To what extent did Ronald Reagan’s economic strategy benefit the USA?
Ronald Reagan was the President who was going to get the USA back on track. Involvement in foreign wars and political scandal in the years before his election had left the country in need of stability.
Serving two terms from 1981 to 1989, Reagan was helped into the White House by Democratic predecessor Jimmy Carter and his handling of US involvement in the Iran-Iraq War during 1980. In short, public opinion on Carter was low.
When he moved into the Oval Office, Reagan brought with him a brand of economic strategy rarely seen before. It came to be known as ‘Reaganomics’.
From the early days of his Presidency, Reagan had been a popular resident of the White House. An assassination attempt just 69 days into his term shocked the public, but he received a great deal of support with the way he amicably dealt with the situation. He took this determination into the economic recovery of the USA.
Reaganomics moved in the complete opposite direction to economic strategies carried out by previous Presidents. Whilst Lyndon Johnson and Richard Nixon increased the role of government in the economy, Reagan sought to reduce it. He pledged to make cuts in four areas; the growth of government spending, both income taxes and capital gains, taxes regulations on businesses and the expansion of the money supply.
Arguably the key theory in understanding Reaganomics and seeing how it worked is Supply-side economics, otherwise known as Trickle-down economics. This concept, in a nutshell, is that when companies get more cash they should employ more workers to expand their businesses. It also says that income tax cuts give workers more incentive to work, increasing the supply of labour.
Reagan created this economic structure to tackle rising inflation in America. The country he adopted was troubled with record-high taxes. Reaganomics confronted and reduced these. By seeing that profitable business would create more jobs, levels of unemployment dropped. Then, with taxes cut, workers were more encouraged to work.
His efforts in Congress allowed Reagan to push through legislation to stimulate economic growth, curb inflation, increase employment, and strengthen national defence. Strong public support from these policies saw Reagan, and his Vice President George Bush, seal a comprehensive second term in 1985.
The following year, Reaganomics allowed the President to obtain an overhaul of the income tax code, which eliminated many deductions and exempted millions of people with low incomes.
By the end of Reagan’s second term, America was enjoying its longest recorded period of peacetime prosperity without recession or depression. But to what extent did Reaganomics work?
Reagan followed through on his economic policies, but not as much as people hoped. Whilst the tax cuts helped to end the recession, government spending almost tripled from $99 trillion in 1981 to over $2.8 trillion by 1989. This was mainly money shifted from domestic programmes and moved towards military spending.
The Reagan Administration will be remembered for many key moments. In a timeline which includes the descaling of the Cold War with the Soviet Union, Reaganomics helped to tackle high taxes and unemployment in a way never before seen in peacetime. He may have failed to completely tick all of the boxes during his eight years as President, but his strategy accomplished more than many of his predecessors and most of those who have followed him into the White House.