Don't Know Much About History, Anniversary Edition: Everything You Need to Know About American History but Never Learned (Don't Know Much About®) (81 page)

The following years of oil shortages and altered economic realities produced by the OPEC domination created the highest rates of unemployment since the Depression and historically high inflation—a combination of low growth and rising prices termed “stagflation”—striking a severe blow to American prestige and confidence. Once built on a bedrock of cheap labor and cheap oil, the American economy no longer enjoyed either.

An inflationary cycle of double-digit dimensions had been set in motion, and it would take Americans through a dizzying decade that seemed beyond the control of the country’s leadership. The crisis, begun in Nixon’s final days, became Gerald Ford’s problem. His inability to “WIN”—“Whip Inflation Now” was his administration’s inept, empty economic rallying cry—played a large part, along with post-Watergate disillusionment, in the 1976 election of former Georgia governor Jimmy Carter.

While America agonizingly transformed itself into a more efficient energy user and adjusted to new economic realities, it also began the search for alternative sources of energy. Congress, under Carter, funded development of wind, solar, and synthetic fuels. The American nuclear industry got a new boost as well. But there were still shocks to come. In 1978, Muhammad Reza Shah Pahlavi (1919–80), the shah of Iran, a military dictator established in 1954 through a CIA-backed coup, was overthrown by a fundamentalist Islamic revolution led by Ayatollah Ruhollah Khomeini (1900–89). Iran cut off oil exports, setting off another mild oil shortage. A year later, America’s energy future was darkened when there was a major accident in the core of a nuclear reactor at Three Mile Island in Pennsylvania, which severely curtailed the planned development of nuclear power in this country. To make matters worse, that year OPEC announced another drastic price increase.

But it was the situation in Iran that would move to the foreground of American life, overshadowing Carter’s historic achievement in negotiating a peace treaty between Egypt and Israel in 1978. On November 4, 1979, some 500 Iranians stormed the American embassy in Teheran, capturing ninety American diplomats and beginning a hostage crisis that effectively ended Jimmy Carter’s hopes for governing effectively and being reelected. Carter’s inability to free the hostages, including a disastrous, abortive rescue mission that ended with eight Americans dead in the Iranian desert, seemed to symbolize American powerlessness.

In 1980, America turned to a man it thought represented old-style American ideals and strength. Ronald Reagan (1911–2004), former movie star and governor of California, soundly defeated Carter in 1980 by promising to restore American prestige, power, and economic health. At the moment of Reagan’s inauguration, as a last insult to Jimmy Carter and an omen of the good fortune Reagan would enjoy, the hostages were freed by Iran.

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From
JIMMY CARTER’S
“Crisis of Confidence” speech (July 15, 1979):

All the legislation in the world can’t fix what’s wrong with America. So I want to speak with you first tonight about a subject even more serious than energy or inflation. I want to talk to you right now about a fundamental threat to American democracy. . . .

The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation.

The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.

What was “voodoo economics”?

If there is one thing America does not want from its presidents, it’s a sermon. America wants pep talks. America wants the coach to tell the country that it only has to fear “fear itself.” America likes the trumpet sounding a summons. Americans want to be told they’re the best. When America thumbed its nose at Jimmy Carter’s “Crisis of Confidence” speech, he belatedly learned that lesson. But Ronald Reagan knew it instinctively. He also understood a basic American political precept: This country, since the pre-Revolutionary days of James Otis back in Boston (see p. 64), doesn’t like taxes.

When Ronald Reagan campaigned in 1980, he promised to cut taxes, reduce government deficits, reduce inflation, and rebuild America’s defenses. One of his Republican primary opponents said it could only be done “with mirrors.” Another Republican called Reagan’s ideas “voodoo economics.” He was George Bush, later to become Reagan’s loyal vice president and then president himself. Bush got a laugh with that line in 1980.

But Ronald Reagan got the last laugh when he was resoundingly elected, bringing to power a new conservative coalition pledged to reverse what it saw as the damage done by decades of liberal Democratic control of American economic and social policy. The Reagan coalition featured the “neo-conservatives,” political theorists who put a new face on old-line anti-Communism; the so-called Moral Majority, the religious right wing led by Reverend Jerry Falwell, whose solutions to America’s problems included returning prayer to public schools, outlawing abortion, and reducing government’s role in social policy; conservative southerners, who responded to Reagan’s call for a strengthened American defense and lower taxes; and, perhaps most importantly but least visibly, a blue-collar majority who saw their paychecks disappearing in taxes and an endless inflationary spiral.

The theoretical underpinning of Reagan’s plans was called “supply side economics.” The basic premise was that if taxes were cut, people would produce more goods and spend more money, creating more jobs and broader prosperity, which would lead to higher government revenues. Coupled with deep cuts in “wasteful” government spending, these revenues would provide a balanced budget. Reagan supporters even pointed to the fact that Democratic hero John Kennedy had had a similar idea in 1963, when he promoted a tax cut by saying, “A rising tide lifts all boats.”

There certainly was nothing new about this idea. President Carter had proposed tax cuts, smaller government, and tight credit to keep down inflation. Earlier in American history, another Republican administration had used a similar strategy. Herbert Hoover had tried the same things during the Depression; back then the name for supply side economics was “trickle down economics.”

With strong popular support and the congressional backing of a bloc of southern Democrats known as “boll weevils,” Reagan’s economic package sailed through Congress in 1981. But there was certainly no immediate relief, and the American economy was soon in the midst of a full-blown and devastating recession.

Unemployment was high, inflation continued, bankruptcies and business failures skyrocketed, and family farms went on the auction block. Committed to purging inflation from the world economic system, the Federal Reserve Board, led under Carter and Reagan by Paul Volcker, had adopted a policy of high interest rates to put the brakes on the economy. Without easy credit, houses go unbuilt, cars unsold, and businesses and factories contract or fold.

Oil had been at the root of the inflationary pressure, and it was only the eventual tumble in oil prices that relieved that pressure. Brought on by the international recession, the oil shortage became an oil glut. Buffeted by new competition from non-OPEC oil producers like Mexico, Norway, and Great Britain, OPEC’s chokehold on the Western economies began to loosen. Suddenly awash in their unsold oil, the OPEC members saw their clout crippled as they struggled to maintain artificially high prices through production quotas that were routinely broken by OPEC’s members.

The beneficiary of this reversal was none other than Ronald Reagan. The slide in oil prices signaled the beginning of the recovery. With oil prices falling, the heart of the inflationary dragon was cut out, and Ronald Reagan looked like St. George. Other pro-business Reagan policies, such as deregulating industry and ignoring the antitrust laws, fueled the recovery. Employment started to grow, and inflation, which had been running at 12 percent, dropped to less than 5 percent. The tax cuts passed in 1981, to be phased in over three years, fueled a resurgence in the financial markets and would reap a bonanza for the nation’s wealthiest, but the poor and the middle class would feel few of its rewards.

The shift in tax policy was accompanied by a new reality in government spending. A succession of Reagan budgets slashed domestic spending in those areas that most affected the poor—the legacy of LBJ’s Great Society. Welfare, housing, job training, drug treatment, and mass transportation all fell under the rubric of wasteful government spending. Yet in spite of these cuts and the passage of the tax changes meant to stimulate government revenues, the federal deficits ballooned. Apart from the reductions made by the tax cuts, the chief culprit in the deficits was the expansion of the defense budget. Although pledged publicly to cutting the budget, Reagan was merely overseeing a massive transfer of funds from the domestic sector to the Pentagon. For years, conservatives had complained that liberal social programs had tried to solve problems by “throwing money at them.” Now, under President Reagan, the conservatives were going to solve the “weakness” of America’s defenses by doing the same thing.

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T
HOMAS
K
. JONES,
Reagan administration defense official in an interview with
Los Angeles Times
reporter Robert Scheer:

Dig a hole, cover it with a couple of doors and then throw three feet of dirt on top. It’s the dirt that does it. . . . Everybody’s going to make it if there are enough shovels to go around.

According to Robert Scheer’s 1982 book,
With Enough Shovels,
T. K. Jones was the man responsible for administering a multimillion-dollar civil defense program, the centerpiece of which seemed to be making sure that America had plenty of doors, dirt, and shovels with which to build fallout shelters. This was his plan for saving American lives and putting the country back on its feet within a few years of an all-out nuclear war with the Soviet Union.

What happened to the space shuttle Challenger?

The Manhattan Project that developed the atomic bombs that those shovels would guard against had been the greatest scientific achievement of the century. The space program that put an American on the moon was certainly a close second. The Apollo program represented the pinnacle of human achievement and the greatest moment for NASA.

Its lowest point was unquestionably the tragic event that took place on the cold morning of January 28, 1986. The tenth launch of the space shuttle
Challenger
was scheduled as the twenty-fifth space shuttle mission. Francis R. (Dick) Scobee was the mission commander. The five other regular crew members were Gregory B. Jarvis, Ronald E. McNair, Ellison S. Onizuka, Judith A. Resnik, and Michael J. Smith. But this mission was different; the crew included Christa McAuliffe, a high school teacher from Concord, New Hampshire, mother of two and winner of a contest to become the first “citizen passenger” in space. The choice of McAuliffe was part of NASA’s usually unerring sense of perfect pitch for public relations. If only its understanding of the weather, engineering, and physics had been so flawless.

The space shuttle program, which once again had captured flagging American enthusiasm for space exploration, had become rather humdrum in public opinion. Sending shuttles up had become as predictable as airline flights. But like the commercial airlines, NASA could fall behind schedule. By 1986, it was way behind schedule, and way over budget. Congressional budget hawks were looking for targets and NASA and the space program, a bloated bureaucracy, had become a sitting duck. Ronald Reagan’s budget director, David Stockman, had argued for an end to all manned NASA missions. Reagan resisted, believing that the public imagination was still captivated by the space program.

As had become annoyingly routine with shuttle flights, this
Challenger
mission had been set back by several launch delays. Despite warnings from representatives of the shuttle’s builders, NASA officials overruled the concerns of engineers and ordered a liftoff at 11:38
A.M.
with the Florida temperature at thirty-six degrees. Seventy-three seconds into flight, with the nation watching its first “mom and apple pie” shuttle astronaut, the
Challenger
disintegrated into a ball of fire at an altitude of 46,000 feet (14,020 meters). Among the stunned audience watching the launch had been McAuliffe’s parents and sister. Television cameras grippingly caught their faces going from excitement to bewilderment to disbelief in a matter of seconds as it became apparent that something had gone terribly wrong. Around the country, millions of schoolchildren had also tuned in to see a teacher being sent into space.

The concept of “civilian astronauts” had emerged as the shuttle program progressed from its early experimental days. The shuttle’s first orbital mission began on April 12, 1981. That day, the shuttle
Columbia
was launched, with astronauts John W. Young and Robert L. Crippen at the controls. The fifty-four-hour mission went perfectly. Seven months later, the vehicle made a second orbital flight, proving that a spacecraft could be reused.

The first four shuttle flights each carried only two pilots, but the crew size was soon expanded to four, and later to seven or eight. Besides the two pilots, shuttle crews grew to include “mission specialists,” experts in the scientific research to be performed, and “payload specialists,” a term that was supposed to mean experts in the operation of the shuttle but which grew increasingly ambiguous. Soon it was applied to include a variety of passengers like a U.S. senator and a Saudi prince whose presence on board was more ceremonial than scientific. They were among the first non-astronauts, a group NASA eventually hoped would include journalists and artists. New Hampshire schoolteacher Christa McAuliffe was the first true “citizen passenger,” who would deliver classroom lessons from space in a carefully calculated measure of NASA’s public relations blitz.