Reagan's economic policies Flashcards
Reagan’s aims (4)
-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
What did Reagan’s Program for Economic Recovery set out (4)
-Cutting the federal deficit
-Personal and business tax reductions
-Deregulation of industry and government
-Planned control of the money supply
What were Reagan’s economic legislation (5)
-ERTA
-ORA
-TEFRA
-COBRA
-Tax Reform Act
What legislation was passed in 1981 (2)
ERTA
-ORA
What legislation was passed in 1982?
TEFRA
What legislation was passed in 1986 (2)
-COBRA
-Tax Reform Act
What was ERTA (3)
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%
What was ORA?
Omnibus Reconciliation Act
-Variety of cuts that would take $35 billion out of federal spending
(initial bill proposed $45 billion worth of cuts)
What was TEFRA (3)
-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
What was COBRA (3)
-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
Tax Reform Act (4)
- 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
Reagan’s tax cuts INTENTIONS (6)
-stop inflation
-reduce unemployment
-increase personal wealth
-increase productivity
-encourage personal saving and investing
-Encourage businesses to produce more
What did Reagan do to try stop inflation?
-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
How did restricting the money supply effect industries (3)
-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
Unemployment statistics (2)
1979- 7.2%
1988- 5.5%
Inflation statistics (2)
1979- 13.5%
1983- 3.2%
Counter analysis for increased employment (3)
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
Budget deficit statistics (2)
1980 - $60 billion
1983- $208 billion
What did Reagan do as soon as he became president (4)
- 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
What did the Federal Reserve Board raise interest rates to?
- 21.5%
- 1981-82 saw a deep recession in part due to this
By 1982 what had unemployment risen to?
10.8%
National debt from 1981-84 and budget
- went from $800 billion to $1.5 trillion
- a budget that consistently ran a deficit of 5% every year up to 1996
Growth rate 1983-84
5-7%
Public perception of Reagan’s policies
The electoral campaigns of Reagan in 1984 and Bush in 1988 played on economic prosperity
What may have led to later booms
Federal deregulation of markets and lending can be argued to have contributed to later booms, e.g. under Clinton to 1996.
What did Bush do in 1990
Increased taxes despite promising not to
