Reaganomics

The United States is a country full of debate, and with an ever growing politically stimulated atmosphere, the informed members of society find themselves boxing each other in the ideological ring of disagreements. So many events capture our attention in the world of today, but every so often events in the world of yesterday capture that same attention and once again, the gloves are back on.

Ronald Reagan, President from 1981 to 1989, casts a shadow of epic proportion on many fronts. Most specifically, his economic policy was one of the most far-reaching attempts to change how America and American’s viewed the federal economic system as well as their own money. I’m proud to share those ambitious reaches and answer the ever lingering question, “Did Reaganomics really work?”

So what was Reaganomics? Reaganomics was a policy implemented by Ronald Reagan that mimicked what is known as supply-side economics which is based on the idea that supply creates its own demand. Thus, Reagan believed that by giving American businesses tax cuts allowed them to increase supply. Complemented with tax cuts for the American families, Reaganomics drove up business revenue, by increasing the personal income revenue percentile and thusly, spurred economic growth.

Surging inflation, plummeting consumer confidence, and interest rates above 20 percent all made up the final years of the Democratic Carter Administration, and laid new and daring challenges for the upcoming Republican Regan Administration. Twenty-nine days into his presidency, Ronald Regan announced his budget plans which included large tax cuts for Americans. According to ABC News, Ronald Reagan held an approval rating of 73% just one month after his tax cuts took effect. Immediately, inflation plummeted, consumer confidence soared, nearly 20 million new jobs created, the Dow Jones Industrial Average climbed 240 percent, and personal income tax revenues climbed dramatically.

But Reagan wasn’t done yet. When Reagan’s Tax Reform Act of 1986 was passed, it immediate affected American business and households. Business Week’s Michael Mandel mentioned in his 2004 column that “[t]he new law helped support "idea-based" industries such as software and financial services.” Mandel also states that Reagan “helped lay the groundwork for the Information Revolution of the 1990s.”

Sean Hannity, in his book entitled Let Freedom Ring, said it as simple as it could be, “Together, the two Reagan reforms brought the nation’s top marginal tax rate (on the richest Americans) down from an outrageous 70 percent to just 28 percent,” and because of it, “the economy flourished and more wealth was created”.

Despite the many highly-politicized events that shook the 1980’s, the economy remained strong, and maintained a steady climb. The CATO Institute informs us that under the Reagan Administration, America enjoyed a 3.2 percent economic growth average compared to 2.8 percent in the Ford-Carter years – a clear sign that economic activity undertaken in the 1980’s was one of success.

The experts agree: Reagan knew what he was doing, and it worked. “There is no doubt in my mind that that action of Reagan, plus his emphasis on lowering tax rates, plus his emphasis on deregulating … unleashed the basic constructive forces of the free market and from 1983 on, it's been almost entirely up,” said Milton Friedman, former policy advisor to the Reagan Administration in an interview with PBS. “By 1988 we were in early stages of what has now been almost 20 years of economic growth,” mentioned Newt Gingrich, Speaker of the U.S. House of Representatives from 1995-1999, in another PBS interview.

So, in conclusion, based on the evidence that I have found and presented, I have strong reason to believe that the economic outreach of the Reagan Administration was one that took a country out of a recession, and into a decade of economic growth. Yes, Reaganomics worked. It works in the world of today, and it certainly worked in the world of yesterday.

Sources:
Dalia Sussman, ABC News, “Improving With Age: Reagan Approval Grows Better in Retrospect”


Hannity, Sean. Let Freedom Ring. New York: Regan Books, 2002.

Michael Mandel, Business Week, “Reagan’s Economic Legacy”


Wikipedia. Supply-side economics. 17 May 2006.

William A. Niskanen and Stephen Moore, CATO Institute, “Supply Tax Cuts and the Truth About the Reagan Economic Record,”

The Public Broadcasting System. Commanding Heights: Reaganomics. 2006.


The Public Broadcasting System. Commanding Heights: Reaganomics. 2006.


National Video Resources. Ronald Reagan 1981-1989. May 2004.

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