President Ronald Reagan: Trickle Down Economics and Cold War Defense Spending

E. America Enters World War II (1945-Present) g. Analyze the origins of the Cold War, foreign policy developments, and major events of the administrations from Truman to present

2.Changes at Home a. Analyze major domestic issues and responses of the administrations from Truman to present d. Evaluate the impact of changes in the national economy on contemporary American society e. Identify the major contemporary social, environmental, and political issues (e.g., immigration, global warming, terrorism), the groups involved, and the controversies engendered by those issues f. Assess increasing global interdependence, the potential for conflict, and the U.S. role in world events in the present and future

There are many diagrams, maps, and illustrations in this presentation. You only have to take notes for the sections titled: Reaganomics, Cutting Taxes, Increasing Spending in Other Areas, The Economy Under Reagan, and Reagan Appoints Conservative Justices Fill in the blanks when these slides pop up.

When the Great Depression began, in 1928, many were discontent with Hoover s hands off approach. Hoover was a Republican. He did not want to raise taxes to give direct relief and aid to struggling Americans. He was afraid this would make people dependent on the government. He felt the government should get out of the way and let the free market work out the Great Depression on its own.

Villages of homeless people in shacks were nicknamed Hoovervilles and Hoover s tension with WW I veterans, called the Bonus Army, tarnished his political popularity.

Franklin Delano Roosevelt, a Democrat, defeated Herbert Hoover for the Presidency in the Election of 1932. While Hoover wanted the government to get out of the way in the Great Depression, FDR felt the government had to be involved and intentional to fix the bad economy.

Like the Progressives, FDR wanted the government to act like a strict referee in the economy.

Yet, to pay for the New Deal, FDR was going to have to spend tax payer money.

By planting trees, the Civilian Conservation Corps, a New Deal government program, helped to prevent a future Dustbowl. It also gave men jobs who were out of work.

Men who were out of work could come to places like Tennessee to work for the government in various New Deal projects. Yet, they were paid with government money from taxes.

Social Security was a major aspect of the New Deal and is still around today.

This is how Social Security works. The top row represents the younger generation of Americans in the workforce. As they work, they pay a portion of their income into Social Security as a tax. The bottom row is the older generation of those 65 and older. Since they paid into the system when they were young, they get to draw money out of the system during their retirement years.

Some people thought the New Deal was a good thing that would take the USA toward economic recovery. Others thought it was a negative thing and that FDR was becoming a dictator and increasing taxes to an unhealthy level.

By the 1960s, many Republicans felt that Americans were paying taxes that were too high to fund the various government programs that had appeared since FDR s New Deal. Republican: Barry Goldwater -Claim: The government is taxing too much and must reduce its size and lower taxes. Democrat: Lyndon Baines Johnson -Claim: The government should use taxes to provide social programs for the poor, elderly, and others who need assistance. LBJ won the election. The Election of 1964

Reaganomics -Reagan, a Republican, supported an economic theory dubbed Trickle Down Economics. This meant he wanted to lower taxes and reduce funding for government programs. -His concept was that, when the government heavily taxed citizens, it meant less money was being used in the economy to purchase services and goods. -Reagan believed that, if the government reduced taxes, especially on the rich, the money people were then allowed to keep would be spent and create an economic boom.

Economic Differences The Democrats and Republicans want to see money flow through the economic classes. Yet, they radically disagree about how to accomplish this goal.

Economic Differences The arrows represent taxes. Democrats believe that, to ensure that money flows from the Rich to the Middle Class and the Poor, money has to be sent down through taxes. The Middle Class pay taxes too. Yet, not as much as the rich. Democrats Republicans

Economic Differences So, what do these taxes pay for? They pay for government programs like these below. Pell Grants: Government grants to pay for college. Social Security: Money for the elderly in retirement. Medicare: Insurance for the elderly. Medicaid: Government insurance for the poor. Food Stamps: Money to help the poor get food. Welfare: Government aid to help low income families. Disability: Financial help for the disabled. Democrats Republicans The Republicans disagree with the Democrat model. They believe that the best way to make sure money flows from the Rich, to the Middle Class, and Poor is through jobs, not governments assistance. They assert that, when the government heavily taxes citizens, especially the Rich, that the government then hinders the Rich from creating jobs and that this damages the economy.

Economic Differences So, what do these taxes pay for? They pay for government programs like these below. Pell Grants: Government grants to pay for college. Social Security: Money for the elderly in retirement. Medicare: Insurance for the elderly. Medicaid: Government insurance for the poor. Food Stamps: Money to help the poor get food. Welfare: Government aid to help low income families. Disability: Financial help for the disabled. Democrats Republicans Phase 1 of the Republican Plan: Reduce taxes on the Rich and reduce funding for government programs so that people are not taxed as much as they would be under the Democrat model.

Economic Differences So, what do these taxes pay for? They pay for government programs like these below. Pell Grants: Government grants to pay for college. Social Security: Money for the elderly in retirement. Medicare: Insurance for the elderly. Medicaid: Government insurance for the poor. Food Stamps: Money to help the poor get food. Welfare: Government aid to help low income families. Disability: Financial help for the disabled. Democrats Republicans Phase 2 of the Republican Plan: When the Rich realize they get to keep more money, rather than having to pay it to the government through taxes, they will be more likely to start businesses to make even more money.

Economic Differences So, what do these taxes pay for? They pay for government programs like these below. Pell Grants: Government grants to pay for college. Social Security: Money for the elderly in retirement. Medicare: Insurance for the elderly. Medicaid: Government insurance for the poor. Food Stamps: Money to help the poor get food. Welfare: Government aid to help low income families. Disability: Financial help for the disabled. Democrats Republicans Phase 3 of the Republican Plan: As the Rich seek to start businesses, they will hire workers and this creates jobs for the Middle Class and Poor. In this sense, the money of the Rich will trickle down to the Middle Class and Poor by providing jobs.

Economic Differences What positive features would the Democrats say come with their plan? 1: It ensures money flows, instead of merely getting out of the way and hoping it does. 2: It helps those who may not be able to get a job, such as the disabled and elderly. 3: It puts money into the pockets of the middle class and poor to buy goods and services offered by the Rich. 4: It helps families who hit hard times, such as a family with the death of a parent. Democrats Republicans This Republican Plan is dubbed Trickle Down Economics.

Economic Differences What critiques would the Democrats give against the Republican plan? 1 st : The rich will do everything they can to stop their money from trickling down by paying low wages and other tactics. Therefore, the trickle down effect won t really happen, in their opinion. 2: The disabled and elderly will suffer as they have greater obstacles to finding work. 3: Those who are born into a wealthy family have more opportunity than those born to the middle class or poor in the Republican model. Democrats Republicans This Republican Plan is dubbed Trickle Down Economics.

Economic Differences Democrats Republicans What positive features would the Republicans say are included in their plan? 1 st : They claim their plan would boost economic activity by encouraging more businesses to create jobs. 2 nd : The government would not be burdened with vastly expensive social programs that require high taxes. 3 rd : It would encourage individuals to work, instead of relying on the government for assistance. This Republican Plan is dubbed Trickle Down Economics.

Economic Differences Democrats Republicans What critiques do the Republicans offer toward the Democrat s economic plan? 1 st : They claim the high taxes make it less likely that people will start businesses to create jobs. 2 nd : They assert that people become dependent on government programs instead of working. 3 rd : They stress that citizens should not be forced to provide for other citizens because this creates high taxes for those working. This Republican Plan is dubbed Trickle Down Economics.

Democrats Economic Differences Therefore, while both Democrats and Republicans want to see money flow throughout the economy with opportunity for those in the Middle Class and those who are Poor to move up, they radically disagree on how to achieve that type of economy. So, what do these taxes pay for? They pay for government programs like these below. Pell Grants: Government grants to pay for college. Social Security: Money for the elderly in retirement. Medicare: Insurance for the elderly. Medicaid: Government insurance for the poor. Food Stamps: Money to help the poor get food. Welfare: Government aid to help low income families. Disability: Financial help for the disabled. Republicans This Republican Plan is dubbed Trickle Down Economics.

Cutting Taxes -Reagan cut funding to programs such as student loans to college students, free school lunches, welfare, food stamps, job training, Medicaid, and and other social programs. -Reagan also felt there were too many rules in the economy and this slowed down businesses. He wanted to reduce the government rules for television companies, phone companies, banking, and other industries. -Think of it like this. FDR wanted a strict referee for the economy. Reagan wanted a very lenient referee. When the government reduces rules for businesses, it is called deregulation.

Increasing Spending in Other Areas -Reagan cut funding to many social programs that provided economic assistance to the middle class and poor. -Yet, the Cold War was still a focus for the USA. Reagan pumped huge amounts of money into defense spending to ensure the USA remained more powerful than the Soviet Union of Russia in terms of military might. -He ordered the building of the Strategic Defense Initiative. He claimed it could stop misses from hitting the USA, even suggesting it would use lasers to do so. It was nicknamed Star Wars. Democrats argued it was too expensive, unrealistic, and would simply increase hostility with the USSR.

During WW II, the Democracies of the world had originally teamed up the Communist USSR to defeat Nazi Germany.

When World War II was finished, the USA, Britain, and France grew concerned. They wanted the nations of the world to accept Democracy. Yet, it was clear that Stalin wanted Eastern Europe to be dominated by Communism.

After World War II, Poland, East Germany, Czechoslovakia, Hungary, Romania, and Bulgaria became Satellite Nations that were controlled by the USSR.

Back in the 1940s, President Truman s goal of Containment was simply to keep Communism from spreading any further into the world. This policy failed.

Communism expanded to China, North Korea, Cuba, and Vietnam from the 1940s to the 1960s. Vietnam

After World War II, the Democracies of the world, including the USA, were concerned about Communism spreading in Asia. Eventually, China fell to Communism as did North Korea. Then, Communism spread down to Vietnam. The USA got involved to try and keep South Vietnam from falling to Communism. The war became very unpopular in the USA as it lasted from the 1950s to the 1970s. President Lyndon Johnson and President Richard Nixon had to deal with various military campaigns in Vietnam. The USA s involvement ended while Ford was President. South Vietnam fell to Communism.

By 1980, the Soviet Union (USSR) was still a nation and Communist struggles were occurring in various parts of the world. Reagan argued he had to heavily fund defense spending to remain more powerful than the Communist USSR.

Many Democrats critiqued Reagan because he cut social programs that gave aid to citizens but used vast amounts of money to increase defense spending, which many argued made the tension between the USSR and the USA escalate. Likewise, they asserted the so called Star Wars endeavor wouldn t even work and was unrealistic.

The Economy Under Reagan -In the early 1980s, at the start of Reagan s term, the American economy struggled. Unemployment reached around 10%. The second half of Reagan s first term saw an economic turnaround. Starting in 1983, the economy began to improve. Inflation, a massive problem in the 1970s, stabilized. -The Democrats critiqued Reagan s economy, despite the improvements. They asserted that the economy was making the very wealthy even more prosperous and the poor continued to suffer under worse economic situations. -Reagan s massive defense spending created a budget deficit, meaning the government spent more than it took in, despite the cuts to social programs, this increased the national debt.

Jerry Falwell, pictured above, holding the microphone, a televangelist, urged Evangelical and Fundamentalist Christians to support the Republican Party. He believed in lower taxes. Yet, he also believed the Republican Party should support the concerns of his political coalition, which he called the Moral Majority.

The New Conservative Right supported low taxes, but, they also championed their Social Concerns. Many of these New Republicans supported Ronald Reagan in the Election of 1980. Above is Ronald Reagan and Jerry Farwell meeting to discuss the concerns of the Moral Majority group that Farwell started.

Many of the New Republicans opposed the Supreme Court Decision of Roe vs. Wade, which recognized abortion as legal in the USA. They wanted to see this decision overturned and abortion outlawed. Their movement was called the Pro-Life Movement.

While many Conservatives on the Right wanted to see abortion outlawed, many liberals on the political left felt that abortion was a right and a choice that women should be allowed to make without the government stopping them. This movement was called the Pro-Choice Movement.

Reagan Appoints Conservative Justices -Prior to Reagan, and since FDR was Elected in the 1930s, the Supreme Court was dominated by liberal judges. -Sandra Day O Conner, Antonin Scalia, and Anthony M. Kennedy were appointed to the court by Reagan. William Rehnquist, the most conservative judge, was named chief justice. -The Religious Right, like those who supported Jerry Falwell s Moral Majority, wanted Reagan to appoint judges that went against the liberal trend that had limited the prayers of school staff, passed Roe v. Wade, and pursued other liberal social rulings.

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