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Reaganomics

Definition

Reaganomics refers to the economic policies promoted by U.S. President Ronald Reagan during the 1980s. These policies are commonly associated with supply-side economics, referred to as trickle-down economics or voodoo economics by political opponents, and free-market economics by political advocates.

What is 'Reaganomics'

Reaganomics is a popular term used to refer to the economic policies of Ronald Reagan, the 40th U.S. president (1981–1989), which called for widespread tax cuts, decreased social spending, increased military spending and the deregulation of domestic markets. These economic policies were introduced in response to a prolonged period of economic stagflation that began under President Gerald Ford in 1976.

Explaining 'Reaganomics'

The term Reaganomics was used by both supporters and detractors of Reagan's policies. Reaganomics was partially based on the principles of supply-side economics and the trickle-down theory. These theories hold the view that decreases in taxes, especially for corporations, offer the best way to stimulate economic growth. The idea is if the expenses of corporations are reduced, the savings "trickle down" to the rest of the economy, spurring growth. Prior to becoming Reagan's vice president, George H. Bush coined the term "voodoo economics" as a proposed synonym for Reaganomics.

The Objectives of Reaganomics

As Reagan began his first term in office, the country had been suffering through several years of stagflation, in which high inflation was accompanied by high unemployment. To fight high inflation, the Federal Reserve Board had been increasing the short-term interest rate, which was near its peak in 1981. Reagan proposed a four-pronged economic policy that was intended to reduce inflation and stimulate economic and job growth: 1) reduce government spending on domestic programs; 2) reduce taxes for individuals, businesses and investments; 3) reduce the burden of regulations on business; and 4) support slower money growth in the economy.

Reaganomics in Action

Although Reagan reduced domestic spending, it was more than offset by increased military spending, creating a net deficit throughout his two terms. The top marginal tax rate on individual income was slashed to 28% from 70%, and the corporate tax rate was reduced to 34% from 48%. Reagan continued with the reduction of economic regulation that began under President Jimmy Carter and eliminated price controls on oil and natural gas, long distance telephone services and cable television. In his second term, Reagan supported a monetary policy that stabilized the U.S. dollar against foreign currencies.


Further Reading


Where Reaganomics Works
www.jstor.org [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …

What Everyone" Knows" About ReaganomicsWhat Everyone" Knows" About Reaganomics
search.proquest.com [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …

The costs of ReaganomicsThe costs of Reaganomics
www.jstor.org [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …

From Boumedienomics to Reaganomics: Algeria, OPEC, and the international struggle for economic equalityFrom Boumedienomics to Reaganomics: Algeria, OPEC, and the international struggle for economic equality
muse.jhu.edu [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …

Reaganomics, Saving, and the Casino EffectReaganomics, Saving, and the Casino Effect
link.springer.com [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …

After Reaganomics and Thatcherism, what? From Keynesian demand management via supply-side economics to corporate state planning and 1984After Reaganomics and Thatcherism, what? From Keynesian demand management via supply-side economics to corporate state planning and 1984
www.jstor.org [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …

The Conservative Critics of ReaganomicsThe Conservative Critics of Reaganomics
search.proquest.com [PDF]
… The administra- tion, it is argued, has "relegated international economics to a lower priority than … Brown and Co., 1983); and C. Fred Bergsten, "The Costs of Reaganomics, " FOREIGN POLICY … reflected the domesticist co viction that freer trade is the chief economic rationale for …



Q&A About Reaganomics


Did this work as planned or not as planned?

It worked as planned because it helped bring down inflation rates but created a large deficit over time due to increased military spending.

What action did President Reagan take that reduced government spending on domestic programs?

He reduced government spending on domestic programs by cutting taxes for individuals, businesses and investments.

What is the definition of Reaganomics?

Reaganomics refers to the economic policies of Ronald Reagan, which called for widespread tax cuts, decreased social spending, increased military spending and the deregulation of domestic markets.

Why did he do this?

To reduce inflationary pressures in the economy caused by high levels of government expenditures.

Was there anything else done with taxes under President Regan's administration that you can remember?

Yes, capital gains taxes were also slashed dramatically during his tenure in office (from 40% to 20%).

How did President Reagan's economic policy plan to reduce inflation and stimulate economic growth?

He proposed a four-pronged economic policy that was intended to reduce inflation and stimulate economic growth.

What happened with tax rates under President Regan's administration?

The top marginal tax rate on individual income was slashed from 70% to 28%, while corporate tax rates were reduced from 48% to 34%.

How much money did he cut from domestic programs?

He cut more than $100 billion from domestic programs during his first term alone.

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