Ronald Reagan: Difference between revisions

==="Reaganomics" and the economy===

{{Main|Reaganomics}}

 

====Taxation====

Reagan implemented [[neoliberal]] policies based on [[supply-side economics]], advocating a ''[[laissez-faire]]'' philosophy<ref>{{cite book |last=Gerstle|first=Gary|author-link=Gary Gerstle|date=2022 |title=The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era|url=https://global.oup.com/academic/product/the-rise-and-fall-of-the-neoliberal-order-9780197519646?cc=us&lang=en&|location= |publisher=[[Oxford University Press]]|pages=106–108, 121–128|isbn=978-0197519646}}</ref><ref>{{Cite book|author=Karaagac, John|title=Ronald Reagan and Conservative Reformism|url=https://books.google.com/books?id=ZFhGnjKqjgAC&pg=PA113 |isbn=978-0-7391-0296-1|publisher=Lexington Books|year=2000|page=113}}</ref> and seeking to stimulate the economy with large, across-the-board tax cuts.<ref name="Cannon99">Cannon & Beschloss (2001) p. 99.</ref><ref>Hayward, pp.&nbsp;146–148.</ref> He signed the [[Economic Recovery Tax Act of 1981]],<ref>{{cite web|last=Mitchell|first=Daniel J.|url=http://www.heritage.org/Research/Taxes/BG1086.cfm|title=The Historical Lessons of Lower Tax Rates|publisher=The Heritage Foundation|date=July 19, 1996|access-date=May 22, 2007|archive-url=https://web.archive.org/web/20070530071923/http://www.heritage.org/Research/Taxes/BG1086.cfm|archive-date=May 30, 2007}}</ref> which significantly lowered federal [[income tax in the United States|income tax rates]] and required exemptions and brackets to be indexed for inflation starting in 1985.<ref name="The Tax Decade, Eugene Steuerle, Urban Institute, 1992, page 42">{{cite book |title=The Tax Decade: How Taxes Came to Dominate the Public Agenda |first=C. Eugene |last=Steuerle |location=Washington D.C. |publisher=Urban Institute Press |year=1992 |chapter-url=https://books.google.com/books?id=zxMl-rQNkosC&pg=PA42 |chapter=Chapter 3: The Early Reagan Era |page=42 |isbn=9780877665236 }}</ref> The [[Tax Reform Act of 1986]] simplified the tax code by reducing the number of tax brackets to four and slashing several tax breaks.<ref>{{cite book|last1=Brownlee|first1=Elliot|last2=Graham|first2=Hugh Davis|title=The Reagan Presidency: Pragmatic Conservatism & Its Legacies|date=2003|publisher=University of Kansas Press|location=Lawrence, Kansas|pages=172–173}}</ref><ref>{{cite book|last1=Steuerle|first1=C. Eugene|title=The Tax Decade: How Taxes Came to Dominate the Public Agenda|date=1992|publisher=The Urban Institute Press|location=Washington D.C.|isbn=978-0-87766-523-6|page=[https://archive.org/details/taxdecadehowtaxe0000steu/page/122 122]|url=https://archive.org/details/taxdecadehowtaxe0000steu/page/122}}</ref> Citing the economic theories of [[Arthur Laffer]], Reagan promoted the proposed tax cuts as potentially stimulating the economy enough to expand the tax base, offsetting the revenue loss due to reduced rates of taxation, a theory that entered political discussion as the [[Laffer curve]].<ref name="Levy Encylopedia">{{cite book|author=Peter B. Levy|title=Encyclopedia of the Reagan-Bush Years|url=https://books.google.com/books?id=7veohk0fkLYC&pg=PA305|year=1996|publisher=ABC-CLIO|pages=305–306|isbn=9780313290183}}</ref> Reagan's policies proposed that economic growth would occur when marginal tax rates were low enough to spur investment, which would then lead to higher employment and wages. Critics labeled this "[[trickle-down economics]]", the belief that tax policies that benefit the wealthy will spread to the poor.<ref>{{Cite news|url=https://www.pbs.org/newshour/bb/economy/jan-june04/reagan_6-10-04.html|date=June 10, 2004|title=Reaganomics|access-date=August 21, 2007|publisher=PBS|archive-url=https://web.archive.org/web/20071011205531/http://pbs.org/newshour/bb/economy/jan-june04/reagan_6-10-04.html|archive-date=October 11, 2007}}</ref> Conversely, [[Milton Friedman]] and [[Robert Mundell]] argued that Reagan's tax policies invigorated America's economy and contributed to the economic boom of the 1990s.<ref name="Reagan's Economic Legacy">{{Cite news|url=http://www.businessweek.com/magazine/content/04_25/b3888032_mz011.htm|title=Reagan's Economic Legacy|access-date=July 1, 2007|work=Business Week|date=June 21, 2004|archive-url=https://web.archive.org/web/20070608222134/http://www.businessweek.com/magazine/content/04_25/b3888032_mz011.htm|archive-date=June 8, 2007}}</ref>

 

 

====Inflation and unemployment====

Reagan took office in the midst of [[stagflation]].<ref>Brands, pp. 221–222</ref> The economy briefly experienced growth early in his first year in office before it plunged into a recession in July 1981.<ref>Rossinow, pp. 90–91</ref> [[Federal Reserve chairman]] [[Paul Volcker]] sought to fight inflation by pursuing a "tight money" policy of high interest rates<ref name="brands317319"/> to restrict lending and investment, reduce inflation, raise unemployment and temporarily reduce economic growth.<ref>Rossinow, pp. 88–90</ref> Unemployment reached a high of nearly 11 percent in 1982.<ref name="brands317319">Brands, pp. 317–319</ref> That same year, the United States began its then-longest peacetime expansion,<ref name="Gardner">{{cite journal |last1=Gardner |first1=Jennifer M. |year=1994 |title=The 1990-1991 Recession: How Bad was the Labor Market? |journal=Monthly Labor Review |volume=117 |issue=6 |pages=3–11 |publisher=Bureau of Labor Statistics |url=http://www.bls.gov/opub/mlr/1994/06/art1full.pdf |access-date=6 April 2011 }}</ref><ref name="Walsh">{{Cite journal | title = What Caused the 1990–1991 Recession | author = Carl E. Walsh | publisher = [[Federal Reserve Bank of San Francisco]] | url = http://www.frbsf.org/publications/economics/review/1993/93-2_34-48.pdf | journal = Economic Review | year = 1993 | issue = 2 }}</ref> emerging from the recession the next year,<ref name="Brands, pp. 452-453">Brands, pp. 452–453</ref> but not all shared equally in the economic recovery, and [[economic inequality]] and the number of [[Homelessness in the United States|homeless individuals]] both increased during the 1980s.<ref>Patterson, pp. 166–167</ref><ref>Rossinow, p. 145</ref> Fearful of damaging confidence in the economic recovery, Reagan nominated Volcker to a second term in 1983.<ref name="brands668671">Brands, pp. 668–671</ref> Inflation dropped to approximately 3.5 percent in 1985, while the unemployment rate fell to about 5 percent in 1988.<ref>Patterson, pp. 162-163</ref> In 1987, Reagan appointed [[Alan Greenspan]] to succeed Volcker. Greenspan raised interest rates in another attempt to curb inflation, setting off the [[1987 stock market crash]] although the markets recovered in the following weeks.<ref name="brands668671"/>