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Top Down Economics: A Comparative Analysis Of Roosevelt's WPA And Reagans

2137 Words9 Pages

Bottom Up verses Top Down Economics: A Comparative Analysis of the causes, interventions and effects of FDR’s WPA and Reagans Trickle Down Economics

Claire Mortilla, Nicole Mair and Roosevelt Ward

4/1/2015

Western Connecticut State University

March 30, 2015

Bottom Up verses Top Down Economics: A Comparative Analysis of the causes, interventions and effects of FDR’s WPA and Reagans Trickle Down Economics
I. Introduction
What were the Economic conditions that required such drastic interventions?
This is a comparative and descriptive analysis of two administrations, the Roosevelt and Reagan administrations, which faced dire economic situations. While the circumstances of both economies were similar, each administration had opposite …show more content…

The country was reeling from the stock market crash of 1929. Industrial production was at an all-time low, and bank failures were extreme. In fact, when Franklin Delano Roosevelt (FDR) took office, nearly all banks were closed. FDR declared a bank holiday, which closed all financial institutions for four days. In addition to the banking crisis, farms were failing miserably. This was due to a cycle of falling prices and increases in production. This created surpluses that resulted in a “market glut” which causes prices to fall even further.
Fast-forward to 1980, when Ronald Reagan entered the White House. The unemployment rate was ten-percent (10.8%), inflation was in the double digit range and the Consumer Price Index (CPI) rose from eleven-percent (11.3%) in 1979 to thirteen-percent (13.5%) in 1980, a twenty-five (25%) increase! The prime interest rate was 21.5%. Real family median income declined by 10% by 1982, and that caused the poverty rate to rise to 15.2%. The Dow Jones industrial average lost 70% of its real …show more content…

It was, in the end considered to be quite successful, rocky and risky though.
Reagan’s interventions realized the following: real GDP per working age adult rose from 0.8 % during the Carter Administration to 1.8% during Reagan’s administration. Productivity growth: output per hour in the business sector increased at at 1.4% rate during Reagan’s term in office. Most impressive is that productivity in the manufacturing sector increased at a rate of 3.8% annually, which was a record for a peacetime economy. The rate of new businesses increased sharply.
Unemployment declined from 7% to 4.2% in 1988. Inflation declined from 10.4% in 1980 to 4.2% in 1988. This combination of conditions proved that there is no long run trade-off between the unemployment rate and the inflation rate; the Phillips Curve

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