6. Into the Modern Era (1950s – Present)

The United States continued to grow after the war, both in population and economically. The postwar “baby boom” consumer spending and numbers of consumers increased substantially. The American “middle class” became dominant. By now the United States was the richest nation in the world. As a result, America was developing an extensive infrastructure to match its wealth. The completion of the Interstate Highway System “remains the largest public works project in the history of the world”. Finally, the strong interrelationship between the government and the ever-expanding industrial sector (the “military-industrial complex”) helped establish the United States as the economic superpower of the world.

The middle of the twentieth century saw a brief expansion of labor unions and then labor policy. The Civil Rights movement of the 1960s urged President to further expand and guarantee access to opportunity by minorities in America while Congress helped support new federal spending in the form of programs such as Medicare and Food Stamps. But economic trouble largely resulting from the Vietnam War and high domestic spending plagued the economy in the 1970s. The economy faced inflation and shockwaves from global crises that drove oil prices and consumer discontent high.

As a result of increased expenditures (particular in the military and defense) but decreased taxes there were significant increases in both the budget deficit and the national debt as the U.S. government was forced to borrow heavily from other countries.

A recession of the early 1990s lingering from the stock market crash of 1987 was drawn out by high oil prices, but consumer confidence and spending helped keep the economy afloat. The economy of the 1990s was driven by the rise of technology and the Internet, whose companies made startling gains on the stock market. Personal and business technology alike broadened and streamlined access to the global marketplace. Economic optimism was based upon high-tech “dot.com” industries who built their success from low interest rates and enthusiastic investors during an era of low unemployment and low inflation.

The Federal Reserve closely monitored America’s economic pace and played an active role in the American economy. But it is also because of the Reserve selling billions in bonds to the Chinese that China has gradually assumed role of banker to America. That, in addition to America’s virtual dependence upon cheaply manufactured Chinese goods to sustain America’s consumer-driven economy, had managed to keep inflation, interest rates, and corporate wage costs in America artificially low. Low, even as the economy was taxed by terrorism, military fronts and natural disasters.

7. Understanding the Recession: Stock Markets, Subprime Lending, and Bursting Bubbles

In all, there have been over thirty cycles of expansions and recessions of the U.S. economy just since 1854. When markets are surging, “bubbles” form out of wild speculation and overvaluation that are based largely upon euphoria and greed. Electronic “herds” of investors are populated with optimistic, or “bull” buyers. In 2000, the dot.com economic boom came to an end as interest rates rose and investments in technology slowed. When an economic bubble bursts, the herd became fearful. A pessimistic “bear” market is a seller’s stock market in decline. Some of these economic forces were the same key factors that caused the “subprime” mortgage bubble that burst in late 2007. However, it was dubious and unregulated lending practices (with encouragement from the U.S. government) that caused this shutter in the economy—with aftershocks felt around the world.

Americans have tried to be cautiously optimistic, embracing the message of “Hope” in the presidential campaign of Barack Obama. Like many presidents who took over in the midst of recession, President Obama faced the task of virtually “remaking America”. Direct effects of smaller government and deregulation under previous administrations, but most recently with the energy and environmental policies of President Bush, were seen in the Gulf of Mexico when as much as 180 million gallons of oil gushed from a self-regulated rig’s blown out wellhead. The question, then, seems virtually the same as that which faced a younger America: how big should the government be? The answer is overwhelmed by the sheer number of complexities that complicate the task facing President and Americans today—the task of remaking another new American economy.