Download Reaganomics

Reaganomics
By Michael Tylko
Ronald Reagan
Former Hollywood actor and
Republican governor of
California
Elected to the presidency in
1980
Promised return to old values to
reverse the economic problems
Believed the government was too
involved in the economy
Advocated for the deregulation
of our economic and financial
system
(1911-2004)
Pre-Reagan Economy
American economy was in its worst shape since the Great
Depression
After WWII, there was a period of prosperity built around the
supremacy of the American Industrial Production after
destruction in WWII.
After the European and Japanese economies rebounded,
America could not maintain control of the global markets
Pre-Reagan Economy
(Continued)
Loss of American manufacturing with a rapidly growing
workforce required the creation of several million new jobs
each year
As the Baby Boomer generation and immigrant workers
sought to enter the work force, labor markets experienced
increased strain
Before Reagan took office in 1981, the economy had been
battered by unsustainably high levels of government
spending and strong inflationary pressures which resulted
from the global energy crisis
Stagflation occurs when the economy isn't growing
but prices are, which is not a good situation for a
country to be in.
This happened to a great extent during the 1970s,
5 Goals of Economic Policy
1
2
3
Lower inflation
Reduce deficit
spending and
government debt
Decrease government
spending
4
Reduce unemployment
5
Raise Gross Domestic
Product
Reagan’s Plan
Cut taxes to corporations
and the wealthy
Lower taxes for all
Americans
Deregulate the financial
sector and the stock
market
Cut spending to
Trickle-Down Theory
Reagan believed in Supply-side economics and the
Trickle-down theory, both of which called for a
reduction of taxes on large corporations and the
wealthy.
This tax reduction would result in more corporate
savings and investment, creating more jobs and
producing more products, increasing the supply of
goods on the market, as well as the GDP.
Reagan’s Plan
Pushed to lower taxes on the rest of Americans
allowing for them a higher disposable income and
thus stimulating economic growth with a rise in
consumer spending.
Also hoped to incentivize Americans to work harder
and longer by allowing them a larger portion of their
total income.
Reagan’s Plan
Cut taxes to the American people and corporations to spur
economic growth.
These tax cuts to the American people significantly decrease the
flow of money into the United States Treasury. To compensate,
Reagan cut spending on social programs such as Welfare and
Medicare.
Realized that in the wake of Vietnam the United States had
neglected its military and advocated for an increase in defense
spending. Reagan almost doubled the defense budget, believing it
was necessary to win the Cold War.
Reagan’s Plan
Reagan argued that 50 years of misguided liberal
economic policies had exhausted the free market
system by straining it with heavy regulation and high
levels of government involvement
Promised to get the government off the backs of the
American people by deregulating the economy
Wanted to restore confidence in the American economy
He believed that economic and political freedom were
inseparable
He argued that heavy government involvement in the
market, through taxation and regulation, restricts
economic growth and endangers the individual
Outcomes
The Free Market policies enacted by Reagan
reversed the harsh economy from 1970s and
early 1980s.
Between 1970 and 1982 the Dow Jones Industrial
Average increased 14%. Between 1982 and 1987,
it jumped 150%.
Taxpayers reporting over $1 million in income
jumped from 4,400 in 1980 to 35,000 in 1987
Outcomes
With the creation of the 401k
tax-deferred retirement plan
more Americans participated in
investments on Wall Street,
allowing success to reach middle
class Americans as well
Unemployment significantly
declined
The percentage of households
that held assets in the stock
Inflation
When President Reagan entered office in 1981
inflation averaged 12.5% and when he left
office in 1989 inflation was reduced to 4.4%.
Gross Domestic Product
Under President Reagan’s policies the
average annual growth rate of the real GDP
from 1981 to 1989 was 2.57% per year.
Unemployment
When President Reagan entered office in
1981 the unemployment rate was 7.6%.
Unemployment peaked in 1982 at 9.7% and
Drawbacks
Reaganomics caused a significant increase in the
national debt. In 1981, the nation’s debt was $994
Billion and when Reagan left office in 1989 the debt
Drawbacks
The tax burden was shifted down the income scale
The wealthiest fifth of American households saw
their incomes increase by 14%, while the poorest
fifth of American households experienced a 24%
decrease in their income
The upper class began to control a higher
concentration of wealth as a result of deregulation
and corporate tax cuts
High paying blue-collar jobs became more
infrequent and rare
Bibliography
https://sites.google.com/site/theballadofronaldreagan/reaganomics
http://economics.about.com/od/useconomichistory/a/economy_1980s.htm
http://www.newmainetimes.org/articles/2012/07/30/horses-and-sparrowsmyth-trickle-down-economics/
http://elcoushistory.tripod.com/economics1970.html
http://www.financial-planning-techniques.com/Inflation-and-Stagflation.html
http://www.shmoop.com/reagan-era/economy.html
Image Citations
http://ows.edb.utexas.edu/sites/default/files/users/jal3347/reaganomics.jpg
http://www.newmainetimes.org/media/img/blog/2012/07/30/
trickle_down_1.jpg.580x435_q85.jpg
http://www.firstprinciplesjournal.com/images/article/reagan_tax2.jpg
http://teacheru.us/wp-content/uploads/2012/07/Reagan.jpg
http://image.patriotpost.us/2010-03-22-brief-cartoon.jpg
http://thinkprogress.org/wp-content/uploads/2008/10/debt2.gif
http://donmillereducation.com/pivotpoint/wp-content/uploads/
2010/07/401k.jpg
http://www.jonelyn.com/wp-content/uploads/2013/03/how-to-be-listed-ondow-jones-industrial-average.jpg