By giving Ronald Reagan an overwhelming election victory,
the American public had expressed a desire for change in the
style of the nation's leadership. Crises such as the taking of
American hostages by Iran-and the failure of an attempt to
rescue them-had contributed to a general perception that the
Carter Administration was caught by events rather than
directing them. In July 1979 President Carter failed to dispel that
perception when he spoke to the nation about its "crisis of
confidence" concerning the future. By contrast, Reagan--as a
campaigner and as President--exuded full-speed-ahead confidence
in the United States, himself and his own conservative world
view. Throughout his Presidency, he demonstrated the ability to
instill in Americans pride for their country and a sense of
optimism about the future.
Several dramatic events during the first few months of the Reagan Presidency seemed to validate this new spirit. Within minutes of his taking the oath of office on January 21, 1981, following arduous negotiations by the outgoing Carter Administration, the remaining 52 American hostages in Iran were released and returned to a tumultuous national welcome. In March, Reagan survived an assassination attempt, and a month later, the United States successfully launched the first orbital flight of the reusable space shuttle Columbia, initiating a new era in space operations.
During his campaign, Reagan stressed such traditional
American values as individualism,
free enterprise and
democracy. But if there was a central theme to Reagan's national agenda,
it was his belief that the federal government had become too big.
"Government is not the solution to our problem.
Government is
the problem," Reagan declared in his First Inaugural Address.
Within a month of taking office, Reagan began a drastic
reshaping of the federal budget, directed largely at domestic-spending
programs. Although the President insisted that the cuts were
directed at "waste" rather than social "safety-net" programs,
critics accused him of being insensitive to the needs of the less
fortunate. The President argued, however, that individual
initiative and hard work were the keys to a better life for Americans.
At the same time, the President launched an offensive on what he considered the excessive regulation of business. His supporters claimed that unnecessary regulations decreased the competitiveness of U.S. firms by increasing production costs. His critics argued that regulations were needed to ensure safety, and to protect the consumer and the environment.
Reagan's domestic program was rooted in his belief that the nation would grow and prosper if the power of the private economic sector were unleashed. A proponent of"supply-side" economics, a theory which holds that a greater supply of goods and services will lead to economic growth, Reagan sought large tax cuts to promote greater consumer spending, saving and investment. Supply-side economists argued that a tax cut would lead to increased business investment, increased earnings, and --through taxes on these earning--increased government revenues. Despite a slim Republican majority in the Senate, and a House of Representatives controlled by the Democrats, President Reagan succeeded during his first year in office in enacting the major components of his economic program, including a 25-percent tax cut for individuals to be phased in over three years.
The Reagan Administration also sought and won significant increases in defense spending to modernize the nation's military. Even with cuts in social spending, however, the increased military budget--combined with a tax cut--resulted in the federal government spending more than it received in revenues each year. Federal budget deficits soared to over $100,000 million in 1982-more than three times the largest deficit under the Carter Administration. By 1988 the national debt reached a record $2.3 million million ($2.3 trillion).
But in 1981 the administration's immediate problem was stagnant economic growth, high inflation and soaring interest rates. The nation endured a deep recession throughout 1982. This, combined with falling oil prices, helped to curb the runaway inflation. By 1983 the economy had rebounded, and the United States entered into one of the longest periods of sustained economic growth since World War II. The annual inflation rate remained between three and five percent from 1983 through 1987, except in 1986 when it fell to just under 2 percent --the lowest level in decades. The nation's gross national product (GNP), a measure of the output of all goods and services, grew from $2,732 thousand million in 1980 to $4,527 thousand million in 1987; and from 1982 to 1987 the U.S. economy created more than 13 million new jobs.
President Reagan's unflagging optimism, his quick wit and his ability to celebrate the achievements and aspirations of the American people, remained a sustaining element throughout his two terms in office. He was a figure of reassurance and stability for many Americans. Despite his propensity for misstatements, Reagan was known as the "Great Communicator," primarily for his mastery of television. Although Reagan rose to political prominence in the turbulent 60s, he had long been a familiar figure as a Hollywood actor in scores of motion pictures, and later, in television. For many, he embodied the remembered prosperity and relative social tranquility of the 1950s-an era dominated by President Dwight D. Eisenhower, whose genial public personality also evoked widespread popularity.
Presiding, like Eisenhower, over a period of relative peace and prosperity at the end of his first term, President Reagan and Vice President George Bush overwhelmingly won reelection in 1984, carrying 49 of 50 states in defeating the Democratic Party ticket of Walter Mondale, Vice President under Jimmy Carter, and Geraldine Ferraro, a member of the House of Representatives from New York.
Economic trends were by no means uniformly positive in the I980s, however. Like most other nations, the United States was increasingly tied to the global economy. Huge federal deficits meant increased government borrowing at unusually high interest rates. High interest rates kept international demand for dollars strong and the dollar's foreign exchange value high. In turn, the strong U.S. dollar-which only began to decline in value in the mid-1980s-made U.S. goods expensive abroad and imports relatively cheap at home. As a result, the United States registered an ominously large and growing trade deficit. In 1980 the annual U.S. merchandise trade deficit was $25,500 million; by 1986 it had ballooned to $144,500 million.
In one sense, the imbalance in imports over exports marked the success of an open postwar trading system, championed by the United States, that had progressively lowered tariffs and other trading barriers. However, American industry, long dominant in the world economy, suddenly found itself in the position of competing for markets at home and abroad in basic products such as grain and steel, as well as in advanced technology such as electronics and computers.
Farmers were especially hard hit by depressed crop prices and loss of export markets, which left them unable to pay off the high-interest loans that they had incurred in the 1970s when incomes were higher. As a result, the rural economies of many midwestern farm states were severely depressed. In 1985, the federal government enacted a farm law aimed at improving the international competitiveness of U.S. agricultural products by making price supports for basic farm commodities more flexible.
The nation's response to the overall trade issue was more ambivalent. Many Democrats, with strong support from labor unions, called for legislation establishing quotas and higher tariffs to protect domestic manufacturing jobs being lost to foreign competition. The Reagan Administration, philosophically committed to the principle of free trade, resisted such broad-scale protectionist responses, and resorted instead to informal restrictions to help individual industries hurt by an influx of imports. Some of these restrictions, such as voluntary import restraints on Japanese cars, were particularly controversial because the protection was not tied to any adjustment plan on the part of American producers. At the same time, the United States signed a historic free-trade agreement with Canada in 1988, which will eliminate all tariffs and most other trade barriers over 10 years. Government and business leaders alike called for renewed efforts to make American industry more efficient and competitive, and aided by a declining dollar, U.S. exports did grow substantially in the late 80s.
In 1988, Congress approved and President Reagan signed a comprehensive trade bill aimed at opening foreign markets to U.S. exports. Its provisions expanded the administration's authority to negotiate bilateral and multilateral trade agreements, and required that an industry seeking relief from imports prove that assistance would enable it to make "positive adjustment" by becoming more competitive or shifting into a more productive business.
The trade deficit, the overvalued dollar and the federal budget deficit transformed the domestic political debate during Reagan's second term and the new Bush Administration: Few political leaders, even liberals, advocated major new domestic-spending programs. Instead, Congress enacted the Gramm-Rudman-Hollings Act in 1985 to require by law a progressive reduction in the federal deficit. A year later, Congress passed a far-reaching tax reform program designed to make the tax system simpler and fairer by eliminating most tax benefits for special interests. President Bush, who had pledged "no new taxes" during his campaign, could propose only modest funding increases for his highest priority domestic initiatives to combat drug abuse, clean up the environment and upgrade American education.
In foreign policy, President Reagan sought a more assertive role for the nation, and Central America provided an early test. The United States confronted a guerrilla insurgency in El Salvador that threatened to topple the government, and a Sandinista regime in Nicaragua, which the administration believed to be intent on establishing a Marxist dictatorship to replace the rightwing Somoza dictatorship. In El Salvador, the administration responded with a program of economic aid and military training to help the government in stemming guerrilla attacks. The United States also backed democratic forces in El Salvador intent on reducing killings and other human rights violations by rightwing death squads, and actively encouraged the transition to an elected democratic government under Napoleon Duarte. U.S. support helped stabilize the government, but the level of violence in El Salvador remained undiminished. In November 1989, guerrilla forces launched massive attacks in the capital of San Salvador and other cities throughout the country; murders linked to alleged right-wing death squads increased as well.
U.S. policy toward Nicaragua was much more controversial. Nicaragua rejected U.S. demands for cutting its military ties to Cuba and the Soviet Union and opening up its political system to democratic reforms. Regional peace efforts under the auspices of other Latin American nations (the "Contadora process") ended in failure, and the focus of administration efforts shifted to support for the anti-Sandinista resistance, known as the contras. Following intense political debate over this policy, the Congress ended all military aid to the contras in October 1984, but continued humanitarian assistance. Under administration pressure, Congress reversed itself in the fall of 1986, and approved $100 million in military aid for the contras. However, a relative lack of success on the battlefield, charges of human rights abuses, and the revelation that funds from secret Iranian arms sales had been diverted to the contras undercut political support in Congress for continuing military aid to the anti-Sandinista guerrillas.
With its Nicaraguan policy at an impasse, the Reagan Administration declared its support for the 1987 Central American peace plan. The plan, proposed by President Oscar Arias of Costa Rica, called for amnesty for anti-government insurgents, an end to outside support for guerrilla forces,and democratization throughout the region. The Bush Administration abandoned any effort to secure military aid for the contras, although it pushed for non-military assistance that would keep the contras intact until democratic elections scheduled for February 1990. The Bush Administration also sought funding from Congress for the opposition political coalition contesting the election against the Sandinistas.
Meanwhile, a new foreign policy impasse arose in Panama, where the United States refused to recognize the regime of General Manuel Noriega, who ousted the elected president. Complicating the issue was Noriega's indictment by a U.S. grand jury on drug trafficking charges-at a time when polls indicated that Americans considered drug abuse the nation's number one domestic problem. Despite intensive diplomatic efforts, the Reagan Administration failed to find a way of removing Noriega from power. In the first year of the Bush Administration, the United States refrained from providing military support for a coup aimed at ousting Noriega, choosing instead to seek a solution through diplomacy, economic pressure, and the collective efforts of the Organization of American States.
The Reagan Administration was more fortunate in witnessing a return to democracy throughout Latin America, in nations from Guatemala to Argentina. The emergence of democratically elected governments was not limited to Latin America, however; in Asia, the "people power" campaign of Corazon Aquino overthrew the dictatorship of Ferdinand Marcos, and elections in Korea ended decades of military rule.
By contrast, South Africa remained intransigent in the face of the administration's efforts to encourage an end to racial apartheid through the controversial policy of "constructive engagement." In 1986, frustrated at the lack of progress, the U.S. Congress overrode Reagan's veto and imposed a set of economic sanctions on South Africa. A number of U.S. companies also announced that they were divesting themselves of their South African holdings.
Only in December 1988, in the last weeks of the Reagan Administration, did years of patient U.S. mediation, conducted primarily by Assistant Secretary of State for Africa Chester Crocker, contribute to a potentially historic peace settlement for the territory of Namibia in southern Africa. The agreements, signed by South Africa, Angola and Cuba, called for the phased withdrawal of Cuban troops from Angola, democratic elections (held in November 1989), the withdrawal of all South African troops, and independence for Namibia.
Despite its outspoken anti-communist rhetoric, the Reagan Administration's direct use of U.S. military force was restrained and limited. On October 25, 1983, U.S. forces landed on the Caribbean island of Grenada after an urgent appeal for help by neighboring countries. The action followed the assassination of Grenada's leftist Prime Minister by members of his own Marxist-oriented party. After a brief period of fighting, U.S. troops captured hundreds of Cuban military and construction personnel and seized caches of Soviet-supplied arms. In December 1983, the last American combat troops left Grenada, which held democratic elections a year later.
By contrast, military efforts in Lebanon, where the United States was attempting to bolster a moderate, pro-Western government, ended tragically, when 241 American Marines were killed in a terrorist bombing. In April 1986, U.S. Navy and Air Force planes struck targets in Tripoli and Benghazi, Libya, in retaliation for Libyan-instigated terrorist attacks on U.S. military personnel in Europe.
In the Persian Gulf, the United States confronted Iran to keep vital oil-shipping lanes open during the protracted Iran-Iraq War. U.S. forces retaliated for Iranian mining operations in the Gulf, and for a missile attack on an American-flag vessel. Initially, the United States had responded to a request from Kuwait for protection of its tanker fleet; but eventually the United States, along with naval vessels from Western Europe, escorted convoys of tankers and other neutral vessels traveling up and down the Gulf. The convoys succeeded in keeping the sea lanes open. However, a number of lives were lost through tragic errors. Thirty-seven American sailors died aboard the Navy frigate Stark in May 1987, for example, after the ship was struck by missiles fired in error by an Iraqi jet. In July 1988, the USS Vincennes mistakenly shot down an Iranian civilian airliner, killing all 290 persons on board.
U.S. diplomatic efforts in the Arab-Israeli conflict were largely stalemated, although U.S. Secretary of State George Shultz attemped intensive diplomacy during the final year of the Reagan Administration. On December 14, Secretary Shultz announced that the United States would open a "substantive dialogue" with the Palestine Liberation Organization (PLO) following its acceptance of three U.S. conditions: acceptance of key U.N. Security Council resolutions 242 and 338, recognition of Israel's right to exist and a renunciation of terrorism. The Bush Administration maintained the PLO dialogue, despite vigorous Israeli objections. In addition, Secretary of State James Baker attempted to revitalize American diplomacy in the Middle East with proposals to initiate Israeli-Palestinian talks on Palestinian elections leading to negotiations, an interim period of self-rule for Palestinians, and eventually final status negotiations for the West Bank and Gaza.
U.S. relations with the Soviet Union during the Reagan years fluctuated between political confrontation and far-reaching arms control agreements. Two events increased U.S.-Soviet tensions: the suppression of the Solidarity labor movement in Poland in December 1981, and the destruction of an offcourse civilian airliner, Korean Airlines Flight 007, by a Soviet jet fighter on September 1, 1983. The United States also condemned the continuing Soviet occupation of Afghanistan and provided aid to the mujahidin resistance there.
Nevertheless, security issues remained at the center of the U.S.-Soviet relationship. Despite protests by a vocal anti-nuclear movement on both sides of the Atlantic, the United States, implementing a 1979 NATO decision, began deploying single-warhead Pershing II and ground-launched cruise missiles in Western Europe at the end of 1983 to counter Soviet triple-warhead SS-20 missiles capable of striking Western Europe from the Soviet Union. And on March 23, 1983, in one of the most hotly debated policy decisions of his Presidency, Reagan announced the Strategic Defense Initiative (SDI) research program to explore advanced technologies, such as lasers and high-energy projectiles, that could defend against nuclear ballistic missiles.
In November 1985 Reagan held a summit meeting with the new Soviet leader, Mikhail Gorbachev, in Geneva. They agreed in principle to seek 50-percent reductions in strategic offensive nuclear arms as well as an interim agreement on intermediaterange nuclear forces (INF), but found no common ground on the issue of SDI. A year later, Reagan and Gorbachev met at a hastily arranged summit in Reykjavik, Iceland. However, sweeping but tentative agreements on nuclear arms foundered on the SDI issue. A related dispute arose over whether the SALT I ABM Treaty, signed in 1972, permitted development and testing of advanced anti-ballistic missile systems. Despite the impasse on SDI, the United States and Soviet Union entered into an intensive phase of arms negotiations.
In December 1987, President Reagan and General Secretary Gorbachev signed the Intermediate-Range Nuclear Forces (INF) Treaty, which provided for the elimination of all INF missiles with a range of 500 to 5,500 kilometers, coupled with unprecedented provisions for on-site inspections. Progress on reducing strategic nuclear weapons-ICBMs, submarine-launched missiles and heavy bomber-proved more difficult, in part because of complicated issues involving mobile missiles, and because the United States and Soviet Union were unable to cut the Gordian knot of strategic defenses (SDI). In the early months of the Bush Administration, the focus of arms negotiations shifted to conventional forces, with both NATO and the Warsaw Pact submitting proposals for deep cuts in tanks, artillery, troops and other weaponry deployed in Europe.
The U.S.-Soviet dialogue continued to broaden and deepen during the first year of the Bush Administration, at a time of ferment and remarkable political change in the Soviet Union and in Eastern Europe symbolized most eloquently by the opening of the Berlin Wall in November 1989. In an event emblematic of this new relationship, Presidents Bush and Gorbachev met aboard U.S. and Soviet naval vessels off the coast of Malta in December 1989 for two days of wide-ranging discussions on bilateral and international issues.
In space, the United States suffered a shocking setback. On January 28, 1986, after 24 successful shuttle flights, the space shuttle Challenger exploded 73 seconds after takeoff, killing six astronauts and a schoolteacher who was to be the first ordinary citizen flown into space. The manned space flight program was halted while a special investigative panel determined the cause -faulty seals on the shuttle's solid rocket boosters-then began an exhaustive review and redesign program before the resumption of shuttle flights.
The Challenger tragedy was a reminder of the limits of technology at a time when another technological revolution, in computers, was rapidly transforming the way in which millions of Americans work and live. Estimates were that, by mid-decade, Americans possessed more than 30 million computers.
The Reagan Administration suffered a political defeat in the November 1986 congressional elections when the Democrats regained majority control of the U.S. Senate. Nevertheless, the most serious issue confronting the administration was the revelation that the United States had secretly sold arms to Iran in an attempt to win freedom for American hostages held in Lebanon by radical organizations controlled by the Khomeini government. Investigation also revealed that funds from the arms sales had been diverted to the Nicaraguan contras during a period when Congress had prohibited such military aid.
The ensuing Iran-contra hearings before a joint House-Senate committee examined issues of possible illegality as well as the broader question of defining American foreign policy interests in the Middle East and Central America. In a larger sense, the Iran-contra hearings, like the celebrated Senate Watergate hearings 14 years earlier, addressed fundamental questions about the public's right to know, and the proper balance between the executive and legislative branches of government.
The United States suffered an economic setback on October 19, 1987, so-called "black Monday," when the value of stocks tumbled 22 percent on Wall Street-immediately bringing back memories of the fabled stock market crash of 1929, which was followed by the Great Depression of the I930s. The causes of the crash included anxiety about U.S. international trade and federal budget deficits, and a new stock market fad known as "program trading," in which computers automatically ordered the buying or selling of a large volume of shares when certain circumstances occurred.
Nevertheless, the nation recovered in a remarkably short time. Although many Americans turned from the stock market to safer forms of investment, a recession did not materialize. In fact, economic growth continued, with the unemployment rate dropping to roughly 6.2 percent in 1987, and then falling to a 14-year low of 5.2 percent in June 1988.
In late 1988, the United States successfully launched a redesigned space shuttle Discovery to deploy a satellite in the first shuttle flight since the Challenger tragedy. Then, less than six months into the Bush Administration, the shuttle Atlantis deployed the space probe Magellan, whose advanced radar systems will map the sweltering, cloud-covered surface of Venus; and in October 1989, Atlantis launched Galileo, which will orbit Jupiter and drop a parachute probe into the planet's gravity-crushing atmosphere. But these advanced interplanetary probes were almost overshadowed by a relatively small, unsophisticated space probe launched in 1977, Voyager 2, which in August 1989 beamed back remarkable images of the planet Neptune and its moons. Voyagers 1 and 2, which earlier flew past Jupiter, Saturn and Uranus, provided scientists with data that they will be studying for years, if not decades. The success of the Voyager probes, together with Magellan and Galileo, have opened a new era in interplanetary space science. By 1990, the United States hopes to orbit the Hubble Space Telescope, which will peer more deeply into space-and time-than any previous telescope. Later in the decade, the United States plans to assemble, in orbit, a permanent, internationally operated space station with crews from the United States, Japan and the European Space Agency.
President Reagan enjoyed unusually strong popularity at the end of his second term in office, but under the terms of the U.S. Constitution could not run again in 1988. His political heir, the Vice President during all eight years of his Presidency, George Bush, benefited greatly from Reagan's popularity. Born and raised in New England, Bush served as a fighter pilot in the U.S. Navy during World War II. After the war, Bush built his reputation as a businessman in the Texas oil industry. He then went on to become one of the nation's most experienced politicians--serving as a Congressman, ambassador to the United Nations, envoy to China, chairman of the Republican National Committee and director of the Central Intelligence Agency.
In 1988 Bush defeated the
Democratic Party's presidential
nominee, Massachusetts Governor Michael Dukakis, by a wide
margin-and thus became the first sitting Vice President since
Martin Van Buren in 1836 to be elected directly to the
Presidency. Unlike Bush, who won the Republican Party nomination
early in the cycle of party primaries and caucuses, Dukakis
needed more time to overcome his rivals for the the Democratic Party
nomination. Dukakis' closest competitor, the Reverend Jesse
Jackson
, a prominent black leader who made his name in the civil
rights movement, first ran for President in 1984. Jackson
expanded his political following during the 1988 campaign by
creating a "Rainbow Coalition" of blacks, Hispanics and
disadvantaged whites, and held onto his delegates until the Democratic
National Convention.
President Bush's campaign promised a continuation of the Reagan Administration's economic policies, which had brought economic prosperity. In foreign affairs, he claimed that his experience in public service would support a strong national defense. He echoed some of Reagan's popular "new right" positions on social issues such as his strong stand against abortion, while quieting some of Reagan's critics with a call for a "kinder, gentler nation," and by stressing his commitment to being the "education president."
In the balloting, Bush finished with a 54-46 popular vote margin and carried 40 states to gain a 426-112 electoral vote victory. Congress, however, remained under Democratic control, as the new administration, and the nation, faced the challenges of a new decade.