10th American History
U.S. Economic History
Handy Dandy Guide to Economic
Thinking
$ 1. People choose to do the things they think are best for
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them.
2. People’s choices have costs.
3. People choose to do the things for which they are
rewarded. (People respond to incentives)- such as money.
4. People create rules that affect their choices and how
they act. (People create ECONOMIC SYSTEMS that
influence individual choices and incentives.)
5. People gain when they freely decide to trade with one
another. Free trade creates wealth.
$ 6. People’s choices today have future results. People often
live for tomorrow.
Economic Questions
$ What is economics?
Economics:The study of choice and decision-making in a world
with limited resources.
$ Economic Growth: A sustained increase in total output or output per
person for an economy over a long period of time.
$ Economics is based on two facts:
$ 1. Society's material wants are virtually unlimited or insatiable
$ 2. Economic resources are scarce
$ Economic resources are all natural, human, and manufactured
resources that go into the production of goods and services:
$ 1. Land and all "gifts of nature" (arable land, forests, mineral
deposits)
$ 2. Capital: all manufactured aids to production (tools, machinery)
$ 3. Labor: all physical and mental talents of men and women.
$ 4. Entrepreneurial Ability: entrepreneurs have initiative, make
basic business-policy decisions, be innovative, and take risks
$
Economic Questions
$ What is economics?
$ Economic Systems -The way a society organizes
the production, consumption, and distribution of
goods and services.
$ Market Economy -An economic system where
most goods and services are exchanged through
private transactions by private households and
businesses. Prices are determined by buyers and
sellers making exchanges in private markets.
Economic Questions
$ What are goods, services and resources?
 Goods-Objects that can be held or touched that can satisfy people’s wants.
 Services- Activities that can satisfy people’s wants.
 Resources-All natural, human and human-made aids to the production of
goods and services. Also called productive resources.
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Natural Resources-"Gifts of nature" that are present without
human intervention (also called land).
Human Resources-The quantity and quality of human effort
directed toward producing goods and services (also called labor).
Capital Resources-Goods made by people and used to produce
other goods and services (also called intermediate goods).
Economic Questions
$ What is supply and demand?
$ Demand - A schedule of how much consumers are willing
and able to buy at all possible prices during some time
period.
$ Supply - A schedule of how much producers are willing and
able to produce and sell at all possible prices during some
time period.
$ Equilibrium Price - The market clearing price at which the
quantity demanded by buyers equals the quantity supplied by
sellers.
Economic Questions
$ What are unemployment, shortages
and surpluses?
$ Unemployment - The situation in which people are willing
and able to work at current wages but do not have jobs.
$ Shortages- The situation resulting when the quantity
demanded exceeds the quantity supplied of a good, service,
or resource.
$ Surpluses -The situation resulting when the quantity
supplied exceeds the quantity demanded of a good, service,
or resource, usually because the price is for some reason
above the equilibrium price in the market
Economic Questions
$ What are producers, consumers and markets?
 Production/Producers- People who use resources to
make goods and services, also called workers.
 Consumers-People whose wants are satisfied by using
goods and services.
 Markets-Any setting where buyers and sellers
exchange goods, services, resources, and currencies.
Economic Questions
$ What are stocks, bull markets and bear
markets?
 Stocks- Ownership of a corporation represented by shares that are a claim on
the corporation's earnings and assets.
 Bull Markets-prolonged period in which investment prices rise faster than
their historical average. Bull markets can happen as a result of an economic
recovery, an economic boom, or investor psychology. The longest and most
famous bull market is the one that began in the early 1990s in which the U.S.
equity markets grew at their fastest pace ever
 Bear Markets-A prolonged period in which investment prices fall,
accompanied by widespread pessimism. Bear markets usually occur when the
economy is in a recession and unemployment is high, or when inflation is
rising quickly. The most famous bear market in U.S. history was the Great
Depression of the 1930s
Economic Questions
$ What is Money?
 Medium of Exchange: Money allows people to avoid the
complications of barter. For example, a bookseller does not
want to be paid in bagels because others may not accept
bagels as a means of trade. Money is convenient because it
is accepted by all.
 What gives money it's value?
 Everybody accepts it
 Legal Tender - currency has been designated as legal
tender by government, which means it must be accepted
as payment
 Relative Scarcity - money derives its value from it's
scarcity relative to utility
Economic Questions
$ What is profit?
$ Profit - The difference between the
total revenue and total cost of a
business; entrepreneurial income- (The
human resource that assumes the risk
of organizing other productive
resources to produce goods and
services.)
Economic Questions
$ What is GDP?
$
GDP is Gross domestic product. For a region, the GDP is “the market value
of all the goods and services produced by labor and property located in the
region, usually a country”.
GDP measures the market value of annual output
It is a monetary measure
GDP includes only market value of final goods and ignores
transactions involving intermediate goods to avoid double
counting. Intermediate sales of goods are all the steps before
the final selling of the good. For an example the cotton to
make a shirt may be sold to the shirt manufacturer but it is
not counted in the GDP because the cotton was an
intermediate good…the final good is the shirt.
Economic Questions
$ What is inflation?
$ Inflation: Inflation is a sustained increase in the average price level,
or general rise in the price of the entire economy.
 Tight Money Policy:This policy is exercised in times of inflation.
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Components:1). Selling securities to banks and the public. 2). Increase the
Federal Funds Rate. 3). Increasing the Discount Rate. 4). Increase the
Reserve Ratio
 Easy Money Policy: This monetary policy is used when the economy is faced with
recession and unemployment.
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Components: 1.) Buy Securities from commercial banks and public. 2.)
Reduce the Federal Funds Rate. 3.) Lowering the Discount Rate. 4.) Reduce
the Reserve Ratio
Economic Questions
$ What are Taxes?
$ Taxes- Required payments of money made to
governments by households and business firms.
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$
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Income Taxes - Taxes paid by households
and business firms on the income they
receive.
Property Taxes - Taxes paid by households
and businesses on land and buildings.
Sales Taxes - Taxes paid on the goods and
services people buy.
Economic Questions
$ What is a depression?
 There’s an old joke among economists that states: A recession is when
your neighbor loses his job. A depression is when you lose your job.
 A depression is any economic downturn where real GDP declines by
more than 10 percent. A time of economic crisis or bad times in
commerce, finance, and industry, characterized by falling prices,
restriction of credit, low output and investment, many bankruptcies,
and a high level of unemployment (many people without jobs). The
last depression in the United States was from May 1937 to June 1938,
where real GDP declined by 18.2 percent.
 A recession could be defined as the time when business activity has
reached its peak and starts to fall until the time when business activity
bottoms out. By this definition, the average recession lasts about a
year. A recession is an economic downturn that is less severe.
Economic Questions
$ What precisely is the national debt?
It's the total amount of funds that the federal government has borrowed over
the years and not yet repaid.
 And what about the deficit? That's the amount that the government spends each
year in excess of what its tax, tariff, and fee revenues bring in. The government
then must borrow to make up the difference. It's the accumulation of deficits year
after year that makes up the total national debt.
 Why do we have deficits? Because the government makes commitments to
spending programs without raising enough revenue to pay for them. Therefore,
the government has to borrow.
 How does the government borrow money? Does it just go to the bank? No.
The U.S. Treasury issues securities, or IOUs, such as savings bonds and Treasury
bills, notes, and bonds. Lenders buy these securities and the money goes to the
government. In return, the government pays interest to the owners of the
securities.
$
Economic Questions
$ National
$ Debt?
Economic Questions
$ National Debt Clock (Hyperlink)
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Wow! When did the debt get so big? Well, for the past two decades the net debt has
risen very rapidly. At the end of fiscal 1973, it was about a third of a trillion dollars; in 1983,
a little over $1 trillion; and in 1993, it was more than $3 trillion. The government has
been increasing its spending ––particularly on such items as Social Security,
Medicare, and, for a time, national defense –– at a rate faster than revenues have
been growing. Also, there is a snowball effect resulting from each increase in the
debt: as the debt expands, so do the interest payments.
Anything else? In addition, the inflation and high interest rates of the 1970s and
early 1980s contributed to the rapidly growing debt. Even with inflation and interest
rates declining in recent years, the debt has not been reduced, because spending
has continued to outpace revenues.
Has the debt always been rising? The first great surge in the national debt was
caused by U.S. participation in World War I. By the time the war ended in 1918, the
debt had increased from a little over $1billion to about $15 billion. The second surge
took place during the Great Depression. There was high unemployment and,
therefore, less taxable income. New social programs meant that the government
had to borrow in order to finance increased spending. As a result, the debt climbed
to almost $50 billion by the start of World War II.
What does "fiscal" mean? For budget purposes, the government year runs from
October 1 to September 30; this is a called a fiscal year. For example, the 1996 fiscal year
starts October 1, 1995, and ends September 30, 1996.
Test your economic IQ
How much do you know about our how
our economy works and how it affects
you? According to the National Council
on Economic Education, the average
graduating H.S. student should be able to
score 100% on the following quiz. Can
you?
#1
The town of Bedford Falls wants to buy four
new police cars. The opportunity cost of buying
the police cars is the:
(a) cost of buying the cars now vs. buying them
later.
(b) ability to make more arrests and reduce the total
annual crime rate.
(c) other desirable goods or services that must be
given up to buy the cars.
(d) dollar cost of the new cars.
Answer for #1
C
Opportunity Cost: the next best alternative
that must be given up when a choice is
made.
#2
The best measure of the economy’s
performance is:
(a) the unemployment rate.
(b) gross domestic product.
(c) consumer price index.
(d) Dow Jones industrial Average.
Answer for #2
B
Gross Domestic Product (GDP): The market
value of all final goods and services
produced in the economy in a given
period of time.
#3
The best definition of profit is:
(a) total assets minus total liabilities.
(b) total sales minus total taxes.
(c) total revenues minus total costs.
(d) total sales minus total wages.
Answer for #3
C
Profits: total revenues from exchange
minus total costs associated with
production of a good or service. Profits
are the resource payment to the
entrepreneur or the owners of a business
enterprise.
#4
Gross Domestic Product is a measure
of:
(a) total market value of all final goods and services produced
in one year.
(b) the price level of goods and services sold in one year.
(c) the total amount of refrigerators, washing machines and
other household appliances produced in one year.
(d) the total amount of goods and services produced by
private companies in one year.
Answer for #4
A
Gross Domestic Product (GDP): The market
value of all final goods and services
produced in the economy in a given
period of time.
#5
Who would benefit from an unexpected
10% inflation rate?
(a) Sam, who has $5,000 in a savings account.
(b) Maria, who has a $5,000 life insurance policy.
(c) John, who loaned Bonnie $5,000 last year.
(d) Bonnie, who borrowed $5,000 from John and
must pay it back this year.
Answer for #5
D
Bonnie would benefit. Inflation is a
sustained increase in the average price
level, or general rise in the price of the
entire economy. She benefits because
even though prices go up, her loan rate
and amount will remain the same. Cheap
money.
#6
Who would benefit if the U.S. dollar becomes
stronger against the Japanese Yen?
(a) a Japanese company selling products in the
U.S.
(b) a U.S. company buying a building in Japan.
(c) a U.S. tourist taking a two week vacation in
Japan.
(d) all of the above.
(e) none of the above.
Answer for #6
D
They all benefit. This has to do with
exchange rates: the price of a nation’s
currency in terms of the currency of
another nation.
#7
The limit of the economy’s real output at any
time is set by:
(a) the quantity and quality of human and natural
resources and capital goods.
(b) the total amount of money, stocks, and bonds
in circulation.
(c) business demand for goods and services.
(d) the amount of government spending and
taxes.
Answer for #7
A
Economic resources: land, labor,
capital goods and entrepreneurs.
#8
If your annual money income goes up
10%, while the prices of what you buy go
up 20% then:
a) your real income has risen.
(b) your real income is unchanged.
(c) your real income has fallen.
(d) you’re shopping in the wrong stores.
(
Answer for #8
C
Real Income: money income adjusted to
compensate for inflation.
#9
Three major productive resources are
natural and human resources and capital goods.
Which best illustrates these three productive
resources?
(a) rent, workers and money.
(b) iron ore, taxi drivers and bonds.
(c) farmers, importers, and exporters.
(d) oil, engineers, and drills.
Answer for #9
D
Economic resources: land, labor, capital
goods and entrepreneurs.
#10
Nation A grows bananas and Nation B
produces cheese. If they exchange
bananas and cheese:
(a) Nation A gains and Nation B loses.
(b) Nation B gains and Nation A loses.
(c) Both Nations lose.
(d) Both Nations gain.
Answer for #10
D
They both benefit. This has to do with
international trade: the exchange of goods
and services between people and
institutions in different countries.
#11
True or False: Most
millionaires are college
graduates
Answer for #11
True
Four of five millionaires are college
graduates. Eighteen percent have
Master’s degrees, eight percent law
degrees, six percent medical degrees and
six percent Ph.D.’s.
#12
Most millionaires work
fewer than 40 hours a
week.
Answer for #12
False
About 2/3 of millionaires work 45-55 hours a
week.
#13
More than half of all
millionaires never received
money from a trust fund or
estate.
Answer for #13
True
Only 19% of millionaires received any
income or wealth of any kind from a trust
fund or an estate. Fewer than 10 % of
millionaires inherited 10% or more of their
wealth.
#14
Most millionaires work in
glamorous jobs, such as sports,
entertainment, or high tech.
Answer for #14
False
A majority of millionaires are in ordinary
industries and jobs. They are proficient in
targeting marketing opportunities.
#15
Many poor people
become millionaires by
winning the lottery.
Answer for #15
False
Few people get rich the easy way. If you play the
lottery, the chances of winning are about 1 in
12 million. The average person who plays the
lottery every day would have to live about
33,000 years to win once. In contrast, you have
a 1 in 9 million chance of being struck by
lightning. A pregnant woman has one chance
in 750,000 births to have quadruplets. How
many sets of quadruplets do you know?
Time spent on the job
If you work from the time you’re 21 years old, until you’re 70 years
old, you’ll work 49 years.
If you work an average of 50 weeks for each of those 49 years, you’ll
work 2450 weeks.
If you average 40 hours for each of those 2450 weeks, you’ll work
98,000 hours minimum. (A high school dropout works 10 hours a
week more to earn the same pay as a high school graduate.)
And that doesn’t include your lunch hour, the time it will take to get
to and from work, overtime hours and time you will spend keeping
up to date on new skills required for your career.
Rules for improving your
financial life
1) Get a good education.
2)
3)
4)
5)
6)
7)
Work long, hard and smart.
Learn money management skills.
Spend less than you can spend.
Save early and often.
Invest in common stocks for the long term.
Gather information before making decisions.
Industrial Revolution
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Oil
Steel
Railroads
Big Business
Corporations
Monopolies and the Sherman Anti-Trust Act
1890
 McKinley Tariff 1890- Protectionism and Tariff
war.
 Wilson Gorman Tariff- 1894- slight reduction
in tariff and income tax (ruled
unconstitutional)
Industrial Revolution
 Rockefeller, Carnege, Vanderbilt, and Pullman-
“Robber Barons or Captains of Industry?”
 Mass Marketing
 Unions- Organization, Strikes, Violence, and
Bread and Butter Unionism (better pay, shorter
hours, and better conditions)
 Transportation and Communication
improvements of the late 1800’s
 Silver v. Gold Issue and the Populists
Progressivism
 Square Deal and Theodore Roosevelt
 Regulating Big Business- Sherman Anti-Trust
and Trust Busting
 16th Amendment - 1913
 Taft and the Payne-Aldrich Tariff- supposed to
lower tariffs actually raised them
 Wilson’s New Freedom
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Tariff reform
Banking reform- Federal Reserve System
Anti-Trust Laws- Clayton Anti-Trust Act
What is the Federal Reserve? It manages the countries money system; regulates the
banking system; is a bankers bank; and is the government’s bank.
Imperialism
 Why? Economic, Military and Ideology
 Manifest Destiny
 Hawaii- trade, sugar, bayonet constitution and
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annexation
China- trade, Treaty of Wanghia 1844- gave U.S. most
favored nation status, Sphere’s of Influence, OpenDoor Policy and Boxer Rebellion
Japan- trade, Commodore Matthew Perry, and the
Treaty of Kanagawa.
Spanish American War- Cuba, Philippines, Guam and
Puerto Rico.
Panama Canal
Taft’s Dollar Diplomacy
World War I
 Financial ties to the Allies
 Unrestricted submarine warfare
 Homefront
 Mobilizing the economy- industry, food, fuel and
supplies
 Mobilizing workers- National War Labor
Board, Women,
 Paying for the War- Taxes and Liberty Bonds
(war bonds)
 Economic Impact on US and the World
Post World War I
 Labor Strife- difficulties, labor losses and major
strikes.
 New Economic Era
 Henry Ford, the Assembly line and worker pay.
 The effect on industry: competition, productivity,
and welfare capitalism.
 The New Consume: new products, advertising and
demand, installment paying and credit.
 Weaknesses: many Americans were suffering after
WWI- farmers, overproduction, low prices, farm
failures, insects, floods, hurricane, etc, brought
economic depression to many parts of the nation.
Harding and Coolidge
 Harding
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Cut federal budget and reduced taxes on wealthy (trickle down).
Fordney-McCumber Tariff- high tariff, foreign products went up,
American prices went up- hurt farmers and Europeans.
Teapot Dome Scandal- Bribes from Oil companies to drill for oil
in federal oil reserve.
 Coolidge
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“Business of America is business”
Business would help America grow, promote the arts and sciences
and fund the charities.
Limited role of government in business.
Lowered taxes and reduced the budget.
Weakened federal regulations on business.
 War Debt- Europe owed the U.S. over $10 billion, but too war torn
and tariffs to high, force Germany to pay more reparations. U.S.
become world’s banker.
1920’s
 The role of women- work outside the home during WWI.
Economic boom of the 20’s provided jobs for women.
 Urbanization
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Hard times in agriculture saw people move to cities to get work.
Rise of the automobile
Increase in eduation
Industrial growth means rise in earnings
 Gross Domestic Product- between 1922-1928 grew 30%
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Growth of the automobile industry
Corporate profits up, unemployment down, welfare capitalism,
and the ability to purchase new products and services
Stock Market expansionFalse Sense of Security
1920’s
 Weaknesses
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Wealth Distribution
Credit on the Stock Market- buying on margin
Federal Reserve System
 Stock Market Crash
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Black Thursday, Black Monday, Black Tuesday
GDP dropped almost in 1/2
Effects of the crash- Individuals, Banks (over
5,000 closed), Business and World Economy.
The Great Depression – 1930’s
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Bank Failures
Farm Failures
Unemployment
Hoovervilles
Dust Bowl
Hoover
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Rugged individualism- to much government dims the spirit of
Americans
Associative State- partnership between business associations and
the government- Hoover Dam.
Voluntary cooperation between business and government.
Direct Action- loans to banks, insurance companies, encourage
home building and make work projects.
Smoot-Hawley Tariff- raised cost of imported goods to get
American consumers to buy cheaper American goods. Europe
raised tariffs on American goods and a tariff war began.
FDR and the New Deal
 Banking Crisis-
Bank Holiday
 Emergency Banking Act.
 Glass-Steagall Act- FDIC
Relief, Recovery and Reform
Alphabet soup programs
Emergency Relief Appropriations Act and WPA.
Social Security
Wagner Act- National Labor Relations Act, NLRB, CIO, Sitdown strikes,
Rural Electricity
Economic Recovery? 1937 drop in stock market- Deficit
spending and Keynesian Theory. Minimum wage.
Did the New Deal end the depression?
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World War II
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Hyper Inflation in Germany after WWII
Neutrality Act- 1935
Cash and Carry policy
50 Warships for 8 British bases.
Lend-Lease Act
Mobilizing for War
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Soldiers
Women
New Military bases
Industry and Science- labor and the Manhattan project, retooling
African Americans- military and workforce
Hispanic Americans
Food, rationing, and recycling- Office of Price Administration, War
Production Board
Paying for the war- taxes and war bonds
Cold War and the Iron Curtain
 Truman Doctrine- aid to countries fighting communism.
 Marshall Plan- European Recovery Program- over $13
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Billion spent.
G.I. Bill
Labor Unions after the war and Taft-Hartly Act 1947reduce union power, closed shops outlawed and 90 day
cooling off.
World Bank- Help poor countries build their economiesmoney grants and loans.
International Monetary fund- encourage economic policies
that promoted international trade.
GATT (General Agreement on Tariffs and Trade)- reduce
trade barriers.
Eisenhower Era
 Space Race- Sputnik, Explorer, NASA and the National
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Defense Education Act.
Military-Industrial Complex- Our permanent arms industry
could be a threat to freedom.
Technological developments- television, transistors and
integrated circuit, computers (UNIVAC), vaccines
1950’s Boomtime- Levitown, sunbelt, interstate highways.
Ike wanted
 To cut back on the size of government, taxes, budget and
regulations
 He supported private ownership over government
ownership.
 Flexible price supports for farmers and a “Soil Bank” plan.
 New Cabinet position- Dept. of Health, Education and
Welfare
JFK
 “New Frontier”- the domestic policy and changing the
nation.
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Asked Congress to reduce taxes to fight unemployment;
Congress failed to act.
Asked Congress for $6 billion in federal aid to education; failed
in Congress.
Wanted to use Social Security to fund medical care to aged;
Congress did not consider it.
Got Steel companies and unions to cut back price and wage
increases.
Wage and Price Guideposts- increase in wages was tied directly
into increase in output. Help stop inflation.
Aid to the poor- Area Redevelopment Act 1961- financial aid to
economically stressed areas
Raised minimum wage from $1.00 to $1.25 per hour.
The Space Program
Lyndon B. Johnson
 Great Society
 The Job Corps and VISTA
 War on Poverty- 1962-1968- $12 to $27 billion and
percentage of poor fell from 20% to 12%
 Tax Reduction Act 1964
 Medicare and Medicaid
 Conservation and Ecology
 Secondary and Elementary Education Act and Higher
Education Act
 Vietnam
 Costs- $2.5 Billion per month- this hurt the Great Society.
Nixon
 Key Actions
 Space- Moon landing
 Winding down of the
Vietnam War
 Cambodian
Incursian
 Kent State
 Détente
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Visit to China and Ping
Pong Diplomacy
Visit to Russia +
S.A.L.T.
New Federalism
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give states control and
reduce Federal
Governmentderegulation
Troubled Economy
 Inflation and Stagflation
 Nixon Promised to balance the
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Budget ($200 Billion) and produce
a surplus.
Tax Reform Act- 1969 ended the
Johnson income tax surcharge.
Vietnam costs rising.
1969-1970- Nixon proposed wageprice guidelines to slow down
prices.
Congress created EPA.
Arab oil embargo caused oil prices
to jump in 1973.
Baby boomers in job market- glut.
Troubled Economy
 Aug. 15, 1971- Nixon announced a 90
price freeze after prices went up 14.5%
(first mandatory wage-price control in
peace time.)
 Took the country off the gold standard.
This would end the gold drain to foreign
countries turning U.S. dollars in for U.S.
gold.
 10% surcharge on foreign imports.
Trying to promote sale of U.S. goods
abroad and discourage Americans from
buying foreign products- Japan + W.
Germany.
 The Economy began to thrive
 Inflation fell to 3.5%
 Unemployment dropped
Troubled Economy
 Winding down the Vietnam War- Costs
 Economic Costs
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The war cost the United States more than $140 billion.
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In Vietnam, the last sustained war the nation fought, the United
States spent $111 billion during the eight years of the war, from
1964 to 1972. Adjusted for inflation, that's more than $494 billion,
an average of $61.8 billion per year, or $5.15 billion per month. (The
Pentagon is spending nearly $5 billion per month in Iraq and Afghanistan, a pace that
would bring yearly costs to almost $60 billion)
 Human Costs:
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There were 540,000 American troops in Vietnam sent by Presidents
Kennedy and Johnson, more than 325 men being held prisoners of
war, and America was sharply divided over our purpose and our
presence in Vietnam.
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The war left 58,000 American soldiers dead and more than 300,000
wounded. Numerous American soldiers also returned home with
crippling and long-lasting psychological wounds.
Troubled Economy
 Voyage to the Moon- Apollo 11
 Televised- Hundreds of millions of
viewers
 3 Astronauts- Armstrong, Aldrin
and Collins.
 Lunar Module- the “Eagle”
 The Eagle has landed on
Tranquility base. July 20, 1969
 6 and 1/2 hours on the Moon.
 Costs- three astronauts killed in a
fire on earth and between $25-$35
Billion dollars.
 Benefits- Priceless
President Ford
 Wanted to cut government spending- had to fight
Congress over this.
 Budget and Impoundment Act of 1974- stopped
the President from impounding or refusing to
spend money Congress had voted.
 Oil and Inflation
President Carter
 Economy
 Inflation
 Unemployment
 Energy
 Established the Department of Energy
 Ease dependence on foreign oil- conservation, new sources
and loosening government regulations
 Change American Habits
 Alternative energy and tax breaks
 Environment
 Alaskan National Interests Lands Conservation Act
 Three Mile Island- nuclear power disaster
 Love Canal- toxic waste cleanup
President Reagan
 Economy
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Lower taxes and smaller government (reducing agencies and cutting the
federal budget and eliminating budget deficits.)
Strong military- increase in defense spending
loosened government regulations
 Supply-Side Economics
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Tax cuts and business incentives stimulate investment
Investment encourages economic growth
This results in and increased supply of goods and services.
“VooDoo Economics” cutting taxes and boosting military spending.
 Recession and Recovery
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1981 and 1982 worst recession since great depression and the deficit
skyrocketed
Federal Reserve Board raised interest rates- 1979-1982
Economic growth favored the wealthy.
Gramm-Rudman- Hollings Act- The Balanced Budget and Emergency Deficit
Control Act- called for mandatory budget cuts to control inflation.
President George H.W. Bush
 Shakey Economy
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“Read My Lips, no new taxes”
1980’s-1990’s- uneven economic growth- Famers did poorly, Older U.S.
industries were hit hard.
Reagan’s tax cuts benefited mostly the wealthy.
Fed. actively raised and lowered interest rate- to avoid recession and inflation.
 Deficits
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Reagan tax cuts and increased military spending- budget deficits tripled.
Rising trade deficit- difference between the value of U.S. exports and imports.
 Financial deregulation
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Reagan’s deregulation lead rise to corporate raiding.
Companies raided were restructured, merged, sold off piece by piece,
dissolved – downsized.
 Savings and Loan Crisis
 1990- President Bush broke campaign promise and raised taxes. But that did
not stop the deficit, unemployment or poverty from rising.
President Clinton
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Economy
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Health-care reform
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Health-care costs were rising sharply in 1990’s.
Very expensive and lots of major changes to health care system.
Welfare reform
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Cut the deficit by having a major increase in taxes.
Long period of low unemployment and low interest rates.
Larger disposable income- income available for spending or saving.
Stock Market was up
Republican “Contract with America”- Congressional plan to balance the budget, fight
crime, welfare reform and provide tax cuts.
Clinton plan limited time people could receive benefits and required to find work with
two years of receiving benefits.
International Trade
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NAFTA- North American Free Trade Agreement
U.S., Canada, and Mexico- free trade zones – no tariffs
Would it increase trade or lose jobs.
WTO- World Trade Organization replaced GATT as a means of settling trade disputes
and forming rules for Global trade.
President George W. Bush
 Economy
Booming stock market starting to fall
 Collapse of internet related stocks- dot.coms- Investors gambled billions
on dot.coms, but profits did not appear as planned and prices dropped.
 Recession was beginning
2001- Tax cuts and new tax codes- would it spur the economy? It did not
improve the economy and recession got worse.
2003- Tax cuts- hope to promote economic growth. Cuts on Dividends.
Updated Medicare
Running up large deficits.
Social Security reforms- creation of private accounts to fund retirement.
Department of Homeland Security
War in Afghanistan, Osama bin Laden, War in Iraq, $$$$$
Health Care
Energy and Environment
Natural Disasters- Hurricane Katrina, Rita, etc..
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