Navigation Acts-molasses act-controlled trade to, from, and between colonies

North vs. South Economy in the Civil War era

  • North- population growing rapidly,railroads and manufacturing,industrialization

South,agriculture,slavery

Gilded Age: Industries, Robber Barons

  • robber barons / captains of industry and their industries
    • john d. rockefeller: standard oil
    • andrew carnegie: steel
    • cornelius vanderbilt: railroads
    • jp morgan: finance

Regressive Tax A tax that takes a larger percentage from low-income people than from high-income people

  • it’s generally a tax that is applied uniformly. This means that it hits lower-income individuals harder

Progressive Tax A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals.

ClassA social stratum whose members share similar political, economic, and cultural characteristics ... social rank

Poverty RateBased on cost of adequate food supply (times 3 – assumed food is 1/3rd of family budget)

Distribution of US family wealth, 2013Distribution of wealth is divided into 3 sections

  • Bottom 90% of families receive 25%
  • Next 7% of families receive 21%
  • Richest 3% families receive 54%

Movement to cities first time more Americans live in cities than in rural areas

  • African Americans (from South to North) begins in WWI due to labor shortages wages 3x higher in the North leads to cultural changes: Harlem Renaissance% increase in African Americans: New York (66%), Chicago (148%), Philadelphia (500%), Detroit (611%)

Technology and manufacturing automobiles became the largest US industry in 1920s

  • Mass Production inspired by Henry Ford adopted moving assembly line with each worker completing a simple task (1913) Ford paid workers $5 a day (generous for the time period)

Mass cultureAmericans had extra money to spend: clothes, home appliances, radios, film, cars

Prohibition prohibits the sale and manufacture of alcohol in 1920

How did women’s lives change?1920: 19th amendment, going to high school and college

participated in sports, flappers, going to speakeasies

  1. How did consumerism and advertising change the culture? with the help of psychologists, advertisers tapped into the subconscious fears of consumers “make a woman feel guilty”
  1. What was the cultural significance of the movie industry? habits and behaviors seen in movies are mimicked by movie-goers redefine beauty and masculinity stars are role models and leisure experts
  1. Where did jazz begin and where did it spread to? jazz was fast, loud, and highly controversial born in New Orleans New Orleans, Kansas City, Chicago, Harlem jazz drew people to speakeasies whites began to play jazz which was then spread around the country (popularized by the radio)

Causes of Depression

  1. excess borrowing (private debt close to 200% of GDP) buying on credit (consumerism, personal debt)
  • buying stocks on margin (5% of cost) overvalued stocks and ‘bubble’ market
  1. banks make risky loans, no insurance for deposits
  1. technology’s effects- workers more productive, decline in jobs efficiency created over-production of goods, concentration of wealth, collapse of the stock market- not a main cause of the Depression but exposed weaknesses in the economy; shook confidence, higher tariffs (particularly Smoot-Hawley 1930, farm debts in 1920s (farms responsible for 25% of GDP), drought begins in Mississippi River Valley (1930) and spreads through the Midwest

Hoover’s response largely laissez-faire (capitalism, not government handouts), believed in self-help and charity, balanced budget, reversal, but ‘too little too late’

Hoovervilles camps established by the unemployed and migrant workers

Dust bowl a severe drought in the midwest that greatly impacted US agriculture

Hoover (T/F type questions)

  • first 6 months of administration, attempted to expand the policies he believed would sustain a successful economy
  • the economic crisis began in the first year of his presidency
  • attempted to restore public confidence in the economy
    • implored businessmen not to cut production or lay off workers
    • talked labor leaders into forgoing demands for higher wages or better hours

but economic conditions had deteriorated so much that the volunteer cooperation collapsed

attempted to use government spending as a tool for fighting the Depression

began to construct a program to assist the troubled agricultural economy

  • Agricultural Marketing Act: established the first major government program to help farmers maintain prices
  • Hawley-Smoot Tariff: contained increased protection from international competitors on 75 farm products
  • neither helped American farmers significantly

Hoover’s political position had deteriorated considerably

conditions had grown so desperate that he supported a series of measures designed to keep endangered banks afloat and protect homeowners from foreclosure on their mortgages

  • Reconstruction Finance Corporation (RFC): government agency whose purpose was to provide federal loans to troubled banks, railroads, and other businesses

Congress approved the payment of a $1000 bonus to all WWI veterans [paid in 1945]

  • many veterans wanted money immediately but Hoover rejected their appeal
  • veterans formed “Bonus Army” and marched into Washington
  • built camps around city and promised to stay until COngress approved legislation to pay the bonus Hoover ordered police to clear veterans out of some abandoned federal buildingspolice opened fire after veteran retaliation; Hoover requested Army assistance in clearing out veterans

Hoover became a symbol of the nation’s failure

Effects of the GD

  1. stock market crash investors lost confidence and the stock market bubble burst-panic selling began on “Black Thursday”

Sept — Nov: US stock prices declined 33% (“Great Crash of 1929”)

reduced American demand substantially-

  1. banking panics
  1. high unemployment unemployment rose to 25% in 1933 (highest level)
  1. agricultural problems dust bowl aggravated the problems of the Great Depression: more than a million acres of farmland were deemed useless because of severe drought hundreds of thousands of farmers joined the ranks of the unemployed
  1. lack of credit with massive draws on funds during the GD, banks had no money to lend, and this lack of available credit led to a further worsening of economic conditions
  1. money supply purchasing power decreased and deflation set in

merchants cut prices, manufacturers cut production, and workers were laid-off due to profit decreases

Federal Reserve is the central bank of the United States [aka ‘The Fed’]

Monetary policy management of interest rates and the total supply of money in circulation is generally carried out by central banks [such as the Federal Reserve]

Fiscal policy is the collective term for the taxing and spending actions of governments

Solvency a bank’s ability to meet long-term obligations- total $ they have

Liquidateto convert assets into cash or equivalents by selling them on the open market

The New Deal: FDR New Deal

First Hundred Days steps:

  1. Restore confidence in banks declared ‘bank holiday’

FDR gives first ‘fireside chat’, estimated 60 mill listeners, promised banks safe-when banks reopened, more deposits than withdrawals Federal Deposit Insurance Corporation (FDIC)

  1. Restore farm incomes Agricultural Adjustment Agency (AAA)
  • farmers negotiated how much they would grow, government paid them for not planting portion of land

aim: to increase crop prices and farm income

  • criticisms: too much government involvement in economic planning, not enough oversight

Employ young men created Civilian Conservation Corps (CCC) restricted to males 18-25

  • paid $1 per day (plus food) half sent to parents stayed in campus administered by military

 

  • work was mainly in National Parks, building trails, planting trees, stocking fish
  • employed 2.5 million (500,000 by 1935)
  1. Home Owners eventually re-mortgaged 20% of urban homes
  1. Electricity and Economic Development created Tennessee Valley Authority (TVA)
    • Got electricity to rural areas. 10% in 1933, 40% by 1941, 90% by 1950
    • built dams and sold electricity to rural cooperatives flood control projects reforestation
  1. Gov’t-Business-Labor AllianceNational Recovery Administration (NRA) labor got minimum wage, maximum hours, right to bargain collectively

criticism: anti-competition, anti-Capitalist

  1. Stabilize stock market required financial disclosure regarding stocks Securities & Exchange Commission (SEC)
  1. Help for unemployed
  2. Criticism: new deal criticized by far left and far right
    • American Liberty League formed by the wealthiest FDR far right opponents

criticized by political groups that gained a lot of public support

  • Dr. Francis Townsend plan: americans over 60 receive $200/month from the gov and have to spend it all within the month opens up jobs for younger generations and pumps economy with $ massive public support
  • Father Charles Coughlin weekly sermon broadcasts on the radio established own political organization: National Union for Social Justice
  • Senator Huey P. Long blamed problems on banks, oil companies, and utilities alternative idea to New Deal: Share-Our-Wealth-Plan

2nd New Deal

  • FDR changed his attitude toward big businesses and affluent Americans openly attacked corporate interests

tax reforms were targeted at the rich conservatives called it the “soak-the-rich” scheme

highest peacetime tax rates in history

protected workers’ rights more National Industrial Recovery Act which gave workers the right to organize and bargain together together was replaced by the National Labor Relations Act of 1935 (aka Wagner Act) which provided workers with more federal protection

Social Security Act of 1935

  • 2 elderly programs if in poverty: received up to $15/month in federal assistance
    • blacks and women [among others] were excluded

unemployment insurance: laid-off workers could receive temporary government assistance

federal aid for disabled people and dependent children

wanted to create a system of insurance, not welfare

FDR film questions

  1. How does FDR change attitudes in the country? lively attitude during his inaugural speech
  • waves top hat at crowd while previous president doesn’t acknowledge them
  • “fireside chats” boosted the Americans’ confidence in them--spoke candidly with the public
  • displayed endless happiness
  1. What was FDR’s basic approach to the economy?
  • try a plan, if it doesn’t work, try another, but at least try something
  • get the banks open: NRA forms
  • 100 day plan: resulted in 15 new major bills signed into law
  1. What role did Eleanor play? during first presidency, she traveled 400,000 miles revolutionized the role as first lady

LBJ’s Great Society: LBJ’s Great Society How does WWII end the depression?

  • from 1941 — 1945, government spent $321 billion twice as much as it had spent in its 150 year existence

national debt rose from $49 billion to $259 billion paid for by selling bonds & raising income taxes

by 1944, US factories produced more than twice all axis powers combined

The Affluent Society national prosperity 1945 — 1960

  • 1945 — 1960: GNP $200 billion to $500 billion; unemployment at 5%
  • government spending: schools, housing, veterans benefits, highways, welfare, military
  • baby boom: population increase by 20% increased consumer demand
  • growth of the suburbs: stimulates sales in autos and construction
  • national income grows 50%

on the margins of national prosperity The Other America: How many Americans lived below the poverty line 30 million in 1960 [or 1 in 5] 20% of them remained in constant poverty higher % of minorities, native americans

  • rural Americans surplus of staple crops = 33% decrease in prices black sharecroppers, migrant Asian and Mexican workers
  • inner cities white flight to suburbs = wealth drain great migration of African Americans to cities, poverty due to persistent discrimination and denial of opportunity factories to suburbs and abroad where labor costs lower. automation = decrease in unskilled jobs

War on Poverty

  • January 1964 LBJ State of Union address — aim to expand New Deal food stamps: provides monthly benefit to eligible low-income families to purchase food

head start: provides preschool for children of low-income families. based on the idea that education would break the cycle of poverty

job corps: integrated academic, vocational, and social skills training for disadvantaged youth. helps 70,000 youths annually

Medicare (1965) old people part of Social Security system covers doctor’s fees and other medical expenses and provides hospitalization insurance for Americans 65 years old and older

  • biggest gap for prescription drugs (increasing in price faster than any component of medical system)

Medicaid (1966)poor prople

  • provides health care for the poor and disabled
  • covers poorest of the poor: The Affordable Care Act of 2010 [signed by Obama on March 23, 2010] creates a national Medicaid minimum eligibility level of 133% of the federal poverty level for nearly all Americans under the age of 65
  • serves over 60 million people

Public Housing efforts to expand began during the Great Depression current spending $25 billion annually for rental vouchers, $8 billion on public housing projects

Reagan Revolution Milton Friedman

  • Nobel Economist at the University of Chicago
  • beginning in 1960s, rejects Keynesian theory
  • called for return to limited government role in economy, markets
  • return of laissez-faire

J.M. Keynes

  • British economist published book in 1936 (General Theory of Employment, Interest, and Money)
  • government spending can end economic downturn, deficit spending part of cure for ailing economy
  • the key is to get money into consumers’ pockets, increase consumption “pump priming”

Stagflation occurs when the economy isn’t growing but prices are which is not a good situation for a country to be in this happened to a great extent during the 70s when world oil prices rose dramatically, fueling sharp inflation in developed countries

Supply-side economics aka “Reaganomics” or “the trickle-down policy”

  • a school of macroeconomics that argues that economic growth can be most effectively created by lower barriers for people to produce (supply) goods and services as well as make capital investments
  • the idea that greater tax cuts for investors and entrepreneurs provide incentives to save and invest that will produce economic benefits that trickle down into the overall economy
  • three pillars
    • idea is that production is most important in determining economic growth
  1. tax policy--lower marginal income tax: lower rates will induce workers to prefer work over leisure and will induce investors to deploy capital productively
  2. regulatory policy--supply-siders tend to ally with traditional political conservatives: those who would prefer a smaller government and less intervention in the free market
  3. monetary policy--supply-siders don’t think that monetary policy can create economic value
  • supply-siders believe that producers and their willingness to create goods and services set the pace of economic growth

Keynesian/demand side economics

  • believe the primary factor driving economic activity and short-term fluctuations is the demand for goods and services
  • in response to the Great Depression
  • emphasis on aggregate demand--composed of 4 elements:
    • consumption of goods and services
    • investment by industry in capital goods
    • government spending on public goods
    • net exports

if people are less able or willing to consume, and businesses are less willing to invest in building more factories, the government can step in to generate demand for goods and services

supports heavy government spending during a national recession to encourage economic activity

putting more money in the pockets of the middle and lower classes has a greater benefit

Reaganomics impacts

  • the growth of defense spending during his first term was higher than originally proposed
  • changes to the federal tax code
  • major reversal in the tax treatment of business income
  • reduction in economic regulation
  • monetary policy was somewhat erratic but successful

Reagan film ?’s

  1. How was Reagan similar to FDR? Different?
    1. Similarities:
      1. Communicators
      2. Came to Washington during economic crisis
    1. Differences:
      1. Liberal vs. Conservative
      2. FDR was flexible and Reagan had very concrete ideals and visions

What was included in the Reagan revolution?

  1. Balanced budget, tax cuts, and reduced government spending

What was the idea behind “supply side economics”?

  1. Tax cuts to “trickle the money down”

Where did budget cuts fall most heavily?

  1. Fell mostly on the poor.
  2. The wealthy benefitted the most

What factors helped Reagan win support for his economic plan among Democrats in Congress?

  1. Very persuasive, called 29 congressmen in one night
  2. Vocalized people’s frustrations and concerns in a language everyone could understand. He also told the people to call their congressmen or senator to express their concerns

What was the budget impact of his plan?

  1. Face the largest U.S. deficit, but the country would tolerate the deficit
  2. He wouldn’t cut the defense budget