APUSH: Period 9, 1980-Present - The Reagan Revolution, Supply-Side Economics, Deregulation

Why This Matters

The Reagan Revolution, a pivotal event in American history, marked a significant shift in economic and social policies during the 1980s. This period, characterized by supply-side economics and deregulation, had far-reaching consequences for the nation's economy, politics, and social fabric. The Reagan Revolution's emphasis on individualism, limited government intervention, and free market principles resonated with the AP theme of Politics and Power, highlighting the ongoing struggle between government control and individual freedom. Understanding this period is crucial for grasping the complexities of American politics, the role of the executive branch, and the ongoing debate over economic and social policies.

Key Events & People

• Ronald Reagan (40th President of the United States): Implemented supply-side economics, cutting taxes and regulations to stimulate economic growth.
• Milton Friedman (Economist): Influenced Reagan's economic policies with his advocacy for monetarism and free market principles.
• Alan Greenspan (Federal Reserve Chairman): Implemented monetary policies to combat inflation and support Reagan's economic agenda.
• Paul Volcker (Federal Reserve Chairman): Raised interest rates to combat high inflation, setting the stage for Reagan's economic policies.
• The Tax Reform Act of 1986: Signed into law by Reagan, this act reduced tax rates and eliminated many tax loopholes.
• The Gramm-Leach-Bliley Act of 1999: Built upon Reagan's deregulation efforts, allowing commercial banks to engage in investment activities.
• The Airline Deregulation Act of 1978: Signed into law by President Jimmy Carter, but implemented during Reagan's presidency, this act removed government control over the airline industry.
• The Stagflation of the 1970s: A period of high inflation and stagnant economic growth that Reagan's policies aimed to address.
• The Savings and Loan Crisis: A financial crisis that occurred during Reagan's presidency, resulting from deregulation and excessive risk-taking in the savings and loan industry.
• The Iran-Contra Affair: A scandal that occurred during Reagan's presidency, involving the secret sale of arms to Iran and the diversion of funds to support anti-Sandinista rebels in Nicaragua.

Cause & Effect Chain

• Cause: Reagan's economic policies, including tax cuts and deregulation, aimed to stimulate economic growth.
• Effect: The economy experienced a period of rapid growth, often referred to as the "Reagan Boom."

• Long-term consequence: The Reagan Boom laid the groundwork for the economic policies of subsequent administrations, including the Clinton and Bush presidencies.

• Cause: The deregulation of industries, such as airlines and banking, aimed to increase competition and efficiency.

• Effect: The deregulation of industries led to increased competition and innovation, but also created new risks and challenges.

• Long-term consequence: The deregulation of industries contributed to the development of new financial instruments and the growth of the financial sector.

• Cause: The Gramm-Leach-Bliley Act of 1999 built upon Reagan's deregulation efforts, allowing commercial banks to engage in investment activities.

• Effect: The act led to increased consolidation in the banking industry and the growth of complex financial instruments.
• Long-term consequence: The act contributed to the development of the subprime mortgage crisis and the 2008 financial crisis.

Essential Vocabulary

• Supply-side economics: An economic theory that emphasizes the role of individual initiative and free market principles in driving economic growth.
• Deregulation: The removal of government controls and regulations on industries, aimed at increasing competition and efficiency.
• Monetarism: An economic theory that emphasizes the role of monetary policy in controlling inflation and promoting economic growth.
• Stagflation: A period of high inflation and stagnant economic growth.
• Reagan Boom: A period of rapid economic growth that occurred during the 1980s, often attributed to Reagan's economic policies.
• Gramm-Leach-Bliley Act: A law that allowed commercial banks to engage in investment activities, building upon Reagan's deregulation efforts.
• Airline Deregulation Act: A law that removed government control over the airline industry, signed into law by President Jimmy Carter but implemented during Reagan's presidency.
• Tax Reform Act of 1986: A law that reduced tax rates and eliminated many tax loopholes, signed into law by Reagan.
• Savings and Loan Crisis: A financial crisis that occurred during Reagan's presidency, resulting from deregulation and excessive risk-taking in the savings and loan industry.
• Iran-Contra Affair: A scandal that occurred during Reagan's presidency, involving the secret sale of arms to Iran and the diversion of funds to support anti-Sandinista rebels in Nicaragua.

Common Student Mistakes

• What students often get wrong: Believing that Reagan's economic policies were solely responsible for the economic growth of the 1980s.
• Correction: While Reagan's policies played a significant role, other factors, such as the end of the Cold War and the growth of the service sector, also contributed to the economic growth of the 1980s.
• What students often get wrong: Thinking that the Gramm-Leach-Bliley Act was a new law passed during the Clinton presidency.
• Correction: The Gramm-Leach-Bliley Act was actually passed in 1999, during the Clinton presidency, but built upon Reagan's deregulation efforts.
• What students often get wrong: Believing that the Savings and Loan Crisis was caused solely by deregulation.
• Correction: While deregulation played a role, the crisis was also caused by excessive risk-taking and poor management in the savings and loan industry.

DBQ / LEQ Connections

• Possible essay prompt: Analyze the impact of Reagan's economic policies on the US economy during the 1980s. Be sure to include specific evidence from the Tax Reform Act of 1986, the Gramm-Leach-Bliley Act, and the Savings and Loan Crisis.
• Possible document-based question: Evaluate the role of deregulation in the development of the US economy during the 1980s. Use evidence from the Airline Deregulation Act, the Savings and Loan Crisis, and the Gramm-Leach-Bliley Act to support your argument.
• Possible essay prompt: Discuss the significance of the Reagan Revolution in shaping American politics and society. Be sure to include specific evidence from the Iran-Contra Affair, the Tax Reform Act of 1986, and the Gramm-Leach-Bliley Act.

Quick Self?Check

1. What was the primary goal of Reagan's economic policies? a) To reduce government spending b) To stimulate economic growth through tax cuts and deregulation c) To increase government control over industries Answer: b) To stimulate economic growth through tax cuts and deregulation Explanation: Reagan's economic policies aimed to stimulate economic growth by reducing taxes and regulations.

2. What was the Gramm-Leach-Bliley Act of 1999? a) A law that increased government control over industries b) A law that allowed commercial banks to engage in investment activities c) A law that reduced tax rates Answer: b) A law that allowed commercial banks to engage in investment activities Explanation: The Gramm-Leach-Bliley Act allowed commercial banks to engage in investment activities, building upon Reagan's deregulation efforts.

3. What was the Savings and Loan Crisis? a) A financial crisis caused by excessive risk-taking and poor management in the savings and loan industry b) A financial crisis caused by deregulation c) A financial crisis caused by high inflation Answer: a) A financial crisis caused by excessive risk-taking and poor management in the savings and loan industry Explanation: The Savings and Loan Crisis was caused by excessive risk-taking and poor management in the savings and loan industry, as well as deregulation.

Last?Minute Cram Sheet

• The Reagan Boom was a period of rapid economic growth that occurred during the 1980s.
• The Gramm-Leach-Bliley Act of 1999 allowed commercial banks to engage in investment activities.
• The Savings and Loan Crisis was a financial crisis that occurred during Reagan's presidency.
• The Iran-Contra Affair was a scandal that occurred during Reagan's presidency.
• The Tax Reform Act of 1986 reduced tax rates and eliminated many tax loopholes.
• The Airline Deregulation Act of 1978 removed government control over the airline industry.
• Milton Friedman was a key influence on Reagan's economic policies.
• Alan Greenspan was the Federal Reserve Chairman during Reagan's presidency.
• Paul Volcker was the Federal Reserve Chairman before Reagan's presidency.
• The Stagflation of the 1970s was a period of high inflation and stagnant economic growth.