Reaganomics "Only by reducing the growth of government, can we increase the growth of the economy." - Ronald Reagan

Ronald Reagan President of the United States from 1981-1988 Was originally a movie star and later was the governor of California Now seen by many Republicans as a “model” president that presidents today should try to be like.

Ronald Reagan’s Economic Policies “Reaganomics” Supply-Side Economics Ronald Reagan’s economic team decided that they would try to affect the “supply” side of the economy. His plan had two main tenets: Reduce income taxes significantly to help the “supply side” of the economy. Reduce government spending significantly called supply side economics because it is helping the rich or the or the suppliers of goods and services in the economy – the rich

Tax Cuts The wealthiest tax bracket had their taxes decreased from 70% to 28% (over the course of a few tax cuts) Corporate income tax was decreased from almost 50% to 34% Capital Gains taxes and estate taxes were also cut *** Capital gains – when you make money on stocks***

Spending Changes Reagan cut a number of social programs to try to keep the country from going into debt But Reagan increased defense spending to try to scare the Soviet Union during the Cold War

What is a better way to create jobs What is a better way to create jobs? Government spending or tax cuts for the rich?

The Logic Behind Tax Cuts

1. How Government Spending Creates Jobs Increase in Income of the businesses. DEMAND SHIFTER: Income of consumers (businesses). What do businesses buy? JOBS! JOBS GRAPH supply New Jobs Price (Wage) Original Jobs Price (Wage) Income of consumers because they are paying businesses to pave roads etc. demand Original Quantity of jobs New Quantity of jobs Quantity of jobs

2. How Tax Cuts for Everyone (But Mostly the Rich) Create Jobs. Increase in Income of the rich, increases the demand for goods they buy supply tax cuts benefit the rich the most – the poor also have their taxes cut but they don’t see as much benefit demand Original Quantity of goods New Quantity of goods Quantity of Goods that the rich buy

2. How Tax Cuts for Everyone (But Mostly the Rich) Create Jobs… (cont Increase in Income of companies, increases the demand for the people they hire supply More jobs cutting taxes for jobs demand Original Quantity of Labor New Quantity of Labor Quantity of labor

So cutting taxes for the rich will… Give them more income to spend on things they like to buy This means businesses that produce these items will be selling more items and making more money. So their demand for labor will increase, and they will hire more people! build a second story on their house, re-do their yard…

Logical Reasoning Without taxes, businesses and workers will not lose money to the government when they work If we decrease taxes on rich people and businesses, they will provide more jobs for all people. Americans will all be more wealthy because of increased productivity in the society. Even though the taxes mostly affect the wealthy, these benefits will “trickle down” to help out everybody

Did trickle down economics actually work? Did the poor actually benefit from Reagan’s economic policies of decreasing taxes for Americans?