Reaganomics: What effect did Reagan's economic policies have? Flashcards
What immediate actions did Reagan take upon entering the White House?
- Sacked White House staff
- Federal government freeze on hiring staff
- Freeze on new purchases of office furniture and equipment
- Federal travel expenses cut by 15%
- New advisory groups reported directly to him
- Planned to present whole budget for next 4 years at first meeting with Congress
What kind of economics influenced Reagan’s domestic policy?
Supply side economics
What did supply side economics suggest?
If taxes were cut, the amount of money available to individuals and corporations would increase, leading to:
* More investments
* Increased demand for workers
* Higher profits
* More taxes paid to the federal budget
* Increased personal income creating demand for more goods and services
What economic issue did Reagan aim to end?
Stagflation
What characterised stagflation?
No growth in the economy with high inflation and high unemployment
In which four areas did Reagan promise to make cuts?
- Reduce Federal Income and Capital Gains Taxes
- Reduce Federal spending
- Reduce government regulation
- Tighten money supply to reduce inflation
What was the intended outcome of Reagan’s proposed cuts?
To improve the economy and stop stagflation by:
* Tightening the money supply
* Raising interest rates
* Increasing personal wealth
* Increasing productivity
* Encouraging saving and investing
Did Reagan stop inflation & unemployment?
Yes:
* 1983: Employment down 9.6%
* Inflation fell from 13.5% in 1980 to 6.2% 1982
No:
* Did not work initially - unemployment rose to 9.6^ in 1983 - part time workers being paid less
Did Reagan increase person wealth?
YES:
* No. of billionaires rose from 5 in 81’ to 52
* Millionares rose from 574,00 to 1.3m
* Gross private domestic investments grew by 77%
* Disposable income increased by 2.6%
NO:
* Wages of lower-class fell
% HUge gains for investors/landlords but not from salaries
Did Reagan encourage people to save and invest?
YES:
* Huge amount of people began to save + invest after 1982
* Increase in investment portfolios
NO:
* Deregulation 1983 = boom and bust
* Savings deregulated 1983 - oil at low rates, high rates of savings
Did Reagan cut taxation?
Did Reagan increase producvitiy?
YES:
* Highest manufacturing since WW2 - 4.6% compared to 2.3% in 70s
* GNP up, real GDP never below 3.5% growth
* Growth about 1970s limits every year
NO:
* Mini downturn economic crisis in 1982, GNP does down from 2.5% to -1.7%
* Periods of growth/decline
Did Reagan reduce the deficit of the Federal government?
Biggest failure - cost of paying interest rose from 9.1% to 12%
