1979 Fiscal Policy

Reagan kept trying to make the economy better throughout his presidency. The midterm elections in 1982 saw a change in Congress when the Democrats gained twenty-five seats in the House of Representatives (Moss & Thomas, 2013, p. 236). House speaker Thomas O’Neill managed to get Reagan to agree to budget compromises in 1983 in order to get the economy back on track (Moss & Thomas, 2013, p. 236).

Reagan really focused on improving the economy during his presidency, with a plan he called Reaganomics, or supply side economics. The main parts of this plan were cuts on taxes and budgets, and monetary policy. Also, he wanted to reduce government regulation on businesses. He thought that these and increasing defense expenditures would heighten economic efficiency. Reagan managed to cut taxes by twenty five percent in three years. However, the plans did not work out at first, causing a recession that some call “The Great Inflation.” The national debt heightened substantially, and the rate of unemployment reached up to eleven percent. Despite these negative outcomes, the economy experienced a sudden growth and prosperity in 1983, which was

Conte & Karr (2001) report the economic growth of the 1980’s in the United States sees President Regan cutting taxes and slashing social programs. President Reagan also

Carter vetoed a public works package in 1978 in retaliation. Without mutual respect within the branches of the government, compromises and agreements for the domestic issues are hard to reach. The hostility between the two branches deterred progress in the nation’s fragile economy and unemployment. Ford and Carter tackled the perplexing economic issues of the decade, an issue that economists at the time couldn’t even solve. Ford decided to tackle inflation first. His “WIN” plan (Whip Inflation Now” called for an increase in taxes and a reduction of federal spending. To promote this plan, he called for the production of pins with “WIN” on them. This plan did not go well with Congress. Congress eventually passed a bill for a $22 billion tax cut, but it increased government spending on government programs. Ford signed this bill to strive to ease tensions between Congress and himself. In 1975, Congress passed a Revenue Adjustment Act which called for a tax cut and a limit to future spending in the future. It served as a negotiation between the executive and the legislative branches. This was successful in helping inflation; however, unemployment continued to rise. Carter attempted to tackle unemployment first, unlike Ford. Although Carter’s economic decisions helped to reduce unemployment by stimulating the economy, he did not pass any legislation that specifically targeted unemployment. His personal conflict in

Ronald Reagan hard work paid off when he signed the recovery tax act of 1981, which made

21.  When Congress blocked President Reagan's efforts to help opponents of the leftist Sandinista government in Nicaragua,

Reagan increased defense spending. U.S. exports were falling, creating a negative balance of trade where the country was buying more from foreign countries than it was selling to them.

Following his less-government intervention views, Reagan cut the budgets of non-military programs including Medicaid, food

Reagan’s deficit spending did not only affect that period of time, it created a tolerance for deficit spending that will continue to affect the economy for many years.

As President, Ronald Reagan encountered many significant events; from surviving an assassination attempt, to the space shuttle Challenger disaster. Perhaps the most significant event was the economic downturn. He came to office (much like President Obama) in the midst of an economic crisis; however, President Reagan was able to turn the economy around. How did he do this? In order to answer this question, you must first ask what the economy was like when he was sworn into office, how his policy changed from the prior administration’s policy, and how it contrasts our present economic policy.

During President Jimmy Carter's administration (1977-1981), he had seen a substantive decrease in unemployment and a reduction of the deficit, but the recession ultimately continued. Carter created the United States Department of Education and United States Department of Energy, established a national energy policy and pursued civil service and social security reform. Carter also started the Camp David Accords, the Panama Canal Treaties and the second round of Strategic Arms Limitation Talks. His work to return the Panama Canal Zone to Panama received criticism from the American people for his decisions, which was seen as a U.S. weakness and of Carter's own habit of backing down when faced with confrontation. The final year of Carter’s presidential

Fears became a reality as the 1990’s approached. The budget deficits on the federal level began to rise again. At $220 billion in 1990, the deficit had grown three times in size since 1980. Bush was dedicated to curbing the deficit, believing that America could not continue to be a leader in the world without doing so. In the wake of a struggle with Congress, Bush was forced by the Democratic majority in Congress to raise tax revenues and as a result, many Republicans felt betrayed. After all, Bush had promised "no new taxes" in his 1988 campaign.

In this debate, both Jimmy Carter and Ronald Reagan made several claims related to inflation. Carter claimed he had established polices in his first term that brought down inflation, while creating 9 million jobs. To support this, he declared inflation fell from 18 percent in the first quarter of the year to 7 percent in the third quarter. Carter also claimed he was working on an economic revitalization program that would reduce tax credits to encourage businesses to invest in new tools and factories, resulting in increased productivity and more new jobs. In addition, he claimed some economists had called Reagan’s competing plan "irresponsible” and that it would increase inflation. However, he failed to explain why this was the case. He also

On assuming office in 1977, President Carter inherited an economy that was slowly emerging from a recession. He had severely criticized former President Ford for his failures to control inflation and relieve unemployment, but after four years of the Carter presidency, both inflation and unemployment were considerably worse than at the time of his inauguration. The annual inflation rate rose from 4.8% in 1976 to 6.8% in 1977, 9% in 1978, 11% in 1979, and hovered around 12% at the time of the 1980 election campaign. Although Carter had pledged to eliminate federal deficits, the deficit for the fiscal year 1979 totaled $27.7 billion, and that for 1980 was nearly $59 billion. With approximately 8 million people out of work, the unemployment rate

Housing prices was another contributing cause to the recession. In the decade going towards 2006, housing prices spiraled up by more than 25% due to high demand, decline in lending standards, and low interest rates in the 2000s. Between 2000 and 2006 large number of borrowers took out mortgages as they were lured by the prevailing favorable rates. This had the effect of fetching all and sundry including those individuals with bad credit records. The Federal Reserve began to raise fed funds thus interest rates cropped from 1.25% to 5.25% - a reasonable level to fight the inflation level as well as overall loans between banks. Expensive repayment on loan had the effect of softening housing markets since borrowing was costly.