History of the United States (1980-1988)

Changing demographics and the growth of the Sun Belt

The most widely discussed demographic phenomenon of the 1970s was the rise of the "Sun Belt," the Southwest, Southeast, and especially Florida and California (surpassing New York as the nation's most populous state in 1964). By 1980, the population of the Sun Belt had risen to exceed that of the industrial regions of the Northeast and Midwest, which were experiencing not only a relative but in some cases an absolute decline in their numbers. The rise of the Sun Belt continued a trend in the growth of suburbs since the 1950s, due in large measure to ever-increasing mobility brought by the growing popularity of automobiles. In addition, the rise of the service sector, at the expense of industry and manufacturing, facilitated demographic shifts to the "frontiers" from the more industrialized states in the Northeast and Midwest.

The rise of the Sun Belt has been producing a change in the nation's political climate strengthening conservatism. Always more conservative than many other regions of the country, the boom mentality in this growing region conflicted sharply with the concerns of the so-called Rust Belt, a region saddled with a declining economic base, highly congested, and home to large, impoverished minority groups. The Northeast and Midwest have remained far more committed to social programs and far more interested in regulated growth than the wide-open, sprawling areas of the South and West. Electoral trends in the regions reflect this divergence; the Northeast and Midwest have been increasingly voting for Democratic candidates in federal, state and local elections while the South and West are now the solid base for the Republican Party. As an aside, California has reemerged as a bright spot for the Democratic Party in the late 1990s, due to a backlash against the GOP's perceived anti-immigrant, anti-affirmative action stances. Non-Hispanic whites are now a minority in the nation's most populated state.

As more and more industries moved their plants and headquarters from the inner cities and urban centers to the suburbs with lower tax and looser regulatory environments, many saw a contraction of their economic base as municipalities lost the revenues from the enterprises that had departed. In the nation's major urban areas unemployment increased, expanding demand for social services, while tax bases declined. New York City barely averted bankruptcy in 1975.

The fiscal problems of the nation's major urban centers were occurring in the broader context of demographic shifts in the country since the end of the Second World War, which forced large cites to cope with declining tax bases. Meanwhile, conservatives railed against what they saw as the failures of liberal social programs, a potent theme in the 1980 presidential race and the 1994 mid-term elections, when the GOP captured the U.S. House after 40 years of Democratic control.

Thus, the liberal leaders of the 1960s, characteristic of the era of the Great Society and civil rights movement, gave way to conservative urban politicians in the 1970s across the country, such as New York Mayor Ed Koch, a conservative Democrat.

Since the 1980s, many old urban centers have been making a sort of comeback in a wave of gentrification. Downtown areas began attracting investment once again, contributing to a return of affluent, upper middle class urbanites, especially in New York in recent years. While this has increased commercial growth and improved the tax bases of urban areas, housing prices have been driven up, displacing poor residents. The processes of gentrification and stratification between rich and poor have been greatly intertwined since the decline of the liberal welfare state of the 1960s. The increasing scarcity of low-income housing in the 1980s thus contributed to one of the most widely discussed demographic phenomena of the mid-1980s: homelessness. And despite the achievements of the civil rights movement of the 1960s, inner-city, working class African Americans have grown more marginalized from the mainstream of U.S. society than their counterparts two decades ago due to the demographic trends of suburbanization and gentrification. Stores and businesses have been abandoning the inner cities while the decline of social services and effective affirmative action over the past two decades had reduced prospects for advancement.

The "Reagan Revolution"

The assault on U.S./Soviet Détente

The 1970s inflicted damaging blows to the American confidence characteristic of the 1950s and early 1960s. The Vietnam War and the Watergate crisis shattered confidence in the presidency. International frustrations, including the fall of South Vietnam in 1975, the hostage crisis in Iran in 1979, the Soviet invasion of Afghanistan, the growth of international terrorism, and the acceleration of the arms race raised fears over the country's ability to control international affairs. The energy crisis, unemployment, and inflation, derided as stagflation, raised fundamental questions over the future of American prosperity.

American "malaise," a term that caught on following Carter's 1979 "malaise speech," in the late 1970s and early 1980s was not unfounded. Under the leadership of Leonid Brezhnev (1964-1982), the Soviet Union improved living standards by doubling urban wages and raising rural wages by around 75%, building millions of one-family apartments, and manufacturing large quantities of consumer goods and home appliances. Soviet industrial output increased by 75%, and the Soviet Union became the world's largest producer of oil and steel.

Even abroad, the tide of history appeared to be turning in favor of the Soviet Union. While the United States was mired in recession and the Vietnam quagmire, pro-Soviet governments were making great strides abroad, especially in the Third World. The United States had failed to prevent communist forces from taking Vietnam, which became an independent state united by a Communist government. Other Communist governments and pro-Soviet insurgencies were spreading rapidly across Africa, Southeast Asia, and Latin America. And the Soviet Union seemed committed to the Brezhnev Doctrine, sending troops to Afghanistan. The Afghan invasion in 1979 marked the first time that the Soviet Union sent troops outside the Warsaw Pact since the inception of the Eastern counterpart of NATO.

Reacting to all these perceptions of American decline internationally and domestically, a group of academics, journalists, politicians, and policymakers, labeled by many as "new conservatives" or "neoconservatives," since many of whom were still Democrats, rebelled against the Democratic Party's leftward drift on defense issues in the 1970s (especially after the nomination of George McGovern in 1972), harped on America's geo-political decline, blaming liberal Democrats. Many clustered around Sen. Henry "Scoop" Jackson, a Democrat, but then they aligned themselves with Ronald Reagan and the Republicans, who promised to confront charges of Soviet expansionism.

Generally they were anti-communist and supported minimal social welfare services by the government. But their main targets were the old policies of containment of Communism (rather than "rollback"). Détente with the Soviet Union was their immediate target, with its aims of peace through negotiations, diplomacy, and arms control.

Led by Norman Podhoretz, the neoconservatives attacked the foreign policy orthodoxy in the Cold War as "appeasement," an allusion to Neville Chamberlain's negotiations at Munich. They regarded concessions to relatively weak enemies of the United States as "appeasement" of "evil," attacked Détente, opposed most-favored nation trade status for the Soviet Union, and supported unilateral American intervention in the Third World as a means of boosting U.S. leverage over international affairs. Before the election of Reagan, the neoconservatives, gaining in influence, sought to stem the antiwar sentiments caused by the U.S. defeats in Vietnam and the massive casualties in Southeast Asia that the war induced.

During the 1970s Jeane Kirkpatrick, a prominent political scientist and later US ambassador to the United Nations under Ronald Reagan, a position she held for four years, increasingly criticized the Democratic Party. Kirkpatrick became a convert to the ideas of the new conservatism of once liberal Democratic academics.

Ronald Reagan and the elections of 1980

In addition to the growing appeal of conservative sentiment, President Carter's prospects for reelection in the U.S. presidential election of 1980 were weakened by a primary challenge by liberal icon Senator Edward Kennedy of Massachusetts. Kennedy, although a far more magnetic personality than Carter and beloved by the Democratic base, could not transcend personal controversies, most notably a 1969 automobile accident at Chappaquiddick Island in Massachusetts that had left a young woman dead. Carter easily won the nomination at the Democratic convention. The party also renominated Walter Mondale for vice president.

Against the backdrop of inflation and perceived American weakness abroad, Ronald Reagan, former governor of California, received the Republican nomination in 1980, and his chief challenger, George H. W. Bush, became the vice-presidential nominee. During Reagan's campaign, he hired Kirkpatrick as his foreign policy adviser to exploit Carter's vulnerabilities on foreign policy.

Reagan promised an end to the drift in post-Vietnam U.S. foreign policy and a restoration of the nation's military strength. He also promised an end to "big government" and to restore economic health by use of supply-side economics. However, all these aims were not reconcilable through a coherent economic policy.

Supply-side economists led the assault on the welfare state built up by the New Deal and Great Society. They asserted that the woes of the U.S. economic were in large part a result of excessive taxation, which "crowded out" money away from private investors and thus stifled economic growth. The solution, they argued, was to offer generous benefits to corporations and wealthy taxpayers in order to encourage new investments and to cut benefits geared toward the poor.

Apparently the public, specifically the middle class in the Sun Belt regions, which Reagan won handily in 1980, agreed. Critics charged that Reagan's attacks on federal assistance programs were demagogic, appealing to a middle class supposedly insensitive to the plight of marginalized lower income groups and minorities, with little understanding of the international forces creating the economic problems plaguing the country since the end of the Vietnam War.

The presidential election of 1980 was a key turning point in American politics. It signaled the new electoral power of the suburbs and the Sun Belt; moreover, it was a watershed ushering out the commitment to government anti-poverty programs and affirmative action characteristic of the Great Society. It also signaled a commitment to a hawkish foreign policy.

Although Reagan's candidacy was burdened by Representative John B. Anderson of Illinois, a moderate Republican and primary opponent who ran as an independent, the two major issues of the campaign were far greater threats to Carter's prospects for reelection: the economy, national security, and the Iranian hostage crisis. Carter seemed unable to control inflation and had not succeeded in obtaining the release of U.S. hostages in Tehran before Reagan took office.

Reagan won a landslide victory, and Republicans also gained control of the Senate for the first time in twenty-five years. Reagan received 43,904,153 votes in the election (50.7 percent of total votes cast), and Carter, 35,483,883 (41.0 percent). Reagan won 489 votes in the electoral college to Carter's 49. John Anderson won no electoral votes, but got 5,720,060 popular votes. Anderson's share of the popular, totaling 6.6 percent, was moderately impressive for a third party candidate in the United States, demonstrating that a sizable share of moderate voters, while disenchanted with Carter, did not approve of Reagan's staunchly conservative agenda.

The Reagan administration

Reagan's approach to the presidency was somewhat of a departure from his predecessors; he delegated a great deal of work to his subordinates, letting them handle most of the government's day-to-day affairs. As an executive, Reagan framed broad themes and made a strong personal connection to voters. Unlike fellow Republican Richard Nixon, Reagan was not nearly as concerned with the day-to-day drudgery of executive governance, which he delegated among subordinates.

"Reaganomics" and the 1981 federal budget

Ronald Reagan promised an economic revival that would affect all sectors of the population. But since cutting taxes would reduce government revenues, it would also be necessary to target "big government." Otherwise, large federal deficits might negate the effects of the tax cut by requiring the government to borrow in the marketplace, thus raising interest rates and drying up capital for investment once again. Thus, Reagan promised a drastic cut in government spending, which he pledged would produce a balanced budget for the first time since 1969.

Regan's 1981 economic legislation, however, was a mixture of rival programs to satisfy of all his conservative constituencies (monetarists, cold warriors, middle class swing voters, and the affluent). Monetarists were placated by tight controls of the money supply; cold warriors, especially neoconservatives like Kirkpatrick, won large increases in the defense budget; wealthy taxpayers won sweeping three-year tax rate reductions on both individual and corporate taxes; and the middle class saw that its pensions and entitlements would not be targeted. Reagan declared spending cuts for the Social Security budget, which accounted for almost half of government spending, off limits due to fears over an electoral backlash, but the administration was hard pressed to explain how his program of sweeping tax cuts and large defense spending would not increase the deficit.

Advocates of "trickle down economics," however, argued that low taxes encouraged extra enterprise, which generated extra revenue. Even if this were true, spending cuts would be needed. Budget Director David Stockman had to race to force this economic legislation down the throat of Congress within the administration's deadline of forty days. Stockman had no doubt that spending cuts were needed, and slashed expenditures across the board (with the exception of defense expenditures) by some $40 billion; and when figures did not add up, he resorted to the "magic asterisk" - which signified "future savings to be identified." Pleas by constituencies threatened by the loss of social services were futile. The budget cuts passed through the Congress with relative ease.

The recession of 1982

By early 1982 Reagan's economic program was beset with difficulties. The nation had entered the most severe recession since the Great Depression. In the short term, the effect of Reaganomics was a soaring budget deficit. Government borrowing, along with the tightening of the money supply, resulted in skyhigh interest rates (briefly hovering around 20 percent) and a serious recession with 10 percent unemployment in 1982. Some regions of the "Rust Belt" (the industrial Midwest and Northeast) descended into virtual depression conditions.

Although Reagan would win reelection in a historic landslide in his 1984 presidential election, his approval ratings plummeted in the worst months of the recession of 1982. Democrats swept the mid-term elections, making up for their losses in the previous election cycle. At the time, critics often accused Reagan of presiding unknowingly over fiscal and economic crisis, content with telling stories about his movie days, appearance, sound bites, and slogans. For example, by 1982, former Budget Director David Stockman, an ardent fiscal conservative, wrote, "I knew the Reagan Revolution was impossible - it was a metaphor with no anchor in political and economic reality."

Yet, the recession stretched well back into 1970s, well before the Reagan economic program. Moreover, the performance of the U.S. economy under Reagan compared favorably to Margaret Thatcher's Britain, which had been consistent in its application of a monetarist regime (a tight monetary policy and a tight fiscal policy, which resulted in deflation in the midst of depression).

Recovery

Unlike Thatcher, Reagan combined the tight-money regime of the Federal Reserve with an expansionary fiscal policy. The administration presided over a scale of fiscal stimulation not seen since the sixties, but this time with the spending not on welfare (as during Lyndon Johnson's Great Society) but defense. Following the recession of 1982, fiscal stimulation (high government spending) contributed to steady growth (4.2 percent per year in the period 1982-1988).

Another factor in the recovery from the worst periods of 1982-83 was the radical drop in oil prices, which ended inflationary pressures of spiraling fuel prices. The virtual collapse of the OPEC cartel enabled the administration to alter its tight money policies, to the consternation of conservative monetarist economists, who began pressing for a reduction of interest rates and an expansion of the money supply, in effect subordinating concern about inflation (which now seemed under control) to concern about unemployment and declining investment.

By the middle of 1983, unemployment fell from 11 percent in 1982 to 8.2 percent in the middle of 1983. GDP growth was 3.3 percent, the highest since the mid-1970s. Inflation was below 5 percent. GDP growth, however, obscured increasingly uneven distribution of income, growing poverty, and falling real wages for the bottom half of income earners.

Deficit spending, the dollar, and trade

Following the mild recovery (which occurred in time for Reagan's 1984 reelection bid), the medium-term effect of Reganomics was a soaring budget deficit as spending exceeded revenue year after year due to tax cuts and increased defense spending. Military costs rose while tax revenues failed to increase.

In his first term, Reagan kept demanding increases to the defense budget of up to 10 percent a year. Congressional committees, meanwhile, investigated charges that the $1 trillion of U.S. military spending in Reagan's first term bought surprisingly little, pointing to alleged Pentagon mismanagement. In the 1980s, for example, nearly 50 of the largest U.S. defense contractors came under investigation for overcharges and other criminal malfeasance.

The 1981 tax cuts, the largest in U.S. history, also eroded the revenue base of the federal government in the short-term. The massive increase in military spending (about $1.6 trillion over five years) far exceeded cuts in social spending, despite wrenching impact of such cuts spending geared toward some of the poorest segments of society. Even so, by the end of 1985, funding for domestic programs had been cut nearly as far as Congress could tolerate.

In this context, the deficit rose from $60 billion in 1980 to a peak of $220 billion in 1986 (well over 5 percent of GDP). Over this period, national debt more than doubled from $749 billion to $1,746 billion.

While deficit spending has value as an economic stimulus, and while it did counter-act the recession of 1982, the dimension of the budget shortfalls of the 1980s left interest rates high and the dollar over-valued, causing investment and exports to suffer.

Since U.S. saving rates were very low (roughly one-third of Japan's), the deficit was mostly covered by borrowing from abroad, turning the United States within a few years from the world's greatest creditor nation to the world's greatest debtor. Not only was this damaging to America's status, it was also a profound shift in the postwar international financial system, which had relied on the export of U.S. capital.

The deficits were keeping interest rates, although lower than the 20 percent peak levels earlier in the administration due to a respite in the administration's tight money policies, high and threatening to push them higher. The government was thus forced to borrow so much money to pay its bills that it was driving up the price of borrowing. Although supply-siders promised increased investment as a result of top-rate and corporate tax cuts, growth and investment suffered for now in the context of high interest rates.

Perhaps more alarmingly, Reagan-era deficits were keeping the U.S. dollar overvalued. With such a high demand for dollars (due in large measure to government borrowing), the dollar achieved an alarming strength against other major currencies. As the dollar soared in value, so American exports became increasingly uncompetitive, with Japan as the leading beneficiary. The high value of the dollar made it difficult for foreigners to buy American goods and encouraged Americans to buy imports, coming at a high price to the industrial export sector.

The U.S. balance of trade grew increasingly unfavorable; the trade deficit grew from $20 billion to well over $100 billion. Thus, American industries such as automobiles and steel, faced renewed competition abroad and within the domestic market as well.

The enormous deficits were in large measure holdovers from Lyndon Johnson's commitment to both "guns and butter" (the Vietnam War and the Great Society) and the growing competition from other G7 nations after their postwar reconstruction, but it was the Reagan administration that chose to let the deficits develop.

While Reagan was in office, charges of an executive "power vacuum" and a low presidential attention span were probably not entirely partisan in nature. Some fiscal conservatives and Democrats criticized Reagan for the extent of deficit spending, often focusing on the lack of oversight of defense expenditures. In January 1985 prominent conservative columnist William Safire, alluding to George H.W. Bush's charges that Reagan was advocating "voodoo economics" in the 1980 race for the GOP nomination, stated in The New York Times Magazine that "Reaganomics is giving voodoo a bad name" and that the "United States has lost control of its financial markets to foreigners."

Reagan and the world

Intervention in Latin America and the Middle East

With Reagan's promises to restore the nation's military strength, the 1980s saw massive increases in military spending, amounting to about $1.6 trillion over five years. A new arms race would develop as superpower relations deteriorated to a level not seen since the 1960s.

Enormous deficits to pay for the growing defense budgets, inducing high levels of government borrowing, resulted in high interest rates and an overvalued dollar, which stifled economic growth, resulted in a very unfavorable balance of trade, and depressed the U.S. steel and automotive sectors.

The Reagan administration favored a hawkish approach to the Cold War, especially in the Third World arena of superpower competition. In the wake of the Vietnam debacle, however, Americans were increasingly skeptical of bearing the economic and financial cost of large troop commitments. The administration sought to overcome this by backing the relatively cheap strategy of specially trained counterinsurgencies or "low-intensity conflicts" rather than large-scale ground wars like Vietnam and Korea.

The Arab-Israeli conflict was another impetus for military action. Israel invaded Lebanon to destroy the Palestine Liberation Organization (PLO). But in the wake of the 1982 Sabra and Shatila Massacre, which provoked a political crisis in Israel and international embarrassment, U.S. forces moved into Beirut to encourage Israeli withdrawal. Previously, the administration stood by Israel's invasion of Lebanon in mid-1982 to maintain the support of Israel on one hand, but also to quell the influence of Israel's pro-Soviet enemy Syria in Lebanon. However, U.S. intervention in the multi-sided Lebanese civil war had disastrous consequences. On October 23, 1983, the Marine Barracks Bombing killed 241 American troops. Shortly afterwards, the U.S. withdrew its remaining 1600 soldiers.

Two days after the Beirut barracks bombing, the U.S. conducted Operation Urgent Fury - the invasion of Grenada. The administration's pretext was the protection of 500 U.S. and Western medical students from a pro-Cuban socialist government. US forces ousted the government, in the process diverting media coverage from the barracks bombing. Grenada would serve as a model for later "low intensity conflicts." The U.S. later attacked Libya.

The Reagan administration also supplied funds and weapons to rightwing military governments in Latin America. Central America was a concern to the administration, especially El Salvador and Nicaragua, where the Sandinista revolution brought down the U.S.-backed Somoza family rule. Two poor nations historically dominated by local landed oligarchies and multinational corporations, and characterized by some of the most extreme conditions of socio-economic inequality in the world, the Nicaraguan and Salvadorian regimes could no longer keep a lid on the peasantry - the principal base of support for "communist" social revolutionaries.

In 1982 the CIA organized and financed rightwing paramilitaries in Nicaragua. The tracing of secret funds for this scheme led to the revelations of the Iran-Contra Affair. In 1985 Reagan authorized the sale of arms in Iran in an unsuccessful effort to free U.S. hostages in Lebanon; he later professed ignorance that subordinates were illegally diverting the proceeds to Central American contras.

The end of the Cold War

The Reagan administration adopted a hard-line stance toward the USSR. Early in his first term, the president attacked the rival superpower as the "evil empire." While it was Jimmy Carter who had officially ended the policy of Détente following Soviet intervention in Afghanistan, East-West tensions in the early 1980s reached levels not seen since the Cuban Missile Crisis. The Strategic Defense Initiative (SDI) was born out of the worsening U.S.-Soviet relations of the Reagan era. Popularly dubbed "Star Wars" at the time, SDI was a multibillion dollar research project for a missile defense system.

While the Soviets had enjoyed great achievements on the international stage before Reagan entered office in 1981, such as the unification of their socialist ally, Vietnam, in 1976, and a string of socialist revolutions in Southeast Asia, Latin America, and Africa, the country's strengthening ties with Third World nations in the 1960s and 1970s only masked utter weakness next to the United States. The Soviet economy suffered severe structural problems. Reform stalled between 1964-1982 and supply shortages of consumer goods were becoming notorious.

East-West tensions eased rapidly after the rise of Mikhail Gorbachev. After the deaths of three elderly Soviet leaders in a row since 1982, the Politburo elected Gorbachev Soviet Communist Party chief in 1985, marking the rise of a new generation of leadership. Under Gorbachev, relatively young reform-oriented technocrats rapidly consolidated power, providing new momentum for political and economic liberalization, and the impetus for cultivating warmer relations and trade with the West.

Focused on perestroika, Gorbachev struggled to boost production of consumer goods, which would be impossible given the twin burdens of the Cold War arms race on one hand, and the provision of large sums of foreign and military aid, which the socialist allies had grown to expect, on the other. Under Gorbachev, Soviet policymakers increasingly accepted Reagan administration warnings that the U.S. would make the arms race a huge burden for them. The result in the Soviet Union was a dual approach of concessions to the United States and economic restructuring (perestroika) and democratization (glasnost) domestically, which eventually made it impossible for Gorbachev to reassert central control. Reaganite hawks have since argued that pressures stemming from increased U.S. defense spending was an additional impetus for reform.