The 1980s
A NEW GLOBAL ERA: 1980–PRESENT
The history of the United States since 1980 is not a focus of the Advanced Placement U.S. History examination. The exam will probably have only a couple of multiple-choice questions from this chapter, and the College Board assures students that no DBQ or essay question “will deal exclusively with this period.” However, an understanding of the last two decades of the 20th century provides perspective for the postwar years, especially for the Cold War and domestic politics and policies. This final chapter will survey the key events from 1980 both for exam preparation and to complete our review of U.S. history.
Among the important changes during the 1980s and 1990s were the collapse of communism in Eastern Europe, the breakup of the Soviet Union, and the end of the Cold War. In the post-Cold War world, older ethnic and religious conflicts reemerged to threaten the peace with civil wars and terrorism. On the domestic scene, the conservative agenda of the Reagan administration (1981– 1989)—for a stronger military, lower taxes, fewer social programs, and traditional cultural values—helped the Republicans become the majority party, which by 2003 controlled the White House and both houses of Congress.
The Rise of Conservatism
Even though Barry Goldwater was defeated in a landslide in the election of 1964, his campaign for the presidency marked the beginning of the resurgence of conservatism. The policies of presidents Nixon and Ford and the writings of the political commentator William F. Buckley, Jr., and the economist Milton Friedman gave evidence in the 1970s of a steady shift to the right, away from the liberalism of the sixties. By 1980, a loose coalition of economic and political conservatives, religious fundamentalists, and political action committees (PACs) had become a potent force for change. These groups were opposed to big government, New Deal liberalism, gun control, feminism, gay rights, welfare, affirmative action, sexual permissiveness, abortion, and drug use, which, in their view, were responsible for undermining family and religious values, the work ethic, and national security.
Leading Issues
By 1980, various activists had taken the lead in establishing a conservative agenda for the nation, which included such diverse causes as lower taxes, improved morals, and reduced emphasis on affirmative action.
Taxpayers’ revolt. In 1978, California voters led the revolt against high taxes by passing Proposition 13, a measure that sharply cut property taxes. Nationally, conservatives promoted economist Arthur Laffer’s belief that tax cuts would promote economic growth. Two Republican members of Congress, Jack Kemp and William Roth, proposed legislation to reduce federal taxes by 30 percent, which became the basis for the Reagan tax cuts.
Moral revival. Moral decay was a weekly theme of televangelists such as Pat Robertson, Oral Roberts, and Jim Bakker, who by 1980 had a combined weekly audience of between 60 and 100 million viewers. Religion became an instrument of electoral politics, when the Moral Majority, founded by Virginia evangelist Jerry Falwell, financed campaigns to unseat liberal members of Congress. Religious fundamentalists attacked “secular humanism” as a godless creed taking over public education and also campaigned for the return of prayers and the teaching of the Biblical account of creation in the public schools. The legalization of abortion in the Roe v. Wade (1973) decision sparked the right- to- life movement that joined together Catholics and fundamentalist Protestants, who believed that human life began at the moment of conception.
“Reverse discrimination.” In 1965, President Johnson had committed the U.S. government to a policy of affirmative action to ensure that underprivileged minorities and women would have equal access to education, jobs, and promo- tions. Suffering through years of recession and stagflation in the 1970s, many white males blamed their troubles on the “reverse discrimination” imposed by the government’s support of racial and ethnic quotas. The Supreme Court ruled in their favor in the landmark case of Regents of the University of California v. Bakke (1978), by deciding that college admissions could not be based on race alone. After this decision, conservatives intensified their campaign to end all quotas and preferential treatment based on race and ethnic background.
Ronald Reagan and the Election of 1980
Ronald Reagan, a well-known movie and television actor, gained fame among Republicans as an effective political speaker in the 1964 Goldwater campaign. He went on to be elected the governor of California, the nation’s most populous state. In 1976 Reagan came close to taking the party’s nomination from President Ford. By this time, he was widely recognized as the most effective spokesperson for conservative positions. Handsome and vigorous in his late sixties, he proved a master of the media and was seen by millions as a likable and sensible champion of average Americans.
Campaign for president, 1980. Senator Edward Kennedy’s challenge to President Carter for the Democratic nomination left Carter battered in the polls. As the Republican nominee, Reagan attacked the Democratic party’s big- government solutions to problems and the loss of U.S. prestige abroad. (Throughout the campaign, American hostages remained in the hands of Iranian radicals.) Reagan also pointed to a “misery index” of 28 (rate of inflation added to the rate of unemployment) and concluded his campaign by asking a huge television audience, “Are you better off now than you were four years ago?” The voters’ rejection of Carter’s presidency and the growing conservative mood gave Reagan 51 percent of the popular vote and almost 91 percent of the electoral vote. Carter received 41 percent of the popular vote, while a third candidate, John Anderson (a moderate Republican running as an independent), received 8 percent.
Significance. Reagan’s election broke up a key element of the New Deal coalition by taking over 50 percent of the blue-collar vote. For the first time since 1954, the Republicans gained control of the Senate by defeating 11 liberal Democrats targeted by the Moral Majority. The Republicans also gained 33 seats in the House, which when combined with the votes of conservative southern Democrats would give them a working majority on many key issues. Political analysts marked the 1980 election as the end of a half century of Democratic dominance of Congress.
The Reagan Revolution
On the very day that Reagan was inaugurated, the Iranians released the 52 American hostages, giving his administration a positive start. Two months later, the president survived a serious gunshot wound from an assassination attempt. Reagan handled the crisis with such humor and charm that he emerged from the ordeal as an even more popular leader. He pledged that his administration would lower taxes, reduce government spending on welfare, build up the U.S. armed forces, and create a more conservative federal court. He delivered on all four promises—but there were some costs.
Supply-Side Economics (“Reaganomics”)
The Reagan administration advocated supply-side economics, arguing that tax cuts reduced government spending, would increase investment by the private sector, and lead to increased production, jobs, and prosperity. This approach contrasted with the Keynesian economics long favored by the Democrats, which relied on government spending to boost consumer income and demand. The supply-side theory reminded critics of the “trickle-down” economics of the 1920s, in which wealthy Americans prospered, and some of their increased profits and spending benefited the middle class and the poor.
Federal tax reduction. The legislative activity early in Reagan’s presi- dency reminded some in the media of FDR’s Hundred Days. Congress passed most of the tax cuts that Reagan asked for, including a 25 percent decrease in personal income taxes over three years. Cuts in the corporate income tax, capital gains tax, and gift and inheritance taxes guaranteed that a large share of the tax relief went to upper-income taxpayers. Under Reagan, the top income tax rate was reduced to 28 percent. At the same time, small investors were also helped by a provision that allowed them to invest up to $2,000 a year in Individual Retirement Accounts (IRAs) without paying taxes on this money.
Spending cuts. With the help of conservative southern Democrats (“boll weevils”), the Republicans cut over $40 billion from domestic programs, such as food stamps, student loans, and mass transportation. These savings were offset, however, by a dramatic increase in military spending. No cuts in Medicare or Social Security were passed, but the Social Security system was made more solvent by legislation that raised the retirement age and taxed benefits paid to upper-income recipients.
Deregulation
Following up on the promise of “getting government off the backs of the people,” the Reagan administration reduced federal regulations on business and industry—a policy of deregulation begun under Carter. Restrictions were eased on savings and loan institutions, mergers and takeovers by large corporations, and environmental protection. To help the struggling American auto industry, regulations on emissions and auto safety were also reduced. Secretary of the Interior James Watt opened federal lands for increased coal and timber production and offshore waters for oil drilling.
Labor Unions
Despite having once been the president of the Screen Actors Guild, Reagan took a tough stand against unions. He fired thousands of striking federal air traffic controllers for violating their contract and decertified their union (PATCO). Many businesses followed this action by hiring striker replacements in labor conflicts. These antiunion policies along with the loss of manufacturing jobs hastened the decline of union membership among nonfarm workers from over 30 percent in 1962 to only 12 percent in the late 1990s. In addition, the recession of 1982 and foreign competition had a dampening effect on workers’ wages.
Recession and Recovery
In 1982, the nation suffered the worst recession since the 1930s. Banks failed and unemployment reached 11 percent. At the same time, however, the recession along with a fall in oil prices reduced the double-digit inflation rate of the late 1970s to less than 4 percent. As the policies of Reaganomics took hold, the economy rebounded and beginning in 1983 entered a long period of recovery. The recovery, however, only widened the income gap between rich and poor. While upper-income groups and “yuppies” (young urban profession- als) enjoyed higher incomes and material benefits from a deregulated market- place, the standard of living of the middle class remained stagnant or declined during the 1980s and early 1990s. In the late 1990s, the middle class gained back some of its losses.
Social Issues
President Reagan followed through on his pledge to appoint conservative judges to the Supreme Court by nominating Sandra Day O’Connor, the first woman on the Court, as well as Antonin Scalia and Anthony Kennedy. Led by a new chief justice, William Rehnquist, the Supreme Court scaled back affirmative action in hiring and promotions and limited Roe v. Wade by allowing states to impose certain restrictions on abortion, such as requiring minors to notify their parents before having an abortion.
The Election of 1984
The return of prosperity, even if not fully shared by all Americans, restored public confidence in the Reagan administration. At their convention in 1984, Republicans nominated their popular president by acclamation. Among Democrats, Jesse Jackson became the first African-American politician to make a strong run for the presidency by seeking the support of all minority groups under the banner of the rainbow coalition. The Democratic majority, however, nominated Walter Mondale, Carter’s vice president, to be their presidential candidate and Representative Geraldine Ferraro of New York to be the first woman to run for vice president.
Reagan easily defeated the liberal Mondale, taking every state except Mondale’s home state of Minnesota. Two-thirds of white males voted for Reagan. Analysis of voting returns indicated that only two groups still favored the Democrats: African Americans and those earning less than $12,500 a year.
Budget and Trade Deficits
By the mid-1980s, Reagan’s tax cuts combined with large increases in military spending were creating federal deficits of over $200 billion a year. Over the course of Reagan’s two terms as president, the national debt tripled from about $900 billion to almost $2.7 trillion. The tax cuts, designed to stimulate investments, seemed only to increase consumption, especially of foreign-made luxury and consumer items. As a result, the U.S. trade deficit reached a staggering $150 billion a year. The cumulative trade imbalance of $1 trillion during the 1980s contributed to a dramatic increase in the foreign ownership of U.S. real estate and industry. In 1985, for the first time since the World War I era, the United States became a debtor nation.
In an effort to keep the federal deficit under control, Congress in 1985 passed the Gramm-Rudman-Hollings Balanced Budget Act, which provided for across-the-board spending cuts. Court rulings and later congressional changes kept this legislation from achieving its full purpose, but Congress was still able to reduce the deficit by $66 billion from 1986 to 1988.
Impact of Reaganomics
President Reagan’s two terms reduced restrictions on a free-market econ- omy and left more money in the hands of investors and higher income Ameri- cans. Reagan’s policies also succeeded in containing the growth of the New Deal-Great Society welfare state. Another legacy of the Reagan years were the huge federal deficits, which were to change the context of future political debates. With yearly deficits running between $200–$300 billion, it no longer seemed reasonable for either Democrats or Republicans to propose new social programs, such as universal health coverage. Instead of asking what new govern- ment programs might be needed, Reaganomics changed the debate to issues of what government programs to cut and by how much.
Foreign Policy During the Reagan Years
Reagan started his presidency determined to restore the military might and superpower prestige of the United States and to intensify the Cold War competition with the Soviet Union. He called the Soviet Communists “the evil empire” and “focus of evil in the modern world.” Reagan was prepared to use military force to back up his rhetoric. During his second term, however, he proved flexible enough in his foreign policy to respond to significant changes in the Soviet Union and its satellites in Eastern Europe.
Renewing the Cold War
Increased spending for defense and aid to anticommunist forces in Latin America were the hallmarks of Reagan’s approach to the Cold War during his first term.
Military buildup. The Reagan administration spent billions to build new weapons systems, such as the B-1 bomber and the MX missile, and to expand the U.S. Navy from 450 to 600 ships. The administration also increased spending on the Strategic Defense Initiative (SDI), an ambitious plan for building a high- tech system of lasers and particle beams to destroy enemy missiles before they could reach U.S. territory. Critics called the SDI “Star Wars” and argued that the costly program would only escalate the arms race and could be overwhelmed by the Soviets building more missiles. Although Congress made some cuts in the Reagan proposals, the defense budget grew from $171 billion in 1981 to over $300 billion in 1985.
Central America. In the Americas, Reagan supported “friendly” right- wing dictators to keep out communism and also worked to overthrow Marxist regimes such as the Sandinistas that had taken over Nicaragua in 1979. Large amounts of U.S. military aid went to the “contras,” antileftist rebels in Nicaragua who fought the Sandinistas in an attempt to seize power. In 1985, Democrats opposed to the administration’s policies in Nicaragua passed the Boland Amendment prohibiting further aid to the contras. In El Salvador, meanwhile, the Reagan administration spent nearly $5 billion to support the Salvadoran government against a coalition of leftist guerrillas. Many Americans protested the killing of more than 40,000 civilians, including American missionaries, by right-wing “death squads” with connec- tions to the El Salvador army.
Grenada. On the small Caribbean island of Grenada, a coup led to the establishment of a pro-Cuban regime. In October 1983, President Reagan or- dered a small force of marines to invade the island in order to prevent the establishment of a strategic Communist military base in the Americas. The invasion quickly succeeded in reestablishing a friendly government in Grenada.
Iran-contra affair. If Grenada was the notable military triumph of Reagan’s presidency, his efforts to aid the Nicaraguan contras involved him in a serious blunder and scandal. The so-called Iran-contra affair had its origins in U.S. troubles with Iran. Since 1980, Iran and Iraq had been engaged in a bloody war. Reagan aides came up with the plan—kept secret from the American public—of selling U.S. antitank and antiaircraft missiles to Iran’s government for its help in freeing the Americans held hostage by a radical Arab group. In 1986, another Reagan staff member had the “great idea” to use the profits of the arms deal with Iran to fund the contras in Nicaragua.
President Reagan denied that he had knowledge of the illegal diversion of funds—illegal in that it violated both the Boland Amendment and congressional budget authority. The picture that emerged from a televised congressional investigation was of an uninformed, hands-off president who was easily manipu- lated by his advisers. Reagan suffered a sharp, but temporary, drop in the popularity polls. He would leave office with his reputation intact as one of the most popular presidents of the 20th century.
Lebanon, Israel, and the PLO
Reagan’s foreign policy suffered a series of setbacks in the Middle East. In 1982, Israel (with U.S. approval) invaded southern Lebanon to stop PLO terrorists from raiding Israel. Soon the United States became involved in helping to evacuate the PLO to a safe haven and in providing peacekeeping forces to Lebanon in an effort to contain that country’s bitter civil war. In April 1983, an Arab suicide squad bombed the U.S. embassy in Beirut, killing 63 people. A few months later, another Arab terrorist drove a bomb-filled truck into the U.S. Marines barracks, killing 241 servicemen. In 1984, Reagan pulled U.S. forces out of Lebanon, with little to show for the effort and loss of lives.
Secretary of State George Schultz pushed for a peaceful settlement of the Palestinian-Israeli conflict by setting up a homeland for the PLO in the West Bank territories occupied by Israel since the 1967 war. Under American pres- sure, PLO leader Yassir Arafat agreed in 1988 to recognize Israel’s right to exist.
Improved U.S.-Soviet Relations
The Cold War intensified in the early 1980s as a result of both Reagan’s arms buildup and the Soviet deployment of a larger number of missiles against NATO countries. In 1985, however, a dynamic reformer, Mikhail Gorbachev, became the new Soviet leader. Gorbachev attempted to change Soviet domestic politics by introducing two major reforms: (1) glasnost, or openness, to end political repression and move toward greater political freedom for Soviet citi- zens, and (2) perestroika, or restructuring of the Soviet economy by introducing some free-market practices. To achieve his reforms, Gorbachev had to end the costly arms race and deal with a deteriorating Soviet economy.
In 1987, after two earlier attempts, Gorbachev and Reagan agreed to remove and destroy all intermediate-range missiles (the INF agreement). In 1988, Gorbachev further reduced Cold War tensions by starting the pullout of Soviet troops from Afghanistan. He also cooperated with the United States in putting diplomatic pressure on Iran and Iraq to end their war. By the end of Reagan’s second term, relations between the two superpowers had so improved that the end of the Cold War seemed at hand.
Assessing Reagan’s policy. The Reagan administration would claim that its military buildup forced the Soviet Union to concede defeat and abandon the Cold War. Others would give credit to George Kennan’s containment policies and to Gorbachev’s initiative. Regardless of what caused the Soviets to change their policy, President Reagan must be credited with responding to the opportunity to end the Cold War. By the time Reagan’s second term came to a close in 1988, many Americans wished he could continue for another four years, but the constitutional limit forced him into retirement. Ronald Reagan’s combination of style, humor, and patriotism had won over the electorate. As a leader, he changed the politics of the nation for at least a generation by bringing many former Democrats into the Republican party.
President George H. Bush and the End of the Cold War
The Cold War had threatened the very existence of the planet and of humankind. At the same time, ever since 1945, it had given clear purpose and structure to U.S. foreign policy. What would be the U.S. role in the world after the Cold War? George H. Bush, a former ambassador to the United Nations and director of the CIA (and the father of President George W. Bush), became the first president to define the U.S. role in the new era.
The Election of 1988
The Democrats regained control of the Senate in 1986 and hoped that the Iran-contra scandal and the huge deficits under Reagan would hurt the Republicans in the presidential race of 1988. Michael Dukakis, governor of Massachusetts, won the Democratic nomination and balanced the ticket by selecting Senator Lloyd Bentsen of Texas as his running mate. The Republican candidates were Reagan’s vice president, George H. Bush, and a young Indiana senator, Dan Quayle. Bush was no Reagan in front of the camera, but he quickly overtook an expressionless Dukakis by charging that the Democrat was soft on crime (for furloughing criminals) and weak on national defense. Bush also appealed to voters by promising not to raise taxes: “Read my lips—no new taxes.”
The Republicans won a decisive victory in November by a margin of 7 million votes. Once again, the Democrats failed to win the confidence of most white middle-class voters. Nevertheless, the voters sent mixed signals by returning larger Democratic majorities to both the House and the Senate. Americans evidently believed in the system of checks and balances, but unfortu- nately it often produced legislative gridlock in Washington.
The Collapse of Soviet Communism and the Soviet Union
The first years of the Bush administration were dominated by dramatic changes in the Communist world.
Tiananmen Square. In China during the spring of 1989, prodemocracy students demonstrated for freedom in Beijing’s Tiananmen Square. Television cameras from the West broadcast the democracy movement around the world. Under the cover of night, the Chinese Communist government crushed the protest with tanks, killing hundreds and ending the brief flowering of an open political environment in China.
Eastern Europe. Challenges to communism in Eastern Europe produced more positive results. Gorbachev declared that he would no longer support the various Communist governments of Eastern Europe with Soviet armed forces. Starting in Poland in 1989 with the election of Lech Walesa, the leader of the once outlawed Solidarity movement, the Communist party fell from power in one country after another—Hungary, Czechoslovakia, Bulgaria, and Romania. The Communists in East Germany were forced out of power after protesters tore down the Berlin Wall, the hated symbol of the Cold War. In October 1990, the two Germanys, divided since 1945, were finally reunited with the blessing of both NATO and the Soviet Union.
Breakup of the Soviet Union. The swift march of events and the national- ist desire for self-determination soon overwhelmed Gorbachev and the Soviet Union. In 1990 the Soviet Baltic republics of Estonia, Latvia, and Lithuania declared their independence. After a failed coup against Gorbachev by Communist hard-liners, the remaining republics dissolved the Soviet Union in December 1991, leaving Gorbachev a leader with no country. Boris Yeltsin, president of the Russian Republic, joined with nine former Soviet republics to form a loose confederation, the Commonwealth of Independent States (CIS). Yeltsin disbanded the Communist party in Russia and attempted to establish a democ- racy and a free-market economy.
End of the Cold War. Sweeping agreements to dismantle their nuclear weapons were one tangible proof that the Cold War had ended. Bush and Gorbachev signed the START I agreement in 1991, reducing the number of nuclear warheads to under 10,000 for each side. In late 1992, Bush and Yeltsin agreed to a START II treaty, which reduced the number of nuclear weapons to just over 3,000 each. The treaty also offered U.S. economic assistance to the troubled Russian economy.
Even as Soviet communism collapsed, President Bush, a seasoned diplo- mat, remained cautious. Instead of celebrating final victory in the Cold War, Americans grew concerned about the outbreak of civil wars and violence in the former Soviet Union. In Eastern Europe, Yugoslavia started to disintegrate in 1991, and a civil war broke out in the provinces of Bosnia and Herzegovina the need still existed for heavy defense spending and large numbers of U.S. military bases.
Invasion of Panama
Since the outbreak of the Cold War in the 1940s, U.S. intervention in foreign conflicts had been consistently tied to the containment of communism. In December 1989, U.S. troops were used for a different purpose, as Bush ordered the invasion of Panama to remove the autocratic General Manuel Noriega. The alleged purpose of the invasion was to stop Noriega from using his country as a drug pipeline to the United States. U.S. troops remained until elections established a more creditable government.
Persian Gulf War
President Bush’s hopes for a “new world order” of peace and democracy were challenged in August 1990 when Iraq’s dictator, Saddam Hussein, invaded oil-rich but weak Kuwait and threatened Western oil sources in Saudi Arabia and the Persian Gulf. President Bush successfully built a coalition of United Nations members to put pressure on Hussein to withdraw from Kuwait. A U.N. embargo against Iraq, however, had little effect. Bush won congressional approval for a military campaign to roll back Iraq’s act of aggression. In January 1991, in a massive operation called Desert Storm, over half a million Americans were joined by military units from 28 other nations. Five weeks of relentless air strikes were followed by a brilliant ground war conducted by U.S. General Norman Schwarzkopf. After only 100 hours of fighting on the ground, Iraq was forced to concede defeat.
Some Americans were disappointed that the United States stopped short of driving Saddam Hussein from power in Iraq. Nevertheless, after the victory, Bush enjoyed a boost in his approval rating to nearly 90 percent.
Domestic Problems
President Bush’s political future seemed secure based on his foreign policy successes, but a host of domestic problems dogged his administration.
Nomination of Clarence Thomas. The president’s nomination of Clarence Thomas to the Supreme Court to replace the retiring Thurgood Marshall proved extremely controversial. Thomas’s conservative views on judicial issues were attacked by African-American organizations, and charges of sexual harassment against him were widely believed by millions of women. Nevertheless, the Senate confirmed Thomas’ nomination.
Taxes and the economy. Americans were shocked to learn that the government’s intervention to save weak savings and loan institutions and to pay insured depositors for funds lost in failed S&L’s would cost the taxpayers over $250 billion. Also disturbing was the idea that federal budget deficits of over $250 billion a year added over $1 trillion to the national debt during the Bush presidency. Thousands of Republican voters felt betrayed when, in 1990, Bush violated his campaign pledge of “no new taxes” by agreeing to accept the Democratic Congress’ proposed $133 billion in new taxes. The unpopular tax law increased the top income tax rate to 31 percent and raised federal excise taxes on beer, wine, cigarettes, gasoline, and luxury cars and boats. Most damaging of all for Bush’s reelection prospects was a recession starting in 1990 that ended the Reagan era of prosperity, increased unemployment, and decreased average family income.
Political inertia. President Bush began his administration calling for “a kinder, gentler America” and declaring himself the “education president.” He did sign into law the Americans With Disabilities Act (1990), which prohibited discrimination against citizens with physical and mental disabilities in hiring, transportation, and public accommodation. Outside of this accomplishment, the president offered little in the way of domestic policy. In the midst of recession, he emphasized cuts in federal programs. This seemed to offer little hope to growing numbers of Americans left behind by the “Reagan revolution.”
The Clinton Years, 1993–2001: Prosperity and Partisanship
During the last years of the 20th century, the United States enjoyed a period of unrivaled economic growth and technological innovation. The end of the Cold War allowed Americans to focus more on economic and domestic issues. But, during this period, American politics became more divided, bitter, and scandal-driven.
Anti-Incumbent Mood
A stagnant economy, huge budget deficits, and political deadlock fueled a growing disillusionment with government, especially as practiced in the nation’s capital. The movement to impose term limits on elected officials gained popularity on the state level, but the Supreme Court ruled in U.S. Term Limits Inc. v. Thorton (1995) that the states could not limit the tenure of federal lawmakers without a constitutional amendment.
Another reflection of Americans’ disillusionment with Washington politics was the ratification in 1992 of the Twenty-seventh Amendment. First proposed by James Madison in 1789, this amendment prohibited members of Congress from raising their own salaries. Future raises could not go into effect until the next session of Congress.
The Election of 1992
As expected, George H. Bush was nominated by the Republicans for a second term. After a long career in public service, the president seemed tired and out of touch with average Americans, who were more concerned about their paychecks than with Bush’s foreign policy successes.
Bill Clinton, the then governor of Arkansas, emerged from the primaries as his party’s choice for president. The first member of the baby-boom generation to be nominated for president, Clinton proved an articulate and energetic campaigner. He presented himself as a moderate “New Democrat,” who focused on economic issues such as jobs, education, and health care, which were important to the “vital center” of the electorate. The strategy was known among his political advisers as: “It’s the economy, stupid!”
H. Ross Perot. Ross Perot, a Texas billionaire, entered the 1992 race for president as an independent. Able to use his own resources to finance a series of TV commercials, Perot appealed to millions with his anti-Washington, anti- deficit views. On election day, Perot captured nearly 20 percent of the popular vote for the best third-party showing since Theodore Roosevelt and the Bull Moose campaign of 1912.
Results. Despite the serious challenge from Perot, the front-runners still divided up all the electoral votes: 370 for Clinton (and 43 percent of the popular vote), 168 for Bush (37 percent of the popular vote). Clinton and his running mate, Senator Albert Gore of Tennessee, did well in the South and recaptured the majority of the elderly and blue-collar workers from the Republicans. In addition, the Democrats again won control of both houses of Congress. The new Congress better reflected the diversity of the U.S. population. Among its 66 minority members and 48 women was Carol Moseley-Braun of Illinois, the first African-American woman to be elected to the Senate.
Clinton’s First Term (1993–1997)
The early years of Bill Clinton’s presidency were marked by controversies over his cabinet nominations, his failed effort to lift the ban on homosexuals in the military, scandals in the White House travel office, and his connection to the failed Whitewater real estate deal in Arkansas.
Setbacks. During the first two years of the Clinton administration, the Republicans, by filibustering in the Senate, were able to kill the president’s economic stimulus package, campaign-finance reform, environmental bills, and health care reform. The president’s use of his wife, Hilary Rodham Clinton, as the chief architect of his program for universal health coverage backfired. The Clintons’ complicated proposal for managed health care ran into determined opposition from the insurance industry and small business organizations. By the end of 1994, the Republicans had managed to stop all the Democrats’ proposals for health care reform.
Early accomplishments. The Democratic Congress started out in 1993 by passing the Family and Medical Leave Act and the “motor-voter” law that enabled citizens to register to vote as they received their driver’s licenses. The Brady Handgun bill, which mandated a five-day waiting period for the purchase of handguns, was enacted. In 1994, Congress enacted Clinton’s Anti-Crime Bill, which provided $30 billion in funding for more police protection and crime-prevention programs. The legislation also banned the sale of most assault weapons, which angered the gun lobby. After protracted negotiation and com- promise, Congress passed a deficit-reduction budget that included $255 billion in spending cuts and $241 billion in tax increases. Incorporated in this budget were the president’s requests for increased appropriations for education and job training. Clinton also won a notable victory by signing the North American Free Trade Agreement (NAFTA), which created a free-trade zone with Canada and Mexico. Despite these accomplishments, Clinton’s apparent waffling on policies and eagerness to compromise seemed to confirm his negative image, as “Slick Willie.”
Republicans Take Over Congress
In the midterm elections of November 1994, the Republicans gained control of both houses of Congress for the first time since 1954. They benefited from the perception that the Democratic Congress was inept and dedicated to increasing taxes and federal regulations. President Clinton adjusted to his party’s defeat by declaring in his 1995 State of the Union address, “The era of big government is over.”
Zealous reformers. Newt Gingrich, the newly elected Speaker of the House, led the Republicans in an attack on federal programs and spending outlined in their campaign manifesto, “Contract with America.” While the president and moderates agreed with the goal of a balanced budget, Clinton proposed a “leaner, not meaner” budget. This confrontation resulted in two shutdowns of the federal government in late 1995, which many Americans blamed on an overzealous Congress. Antigovernment reformers were not helped by the mood after the bombing in 1995 of a federal building in Oklahoma City by militia-movement extremists. The bombing took 169 lives, the worst act of terrorism in the nation’s history until the attacks on September 11, 2001.
Balanced budget. Finally, in the 1996 election year, Congress and the president compromised on a budget that left Medicare and Social Security benefits intact, limited welfare benefits to five years under the Personal Responsibility and Work Opportunity Act, set some curbs on immigrants, increased the minimum wage, and balanced the budget. The spending cuts and tax in- creases made during Clinton’s first term, along with record growth in the economy, helped to eliminate the deficit in federal spending in 1998 and produced the first federal surplus since 1969. In his battle with the Republican Congress, President Clinton captured the middle ground by successfully charac- terizing the Republicans as extremists, and by taking over their more popular positions, such as balancing the budget and reforming welfare. He was also aided in the 1996 election by a fast-growing economy that had produced over 10 million new jobs.
The Election of 1996
Senator Bob Dole of Kansas, the majority leader of the Senate, became Clinton’s Republican opponent. His campaign, which proposed a 15 percent tax cut, never captured the voters’ imagination. Character attacks and massive campaign spending by both sides did little to bring more people to the polls, and the turnout dropped below 50 percent of eligible voters.
The Clinton-Gore ticket won with 379 electoral votes (49.2 percent of the popular vote), while Dole and his running mate, Jack Kemp, captured 159 electoral votes (40.8 percent of the popular vote). Ross Perot ran again, but had little impact on the election. President Clinton became the first Democrat since Franklin Roosevelt to be reelected president. The Republicans could celebrate retaining control of both houses of Congress, which they had not done since the 1920s.
Clinton’s Second Term: Prosperity and Poisonous Politics
During President Clinton’s second term (1997–2001), the United States enjoyed the longest peacetime economic expansion in its history, with annual growth rates of over 4 percent. Technological innovations in computers, the Internet, and wireless communications fueled increased national productivity (a gain of over 5 percent in 1999) and made “e- (or electronic) commerce” part of American life. After years of heavy competition with Europe and Asia, American businesses had become proficient in cutting costs, which both increased their profitability and held down the U.S. inflation rate to 2–3 percent a year. Investors were rewarded with record gains in the stock market (over 22 percent average annual gains in Standard and Poor’s Index of 500 leading stocks). The number of households worth $1 million or more quadrupled in the 1990s, to over 8 million, or one in 14 households. The unemployment rate fell from 7.5 percent in 1992 to a 30-year low of 3.9 percent in 2000, and the unemployment of African Americans and Hispanics was the lowest on record. During the peak of prosperity from 1997–1999, average and lower-income Americans experienced the first gains in real income since 1973. However, the economic boom was over by 2001, and both investors and wage earners faced another recession.
Issues of the surplus. The prosperity of the late 1990s shifted the debate in Washington to what to do with the federal government’s surplus revenues, projected to be $4.6 trillion over the first ten years of the 21st century. In 1997 Congress and the president did compromise on legislation that cut taxes on estates and capital gains, and gave tax credits for families with children and for higher education expenses. As Clinton’s second term progressed, the struggle between the Democratic president and the Republican Congress intensified. The Republicans pressed for more tax revenue cuts, such as the elimination of the “death tax” (estate taxes) and the “marriage penalty” (taxes on two- income families), while the president held out for using the projected surplus to support Social Security, expand Medicare, and reduce the national debt.
Investigations and impeachment. From the early days of the Clinton presidency, President Clinton, his wife, Hillary, cabinet members, and other associates had been under investigation by Congress and by congressionally appointed independent prosecutors (a legacy of the independent prosecutor law of the Watergate era). Some Democrats viewed these investigations as a “right- wing conspiracy” to overturn the elections of 1992 and 1996. After long and expensive investigations, the Clintons were not charged with illegalities in the Whitewater real estate deal, the firings of White House staff (“Travelgate”), or the political use of FBI files (“Filegate”). However, independent prosecutor Kenneth Starr charged that President Clinton, during his deposition in a civil suit about alleged sexual harassment while governor of Arkansas, had lied about his relations with a young woman who had served as a White House intern.
Impeachment. In December 1998, the House voted to impeach the president on two counts, perjury and obstruction of justice. Members of both parties and the public condemned Clinton’s reckless personal behavior, but popular opinion did not support the largely Republican attempt to remove him from office. In the fall elections, Democrats gained House seats and Newt Gingrich resigned as speaker. In February 1999, after a formal trial in the Senate, neither impeachment charge was upheld even by a Senate majority, much less the two- thirds vote needed to remove a president from office. However, the Republicans damaged Clinton’s reputation by making him the first president to be impeached since 1868. A weary Congress in 2000 allowed the controversial law establishing the independent prosecutor’s office to lapse.
Foreign Policy in the Clinton Administration
The end of the Cold War, while taking away the Soviet threat, exposed dozens of long-standing ethnic, religious, and cultural conflicts in a world of 190 nations. During Clinton’s first term, Secretary of State Warren Christopher conducted a low-key foreign policy, which critics thought lacked coherent purpose. In 1997 Madeleine K. Albright became the first women to serve as secretary of state. She proved more assertive in the use of American power, but questions still remained about the role of the United States, especially the use of its armed forces for peacekeeping in foreign nations’ internal conflicts.
Peacekeeping. The first deaths of U.S. soldiers in humanitarian missions during the Clinton administration came in the civil war in Somalia in 1993. In 1994, after some reluctance, the president sent 20,000 troops into Haiti to restore its elected president, Jean-Bertrand Aristide, after a military coup and deteriorating economic conditions had caused an exodus of Haitians to Florida. The United States also played a key diplomatic role in negotiating an end to British rule and the armed conflict in Northern Ireland in 1998.
Europe. Under President Boris Yeltsin, Russia struggled with attempted economic reforms and rampant corruption. In 2000 his elected successor, Vladi- mir Putin, had to deal with the physical breakdown of systems, such as Russia’s space station, and the accidental sinking of a nuclear submarine, which killed all on board. Relations with the United States were strained by Russia’s brutal repression of the civil war in Chechnya, the admittance in 1999 of the Czech Republic, Hungary, and Poland to NATO, and by Russia’s support of Serbia in the Balkan wars of the 1990s. In the latter, Serbian dictator Solobodan Milosevic carried out a series of armed conflicts to suppress independence movements in the former Yugoslav provinces of Slovenia, Croatia, Bosnia, and Kosovo. Hundreds of thousands of members of ethnic and religious minori- ties were killed in a process that was labeled “ethnic cleansing.” A combination of diplomacy, bombing, and troops from NATO countries, including the United States, stopped the bloodshed first in Bosnia in 1995 and again in Kosovo in 1999. The Serbian people themselves removed Milosevic from power in the 2000 election, and an international tribunal tried him for the crime of genocide. These Balkan wars proved to be the worst conflict Europe had seen since World War II, and were a troubling reminder of how World War I had started.
Asia. Nuclear proliferation became a growing concern in the 1990s, when North Korea stepped up its nuclear reactor and missile programs, and India and Pakistan tested nuclear weapons for the first time in 1998. North Korea agreed to halt the development of nuclear weapons after direct negotiations with the Clinton Administration, but later secretly restarted the program. In 1995, 20 years after the fall of Saigon to the Communists, the United States established diplomatic relations with Vietnam. The Clinton administration con- tinued to sign trade agreements with China through his second term, hoping to improve diplomatic relations and encourage reform within China, despite protests from human rights activists and labor unions at home, and Chinese threats to the still-independent island nation of Taiwan.
Middle East. Iraqi leader Saddam Hussein’s continued defiance of UN weapons inspectors led to the suspension of all inspections in 1998. President Clinton responded with a series of air strikes against Iraq, but Hussein remained in power, as support for U.S. economic sanctions declined in Europe and the Middle East. The United States continued to assist in the Israeli-Palestinian peace process, which resulted in the return of home rule to the Palestinians in the Gaza strip and parts of the West Bank territories, and the signing of a peace treaty with King Hussein of Jordan in 1994. The peace process slowed after the assassination of Israeli Prime Minister Yitzak Rabin in 1995, and it broke down late in 2000 over issues of Israeli security and control of Jerusalem. Renewed violence in Israel also provoked a new round of anti-American sentiment in the Islamic world.
Globalization. The surging increases in trade, communications, and the movement of capital around the world during this era were key parts of the process of globalization. Globalization promoted the development of global and regional economic organizations. The World Trade Organization (WTO) was established in 1994 to oversee trade agreements, enforce trade rules, and settle disputes. The powerful International Monetary Fund (IMF) and the World Bank made loans to and supervised the economic policies of poorer nations with debt troubles. The European Union (EU) became a unified market of 15 nations, 12 of which adopted a single currency, the euro, in 2002. The EU planned to grow to 25 European nations, and promised to become an economic superpower of the 21st century. The Group of Seven (G-7), the world’s largest industrial powers (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States), which controlled two-thirds of the world’s wealth, remained the leading economic powers, but China, Russia, Brazil, and India enjoyed rapid development. The growing gap between the rich and poor nations of the world caused tensions, especially over the debts the poor nations owed to powerful banks and the richest nations. Workers and unions in the richest nations often resented globalization, however, because they lost their jobs to cheaper labor markets in the developing world.
A CHANGING AMERICAN SOCIETY
According to the 2000 census, the resident population of the United States was 281.4 million, making it the third most populous nation in the world. The 32.7-million-person increase since 1990 represented a growth rate of 13.2 percent over the decade. The fastest-growing regions of the United States in the 1990s continued to be centered in the West (19.7 percent) and in the South (17.3 percent), while slower growth took place in the Midwest (7.9 percent) and the Northeast (5.9 percent). The South, the most populous region with over 100 million people, and the West would continue to enjoy the shift of congressional representatives and electoral votes to their regions, which had helped to make them the centers of political power. The 2000 census reported that more than 80 percent of U.S. residents lived in the nation’s 280 metropolitan areas, which included cities and their surrounding suburbs.
Race and origins. In the 2000 census, Americans could identify their origins by two or more races for the first time, which 6.8 million people did. The white-only population, while growing in numbers, continued to decline as a percentage of the population, from 87.5 percent in 1970 to 75.1 percent in 2000. This was largely a result of lower birthrates and shifts in sources of immigration. The percentage of black-only population was 12.3 in 2000, up from 11.1 in 1970. However, the Hispanic population, whose origins may be of any race, was the fastest-growing segment of the population. In 2000, for the first time, Hispanics emerged as the largest minority group in the nation, with 12.5 percent of the U.S. population. Asian Americans also represented another fast-growing part of society, with a population of over 10 million.
By 2000, 10.4 percent of the population was foreign born, the largest percent- age since the 1930 census, but well below the levels of foreign born population that the United States had in the 1870s through the 1920s. Immigration ac- counted for 27.8 percent of the population increase in the 1990s, and was a key stimulus to the economic growth during the decade. Without immigration, it is predicted that the United States could experience a negative population growth by 2030.
Aging and the family. As the United States becomes more ethnically diverse, the population is also “graying,” with a steady increase in life expectancy. By 2000, 35 million people were over 65 (12.3 percent), but the fastest-growing segment of the population was those 85 and over. As the baby-boom generation ages, there is growing concern about health care, prescription drugs, senior housing, and Social Security. It is estimated that in 2030 that there will be only about two workers for every person receiving Social Security.
The decline of the traditional family and the growing number of single- parent families had become another national concern. The number of families headed by a female with no husband soared from 5.5 million (10.7 percent) in 1970 to 12.8 million (17.6 percent) in 2000. Single women headed an alarming 47.2 percent of black families in 2000, but the same trend was also evident in white and Hispanic households with children under 18. Children in these families often grew up in poverty and without adequate support.
Income and wealth. In many ways, American were achieving the American dream. Homeownership continued to climb during the prosperity of the 1990s to 67.4 percent of all households, up from 62.9 percent in 1970. Per-capita money income in constant (inflation-adjusted) dollars rose dramatically, from $12,275 in 1970 to $22,199 in 2000. However, the distribution of income varied widely by race, gender, and education. For example, the median income in 2000 was $53,256 for white families, $35,054 for Hispanic families, and $34,192 for black families. High school graduates earned only half the income of their college-educated counterparts.
Even more pronounced was the growing concentration of wealth among the richest Americans. In 1999 the top fifth of American households earned over half of all income, up from 44.2 percent in 1977. All other categories saw their share of income decline. The average after-tax income actually declined between 1977 and 1997 for the lowest three-fifths of households. The United States entered the 21st century as the richest country in the world. But of all the leading industrialized nations, it also had the largest gap between lowest and highest paid workers and the greatest concentration of wealth among the top- earning households. Some critics of the change called it the new Gilded Age.
Challenges of the Early 21st Century
The United States entered the 21st century with unrivaled economic and military dominance in the world, but international terrorism, economic problems, and government mismanagement exposed the nation’s vulnerability.
Disputed Election of 2000
The presidential election of 2000 was the closest since 1876, and the first to be settled by the Supreme Court. President Clinton’s Vice President, Al Gore, easily gained the nomination of the Democratic party, selecting Senator Joseph Lieberman of Connecticut as his running mate. Governor George W. Bush of Texas, eldest son of former President George H. Bush, won the nomination of the Republican party, and selected Dick Cheney, a veteran of the Reagan and elder Bush administrations, as his running mate. Both candidates fought over the moderate and independent vote, Gore as a champion of “working families” and Bush running as “a compassionate conservative.” Ralph Nader, the candidate for the Green party, ran a distant third, but he probably took enough votes from Gore to make a difference in Florida and other states.
Gore received over 500,000 more popular votes nationwide than Bush, but victory hinged on who won Florida’s 25 electoral votes. Bush led by only 537 popular votes in Florida after a partial recount. Then the Democrats asked for manual recounts of the error-prone punch cards. The Supreme Court of Florida ordered recounts of all the votes, but the U.S. Supreme Court overruled them in a split 5-4 decision that matched the party loyalty of the justices. In Bush v. Gore, the majority ruled that the varying standards used in Florida’s recount violated the Equal-Protection Clause of the Fourteenth Amendment. Al Gore ended the election crisis by accepting the ruling. Governor Bush won with 271 electoral votes against Gore’s 266. (One elector abstained.)
Political Polarization
The early 21st century elections revealed a nation politically divided into a conservative south and west, and a more liberal northeast and east and west coasts. The more traditional, religious, and nationalist rural areas and small towns went Republican, while the more diverse, tolerant, and international-minded urban centers voted Democrat. The shift of Southern, white conservatives after the 1960s from the Democratic to the Republican party transformed American politics. In the 1990s, Southern conservatives like Newt Gingrich of Georgia, Tom DeLay of Texas, and Trent Lott of Mississippi took over the leadership of the Republican party, making it more conservative and partisan. As the party of Lincoln became the party of Ronald Reagan, moderate Republicans lost influence and elections. In the state legislatures, both parties gerrymandered congressional districts to create “safe seats,” which rewarded partisanship and discouraged compromise in Congress.
Domestic Policies and Problems
President George W. Bush aggressively pushed his conservative agenda: tax cuts, deregulation, federal aid to faith-based organizations, pro-life legislation, school choice, privatization of Social Security and Medicare, drilling for oil and gas in the Alaska wildlife refuge, and voluntary environmental standards for industry.
Republican tax cuts. In 2001, Congress passed a $1.35 trillion dollar tax cut spread over ten years. The bill lowered the top tax bracket, gradually eliminated estates taxes, increased the child tax credit and limits for IRA and 401(k) contributions, and gave all taxpayers an immediate tax rebate. In 2003, President Bush pushed through another round of tax cuts for stock dividends, capital gains, and married couples. Democrats criticized the tax cuts for giving most of the benefits to the richest 5 percent of the population, and for contributing to the doubling of the national debt during the Bush presidency from about $5 to $10 trillion.
Educational and health reform. President Bush championed the bipartisan No Child Left Behind Act. It aimed to improve student performance and close the gap between well-to-do and poor students in the public schools through nationwide testing of all students, student transfer rights to better schools, improved reading programs, and the training of high-quality teachers. Republicans also passed laws to give seniors in Medicare the option to enroll in private insurance companies. Congress also fulfilled a campaign promise by President Bush to provide prescription drug coverage for seniors. Democrats criticized the legislation as primarily designed to profit insurance and drug companies.
Economic bubbles and corruption. The technology boom of the 1990s peaked in 2000, and was over by 2002. The stock market crashed; the Dow Jones Average fell by 38 percent. The unemployment rate climbed to 6 percent, and the number of people living in poverty increased for the first time in eight years. Fraud and dishonesty committed by business leaders also hurt the stock market and consumer confidence in the economy. For example, the large corporations Enron and World Com had “cooked their books” (falsified stated earnings and profits) with the help of accounting companies. The Federal Reserve fought the recession by cutting interest rates to 1.25 percent, the lowest in 50 years. The end of the technology boom-bust cycle (1995–2002) encouraged many investors to move into real estate, which created another speculative “bubble” (2002–2007) that would burst with even more tragic consequences in Bush’s second term.
The War on Terrorism
Terrorism dominated U.S. foreign policy after September 11, 2001. George W. Bush entered the White House with no foreign policy experience, but surrounded himself with veterans of prior Republican administrations. General Colin Powell became his Secretary of State, the first African American to hold the job. President Bush’s confident and aggressive approach against terrorism won over many Americans, but his administration often alienated other nations.
Roots of terrorism. The United States was faulted by many in the Arab world for siding with Israel in the deadly cycle of Palestinian terror-bombing and Israeli reprisals. However, the causes of anti-Americanism often went deeper. After World War I, the Ottoman Empire, the last of the Islamic empires, was replaced in the Middle East by Western-style, secular nation-states. Religious fundamentalists decried modernization and the corruption of the “House of Islam,” an ancient Islamic ideal of a realm governed by the precepts of the Koran. The stationing of U.S. troops in the Middle East after the Gulf War was seen as another violation of their lands. Islamic extremists, such as Osama bin Laden and the supporters of Al Qaeda (“The Base”), preached jihad, or holy war against the “Jews and Crusaders.” The restrictive economic and political conditions in the Middle East also provided a fertile breeding ground for recruiting extremists.
The bombing of the World Trade Center in New York City in 1993 brought home for the first time the threat posed by Islamic extremists. In 1998, the United States responded to the terrorist bombing of two U.S. embassies in Kenya and Tanzania by bombing Al Qaeda camps in Afghanistan and the Sudan. Their leader, Osama bin Laden, had fled to Afghanistan and allied himself with the Taliban, the Islamic fundamentalists who had taken over Afghanistan. In 2000, U.S. armed forces also learned the nature of “asymmetric” warfare conducted by terrorists, when two suicide bombers in a small rubber boat nearly sank a billion dollar warship, the U.S.S. Cole, docked in Yemen.
September 11, 2001. The coordinated attacks by Al Qaeda terrorists in commercial airliners on the twin towers of the World Trade Center in New York City, the Pentagon near Washington, D.C., and a fourth plane that crashed in Pennsylvania claimed nearly 3,000 lives. The attacks galvanized public opinion as nothing since the Japanese attack on Pearl Harbor in 1941, and they empowered the Bush administration to take action.
War in Afghanistan. President Bush declared that he wanted Osama bin Laden and other Al Qaeda leaders “Dead or Alive.” After the Taliban refused to turn over bin Laden and his associates, their government was quickly overthrown in the fall of 2001 by a combination of U.S. bombing, the anti-Taliban Northern Alliance troops, and U.S. Special Forces. U.S. and Afghan forces continued to pursue the remnants of Al Qaeda in the mountains bordering Pakistan, but they failed to capture bin Laden. A pro-American leader, Hamid Karzai, became head of the government in Kabul, but Afghanistan remained unstable and divided by the Taliban insurgency and tribal conflicts.
Homeland security. After the 9/11 attacks, most Americans were willing to accept background checks and airport searches. The Patriot Acts of 2001 and 2003 gave unparalleled powers to the U.S. government to obtain information and expand surveillance and arrest powers. A growing number of Americans, though, were troubled by unlimited wiretaps without court orders, military tribunals, and the imprisonment of suspects indefinitely in Guantánamo, Cuba.
To enhance security, a new Homeland Security Department was created by combining over 20 federal agencies with 170,000 employees, including Customs, Immigration and Naturalization, the Coast Guard, and the Secret Service. This was the largest reorganization of government since the creation of the Department of Defense after World War II. Many in Congress questioned why the FBI and CIA were left out of the new department. In 2004, a bipartisan commission on terrorism criticized the FBI and the CIA, as well as the Defense Department, for failing to work together to “connect the dots” that may have uncovered the 9/11 plot. Congress followed up on their recommendations, creating a Director of National Intelligence with the difficult job of coordinating the intelligence activities of all agencies.
Bush II foreign policy. President Bush worked with European nations to expand the European Union and NATO, help admit China to the World Trade Organization, and broker conflicts between two nuclear powers: India and Pakistan. However, the Bush administration refused to join the Kyoto Accord to prevent global warming, walked out of a U.N. conference on racism, abandoned the 1972 Anti-Ballistic Missile Treaty with Russia, and for years would not negotiate with North Korea or Iran. Critics questioned whether the administration valued cooperation with the nations of the world or instead followed a unilateralist approach. The President argued, in what became known as the “Bush Doctrine,” that the old policies of containment and deterrence were no longer effective in a world of stateless terrorism. To protect America, the president claimed that the United States would be justified in using preemptive attacks to stop the acquisition and use of weapons of mass destruction (WMDs) by terrorists and by nations that support terrorism.
Iraq War. President Bush, in his 2002 State of the Union Address, singled out Iraq, North Korea, and Iran as the “axis of evil.” While U.S. intelligence agencies were finding no link between Iraq’s Saddam Hussein and the September 11, 2001, attacks, the Bush administration pursued a preemptive attack on Iraq before Saddam Hussein could build and distribute WMDs (nuclear and biological) to terrorists. Late in 2002, Secretary of State Powell negotiated an inspection plan with the U.N. Security Council, which Iraq accepted. In the following months, the U.N. inspectors failed to find WMDs in Iraq. Nevertheless, the Bush administration continued to present claims of their existence based on intelligence information that proved false.
In early 2003, President Bush declared that Iraq had not complied with numerous U.N. resolutions, and that “the game was over.” Without support of the U.N. Security Council, the United States launched air attacks on Iraq on March 19. In less than four weeks, U.S. armed forces, with the support of the British and other allies, overran Iraqi forces, captured the capital city, Baghdad, and ended Hussein’s dictatorship. When U.S. forces could not find WMDs in Iraq, criticism of the “war of choice” and the “regime change” mounted both at home and overseas.
The defeat of the Iraq army and the capture of Saddam Hussein in late 2003 did not end the violence in Iraq. Diverse groups of insurgents (Sunni followers of the former dictator, Shiite militias, and foreign fighters, including Al Qaeda) continued to attacked U.S. and allied troops, Westerners, and one another. Violence between Sunni and Shiite groups raised fears of a civil war that would split the country apart. Millions of Iraqis fled the country or were displaced by the sectarian attacks. This violence slowed both the political and physical reconstruction of Iraq. The Bush administration was widely criticized for going into Iraq without sufficient troops to control the country and for disbanding the Iraqi army. Pictures of the barbaric treatment of prisoners by U.S. troops at Abu Ghraib further diminished America’s reputation in Iraq and around the world.
Elections of 2004 and a Bush Second Term
The Democrats approached the elections of 2004 optimistic that they could unseat the incumbent president burdened by an increasing unpopular war and limited economic recovery. Democratic voters selected Senator John Kerry of Massachusetts as their presidential candidate. Kerry selected a primary rival, Senator John Edwards of North Carolina, as his running mate. The Republicans successfully energized their conservative base on issues such as the war against terrorism, more tax cuts, and opposition to gay marriage and abortion. Republicans successfully painted Kerry as a “flip-flopper” on issues and a “tax-and-spend liberal.” Senator Kerry did not respond effectively to attacks (such as the so-called “Swiftboat” ads) that questioned his military service and patriotism.
President Bush received 51 percent of the popular vote and captured 286 electoral votes to Kerry’s 252. The country remained divided much as in 2000. (See the electoral map on page 662.) Republicans in 2004 added Iowa and New Mexico, while losing New Hampshire to the Democrats. Republicans also expanded their majorities in the Senate and House, and continued to gain on the state level, especially in the South. All this left the party in the strongest position it enjoyed since the 1920s.
Four more years at war. The reconstruction of Iraq had made some headway by 2005 when the Iraqis held their first election, created a national assembly, and selected a prime minister and cabinet ministries. The Sunni minority that had ruled Iraq under Hussein began to work with the Shiite majority and the Kurds in the new government. At first, these steps did little to reduce violence, which killed on the average 100 Americans and 3,000 Iraqis a month. In the United States, the bipartisan Iraqi Study Group recommended steps to have the Iraqis take greater responsibility for their country and set a timeline for U.S. withdrawal. President Bush rejected a timetable, and in early 2007 sent an additional 30,000 troops in a “surge” to establish order. By late 2008, militia violence and American deaths were down in Iraq, and the United States had started to turn over control of the provinces to the Iraqi government.
In Afghanistan, the Taliban stepped up their attacks. For the first time, the number of Americans killed there outnumbered those killed in Iraq. President Bush turned over to the next president two unresolved wars and incomplete efforts to deal with nuclear threats from Iran and North Korea. The Bush admin- istration, though, did have the satisfaction of knowing that there had not been another major terrorist attack in the United States since September 11, 2001.
Washington politics. After his reelection victory in 2004, President Bush pushed hard to get laws passed that would privatize Social Security by encouraging Americans to invest part of their Social Security payroll deductions in various market investments. His administration also failed to pass immigration reform, which was criticized by conservatives as “amnesty” for illegal immigrants. When a strong hurricane hit the Gulf Coast and flooded New Orleans in August 2005, the Federal Emergency Management Agency (FEMA) failed both to anticipate and respond to the crisis. More than 1,000 people died, and tens of thousands of others (mostly poor people) were left in desperate conditions. Republicans were further tarnished by scandals involving taking bribes from lobbyists, charges of perjury and obstruction of justice, improper relations with congressional pages, and the resignation of the Republican majority leader of the House, Tom DeLay, over his gerrymandering scheme in Texas. These failures, along with dissatisfaction with the Iraq War, helped the Democrats win control of both houses of Congress in 2006. President Bush, however, did leave a lasting impact on the federal courts by appointing two conservatives to the Supreme Court—John Roberts (as Chief Justice) and Samuel Alito—and increasing conservative majorities in the federal appellate courts.
Financial crisis of 2007–2009. The housing boom of 2002–2007 was fueled by risky subprime mortgages and speculators who borrowed to “flip” properties for a quick profit. Wall Street firms packaged these high-risk loans into a variety of complex investments (“securitization”), and sold them to investors around the world. Investments worth trillions of dollars lost value as loan foreclosures climbed, the real estate bubble burst, and housing prices collapsed. Many banks and financial institutions at home and overseas faced failure as investors panicked. This resulted in a credit or “liquidity” crisis, because banks either lacked funds or were afraid to make the loans to businesses and consumers necessary for the day-to-day functioning of the economy.
As the crisis deepened within credit markets, Americans were also hit with soaring gas prices (well over $4 a gallon), stock market declines of more than 40 percent, and rising unemployment. In early 2008, the federal government tried a $170 billion stimulus package and took over a few critical financial institutions, such as Fannie Mae and Freddie Mac. The panic in the markets in September, following the bankruptcy of the large Wall Street investment bank Lehman Brothers, forced the Bush administration to ask Congress for additional funds to help U.S. banks and restore the credit markets. The controversial Economic Stabilization Act of 2008 was passed, creating a $700 billion Troubled Assets Relief Program (TARP) to purchase failing assets that included mortgages and mortgage related securities. This was attacked by both conservatives as “socialism” and liberals as a bailout of the Wall Street executives who had caused the problems. Like the Great Depression of 1929, the causes of this crash will be debated for years. Suspected causes were a Federal Reserve policy of low interest rates and a political atmosphere that discouraged regulation of financial institutions. What we do know is that the crisis had a significant impact on the 2008 election.
Election of 2008
For the Democrats, Senator Hillary Clinton of New York, wife of former President Clinton, was the early favorite to become the first woman to head a national ticket. However, the big surprise of this election came after a long primary battle. A 47-year-old, charismatic, African-American, junior senator from Illinois, Barack Obama, captured the Democratic nomination for president. Obama chose as his running mate Joseph Biden of Delaware, an experienced member of the Senate. In the shadow of the unpopular Bush administration, the Republicans nominated Senator John McCain of Arizona, a Vietnam War hero and a political “maverick” who hoped to appeal to undecided voters. McCain selected Governor Sarah Palin of Alaska, a 44-year-old, relatively unknown politician. She became only the second woman to run for the vice presidency on a major political party ticket.
After the party conventions, the McCain-Palin ticket led in the polls, but the economic crisis, Obama’s message for change, and his grassroots and well- funded campaign helped the Democrats win in November. The Obama-Biden ticket gained 7,000,000 more votes than McCain-Palin. Obama won with a decisive 364 electoral votes to McCain’s 174 by taking eight states (including Florida, Ohio, Virginia, and North Carolina) that had been won by Bush in 2004. The Democrats also increased their majorities in the House and Senate well beyond their victories in 2006.
An Historic Change in the Face of Crisis
The election of the first African American as president of the United States was historic, but Barack Obama and the Democrats now faced the country’s worst economic crisis since the Great Depression, two unfinished U.S. wars, and a world increasingly skeptical of U.S. power and leadership.
Presidential Transition
The political and policy differences between President Bush and President- elect Obama did not keep them from working cooperatively for a smooth changeover of administrations during the months between the election and the inauguration.
The economy. The rapidly growing economic crisis dominated the transition. With the support of President-elect Obama, President Bush asked Congress to approve the use of the second half of the controversial TARP funding—$350 billion. And following Obama’s request, Bush used over $10 billion of TARP funds to support the failing automakers General Motors (GM) and Chrysler Corporation.
Cabinet. President Obama appointed his strongest Democratic primary challenger, Hillary Clinton, as Secretary of State and Eric Holder as the first African-American Attorney General. Obama reappointed Robert Gates, President Bush’s Secretary of Defense, to the same position. Obama promised higher ethical standards for his appointments, but a number of his candidates had to withdraw over questions about their failure to pay taxes or prior work as lobbyists.
Inauguration
On a sunny, cold January 20, 2009, the eyes of the nation and much of the world focused on Washington, D.C., for the historic oath-taking of the nation’s 44th American President. A joyous crowd estimated at more than 1.5 million, the largest ever to witness a presidential inauguration, gathered around the U.S. “new era of responsibility” and “the work of remaking America.”
First 100 Days
Ever since Franklin D. Roosevelt, a new president’s work has often been judged by the accomplishments of the administration’s first 100 days in office. With the growing economic crisis that many compared to the Great Depression, this time frame was readily applied to the new Obama administration. While economic concerns would dominate, there were also efforts to fulfill campaign promises and reverse numerous actions of the Bush administration.
Executive orders. President Obama signed a range of orders in a direct effort to overturn actions of the Bush administration. In his early days in office, Obama started the process of closing the U.S. prison at Guantánamo Bay, Cuba. He placed a formal ban on torture by requiring that Army field manuals be used as the guide for interrogating terrorist suspects. The new President also expanded stem-cell research and ended restrictions on federal funding of overseas health organizations that provided abortions.
Economic actions. Faced with growing unemployment, a weak stock market, continuing uncertainty in the banking system, and low public confi- dence in the economy, the Obama administration took a number of actions to stabilize the economy:
American Recovery and Reinvestment Act of 2009 provided $787 billion in economic stimulus designed to create or save 3.5 billion jobs. $288 billion, the largest share, was for tax relief. $144 billion was for state and local fiscal aid. The balance of the package was for construction projects, health care, education, and renewable energy.
The Public-Private Investment Program for Legacy Assets used $75 to $100 million in TARP funds along with the involvement of the FDIC and Federal Reserve together with private investors to purchase up to $1 trillion in bad mortgage-back securities (commonly called “toxic assets”) from banks to restore confidence in those banks and increase the availability of credit for businesses and consumers.
Changes in Financial System Regulations, proposed in March 2009 by Treasury Secretary Timothy Geithner, included (1) proposing stronger financial standards, including a systemic risk regulator, on large financial institutions whose failure would endanger the entire financial system; and (2) extending federal financial regulations (including the power to take over major nonbank financial institutions) on large hedge funds as well as on all trading in financial derivatives—the complex financial instruments that led to much of the crisis.
Aid to the Auto Industry. With General Motors and Chrysler Corporation near collapse, the Obama administration became deeply involved in the development of recovery plans. Unprecedented government actions included: (1) requesting the resignation of the CEO of General Motors; (2) guiding Chrysler into a bankruptcy plan that involved $8 billion of additional U.S. government aid and new ownership that could include the United Auto Workers health trust owning over 50 percent of the company and smaller shares held by Fiat, the Italian automaker, and the U.S. and Canadian governments; (3) guiding GM into a bankruptcy similar to Chrysler’s.
International security. While reassurances were made about U.S. concerns with many foreign areas (including Iraq, Afghanistan, Pakistan, Korea, Israel, Palestine, and Mexico), immediate policy statements were made for:
Iraq. In late February 2009, the President proposed a plan that would have most U.S. troops leave Iraq by August 2010. A “transitional force” of 35,000 to 50,000 troops would remain to assist Iraqi security forces and fight terrorism. All of the troops would be withdrawn by the end of 2011, as was agreed upon in 2008 by the Bush administration and the Iraqi government.
Afghanistan. The Obama administration conducted a series of reviews of U.S. policy in Afghanistan, which the President felt had been neglected due to U.S. preoccupation with Iraq. New policies were being considered in light of the Taliban’s resurgence there, the weakening of Pakistan. President Obama initially approved adding 17,000 troops to U.S. forces in Afghanistan and later called for 4,000 more troops to train the Afghan army and police. Obama said the troop increases would be made possible partially because of U.S. troop withdrawals from Iraq.
Mexico. The Mexican government’s efforts to break the illegal drug trade have been met by violent opposition in Mexico. In 2008, more than 5,800 Mexicans were killed in this conflict between government forces and drug cartels. Mexican President Felipe Calderon was the first foreign leader to meet Obama after the 2008 U.S. elections. Soon after taking office, the Obama administration publicly recognized the United States’ role as the major source for the money and guns supporting the Mexican drug cartels. President Obama promised continued aid to Mexico to fight drug trafficking as well as an updated and comprehensive U.S. drug policy in the near future.
Campaign initiatives. President Obama insisted that his administration could both deal with the economic situation and follow through with long promised reforms, particularly in health care, education, and energy. Many Republicans and some Democrats questioned this broad strategy given a projected $1.75 trillion budget deficit for 2009 (the largest in history) and a $3.55 trillion budget for 2010.
While the President’s initial efforts at bipartisanship were largely rejected by the Republicans, his Democratic party’s control of Congress has enabled him to act decisively. His personal popularity remains high both nationally and worldwide in face of widespread concern about the economy. Many future decisions and actions face the President as the economy remains uncertain and numerous unstable international situations continue.
The history of the United States since 1980 is not a focus of the Advanced Placement U.S. History examination. The exam will probably have only a couple of multiple-choice questions from this chapter, and the College Board assures students that no DBQ or essay question “will deal exclusively with this period.” However, an understanding of the last two decades of the 20th century provides perspective for the postwar years, especially for the Cold War and domestic politics and policies. This final chapter will survey the key events from 1980 both for exam preparation and to complete our review of U.S. history.
Among the important changes during the 1980s and 1990s were the collapse of communism in Eastern Europe, the breakup of the Soviet Union, and the end of the Cold War. In the post-Cold War world, older ethnic and religious conflicts reemerged to threaten the peace with civil wars and terrorism. On the domestic scene, the conservative agenda of the Reagan administration (1981– 1989)—for a stronger military, lower taxes, fewer social programs, and traditional cultural values—helped the Republicans become the majority party, which by 2003 controlled the White House and both houses of Congress.
The Rise of Conservatism
Even though Barry Goldwater was defeated in a landslide in the election of 1964, his campaign for the presidency marked the beginning of the resurgence of conservatism. The policies of presidents Nixon and Ford and the writings of the political commentator William F. Buckley, Jr., and the economist Milton Friedman gave evidence in the 1970s of a steady shift to the right, away from the liberalism of the sixties. By 1980, a loose coalition of economic and political conservatives, religious fundamentalists, and political action committees (PACs) had become a potent force for change. These groups were opposed to big government, New Deal liberalism, gun control, feminism, gay rights, welfare, affirmative action, sexual permissiveness, abortion, and drug use, which, in their view, were responsible for undermining family and religious values, the work ethic, and national security.
Leading Issues
By 1980, various activists had taken the lead in establishing a conservative agenda for the nation, which included such diverse causes as lower taxes, improved morals, and reduced emphasis on affirmative action.
Taxpayers’ revolt. In 1978, California voters led the revolt against high taxes by passing Proposition 13, a measure that sharply cut property taxes. Nationally, conservatives promoted economist Arthur Laffer’s belief that tax cuts would promote economic growth. Two Republican members of Congress, Jack Kemp and William Roth, proposed legislation to reduce federal taxes by 30 percent, which became the basis for the Reagan tax cuts.
Moral revival. Moral decay was a weekly theme of televangelists such as Pat Robertson, Oral Roberts, and Jim Bakker, who by 1980 had a combined weekly audience of between 60 and 100 million viewers. Religion became an instrument of electoral politics, when the Moral Majority, founded by Virginia evangelist Jerry Falwell, financed campaigns to unseat liberal members of Congress. Religious fundamentalists attacked “secular humanism” as a godless creed taking over public education and also campaigned for the return of prayers and the teaching of the Biblical account of creation in the public schools. The legalization of abortion in the Roe v. Wade (1973) decision sparked the right- to- life movement that joined together Catholics and fundamentalist Protestants, who believed that human life began at the moment of conception.
“Reverse discrimination.” In 1965, President Johnson had committed the U.S. government to a policy of affirmative action to ensure that underprivileged minorities and women would have equal access to education, jobs, and promo- tions. Suffering through years of recession and stagflation in the 1970s, many white males blamed their troubles on the “reverse discrimination” imposed by the government’s support of racial and ethnic quotas. The Supreme Court ruled in their favor in the landmark case of Regents of the University of California v. Bakke (1978), by deciding that college admissions could not be based on race alone. After this decision, conservatives intensified their campaign to end all quotas and preferential treatment based on race and ethnic background.
Ronald Reagan and the Election of 1980
Ronald Reagan, a well-known movie and television actor, gained fame among Republicans as an effective political speaker in the 1964 Goldwater campaign. He went on to be elected the governor of California, the nation’s most populous state. In 1976 Reagan came close to taking the party’s nomination from President Ford. By this time, he was widely recognized as the most effective spokesperson for conservative positions. Handsome and vigorous in his late sixties, he proved a master of the media and was seen by millions as a likable and sensible champion of average Americans.
Campaign for president, 1980. Senator Edward Kennedy’s challenge to President Carter for the Democratic nomination left Carter battered in the polls. As the Republican nominee, Reagan attacked the Democratic party’s big- government solutions to problems and the loss of U.S. prestige abroad. (Throughout the campaign, American hostages remained in the hands of Iranian radicals.) Reagan also pointed to a “misery index” of 28 (rate of inflation added to the rate of unemployment) and concluded his campaign by asking a huge television audience, “Are you better off now than you were four years ago?” The voters’ rejection of Carter’s presidency and the growing conservative mood gave Reagan 51 percent of the popular vote and almost 91 percent of the electoral vote. Carter received 41 percent of the popular vote, while a third candidate, John Anderson (a moderate Republican running as an independent), received 8 percent.
Significance. Reagan’s election broke up a key element of the New Deal coalition by taking over 50 percent of the blue-collar vote. For the first time since 1954, the Republicans gained control of the Senate by defeating 11 liberal Democrats targeted by the Moral Majority. The Republicans also gained 33 seats in the House, which when combined with the votes of conservative southern Democrats would give them a working majority on many key issues. Political analysts marked the 1980 election as the end of a half century of Democratic dominance of Congress.
The Reagan Revolution
On the very day that Reagan was inaugurated, the Iranians released the 52 American hostages, giving his administration a positive start. Two months later, the president survived a serious gunshot wound from an assassination attempt. Reagan handled the crisis with such humor and charm that he emerged from the ordeal as an even more popular leader. He pledged that his administration would lower taxes, reduce government spending on welfare, build up the U.S. armed forces, and create a more conservative federal court. He delivered on all four promises—but there were some costs.
Supply-Side Economics (“Reaganomics”)
The Reagan administration advocated supply-side economics, arguing that tax cuts reduced government spending, would increase investment by the private sector, and lead to increased production, jobs, and prosperity. This approach contrasted with the Keynesian economics long favored by the Democrats, which relied on government spending to boost consumer income and demand. The supply-side theory reminded critics of the “trickle-down” economics of the 1920s, in which wealthy Americans prospered, and some of their increased profits and spending benefited the middle class and the poor.
Federal tax reduction. The legislative activity early in Reagan’s presi- dency reminded some in the media of FDR’s Hundred Days. Congress passed most of the tax cuts that Reagan asked for, including a 25 percent decrease in personal income taxes over three years. Cuts in the corporate income tax, capital gains tax, and gift and inheritance taxes guaranteed that a large share of the tax relief went to upper-income taxpayers. Under Reagan, the top income tax rate was reduced to 28 percent. At the same time, small investors were also helped by a provision that allowed them to invest up to $2,000 a year in Individual Retirement Accounts (IRAs) without paying taxes on this money.
Spending cuts. With the help of conservative southern Democrats (“boll weevils”), the Republicans cut over $40 billion from domestic programs, such as food stamps, student loans, and mass transportation. These savings were offset, however, by a dramatic increase in military spending. No cuts in Medicare or Social Security were passed, but the Social Security system was made more solvent by legislation that raised the retirement age and taxed benefits paid to upper-income recipients.
Deregulation
Following up on the promise of “getting government off the backs of the people,” the Reagan administration reduced federal regulations on business and industry—a policy of deregulation begun under Carter. Restrictions were eased on savings and loan institutions, mergers and takeovers by large corporations, and environmental protection. To help the struggling American auto industry, regulations on emissions and auto safety were also reduced. Secretary of the Interior James Watt opened federal lands for increased coal and timber production and offshore waters for oil drilling.
Labor Unions
Despite having once been the president of the Screen Actors Guild, Reagan took a tough stand against unions. He fired thousands of striking federal air traffic controllers for violating their contract and decertified their union (PATCO). Many businesses followed this action by hiring striker replacements in labor conflicts. These antiunion policies along with the loss of manufacturing jobs hastened the decline of union membership among nonfarm workers from over 30 percent in 1962 to only 12 percent in the late 1990s. In addition, the recession of 1982 and foreign competition had a dampening effect on workers’ wages.
Recession and Recovery
In 1982, the nation suffered the worst recession since the 1930s. Banks failed and unemployment reached 11 percent. At the same time, however, the recession along with a fall in oil prices reduced the double-digit inflation rate of the late 1970s to less than 4 percent. As the policies of Reaganomics took hold, the economy rebounded and beginning in 1983 entered a long period of recovery. The recovery, however, only widened the income gap between rich and poor. While upper-income groups and “yuppies” (young urban profession- als) enjoyed higher incomes and material benefits from a deregulated market- place, the standard of living of the middle class remained stagnant or declined during the 1980s and early 1990s. In the late 1990s, the middle class gained back some of its losses.
Social Issues
President Reagan followed through on his pledge to appoint conservative judges to the Supreme Court by nominating Sandra Day O’Connor, the first woman on the Court, as well as Antonin Scalia and Anthony Kennedy. Led by a new chief justice, William Rehnquist, the Supreme Court scaled back affirmative action in hiring and promotions and limited Roe v. Wade by allowing states to impose certain restrictions on abortion, such as requiring minors to notify their parents before having an abortion.
The Election of 1984
The return of prosperity, even if not fully shared by all Americans, restored public confidence in the Reagan administration. At their convention in 1984, Republicans nominated their popular president by acclamation. Among Democrats, Jesse Jackson became the first African-American politician to make a strong run for the presidency by seeking the support of all minority groups under the banner of the rainbow coalition. The Democratic majority, however, nominated Walter Mondale, Carter’s vice president, to be their presidential candidate and Representative Geraldine Ferraro of New York to be the first woman to run for vice president.
Reagan easily defeated the liberal Mondale, taking every state except Mondale’s home state of Minnesota. Two-thirds of white males voted for Reagan. Analysis of voting returns indicated that only two groups still favored the Democrats: African Americans and those earning less than $12,500 a year.
Budget and Trade Deficits
By the mid-1980s, Reagan’s tax cuts combined with large increases in military spending were creating federal deficits of over $200 billion a year. Over the course of Reagan’s two terms as president, the national debt tripled from about $900 billion to almost $2.7 trillion. The tax cuts, designed to stimulate investments, seemed only to increase consumption, especially of foreign-made luxury and consumer items. As a result, the U.S. trade deficit reached a staggering $150 billion a year. The cumulative trade imbalance of $1 trillion during the 1980s contributed to a dramatic increase in the foreign ownership of U.S. real estate and industry. In 1985, for the first time since the World War I era, the United States became a debtor nation.
In an effort to keep the federal deficit under control, Congress in 1985 passed the Gramm-Rudman-Hollings Balanced Budget Act, which provided for across-the-board spending cuts. Court rulings and later congressional changes kept this legislation from achieving its full purpose, but Congress was still able to reduce the deficit by $66 billion from 1986 to 1988.
Impact of Reaganomics
President Reagan’s two terms reduced restrictions on a free-market econ- omy and left more money in the hands of investors and higher income Ameri- cans. Reagan’s policies also succeeded in containing the growth of the New Deal-Great Society welfare state. Another legacy of the Reagan years were the huge federal deficits, which were to change the context of future political debates. With yearly deficits running between $200–$300 billion, it no longer seemed reasonable for either Democrats or Republicans to propose new social programs, such as universal health coverage. Instead of asking what new govern- ment programs might be needed, Reaganomics changed the debate to issues of what government programs to cut and by how much.
Foreign Policy During the Reagan Years
Reagan started his presidency determined to restore the military might and superpower prestige of the United States and to intensify the Cold War competition with the Soviet Union. He called the Soviet Communists “the evil empire” and “focus of evil in the modern world.” Reagan was prepared to use military force to back up his rhetoric. During his second term, however, he proved flexible enough in his foreign policy to respond to significant changes in the Soviet Union and its satellites in Eastern Europe.
Renewing the Cold War
Increased spending for defense and aid to anticommunist forces in Latin America were the hallmarks of Reagan’s approach to the Cold War during his first term.
Military buildup. The Reagan administration spent billions to build new weapons systems, such as the B-1 bomber and the MX missile, and to expand the U.S. Navy from 450 to 600 ships. The administration also increased spending on the Strategic Defense Initiative (SDI), an ambitious plan for building a high- tech system of lasers and particle beams to destroy enemy missiles before they could reach U.S. territory. Critics called the SDI “Star Wars” and argued that the costly program would only escalate the arms race and could be overwhelmed by the Soviets building more missiles. Although Congress made some cuts in the Reagan proposals, the defense budget grew from $171 billion in 1981 to over $300 billion in 1985.
Central America. In the Americas, Reagan supported “friendly” right- wing dictators to keep out communism and also worked to overthrow Marxist regimes such as the Sandinistas that had taken over Nicaragua in 1979. Large amounts of U.S. military aid went to the “contras,” antileftist rebels in Nicaragua who fought the Sandinistas in an attempt to seize power. In 1985, Democrats opposed to the administration’s policies in Nicaragua passed the Boland Amendment prohibiting further aid to the contras. In El Salvador, meanwhile, the Reagan administration spent nearly $5 billion to support the Salvadoran government against a coalition of leftist guerrillas. Many Americans protested the killing of more than 40,000 civilians, including American missionaries, by right-wing “death squads” with connec- tions to the El Salvador army.
Grenada. On the small Caribbean island of Grenada, a coup led to the establishment of a pro-Cuban regime. In October 1983, President Reagan or- dered a small force of marines to invade the island in order to prevent the establishment of a strategic Communist military base in the Americas. The invasion quickly succeeded in reestablishing a friendly government in Grenada.
Iran-contra affair. If Grenada was the notable military triumph of Reagan’s presidency, his efforts to aid the Nicaraguan contras involved him in a serious blunder and scandal. The so-called Iran-contra affair had its origins in U.S. troubles with Iran. Since 1980, Iran and Iraq had been engaged in a bloody war. Reagan aides came up with the plan—kept secret from the American public—of selling U.S. antitank and antiaircraft missiles to Iran’s government for its help in freeing the Americans held hostage by a radical Arab group. In 1986, another Reagan staff member had the “great idea” to use the profits of the arms deal with Iran to fund the contras in Nicaragua.
President Reagan denied that he had knowledge of the illegal diversion of funds—illegal in that it violated both the Boland Amendment and congressional budget authority. The picture that emerged from a televised congressional investigation was of an uninformed, hands-off president who was easily manipu- lated by his advisers. Reagan suffered a sharp, but temporary, drop in the popularity polls. He would leave office with his reputation intact as one of the most popular presidents of the 20th century.
Lebanon, Israel, and the PLO
Reagan’s foreign policy suffered a series of setbacks in the Middle East. In 1982, Israel (with U.S. approval) invaded southern Lebanon to stop PLO terrorists from raiding Israel. Soon the United States became involved in helping to evacuate the PLO to a safe haven and in providing peacekeeping forces to Lebanon in an effort to contain that country’s bitter civil war. In April 1983, an Arab suicide squad bombed the U.S. embassy in Beirut, killing 63 people. A few months later, another Arab terrorist drove a bomb-filled truck into the U.S. Marines barracks, killing 241 servicemen. In 1984, Reagan pulled U.S. forces out of Lebanon, with little to show for the effort and loss of lives.
Secretary of State George Schultz pushed for a peaceful settlement of the Palestinian-Israeli conflict by setting up a homeland for the PLO in the West Bank territories occupied by Israel since the 1967 war. Under American pres- sure, PLO leader Yassir Arafat agreed in 1988 to recognize Israel’s right to exist.
Improved U.S.-Soviet Relations
The Cold War intensified in the early 1980s as a result of both Reagan’s arms buildup and the Soviet deployment of a larger number of missiles against NATO countries. In 1985, however, a dynamic reformer, Mikhail Gorbachev, became the new Soviet leader. Gorbachev attempted to change Soviet domestic politics by introducing two major reforms: (1) glasnost, or openness, to end political repression and move toward greater political freedom for Soviet citi- zens, and (2) perestroika, or restructuring of the Soviet economy by introducing some free-market practices. To achieve his reforms, Gorbachev had to end the costly arms race and deal with a deteriorating Soviet economy.
In 1987, after two earlier attempts, Gorbachev and Reagan agreed to remove and destroy all intermediate-range missiles (the INF agreement). In 1988, Gorbachev further reduced Cold War tensions by starting the pullout of Soviet troops from Afghanistan. He also cooperated with the United States in putting diplomatic pressure on Iran and Iraq to end their war. By the end of Reagan’s second term, relations between the two superpowers had so improved that the end of the Cold War seemed at hand.
Assessing Reagan’s policy. The Reagan administration would claim that its military buildup forced the Soviet Union to concede defeat and abandon the Cold War. Others would give credit to George Kennan’s containment policies and to Gorbachev’s initiative. Regardless of what caused the Soviets to change their policy, President Reagan must be credited with responding to the opportunity to end the Cold War. By the time Reagan’s second term came to a close in 1988, many Americans wished he could continue for another four years, but the constitutional limit forced him into retirement. Ronald Reagan’s combination of style, humor, and patriotism had won over the electorate. As a leader, he changed the politics of the nation for at least a generation by bringing many former Democrats into the Republican party.
President George H. Bush and the End of the Cold War
The Cold War had threatened the very existence of the planet and of humankind. At the same time, ever since 1945, it had given clear purpose and structure to U.S. foreign policy. What would be the U.S. role in the world after the Cold War? George H. Bush, a former ambassador to the United Nations and director of the CIA (and the father of President George W. Bush), became the first president to define the U.S. role in the new era.
The Election of 1988
The Democrats regained control of the Senate in 1986 and hoped that the Iran-contra scandal and the huge deficits under Reagan would hurt the Republicans in the presidential race of 1988. Michael Dukakis, governor of Massachusetts, won the Democratic nomination and balanced the ticket by selecting Senator Lloyd Bentsen of Texas as his running mate. The Republican candidates were Reagan’s vice president, George H. Bush, and a young Indiana senator, Dan Quayle. Bush was no Reagan in front of the camera, but he quickly overtook an expressionless Dukakis by charging that the Democrat was soft on crime (for furloughing criminals) and weak on national defense. Bush also appealed to voters by promising not to raise taxes: “Read my lips—no new taxes.”
The Republicans won a decisive victory in November by a margin of 7 million votes. Once again, the Democrats failed to win the confidence of most white middle-class voters. Nevertheless, the voters sent mixed signals by returning larger Democratic majorities to both the House and the Senate. Americans evidently believed in the system of checks and balances, but unfortu- nately it often produced legislative gridlock in Washington.
The Collapse of Soviet Communism and the Soviet Union
The first years of the Bush administration were dominated by dramatic changes in the Communist world.
Tiananmen Square. In China during the spring of 1989, prodemocracy students demonstrated for freedom in Beijing’s Tiananmen Square. Television cameras from the West broadcast the democracy movement around the world. Under the cover of night, the Chinese Communist government crushed the protest with tanks, killing hundreds and ending the brief flowering of an open political environment in China.
Eastern Europe. Challenges to communism in Eastern Europe produced more positive results. Gorbachev declared that he would no longer support the various Communist governments of Eastern Europe with Soviet armed forces. Starting in Poland in 1989 with the election of Lech Walesa, the leader of the once outlawed Solidarity movement, the Communist party fell from power in one country after another—Hungary, Czechoslovakia, Bulgaria, and Romania. The Communists in East Germany were forced out of power after protesters tore down the Berlin Wall, the hated symbol of the Cold War. In October 1990, the two Germanys, divided since 1945, were finally reunited with the blessing of both NATO and the Soviet Union.
Breakup of the Soviet Union. The swift march of events and the national- ist desire for self-determination soon overwhelmed Gorbachev and the Soviet Union. In 1990 the Soviet Baltic republics of Estonia, Latvia, and Lithuania declared their independence. After a failed coup against Gorbachev by Communist hard-liners, the remaining republics dissolved the Soviet Union in December 1991, leaving Gorbachev a leader with no country. Boris Yeltsin, president of the Russian Republic, joined with nine former Soviet republics to form a loose confederation, the Commonwealth of Independent States (CIS). Yeltsin disbanded the Communist party in Russia and attempted to establish a democ- racy and a free-market economy.
End of the Cold War. Sweeping agreements to dismantle their nuclear weapons were one tangible proof that the Cold War had ended. Bush and Gorbachev signed the START I agreement in 1991, reducing the number of nuclear warheads to under 10,000 for each side. In late 1992, Bush and Yeltsin agreed to a START II treaty, which reduced the number of nuclear weapons to just over 3,000 each. The treaty also offered U.S. economic assistance to the troubled Russian economy.
Even as Soviet communism collapsed, President Bush, a seasoned diplo- mat, remained cautious. Instead of celebrating final victory in the Cold War, Americans grew concerned about the outbreak of civil wars and violence in the former Soviet Union. In Eastern Europe, Yugoslavia started to disintegrate in 1991, and a civil war broke out in the provinces of Bosnia and Herzegovina the need still existed for heavy defense spending and large numbers of U.S. military bases.
Invasion of Panama
Since the outbreak of the Cold War in the 1940s, U.S. intervention in foreign conflicts had been consistently tied to the containment of communism. In December 1989, U.S. troops were used for a different purpose, as Bush ordered the invasion of Panama to remove the autocratic General Manuel Noriega. The alleged purpose of the invasion was to stop Noriega from using his country as a drug pipeline to the United States. U.S. troops remained until elections established a more creditable government.
Persian Gulf War
President Bush’s hopes for a “new world order” of peace and democracy were challenged in August 1990 when Iraq’s dictator, Saddam Hussein, invaded oil-rich but weak Kuwait and threatened Western oil sources in Saudi Arabia and the Persian Gulf. President Bush successfully built a coalition of United Nations members to put pressure on Hussein to withdraw from Kuwait. A U.N. embargo against Iraq, however, had little effect. Bush won congressional approval for a military campaign to roll back Iraq’s act of aggression. In January 1991, in a massive operation called Desert Storm, over half a million Americans were joined by military units from 28 other nations. Five weeks of relentless air strikes were followed by a brilliant ground war conducted by U.S. General Norman Schwarzkopf. After only 100 hours of fighting on the ground, Iraq was forced to concede defeat.
Some Americans were disappointed that the United States stopped short of driving Saddam Hussein from power in Iraq. Nevertheless, after the victory, Bush enjoyed a boost in his approval rating to nearly 90 percent.
Domestic Problems
President Bush’s political future seemed secure based on his foreign policy successes, but a host of domestic problems dogged his administration.
Nomination of Clarence Thomas. The president’s nomination of Clarence Thomas to the Supreme Court to replace the retiring Thurgood Marshall proved extremely controversial. Thomas’s conservative views on judicial issues were attacked by African-American organizations, and charges of sexual harassment against him were widely believed by millions of women. Nevertheless, the Senate confirmed Thomas’ nomination.
Taxes and the economy. Americans were shocked to learn that the government’s intervention to save weak savings and loan institutions and to pay insured depositors for funds lost in failed S&L’s would cost the taxpayers over $250 billion. Also disturbing was the idea that federal budget deficits of over $250 billion a year added over $1 trillion to the national debt during the Bush presidency. Thousands of Republican voters felt betrayed when, in 1990, Bush violated his campaign pledge of “no new taxes” by agreeing to accept the Democratic Congress’ proposed $133 billion in new taxes. The unpopular tax law increased the top income tax rate to 31 percent and raised federal excise taxes on beer, wine, cigarettes, gasoline, and luxury cars and boats. Most damaging of all for Bush’s reelection prospects was a recession starting in 1990 that ended the Reagan era of prosperity, increased unemployment, and decreased average family income.
Political inertia. President Bush began his administration calling for “a kinder, gentler America” and declaring himself the “education president.” He did sign into law the Americans With Disabilities Act (1990), which prohibited discrimination against citizens with physical and mental disabilities in hiring, transportation, and public accommodation. Outside of this accomplishment, the president offered little in the way of domestic policy. In the midst of recession, he emphasized cuts in federal programs. This seemed to offer little hope to growing numbers of Americans left behind by the “Reagan revolution.”
The Clinton Years, 1993–2001: Prosperity and Partisanship
During the last years of the 20th century, the United States enjoyed a period of unrivaled economic growth and technological innovation. The end of the Cold War allowed Americans to focus more on economic and domestic issues. But, during this period, American politics became more divided, bitter, and scandal-driven.
Anti-Incumbent Mood
A stagnant economy, huge budget deficits, and political deadlock fueled a growing disillusionment with government, especially as practiced in the nation’s capital. The movement to impose term limits on elected officials gained popularity on the state level, but the Supreme Court ruled in U.S. Term Limits Inc. v. Thorton (1995) that the states could not limit the tenure of federal lawmakers without a constitutional amendment.
Another reflection of Americans’ disillusionment with Washington politics was the ratification in 1992 of the Twenty-seventh Amendment. First proposed by James Madison in 1789, this amendment prohibited members of Congress from raising their own salaries. Future raises could not go into effect until the next session of Congress.
The Election of 1992
As expected, George H. Bush was nominated by the Republicans for a second term. After a long career in public service, the president seemed tired and out of touch with average Americans, who were more concerned about their paychecks than with Bush’s foreign policy successes.
Bill Clinton, the then governor of Arkansas, emerged from the primaries as his party’s choice for president. The first member of the baby-boom generation to be nominated for president, Clinton proved an articulate and energetic campaigner. He presented himself as a moderate “New Democrat,” who focused on economic issues such as jobs, education, and health care, which were important to the “vital center” of the electorate. The strategy was known among his political advisers as: “It’s the economy, stupid!”
H. Ross Perot. Ross Perot, a Texas billionaire, entered the 1992 race for president as an independent. Able to use his own resources to finance a series of TV commercials, Perot appealed to millions with his anti-Washington, anti- deficit views. On election day, Perot captured nearly 20 percent of the popular vote for the best third-party showing since Theodore Roosevelt and the Bull Moose campaign of 1912.
Results. Despite the serious challenge from Perot, the front-runners still divided up all the electoral votes: 370 for Clinton (and 43 percent of the popular vote), 168 for Bush (37 percent of the popular vote). Clinton and his running mate, Senator Albert Gore of Tennessee, did well in the South and recaptured the majority of the elderly and blue-collar workers from the Republicans. In addition, the Democrats again won control of both houses of Congress. The new Congress better reflected the diversity of the U.S. population. Among its 66 minority members and 48 women was Carol Moseley-Braun of Illinois, the first African-American woman to be elected to the Senate.
Clinton’s First Term (1993–1997)
The early years of Bill Clinton’s presidency were marked by controversies over his cabinet nominations, his failed effort to lift the ban on homosexuals in the military, scandals in the White House travel office, and his connection to the failed Whitewater real estate deal in Arkansas.
Setbacks. During the first two years of the Clinton administration, the Republicans, by filibustering in the Senate, were able to kill the president’s economic stimulus package, campaign-finance reform, environmental bills, and health care reform. The president’s use of his wife, Hilary Rodham Clinton, as the chief architect of his program for universal health coverage backfired. The Clintons’ complicated proposal for managed health care ran into determined opposition from the insurance industry and small business organizations. By the end of 1994, the Republicans had managed to stop all the Democrats’ proposals for health care reform.
Early accomplishments. The Democratic Congress started out in 1993 by passing the Family and Medical Leave Act and the “motor-voter” law that enabled citizens to register to vote as they received their driver’s licenses. The Brady Handgun bill, which mandated a five-day waiting period for the purchase of handguns, was enacted. In 1994, Congress enacted Clinton’s Anti-Crime Bill, which provided $30 billion in funding for more police protection and crime-prevention programs. The legislation also banned the sale of most assault weapons, which angered the gun lobby. After protracted negotiation and com- promise, Congress passed a deficit-reduction budget that included $255 billion in spending cuts and $241 billion in tax increases. Incorporated in this budget were the president’s requests for increased appropriations for education and job training. Clinton also won a notable victory by signing the North American Free Trade Agreement (NAFTA), which created a free-trade zone with Canada and Mexico. Despite these accomplishments, Clinton’s apparent waffling on policies and eagerness to compromise seemed to confirm his negative image, as “Slick Willie.”
Republicans Take Over Congress
In the midterm elections of November 1994, the Republicans gained control of both houses of Congress for the first time since 1954. They benefited from the perception that the Democratic Congress was inept and dedicated to increasing taxes and federal regulations. President Clinton adjusted to his party’s defeat by declaring in his 1995 State of the Union address, “The era of big government is over.”
Zealous reformers. Newt Gingrich, the newly elected Speaker of the House, led the Republicans in an attack on federal programs and spending outlined in their campaign manifesto, “Contract with America.” While the president and moderates agreed with the goal of a balanced budget, Clinton proposed a “leaner, not meaner” budget. This confrontation resulted in two shutdowns of the federal government in late 1995, which many Americans blamed on an overzealous Congress. Antigovernment reformers were not helped by the mood after the bombing in 1995 of a federal building in Oklahoma City by militia-movement extremists. The bombing took 169 lives, the worst act of terrorism in the nation’s history until the attacks on September 11, 2001.
Balanced budget. Finally, in the 1996 election year, Congress and the president compromised on a budget that left Medicare and Social Security benefits intact, limited welfare benefits to five years under the Personal Responsibility and Work Opportunity Act, set some curbs on immigrants, increased the minimum wage, and balanced the budget. The spending cuts and tax in- creases made during Clinton’s first term, along with record growth in the economy, helped to eliminate the deficit in federal spending in 1998 and produced the first federal surplus since 1969. In his battle with the Republican Congress, President Clinton captured the middle ground by successfully charac- terizing the Republicans as extremists, and by taking over their more popular positions, such as balancing the budget and reforming welfare. He was also aided in the 1996 election by a fast-growing economy that had produced over 10 million new jobs.
The Election of 1996
Senator Bob Dole of Kansas, the majority leader of the Senate, became Clinton’s Republican opponent. His campaign, which proposed a 15 percent tax cut, never captured the voters’ imagination. Character attacks and massive campaign spending by both sides did little to bring more people to the polls, and the turnout dropped below 50 percent of eligible voters.
The Clinton-Gore ticket won with 379 electoral votes (49.2 percent of the popular vote), while Dole and his running mate, Jack Kemp, captured 159 electoral votes (40.8 percent of the popular vote). Ross Perot ran again, but had little impact on the election. President Clinton became the first Democrat since Franklin Roosevelt to be reelected president. The Republicans could celebrate retaining control of both houses of Congress, which they had not done since the 1920s.
Clinton’s Second Term: Prosperity and Poisonous Politics
During President Clinton’s second term (1997–2001), the United States enjoyed the longest peacetime economic expansion in its history, with annual growth rates of over 4 percent. Technological innovations in computers, the Internet, and wireless communications fueled increased national productivity (a gain of over 5 percent in 1999) and made “e- (or electronic) commerce” part of American life. After years of heavy competition with Europe and Asia, American businesses had become proficient in cutting costs, which both increased their profitability and held down the U.S. inflation rate to 2–3 percent a year. Investors were rewarded with record gains in the stock market (over 22 percent average annual gains in Standard and Poor’s Index of 500 leading stocks). The number of households worth $1 million or more quadrupled in the 1990s, to over 8 million, or one in 14 households. The unemployment rate fell from 7.5 percent in 1992 to a 30-year low of 3.9 percent in 2000, and the unemployment of African Americans and Hispanics was the lowest on record. During the peak of prosperity from 1997–1999, average and lower-income Americans experienced the first gains in real income since 1973. However, the economic boom was over by 2001, and both investors and wage earners faced another recession.
Issues of the surplus. The prosperity of the late 1990s shifted the debate in Washington to what to do with the federal government’s surplus revenues, projected to be $4.6 trillion over the first ten years of the 21st century. In 1997 Congress and the president did compromise on legislation that cut taxes on estates and capital gains, and gave tax credits for families with children and for higher education expenses. As Clinton’s second term progressed, the struggle between the Democratic president and the Republican Congress intensified. The Republicans pressed for more tax revenue cuts, such as the elimination of the “death tax” (estate taxes) and the “marriage penalty” (taxes on two- income families), while the president held out for using the projected surplus to support Social Security, expand Medicare, and reduce the national debt.
Investigations and impeachment. From the early days of the Clinton presidency, President Clinton, his wife, Hillary, cabinet members, and other associates had been under investigation by Congress and by congressionally appointed independent prosecutors (a legacy of the independent prosecutor law of the Watergate era). Some Democrats viewed these investigations as a “right- wing conspiracy” to overturn the elections of 1992 and 1996. After long and expensive investigations, the Clintons were not charged with illegalities in the Whitewater real estate deal, the firings of White House staff (“Travelgate”), or the political use of FBI files (“Filegate”). However, independent prosecutor Kenneth Starr charged that President Clinton, during his deposition in a civil suit about alleged sexual harassment while governor of Arkansas, had lied about his relations with a young woman who had served as a White House intern.
Impeachment. In December 1998, the House voted to impeach the president on two counts, perjury and obstruction of justice. Members of both parties and the public condemned Clinton’s reckless personal behavior, but popular opinion did not support the largely Republican attempt to remove him from office. In the fall elections, Democrats gained House seats and Newt Gingrich resigned as speaker. In February 1999, after a formal trial in the Senate, neither impeachment charge was upheld even by a Senate majority, much less the two- thirds vote needed to remove a president from office. However, the Republicans damaged Clinton’s reputation by making him the first president to be impeached since 1868. A weary Congress in 2000 allowed the controversial law establishing the independent prosecutor’s office to lapse.
Foreign Policy in the Clinton Administration
The end of the Cold War, while taking away the Soviet threat, exposed dozens of long-standing ethnic, religious, and cultural conflicts in a world of 190 nations. During Clinton’s first term, Secretary of State Warren Christopher conducted a low-key foreign policy, which critics thought lacked coherent purpose. In 1997 Madeleine K. Albright became the first women to serve as secretary of state. She proved more assertive in the use of American power, but questions still remained about the role of the United States, especially the use of its armed forces for peacekeeping in foreign nations’ internal conflicts.
Peacekeeping. The first deaths of U.S. soldiers in humanitarian missions during the Clinton administration came in the civil war in Somalia in 1993. In 1994, after some reluctance, the president sent 20,000 troops into Haiti to restore its elected president, Jean-Bertrand Aristide, after a military coup and deteriorating economic conditions had caused an exodus of Haitians to Florida. The United States also played a key diplomatic role in negotiating an end to British rule and the armed conflict in Northern Ireland in 1998.
Europe. Under President Boris Yeltsin, Russia struggled with attempted economic reforms and rampant corruption. In 2000 his elected successor, Vladi- mir Putin, had to deal with the physical breakdown of systems, such as Russia’s space station, and the accidental sinking of a nuclear submarine, which killed all on board. Relations with the United States were strained by Russia’s brutal repression of the civil war in Chechnya, the admittance in 1999 of the Czech Republic, Hungary, and Poland to NATO, and by Russia’s support of Serbia in the Balkan wars of the 1990s. In the latter, Serbian dictator Solobodan Milosevic carried out a series of armed conflicts to suppress independence movements in the former Yugoslav provinces of Slovenia, Croatia, Bosnia, and Kosovo. Hundreds of thousands of members of ethnic and religious minori- ties were killed in a process that was labeled “ethnic cleansing.” A combination of diplomacy, bombing, and troops from NATO countries, including the United States, stopped the bloodshed first in Bosnia in 1995 and again in Kosovo in 1999. The Serbian people themselves removed Milosevic from power in the 2000 election, and an international tribunal tried him for the crime of genocide. These Balkan wars proved to be the worst conflict Europe had seen since World War II, and were a troubling reminder of how World War I had started.
Asia. Nuclear proliferation became a growing concern in the 1990s, when North Korea stepped up its nuclear reactor and missile programs, and India and Pakistan tested nuclear weapons for the first time in 1998. North Korea agreed to halt the development of nuclear weapons after direct negotiations with the Clinton Administration, but later secretly restarted the program. In 1995, 20 years after the fall of Saigon to the Communists, the United States established diplomatic relations with Vietnam. The Clinton administration con- tinued to sign trade agreements with China through his second term, hoping to improve diplomatic relations and encourage reform within China, despite protests from human rights activists and labor unions at home, and Chinese threats to the still-independent island nation of Taiwan.
Middle East. Iraqi leader Saddam Hussein’s continued defiance of UN weapons inspectors led to the suspension of all inspections in 1998. President Clinton responded with a series of air strikes against Iraq, but Hussein remained in power, as support for U.S. economic sanctions declined in Europe and the Middle East. The United States continued to assist in the Israeli-Palestinian peace process, which resulted in the return of home rule to the Palestinians in the Gaza strip and parts of the West Bank territories, and the signing of a peace treaty with King Hussein of Jordan in 1994. The peace process slowed after the assassination of Israeli Prime Minister Yitzak Rabin in 1995, and it broke down late in 2000 over issues of Israeli security and control of Jerusalem. Renewed violence in Israel also provoked a new round of anti-American sentiment in the Islamic world.
Globalization. The surging increases in trade, communications, and the movement of capital around the world during this era were key parts of the process of globalization. Globalization promoted the development of global and regional economic organizations. The World Trade Organization (WTO) was established in 1994 to oversee trade agreements, enforce trade rules, and settle disputes. The powerful International Monetary Fund (IMF) and the World Bank made loans to and supervised the economic policies of poorer nations with debt troubles. The European Union (EU) became a unified market of 15 nations, 12 of which adopted a single currency, the euro, in 2002. The EU planned to grow to 25 European nations, and promised to become an economic superpower of the 21st century. The Group of Seven (G-7), the world’s largest industrial powers (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States), which controlled two-thirds of the world’s wealth, remained the leading economic powers, but China, Russia, Brazil, and India enjoyed rapid development. The growing gap between the rich and poor nations of the world caused tensions, especially over the debts the poor nations owed to powerful banks and the richest nations. Workers and unions in the richest nations often resented globalization, however, because they lost their jobs to cheaper labor markets in the developing world.
A CHANGING AMERICAN SOCIETY
According to the 2000 census, the resident population of the United States was 281.4 million, making it the third most populous nation in the world. The 32.7-million-person increase since 1990 represented a growth rate of 13.2 percent over the decade. The fastest-growing regions of the United States in the 1990s continued to be centered in the West (19.7 percent) and in the South (17.3 percent), while slower growth took place in the Midwest (7.9 percent) and the Northeast (5.9 percent). The South, the most populous region with over 100 million people, and the West would continue to enjoy the shift of congressional representatives and electoral votes to their regions, which had helped to make them the centers of political power. The 2000 census reported that more than 80 percent of U.S. residents lived in the nation’s 280 metropolitan areas, which included cities and their surrounding suburbs.
Race and origins. In the 2000 census, Americans could identify their origins by two or more races for the first time, which 6.8 million people did. The white-only population, while growing in numbers, continued to decline as a percentage of the population, from 87.5 percent in 1970 to 75.1 percent in 2000. This was largely a result of lower birthrates and shifts in sources of immigration. The percentage of black-only population was 12.3 in 2000, up from 11.1 in 1970. However, the Hispanic population, whose origins may be of any race, was the fastest-growing segment of the population. In 2000, for the first time, Hispanics emerged as the largest minority group in the nation, with 12.5 percent of the U.S. population. Asian Americans also represented another fast-growing part of society, with a population of over 10 million.
By 2000, 10.4 percent of the population was foreign born, the largest percent- age since the 1930 census, but well below the levels of foreign born population that the United States had in the 1870s through the 1920s. Immigration ac- counted for 27.8 percent of the population increase in the 1990s, and was a key stimulus to the economic growth during the decade. Without immigration, it is predicted that the United States could experience a negative population growth by 2030.
Aging and the family. As the United States becomes more ethnically diverse, the population is also “graying,” with a steady increase in life expectancy. By 2000, 35 million people were over 65 (12.3 percent), but the fastest-growing segment of the population was those 85 and over. As the baby-boom generation ages, there is growing concern about health care, prescription drugs, senior housing, and Social Security. It is estimated that in 2030 that there will be only about two workers for every person receiving Social Security.
The decline of the traditional family and the growing number of single- parent families had become another national concern. The number of families headed by a female with no husband soared from 5.5 million (10.7 percent) in 1970 to 12.8 million (17.6 percent) in 2000. Single women headed an alarming 47.2 percent of black families in 2000, but the same trend was also evident in white and Hispanic households with children under 18. Children in these families often grew up in poverty and without adequate support.
Income and wealth. In many ways, American were achieving the American dream. Homeownership continued to climb during the prosperity of the 1990s to 67.4 percent of all households, up from 62.9 percent in 1970. Per-capita money income in constant (inflation-adjusted) dollars rose dramatically, from $12,275 in 1970 to $22,199 in 2000. However, the distribution of income varied widely by race, gender, and education. For example, the median income in 2000 was $53,256 for white families, $35,054 for Hispanic families, and $34,192 for black families. High school graduates earned only half the income of their college-educated counterparts.
Even more pronounced was the growing concentration of wealth among the richest Americans. In 1999 the top fifth of American households earned over half of all income, up from 44.2 percent in 1977. All other categories saw their share of income decline. The average after-tax income actually declined between 1977 and 1997 for the lowest three-fifths of households. The United States entered the 21st century as the richest country in the world. But of all the leading industrialized nations, it also had the largest gap between lowest and highest paid workers and the greatest concentration of wealth among the top- earning households. Some critics of the change called it the new Gilded Age.
Challenges of the Early 21st Century
The United States entered the 21st century with unrivaled economic and military dominance in the world, but international terrorism, economic problems, and government mismanagement exposed the nation’s vulnerability.
Disputed Election of 2000
The presidential election of 2000 was the closest since 1876, and the first to be settled by the Supreme Court. President Clinton’s Vice President, Al Gore, easily gained the nomination of the Democratic party, selecting Senator Joseph Lieberman of Connecticut as his running mate. Governor George W. Bush of Texas, eldest son of former President George H. Bush, won the nomination of the Republican party, and selected Dick Cheney, a veteran of the Reagan and elder Bush administrations, as his running mate. Both candidates fought over the moderate and independent vote, Gore as a champion of “working families” and Bush running as “a compassionate conservative.” Ralph Nader, the candidate for the Green party, ran a distant third, but he probably took enough votes from Gore to make a difference in Florida and other states.
Gore received over 500,000 more popular votes nationwide than Bush, but victory hinged on who won Florida’s 25 electoral votes. Bush led by only 537 popular votes in Florida after a partial recount. Then the Democrats asked for manual recounts of the error-prone punch cards. The Supreme Court of Florida ordered recounts of all the votes, but the U.S. Supreme Court overruled them in a split 5-4 decision that matched the party loyalty of the justices. In Bush v. Gore, the majority ruled that the varying standards used in Florida’s recount violated the Equal-Protection Clause of the Fourteenth Amendment. Al Gore ended the election crisis by accepting the ruling. Governor Bush won with 271 electoral votes against Gore’s 266. (One elector abstained.)
Political Polarization
The early 21st century elections revealed a nation politically divided into a conservative south and west, and a more liberal northeast and east and west coasts. The more traditional, religious, and nationalist rural areas and small towns went Republican, while the more diverse, tolerant, and international-minded urban centers voted Democrat. The shift of Southern, white conservatives after the 1960s from the Democratic to the Republican party transformed American politics. In the 1990s, Southern conservatives like Newt Gingrich of Georgia, Tom DeLay of Texas, and Trent Lott of Mississippi took over the leadership of the Republican party, making it more conservative and partisan. As the party of Lincoln became the party of Ronald Reagan, moderate Republicans lost influence and elections. In the state legislatures, both parties gerrymandered congressional districts to create “safe seats,” which rewarded partisanship and discouraged compromise in Congress.
Domestic Policies and Problems
President George W. Bush aggressively pushed his conservative agenda: tax cuts, deregulation, federal aid to faith-based organizations, pro-life legislation, school choice, privatization of Social Security and Medicare, drilling for oil and gas in the Alaska wildlife refuge, and voluntary environmental standards for industry.
Republican tax cuts. In 2001, Congress passed a $1.35 trillion dollar tax cut spread over ten years. The bill lowered the top tax bracket, gradually eliminated estates taxes, increased the child tax credit and limits for IRA and 401(k) contributions, and gave all taxpayers an immediate tax rebate. In 2003, President Bush pushed through another round of tax cuts for stock dividends, capital gains, and married couples. Democrats criticized the tax cuts for giving most of the benefits to the richest 5 percent of the population, and for contributing to the doubling of the national debt during the Bush presidency from about $5 to $10 trillion.
Educational and health reform. President Bush championed the bipartisan No Child Left Behind Act. It aimed to improve student performance and close the gap between well-to-do and poor students in the public schools through nationwide testing of all students, student transfer rights to better schools, improved reading programs, and the training of high-quality teachers. Republicans also passed laws to give seniors in Medicare the option to enroll in private insurance companies. Congress also fulfilled a campaign promise by President Bush to provide prescription drug coverage for seniors. Democrats criticized the legislation as primarily designed to profit insurance and drug companies.
Economic bubbles and corruption. The technology boom of the 1990s peaked in 2000, and was over by 2002. The stock market crashed; the Dow Jones Average fell by 38 percent. The unemployment rate climbed to 6 percent, and the number of people living in poverty increased for the first time in eight years. Fraud and dishonesty committed by business leaders also hurt the stock market and consumer confidence in the economy. For example, the large corporations Enron and World Com had “cooked their books” (falsified stated earnings and profits) with the help of accounting companies. The Federal Reserve fought the recession by cutting interest rates to 1.25 percent, the lowest in 50 years. The end of the technology boom-bust cycle (1995–2002) encouraged many investors to move into real estate, which created another speculative “bubble” (2002–2007) that would burst with even more tragic consequences in Bush’s second term.
The War on Terrorism
Terrorism dominated U.S. foreign policy after September 11, 2001. George W. Bush entered the White House with no foreign policy experience, but surrounded himself with veterans of prior Republican administrations. General Colin Powell became his Secretary of State, the first African American to hold the job. President Bush’s confident and aggressive approach against terrorism won over many Americans, but his administration often alienated other nations.
Roots of terrorism. The United States was faulted by many in the Arab world for siding with Israel in the deadly cycle of Palestinian terror-bombing and Israeli reprisals. However, the causes of anti-Americanism often went deeper. After World War I, the Ottoman Empire, the last of the Islamic empires, was replaced in the Middle East by Western-style, secular nation-states. Religious fundamentalists decried modernization and the corruption of the “House of Islam,” an ancient Islamic ideal of a realm governed by the precepts of the Koran. The stationing of U.S. troops in the Middle East after the Gulf War was seen as another violation of their lands. Islamic extremists, such as Osama bin Laden and the supporters of Al Qaeda (“The Base”), preached jihad, or holy war against the “Jews and Crusaders.” The restrictive economic and political conditions in the Middle East also provided a fertile breeding ground for recruiting extremists.
The bombing of the World Trade Center in New York City in 1993 brought home for the first time the threat posed by Islamic extremists. In 1998, the United States responded to the terrorist bombing of two U.S. embassies in Kenya and Tanzania by bombing Al Qaeda camps in Afghanistan and the Sudan. Their leader, Osama bin Laden, had fled to Afghanistan and allied himself with the Taliban, the Islamic fundamentalists who had taken over Afghanistan. In 2000, U.S. armed forces also learned the nature of “asymmetric” warfare conducted by terrorists, when two suicide bombers in a small rubber boat nearly sank a billion dollar warship, the U.S.S. Cole, docked in Yemen.
September 11, 2001. The coordinated attacks by Al Qaeda terrorists in commercial airliners on the twin towers of the World Trade Center in New York City, the Pentagon near Washington, D.C., and a fourth plane that crashed in Pennsylvania claimed nearly 3,000 lives. The attacks galvanized public opinion as nothing since the Japanese attack on Pearl Harbor in 1941, and they empowered the Bush administration to take action.
War in Afghanistan. President Bush declared that he wanted Osama bin Laden and other Al Qaeda leaders “Dead or Alive.” After the Taliban refused to turn over bin Laden and his associates, their government was quickly overthrown in the fall of 2001 by a combination of U.S. bombing, the anti-Taliban Northern Alliance troops, and U.S. Special Forces. U.S. and Afghan forces continued to pursue the remnants of Al Qaeda in the mountains bordering Pakistan, but they failed to capture bin Laden. A pro-American leader, Hamid Karzai, became head of the government in Kabul, but Afghanistan remained unstable and divided by the Taliban insurgency and tribal conflicts.
Homeland security. After the 9/11 attacks, most Americans were willing to accept background checks and airport searches. The Patriot Acts of 2001 and 2003 gave unparalleled powers to the U.S. government to obtain information and expand surveillance and arrest powers. A growing number of Americans, though, were troubled by unlimited wiretaps without court orders, military tribunals, and the imprisonment of suspects indefinitely in Guantánamo, Cuba.
To enhance security, a new Homeland Security Department was created by combining over 20 federal agencies with 170,000 employees, including Customs, Immigration and Naturalization, the Coast Guard, and the Secret Service. This was the largest reorganization of government since the creation of the Department of Defense after World War II. Many in Congress questioned why the FBI and CIA were left out of the new department. In 2004, a bipartisan commission on terrorism criticized the FBI and the CIA, as well as the Defense Department, for failing to work together to “connect the dots” that may have uncovered the 9/11 plot. Congress followed up on their recommendations, creating a Director of National Intelligence with the difficult job of coordinating the intelligence activities of all agencies.
Bush II foreign policy. President Bush worked with European nations to expand the European Union and NATO, help admit China to the World Trade Organization, and broker conflicts between two nuclear powers: India and Pakistan. However, the Bush administration refused to join the Kyoto Accord to prevent global warming, walked out of a U.N. conference on racism, abandoned the 1972 Anti-Ballistic Missile Treaty with Russia, and for years would not negotiate with North Korea or Iran. Critics questioned whether the administration valued cooperation with the nations of the world or instead followed a unilateralist approach. The President argued, in what became known as the “Bush Doctrine,” that the old policies of containment and deterrence were no longer effective in a world of stateless terrorism. To protect America, the president claimed that the United States would be justified in using preemptive attacks to stop the acquisition and use of weapons of mass destruction (WMDs) by terrorists and by nations that support terrorism.
Iraq War. President Bush, in his 2002 State of the Union Address, singled out Iraq, North Korea, and Iran as the “axis of evil.” While U.S. intelligence agencies were finding no link between Iraq’s Saddam Hussein and the September 11, 2001, attacks, the Bush administration pursued a preemptive attack on Iraq before Saddam Hussein could build and distribute WMDs (nuclear and biological) to terrorists. Late in 2002, Secretary of State Powell negotiated an inspection plan with the U.N. Security Council, which Iraq accepted. In the following months, the U.N. inspectors failed to find WMDs in Iraq. Nevertheless, the Bush administration continued to present claims of their existence based on intelligence information that proved false.
In early 2003, President Bush declared that Iraq had not complied with numerous U.N. resolutions, and that “the game was over.” Without support of the U.N. Security Council, the United States launched air attacks on Iraq on March 19. In less than four weeks, U.S. armed forces, with the support of the British and other allies, overran Iraqi forces, captured the capital city, Baghdad, and ended Hussein’s dictatorship. When U.S. forces could not find WMDs in Iraq, criticism of the “war of choice” and the “regime change” mounted both at home and overseas.
The defeat of the Iraq army and the capture of Saddam Hussein in late 2003 did not end the violence in Iraq. Diverse groups of insurgents (Sunni followers of the former dictator, Shiite militias, and foreign fighters, including Al Qaeda) continued to attacked U.S. and allied troops, Westerners, and one another. Violence between Sunni and Shiite groups raised fears of a civil war that would split the country apart. Millions of Iraqis fled the country or were displaced by the sectarian attacks. This violence slowed both the political and physical reconstruction of Iraq. The Bush administration was widely criticized for going into Iraq without sufficient troops to control the country and for disbanding the Iraqi army. Pictures of the barbaric treatment of prisoners by U.S. troops at Abu Ghraib further diminished America’s reputation in Iraq and around the world.
Elections of 2004 and a Bush Second Term
The Democrats approached the elections of 2004 optimistic that they could unseat the incumbent president burdened by an increasing unpopular war and limited economic recovery. Democratic voters selected Senator John Kerry of Massachusetts as their presidential candidate. Kerry selected a primary rival, Senator John Edwards of North Carolina, as his running mate. The Republicans successfully energized their conservative base on issues such as the war against terrorism, more tax cuts, and opposition to gay marriage and abortion. Republicans successfully painted Kerry as a “flip-flopper” on issues and a “tax-and-spend liberal.” Senator Kerry did not respond effectively to attacks (such as the so-called “Swiftboat” ads) that questioned his military service and patriotism.
President Bush received 51 percent of the popular vote and captured 286 electoral votes to Kerry’s 252. The country remained divided much as in 2000. (See the electoral map on page 662.) Republicans in 2004 added Iowa and New Mexico, while losing New Hampshire to the Democrats. Republicans also expanded their majorities in the Senate and House, and continued to gain on the state level, especially in the South. All this left the party in the strongest position it enjoyed since the 1920s.
Four more years at war. The reconstruction of Iraq had made some headway by 2005 when the Iraqis held their first election, created a national assembly, and selected a prime minister and cabinet ministries. The Sunni minority that had ruled Iraq under Hussein began to work with the Shiite majority and the Kurds in the new government. At first, these steps did little to reduce violence, which killed on the average 100 Americans and 3,000 Iraqis a month. In the United States, the bipartisan Iraqi Study Group recommended steps to have the Iraqis take greater responsibility for their country and set a timeline for U.S. withdrawal. President Bush rejected a timetable, and in early 2007 sent an additional 30,000 troops in a “surge” to establish order. By late 2008, militia violence and American deaths were down in Iraq, and the United States had started to turn over control of the provinces to the Iraqi government.
In Afghanistan, the Taliban stepped up their attacks. For the first time, the number of Americans killed there outnumbered those killed in Iraq. President Bush turned over to the next president two unresolved wars and incomplete efforts to deal with nuclear threats from Iran and North Korea. The Bush admin- istration, though, did have the satisfaction of knowing that there had not been another major terrorist attack in the United States since September 11, 2001.
Washington politics. After his reelection victory in 2004, President Bush pushed hard to get laws passed that would privatize Social Security by encouraging Americans to invest part of their Social Security payroll deductions in various market investments. His administration also failed to pass immigration reform, which was criticized by conservatives as “amnesty” for illegal immigrants. When a strong hurricane hit the Gulf Coast and flooded New Orleans in August 2005, the Federal Emergency Management Agency (FEMA) failed both to anticipate and respond to the crisis. More than 1,000 people died, and tens of thousands of others (mostly poor people) were left in desperate conditions. Republicans were further tarnished by scandals involving taking bribes from lobbyists, charges of perjury and obstruction of justice, improper relations with congressional pages, and the resignation of the Republican majority leader of the House, Tom DeLay, over his gerrymandering scheme in Texas. These failures, along with dissatisfaction with the Iraq War, helped the Democrats win control of both houses of Congress in 2006. President Bush, however, did leave a lasting impact on the federal courts by appointing two conservatives to the Supreme Court—John Roberts (as Chief Justice) and Samuel Alito—and increasing conservative majorities in the federal appellate courts.
Financial crisis of 2007–2009. The housing boom of 2002–2007 was fueled by risky subprime mortgages and speculators who borrowed to “flip” properties for a quick profit. Wall Street firms packaged these high-risk loans into a variety of complex investments (“securitization”), and sold them to investors around the world. Investments worth trillions of dollars lost value as loan foreclosures climbed, the real estate bubble burst, and housing prices collapsed. Many banks and financial institutions at home and overseas faced failure as investors panicked. This resulted in a credit or “liquidity” crisis, because banks either lacked funds or were afraid to make the loans to businesses and consumers necessary for the day-to-day functioning of the economy.
As the crisis deepened within credit markets, Americans were also hit with soaring gas prices (well over $4 a gallon), stock market declines of more than 40 percent, and rising unemployment. In early 2008, the federal government tried a $170 billion stimulus package and took over a few critical financial institutions, such as Fannie Mae and Freddie Mac. The panic in the markets in September, following the bankruptcy of the large Wall Street investment bank Lehman Brothers, forced the Bush administration to ask Congress for additional funds to help U.S. banks and restore the credit markets. The controversial Economic Stabilization Act of 2008 was passed, creating a $700 billion Troubled Assets Relief Program (TARP) to purchase failing assets that included mortgages and mortgage related securities. This was attacked by both conservatives as “socialism” and liberals as a bailout of the Wall Street executives who had caused the problems. Like the Great Depression of 1929, the causes of this crash will be debated for years. Suspected causes were a Federal Reserve policy of low interest rates and a political atmosphere that discouraged regulation of financial institutions. What we do know is that the crisis had a significant impact on the 2008 election.
Election of 2008
For the Democrats, Senator Hillary Clinton of New York, wife of former President Clinton, was the early favorite to become the first woman to head a national ticket. However, the big surprise of this election came after a long primary battle. A 47-year-old, charismatic, African-American, junior senator from Illinois, Barack Obama, captured the Democratic nomination for president. Obama chose as his running mate Joseph Biden of Delaware, an experienced member of the Senate. In the shadow of the unpopular Bush administration, the Republicans nominated Senator John McCain of Arizona, a Vietnam War hero and a political “maverick” who hoped to appeal to undecided voters. McCain selected Governor Sarah Palin of Alaska, a 44-year-old, relatively unknown politician. She became only the second woman to run for the vice presidency on a major political party ticket.
After the party conventions, the McCain-Palin ticket led in the polls, but the economic crisis, Obama’s message for change, and his grassroots and well- funded campaign helped the Democrats win in November. The Obama-Biden ticket gained 7,000,000 more votes than McCain-Palin. Obama won with a decisive 364 electoral votes to McCain’s 174 by taking eight states (including Florida, Ohio, Virginia, and North Carolina) that had been won by Bush in 2004. The Democrats also increased their majorities in the House and Senate well beyond their victories in 2006.
An Historic Change in the Face of Crisis
The election of the first African American as president of the United States was historic, but Barack Obama and the Democrats now faced the country’s worst economic crisis since the Great Depression, two unfinished U.S. wars, and a world increasingly skeptical of U.S. power and leadership.
Presidential Transition
The political and policy differences between President Bush and President- elect Obama did not keep them from working cooperatively for a smooth changeover of administrations during the months between the election and the inauguration.
The economy. The rapidly growing economic crisis dominated the transition. With the support of President-elect Obama, President Bush asked Congress to approve the use of the second half of the controversial TARP funding—$350 billion. And following Obama’s request, Bush used over $10 billion of TARP funds to support the failing automakers General Motors (GM) and Chrysler Corporation.
Cabinet. President Obama appointed his strongest Democratic primary challenger, Hillary Clinton, as Secretary of State and Eric Holder as the first African-American Attorney General. Obama reappointed Robert Gates, President Bush’s Secretary of Defense, to the same position. Obama promised higher ethical standards for his appointments, but a number of his candidates had to withdraw over questions about their failure to pay taxes or prior work as lobbyists.
Inauguration
On a sunny, cold January 20, 2009, the eyes of the nation and much of the world focused on Washington, D.C., for the historic oath-taking of the nation’s 44th American President. A joyous crowd estimated at more than 1.5 million, the largest ever to witness a presidential inauguration, gathered around the U.S. “new era of responsibility” and “the work of remaking America.”
First 100 Days
Ever since Franklin D. Roosevelt, a new president’s work has often been judged by the accomplishments of the administration’s first 100 days in office. With the growing economic crisis that many compared to the Great Depression, this time frame was readily applied to the new Obama administration. While economic concerns would dominate, there were also efforts to fulfill campaign promises and reverse numerous actions of the Bush administration.
Executive orders. President Obama signed a range of orders in a direct effort to overturn actions of the Bush administration. In his early days in office, Obama started the process of closing the U.S. prison at Guantánamo Bay, Cuba. He placed a formal ban on torture by requiring that Army field manuals be used as the guide for interrogating terrorist suspects. The new President also expanded stem-cell research and ended restrictions on federal funding of overseas health organizations that provided abortions.
Economic actions. Faced with growing unemployment, a weak stock market, continuing uncertainty in the banking system, and low public confi- dence in the economy, the Obama administration took a number of actions to stabilize the economy:
American Recovery and Reinvestment Act of 2009 provided $787 billion in economic stimulus designed to create or save 3.5 billion jobs. $288 billion, the largest share, was for tax relief. $144 billion was for state and local fiscal aid. The balance of the package was for construction projects, health care, education, and renewable energy.
The Public-Private Investment Program for Legacy Assets used $75 to $100 million in TARP funds along with the involvement of the FDIC and Federal Reserve together with private investors to purchase up to $1 trillion in bad mortgage-back securities (commonly called “toxic assets”) from banks to restore confidence in those banks and increase the availability of credit for businesses and consumers.
Changes in Financial System Regulations, proposed in March 2009 by Treasury Secretary Timothy Geithner, included (1) proposing stronger financial standards, including a systemic risk regulator, on large financial institutions whose failure would endanger the entire financial system; and (2) extending federal financial regulations (including the power to take over major nonbank financial institutions) on large hedge funds as well as on all trading in financial derivatives—the complex financial instruments that led to much of the crisis.
Aid to the Auto Industry. With General Motors and Chrysler Corporation near collapse, the Obama administration became deeply involved in the development of recovery plans. Unprecedented government actions included: (1) requesting the resignation of the CEO of General Motors; (2) guiding Chrysler into a bankruptcy plan that involved $8 billion of additional U.S. government aid and new ownership that could include the United Auto Workers health trust owning over 50 percent of the company and smaller shares held by Fiat, the Italian automaker, and the U.S. and Canadian governments; (3) guiding GM into a bankruptcy similar to Chrysler’s.
International security. While reassurances were made about U.S. concerns with many foreign areas (including Iraq, Afghanistan, Pakistan, Korea, Israel, Palestine, and Mexico), immediate policy statements were made for:
Iraq. In late February 2009, the President proposed a plan that would have most U.S. troops leave Iraq by August 2010. A “transitional force” of 35,000 to 50,000 troops would remain to assist Iraqi security forces and fight terrorism. All of the troops would be withdrawn by the end of 2011, as was agreed upon in 2008 by the Bush administration and the Iraqi government.
Afghanistan. The Obama administration conducted a series of reviews of U.S. policy in Afghanistan, which the President felt had been neglected due to U.S. preoccupation with Iraq. New policies were being considered in light of the Taliban’s resurgence there, the weakening of Pakistan. President Obama initially approved adding 17,000 troops to U.S. forces in Afghanistan and later called for 4,000 more troops to train the Afghan army and police. Obama said the troop increases would be made possible partially because of U.S. troop withdrawals from Iraq.
Mexico. The Mexican government’s efforts to break the illegal drug trade have been met by violent opposition in Mexico. In 2008, more than 5,800 Mexicans were killed in this conflict between government forces and drug cartels. Mexican President Felipe Calderon was the first foreign leader to meet Obama after the 2008 U.S. elections. Soon after taking office, the Obama administration publicly recognized the United States’ role as the major source for the money and guns supporting the Mexican drug cartels. President Obama promised continued aid to Mexico to fight drug trafficking as well as an updated and comprehensive U.S. drug policy in the near future.
Campaign initiatives. President Obama insisted that his administration could both deal with the economic situation and follow through with long promised reforms, particularly in health care, education, and energy. Many Republicans and some Democrats questioned this broad strategy given a projected $1.75 trillion budget deficit for 2009 (the largest in history) and a $3.55 trillion budget for 2010.
While the President’s initial efforts at bipartisanship were largely rejected by the Republicans, his Democratic party’s control of Congress has enabled him to act decisively. His personal popularity remains high both nationally and worldwide in face of widespread concern about the economy. Many future decisions and actions face the President as the economy remains uncertain and numerous unstable international situations continue.