Liberalism to Stagflation

1. Liberalism to
Stagflation

2. JFK Years
• deficit spending to stimulate growth
-space race
• New Frontier
-domestic agenda
-educ.; elderly health care; help
migrant laborers & create Dept of
Urban Affairs
• supply side
-wants cut in tax rate
-Congress refuses
• 1st peacetime deficit

3. LBJ Years
• War on Poverty
-aid to poor without tax increase
-help poor help themselves
• Great Society
-creates massive social programs (>60)
-economy strong enough to absorb
-Medicare; Medicaid; Head Start;
Legal Aid; School Lunch; Food Stamps
aid to schools (elem.; secondary;
higher education)
• Creates Dept of Housing & Urban Dev
• increasing costs & Vietnam undermine
support
-large deficits
-high inflation

4. Nixon
• New Federalism
-revenue-sharing to give federal
funds to state & local gov’ts
-conditions on states or withheld
• impounds appropriated funds
-Sup. Court declares unconstit.
• primary goal to reduce inflation
• ‘71 wage & price freeze
-reduces inflation temporarily
• ‘73 re-imposes (inflation returned)
-unpopular
-farmers destroy food=shortage

5. OPEC
• Organ. Of Petroleum Exporting Nations
-primarily M.E. nations
-set oil prices together
• Arab-Israeli War ‘73
-embargo sales to Israeli supporters
-lifted but raised price by 70% then
another 130%
-US suffers oil shortage
• oil prices
-$3/barrel – ‘73
-$30/barrel – ‘80
• consumers have less to spend on goods
-recession

6. Stagflation
• ‘71 US imports more than exports
• factories close
-workers lose jobs
-new jobs are service-oriented
• stagflation
-rising prices & econ. stagnation
-economist didn’t think possible
bcs demand drives prices –
inflation occur with high demand
• Nixon tries to cut spending & raise
taxes
-wage & price freeze

7. Ford Years
• Whip Inflation Now (WIN)
-cut back on oil/gas use
• cut gov’t spending & raise
interest rates (to cut inflation)
-fails
• attempt to limit fed. authority,
balance budget, keep low taxes

8. Carter
• increase gov’t spending & cut taxes
-to end recession
-changes his mind
• delays tax cuts
• reduce money supply & raise
interest rates
-to end inflation = fails
• “war” on consumption
-address dependency on oil
-creates Dept. of Energy
• de-regulation of oil
-push extra cost to consumers
but..
-insists on “windfall profit tax”
-defeats the purpose