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Originally Posted by Oerdin
No, no it didn't. Most of you seem to have not been alive at the time so I'll enlighten you. The big problem in the late 1970's was inflation due to high oil prices which tanked the economy along with low interest rates as the Fed tried to get the economy moving again. This was the so called stag-flation because instead of growing in absolute terms most businesses (especially heavy industry) spent its time trying to figure out how to use less energy (especially expensive foreign oil).
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No, that is incorrect. Inflation emerged following the end of the Vietnam War in the early 70s. The entirety of 1974 and half of 1975 saw double digit inflation. Inflation remained elevated well before the 1980 crisis.
And the problem facing heavy industry was a lack of energy, instead of trying to utilize energy efficiency, many steel mills, auto plants, and mineral extraction sites shut down completely. At the same time, the US domestic steel market was flooded with cheap Chinese steel. It was during this period in the late 70s that the so called "Rust Belt" formed in the Midwest.
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Originally Posted by Oerdin
Carter appointed Paul Volker as head of the Fed as Volker was known as the leading economist known to fight inflation even though Volker said the shock would hurt economy very deeply in the short run but greatly improve long term growth potentiometer. Volker raised interest rates from near zero all the way up to 13.5% thus bringing the economy to a screeching halt but also killing inflation which he saw as the worst economic threat. This move pretty much killed Carter's chances for reelection but it also set the stage for economic expansion in the 1980's. It was so obvious that Volker was responsible for ending stag-flation that even Reagan was forced to keep Volker as the Fed Chairman when wall st balked at Reagan's trial balloons to replace Volker with a supply sider.
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Interest rates were never near zero, it ranged between 4-6% throughout the late 70s. It peaked in the 20% range in late 1981, and remained high through the very depth of the early 80s recession. Rates stayed in the double digit range until 1983.
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Originally Posted by Jill61
They also seem to have forgotten about, or never bothered to learn about, both the '80s Recession or the Savings & Loan Crisis, which Bill Clinton had to try to clean up.
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Bill Clinton did not do anything about the early 80s recession or the S&L crisis. By the time he took office, the economy had been growing for nearly 2 years, and the unemployment rate had been falling for several months. No president has ever inherited a better economy from their predecessor.
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Originally Posted by Memphis1979
Second, the Soviet Union only adjusted its military spending during the Reagan years by 0.4% and this spending increase was planned ahead of time as a response to the military spending of the Carter Administration. If you want to argue that America outspent the Soviet Union, Carter's your man, not Reagan.
Finally, the “Reagan Victory” theory ignores the changes in his policies towards the Soviet Union. Reagan was only a hard-line anti-communist for the first few years of his presidency. The famous “Evil Empire” speech was from 1983. The rest of his Presidency was spent trying to reconcile with the Soviets.
Ronald Reagan Didn’t Win the Cold War - The Intrepid |
I have seen a lot of people takes some weird leaps to try and trash Reagan's image, but this is probably the most outlandish example.
What you are basically saying is, there was no military buildup under Reagan. By the mid-80s, the USSR was spending 20% of GDP on its military. In 1981 alone they budgeted a 50% increase in defense spending for the next year. Even so, it would be hard to avoid the point that the Soviets were at war in Afghanistan throughout the same period, so at least part of that money would have come along anyway.
Second, Operation Cyclone was in full effect, where the US armed Afghans in their fight against the USSR. For every $1 million we spent on weapons, the Soviets would lose $10 million to $20 million in equipment. Couple that with encouraging several OPEC nations to increase oil production, and there goes their principle source of income. By 1985 the USSR had reached an unsustainable debt level thanks to these policies.
In the early 80s we were essentially at 1950s style relations with the USSR. Weapons buildups, constant threat of nuclear war, and tensions were high, especially after events such as the downing of KAL 007. By the end of the 80s, Reagan and Gorbochav were on a first name basis with each other, the USSR joined two major world economic forums, and both had arranged several arms reduction treaties. I do not care how much you detest Reagan, that is a significant accomplishment.
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