The End of the Cold War Test, Reaganomics

4 components of Reaganomics WRITTEN

Reduce taxes, Increase government spending, Cut domestic programs, Reduce the size of government

Explain Supply-Side economics WRITTEN

Lower taxes on businesses & individuals, Invest & Spend extra $$, Creating prosperity & economic growth- Offset the tax cut

Where was Reagan leaving from when the assassin struck?

Washington DC Hilton

Who was the assassin?

John Hinckley Jr.

Reagan & Communism

Extremely ANTI-communist, Believed Soviets were "focus of evil in the modern world," Tired of practicing mutual deterrence

Peace through Strength

$1.5 trillion weapons build up to achieve strength, Bankrupt & Destroy USSR, "Star Wars" -> Strategic Defense Initiative, Open lines of communication w/USSR- proposals to control and reduce weapons

Strategic Arms Reduction Talks (START)

Reduce # of nuclear bombs, conventional weapons, & nuclear testing

INF Treaty Intermediate-Range Nuclear Forces (1988)

US & USSR, Limited # of nukes in both arsenals, opened the door to more arms treaties between the two countries

Reagan Doctrine.

US should support rebel groups fighting against Communism or Pro-Soviet government

Aid to Afghanistan

US $$ & weapons for Afghan rebels to fight USSR (8yr war)

Grenada

US invades to overthrow communist government, Anti-Communist government

Nicaragua

Socialist Government, US secretly funded contra rebels to overthrow, Congress banned funding!!!

Iran-contra Scandal (contra-gate)

Reagan administration still wanted to fund contras, Reagan Adm. investigated, Reagan cleared, Oliver North→ Marine Colonel convicted of felony then dismissed on appeal, 11 people charged

Collapse of USSR & Eastern Bloc- Soviets economy in serious trouble

Collapsing infrastructure, Arms Race, Expensive war with Afghanistan, Discontent amongst citizens

Mikhail Gorbachev

Took office of Soviet Union in '85, introduced Glasnost, Perestroika, & Politics. Need help from US & western democracies

Glasnost

opening of Soviet society to new ideas (Western ideas)

Perestroika

restructuring of Soviet Business

Politics

citizens allowed to vote for non-communists

Eastern Bloc

Independence: Poland, Yugoslavia, Czechoslovakia

Germany Reunited

Berlin Wall torn down, becomes a major economic and world player once again

1991 Gorby resigns

Bans communist party from politics

USSR begins to break apart

15 independent republics struggle to rebuild

US reaction- Positives

Enjoyed seeing end of the Cold War, we see it as a victory, better relationship with former enemy

US reaction- Negatives

Who gets control of the nukes?, Political instability - Caucus Mt,. The "Stans", Russian satellite states; Belarus, Moldova, Buffer zone, War w/Ukraine

Why did Reagan build up the military?

It meant to bankrupt and destroy the Soviet Union if they tried to keep up

Reagan Doctrine

Reagan believed that the US should support guerrilla groups who were fighting to overthrow Communist or pro-Soviet government

What was the Iran-contra scandal?

Reagan's adm. illegally continued to support the Nicaraguan rebels. They also secretly sold weapons to Iran, considered an enemy and sponsor of terrorism, in exchange for the release of American hostages in the Middle East.

What problems did the Soviet Union face by the 1980's?

the Soviet economy was suffering from years of inefficient central planning and huge expenditures on the arms race

Perestroika policy

a policy of economic and government restructuring instituted by Mikhail Gorbachev in the Soviet Union

Glasnost policy

a Soviet policy permitting open discussion of political and social issues and freer dissemination of news and information, to allow more freedom of religion and speech

1980 election

Reagan wins, former actor and former governor of California

Economic Conditions: High-interest rates

Control inflation, Prevented borrowing or expansion

Economic Conditions: Decline in Productivity

10% unemployment (11 mill), Most since 1940

Economic Conditions: Farm Crisis

Borrowed when prices were high (so were interest rates), Prices dropped- not able to pay back loans, Lost farms and bankruptcies rose

Reagan → Balance Budget (Revenue = Spending)

Revenue > Spending → Budget Surplus Revenue < Spending → Budget Deficit

Supply-Side Economics: 1. Reduce taxes

Especially on the wealthy and large corporations, Trickle-down theory; More investment = business expansion = more jobs = more productivity = more money to spend

Supply-Side Economics: 2. Increase Government Spending

Military and Defense spending

Supply-Side Economics: 3. Cut Domestic Programs

Welfare, food stamps, Medicare

Supply-Side Economics: 4.Reduce the size of Government

Deregulation

Successes in Reaganomics

Confidence restored, Economy recovered, Inflation down to 14% → 4%, Interest rates down 12% → 8%, Unemployment down 10% → 5.5%- More money for consumers to help spend in the economy

Failures of Reaganomics

Tax cut- Benefited the wealthy the most, Social Programs Cut- Poverty increased, No help for the farmers, No Balanced Budget (campaign promise), Budget Deficit & increased national debt

Causes of the Debt

Budget Deficits- Spending > Revenue, Borrowing Money → Government sells to investors...Savings Bonds, Treasury Bills, Treasury Notes, Treasury Bonds

Supply-side Economics

lower taxes will boost the economy as businesses and individuals invest their money, creating prosperity and economic growth that will offset the tax cuts

What was the main idea in Reaganomics?

high taxes took too much money away from investors, and that tax cuts could provide extra money to expand businesses and create new jobs

What was cut to try to balance the budget?

food stamps, school lunches, Medicare payments, unemployment compensation, and student loans. Congress passed most of these cuts

What some examples of how Reagan deregulated the US?

end price controls on oil and gasoline, deregulation in broadcasting, banking, and automotive industries soon followed. Increased oil drilling, mining, and logging on public land

What was Operation Restore Hope?

Providing humanitarian assistance and famine relief to refugees in Somalia.

Why did US troops invade Panama in 1989?

Panama’s dictator, General Manuel Noriega, was aiding drug traffickers and harassing American military personnel defending the canal.

H. Ross Perot

Billionaire Texas Businesses man and Politician

Who won the election in 1992?

Clinton won the election with 43 percent of the popular vote and 370 electoral votes.

Clinton’s “New Democrat” promises.

Clinton promised to cut middle-class taxes, reduce government spending, and reform the nation’s health care and welfare programs. His campaign repeatedly blamed Bush for the recession.

What reasons lead to President Bush losing the election in 1992?

President Bush spent much of his time dealing with foreign policy, but he could not ignore domestic issues.With the Persian Gulf crisis, the economy plunged into a recession and unemployment rose.

Tiananmen Square Massacre

Pro-democracy protests are killed and arrested

What was the US’ response to China’s handling of the Tiananmen Square protests?

Shocked, the United States and several European countries halted arms sales and reduced diplomatic contacts with China. The World Bank suspended loans. Bush resisted harsher sanctions. He thought that trade and diplomacy would change China’s behavior.