Ronald Reagan produced a major realignment with his 1980 and 1984 landslide elections. Reagan's economic policies (dubbed "Reaganomics") and the implementation of the Economic Recovery Tax Act of 1981 lowered income taxes from 70% to 28% over the course of seven years Reagan continued to downsize government taxation and regulation. The U.S. experienced a recession in 1982; unemployment and business failures soon entered rates close to Depression-era levels. These negative trends reversed the following year, when the inflation rate decreased from 11% to 2%, the unemployment rate decreased from 10.8% in December 1982 to 7.5% in November 1984 and the economic growth rate increased from 4.5% to 7.2%.
Reagan ordered a massive buildup of the U.S. military, incurring a costly budget deficit. Reagan introduced a complicated missile defense system known as the (dubbed "Star Wars" by opponents) in which the U.S. could, in theory, shoot down missiles with laser systems in space. Though it was never fully developed or deployed, the Soviets were genuinely concerned about the possible effects of the program and the research and technologies of SDI paved the way for the anti-ballistic missile systems of today.
The Reagan administration also provided covert funding and assistance to anti-Communist resistance movements worldwide. Reagan's interventions against Grenada and Libya were popular in the U.S., though his backing of the Contra rebels was mired in controversy. The arms-for-hostages scandal led to the convictions of such figures as Oliver North and John Poindexter.
Reagan met four times with Soviet leader Mikhail Gorbachev, who ascended to power in 1985, and their summit conferences led to the signing of the Intermediate-Range Nuclear Forces Treaty. Gorbachev tried to save Communism in the Soviet Union first by ending the expensive arms race with America, then by shedding the East European Empire in 1989. The Soviet Union collapsed in 1991, ending the U.S.–Soviet Cold War.
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