Post-World War II Economic Analysis

The great post-World War II economic boom ended with an economic recession in the 1970s. There was a lot of money diverted from the federal government and put toward Vietnam, the Great Society and the arms race in America, and President Johnson refused to raise taxes to cover the debt (Schultz, 2013). The increase of foreign competition and decreasing demand for American goods caused the American industry to weaken. The trade deficit led to a decline in international confidence in the dollar, which led to international holders demanding redemption of their dollars for gold, which, in turn, depleted the U.S gold reserves (Reuss, n.d.). America had to borrow money in order to balance the budget, which led to inflation. Nixon also doubled the

The United States, and other European countries, backed Israel in many battels against Egypt, Syria and other nations. To punish the United States these oil-rich nations placed an embargo on oil sold to the United States. This embargo sent oil prices soaring, which made gas hard to find. This also raised the cost of making and transporting goods from one place to another. The combination of inflation and stagnation became known as stagflation. This condition was very hard to fight as there were controls in place for each individually but not together. There was no tool to lower inflation while growing the economy at the same

Along with these controls he ran budget deficits, which was a short term plan, but long enough to get him re-elected. Ford became President after Nixon resigned. Ford tried to tackle the stagflation, first, by telling Americans to save their money, rather than spend it. In 1974 Ford proposed a tax increase and a reduction in federal spending, to attempt to manage inflation. This plan was criticized by congress as it was midterm elections and they and no use for these steps (Greene, 2017). Second, he was criticized for ignoring unemployment. Ford came up with a new plan in which he called for a tax cut in the amount of $16 billion. He also asked Congress to hold government spending. What Congress did was pass a $22 billion tax cut and increase government spending. Ford also asked for tariffs on imported oil, new tax on domestic oil producers and an end to price controls.

President Carter increased government spending, to help unemployment, as well as a voluntary wage and price guidelines, to help control inflation (Dept of State, 2018). The energy crisis closed down elementary and high schools in 1977 because they could not heat them (Schultz, 2013). This made Carter to choose higher taxes and search for alternative fuels. The Federal Reserve Board announced it would restrain the growth of money (digital history, 2016.). This caused interest rates to climb. Carter’s administration also used deregulation