To What Extent Was ‘Big Government’ Reduced? Flashcards
(23 cards)
Was reducing big government beneficial
Reagan believed reducing it under new federalist policies would benefit the USA
- produce less federal intervention in state and local affairs, business, finance, and other aspects of peoples lives
- sounded positive to a nation suspicious of government intervention
- however, less funding for state and local government projects, less regulation of business expansionism and greed, less control over foreign imports and less social welfare
How was big government reduced short term
Deregulation was key tool in reducing big government
1982 state of the union address: Reagan said they were winning the fight against big government, since they had come to power they had:
- cut federal regulations almost in half, removed 23,000 from federal register (contains all federal regulations), had 14,500 pages in 1960 and 87,000 when Reagan came to power
- helped bring down cost of petrol and heating fuel by deregulation
- created a federal strike force to combat government fraud and waste, saved $2 billion in 6 months
- replaced federal agencies with private sector ones, federal employees replaced with volunteers
How did Reagan not reduce big government in the short term
- focused on small details of federal spending, deficit was rising, showed he couldn’t control overall rising debt
- this made the savings seem more real to the public, part of media spin to use everyday images when discussion change
- carter actually began deregulation, deregulated the airlines and drafted bills of deregulating trucking, railways, and some areas of finance, e.g. banks (still had to obey FRB rules), also introduced regulations on working conditions and environmental issues
Deregulation legislation: January 1981
28th: Executive order to deregulate oil and fuel prices passed by carter administration, brought forward, to come into effect in October
29th: executive order to stop wage and price regulation
Deregulation legislation: March 1981
26th: Executive order sets up the presidents council on integrity and efficiency
Deregulation legislation: April 1981
8th: executive order setting up the presidential advisory committee on federalism
Deregulation legislation: July 1981
17th: Deregulation of controls on fuel prices
Deregulation legislation: September 1982
20th: bus regulatory reform act deregulates bus services
Deregulation legislation: October 1982
15th: Garn St Germain Depository Institution act
- deregulates savings and loan institutions, allows them to invest in many more ventures, including property speculation
- allows more freedom in mortgage lending
Deregulation legislation: February 1983
26th: deregulation of natural gas supplies
Deregulation legislation: march 1984
20th: shipping act loosens regulations on US and foreign shipping
Deregulation legislation: October 1984
30th: cable communications act deregulates cable communications
Deregulation legislation: October 1986
22nd: surface freight forwarder deregulation act
- allows greater freedom for people working with various trucking companies to ‘bundle’ part loads to be carried by one of them
Deregulation legislation: August 1988
23rd: foreign trade and competitiveness act
- allows the president more rights in making trade treaties to benefit the USA
What were the problems with deregulation
When smaller companies were struggling, big companies bought them out
- during 1980s, big companies expanded and small, independent businesses struggled
- rise in number of conglomerates
- businesses set their own standards for safety, lower than government regulators
- initially, prices were lower but once big businesses grew, price structure was ‘fixed’, no competition
- many businesses cut services provided to maximise profit, rural areas suffered (e.g. phone companies and airlines)
What did the Reagan administration do to savings and loan institutions
Applied carters banking deregulation to them in 1983
- when banking restrictions were lifted, banks could offer high interest rates on savings, good for savers, bad for struggling businesses and people with long-term loans (e.g. farmers)
Effect of deregulating S&Ls
- people with savings and that understood various offers benefited most
- S&Ls run by people used to making safe investments, usually provided mortgage loans at regulated rate of interest
- had to make increasingly risky investments when competing with banks and other financial institutions, lent at very low rates and offer high rates of savings
- many failed due to incompetence
- federal government had to pass competitive equality in banking act in 1987, provided money to cover money lost by closed S&Ls
- 1988: S&Ls lost $10 billion
- 1989: property market collapsed which made situations of all institutions that lent money on property more difficult
- bush signed the financial institutions reform, recovery, and enforcement act (FIRREA), bailed out some failing organisations, closed others, set up new federal regulators, cost $150 billion
Reagan’s policies on trade
Reducing big government by not intervening to affect markets: trade markets and stockmarket
Effect of Reagan’s policies on trade
- balance of world trade shifted against the USA as the power of the dollar weakened
- foreign imports became cheaper and rose
- American companies lost business, textile industry in particular, 1980-85, 250 textiles plants forced to close, over 300,000 workers lost their jobs
- political economists said cheaper foreign imports was damaging the economy and USA was global borrower for the first time, not ‘the world’s banker’ (used in the 1920s)
- American companies being bought up by foreign companies, November 1987: a finance magazine said Britain was getting colonies back by buying them
- supporters said it was good, gave consumers more choice, made USA an attractive place to trade and invest in, e.g. Japanese investment was bringing money into country
- ignored the fact that profits were reinvested in the original country, not the USA
Why was big government not reduced as much as Reagan hoped
- congress agreed to deregulate oil prices but blocked plans to remove regulations on environmental issues (pollution and working conditions at nuclear power stations)
- state and local governments unwilling to take over areas of government and projects under federal control, didn’t want to pay for something otherwise federally funded
- administration didn’t introduce many new regulations (unlike carters), congress persuaded Reagan to pass food security act
What was the food security act
Passed 23 December 1985
Gave federal help to farmers who were struggling with falling prices and falling value of farmland
Forced to pass by congress
Effect of deregulation on plane industry
Pre-regulation: flew all over the USA, often half full
By 1989: big companies corrected initial price fall from competition
- prices high, planes flew to fewer places, less often, tightly packed
Effect of deregulation on peoples opinions after Reagan
When bush came to power, people less keen on deregulation and federal withdrawal from local and state affairs
Industry and banking deregulation had been running for long enough, people saw negative effects
- many businesses cared about own benefit than public benefit after deregulation (shown by planes)
Withdrawal from state and local programmes meant collapse due to lack of funding
- poor rural areas at the back of the queue for communications services, transport services, basic maintenance (road repair)
