Frightening Cities, Crumbling Bridges
Driving through an American city, circa 1975, in one of those Japanese imports could be a pretty depressing experience as well. The post-World War II building boom had developed suburban America, and throughout the 1950s, many middle-class families left the old cities for the new suburbs. The pace of this exodus accelerated following the racial violence that plagued many cities during the 1960s. Social commentators began to speak of white flight--though, in fact, the abandonment of inner city for suburb was as much a matter of economics as it was of race; middle-class blacks fled just as quickly as their white neighbors. The result was cities that rotted at their cores. With the urban economic base dramatically reduced, businesses followed residents to outlying areas, and once-vibrant downtown districts became ghetto ghost towns. Throw into this dismal mix the often-ineffective efforts of a chronically underfunded public education system plus a steady increase in the abuse of illegal narcotics, and it seemed that many U.S. municipalities had been reduced to forbidding urban jungles.
But deteriorating cities weren't the only symptoms of a crisis in the national economy and spirit. The American infrastructure was in need of a general repair. The very roads that had carried the middle class out of the inner city were typically cratered with potholes. And a growing proportion of the nation's bridges-physical expressions of the necessity and desire to join town to town and citizen to citizen-were failing inspection, too old, too neglected to bear the traffic for which they had been designed.
Meltdown
The single most terrifying event that suddenly and dramatically forced Americans to question their faith in U.S. technology, big business, and government regulation occurred on March 28, 1979. A nuclear reactor at the Three Mile Island electric generating plant, near the Pennsylvania capital of Harrisburg, lost coolant water, thereby initiating a partial meltdown of the reactor's intensely radioactive core.
Nuclear energy had long been a subject of controversy in the United States. During the late 1950s and early 1960s, the peaceful use of the atom was seen as the key to supplying cheap and virtually limitless energy to the nation. But by the 1970s, environmentalists and others were questioning the safety of atomic power, which was also proving far more expensive than had been originally projected. By the end of the decade, a beleaguered nuclear power industry was on the defensive. By remarkable coincidence, just before the Three Mile Island accident, a popular movie dramatized the consequences (and attempted corporate cover-up) of a nuclear power plant accident. The movie was called The China Syndrome, an allusion to the theory that a full-scale meltdown of a reactor's core would burn so intensely that the material would, in effect, sear its way deep into the earth--clear down to China, experts grimly joked.
The movie was very much on people's minds when a shaken Pennsylvania governor Richard Thornburgh appeared on television to warn residents to remain indoors and advised pregnant women to evacuate the area. The partial meltdown had already released an amount of radioactive gases into the atmosphere.
Although evidence exists that plant officials improperly delayed notifying public authorities of the accident, backup safety features in the plant did successfully prevent a major disaster of the proportions of the Chernobyl meltdown on April 26, 1986, in the Soviet Ukraine, which would kill 31 persons immediately and untold additional numbers later. Nevertheless, Three Mile Island seemed to many people just one more in a long string of terrible failures of American commerce, technology, and know-how.
The Ayatollah
The year 1979 brought a shock of a different kind to national pride. A revolution in Iran, led by the Ayatollah Ruhollah Khomeini (1900-89), toppled longtime U.S. ally Muhammad Reza Shah Pahlavi, the Shah of Iran, who fled into exile in January 1979. In October, desperately ill with cancer, the Shah was granted permission to come to the United States for medical treatment. In response to this gesture, on November 4, 1979, 500 Iranians stormed the U.S. embassy in Tehran and took 66 embassy employees hostage, demanding the return of the Shah.
While President Carter refused to yield to this demand, the Shah voluntarily left the United States in early December. Still, the hostages remained in captivity (except for 13 who were black or female, released on November 19-20). Stalemated and frustrated, President Carter authorized an army Special Forces unit to attempt a rescue on April 24, 1980. The mission had to be aborted, and although its failure did not result in harm to the hostages, it seemed yet another humiliating defeat for a battered superpower.
Not until November 1980 did the Iranian parliament propose conditions for the liberation of the hostages, including a U.S. pledge not to interfere in Iranian affairs, the release of Iranian assets frozen in the U.S. by President Carter, the lifting of all U.S. sanctions against Iran, and the return of the Shah's property to Iran. An agreement was signed early in January 1981, but the Ayatollah Khomeini deliberately delayed the release of the hostages until January 20, the day Jimmy Carter left office and Ronald Reagan was inaugurated. Although the new president, in an act of great grace and justice, sent Carter as his special envoy to greet the returning hostages at a U.S. base in West Germany, many Americans saw the Iran hostage crisis as a failure of the Carter administration, and the release was regarded as a kind of miracle performed by the incoming president.
The Great Communicator
Depressed and downcast, a majority of the American people looked to smiling, unflappable Ronald Reagan for even more miracles. Certainly, his own life had much magic to it. Born above a grocery store in Tampico, Illinois, in 1911, Reagan worked his way through college, became a sportscaster and then an actor-less than a spectacular talent, perhaps, but with 53 films and many TV appearances to his credit, he was never out of work. Reagan left acting to enter politics with a strong stop-communism and end-big-government message. In 1966 he handily defeated incumbent Democrat Pat Brown for the governor's office in California and served two terms, during which he made a national reputation as a tax cutter. Delivering a feel-good message to the nation and promising large tax cuts, a vast reduction in government ("getting government off our backs"), and a return to American greatness, Reagan defeated the incumbent Carter by a wide margin in 1980. Even those who bitterly opposed what they saw as a shallow conservatism admitted that Reagan deserved the title of The Great Communicator.
The Least You Need to Know
The 1960s and 1970s saw Americans reexamining themselves and struggling to redefine their nation in an effort to renew the American dream.
Ronald Reagan took his sweeping victory over Jimmy Carter in 1980 as a mandate for a rebirth of patriotism and a revolution in economics.
Word for the Day
The rise of feminism brought many changes and proposed changes to American society, including the modification of sexist (gender-biased) language. For example, the word mankind excluded women; feminists preferred humankind. The use of Mrs. and Miss suggested to that a woman's value was unfairly bound to her marital status (in contrast, men are addressed simply as Mr., whether married or not). The abbreviation Ms. (pronounced mizz) was widely adopted as a more equitable female counterpart to Mr.
Main Event
In 1973, the Supreme Court ruled in the case of Roe v. Wade, which had its origin in a suit brought by a woman against the state of Texas for having denied her the right to an abortion. In. a 7-to-1 vote, the high court determined that women have a constitutional right to abortion during the first three months of pregnancy.
Abortion is the most controversial right women have asserted, and the Roe v. Wade decision gave rise to a so-called Right to Life anti-abortion movement. Usually motivated by religious conviction, Right to Life advocates have campaigned for a constitutional amendment banning abortion (except in cases of rape, incest, or threat to the mother's life). In recent years, some opposition to abortion has been fanatical, leading to the bombing of abortion clinics and the murder of medical personnel.
Stats
1993 U.S. Bur
eau of Labor statistics reveal continued inequality of pay for men and women. Among white adults earning hourly wages, 1,290,000 men (over age 16) earned $4.25 or less, compared with 2,177,000 women at this level.
12,415,000 men were paid $10 or more, compared with only 7,186,000 women. (Figures for blacks and those of Hispanic origin show narrower gaps between men and women at the lower range, but wider gaps at the top.)
Stats
Because OPEC nations still hold 77 percent of the world proven oil reserves, the organization will continue to remain an important force in the world's economy.
Main Event
Americans have typically had a love-hate relationship with their nation's greatest city, New York. But during the 1970s, Gotham became an unwilling emblem of all that was going wrong with urban America. Poverty, decay, crime, and corruption were bigger there than anywhere else and always under the national spotlight. In 1975, Mayor Abe Bearne issued the astounding statement that his city could not pay its creditors. New York City, cultural center of the nation and home of Wall Street, was broke.
President Gerald Ford did not help matters when he steadfastly resisted extending federal aid to the city to prevent it from defaulting, and the New York Daily News trumpeted an instantly famous headline: "FORD TO NY: DROP DEAD!"
Fortunately, through the efforts of Democratic leaders such as Texas representative Jim Wright, Congress voted emergency loans amounting to $2.3 billion, the city avoided bankruptcy, ultimately recovered, and paid back the loan-with interest.
Word for the Day
An ayatollah is a religious leader among the Shiite Muslims, whose religious zeal and orthodoxy is often compared to that of Christian fundamentalists.
A NEW ECONOMY, A PLAGUE, A FALLENWALL, AND A DESERT IN FLAMES
(1980-1991)
In This Chapter
Rise and fall of Reaganomics
The AIDS crisis
Victory in the Cold War and the Persian Gulf
Iran-Contra scandal
The presidency of James Monroe (1817-25) ushered in an "era of good feelings," a time of perceived national well-being. Much the same happened during the two terms of Ronald Reagan, the most popular president since Ike Eisenhower. Where President Carter took a stern moral tone with the nation, admonishing his fellow Americans to conserve energy, save money, and generally do with a little less, President Reagan congratulated his countrymen on the fact of being Americans and assured them that all was well--or would be well, just as soon as he got "big government off our backs."
For a time, business boomed during the Reagan years--though the boom was largely the result of large-scale mergers and acquisitions, the shifting back and forth of assets, rather than any great strides in production. True, too, the Reagan administration saw the beginning of the end of the Cold War and the disintegration of the Soviet Union, which the president called an "evil empire." Yet, during the Reagan years, the national debt also rose from a staggering $1 trillion to a stupefying $4 trillion. And the period was convulsed by a terrible epidemic of a new, fatal, and costly disease, AIDS, which the administration met largely with indifference and denial.
Many things good and bad befell the Reagan years, yet, for the most part and for most people, only the good seemed to stick. The bad slid off Ronald Reagan with such ease that the press dubbed him the "Teflon president."
Supply Side and Trickle Down
Following his inauguration, President Reagan lost no time in launching an economic program formulated by his conservative economic advisors. The program was quarterbacked by Office of Management and Budget (OMB) director David Stockman (b. 1946), whose ascetic appearance seemed to signal his ruthlessness as a slasher of taxes and domestic social welfare spending. The new administration marched under the banner of supply-side economics, a belief that the economy thrives by stimulating the production of goods and services (the supply side) because (according to advocates of the theory) supply creates demand. Make it, and people will buy it. Government's proper role is to stimulate production by reducing taxes as well as reducing regulation of industry. Yet, even as taxes are reduced, supply-side economics also demands that the government operate on a balanced budget, since deficit spending encourages destructive inflation.
The Reagan revolution turned on three major policies: a reduction in government regulation of commerce and industry; aggressive budget cutting; aggressive tax cutting-not for middle- and lower-income individuals, but for the wealthy and for businesses. Reducing the tax burden on the rich was supposed to free up more money for investment, the benefits of which would ultimately "trickle down" to the less well off in the form of more and better jobs.
If trickle down was a hard concept for many to swallow, Reagan's insistence that a reduction in tax rates would actually increase government revenues seemed downright bizarre to some. When Ronald Reagan and the man who would be his vice president, George Bush, were battling one another in the Republican primaries, Bush branded the notion voodoo economics--a phrase that would come back to haunt Bush in subsequent campaigns. But conservative economist Arthur Laffer (b. 1940) theorized that tax cuts would stimulate increased investment and savings, thereby ultimately increasing taxable income and generating more revenue. President Reagan made frequent reference to the "Laffer Curve," which illustrated this process.
Plausible or not, a majority of the American people were prepared to take the leap with their new president. In 1981, a bold program was hurried through a sometimes bewildered Congress, including a major tax cut, a staggering $43 billion cut in the budget for domestic programs, and broad cutbacks in environmental and business regulation. The "Great Communicator" overcame all resistance. When catastrophe struck on March 30, 1981, in the form of would-be assassin John Hinckley, Jr., the 70-year-old president's calm and heroic response to his having been shot in the chest drew even more support for his programs.
Greed Is Good
A relatively small number of people made a lot of money as a result of Reaganomics. Most of the new wealth was generated not by the stimulated production that the supply-side theory promised, but by a frenzied crescendo of corporate acquisitions and mergers. The stock market buzzed and churned in a way that (for some) disturbingly recalled the late 1920s. Companies were bought and either merged for efficiency (with resulting loss of jobs) or broken up, their component parts and assets sold at a profit to stockholders (with resulting loss of jobs). Unemployment generated by the high-level financial manipulations of the 1980s was hard on the man and woman on the street, but the movement of masses of wealth benefitted those who could afford to invest in the right companies at the right time. The average American may have been raised to believe that businesses existed to make products and provide employment, but the manipulators of wealth insisted that companies existed exclusively to enrich investors, and if that meant destroying a company, breaking it up, so be it. In the words of Gordon Gecko, a fictional tycoon played by Michael Douglas in the popular movie "Wall Street" (1987), "Greed is good."
Early confidence in Reaganomics faltered when the recession of the Nixon-Ford-Carter years deepened further, and public-opinion polls began to suggest that many people believed the tax cuts had benefited only the rich. Inflation did roll back, though interest rates remained high, as did unemployment. However, by 1983, acquisitions, mergers, and arbitrage had made the stock market a very active place, and prices began to rise sharply. This change, combined with relatively low inflation and (at last) rising production, as well as slowly decreasing unemployment, happily portended recovery.
What hopeful observers tended to ignore was the prodigiously growing national debt--under a president whose economic theory called for a balanced budget--and the flimsy sources of the profits being turned on Wall Street. Arbitrage is a high-risk business, which is made less risky if one has inside information, special knowledge of impending mergers, for example. The trouble is that such inside trading is illegal, and beginning in 1985, Wall Street was rocked by a seri
es of massive insider trading scandals. Trader Dennis B. Levine pleaded guilty to making $12.6 million by trading on non-public information, and arbitrageur Ivan Boesky likewise admitted buying huge blocks of stock as a result of receiving inside information. Not all the money made on Wall Street was illegal, but much of it rested on very shaky ground.
To finance the buyout of companies, traders turned to junk bonds, high-risk investments (usually issued by a company without an established earnings history or burdened by poor credit) acquired cheaply and paying a high rate of interest. Such transactions, called leveraged buyouts (the takeover of a company financed by borrowed funds) were pioneered in the 1970s, by the Wall Street firm of Kohlberg Kravis Roberts and brought to a point of frenzy by Michael R. Milken. Often, junk bonds were purchased with very little hope that the issuing company would ever repay the loan, but in the short run, interest payments were so high that the underlying "junkiness" of the bond hardly seemed to matter.
Black Monday
The junk being bought and sold hit the fan on October 19, 1987, when the Dow Jones Industrial Average (key measure of stock market performance) plunged 508 points--almost double the fall in the 1929 crash that brought on the Great Depression. As Herbert Hoover had assured the American public that "prosperity was just around the comer," President Reagan dismissed the crash as "some people grabbing profits." Fortunately, the market gradually recovered--but the high-flying era of Reaganomics had careened to a gut-wrenching end.
"Gay Plaque" and a Blind Eye
While many Americans stared with envy, admiration, or disgust at the Wall Street roller coaster, they turned a blind eye to the growing legion of homeless people who haunted the nation's large cities and even many of its smaller towns. Certainly, the Reagan administration, having drastically cut back federal welfare funding, did little enough for America's poorest. The administration likewise turned away from a terrifying plague that developed initially among homosexual men but was soon also diagnosed in heterosexual men, in women, and in children.
The Complete Idiot's Guide to American History Page 37
