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The effect of Reagan's economic policies - Coggle Diagram
The effect of Reagan's economic policies
Reagan's aims in his 1980 campaign :checkered_flag:
tax cuts to revive economy: encourage people to work harder and buy more
reduce size and role of government: cut $40bil from proposed fed budget of $740bil and minimise or eliminate welfare state arrangements :cry:
deregulation of state and fed gov would liberate business and allow for capitalism to florish- more prosperous and enable them to pay more taxes to reduce federal deficit :smiley:
would build up america's cold war defences- expensive :frowning_face:
economic philosophy known as reaganomics, emphasised low taxes and deregulation was thought to stimulate the economy
Reaganites emphasised how low unemployment since Great Depression pushed up public expenditure and led to public deficits and stagflation- slow economic growth with high unemploymeny with rising prices. also favoured supply-side economics which emphasised economic growth
Reagan's actions :unlock:
In 1981 he pursuaded congress to pass a budget reasonably close to what he wanted
cuts were made in funding 212 federal programmes, most aided the working poor (food stamps), student loans and child nutrition programmes
also cuts in individual and corporate taxes in the economic recovery tax act
Democrat house speaker Tip O'Neill said reagan implemented the greatest increase in defense spending in american history and the greatest cutback in domestic programs and the largest tax cuts [$280 bil] the country has ever seen
Reagan came to the presidency knowing exactly what he wanted to do about the economy and his administration and was totally focused. his administration handled congress welll
the reagan administration manouved the length of congressional debates, successfully convinced swing voters in the house and increased pressure on members of congress by targeting their discricts with radio and TV ads- reagan had good relationship with media
Reagan was willing to compromise with congress; didn't get all tax cuts he wanted but enough. his role in passage of the budget owed much to his talents as the great communicator
Reagan's polling was high after an unsuccessful assasination attempt
reagan appeared regularly and impressively on TV to promote his economic policy. 2 days before congress was due to vote he appeared on TV seeking voter support to promote his economic policy- so much support that some members of congress feared electoral consequences if they didnt support him
imposed his policy preferences in a democrat house
deregulation, balencing the budget and tax reform :recycle:
Reagan saw deregulation as a way to cut expenditure, decrease the size of big gov and alllowed unfettered capitalism to florish
his administration cut back staff in regulatory agencies; averaged 29% overall and included 38% in the consumer product saftey commission
Regan used his power of appointment to ensure that bodies like the occupational saftey and health administration made decisons in favour of business and against labour
when Reagan was informed that the fund for social security payments would be bankrupt by 2000, immediately suggested cuts in benefits for early retirees- led to congressional outcry. He appointed a bipartisan investigory commisson- in 1982 recommended raising the retirement age from 65 to 67 by 2027, taxing social security benefits paid to the wealthy and delaying cost of living increases-1983 congress passed these
his increased defense expenditure from $157.5 billion in 1981 to $303.6 bil in 1989 caused the federal deficit budget to soar and congress pass the balenced budget and emergency deficits control act ( dec 1985) which enforced spending cuts
Reagan considered tax coding excessively complex, unfair and full of loopholes: helped industries like oil, gas, real estate and agriculure and the rich at the extent of others. people were scared tax reform would lead to increases
origins of major tax reform legislation of 1986 was party of 1982 democrat bill- in may 1985 reagan sent his version of that bill to congress, some republicans were horrified but others thought it would win the party new voters and liked clause that very wealthy couldn't be taxed higher than 50%
Economic Growth :tada:
first 2 years unemployment was 10% and inflation in double figures. as businesses crashed and the number of homless increased, reagan stayed true to supply-side economics and said prosperity would return
prosperity did not happen because of Reagan supply side economics but rather because of the tight money polices if carter appointee Paul Volker who reagan supported at the federal reserve board and external factors like new oil sources making prices of oil fall. Also reagans defense spending brought US prosperity in defense and aerospace industries such as west coast
in carter's last year inflation was 13.5% and unemployment 7% but inflation down to 4.7% and unemployment 5.2% (+7mil new jobs) by reagans last year
after recession in early reagan us experiences longest ever economic growth during peacetime
Economic Problems :warning:
his tax rises that followed tax cuts hit the less wealthy harder and his cuts in federal aid programs hurt single mothers and their children
avg family income fell, recovered in 1987 but only to 1973 levels- only half of americans maintained their standard of living usually because both parents worked
he opposed minium wage and was hostile to labour unions- 12,000 air-traffic controllers fired as they ignored no strike rule for fed employees in their contracts and called the military to do their jobs until trained replacements
Conservative appointments to the judiciary made it harder for women, ethnic minorities, elderly and disabled to sue employeers for employment discrimination
deregulation decreased worker saftey measures and occupational safety and health administration invaribly decided for business and against labour
reagan failed to balence fed budget because of tax cuts and defense expenditure- fed expenditure increased from $699.1bil in 80 to $859.3bil in 87, budget defict 5x his predecessors
financed tax cuts with money borrowed from germany and japan; national debt tripled to more than $2.6tril
can be argued congress and electorate responsible for fed deficit budget; congress determined to defend domestic programs and consumer prefer to buy cheap imported goods. administration attempt to reduce trade deficit by persuading japanese manufactures to limit exports to us and put a 25% tarriff on imported goods and 3% on imported cars but trade deficit continue to ride from $38 bil to $150+ bil per year in 2nd half of decade