RUNNING ON EMPTY: THE NATION TRANSFORMED

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RUNNING ON EMPTYTHE NATION TRANSFORMED

• CHAPTER 31 (826-849)

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THE OIL CRISIS

• In 1973 Egypt and Syria attacked Israel
• The US supplied them with planes and other
  needed war material Israel quickly defeated
  Egypt
• Then the Arab world cut off oil shipments to the
  US fuel prices rose 400, prices of everything
  else soared as well gas was rationed, people
  had to wait in long lines only able to buy 10
  gallons at a time
• Henry Kissinger negotiated an agreement to
  withdraw Israeli troops from occupied areas and
  for the other nations to lift the oil embargo
• The oil nations quickly learned their power and
  formed OPEC (Organization of Petroleum Exporting
  Countries) and began to limit production, raising
  the price of oil
• Japanese and German automakers began selling
  their little cars in America competing favorably
  with Detroits big cars soon American
  automakers could not keep up and the nations
  manufacturing sector was in trouble

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STAGFLATION THE WEIRD ECONOMY

• Recession were normal, but after 1973
  unemployment was up and inflation continued to
  rise thus stagflation
• Inflation was high at 5 in 1971, by 1975 it was
  11, by 1979 13
• Unemployment was 6-10 - double the usual postwar
  levels
• Congress passed a minimum wage law, Social
  Security payments were tied to the cost of living
  index, Carter attempted to cut spending, balance
  the budget and cut taxes but was not very
  successful
• The federal deficit soured from 8.7 billion in
  1970 to 72.7 billion in 1980
• Bracket creep caused taxes to rise higher than
  wages
• Mortgage rates soared preventing many from buying
  homes and creating a housing slump causing more
  unemployment
• Businesses could not afford to borrow money to
  expand because interest rates were too high

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COLD WAR OR DÉTENTE?

• It is a new world constant decency Carter
  would deal with other nations in a fair and
  humane way, putting the defense of basic human
  rights above other concerns
• He promptly cut off aid to Chile and Argentina
  and negotiated a treaty to give the canal to
  Panama
• SALT II was signed in 1979 then the Soviet
  Union sent troops to Afghanistan SALT II was
  withdrawn - athletes were not allowed to
  participate in the 1980 Olympic Games in Moscow
  Soon the US was funneling money to Afghan
  militias opposing the Soviets
• Camp David Accords Egypt and Israel met for two
  weeks at Camp David with Carter and the two
  nations signed a peace accord allowing oil to
  continue to flow to the United States

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THE IRAN CRISIS

• November 1979, armed Muslim militants took the
  American embassy in Iran captive
• America had been active in Iran since WW2 it
  supported several governments along the way
• In January 1979 the Ayatollah Khomeini took power
  from the American backed government and declared
  freedom as the great enemy of Islam and denounced
  the United States calling it the Great Satan

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THE IRAN CRISIS

• The militants demanded the return of the shah to
  be tried as a traitor and the release of all his
  assets to the Iranian government Carter refused
  and froze Irans assets in the US and banned
  trade until the hostages were freed
• Months passed in 1980 Carter ordered their
  rescue it turned into a fiasco several
  helicopters shut down, Carter called it off, then
  a crash killed 8 marines as they were leaving
• The hostages were finally released on Reagans
  inauguration day Iraqi victories caused them to
  release the hostages in return for the unfreezing
  of some Iranian assets 52 hostages were finally
  set free after 444 days in captivity

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REAGAN AS PRESIDENT

• Reagan asked Congress to reduce taxes by 30 (he
  got 25) giving people more money to invest in
  the economy Reaganomics he also was able
  (with the help of conservative Democrats) to
  lower spending by 39 billion by cutting many
  social programs
• Business taxes were lowered, the IRA was created
  to give more tax breaks
• On the other hand, he dramatically increased the
  military budget he wanted to build up the
  nuclear arsenal to such a point that the Soviets
  would have no choice but to back down
• He backed Nicaraguan and El Salvadorian rebels
  and sent troops to Grenada to over throw a Cuban
  backed regime

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FOUR MORE YEARS

• The economy was on the rise, unemployment was
  dropping, inflation was dropping and interest
  rates were dropping
• Walter Mondale (Carters VP) ran against him and
  selected a woman, Geraldine Ferraro as his
  running mate
• Reagan ran away with the election he got 60 of
  the popular vote and only lost Minnesota
  (Mondales home state) and DC 525-13 electoral
  votes

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THE REAGAN REVOLUTION

• Mikhail Gorbachev became Soviet premier in 1985
  much more moderate and willing to talk
  glasnost debate and criticism perestroika
  decentralizing the economy
• SDI Strategic Defense Initiative space
  stations that would detect and destroy enemy
  missiles became a sticking point
• The Space Shuttle program 1986 Challenger
  explosion
• Income Tax Act of 1986 reduced the top bracket
  for 50 to 28 and the corporate bracket from 46
  to 34
• Appointed three conservative Supreme Court
  Justices, including Sandra Day OConnor the first
  woman
• The Berlin wall finally came down in 1989