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The Supreme Court, Federalism and the Reagan Presidency, and the Federal
Government’s Role in Today’s Economy
Standard VUS.15 The student will demonstrate knowledge of economic, social, cultural, and political
developments in recent decades and today by
a. Examining the role the United States Supreme Court has played in defining a constitutional right
to privacy, affirming equal rights, and upholding the rule of law
d. Examining the impact of the “Reagan Revolution” on federalism, the role of government, and state
and national elections since 1988
e. Assessing the role of government actions that impact the economy
In recent decades the United States Supreme Court has played a key role in defining a
constitutional right to privacy, affirming equal rights, and upholding the rule of law. The membership of
the U.S. Supreme Court has changed over time. Until 1967 only white males had served on the Supreme
Court. In that year President Lyndon B. Johnson appointed Thurgood Marshall as the first AfricanAmerican justice of the nation’s highest court. Since Marshall’s appointment, presidents have appointed a
number of women and minorities to the Supreme Court. In 1981 President Ronald Reagan appointed Sandra
Day O’Connor, making her the first woman justice in American history. Clarence Thomas became the
second African-American justice, when Thurgood Marshall retired in 1991, and two years later Ruth Bader
Ginsburg became the second female justice. [In 2009 Sonia Sotomayor became the first Hispanic and
third woman justice. In 2010 Elena Kagan joined the Supreme Court as the fourth female justice in
American history. President Barack Obama appointed both these women, and three of the nine justices on
the United States Supreme Court are currently females.]
The decisions of the U.S. Supreme Court have expanded individual rights in the years since its 1954
ruling in Brown v. Board of Education of Topeka, Kansas. Indeed, the civil rights movement of the 1940s,
1950s, and 1960s provided a model that other groups have used to extend civil rights and equal justice. For
example, the federal courts have consistently protected employment opportunities for American women by
citing not only the 1964 Civil Rights Act, but also the Equal Protection Clause of the Fourteenth
Amendment. In 1971 the Supreme Court heard the case of Reed v. Reed. This case involved an Idaho law,
which said that “males must be preferred to females” in appointing administrators of estates. [An
administrator of an estate is the individual who oversees the distribution of property to the heirs of a
deceased (dead) person.] The Supreme Court ruled unanimously that the law’s different treatment of men
and women was unconstitutional, because it violated the Equal Protection Clause of the Fourteenth
Amendment. Thereby, this decision set precedent that the Supreme Court could use the Equal Protection
Clause to protect the rights of American women under certain circumstances. This meant that although the
federal courts may use the Fourteenth Amendment to prohibit sex discrimination in some situations,
gender receives fewer protections under the Equal Protection Clause than issues related to race, religion,
and national origin.
Furthermore, the U.S. Supreme Court continues to protect the individual rights enumerated (listed)
in the Constitution of the United States. For example, in its 1989 decision in Texas v. Johnson the
Supreme Court ruled in favor of a Texas man who was arrested for burning an American flag as a political
protest. The high court declared that flag-burning is protected by the First Amendment right to free
expression. After Congress passed the Flag Protection Act of 1989, the Supreme Court reaffirmed the
Johnson decision’s protection of an individual’s First Amendment right to free expression in the case of
United States v. Eichman (1990). The Eichman decision struck down the Flag Protection Act as
unconstitutional because it too violated the First Amendment.
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The United States Supreme Court has also identified in recent decades a constitutional basis for a
right to privacy that is protected from government interference. Perhaps, the most famous right to
privacy decision involved the case of Roe v. Wade. In its 1973 decision in this case the Supreme Court
declared that women have the right to obtain an abortion during the first three months of pregnancy. The
court’s majority concluded in Roe v. Wade that “State criminal abortion laws, like those involved here, that
except from criminality only a life-saving procedure on the mother's behalf without regard to the stage of
her pregnancy and other interests involved violate the Due Process Clause of the Fourteenth Amendment,
which protects against state action the right to privacy, including a woman's qualified right to terminate
her pregnancy.”
During the last several decades, the Supreme Court has invalidated (cancelled or annulled)
legislative acts and executive actions that the justices agree exceed the authority granted to government
officials by the Constitution of the United States. This means the Supreme Court has used the power of
judicial review to protect the Constitutional principle of separation of powers, as well as the checks and
balances system. For example, during the Watergate scandal, it became known that President Richard
Nixon had secretly tape-recorded all conversations in the Oval Office. When the Senate committee
investigating Watergate asked for these tapes, President Nixon refused to release the tapes, claiming that
executive privilege gave him the right to keep his records private. In a unanimous decision in July 1974,
the Supreme Court ruled in United States v. Nixon that executive privilege did not apply in this instance
and the president must release the complete Watergate tapes. Nixon resigned as president the following
month, shortly after the release of the tapes.
Federalism is the distribution of power between a central government and its political subdivisions.
Under the Constitution, the principle of federalism results in power sharing between the federal
government and the states. In other words only the federal or national government holds certain powers,
while the state governments exclusively possess other powers, and the federal and state governments
share a third category of powers. Since Alexander Hamilton and Thomas Jefferson disagreed on the
constitutionality of the Bank of the United States during the presidency of George Washington and the
first two political parties developed, Americans have held conflicting opinions on the issue of federal vs.
state power. In 1980 the American people elected Ronald Reagan president. President Reagan’s policies
during the next eight years had an impact on the relationship between the federal and state governments,
which some observers have called the “Reagan Revolution.”
Ronald Reagan, a Republican, possessed a conservative political philosophy, which opposed expansion
of federal power at the expense of the states. Reagan’s conservative political philosophy prompted a reevaluation of the size and role of government in the economy and society of contemporary America.
Consequently, the “Reagan Revolution” advocated (supported or promoted) tax cuts, the transfer of
responsibilities from the federal government to state governments, the appointment of federal judges and
Supreme Court justices who exercised “judicial restraint”, and reduction in the number and scope of
government programs and regulations. President Reagan hoped all of these actions would reduce the size
and power of the federal government and turn over decisions to either state governments or individual
citizens. Since Ronald Reagan considered national defense a key function of the federal government, he
and his conservative Republican supporters also advocated a strengthened American military.
The 2008 Virginia and United States History Curriculum Framework, published by the Virginia
State Department of Education, has suggested that the “Reagan Revolution” extended beyond President
Reagan’s tenure (time) in office. This framework points to four facts to prove this assertion. First, at the
end of Reagan’s second term, the American people elected his vice president George H. W. Bush president
of the United States. Second, although George H. W. Bush failed in his bid for re-election in 1992, he lost
to a centrist Democrat William Jefferson (Bill) Clinton, who had previously served as governor of the
conservative state of Arkansas. According to this historical interpretation, the congressional vote on the
North American Free Trade Agreement (NAFTA) provides evidence of Clinton’s moderate political
philosophy. President Clinton actively supported NAFTA, as did his Republican predecessor George H. W.
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Bush. The Reagan administration had taken the first step in the direction of NAFTA, when it concluded a
free trade agreement between the United States and Canada in 1988. When Congress voted on NAFTA in
1993, a majority of the Democrats in both the House of Representatives and the Senate opposed the
agreement. In contrast, President Clinton’s pro-NAFTA position sided with a majority of the Republican
members in both houses of Congress.
Third, the Curriculum Framework argues that the Republican sweep of congressional elections and
statehouses in the 1990s serves as additional proof that the “Reagan Revolution” extended beyond Reagan’s
terms as president. For example, after President Clinton failed to persuade Congress to pass universal
health care legislation during his first two years in office, the Republicans captured control of both houses
of Congress in the 1994 elections. Republicans had argued that universal health care coverage was a move
toward socialism and lobbied hard to defeat this “liberal” bill. The 1994 election results marked the first
time the Republican Party held a majority of the seats in the House of Representatives, since the first two
years of the Eisenhower administration during the early fifties. In Virginia during the 1990s Republican
candidates ran as supporters of Ronald Reagan’s philosophy of limited government and won the governorship
in both 1993 and 1997 and all three statewide offices in 1997. Finally, the Curriculum Framework claims
George W. Bush’s victory in the 2000 presidential election provides further evidence that the “Reagan
Revolution” lasted longer than Reagan’s tenure in office (the eight years Reagan served as president).
In today’s America, the federal government has the ability to influence the American economy. It
bases its decisions on economic indicators such as Gross Domestic Product (GDP), exchange rates, inflation,
and unemployment rates. GDP is the total market value of all final goods and services produced in a country
in a given year, equal to total consumer investment and government spending, plus the value of exports,
minus the value of imports. In other words, GDP is defined as the market value of the goods and services
produced by a country. Exchange rates are the value of the American dollar relative to other world
currencies, like the European Euro and the Japanese Yen. The dollar’s value floats on the international
currency market according to the basic economic principle of supply and demand. Inflation is the economic
phenomenon when prices increase and the value of the dollar decreases or buys less. For example, during
the summer of 2008 the American consumer faced severe inflation in gasoline prices, as the price rose to
over $4 per gallon.
The federal government promotes a healthy economy characterized by full employment and low
inflation by means of monetary policy and fiscal policy. The Federal Reserve controls monetary policy, while
the President and Congress control fiscal policy. Monetary policy is a central bank’s actions to influence
the availability and cost of money and credit, as a means of helping to promote (support) national economic
goals. In the United States the term "monetary policy" refers to what the Federal Reserve, America’s
central bank, does to influence the supply of money and the availability of credit in the U.S. economy. The
money supply directly affects interest rates (the cost of credit) and thereby the performance of the U.S.
economy. The Federal Reserve’s monetary policy decisions control the supply of money and credit to
expand or contract economic growth. For example, if the Federal Reserve Board believes the American
economy is slowing down, it will cut interest rates and thereby encourage borrowing. Greater borrowing
results in an increase in the nation’s money supply, greater consumer spending, an increase in demand, and
economic expansion. On the other hand, if the Federal Reserve Board believes the economy is overheating
and thereby causing inflation, then it will raise interest rates. Higher interest rates result in less
borrowing, a reduction in the nation’s money supply, less consumer spending, a decrease in demand, lower
prices, a drop in the rate of inflation, and a contraction in economic growth.
The term “fiscal policy” refers to taxing and spending actions taken by the President and Congress
to influence the American economy. If the President and Congress believe the American economy is slowing
down, they may pass laws to reduce taxes and/or increase federal spending. By cutting taxes, the
government gives the American consumer more money to spend, which should thereby increase demand for
goods and services in the American economy. By increasing federal spending, Congress and the President
increases demand for whatever goods and services the government buys. Increased demand should
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encourage business to hire more workers to expand production, which will have the effect of reducing
unemployment and thereby stimulate economic growth. In reverse, if the President and Congress believe
the American economy is overheating and thereby causing inflation, then they may pass laws to increase
taxes and/or decrease federal spending. By raising taxes, the government takes away money from the
American consumer, which should in turn decrease demand for goods and services in the American economy.
A drop in demand should result in lower prices and thereby a reduction in the rate of inflation. By cutting
federal spending, Congress and the President also decrease demand for goods and services. If demand
drops and supply stays the same, then business should reduce prices, which will lower inflation. Since fiscal
policy decisions, made by the President and Congress, determine levels of government taxation and
spending, they serve as a means for the government to regulate the nation’s economy.
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