Modern America Final Exam
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Economic Problems of Reagan Administration
- Stagflation and Inflation are big problems
- Inflation created "bracket creep" in which tax brackets remained the same over time.
- Result is that people who made good money in 1965 were really hurting due to the same brackets being used in 1980
Reagan attempts to solve economic problems
is govt the solution or the problem?
- Leaders went 2 ways with this
- 1 set said they needed to create governmental plan to address the issues
- 2nd set said that reducing government is the answer and that we have too much regulation, too many taxes, and too much spending
- 2nd set believed that to get out of these problems had to reduce the size of government.
Foreign Problems during Reagan years
- The Soviet union in the Late 70's appeared to be on the way up
- they had been involved in 3rd world civil wars and picked up several adherents
- The Invasion of Afghanistan suggested they would use their power to increase in size
Foreign Problems during the Reagan Years
Third World Assertiveness
U.S. Believed that 3rd world countries would be in charge in the future due to commodity prices like sugar oil and and rubber.
Social Changes from the 1970's to the Reagan years
- In the workplace women are gaining ground starting in the 1970's
- Start to see the beginnings of the gay-rights movement
- Noted increase in drug use and pornography
Social Change markers during the Reagan years
- Equal rights amendment - ban any discrimination based upon sex - FAILED
- Abortion - until 6 months of the pregnancy was a legal right, extremely controversial in 70's due to supreme court ruling
- Strong Fundamentalism resurgence - in the 1970's in response to these social changes people look to fundamentalist religion to provide them with a social anchor
Election of 1980
- Reagan wins big and Carter loses huge
- Mostly this was a reaction towards Carter because country felt it was moving in the wrong direction and Carter wasn't proposing changes like Reagan would.
Reagan's Domestic Policies
- Substantial changes particularly in economic policy.
- Continues policy of Volker and Monetarism which had strong backing of Reagan Admin.
1980-82 Recession during Reagan Admin
- Economy in 1982 is about the same as it was in 1979 which means there were 4 years of no growth.
- Unemployment is 11%
- Monetarism is brutal but inflation doesn't go up for the rest of the decade
Recession during Reagan years, the Recovery
- Economy grows from 81-89
- last few years of this the country was running almost at full employment
- Very few increases in wage and productivity the bottom 20% of the population is really losing ground but the middle and upper classes are doing pretty good.
Situation among commodity producers during Reagan Years
- Oil prices in 1986 goes down to $12 a barrel, which really put the texans and other oil manufacturers in a lot of trouble
- There is also a huge number of farm foreclosures during this period
Tax Reductions under Reagan
- Reagan wanted to reduce taxes and tax rates the idea being that high taxes discourage people from investing and taking risks.
- Was thought that it was important to encourage entrepreneurs during this period which prompted a tax cut
Tax breaks in 1981 and 1986
- Created tax breaks in 1981 - reduced the rate 30% and knocked 70% off top bracket to 50%
- Congress passed 25% tax breaks across the board
- 1986 - got rid of alot of tax deductions
Budget cuts under Reagan
- Deficit Issue
- Persistence of entitlements
- Initially Reagan is able to cut 40 Billion per year
- 10% increase in military spending during Reagan Admin.
- Entitlements such as social security, medicare, and medicaid were not touched
- Was bipartisan - many industries from the 1930's onward were regulated to determine what they could sell and how much they could sell it for.
- for example, couldn't bank across state lines and in some places you couldn't open a branch bank
- Oil was also strictly regulated
- From the 1970's onward there was real momentum for deregulation
Deregulation in the Carter Administration
- Carted deregulates the airlines, Rail, and motor agencies.
- Some agencies are simply abolished
- Result is railroads begin to make profits again
- U.S. probably had the most efficient rail freight system in the world
- Airlines didn't go as smoothly but you could fly for much cheaper than before
Deregulation in the Reagan Administration
- Finance was very strictly controlled but starting in the late 70's restrictions are gradually relaxed
- over a period of 20 years, all barriers are eliminated
- This increased the complexity of Financial matters throughout the nation
Major changes in Labor throughout the 1980's
-Air traffic controller strike
-Downward trend of organized labor
- 25-30%of workforce was in labor unions during the post war era
- The air traffic controller strike was when the union pushed for a raise, All airtraffic controllers are federal employees, Reagan fired all of them and more were hired overnight to take their place
- Today, union membership comprises less than 10% of the workforce
Foreign Policy of Reagan
- Campaigned on platform particularly getting tough on communism
- Spent alot of money on the military
- Buys military new equipment and issues pay raises
- Reagan wanted to outspend the USSR militarily which would put a strain on them trying to keep up
Reagan's star wars policy
- Idea was to build defenses that could shoot down incoming missiles
- this convinces the soviets that Reagan wants to go to war
Reagan's roll back policy
- was an attempt to destabilize the soviet territory in the third world
- U.S. sponsors wars in Afghanistan, Angola, and Central America
Reagan's role in Libya
Sits on a massive amount of oil with a very small population
Reagan's role in Grenada
- Small island in the Caribbean
- in the late 60's communist type of govt came to rule there under the leadership of Bishop
- Bishop leaned towards communism
- In the fall of 1983 there was a coup and the group that won wanted to support the Soviets
- Reagan decides to invade and was successful, Within 6 months the U.S. was able to leave
Reagan's role in Beirut
- The Palestinian Liberation Organization organized a bombing that Killed 300 marines
- Was unsuccessful and Reagan gives up and leaves
The wars of Central America
- The Sandanista's and the Contras
- President of Nicaragua was overthrown by the Sandinista and the hope was the Sandinistas would create a more democratic regime
- Over time relations deteriorated.
- U.S. Supports rebel movement known as the Contras
The Wars of Central America
- El Salvador
- Radical with communist uprising there
- Carter tries to help people there and Reagan sees this as an opportunity to undo the Vietnam Syndrome
- U.S. ups aide to El Salvador and tries to find a socialist that had a big problem with the old regime, however it takes a long time to find someone like this
Iran Contra Scandal
- War between Iraq and Iran
- Western Powers support the Iraquis provided intelligence and foodstuffs
- Reagan wanted hostages back from Beirutand is willing to make concessions to Iran to get them back
- Sells Iranians spare parts to achieve this
- Oliver North redirects money from the Iranians and gives it to the Contras which when published becomes major scandal which permanently stains Reagan's reputation
U.S. Intervention in Iraq/Iran War
- 1988 U.S. interferes with the war in Iraq.
- Iraquis attack oil tankers and oil companies come to the U.S. for help
- U.S. destroys the entire Iranian Navy
- Convinces the Iranians they have to make peace and everyone goes back to their previous borders and prisoners are exchanged
- Reagan is convinced by Margaret Thatcher that Gorbachev won't pose threat to the U.S.
- Reagan in Turn begins to work with Gorbachev to wind down certain aspects of the Cold War.
George H.W. Bush Cleanup Operations
- George H.W. Bush took over after Reagan and he knew alot about foreign Policy and was much more interested in it than Domestic Policy
- Handled the fallout of the Berlin wall, End of the Soviet's, end of the cold war etc.
- During his presidency, the democrats controlled office
- most of his domestic policy was cleaning up problems that had been left to him by Reagan and Carter
Savings and Loans bailouts under G. Bush Sr. initial Problems
- in the late 70's interest rates go up due to inflation
- Congress tried to rescue that savings and loans by allowing savings and loans to invest in various things
- problem with this is many of the savings and loans didn't know anything about investing and simply dig a deeper hole for themselves
- By the late 80's the industry is essentially bankrupt
Savings and Loan Bailouts under G. Bush Sr.
- Govt feels they have to bail them out because govt has insured deposits in the savings and loans and promised that depositers would be paid off.
- savings and loans are big and if people find out they cant get their money it would create a huge problem
- Govt. Bails them out with 200 Billion and buys them out
- Depositers get their money back
- Of the savings and loans that weren't struggling they were reorganized into banks
- This action is wildly unpopular with American Citizenry
The Brady Plan
- in response to the dropout in the commodities market in the Third world,
- The Plan was a complex financial maneuver that lets third world countries write off half of their debt and makes them promise to pay off the other half
- In the 90's many of the economies in these countries dramatically improves and foreign investment returns
Deficit Problems under G. Bush Sr.
- Cuts deal with congress to cut the deficit 500 Billion over 5 years
- works financially in the short run but is disaster in the long run because:
- He didn't raise taxes to compensate for this
- The Recession in 91 didn't go too deep but cost him the reelection
Deficit Reduction under the Clinton Administration
- Pushed a reduction plan of 500 Billion
- 2/3 cames from higher taxes
- 1/3 came from lower spending
- Result is deficit is under control by the time Clinton leaves office
Domestic Reforms under Clinton Admin
- Attempted health care reform that is defeated
- this results in democrats losing control of congress for the first time since 1955
- Increased minimum wage
- Began when Saddam Hussein invaded and occupied Kuwait in 1991
- Kuwait sat upon an ocean of Oil
- Hussein owed Kuwait 30 Million dollars, invaded Kuwait to keep from having to pay it back and because if he got away with it he would have all this oil.
- Bush Admin didn't want him to get away with this, they realized that control of oil wasn't merely about money, it was about power.
- By early 91 half a million allied forces are in Saudi Arabia and give him the opportunity to back down, he thinks were bluffing.
- we send in the troops and his army is shattered losing between 50-100 thousand men
New World Order
G. H.W. Bush Sr. thinks about how to reorganize the world after the cold war was over, to this end negotiates a free trade agreement with Mexico Called NAFTA
- began by G.H.W. Bush Sr.
- It removes most of the trade barriers between the U.S. and Mexico
- was a good deal of opposition to this plan because wages in Mexico were a good deal lower which would result in companies moving to mexico and American's losing jobs.
- Clinton takes up this idea about a free economy and pushed the idea through congress
World Trade Organization
- Many of the problems with trade is that countries cut stipulations on imports
- When countries didn't agree on what to import they would arbitrate on behalf of both countries to divine what would be good for the overall world economy
Rwandan Genocide of 1994
- Rwanda is populated by the Tutsis and the Hutu's who have a long unhappy history with one another
- Was a horrific bloodbath 1/2 million killed in a few weeks and government was overthrown
- Government killed Tutsis because they suspected they were plotting to overthrow the government
- Alot of the people guilty of this flee in to Zaire where 4-6 million are killed in the civil war there
- U.S don't become involved in this because Africa is a long way away and theres nothing over there that is beneficial to the U.S.
- Historical Background
- After WWII there was a communist dictatorship led by Tito who defied Stalin
- During the Cold War they stayed neutral because they worried that the Soviets would intervene and take them over, end of the war, everyone goes their own way
Yugoslavian wars after the cold war
- Serbia goes to war with Croatia after Yugoslavia splits up into various nations
- Bush is inclined to let europeans handle the problem,
- once serbs go to war with the Bosnians they rape the female population to terrorize and exterminate the population
- this was the worst atrocity in Europe since WWII
U.S. Response to the war between the Bosnians and the Croatians
- U.S. sends air attacks and Clinton sends the leaders to Dayton Ohio to come to an agreement with one another
- They create a government with 2 states half serb and half croat which ends the ethnic cleansing
Intervention in Kosovo
- Serbs gear up for a campaign of cleansing in Kosovo which is in Albania
- Albanians have to crush them
- At the first sign of trouble, the U.S. bombs the hell out of Serbia and makes them grant Kosovo Autonomy
Islamic Terrorism overlooked
- The clinton Administration failed to rise to the challenge of a growing series of attacks perpetrated by a group known as Al-Qaeda
- Clinton underestimates the threat and fails to react
were early computer technology and a big player in this game was IBM
first american computer and was ready for use right about the time that WWII was ending
Early computer technology / U.S. govt. involvement
- government was at forefront of this technology
- military major consumer and puts these computers in bombers
- government finances research and hires companies and universities to to the work
The First Computers, Circuitry - Transistors
- Early computers due to vacuum tubes threw off alot of heat and then At&T / Bell creates the transistor which is small light and generates very little heat
- Licensed other companies to use the transistor; this technology becomes available very quickly
The First Computers, Circuitry - Semiconductor
- 1950's Semiconductor is developed by Texas Instruments and Fairchild, weld transistors onto a Silicon chip and wire them together
- result is you could pile lots of transistors together in a very small space
The First Computer, Circuitry - Microprocessors
1970's Intel creates the microprocessor - manages the information on a computer
- First commercial computer
- People who purchased this were large companies and used them to do the payroll
- dominant in the early computer industry
- drove off most competitors due to their salesmen who helped new companies set up computers and show them how to use them
IBM System 360
- Commercial computer created in the 1960's
- utilized something called modular design which would allow you to custom tailor how you wanted the computer to work
- cost 5 billion in 1960 which is the equivalent of 25-50 billion in todays money
Challengers to IBM
In the long run successful challengers to IBM's Dominance come into play through the use of new tech.
Digital Early IBM Challenger
Created a minicomputer which was utilized by companies who didn't need a supercomputer like IBM was creating
Apple Mcintosh Early IBM Challenger
- Microcomputer created by Steve Jobs and by 1980 3/4 million made
- IBM attempts to foray into minicomputer arena but were shut down by McIntosh which had a point and click operating system that was invented by Xerox
Windows IBM Challenger
- Bill Gates outmanuevers IBM
- They didn't take Gates seriously made bad business decisions and didn't relegate software as highly as hardware
- Gates created Windows which could perform multiple tasks at once
- IBM eventually bails out of Microcomputers
- links all subcontractors in the early phase of the internet technology and allowed them to post things and email one another
- massively more efficient than sending letters/calling on the phone
- In 1970's private traffic begins to pass public and military traffic on the DARPANET
- The decision is made to split the DARPANET into the ARPANET for military use and the INTERNET for civilian use
MOSAIC and Netscape
- Mosaic created in the early 1990's which takes you where you want to go very quicky
- 1994 Netscape is created which was outworked by microsoft
- trickles through whole economy
- most important is in retail in which the checkout scanner is created which allows stores to tell how much of any given product is sold at any given time
Tech Winners and losers
- Napster creates free music but eventually shut down for copyright infringement
- Apple created IPOD and then strongarms music companies into making music available on their computer
Immigration to U.S. from 1850's to 19 teens
- from 1850's to 19teens were the highest areas of immigration from south and eastern europe
- this is when most jews come to the U.S.
- Jews came because of intense discrimination in Russia
- Immigrants came to make money and then take it back home to Italy/Balkans etc
- Many believe these immigrants are depressing wages
- there is a massive influx of skilled German and British workers that provokes very little reaction to the American Polulace
Distinctive Features of immigrants
- Major cultural differences between immigrants and old Stock americans
- many that come are illiterate and have very different customs
- Groups are often clannish and don't trust outsiders or american authorities many of them are suspicious of people in authority
- little to no government action was taken against immigrants, as long as they didn't have infectious diseases or were of Asian descent they were allowed in
Cutting off the influx of immigrants during WWI
- The war halts immigration for several years
- after the war almost 2 million immigrate to the US
- After the War there are several revolutions taking place throughout Europe and the fact that part of the American communist party was dominated by russian Jews caused people to fear that the influx of people wanted revolution
National Origins System
- limits the number of immigrants allowed into the country to 140,000
- they are allotted to the country in quotas and the quota is set according to the portion of the population as recorded in 1890
The Great Migration
- Beginning in WWI the great migration begins 1915-1945
- the impact of this is terrific.
- At least 10 million people move out of the south in this period
- 1/2 of these are african american who had better chance of finding work and random violence was less common than in the south
1965 Immigration reform Act
- Johnson changes the National origins system which was extremely racist to make it less so.
- 300,000 are allowed to immigrate to U.S. every year.
- 20,000 for each country and is first come first served
Unintended consequences of Immigration Reform Act of 1965
- Had provision in the bill to allow people to bring their relatives
- they expected people to bring their husbands, wives, and children but in most cultures the extended family was included and this was a gigantic loophole
Role of Immigrants in American Society
Immigrants play 2 important roles one skilled labor and the other unskilled labor
1986 Immigrant Reform Bill
- Allowed immigrants who had been in the country for years and didn't have criminal record they could get a green card, essentially amnesty
- Tightened enforcement and required employers to check immigration status of the employees to ensure that they are legally in the country
1990 Immigrant Reform Bill
- Attempted to reform categories to allow more immigrants to legally enter the country
- provided more ways for skilled workers to get into the U.S. legally
- If people won the lottery they get a green card
- In 1970 was determined to attempt to teach children both their native language and english
- was disastrous and had they just immersed children in English in the first place it would have been much more successful. it was discontinued in 2000
- By the year 2000 investment banks are gaming the mortgage system; they took high risk mortgages and took the worst thing out of them and then marketed them as safe which they werent
- After 2000 there is a gigantic boom in housing market
- President clinton introduces plan to increase home ownership which allows people to take on higher mortgages that coincide with their income. these are known as sub prime mortgages.
- Another problem of this period is financial deregulation which comes through the relaxing of Capital.
- in the biggest banks it is relaxed from 5 to 3.5% because it was believed they were too big to fail
- and the idea was that the more they borrowed the bigger they would profit
- However, this impairs the ability to take a hit and if/when things go wrong you will be far less likely to survive the financial beating
- In 2007 housing prices start to go up and all these mortgages begin to look dicey which resulted in people owing more on a house than it was worth. particularly the sub-prime mortgages
- People tried to buy a house, fix it up and then flip it to make a profit. however, in 2008 housing prices start to fall and people begin walking away from all of these houses
- It was difficult for the people holding the bonds to know if the homeowners were paying their mortgages
- by 2008 these are toxic assets that no one will touch
- Is the bank most in trouble, they had relied upon mortgage loans more than others
- By Spring of 08, they are bleeding cash and it becomes clear that they will collapse if something doesn't happen
- The govt. decides it's too dangerous to allow them to collapse and buys 29 billion in Bear's most toxic assets.
- They convince J.P. Morgan to buy the rest of Bear out for 2 dollars a share which provides incentive to morgan.
- Deal is extremely unpopular to people who loaned money to Bear.
- Once Bear collapses, Lehman brothers had to be bought out because they had been heavily invested in mortgage business as well
- Fed buys out 20 Billion of Lehman's Bond's and divvy up between nations leading bankers
- Feds arrange the sale to Berkley's one of the leading banks in Britain
- British P.M torpedoes the deal because he was afraid if something went wrong with this he would be blamed
- It was decided to allow Lehman Brothers to collapse which created a full blown panic.
Freddie Mac & Fannie Mae
- were created by the government to buy mortgages and were operated like old savings and loans
- They sold bonds that they invested in mortgages
- They were caught up in the sub-prime frenzy and had a huge number of subprime loans on their books, lobbied congress for more capital
- Congress tried to reign them in, eventually giving them more money but govt. never recouped this money
- AIG was worlds largest insurance company and made money in every area except Bonds, and if bond's went bad, they had to pay
- The losses were big enough to wipe out their profits everywhere else
- A lot of companies had hedged through AIG and their insurance and if AIG went under their insurance didn't count for anything
- 700 Billion Fund was govt solution
- Govt wanted something so massive that everyone would believe it was enough, they only spent 500 billion of this money
- Every major bank in the country got an investment from this money even the ones that weren't in trouble
- Was used to restore confidence
- Banks that didn't need the money paid it back to the government within 6 months with interest
- Gave 150 Billion to fannie and Freddie, AIG got 50 Billion
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