Reagan and Bush

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  • HOW SUCCESSFUL WERE REAGAN + BUSH AT DEALING WITH ECONOMIC PROBLEMS
    • REAGAN
      • reduced taxes
        • $35 billion cut in public spending
        • 1981 Omnibus Reconciliation act
          • gov. spending cut on 300 programmes
            • reduction in spending $963bn 1981-1987
        • however didn't balance the reduced cost of federal aid programmes
          • federal budget went into deficit
            • every budget had $100 billion + deficit
      • military spending
        • caused the federal budget increased rapidly
        • abbual defence spending rose from $171 bn to $242bn by 1986
        • 1983: defence was 23.5% of GDP
      • borrowing money
        • money had to be borrowed to finance the federal budget
          • resulted in more federal debt due to interest
          • 1986: $170 billion trade defecit
            • USA became world's greatest debtor nation
        • balanced budget and emergency deficit control act 1985
          • aimed to reduce defecit till non exsistent i 1991
          • didnt work
      • cut backs
        • cut ADFC and food stamps by 13% from 1982-1985
        • child nutrition programmes cut by 28%
          • poor most disadvantaged due to cutbacks in federal aid
            • cut ADFC and food stamps by 13% from 1982-1985
            • number of poor increased form 11.7% in 1979 to 15% 1982
            • raised national debt from $914 1980 to $2.7 trillion in 1989
      • workers
        • large scale economic regulation
          • office of surface mining lost 40% of work force 1981-1982
        • large corporations could resist union demands
          • e.g. 1983 Greyhound bus company
        • increased economic growth 1981-1984
          • inflation halted
        • rich became richer  and increased spending created comfortable middle class
    • BUSH
      • raised taxes
        • went against election policy
          • as the budget deficit continued to increase
          • 1990: federal deficit of$ $200 billion
        • 1990: rate of federal income tax raised from 28% to 31%
        • new taxes for wealthy and increased taxes on luxury items e.g. cars
      • controlling budget deficit
        • continued to rise to $300 bn
          • recession developed
        • military and domestic spending cuts
          • $492 billion
        • federal reserve board
          • lowered interest rates to 3.5%
            • aimed to stimulate economic growth
              • no impact
      • had a reputation as a safe pair of hands
        • 'read my lips, no taxes'
      • changed republican priorities
        • previous liberal agenda or social welfare replaced with focus of individual enterprise

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