Reaganomics Flashcards
What problems did Reagan initially face economically when he came into power? (2)
- Roosevelt’s New Deal had increased federal control and responsibility and letting the budget go far into deficit as was needed
- Later administrations felt obliged to keep up federal involvement in social welfare and funded it with higher taxes and federal borrowing
What theory was Reagan drawn to?
Supply-side theory
Supply-side theory
- Argues that the economy isn’t driven by consumer demand but by keeping up production and encourage saving and investment.
- Believe restraints on government regulation, high taxes and strong unions should be removed
- ‘Trickle down theory’
‘Trickle Down Theory’
What did Reagan do in the first 3 days of his presidency? (4)
- Sacked many White House staff
- Put a federal government hiring freeze in place
- Put a freeze on office furnishings
- Cut travel expenses by 15%
By cutting taxes and controlling money supply. Reagan was trying to: (7)
- Stop inflation
- Reduce unemployment
- Increase personal wealth
- Increase productivity
- Encouraged personal saving and investing
- Cut federal spending
- Reduce the federal deficit
How many federal programmes’ funding was cut?
212 (Most of which were welfare)
In Senate there was a …
Republican majority
In House of Representatives there was …
Almost a republican majority
How did the Reagan’s failed assassination attempt benefit him?
- Increased his popularity as people felt sympathetic towards him
- Shown as tough and determined as many doubted his age (69)
What did ERTA (Economy Recovery Tax Act) of 1981 reduce marginal income tax by?
23% over 3 years
Tax Indexing (ERTA)
Tax indexing is the adjustment of the various rates of taxation in response to inflation and to avoid bracket creep
What did the highest income tax band fall from?
70% - 50% - lowest rate since 1925
What did the lowest income tax band fall from?
14% - 11%
What happened on the 30 March 1981?
Reagan’s Assassination attempt
How did Reagan deregulate on industry and businesses?
Cutbacks in staff or regulatory agencies
How much did the cutbacks on industries and businesses average to?
29%
in 1982 what was the retirement age changed to?
65 to 67
What was Reagan’s defence spending in 1981?
$157.5 billion
What was Reagan’s defence spending in 1989?
$303.6 billion
Budget deficit when Reagan came into power?
$70 billion
Budget deficit When Reagan left office?
$175 billion
What had the increasing deficit forced Congress to pass?
Balanced Budget and Emergency Deficits Control Act of 1985 - which enforced spending cuts
What did the FRB (Federal Reserve Board) tighten?
Money supply
What was the problem of tightening the money supply during and increase in unemployment?
Led to a sharp rise in interest rates which hurt industries that had to buy supplies on credit or had loans
Unemployment rate in 1980:
7.1%
Unemployment rate in 1983:
9.6%
Inflation in 1980:
13.5%
Inflation in 1982:
6.2%
By 1996 inflation never reached …
double figures again and spent most of its time under 5%
Part time or temporary work (people employed but not earning at their full capacity):
Had risen
in 1988, how many individuals were millionaires by assets?
1.3 million
in 1980, how many individuals were millionaires?
574,000
How much of the workforce was not included in the unemployment figures in 1988?
34.5% as they were considered unemployable, through drug use, or chose not to register for work)
What was the average manufacturing productivity growth annually since 1982?
4.6%
What was the average manufacturing productivity growth annually since 1982?
4.6%
What was the average manufacturing productivity growth annually in the 1970s?
2.7%
When did more people begin to save and invest?
As the economy came out of the recession
What was the deficit in 1980?and what percentage of federal spending would it cost to pay it off?
$59 billion - 9%
What was the deficit in 1980?and what percentage of federal spending would it cost to pay it off?
$208 billion, 14%
What had the immense deficit led to?
USA became a borrowing nation for the first time ever rather than a lending nation
What percentage did defence spending take in 1987?
28%
During Reagans first term what did America experience?
The longest ever period of economic growth in peacetime
