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1981-1982 Recession Timeline

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The purpose of this summary is to describe how the recession started, the events that led up to it, the size, and what happened in result. The recession started in July of 1981 and ended in November of 1982.
In 1980, the United States economy was already in bad shape due to a 6 month long recession that the United States economy eventually made a modest recovery from. Although the short 1980 recession is not the focus of this report, it did play a part in the events that led up to the 1981-1982 recession. Unemployment was around 7.5 percent and in July of 1981, the United States officially entered a recession. Sectors of the economy that relied on borrowing such as construction and manufacturing were being pressured by high interest rates. …show more content…

Interest rates continued to rise in order to reduce inflation; this caused manufacturing and housing to weaken. The savings and loans industry suffered during this time. They experienced frequent account withdrawals, as depositors moved their money to higher-earning accounts offered by commercial banks. The savings and loans industry was already struggling, the recession only made it worse. High mortgage rates destroyed the value of mortgage-backed loans, which is the primary asset of the savings and loans association. The fixed-rate loans were sold at a loss in order to balance withdrawals. That asset liability mismatch was identified as the primary cause of the savings and loan crisis.
Jobs were lost and unemployment rose from around 7.5% to more than 10%. The recession caused a loss of 2.9 million jobs, representing a 3% drop in payroll employment.
Many people blamed the recession on President Jimmy Carter, who was in office from 1977-1981. Lots of people blamed Carter because the recession started during his first term. Ronald Reagan was the President of the United States, and in August of 1981 he signed the Economic Recovery Tax Act of 1981, which was a three-year tax cut plan. Reagan’s economic plan gave hope to the citizens of the United States that the recession would end soon. The recession got worse in 1982 and Reagan’s approval rating …show more content…

Lowering tax rates was another economic change that people said lead to the recovery. Unemployment went from 10.8 percent in December of 1982 to 7.4 percent in December of 1984. Inflation fell from 10.3 percent in 1981to 3.2 percent in 1983. Industries that were hit the hardest during the recession made dramatic improvements; these industries were paper and forest products, rubber, airlines, the auto industry, construction and manufacturing, and the savings and loans industry. During the recession and towards the end of the recession in 1983, President Ronald Regan’s approval ratings were at an all time low. In January of 1983, the United States economy slowly started to recover. Unemployment dramatically decreasing, inflation falling, and the economy being in way better shape than they were in 1981 and 1982 led to President Regan’s landslide of a victory to take his second term as President of the United States. The United States prospered during Regan’s second

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In the 1980’s when President Regan was president, he had such a personality that he made many Americans to believe his conservative ideas. With that we had periods of economic highs, soaring stock market profits which made a lot of people a lot of money. We had a turning point in the Cold War with the Soviet Union, and also had triumphed in American foreign policies. In 1981 Regan formed a coalition with the conservative Democrats and then passes major tax cuts. The people are happy with what Regan is doing and reelects him again in 1984.

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The election of 1980 wasn’t even in the ball park when it came to presidential popularity in the electoral college. Reagan and Bush beat Jimmy Carter and Walter Mondale in the electoral vote 489-49. Reagan was quoted saying, “Government is not the solution to our problems; government is the problem.” This statement opened up what was known then as Reaganomics. Reagan supported the supply-side economics, the theory that lower taxes will boost the economy as businesses and individuals invest their money.

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Unemployment rates began to increase. Over time, Reagan had increased taxes 11 times, mainly on the middle class. When Reagan had left office, he had tripled the national debt of United States. This had affected the United States and led to several issues later on. This is the reason Reaganomics had both aided some and destroyed others.

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Second, Reagan cut taxes for corporations and the wealthy-class. The theory of Reaganomics is tax relief for the rich would enable them to spend more money, save money in banks, and make investments. The additional spending from the rich, was supposed to help stimulate the economy and create new jobs. However, the opposite occurred and America suffered a deep recession in 1981-1982. In addition, the high interest rates caused the value of the dollar to rise on the international exchange market, thus American exports decreased and imports increased.

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Inflation dropped from thirteen point five percent in 1980 to four point one percent by 1988 (Reagan Foundation). Poverty rate declined every year from 1984 to 1989, meaning it dropped by one sixth from its peak. Former President Jimmy Carter did not have such a success in these areas (Fact Real). Carter’s interest rates were at nineteen percent, inflation was at thirteen point five percent, and unemployment was over seven percent.

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