Download Reaganomics

Reaganomics
Economic Policies of the 1980s
Issues at the Time
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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:
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Top Down Cuts
Benefited the Wealthiest Most
• Deficit Spending:
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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
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Improved Economy
Lowered Unemployment
Lowered Inflation
Interest Rates Decreased
Average Household Income rose by
$4000 per year