Transcript running on empty: the nation transformed

RUNNING ON EMPTY: THE
NATION TRANSFORMED
• The Oil Crisis
– following the Arab-Israeli War in October 1973,
the Arab oil-producing states cut off oil
shipments to the United States and other
western countries
– the price of oil rose from $3 a barrel to $12
– this sent the price of nearly everything
skyrocketing
– oil heated homes and powered factories; it also
was used by utility plants to generate electricity
– nylon and other synthetic fibers, many plastics,
paints, insecticides, and fertilizers were based
on petrochemicals and, of course, crude oil was
refined into gasoline to run cars
– Arab oil embargo pushed up prices and created
shortages
– Kissinger negotiated an agreement that
involved the withdrawal of Israel from some of
the territory it occupied in 1967
– the Arab nations lifted the oil embargo
– America, which had once been an oil exporter,
no longer produced enough oil for its own use
– as gasoline prices in the United States
increased, Americans began to turn to smaller,
more efficient cars
– that hurt the American automobile industry
• Ford as President
– after being appointed, rather than elected, vicepresident, Gerald Ford assumed the presidency
on Nixon’s resignation in August of 1974
– he seemed unimaginative and less than brilliant,
but he was hardworking and untouched by
scandal
– an open and earnest person, Ford seemed
unlikely to venture beyond conventional
boundaries
– although this was what the country wanted,
Ford proved unable to contend with the
powerful forces that would shake the nation’s
economic foundation
– he faced high inflation as well as high
unemployment and had to deal with Democratic
majorities in both houses of Congress
– even recognizing the difficult situation he
faced, Ford’s handling of the economy was
inept
• The Fall of South Vietnam
– Congress refused Ford’s request for aid to
South Vietnam, and Saigon fell to the North
Vietnamese in 1975
– the long Vietnam War was finally over
• Ford versus Carter
– after some hesitation, Ford decided to seek the
Republican presidential nomination in 1976
– he narrowly survived a challenge by Ronald
Reagan, a former movie actor and former
governor of California
– Ford’s Democratic challenger was Jimmy
Carter of Georgia
– Carter’s homespun appeal and his outsider’s
image initially gave him a considerable edge
over Ford
– both candidates were vague on issues, but
Carter patched together key elements of the
New Deal coalition and won a narrow victory
• The Carter Presidency
– Carter attempted to impart an air of democratic
simplicity and a measure of moralism to his
presidency
– he set aside the formal trappings of office,
which made a pleasant change from Nixon
– however, Carter filled his administration with
Georgia associates who had as little national
political experience as he had
– the administration developed a reputation for
submitting complicated proposals and failing to
follow them up
• A National Malaise
– Carter alienated public opinion by making a
television address in which he described a
“moral and spiritual crisis” that sapped the
nation’s energies
– sermons on the emptiness of consumption rang
hollow to those who had lost their jobs or seen
inflation shrink their paychecks
– the economic downturn, though triggered by
the energy crisis, had more fundamental causes
– the nation’s productivity had declined, in part
because of discontent among workers with
increasingly dull, repetitive jobs
– younger workers grew impatient with aging
union leaders and a system that tied salary
increases to seniority
– as a result, union membership declined
• Stagflation: The Weird Economy
– Carter confronted an unanticipated and difficult
economic situation
– the nation experienced simultaneously high
inflation and high unemployment
– the term “stagflation” was coined to describe
the seemingly contradictory combination of
high inflation and slow growth
– Carter’s solutions to the nation’s economic
problems closely paralleled those of his
Republican predecessors
– he advanced an admirable, if complicated,
national energy plan but, typically, failed to
press for its implementation
– Congress raised minimum wage and tied social
security payments to the cost of living index
– while this helped the working poor and
pensioners, it unbalanced the federal budget
and caused further upward pressure on prices
– as incomes rose in response to inflation, people
moved into higher tax brackets
– “bracket creep” and decreased spending power
gave rise to "taxpayer revolts”
– deficit spending by the government pushed
interest rates higher and thereby increased the
cost of doing business
– soaring mortgage rates made it difficult to sell
homes; the resulting housing slump cost many
construction workeres their jobs and meant
bankruptcy for many builders
– savings and loan institutions were especially
hard hit because they were saddled with longterm mortgages made when rates were as low
as 4 and 5 percent
– now they had to pay much more than that to
hold deposits and offer even higher rates to
attract new money
• “You Deserve a Break”: Families Under
Strain
– oil prices nearly trippled in 1979, which
touched off another round of inflation
– auto makers were especially hard hit
– workers, most of them men, lost relatively
high-paying jobs in automobile factories and
steel mills
– in many cases, their spouses took lower-paying
jobs in restaurants, retail stores, and offices to
make up for lost income
– eating out, especially in fast food restaurants
became more common; families with two
working parents had little time to shop for,
prepare, and enjoy leisurely meals
– the recession struck just as millions of young
women, raised with feminist expectations, were
beginning careers
– nevertheless, well-educated women made
significant gains in the 1970s
– as a result, women divided into a professional
elite and a poorly paid, struggling class
– one casualty was the Equal Rights Amendment
– although Congress passed the ERA in 1972 and
twenty-two states had ratified it by the end of
that year, Phyllis Schlafly headed a campaign
against the ERA
– Schlafly’s campaign struck a responsive chord
with anxious housewives and women who
worked for low wages
– the ERA failed to win ratification in the
necessary three-fourths of the states
• Cold War or Détente?
– Carter’s foreign policy suffered from the same
indecision and inconsistency as his domestic
policy
– he announced an intention to place the issue of
“basic human rights” before all else
– he cut aid to Chile and Argentina because of
their human rights violations, but said little
about and continued aid to other repressive
nations
– Carter negotiated for the gradual return of the
Panama Canal to Panama’s control and a
guarantee of the neutrality of the canal
– he also attempted to continue Nixon’s policy of
détente
– the president ended American recognition of
Taiwan and exchanged ambassadors with the
People’s Republic of China
– his policies toward the Soviets were
inconsistent, in part because his secretary of
state, Cyrus Vance, supported détente while his
national security advisor, Zbigniew Brzezinski,
was strongly anti-Russian
– the United States and Soviet Union signed a
second Strategic Arms Limitation Treaty (SALT
II) in 1979
– Carter submitted the treaty to the Senate for
ratification, but after the Soviet invasion of
Afghanistan, Carter withdrew the treaty from
consideration
– Carter also stopped the shipment of American
grain and high technology to the Soviet Union
and boycotted the Moscow Olympics
– all of this served effectively to end détente
– Carter’s major diplomatic achievement was the
signing of the Camp David Agreement in 1978
between Egypt and Israel
• The Iran Crisis: Origins
– beginning in World War II, the United States
helped maintain the rule of the Shah of Iran,
Muhammad Reza Pahlavi
– the United States sold weapons to the Shah and
trained his secret police
– although Iran was an enthusiastic member of
OPEC, the Shah was a firm friend of the U.S.
– many regarded Iran to be, as Carter put it, “an
island of stability” in the Middle East; this
appearance was deceptive
– the Shah angered conservative Muslims with
his attempts to westernize Iranian society
– moreover, his regime brutally suppressed
political dissenters
– the Shah’s opponents hated the United States.
In 1978, the Iranian people overthrew the Shah
– a revolutionary government headed by the
Ayatollah Ruhollah Khomeini took power
– when Carter invited the deposed Shah to come
to the United States for medical treatment,
Iranian radicals stormed the American embassy
compound in Teheran and held the Americans
inside hostage
• The Iran Crisis: Carter's Dilemma
– the militants who seized the embassy demanded
the return of the Shah and the surrender of his
assets to the Iranian government in exchange
for their American captives
– Carter refused and froze Iranian assets held in
the United States
– he also banned trade with Iran until the
hostages were released
– Carter initially benefited from the American
people’s willingness to support a president in
times of crisis
– the hostage crisis derailed Senator Edward
Kennedy’s campaign for the Democratic
nomination
– in April 1980, Carter ordered a military rescue
mission; the raid was a fiasco
– several helicopters broke down, and Carter
called off the rescue
– during a confused departure, a crash killed eight
American commandos
• The Election of 1980
– Carter survived the challenge from Kennedy to
win his party’s nomination
– Ronald Reagan, the former governor of
California, ran on the Republican ticket
– John Anderson, a liberal Republican from
Illinois, ran as an independent
– Reagan, a New Deal Democrat turned
conservative Republican, promised to
decentralize the federal government and to turn
over many of its responsibilities to state and
local governments
– both Carter and Reagan ran negative campaigns
– in the end, Reagan won handily
– he polled over 43 million popular votes to
Carter’s 35 million and Anderson’s 5.6 million
– Republicans won the Senate and cut into the
Democratic majority in the House
– Iran released the fifty-two hostages on the day
of Reagan’s inauguration
• Reagan as President
– Reagan demanded reductions in federal
spending and the deficit
– his calls for cuts in federal programs focused
chiefly on social services, which he wanted
returned to the states
– Reagan eliminated many government
regulations affecting business
– in addition, he requested tax cuts to stimulate
the economy and generate new jobs
– Reagan pursued a hard-line anticommunist
foreign policy and engaged in a huge military
buildup to meet the threat of the Soviet Union
– he installed cruise missiles in Europe, sought to
undermine the leftist government of Nicaragua,
and attempted to bolster the conservative
government of El Salvador
– Reagan used American troops to overthrow a
Cuban-backed regime on the Caribbean island
of Grenada in 1982
– he also sent American forces to serve as part of
an international peacekeeping force in Lebanon
– in October 1983, 239 marines died when a
Molsem fanatic crashed a truck loaded with
explosives into a building that housed the
marines
• Four More Years
– in the election of 1984, Reagan faced Walter
Mondale of Minnesota, Carter’s vice-president
– Mondale chose Representative Geraldine
Ferraro of New York as his running mate
– Mondale hoped that Ferraro, an ItalianAmerican and a Catholic, would appeal to
conservative Democratic voters who had
supported Reagan in 1980 and that her gender
would attract bipartisan support from women
– Mondale’s strategy failed to translate into votes
– Reagan benefited from the advantages of
incumbency and the support of the Christian
right
– beyond that, he enjoyed a broad base of support
including a great number of working people
and southerners who had traditionally voted
Democrat
– Reagan’s immense popularity, along with the
collapse of the New Deal coalition, resulted in a
landslide victory for Reagan
• “The Reagan Revolution”
– the shape of Reagan’s foreign policy changed
little at the onset of his second term
– he maintained his call for a strategic defense
initiative, high defense budgets, and vigorous
anticommunist policies
– after Mikhail S. Gorbachev became the Soviet
premier in March 1985, however, Reagan
gradually softened the tone of his anti-Soviet
rhetoric
– during a series of summits, the two leaders
began to break down the hostilities and
suspicion that separated their nations
– in 1988, the two superpowers signed a treaty
eliminating medium-range nuclear missiles
– Congress balked at the cost of Star Wars
– the explosion of the Challenger cast doubt on
the idea of basing the national defense on the
complex technology involved in controlling
machines in outer space
– in domestic affairs, Reagan engineered massive
tax cuts with the Income Tax Act of 1986
– the new tax structure did not prevent the gap
between rich and poor from widening
– the president effected a conservative shift in the
Supreme Court through his appointment of
three justices and the elevation of Associate
Justice William Rehnquist to the Chief
Justiceship
– one of Reagan’s nominees, Sandra Day
O’Connor, became the first woman to serve in
the Supreme Court
• Change and Uncertainty
– the Reagan years witnessed a wave of legal and
illegal immigration; new immigrants of 1970s
and 1980s were primarily Hispanics and Asians
– nation’s population aged creating new demands
on health-care and social services
– the traditional family seemed threatened with
ceasing to be the norm
– increasing numbers of families were headed by
single parents; over a million marriages a year
ended in divorce; couples lived together
without getting married; the number of
illegitimate births rose steadily
• AIDS
– during the 1980s, the nation confronted its most
serious health crisis in decades
– in the early 1980s, scientists identified acquired
immune-deficiency syndrome (AIDS), disease
caused by the human immunodeficiency virus
(HIV), which destroyed the body’s defenses
against infection
– the disease spread when an infected person’s
bodily fluids came into contact with another
person’s
– HIV soon infected the nation’s blood banks
– the government responded slowly
– a nationwide campaign urged “safe” sex,
particularly the use of condoms
• The New Merger Movement
– across the nation in the 1980s there was a
movement toward concentration in business
– “Corporate raiders” raised cash by issuing highinterest bonds secured by the assets of the
companies they purchased
– twenty percent of Fortune 500 companies were
taken over, merged, or forced to go private
– some companies took steps to make themselves
less tempting to raiders by acquiring large debts
or unprofitable companies
– service on debt consumed half of the pre-tax
earnings of the nation’s corporations
• “A Job for Life”: Layoffs At Home
– corporations coped with debt in two ways; they
sold assets or they cut costs, usually through
layoffs
– IBM, the unofficial slogan of which had been
“a job for life,” eliminated more than a third of
its workforce, 80,000 jobs, between 1985 and
1994
– corporations took jobs abroad, where labor
costs were lower
– of even greater significance than the growing
corporate debt was the debt of the federal
government
– Reagan’s policies of tax cuts and increased
military spending produced huge annual federal
deficits
– when Reagan took office, the federal debt was
$900 million; eight years later, it exceeded $2.5
trillion
• A “Bi-Polar” Economy, a Fractured Society
– in spite of the corporate and governmental debt,
the economy began to gain strength in 1982 and
by the late 1980s was growing at a rate
unparalleled since the 1960s
– prices declined, even though the volume of
business was growing; the stock market soared
– many economists considered the run-up of
stock prices excessive, and their misgivings
were seemingly confirmed when the DowJones industrial average fell 508 points on a
single day in 1987
– however, stock prices quickly recovered and
embarked on another period of dramatic growth
– the economy was undergoing a fundamental
transformation
– even as the manufacturing industries of the
“rust belt” declined, new industries based on
technology sprung up in places like the “Silicon
Valley” of California
– by the end of the Reagan years, job
opportunities and wages were declining in
traditional heavy industry; although the older
corporations that survived the shake-out were
more competitive in the global market
– high-tech and service industries provided
opportunities for entrepreneurs
– American society was becoming increasingly
polarized as well
– both the changing economy and governmental
policy benefited the affluent disproportionately
and hit the unskilled or semi-skilled the hardest
• The Iran-Contra Arms Deal
– the public seemed willing to credit the Reagan
administration for the nation’s successes and
absolve it of the nation’s failures
– two initiatives in foreign policy, however,
seriously hampered the effectiveness of the
administration
– in 1984, Congress forbade the expenditure of
federal funds to aid the Nicaraguan contras
– in the Middle East, Iran and Iraq had been
engaged in a bloody war since 1980
– further, many blamed Iran for the holding of a
number of Americans hostage by terrorists in
Lebanon
– Reagan opposed bargaining with terrorists, but
he wanted to find a way to free the hostages
– during 1985, he made a decision to allow the
indirect shipment of arms to Iran by way of
Israel
– when this failed to work, he authorized the
secret sale of American weapons directly to
Iranians
– Marine Colonel Oliver North, an aide to the
president’s national security advisor, Admiral
John Poindexter, devised a plan to supply the
Contras without directly using federal funds
– he used profits from the arms sales to Iran to
provide weapons for the contras
– disclosure of this “deal” led to Senate hearings,
court trials, and the resignations of many
involved
– although he remained personally popular,
Reagan’s influence with Congress and his
reputation as a leader plummeted
– Reagan’s success derived from his ability to
articulate, simply and persuasively, a handful of
concepts, including the evil nature of the Soviet
Union and the need to get government off
people’s backs
– in doing so, he created a climate conducive to
political change