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How Did Reagan's Policies Affect The Economy

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When president Reagan entered the oval office in 1981, his first priority was to stimulate economic growth for generations to come. Reagan’s plan consisted of four economic pillars, they are as follows: to reduce the growth of government spending, to reduce the marginal tax rates on income from both labor and capital, reduce regulation, and to reduce inflation by controlling the money supply (Niskanen, 2002). Reagan’s policies created an economic boom during 1983, however, it is argued that Reagan’s policies increased the national debt for years to come and widened the gap between the rich and the poor (ushistory.org, 2016). Reagan helped America escape the stagflation it faced through most of the 1970’s through four major policy changes (Niskanen, …show more content…

During this period, inflation was high and economic growth was low (Niskanen, 2002). To close a recessionary gap, you must increase aggregate demand. Reagan believed that through his trickle-down theory he could achieve this. However, not everyone agreed, though. Congress wearily accepted a 25% tax cut during Reagan’s first term (ushistory.org, 2016). It was Reagan’s hope that because the marginal tax rate on income from labor and capital was lower, corporations would increase their investment, in turn increasing aggregate demand. You could also argue that because of the lower tax rate, you were more likely to try to raise your income by either furthering education or taking a risk to start a company (Mandel, 2004). Starting a company increases investment spending which also increases aggregate …show more content…

Stagflation means the economy is stagnant in addition to having high inflation. In an effort to pull the economy out of stagflation and try to strengthen it for years to come, Reagan developed his Reaganomics economic plan. If Reagan failed to make a change, inflation would have continued to skyrocket making the average citizen spend less, consequently, businesses would invest less into their businesses and employees. According to the classical the classical theory, the economy would eventually stabilize because wages are flexible and output can’t get any higher (Clifford, 2016). Reagan’s plan was based partly on the Classical theory, nevertheless, he thought the economy would stimulate its growth because although the government wasn’t spending money, the rich were reinvesting their tax cut back into their businesses and the

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During the campaign of 1980, Ronald Reagan announced a formula to fix the nation’s economy. He claimed an inordinate tax burden, intemperate government regulation, and huge social spending programs hindered growth. Reagan proposed a 30 percent tax cut for the first three years of his term in office. The bulk cut would be directed towards the upper income levels. The economic theory was called supply-side of trickle-down economics.

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Though Reagan and Bush found tax cuts effective for the economy, the budget deficit continues to rise. As President Ronald Reagan takes office in 1981, he proposed tax cuts and reduced non-defense expenditures to increase military spending to Congress. Reagan believed that tax cuts would create more job opportunities for people and increase tax revenue in the long run. Lee et al. (2012) found “The tax cuts adopted in 1997, unlike those of 1981, were accompanied by offsetting expenditure reductions, so there was not as much of a reduction in federal revenue… therefore federal revenues did not increase” (Public Budgeting Systems, p. 74).

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”(Doc. 1) This was one of the issues that got Reagan to his presidency. He supported the conservative ideal of lowering taxes. Under his presidency, tax rates dropped.

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American’s enjoyed a pro-longed period of prosperity from World War II until the late 1960’s, which was built largely upon the power of American industrial production had run out of steam by the 1970s. The influx of spending on the Vietnam War also contributed to this demise of revenue. The economy began to become less and less powerful and adopted a new multitude of challenges which led the economy to go into a recession. A recession is a period of temporary economic decline during which trade and industrial activity are reduced. However, Ronald Reagan announced a recipe to attempt to fix the nation's economic troubles.

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During the era of the 1930’s, the United States grappled with a myriad of widespread economic issues. Following the Stock Market Crash of 1929, the United States economy was in shambles, with the loss of billions of dollars in revenue and the general destabilization of the United States economy. In light of the severe economic downturn, FDR stepped up to the presidency, advocating for a larger role of government intervention in an otherwise Laissez-Faire economic model. Half a century later, in 1981, Ronald Reagan assumed office. During this time period, the United States was in the midst of painfully slow economic progress, with this economic hardship being synonymous with terms such as “stagflation”.

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This economic program was planned to promote economic growth, but instead it brought upon more economic burden upon the lower urban social class (Foner 2017). Reagan’s plan to tax the wealthy less to improve the lives of the poor did not pan out well to

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Reagan had the tendency to focus only on the “big issues” while the members of his Cabinet handled other matters. I found it intriguing that Reagan spent his presidency practicing a “hands-off management style” (Broussard 111). Reagan would make an executive decision on a matter, while others would put in work gathering information and coming up with policy alternatives. Broussard points out that Reagan’s concern while in office was inflation and “although he did not actually slay the beast…he left it weaker, wounded and far less dangerous” (Broussard 125). However, he also notes that battling inflation resulted in a serious recession and “the worst economic downturn…since the Great Depression of the 1930s” (Broussard 125).

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The creation of this economic system also resulted in major draw-back of government assistance, and tax lessening's; it cut social welfare and federal government entitlement. Part of his plan, Reagan created one of the largest military spending programs known to history, earning nearly 1.5 trillion dollars mostly due to his being greatly anticommunist. A branch of this, the Strategic Defense Initiative, also received much support from this financial military aid plan. President Reagan also lived under the illusion that "supply side economics" could have a positive effect on the country; this theory stated that a reduction in taxes could improve many aspects of industry. However, by cutting taxes, this also cut many of the government funds; therefore, the government was forced to take out loans which led to our great nation being in very deep

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The United States of America is known to be the land of opportunity, and many presidents tried different kind of methods to change the US economy to the better. The Reganomics policy which is a policy by president Regan on how to change the course of the US economy. The Reganomics had good policies that made sense like reducing the growth of government spending which was a good point in order for the government to save its money. Reduce the marginal tax rates on income from both labor and capital which could help them pay less tax, and also reduce regulation which could benefit the people of the US, and also reduce inflation by controlling the growth of the money supply. This is an important fact because the growth of the money supply is very important.

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Unemployment rates began to increase. Over time, Reagan had increased taxes 11 times, mainly on the middle class. When Reagan had left office, he had tripled the national debt of United States. This had affected the United States and led to several issues later on. This is the reason Reaganomics had both aided some and destroyed others.

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President Reagan’s began his presidency with the understanding that there were growing concerns felt by the American people concerning the events that were taking place within our nation (Schultz, 2013). Also, he realized that family values and a free market were probably the two areas that were most important to the citizens. He started his presidential legacy by cutting taxes, decreasing funds for social programs and by increasing military resources. His thoughts were that by cutting taxes that the government 's revenue would increase, thus, ensuring they could pay their debt instead of the taxpayers. Although, the changes in military funding and social programs led to a drastic increase in the nation 's debt that even

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Many praised Reagan for his economics skills which earned the title “Reaganomics” that is still appreciated today. Reaganomics included the idea of the “trickle down effect”. When taxes are lower, the wealthy have more money to employ people who are out of work. Those newly employed people now have an income to purchase property and other goods, which helps the economy. When the economy is improving, the poor are at an advantage because there are increasingly greater job openings.

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Reagan stood firm because he was sure of the outcome; Reagan believed that the faltering Soviet economy persisted by high prices of oil exportation, gold and other commodities. Therefore, to end with inflation was not only vital to the health of the US economy, but also necessary to defeat communism. The economic achievements were the most important in the presidency of Ronald Reagan. When he assumed the presidential position, the US economy suffered from many problems, including slow growth, high inflation, rising unemployment and higher interest rates than ever before. Economists thought it would take decades to fix many problems and that the political cost of doing so was impossible for a democracy.

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Recession started in the United Kingdom and inflation there was 22 percent in 1980 There was recession in Canada And inflation rate there was more than 12 percent. Ronald Reagan didn’t wan’t Canada and the United Kingdom become America. On February 5, 1981, President Ronald Reagan

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Reaganomics lowered taxes in order to induce economic growth (History Channel, 2009). He believed that lowering taxes would increase income levels, which would then increase profits from taxes. Reagan reduced income taxes by 30% for both individuals and corporations in over three years. Although the tax cuts had some setbacks at first, the economy began to recover by 1983. Unemployment and inflation rates decreased dramatically, and the economy continued to grow throughout Reagan’s time as President of the United States.

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