Ford and Carter and the Economy

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  • Created by: tomtom11
  • Created on: 24-05-16 13:37
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  • The Economy in the '70s
    • Effects on income
      • Inflation 5% in '77/ 10% by '78
      • Cost of living doubled between '68 and '78- continued to rise 'till '82.
      • Cost of borrowing money from banks = 20%
        • Led to a drop in investment and a drop in house-buying.
      • Price of McDonald's Burger cost 15 cents in '67- rose to 50 cents by '81.
      • Between '72 and '78- industrial productivity rose by 1%
      • Real incomes in the US fell 2% each year from 1973 to 1981.
      • Stagflation
        • inflation = 11%
        • Unemployment was 9%
      • There was a significant decline in manufacturing... wealthy areas moved from North East to West.
        • States like New York and Michigan lost thousands of jobs.
    • Growth in homelessness
      • household debt rose, as did foreclosures.
      • Poverty levels through the period remained a stable high at 12%
      • Increased mechanisation in areas like the Mississippi Delta led to greater redundancies
      • Areas dependant on textiles and mining suffered.
      • '51- manufacturing provided Pennsylvania with 46% of its jobs
        • This had fallen to 24% in 1977
      • More than 20% of the population were on welfare in '70
      • Reduction of taxes (57%) in California through Proposition 13 had serious impact on welfare.
    • Oil and energy crisis
      • OPEC x4'd the price of oil in '73
        • Fall of the Shah of Iran led to doubling in price.
      • Oil = $3 a barrel in '73 to $34 a barrel by '79.
      • '79- 58% of US's petrol stations closed due to lack of petrol.
      • '80- USA imported $80bn worth of oil.
      • Nearly 90% of the population believed that inflation was a permanent feature of the US economy.
    • Foreign competition
      • '74- General Motors, Ford and Chrysler had laid of 224,000 workers.
      • Chrysler faced bankruptcy and only survived through a federal bailout.
    • Government response
      • Ford attempted voluntary wage restrain policy (failure)
      • Whip Inflation Now (WIN)
      • Ford cut federal spending to curb rising prices.
      • Carter also cut taxes, but also introduced public works schemes.
      • ('77) introduced Public Works Act- stimulus package to get economy back on track.
        • Included $4bn Public Works Scheme + enlarged other social policies.
        • Earned Income Tax Credit- programme of tax credits for low-income families.
      • Expanded means-tested food stamp programme
        • '80- 21m ppl on welfare supported.
      • National Energy Plan announced deregulation of Natural Gas prices.
      • Department of Energy created- promoted conservation of domestic oil reserves +speed limits on cars to reduce fuel consumption.
      • US energy consumption fell by 10% between '79 and '83.
      • Carter introduced the Airline Deregulation Act of '78
        • abolished the Civil Aeronautics Board to make airlines more competitive.
          • This had little effect on the problems facing Carter.
      • '78- unemployment dropped to 5%
        • inflation had risen from 6% in '77 to 10% in '78.
      • Carter achieved 26% approval rating in the polls.
      • Carter provided research into renewable energy, but this did nothing to curb the economic problems he faced.
      • By '80
        • Stagflation
        • Unemployment at 7.5%
        • mortgage rates at 15%
        • Interest rates at 20%
        • Inflation averages 12-13%

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