Amazing productivity that had highlighted the past

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amazing productivity that had highlighted the past several decades. Flat productivity and high inflation acted as a drag on any kind of economic gains. This, coupled with increased govt. spending on Great Society programs and war (Vietnam), and out of control energy costs – especially on oil - sent the 1970s economy into a stagnant slowdown.
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Part Two: 1970s through the 1980s As the 1980s opened up, a resurgence of conservativism flooded the country as Ronald Reagan took office. His administration re-introduced the nation to “supply-side, trickle-down” economics – Reagan style. “Reaganomics” as it was called aimed to slow the growth of BIG G and to “Andrew Mellon style” lower taxes across the board to stimulate C and I. While intentions may have been good, Mr. Reagan & the Congress added huge amounts to the budget – especially the military – increasing BIG G even greater than before. While we spent the USSR & the Cold War into the grave, the price tag was very high. The legacy of the 80s is BIG budget deficits…a trend that continues on into TODAY…$13+ trillion and rising!!!!
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C. The Stagnant 70s
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C. The Stagnant 70s 1. Conditions: Great Society + Vietnam spending blips Increased Govt. borrowing = rising interest rates on loans for everyone (21% p.r. by 1979) High taxes to fuel govt. spending Increased oil/gas prices (2 oil embargos by OPEC) High inflation (13% by 1979) Rising cost of living (high prices…level wages) Low productivity Sluggish GNP – uncommon condition called Stagflation = recession + inflation at same time
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C. The Stagnant 70s Why such low productivity??? More unskilled workers (teens & women) had joined the labor force Less business investment due to high taxes, govt. regulation codes/laws in the workplace Structural change from manufacturing to services 50s & 60s American business untouched by foreign competition so no need to modernize….BUT NOW…the others (Japanese especially) had caught up…
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C. The Stagnant 70s 2. Government & Fed action to promote a healthy economy: President Nixon in 1971: 90 day wage & price ceiling (freeze on all) Takes us off of the gold standard to: Devalue the U.S. dollar to stimulate U.S. exports by making our products cheaper abroad (increase I & X) Federal Reserve Bank (the Fed) increased interest rates on loans to slow inflation (remember tho that we were also facing unusual stagflation so tightening money available for loans hurt!)
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C. The Stagnant 70s 3. Move from Economic Isolationism to Globalization : High oil prices thru-out the 70s = increased trade deficits (the value of what we import is greater than the value of what we export): B-4 the 70s, the foreign trade bill was no more than 10% of GNP …BUT… Now the need to pay higher oil bills = 27% of GNP by 2000 Thus, must seek trade partnerships – can’t dominate international trade & world finance any more (i.e. NAFTA, GATT) Beginning in 70s to present = lower trade barriers
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D. The Neo-Conservatives: The 1980s Reaganomics
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D. The Neo-Conservatives:
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  • Fall '15

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Christopher Reinemann
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