Economic Policies of the 1980s Reaganomics Economic Policies of the 1980s

Issues at the Time Inflation Unemployment Stagflation Oil Crisis Iranian Revolution Ronald Reagan (1980) http://www.youtube.com/watch?v=loBe0WXtts8

AD/AS Stagflation

Reaganomics Four Pillars Reduce Government Spending Reduce Tax Rates on Capital & Labor Reduce Government Regulation Control the Money Supply to End Inflation Reduce government Spending Reduce Marginal Tax Rates Control $ supply to reduce inflation Reduce govt. Regulation of Economy

Why & What Campaign Promises Reduce Income Taxes: Deficit Spending: Lower Taxes Smaller Government Reduce Income Taxes: Top Down Cuts Benefited the Wealthiest Most Deficit Spending: 8 straight years of deficit spending

The Economy Grows Income Taxes dropped from 70% to 28% in 7 years (1981-1988) Unemployment reached 10.7% in 1982, but lowered as the economy improved Inflation decreased during the 1980s Jobs were created as the economy continued to grow

Trickle Down Economics Massive tax cuts for the top tax bracket Drastic increase in defense spending (“Window of Vulnerability” & Star Wars) In order to function, someone needed to spend (either the wealthy or the government) Vice President George Bush called it “voodoo economics”

Effects Wealthiest Americans became wealthier 8 years of Deficit Spending Reduced Tax Revenue Budget Deficit Trade Deficit (enter China) National Debt tripled during Reagan’s 8 years (from 1 to 3 trillion dollars) No reduction in size of government (afraid to cut Social Security & Medicare)

Reagan’s Achievements Improved Economy Lowered Unemployment Lowered Inflation Interest Rates Decreased Average Household Income rose by $4000 per year