CandleFocus Glossary Editor
Reaganomics, named after the 40th US President Ronald Reagan, is the set of economic policies established by his administration with the goal of stimulating the US economy. Having campaigned on a fiscal conservative platform, President Reagan promised to limit government spending, cut taxes and reduce regulations. He argued that cutting taxes and regulations would create a free market environment, unleash the power of entrepreneurs, spur investments, and increase jobs and wages. At the time, many economists believed that budget deficits, high taxes, and overregulation had slowed economic growth in the US, making it difficult for businesses to grow and for people to find work.
Reaganomics was heavily influenced by the trickle-down theory and supply-side economics. The trickle-down theory argued that reduced taxes for the wealthy would lead to increased investments, resulting in job growth and higher wages for the working class. Supply-side economics suggested that reducing taxes would incentivize businesses to increase productive activities and profits, leading to higher wages and employment.
The cornerstone of Reaganomics was a set of tax cuts by which the marginal tax rate was decreased from 70% to 25%. President Reagan also sought to decrease government spending on social programs such as welfare, food stamps, and housing assistance. In addition, he increased military spending and did away with several regulations that were impeding business growth.
The impacts of Reaganomics can be seen in the positive economic results it yielded. Between 1982 and 1989, US tax revenues increased by 40%, inflation decreased by approximately 40%, and the unemployment rate dropped by more than 50%. While these effects were initially cushioned by an increase in government deficits, the economic growth of Reaganomics later helped to reduce the deficit.
While there is still debate about the effectiveness of Reaganomics, it is generally viewed as having improved the overall health of the US economy. Reaganomics has been credited with increasing economic growth, decreasing unemployment and inflation, and boosting employment. In addition, Reaganomics was crucial in making the US a dominant actor in global affairs and a leader on the world stage.
Reaganomics was heavily influenced by the trickle-down theory and supply-side economics. The trickle-down theory argued that reduced taxes for the wealthy would lead to increased investments, resulting in job growth and higher wages for the working class. Supply-side economics suggested that reducing taxes would incentivize businesses to increase productive activities and profits, leading to higher wages and employment.
The cornerstone of Reaganomics was a set of tax cuts by which the marginal tax rate was decreased from 70% to 25%. President Reagan also sought to decrease government spending on social programs such as welfare, food stamps, and housing assistance. In addition, he increased military spending and did away with several regulations that were impeding business growth.
The impacts of Reaganomics can be seen in the positive economic results it yielded. Between 1982 and 1989, US tax revenues increased by 40%, inflation decreased by approximately 40%, and the unemployment rate dropped by more than 50%. While these effects were initially cushioned by an increase in government deficits, the economic growth of Reaganomics later helped to reduce the deficit.
While there is still debate about the effectiveness of Reaganomics, it is generally viewed as having improved the overall health of the US economy. Reaganomics has been credited with increasing economic growth, decreasing unemployment and inflation, and boosting employment. In addition, Reaganomics was crucial in making the US a dominant actor in global affairs and a leader on the world stage.