Reaganomics—also known as supply-side and trickle-down economics—is an economic policy practiced by presidents Warren G. Harding, Calvin Coolidge, and Herbert Hoover in the twenties and most recently, by the fortieth president of the United States, Ronald Reagan. Just like the state of the economy before Reagan stepped into office, the economy of the United States today is in a vulnerable place. The economy has taken multiple blows over the last few years: a recession in 2008, a close call in 2011, and an overwhelming deficit. Most Americans are looking for something to change. While some are advocating for an increase in the government’s power in order to step in and seemingly help the people, the way for the government to truly succor …show more content…
As Reaganomics was effective in the past, it can still be today. The federal government should cut tax rates for not only the people, but also for businesses to promote people to spend their money, therefore it goes back into the system, helping the economy grow.
When Ronald Reagan became the president of the United States in 1980, he took on the worst economic mess since the Great Depression. The United States was involved with the Cold War with the Soviet Union, mortgage rates were two and a half times that of the amount in 1960 (15.4%), seven million Americans were unemployed, the national debt was $934 billion dollars, and tax rates skyrocketed as high as seventy percent (Reagan, “The State of the Nation’s Economy” 290). Reagan’s predecessor Jimmy Carter planned to fix this dreadful economy of the 1970s with a tax increase of fifty billion dollars, whereas Reagan knew that the best way to fix the economy was with tax decreases. Under the Reaganomics program, “tax rates were to be cut by thirty percent. Tax revenues were to be reduced by forty-four billion dollars in 1982 and eventually result in a $500 billion reduction over the next five years. Never before in the history of the nation had a president proposed reducing taxes by so much for such a long period of time” (Wilson 25). Reagan’s tax cuts involved a greater decrease for the wealthy, but everyone else also received massive tax relief. Reagan’s idea was that when the
Reaganomics was economics policies which were propelled by United States President, Ronald Reagan during 1980s. These policies were based on fours pillars namely; reduction of the growth of government spending, reduction of income and capital gains marginal tax rates, reduction of government regulation of economy, and controlling of the money in supply so as to reduce inflation. Their basic aims were to lower taxes and create a leaner government. According to Reagan his decision was informed on stimulation of the economy taxes, financed by borrowing. Lowering taxes was aimed at reviving the economy, which in turn would see the increased tax revenues being used to offset the debts incurred (Niskanen
In 1981, Reagan signed the Economic Recovery Tax Act, which reduced marginal taxes for every individual by 25 percent (History). Marginal tax is a tax on the additional income of an individual (Investopedia). In 1986, Reagan initiated another tax policy that would close loopholes within the tax system and reduce taxes even more (Feulner). The Tax Reform Act of 1986 reduced the tax rate of the middle class by 15 percent and the wealthy’s by 28 percent (Feulner). Both the 1981 and 1986 tax policies reduced the tax rate of high-income earners from 70 to 28 percent (History). Reagan’s massive tax cut did not seem to disrupt tax revenue since it increased from “$500 billion to $1 trillion by the end of the 1980s” (Feulner). All in all, Reagan pushed a tax agenda that called for a significant tax reduction, and the economy improved as a
One of the many accomplishments of Reagan and why he had the biggest influence on the United States was because of Reaganomics. Reaganomics was this idea of controlling inflation and spurring economic growth through tax cuts, reduced growth in government spending, and reduced business regulation (Graphiq Inc. Editors).
Whilst it is clear that Reagan’s economic policies did help the rich become richer, was this positive impact just limited to this section of society? The policies discussed within the extracts include the disproportionate tax cuts, deregulation of businesses and the reduction of federal funding for welfare; all of which negatively impact the poor whilst helping the already wealthy gain more money. However, it is difficult to determine whether Reagan’s policies just helped the rich as the extracts provided only discuss two of the main four policies that were implemented. Without discussing the cutting of the deficit and controlling the money supply, we cannot come to a full and complete judgement as to whether the policies were only beneficial to the rich.
During his first term in office, Reagan sent congress the revisions of the budget that he thought could work. People said “his plan were an across-the-board tax cut and an effort to reduce the size and growth of the federal government,” (Kenneth Walsh). Though many critics said that the budget he created would not do anything but harm the people and the government, they were still put in place. Those critics were right, with the budget and tax cuts caused for there to be the worst recession since the great depression. Critics went ahead and called
This would supposedly result in an economic boom that would result in more income for both the higher and lower class that would offset the rise of inflation. However, these tax cuts lead to record federal budget deficits, which also resulted in cutting funds from various social services and programs. While these deficits and social program cuts occurred, the national unemployment also rose to record highs, and the gap between working and upper classes only increased. To an extent, the large gap between economic classes still exists today, as the average income for those residing in the top 1% has risen astronomically (lecture topic 14b). It was also around this time that big chain companies such as Wal-Mart and McDonalds rose to prominence. In contrast to the original intent of Reagan’s plan, the heads of these large companies (i.e. most of the people residing at the top of the upper class economically) kept their extra money instead of using it to improve working conditions for their employees. This resulted in outsourcing jobs, expanding locations to different countries outside the U.S., and the lowering of workplace standards (Klein p. 236-237). Today, many of these practices are still in place, with numerous politicians still pushing a similar agenda of tax cuts for big corporations (many of which support said politicians).
Reaganomics did fix economic troubles. His goals of the policies were achieved. Reagan cut tax rates enough to stimulate consumer demand. Government spending was slowed down,
Reagan reimagined the meaning of social programs and taxes. Taxes became a way for the government to take hard-earned money and give it to those who were deemed as less motivated in an effort to stress an unfair tax system. Social programs also became a vehicle that nurtured this illegitimate transfer of wealth rather than a humane answer to those disadvantaged. These ideas such as the demonization of tax hikes were so successful that many of his presidential successors have had to adopt similar economic policy to please constituents. As with the slow-release revolution, as part of the way he changed the political landscape, wealth income inequality rapidly rose after Reagan left office, “revers[ing] five decades of reductions in income and other forms of inequality” (228). Clinton’s election into office is a great indicator of how appealing the new ideology adopted by Reagan, the demonization of taxes and social programs, was to the American
This depicts Reaganomics and its “economic success” as a facade that had tricked the American people into believing that Reagan valued their careers and economic status; which is false in Johnson’s eyes. He emphasizes that this “idea” was covering up the losses the country was suffering such as increased unemployment rates and the rich being the only ones gaining more wealth. This is later backed by his statement “Stripped of slogans and magic economic curves, supply-side theorems were nothing more than the old selfishness dressed up in new garb for the I980s.” (Johnson 111). In other words, despite repeated warnings, Reagan resold supply-side economics to the people, well aware it was more likely to fail than bring about prosperity. Reaganomics is depicted in a new light rather than a period of
How President Reagan ran the economy was through Supply-Side economics or “Reaganomics”. The idea of this process ran under the belief that businesses should be stimulated by cutting taxes, deregulation, and encouraging investment instead of consumption. The association between cutting taxes, and the country's revenue was also known as the Laffer curve; that tax cuts will yield more revenue for corporations to thrive. Along with economic change, Reagan also believed that the government intruded too deeply into American life. Unlike previous New Deal aspects, he wanted to cut programs that he deemed wasteful within society. During his time as President, he reduced federal regulations by 1/3 of what it had been. Unemployment went up 4% during the first two years of his presidency, but started to go down in
Ronald Reagan believed in policies that were based on supply side economics. Reagan showed people improvements in certain types of key economic indicators to show evidence of the success. Part of the proposals by the policy were the growing of economic growth whenever tax rates dropped enough to make instruments. The investments would lead to high employment, increased economic growth and wages. Reagan did not believe in the raise of income takes.
This innovating plan Ronald Reagan had known as the Reagan Revolution, was aimed to give the American people strength. While in office he believed that people would do better if they were given freedom to compete for their own well being and improve their lifestyle. The remarkable thing he did was lower tax rates for all citizens and by doing this he increased revenue and allowed citizens to invest more into their country (staff, 2009). Tax cuts for the rich would enable them to spend and invest more. This was a great move to put America in the right direction, this helped the economy and created many new jobs. Reagan believed that a tax cut like this would ultimately generate even more revenue for the federal government, and that is exactly what happened (staff,
On January 20, 1981 Ronald Reagan was inaugurated to the office of the presidency and with this inauguration came a report from Arthur Laffer, Congressman Jack Kemp, and David Stockman which declared a crisis situation due to government regulation and disastrous overtaxation (Samuelson 60). The solution to this problem became what is now known as Kemp-Laffer-Stockman supply-side economics. This type of economics held that a greater supply of goods and services, made possible by measures to increase business investment,was the swiftest road to economic growth (“The Reagan Years”). To implement this plan a cut in tax rates for three years had to be implemented. These tax cuts the administration argued would increase capital investment and corporate earnings which would increase government revenues (“The Reagan Years”). In 1981 Reagan succeeded in getting Congress to pass the Economic Recovery Tax Act of 1981 (Sloan 7) initiating the beginning of what would be later dubbed Reaganomics. Later, another act would be passed, the Tax Reform Act of 1986, which reduced tax rates for all groups (Sloan 7).
The main idea of supply-side economics is that if people have more money, they can spend more money and invest their money into numerous items. President Bush and President Reagan shared the idea that if they cut taxes, people would want to work more and lower the unemployment rate. Reaganomics had disastrous consequences. There was excessive unemployment, but the economy begun to recover. When the economy was beginning to recover, tax cuts made it agonizingly difficult for poorer people to get more money. The only people who were getting money and investing money were the rich
Supply-side economics is better known as "Reaganomics," or the "trickle-down" economic policy. It is an economic philosophy that conveys the notion greater tax cuts for investors and entrepreneurs provide incentives to save and invest. This economic theory goes further to suggest that in turn, there are economic benefits which will trickle down into the overall economy. The key to answering whether supply side was successful is grounded in a sound understanding of what it is.