Complete Idiot’s Guide to American History

by Alan Axelrod

  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. Bureau 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-Cart
er 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 series 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.

  Throughout the 1980s, grass-roots AIDS organizations—including, most notably, Gay Men’s Health Crisis (GMHC) and AIDS Coalition to Unleash Power (ACT UP)—mobilized. The organizations accused the government of failing to respond to an epidemic perceived to affect socially marginal groups—homosexuals and intravenous drug abusers (who contract the disease by sharing hypodermic needles tainted with infected blood). President Reagan failed. even to make public mention of the disease until April 1987, fully six years after health officials had determined that the epidemic was under way. Only through the efforts of AIDS activists was federal funding increased—from $5.6 million in 1982 to more than $2 billion a decade later.

  “Mr. Gorbachev, Tear Down This Wall!”

  If the Reagan administration did not engage AIDS vigorously, it did not hesitate to take on the Soviet Union, assuming an aggressive stance against what the president called “an evil empire.” Defense spending was dramatically stepped up, dwarfing domestic budget cuts in welfare and other programs.

  The president also acted Aggressively to meet perceived military threats throughout the world, sending U.S. marines in the summer of 1982 to Lebanon as a peacekeeping force. On October 23, 1983, more than 200 of these troops were killed in their sleep when a truck laden with 25,000 pounds of TNT was driven into the marines’ Beirut headquarters building. Just two days after this disaster, the president ordered an invasion of the island nation of Grenada in the West Indies. Cuban troops had been sent to the tiny country (population 110,100) at the behest of its anti-American dictatorship, and the president was determined to protect the approximately 1,000 U.S. citizens there. The president also saw a successful liberation of the country as a kind of emotional compensation for the death of the marines in Beirut.

  Ronald Reagan’s saber rattling was gratifying to some Americans and alarming to others, who were distressed by the stalemate of U.S.-Soviet arms-control talks as a fresh deployment of American nuclear missiles began in Europe during November 1983. Reagan protested to his critics that the build-up was needed to counter Soviet advances, yet the strategy produced no tangible positive diplomatic results.

  Star Wars Arm Wrestle

  During 1983, President Reagan announced the most spectacular, ambitious, elaborate, and expensive military project in world history. It was called the Strategic Defense Initiative (SDI), but the popular press dubbed the system “Star Wars,” after the popular George Lucas science-fiction movie of 1977. Using an orbiting weapons system, the idea was to create a shield against intercontinental ballistic missile attack by destroying incoming ICBMs before they began their descent. The weaponry was so far beyond even the foreseeable cutting edge as to be fanciful: X-ray and particle-beam devices (as yet theoretical) operated by supercomputers that had to be programmed by other computers. Critics pointed out that Star Wars was not only a violation of the 1972 ABM (antiballistic missile) treaty, but a temptation to thermonuclear war because it promised to make such a war survivable. Others suggested that the system could never be made to work, and still others protested that the staggering cost of the program—$100 to $200 billion—would permanently cripple the nation.

  Yet Presidents Reagan and George Bush pursued Star Wars to the tune of $30 billion, even though. the program produced few demonstrable results. Finally, in 1993, anonymous SDI researchers revealed that at least one major space test had been “fixed” to yield successful results. Caspar Weinberger, who had served as President Reagan’s secretary of defense, initially denied these charges, but subsequently claimed that the test in question—and perhaps the entire Star Wars program—had been an elaborate decoy. The program (Weinberger said) had been designed solely to dupe the Soviet Union into spending a huge proportion of its resources on a Star Wars program of its own—a program that U.S. scientists already knew was unworkable.

  The Wall Falls

  Whether one views Star Wars—and the rest of the gargantuan Reagan defense budget—as a vast misjudgment, which quadrupled the national debt from one to four trillion dollars, or as a costly but brilliant strategy to win the Cold War, the fact is that the Cold War did end. The government of the Soviet Union was first liberalized and then fell apart, the nation’s economy in tatters and the people clamoring for democratic capitalist reforms. Even though Mikhail Gorbachev (b. 1931), general secretary of the Soviet Communist party (1985-91) and president of the U.S.S.R. (1988-91), introduced unheard of liberal reforms, President Reagan prodded him to go even further. In 1987, standing near the Berlin Wall, brick, stone, and razor-wire symbol of a half-century of communist oppression, the president made a stirring speech calling out to the Soviet leader: “Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!” Two years later, Berliners began chipping away at the wall, tearing it down piece by piece, as a liberalized Soviet Union merely looked on.

  Although communist hardliners staged a revolt against Gorbachev in 1991, progressive junior army officers refused to follow KGB (Soviet secret police) directives, and the attempted coup failed. Gorbachev then disbanded the Communis
t party and stepped down as leader of the Soviet Union. Boris Yeltsin (b. 1931), radical reformist president of the Russian Republic, assumed leadership not of the Union of Soviet Socialist Republics—which ceased to exist—but of a loose commonwealth of former Soviet states.

  Ollie, Iran, and the Contras

  The debate still rages over whether the policies of Ronald Reagan won the Cold War or whether the Soviet Union, shackled to a financially, intellectually, and morally bankrupt system of government, simply lost the half-century contest. Another episode of unorthodox world diplomacy continues to provoke controversy as well.

  In November 1986, President Ronald Reagan confirmed reports that the U.S. had secretly sold arms to its implacable enemy, Iran. The president at first denied, however, that the purpose of the sale was to obtain the release of U.S. hostages held by terrorists in perpetually war-torn Lebanon, but he later admitted an arms-for-hostages swap. Then the plot thickened—shockingly—when Attorney General Edwin Meese learned that a portion of the arms profits had been diverted to finance so-called Contra rebels fighting against the leftist Sandinista government of Nicaragua. As part of the ongoing U.S. policy of containing communism, the Reagan administration supported right-wing rebellion in Nicaragua, but Congress specifically prohibited aid to the Contras. The secret diversion of the secret arms profits was blatantly unconstitutional and illegal.