U S Economic History

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Information about U S Economic History
Business-Finance

Published on April 13, 2008

Author: Justine

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10th American History :  10th American History U.S. Economic History Handy Dandy Guide to Economic Thinking:  Handy Dandy Guide to Economic Thinking 1. People choose to do the things they think are best for 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:  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:  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:  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. 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:  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:  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:  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:  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:  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:  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:  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:  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. 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. 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:  Economic Questions What are Taxes? Taxes- Required payments of money made to governments by households and business firms. 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:  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:  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:  Economic Questions National Debt? Economic Questions:  Economic Questions National Debt Clock (Hyperlink) 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:  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:  #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:  Answer for #1 C Opportunity Cost: the next best alternative that must be given up when a choice is made. #2:  #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:  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:  #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:  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:  #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:  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:  #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:  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:  #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:  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:  #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:  Answer for #7 A Economic resources: land, labor, capital goods and entrepreneurs. #8:  #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:  Answer for #8 C Real Income: money income adjusted to compensate for inflation. #9:  #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:  Answer for #9 D Economic resources: land, labor, capital goods and entrepreneurs. #10:  #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:  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:  #11 True or False: Most millionaires are college graduates Answer for #11:  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:  #12 Most millionaires work fewer than 40 hours a week. Answer for #12:  Answer for #12 False About 2/3 of millionaires work 45-55 hours a week. #13:  #13 More than half of all millionaires never received money from a trust fund or estate. Answer for #13:  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:  #14 Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech. Answer for #14:  Answer for #14 False A majority of millionaires are in ordinary industries and jobs. They are proficient in targeting marketing opportunities. #15:  #15 Many poor people become millionaires by winning the lottery. Answer for #15:  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:  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:  Rules for improving your financial life 1) Get a good education. 2) Work long, hard and smart. 3) Learn money management skills. 4) Spend less than you can spend. 5) Save early and often. 6) Invest in common stocks for the long term. 7) Gather information before making decisions. Industrial Revolution:  Industrial Revolution 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:  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:  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 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.:  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:  Imperialism Why? Economic, Military and Ideology Manifest Destiny Hawaii- trade, sugar, bayonet constitution and annexation China- trade, Treaty of Wanghia 1844- gave U.S. most favored nation status, Sphere’s of Influence, Open-Door 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:  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:  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 and Coolidge Harding 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 “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:  1920’s The role of women- work outside the home during WWI. Economic boom of the 20’s provided jobs for women. Urbanization 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% Growth of the automobile industry Corporate profits up, unemployment down, welfare capitalism, and the ability to purchase new products and services Stock Market expansion- False Sense of Security 1920’s:  1920’s Weaknesses Wealth Distribution Credit on the Stock Market- buying on margin Federal Reserve System Stock Market Crash 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:  The Great Depression – 1930’s Bank Failures Farm Failures Unemployment Hoovervilles Dust Bowl Hoover 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:  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, Sit-down strikes, Rural Electricity Economic Recovery? 1937 drop in stock market- Deficit spending and Keynesian Theory. Minimum wage. Did the New Deal end the depression? World War II:  World War II 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 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:  Cold War and the Iron Curtain Truman Doctrine- aid to countries fighting communism. Marshall Plan- European Recovery Program- over $13 Billion spent. G.I. Bill Labor Unions after the war and Taft-Hartly Act 1947- reduce union power, closed shops outlawed and 90 day cooling off. World Bank- Help poor countries build their economies- money 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:  Eisenhower Era Space Race- Sputnik, Explorer, NASA and the National 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:  JFK “New Frontier”- the domestic policy and changing the nation. 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:  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:  Nixon Key Actions Space- Moon landing Winding down of the Vietnam War Cambodian Incursian Kent State Détente Visit to China and Ping Pong Diplomacy Visit to Russia + S.A.L.T. New Federalism give states control and reduce Federal Government- deregulation Troubled Economy:  Troubled Economy Inflation and Stagflation Nixon Promised to balance the Budget ($200 Billion) and produce a surplus. Tax Reform Act- 1969 ended the Johnson income tax surcharge. Vietnam costs rising. 1969-1970- Nixon proposed wage-price 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:  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:  Troubled Economy Winding down the Vietnam War- Costs Economic Costs The war cost the United States more than $140 billion. 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: 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. 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:  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 :  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:  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:  President Reagan Economy 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 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 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:  President George H.W. Bush Shakey Economy “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 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 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:  President Clinton Economy 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. Health-care reform Health-care costs were rising sharply in 1990’s. Very expensive and lots of major changes to health care system. Welfare reform Clinton plan limited time people could receive benefits and required to find work with two years of receiving benefits. International Trade 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:  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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