failed in his rescue effort of the hostages in Tehran. Carter dropped his détente-oriented advisers and moved sharply to the right against the Soviets, but Reagan said it was too little, too late.
The presidential election of 1980 was a key turning point in American politics. It signaled the new electoral power of the suburbs and the Sun Belt, with the Religious Right for the first time a major factor. Moreover, it was a watershed ushering out the commitment to government anti-poverty programs and affirmative action characteristic of the Great Society. It also signaled a commitment to a hawkish foreign policy.
The public, particularly the middle class in the Sun Belt region, agreed with Reagan's proposals, and voted for him in 1980. Critics charged that Reagan was insensitive to the plight of the poor, and that anyway the economic troubles of the 1970s were beyond any president's ability to control or reverse.
Supply-side economists were against the welfare state built up by the Great Society. They asserted that the woes of the U.S. economy were in large part a result of excessive taxation, which "crowded out" money away from private investors and thus stifled economic growth. The solution, they argued, was to cut taxes across the board, particularly in the upper income brackets, in order to encourage private investment. They also aimed to reduce government spending on welfare and social services geared toward the poorer sectors of society which had built up during the 1960s.
Reagan promised to rebuild the US military, which had sharply declined in strength and morale after the Vietnam War, and restore American power and prestige on the international front. He also promised an end to "big government" and to restore economic health by use of supply-side economics.