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As President, Reagan implemented new political and economic initiatives. His supply-side economic policies, dubbed "Reaganomics" by his critics, called for tax rate reduction to spur economic growth, as well as economic deregulation, and reduction in government spending. Reagan's popularity increased after he survived an assassination attempt in March, just 69 days into his term. He established a reputation for toughness when he ended an air traffic controllers strike by threatening to fire any of the union members who refused to return to work. Over his two terms, the economy saw a reduction of inflation from 12.5% to 4.4%, and an average annual growth of real GDP of 3.4. Reagan's economic policy originally led to concerns and criticism as the nation endured a period of recession. Unemployment was at historically high levels (about 7.5%) until the end of 1981, but continued into 1982, with rates especially high in many blue collar areas. The peak of the recession occurred in November and December 1982, when the nationwide unemployment rate was 10.8%, the highest since the Great Depression. Many blamed their President and in a poll released on January 31, 1983, Reagan's approval rating dropped to its lowest point, 35%.
Many wondered if Reagan would run for re-election in 1984, given his age and given the poor economy. But as 1983 and 1984 unfolded, things slowly got better. Interest rates lowered and this, coupled with lower tax rates, caused the economy to recover. From a high of 10.8% in December 1982, unemployment gradually improved until it fell to 7.2% on Election Day in 1984. Nearly two million people left the unemployment rolls. Inflation fell from 10.3% in 1981 to 3.2% in 1983. Corporate earnings rose by 29% in the July-September quarter of 1983, compared with the same period in 1982. Some of the most dramatic improvements came in industries hardest hit by the recession, such as paper and forest products, rubber, airlines, and the auto industry. As election day of 1984 approached, voter anger at the recession seemed to evaporate. When Reagan ran for re-election in 1984, his campaign spin doctors proclaimed that it was "morning in America" and that Americans were better off now than they had been four years earlier.
A number of candidates fought for the chance to win the Democratic Party's nomination for President and the chance to oppose Reagan. These included former Mercury astronaut and then Ohio Senator John Glenn, former U.S. senator and 1972 Democratic nominee George McGovern, Florida Governor, Reubin Askew, California Senator Alan Cranston and South Carolina Senator Ernest Hollings. But only three candidates actually won any state primaries: former Vice-President Walter Mondale, Colorado Senator Gary Hart, and Civil Rights leader Jesse Jackson.
Mondale was seen as the front runner for nomination. He had the greatest number of party leaders supporting him, and he had raised more money than any other candidate. But his road to the nomination would not be an easy one thanks to both Jackson and Hart. Jackson was the second African-American (after Congresswoman Shirley Chisholm) to mount a nationwide campaign for the presidency, and he was the first African-American candidate to be considered to be a serious contender. He received 3.5 million votes during the primaries, finishing third behind Hart and Mondale. He won primaries or caucuses in the District of Columbia, South Carolina, and Louisiana, and split Mississippi, where there were two separate contests for Democratic delegates.During the campaign, however, Jackson referred to Jews as "Hymies" and New York City as "Hymietown" in remarks he thought were off the record, but which apparently weren't. He later apologized for the remarks, but they were widely publicized, and derailed his campaign for the nomination. Jackson ended up winning 21% of the national primary vote but received only 8% of the delegates to the national convention. He was critical of Mondale, and said that Hubert Humphrey was the "last significant politician out of Minnesota.
Hart announced his run February 1983. He barely received above 1% in the polls, but he started campaigning early in New Hampshire. This strategy attracted national media attention to his campaign, and by late 1983, he had risen in the polls, mostly at the expense of John Glenn and Alan Cranston. Mondale easily won the Iowa caucus in late January, but Hart finished second, polling better than expected with 16%. Two weeks later, in the New Hampshire primary, he surprised everyone by defeating Mondale by ten percentage points.
Hart's victory in New Hampshire made him the main challenger to Mondale for the nomination. He criticized Mondale, stating that he symbolized the "failed policies" of the past. Hart portrayed himself as a younger, fresher, and more moderate Democrat and claimed that he could appeal to younger voters. He won the key contests in Ohio and California primaries. But Hart could not overcome Mondale when it came to fund-raising. Mondale had support among labor union leaders in the Midwest and industrial Northeast. Hart stumbled during a televised debate when Mondale mocked Hart's vague "New Ideas" that he campaigned on in his commercials. Turning to Hart on camera, Mondale said that whenever he heard Hart talk about his "New Ideas", he was reminded of the Wendy's fast-food slogan "Where's the beef?" The remark drew laughter and applause from the audience. More importantly, Mondale had established the idea in many voters' minds that Hart's "New Ideas" were shallow and lacked specifics.
In the same debate, Hart looked foolish when he was asked what he would do if an unidentified airplane flew over the Iron Curtain from a Warsaw Pact nation, and replied that he'd send up a United States Air Force plane and instruct them to determine whether or not it was an enemy plane by looking in the cockpit window to see if the pilots were wearing uniforms. John Glenn, a former Marine Corps fighter pilot, replied that this was physically impossible.
Mondale gradually pulled away from Hart in the delegate count. In June delegates from five states were on the line: South Dakota, New Mexico, West Virginia, California and New Jersey. The proportional nature of delegate selection meant that Mondale was likely to obtain enough delegates from these states to secure the stated support of an overall majority of delegates. Hart maintained that unpledged delegates that had previously said that they supported Mondale would shift to his side if he swept these primaries. Campaigning in California, Hart told his audience that while the "bad news" was that he and his wife Lee had to campaign separately, "the good news for her is that she campaigns in California while I campaign in New Jersey." His wife told the crowd that she "got to hold a koala bear," and Hart replied that "I won't tell you what I got to hold: samples from a toxic-waste dump." While Hart won California, but his remarks offended voters in New Jersey. He lost that state, squandering a 15 point lead in the polls.
When the Democratic Convention opened in San Francisco on July 16, Mondale had more than enough delegates to win the nomination. Mondale received 2,191 votes, while Hart received 1,200.5 and Jackson finished third with 465.5. When he made his acceptance speech at the Democratic Convention, Mondale told the crowd: "Let's tell the truth. Mr. Reagan will raise taxes, and so will I. He won't tell you. I just did." Mondale's goal was to expose Reagan as a hypocrite and portray himself as the honest candidate. The strategy may have backfired, because it let voters know that if they voted for him, their taxes would increase.
Mondale chose U.S. Rep. Geraldine A. Ferraro of New York as his running mate and she was confirmed by acclamation. Ferraro became the first woman nominated for that position by a major party. Mondale ran a liberal campaign. He told voters that he supported a nuclear freeze and the Equal Rights Amendment. He criticized Reagan's economic policies and pledged to reduce federal budget deficits.
Ferraro's choice was popular within the Democratic party, but according to polls taken on the subject, only 22% of women were excited about her selection, while 18% said that it was a "bad idea". 60% of all voters thought that pressure from women's groups had led to Mondale's decision, while 22% who believed that he had chosen the best available candidate. Some in the Roman Catholic Church criticized Ferraro, a Catholic, for being pro-choice on abortion. In the middle of the campaign, Ferraro also allegations that her husband, John Zaccaro, was involved in organized crime, pornography distribution, and campaign contribution violations. Ferraro responded to these allegations against her husband by releasing her family tax-returns to the media on August 21, 1984.
The Reagan campaign was produced a series of effective television ads, including one known as "Bear in the woods" (which left the impression that Reagan was better suited to deal with the Russian "bear") and "Morning in America" (which reminded Americans how they were better off under his presidency than they had been under the team of Jimmy Carter and Mondale.
At this point, the seventy-three year old Reagan was the oldest president to have ever served in that office and there were many questions about his capacity to endure the grueling demands of the presidency, particularly after Reagan had a poor showing in his first debate with Mondale on October 7. At one point he talked about going to church "here in Washington", although the debate was in Louisville, Kentucky, and he referred to military uniforms as "wardrobe". But in the next debate on October 21, Reagan looked more alert and better prepared. He joked "I will not make age an issue of this campaign. I am not going to exploit, for political purposes, my opponent's youth and inexperience." Mondale himself laughed at the remark and later admitted that Reagan had effectively neutralized the age issue. He candidly remarked, after the election, "If TV can tell the truth, as you say it can, you'll see that I was smiling. But I think if you come in close, you'll see some tears coming down because I knew he had gotten me there. That was really the end of my campaign that night, I think. I told my wife the campaign was over, and it was."
Reagan was re-elected in the November 6 election in an electoral and popular vote landslide. He won 49 states, all but Mondale's home state of Minnesota and the District of Columbia. Reagan won a record 525 electoral votes total (of 538 possible), and received 58.8 percent of the popular vote. Despite Ferraro's selection, 55% of women who voted did so for Reagan, according to exit polls, and he received over 54% of the Catholic vote, the highest for a Republican candidate in history.