REAGANOMICS Flashcards
Which pre Reagan events led
to people looking back at the 70s as a bad time?
backlash against liberalism of 60s and 70s helped reagan to power
public believed there was too much federal expenditure and involvement
Loss in Vietnam, Watergate scandal and inability to fix economy and the ongoing fuel shortages.
how were reagans presidency and the republican gov of the 1920’s similar
-reduction of big government theory was a return to ‘laissez faire’ (stripping of gov interventions)
-they were both hardline anti-union (union membership fell under both governments)
-both allowed for creaton of big businesses that could monopolise areas of industry
-both believed in significant tax reductions
-new industry flourished
-wealth concentrated at the top in both economies
-believed in ‘rugged individualism’, an economy where the poor who ‘werent lazy’ could flourish
who did reagan appeal to
-voters who resented high taxes, affirmative action programmes, rising crime and challenges to traditional values
who was Reagan
-controversial polarising figure in politics
-presented himself as a committed christian
-liberals very critical of Reagan whilst conservatives revere him as a hero
-his presidentcy was significant and influential
-had careers in 3 forms of media-radio, movies and television
Reagan major dates
1980- elected as president
1981- inaugurated as president
March 1981- survived assassination attempt
Aug 1981- major economic reform bills passed and signed into law
Jan 1982- Social security reform act signed
dec 1985- congress mandated cuts to balance the budget by 1991
Nov 1986- iran contra contraversy uncovered
feb 1987-tower commission criticises reagans management
oct 1987- Bork rejected for Supreme Court
what did reagan do to reduce big government 3 days after his inauguration
-sacked many white house staff members and put a federal government hiring freeze in place
-cut federal gov travel expenses by 15%
-used a series of executive orders to set up ‘advisory groups’ reporting directly to him on how to cut down big government
what was the theory of supply side economics
-argues that if taxes are cut then people would have more money to invest in the economy
-called supply side economics because the gov cared less about the demand of the public and instead focused on caring about businesses
-believes that if tax for corporations was reduced they would have more money left from their profits to invest in their businesses meaning that companies would expand and employ more people (higher wages)
-with more employmentt and higher wages people can use money to spend in the economy by buying property and products
-this would then help companies have more money
what theory did Reagan use to control government spending, reduce gov involvement and cut taxes
‘supply-side’ economics
what was the criticism of supply-side economics
-corporations and shareholders tend to keep more profits than its worth, they can reinvest into their business and wider economy
-creates wealth divide between the rich and poor
-less taxes= less gov spending on welfare programs for the poorest
what was the reaganomics plan for economic growth and its 4 parts
-reagan’s program for economic recovery (his economic strategy)
-the plan had 4 parts and stressed the importance of fast legislation:
cutting federal spending
tax cuts
deregulation
control the money supply (keep inflation down)
why was deregulation in the reaganomics four point plan
the deregulation of federal and state requirenents would allow for businesses to flourish, and their increased profit would mean more tax revenue for the government (which would pay off the deficit)
why did reagan introduced reaganomics
-reagan blamed Keynesian economics for the state of the US and wanted a more conservative approach
-wanted incentives for people to work harder
what actually happened under regonomics
-tax cuts
-deregualation
-limited government spending
-increased spending
-federal reserve controlled inflation by contollong the money supply
-mid decade boom helped re elected reagan in 1984
-huge trade deficeit with cheap imports and expensive export
when was reagan reelected
1984
what was the laffer curve
-at the sweet point in this laffer curve the cutting of taxes and getting rid of regulations/bureaucracy led to companies using extra income to invest, innovate and expand
-this would lead to more money and less taxes =increased sales and profits
-neo liberals believe cutting regulations on businesses and slashing corporate taxes would make companies more competitive and therefore able to make more profits
what did reagan want to achieve economically speaking
-tax cuts to revive the economy
-wanted to cut 40 billion from the proposed budget
-deregulation=increased
profits=government would get more tax
-wanted his whole economic plan to be passed through as a singular peice of legislation alongside a new tax reform bill
what was the omnibus budget reconciliation act (ORA) and when was it
-1981
-reagans first proposed budget
-white house initially wanted 45 billion worth of cuts on federal spending
-following negotiations managed to cut 35 billion (across 212 federal programmes)
What was the tax bill which Reagan passed in 1981 and what did it do?
-ECONOMIC RECOVERY TAX ACT 1981
the ERTA bill in august 1981 ushered huge tax cuts for the american people, totalling cuts of around 23% over the next 3 years
Linked tax bands to inflation
highest income tax rate fell from 70 to 50 percent and the lowest fell from 14 to 11 percent
business tax rates cut and various business tax breaks were offered
reagan’s tax cuts successes
SUCCESSES
-the ERA bill in august 1981 ushered huge tax cuts for the american people, totalling cuts of around 23% over the next 3 years
-second major peice of legislation, the 1986 tax reform act: closed loopholes and made the federal tax system a lot easier for americans
-reduced the number of different tax brackets from fourteen to just three
-also further decreased the top rate of tax from 50 to 28 percent
-exempted 6 million of poorest americas from paying any federal tax at all
what did the 1986 tax reform act do
-closed loopholes and made the federal tax system a lot easier for americans
-reduced the number of different tax brackets from fourteen to just three
-also further decreased the top rate of tax from 50 to 28 percent
-exempted 6 million of poorest
americas from paying any federal tax at all
what did regan reduce the number of tax brackets to and how did he decrease the top rate of tax in 1986
-reduced the number of different tax brackets from fourteen to just three
also further decreased the top rate of tax from 50 to 28 percent
ow many poor americans did reagan exempt from paying any tax in 1986
-exempted 6 million of poorest americas from paying any federal tax at all
what were reagan’s tax cuts failures
-after a brief recession in 1981/82 reagan had to make some money for the gov…. ended in him reversing some of the tax cuts for businesses and increased taxes on ciggarettes and airline tickets
-reagans administration put a 25% tarrif on imported goods and a 3% tarriff on imported cars
less federal government expenditure successes
-1981 ERTA bill saw 35 billion worth of cuts across 212 government departments
-under Reagan government spending on human resources dropped from 28 percent of the federal busdget in 1980 to 22 percent by 1987
less federal government expenditure failures
-federal expidenture increased from $699.1 bn in 1980 to $859.6bn in 1987
-defence spending almost doubled from $157.5bn in 1981 to $303.6bn in 1986
-national debt tripled under Reagan to 2.6 trillion
-paying interest on this debt was the govs third highest expidenture
-congress protected popular domestic programs such as Social Security and medicare/medicaid, and funding these programmes increased in 1980
what were the spending cuts of the 1981 erta bill
35 billion worth of cuts across 212 government departments
how much did federal expenditure increasease during reagan’s presidency
-federal expidenture increased from $699.1 bn in 1980 to $859.6bn in 1987
what happened to defence spending under Reagan
-defence spending almost doubled from $157.5bn in 1981 to $303.6bn in 1986
hat happened to national debt under Reagan
-national debt tripled under Reagan to 2.6 trillion
-paying interest on this debt was the govs third highest expidenture
which programmes did government spending actually increase on
-congress protected popular domestic programs such as Social Security and medicare/medicaid, and funding these programmes increased in 1980
failures of deregulation
-deregulation in the finance sector caused companies to make more risky decisions and investments
-this led to a fairly substantial crash in 1987, although this was soon dealt with and recovery was very quick (as the gov knew how much caution damaged the economy during 1929 wall street crash)
-due to deregulation there was a collapse of savings and loans companies in the 1980s
-reagan gov had to bail them out with 132 billion
how many cuts were there of government regulatory agencies
average of 29% cuts in government regulatory agencies, with a huge 38% from the consumer product safety commission
what led to the crash in 1987
deregulation in the finance sector caused companies to make more risky decisions and investments
-this led to a fairly substantial crash in 1987, although this was soon dealt with and recovery was very quick (as the gov knew how much caution damaged the economy during 1929 wall street crash)
hy was there a collapse in savings and loans companies
due to deregulation there was a collapse of savings and loans companies in the 1980s (more competitive and had to start making more risky decisions)
-reagan gov had to bail them out with 132 billion
mproving the economy successes
inflation fell from 13.5% in 1980 to 4,7% in 1988
-unemployment fell from 7% in 1980 to 5.2% in 1988
-18 million new jobs created in america by 1988
-after the brief recession of 1981-1982 the USA went through its longest period of economic growth during its peacetime
-GNP rose from 3.925 trillion in 1981 to 5.866 by 1989
improving the economy failures
-trade deficit rose under reagan from 38 billion per year in 1982 to around 150 billion per year by the end of the decade
-average family income fell during reagans administration down to 1973 levels
-only half of american families maintained their standard of living during the 1980s
-number of part time and temporary work increased (wages. not as high or secure as other jobs)- reason.
what happened to inflation under Reagan
inflation fell from 13.5% in 1980 to 4,7% in 1988
what happened to unemployment under Reagan and how many new jobs were created
unemployment fell from 7% in 1980 to 5.2% in 1988
-18 million new jobs created in america by 1988
what happened after the 1981-82 recession
-after the brief recession of 1981-1982 the USA went through its longest period of economic growth during its peacetime
What happend during the brief recession from 1981-82
-unemployment rates went from 7.1% in 1980 to a high of 9.6% in 1913
-however inflation did begin to fall (in 1980 it was 13.5% and in 1982 it went down to 6.2%)
How did productivity change in
the first term of Reagan?
It went into the negatives (both labour output and GNP) in 1982, before booming in 1983/84 and remaining more steady but strong after.
inflation by 1996
had never reached double figures since 1980
what happened to GNP under Reagan
-GNP rose from 3.925 trillion in 1981 to 5.866 by 1989
what happened to family income under regan
average family income fell during reagans administration down to 1973 levels
-only half of american families maintained their standard of living during the 1980s
what happened to trade deficeit under regan
-trade deficit rose under reagan from 38 billion per year in 1982 to around 150 billion per year by the end of the decade BAD
timeline of reagan’s economic policies
1981- passed executive order setting up advisory boards on economic policy advising directly to him (from outside the government)
-1981- executive order setting up the president’s commission on housing
(set up to investigate all aspects of housing, including how it should be financed, but mainly how to find ways of saving money on low cost housing schemes)
-1981 ERTA (cuts marginal income tax by 23%)
-1981 Omnibus budget Reconciliation act (35 billion from gov spending)
-1982 Tax equity and financial responsibility act (TEFRA) makes changes to budget in response to the economic situation, temporarily raised taxes on ciggarrettes and telephone service and tightens up tax rules
-1986 COBRA (consolidated omnibus budget reconciliation act) revises budget in minor ways to save fed gove money e.g shifted responsibility for many healthcare payments from federal gov onto the employer
-1986 tax reform act- reduces number of tax brackets , closes tax evasion loopholes
what executive order set up the presidents commission on housing and what did it do
-1981- executive order setting up the president’s commission on housing
(set up to investigate all aspects of housing, including how it should be financed, but mainly how to find ways of saving money on low cost housing schemes)
when and what was TEFRA
-1982 Tax equity and financial responsibility act (TEFRA) makes changes to budget in response to the economic situation, temporarily raised taxes on ciggarrettes and telephone service and tightens up tax rules
when and what was COBRA
-1986 COBRA (consolidated omnibus budget reconciliation act) revises budget in minor ways to save fed gove money e.g shifted responsibility for many healthcare payments from federal gov onto the employer
how many individuals were millionaires in assets in 1988
approximately 1.3 individuals
(in 1980 it was 574,000)
how many billionaires were there in 1988
went from a handful in 1981 to 52 in 1989
happened to reagan’s economic policies after Reagan
A
GEORGE BUSH
george H.W bush promised to continue reagan’s policies
-however long term effects and limitations became clear making these policies less popular
-democrats were back in control of both houses in congress which made life harder for his administration
-bush had to raise taxes despite promising in his campaign that would be sonethung he would never do
BILL CLINTON
- elected in 1992
-clinton didnt swing back to old democratic policies (as most voters supported low tax)
-his campaign was economy focused `(low inflation, high employment, reduced defeciet etc)
-however he did increase welfare and medical care, devietatingaway from Reagan
