<P> Jimmy Carter, running as someone who was not a part of the Washington political establishment, was elected president in 1976 . On the world stage, Carter brokered the Camp David Accords between Israel and Egypt . In 1979, Iranian students stormed the U.S. embassy in Tehran and took 66 Americans hostage, resulting in the Iran hostage crisis . With the hostage crisis and continuing stagflation, Carter lost the 1980 election to the Republican Ronald Reagan . On January 20, 1981, minutes after Carter's term in office ended, the remaining U.S. captives held at the U.S. embassy in Iran were released, ending the 444 - day hostage crisis . </P> <P> 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 the top marginal tax rate 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, but the negative indicators reversed, with the inflation rate decreasing from 11% to 2%, the unemployment rate decreasing from 10.8% in December 1982 to 7.5% in November 1984, and the economic growth rate increasing from 4.5% to 7.2% . </P> <P> Reagan ordered a buildup of the U.S. military, incurring additional budget deficits . Reagan introduced a complicated missile defense system known as the Strategic Defense Initiative (SDI) (dubbed "Star Wars" by opponents) in which, theoretically, the U.S. could shoot down missiles with laser systems in space . The Soviets reacted harshly because they thought it violated the 1972 Anti-Ballistic Missile Treaty, and would upset the balance of power by giving the U.S. a major military advantage . For years Soviet leader Mikhail Gorbachev argued vehemently against SDI . However, by the late 1980s he decided the system would never work and should not be used to block disarmament deals with the U.S. Historians argue how great an impact the SDI threat had on the Soviets--whether it was enough to force Gorbachev to initiate radical reforms, or whether the deterioration of the Soviet economy alone forced the reforms . There is agreement that the Soviets realized they were well behind the Americans in military technology, that to try to catch up would be very expensive, and that the military expenses were already a very heavy burden slowing down their economy . </P> <P> Reagan's Invasion of Grenada and bombing of Libya were popular in the U.S, though his backing of the Contras rebels was mired in the controversy over the Iran--Contra affair that revealed Reagan's poor management style . </P>

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