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Reagan economic policy - Coggle Diagram
Reagan economic policy
Aims
- Revive the economy by decreasing taxes which would encourage people to work harder and buy more
- Reduce the size and role of the government by cutting public spending and minimising the welfare state
- Deregulate the state to allow capitalism to monopolise businesses
Reaganomics
- Cutting the federal defecit: the budget bill claimed to reduce the federal deficit from 22% of GNP in 1981 to 19% in 1986
- Deregulation
- Control of money supply- keep inflation down when expanding the economy
- Omnibus Reconciliation Act 1981- $35 billion cuts on government spending and cut personal tax from 30% to 25%
- Economic Recovery Tax Act 1981- cut marginal income tax by 23% over 3 years and cut tax for businesses so they could revise their depreciation costs
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Reducing federal defecit
- 1980 deficit was $59bn, in 1983 it reached $208bn
- By 1987, Human Resources took 22% of government spending and defence took 28%
- Actually increased the deficit rather than decreasing it
Savings and loans crisis
- 1983, banks were no longer subject to regulations so they could set their own interests
- Banks began to compete by making risky investments by lending at low rates and offering high savings rates
- $150bn lost
Impact on individuals
- In 1988, 1.3m people were millionaires by assets, suggesting policies benefitted business owners
- Lower and middle class did not benefit due to the fact their wages remained the same- lowest tax band only fell by 3%
Economic legacy: Bush
- Large gov deficit and national debt
- Didn't want to raise taxes but had to in 1990 leading to his defeat in 1992
- Forced to make cuts in expenditure- $492bn military cuts
Economic legacy: Clinton
- Inherited a massive deficit- even bigger than Bush's
- Lowered taxes for 15m families
- Cuts in welfare
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