Topic 4 - C1 - New Directions in Economic Policy Flashcards
(37 cards)
Who was Ronald Reagan?
Sportscaster, Hollywood actor and TV star. Relaxed, effective public speaker - known as the great communicator of politics. Elected as governor of California in 1967-1974.
Why did Ronald Reagan hate taxation?
While in Hollywood, federal taxes took 91% of his income. Thought it was a disincentive to work
What economic concept did RR believe in?
Supply side economics - emphasised economic growth through low taxation and less gov regulation. Known as Reaganomics.
What was Reagan’s aim and vision for his presidency?
End to big gov. Couldn’t cut social security and medicare due to having a high proportion of elderly voters, couldn’t completely dismantle the GS but wanted to reverse it.
How did Reagan affect family incomes in 1981?
Reduced the budget of 212 federal programs - most aided the poor (food stamps, student loans and child nutrition programmes). Reduced the level and range of benefits for safety net programmes e.g Aid to Families with Dependent Children.
Why did Reagan cut AFDC and what impact did it have?
13 million living below the poverty line in 1984 - many children to single mothers so needed AFDC. Majority were black, reps believed that AFDC encouraged promiscuity, irresponsibility and the break up of the traditional family.
How did Reagan’s 1981 tax cuts benefit the rich and not the poor in the 1980s?
- The share of national income of the wealthiest 1% rose from 8%-15%
- The average income of the poorest decreased by $1300 p/a
- The number of homeless people increased from 200,000 to 400,000
What criticisms did Left Wingers have of Nancy Reagan?
They compared Nancy Reagan’s $25,000 wardrobe for the first inauguration with the 500,000 whose names RR deleted from the list of the registered disabled.
In what state was the economy in in 1981-1983?
10% unemployment, 50% in the Rust Belt. Double digit inflation. Only ½ of US families maintained their standard of living in the 1980s but because both parents worked.
What pro business policies did RR have?
- Opposed the minimum wage and obstructed congressional attempts to increase it - widened the gap between the rich and the poor
- Appointed over 400 conservatives to the judiciary - made it more difficult for women, minorities, the elderly and the disabled to sue employers over discrimination
How did Ronald Reagan treat the 12,000 air traffic controllers who ignored the no strike for federal employee clause in their contract and striked for higher wages?
President had the power to fire fed employees who ignored it so he fired them all and called in the military to do their jobs while new controllers were trained.
How did RR cut regulation on industry and business?
- Cut the staff of regulatory agencies by 25% but
- No. of personnel in the Consumer Product Safety Commission was cut by 38% - commission less active in ensuring that products were safe
What impact did cutting regulation on industry and business have?
50% fall in prosecutions for disposal of hazardous waste, adversely affected environment. RR hadn’t differentiated between econ regulation and health+safety regulation.
What did agency appointees ensure after RR’s deregulation of business and industry to give workers less protection against accidents and poor conditions?
That bodies such as the Occupational Safefy and Health Administration the made decisions in favour of businesses and against labour
Why did Reagan want to cut the benefits for early retirees?
Reagan was informed that the fund from which social security payments came from would be bankrupt by 2000, backed down when the entirity of congress opposed it
What is an example of where congress and RR disagreed on the budget?
RR vetoed the renewal of the $18 billion Clean Water Act but Congress overrode his veto with an identical Water Quality Control Act, 1987
What programmes did RR leave intact and why?
RR left medicare, veterans benefits, school lunches and head start intact due to public opposition.
What alternative to cutting school lunches was sought?
The Department of Agriculture attempted to save money by substituting vegetable portions for ketchup and pickle but it was ridiculed and dropped.
How was RR successful in bringing prosperity to some regions?
Defense expenditure brought prosperity to regions with defense and aerospace industries like the West Coast
What did the Tax Reform Bill 1986 do?
Simplified the tax code and increased taxes on corporations and capital gains - lowered the top rate of IT from 50% to 28%, raised the bottom rate from 11% to 15%
What is the main praise for Reaganomics?
- Longest ever period of economic growth in peacetime - 1980-1988 inflation fell from 13.5% to 4.7%, unemployment fell from 7% to 5.2% and 16 million new jobs created
Why did RR fail to balance the budget?
Failed to balance the budget due to tax cuts that decreased gov income and very high defense expenditure. He said defense was not a budget item.
How unbalanced was the budget?
- $1 trillion national debt in 1980-81 which X3 to more than $2.6 trillion.
- Fed expenditure increased from $699.1 billion in 1980 to $859.3 billion in 1987.
Why did Congress pass the Balanced Budget and Emergency Deficit Control Act (1985)?
Budget deficit in constant dollars was over 5 times that of his predecessors. Tried to ensure a future balanced budget through spending cuts.
