Reagan's economic policies

Question 1

Reagan’s aims (4)

Answer 1

-Tax cuts to encourage people to work harder and buy more
-Reduce the size and role of government
-Deregulation to allow capitalism to flourish
-Build up America’s Cold War defences

Question 2

What did Reagan’s Program for Economic Recovery set out (4)

Answer 2

-Cutting the federal deficit
-Personal and business tax reductions
-Deregulation of industry and government
-Planned control of the money supply

Question 3

What were Reagan’s economic legislation (5)

Answer 3

-ERTA
-ORA
-TEFRA
-COBRA
-Tax Reform Act

Question 4

What legislation was passed in 1981 (2)

Answer 4

ERTA
-ORA

Question 5

What legislation was passed in 1982?

Answer 5

TEFRA

Question 6

What legislation was passed in 1986 (2)

Answer 6

-COBRA
-Tax Reform Act

Question 7

What was ERTA (3)

Answer 7

Economic Recovery Tax Act

-cuts marginal income tax by 23% over 3 years
-Links tax bands to inflation
-Highest income band tax rate fell from 70% to 50%

Question 8

What was ORA?

Answer 8

Omnibus Reconciliation Act
-Variety of cuts that would take $35 billion out of federal spending
(initial bill proposed $45 billion worth of cuts)

Question 9

What was TEFRA (3)

Answer 9

-Tax Equity and Financial Responsibility Act

-Changes to budget in response to economic situation
-Tightened tax rules, especially for businesses
-Temporarily raises taxes on cigarettes and the telephone service

Question 10

What was COBRA (3)

Answer 10

-Consolidated Omnibus Budget Reconciliation Act

-Revises the budget in many minor ways to save fed. government money
-Moves costs to state or private bodies
-SIGNIFICANT: shifts the responsibility for many healthcare payments from federal government to employer

Question 11

Tax Reform Act (4)

Answer 11

• Reduces the top tax rate from 50% to 28%
• Reduces the number of tax brackets
• Supposed to close a lot of tax evasion loopholes
• Ease pressure on poorer families

Question 12

Reagan’s tax cuts INTENTIONS (6)

Answer 12

-stop inflation
-reduce unemployment
-increase personal wealth
-increase productivity
-encourage personal saving and investing
-Encourage businesses to produce more

Question 13

What did Reagan do to try stop inflation?

Answer 13

-Put pressure on the Federal Reserve Board to put tighter restrictions on the money supply
AND didn’t ask to lift these restrictions when unemployment rose

Question 14

How did restricting the money supply effect industries (3)

Answer 14

-Led to a sharp rise in interest rates

-Hurt industries that had to buy supplies on credit (car industry or farming)

-and industries that had loans with a long pay-back period e.g construction

Question 15

Unemployment statistics (2)

Answer 15

1979- 7.2%

1988- 5.5%

Question 16

Inflation statistics (2)

Answer 16

1979- 13.5%

1983- 3.2%

Question 17

Counter analysis for increased employment (3)

Answer 17

Percentage of people in part-time or temporary work had risen
-These people were employed but not earning at their full capacity,
-Not paid in yearly salary rates and insurance and other extra payments were lower or non-existent

Question 18

Budget deficit statistics (2)

Answer 18

1980 - $60 billion
1983- $208 billion

Question 19

What did Reagan do as soon as he became president (4)

Answer 19

• Federal government hiring freeze
• Told White House staff to cut travel expenses by 15%
• Used Executive orders to set up advisory groups how to cut costs
• BUT financial savings were small

Question 20

What did the Federal Reserve Board raise interest rates to?

Answer 20

• 21.5%
• 1981-82 saw a deep recession in part due to this

Question 21

By 1982 what had unemployment risen to?

Answer 21

10.8%

Question 22

National debt from 1981-84 and budget

Answer 22

• went from $800 billion to $1.5 trillion
• a budget that consistently ran a deficit of 5% every year up to 1996

Question 23

Growth rate 1983-84

Answer 23

5-7%

Question 24

Public perception of Reagan’s policies

Answer 24

The electoral campaigns of Reagan in 1984 and Bush in 1988 played on economic prosperity

Question 25

What may have led to later booms

Answer 25

Federal deregulation of markets and lending can be argued to have contributed to later booms, e.g. under Clinton to 1996.

Question 26

What did Bush do in 1990

Answer 26

Increased taxes despite promising not to