Transcript Reaganomics
Reaganomics Economic Policies of the 1980s Issues at the Time • • • • • Inflation Unemployment Stagflation Oil Crisis Iranian Revolution Ronald Reagan (1980) http://www.youtube.com/watch?v=loBe0WXtts8 AD/AS Stagflation Reaganomics Control $ supply to reduce inflation Reduce govt. Regulation of Economy Reduce Marginal Tax Rates 1. Reduce Government Spending 2. Reduce Tax Rates on Capital & Labor 3. Reduce Government Regulation 4. Control the Money Supply to End Inflation Reduce government Spending • Four Pillars Why & What • Campaign Promises 1. Lower Taxes 2. Smaller Government • Reduce Income Taxes: – – Top Down Cuts Benefited the Wealthiest Most • Deficit Spending: – 8 straight years of deficit spending The Economy Grows • Income Taxes dropped from 70% to 28% in 7 years (1981-1988) • Unemployment reached 10.7% in 1982, but lowered as the economy improved • Inflation decreased during the 1980s • Jobs were created as the economy continued to grow Trickle Down Economics • Massive tax cuts for the top tax bracket • Drastic increase in defense spending (“Window of Vulnerability” & Star Wars) • In order to function, someone needed to spend (either the wealthy or the government) • Vice President George Bush called it “voodoo economics” Effects • Wealthiest Americans became wealthier • 8 years of Deficit Spending • Reduced Tax Revenue • Budget Deficit • Trade Deficit (enter China) • National Debt tripled during Reagan’s 8 years (from 1 to 3 trillion dollars) • No reduction in size of government (afraid to cut Social Security & Medicare) Reagan’s Achievements • • • • • Improved Economy Lowered Unemployment Lowered Inflation Interest Rates Decreased Average Household Income rose by $4000 per year