Ronald Reagan, a Republican, won the election of 1980 by promising to end the “tax and spend” policies of his liberal predecessors and to revive the patriotism needed to win the Cold War. These two goals would dominate his presidency.

Ronald Reagan’s economic program, dubbed Reaganomics, was founded on the belief that a capitalist system free from taxation and government involvement would be most productive, and that the prosperity of a rich upper class would “trickle down” to the poor. He pushed a three-year, 25 percent tax cut through Congress in 1981, as well as a $40 billion cut in federal spending on school lunches, student loans, and public transportation, among other services.

To curb inflation, the Federal Reserve Board hiked interest rates in 1981, plunging the country into a severe recession. Unemployment soared to 10 percent, and because of Reagan’s cut in social spending the impoverished found themselves without social programs. Along with unemployment, trade and federal deficits skyrocketed (the federal deficit rose because the government offset its cuts in social spending with huge increases in military spending). Recession, however, gave way to a rebound in early 1983, when inflation stabilized and consumers began to spend in great amounts.

From 1983 to 1987, the economy boomed, spurred by speculation in the stock market. The bubble burst, however, on October 19, 1987, when 20 percent of the stock market’s value was lost, the largest single-day decline in history. The crash exposed the economic problems concealed by the four boom years: a high trade deficit and the widening gap between rich and poor. These problems were still unresolved when the economy began to recover in 1988.

Reagan began issuing anti-Soviet statements soon after coming to the White House, referring to the USSR as the “evil empire.” His administration’s central Cold War strategy was military buildup. The Pentagon’s budget nearly doubled during Reagan’s first term in office, paralleling an increase in nuclear weapons and alarming the nation about a seeming increase in the likelihood of nuclear war. In March 1983, responding to vast domestic protest of nuclear weapons proliferation, Reagan proposed an antiballistic missile defense system known as the Strategic Defense Initiative (SDI), or “Star Wars.” Though “Star Wars” never came close to completion, because technology lagged behind the program’s defensive aims, some historians argue that the massive arms buildup proved to be the ultimate Cold War defense system by forcing the USSR to spend itself into demise in the late 1980s. Other historians counter that internal elements had more to do with the Soviet Union’s eventual collapse.

The Reagan administration’s enmity for the Soviets and all Soviet allies led it into a scandal known as the Iran-Contra affair. In 1982, the CIA organized a force of 10,000 men in Nicaragua, who called themselves “Contras,” to fight against the Sandinista regime, which had military ties to the Soviet Union and Cuba. Reagan hoped to establish a democratic government in Nicaragua friendly to the United States, but Congress voted to ban aid to the Contras. The administration, however, maintained secret support, organized from within the White House by Oliver North, a member of the National Security Council. A series of 1987 investigations uncovered the government’s machinations: the U.S. had been selling arms to the anti-American government in Iran and using profits from these sales to secretly finance the Contras in Nicaragua. Although there was no evidence that Reagan himself had known of the plan, the Iran-Contra scandal rekindled the American public’s distrust of the U.S. government.