The United States is a vast and rich country, with its territory largely organized and its institutions taking shape. In the late 1800s, foreign investment and massive flows of immigration have fueled infrastructure and industrial growth. Concerns about monopolies and "trusts" are well entrenched and growing, leading to establishment of key public institutions such as the Federal Reserve.
The U.S. remains neutral in the European war, but sympathies for the Allies grow, and the U.S. enters in 1917. The war brings temporary but substantial government intervention in the free-market economy, including regimentation and takeover of key industries such as railroads. At war's end, the U.S. hesitates to join the emerging world order, and retreats instead into isolationism and protectionism.
An era of "laissez-faire" capitalism under successive conservative presidents concerned with fiscal rigor sees boom times in the urban economy and the emergence and rise of large modern corporations. Protectionism in trade mirrors isolationism in foreign affairs, but U.S. investment spreads around the world. Farmers do not share in the good times, as agrarian recession turns to deep depression.
The stock market boom is revealed to be a bubble, fueled by increasing speculation and supporting unsustainable real estate and construction investments. The crash of 1929 brings down the banking system and destroys unprotected individual savings. Unemployment, food lines, and general despair tarnish the laissez-faire philosophy of previous years and threaten to discredit capitalism itself.
Franklin D. Roosevelt's New Deal program is a massive, comprehensive transformation of American economy and society, executed at breakneck speed. The foundations of modern industrial regulation, financial markets, and social policy are all put into place. Shorter-term measures stabilize the economy, put millions of jobless to work, and deliver economic recovery through government intervention.
As the recovery takes hold, so too do the rumblings of war in Europe. Roosevelt's personal influence in U.S. politics is unmatched, but he begins to see opposition to his policies, particularly in the judiciary. Some New Deal programs are discontinued as the economy improves, but the fundamental framework of market regulation and social policy is widely accepted.
The U.S. fully enters World War II after the Pearl Harbor attack. The war economy sees strategic industries regimented and wage and price controls implemented. Roosevelt gains a third and then a fourth term in office. Exports boom. Forced Japanese internment mars the constitutional record. The use of atom bombs in securing Japan's defeat, followed by the partition of Europe, ushers in the Cold War.
Harry Truman embraces Keynesian policies to expand the economy through full employment. Wartime controls are gradually released as the economy stabilizes. Truman's social liberalism comes up against dissent in his own party, and a growing anticommunist, security-focused sentiment stoked by the Korean War and the onset of the Cold War. Republican general Dwight D. Eisenhower becomes president.
The Eisenhower years see a cautious form of Keynesianism employed, and steady but unspectacular economic growth. The anticommunist hysteria of the McCarthy hearings crests and fades, and the groundswell of civil rights protest grows across the South. Expanded homeownership, public housing, suburbanization, and highway programs transform the U.S. economy and geography in ways that endure today.
John F. Kennedy brings an uplifting sense of aspiration into public life, but his legislative impact falls short of the enthusiasm he raises. Squarely Keynesian policies use deficit spending to spark high employment and accelerate economic growth. The civil rights movement comes to the fore for mainstream America in 1963. The "Camelot" era ends abruptly and violently with Kennedy's assassination.
Lyndon Johnson's administration combats poverty, increases social opportunities, and entrenches civil rights. But the deepening Vietnam War and increasingly visible unrest in the South and the inner cities spark the rise of violent protest movements and a "counterculture." In a year marked by assassinations and upheavals, Johnson withdraws from the 1968 presidential race; Richard Nixon is elected.
Prosperity runs out of steam as inflation takes hold, soon to be compounded by the oil shock. Nixon's attempt at wage and price controls fails to tame inflation. Amid continuing social upheaval, the administration is caught in the Watergate scandal, which leads to Nixon's investigation, impeachment, and resignation. The Vietnam War winds down, but leaves profound scars.
The brief Ford administration is powerless to control inflation. Soon unemployment is rising as well, signaling the exhaustion of Keynesian policies. The Carter administration faces an energy crisis and mounting foreign policy challenges. The protracted hostage crisis at the U.S. embassy in Iran compounds the national malaise and undermines the presidency.
The "Reagan Revolution" brings tax cuts and reduction of government size through spending cuts and delegation of power to the states. Tight monetary policy tames inflation, and growth resumes. Although supply-side economics is not borne out, the shift to lower taxes and "fiscal discipline" will prove lasting. Reagan's charisma boosts national pride, but new social crises are mounting.
After a series of political and financial scandals, a recession takes hold, revealing new social inequalities and placing sharp focus on the skyrocketing federal deficit and national debt. Despite the end of the Cold War and the Gulf campaign, the George H.W. Bush administration stumbles on economic policy. A promise to focus on the economy helps propel Bill Clinton to the presidency.
Despite early missteps, Clinton scores a major achievement with rapid deficit reduction through spending cuts and tax increases. In the process, though, he loses his majority in Congress. But the economy booms, and the U.S. regains its luster. Rapid technology improvements and the explosion of the Internet transform economic life. The deficit is erased. But Clinton is tarnished by personal scandals.
George W. Bush wins a controversial election arbitrated by the Supreme Court. He rapidly passes tax cuts as the boom ends and recession sets in. The projected surplus shrivels. The September 11, 2001, terrorist attacks alter the political landscape in myriad ways and shake up economic policy. Defense spending is set to increase and "homeland security" becomes a new and all-encompassing concern.
Between long-term tax cuts and sluggish growth, the budget reverts abruptly from surplus to high deficits. Fears of terrorism and looming conflict with Iraq overshadow political life. Relations with allies grow tense as the U.S. advances a national security doctrine that favors preemption of threats. Republicans win control of both the House and Senate. The economic recession continues.
Ignoring U.N. Security Council opposition, the U.S. invades and occupies Iraq with British help. Polls show strong domestic support for the war despite large protests and growing criticism of Bush's domestic agenda. At war's end, major resources are committed to restoring Iraq politically and economically, while at home the domestic economy struggles. A nuclear standoff with North Korea continues.
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