Reagan - Economic issues

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Reagan - Economic issues

Advantages

  • 2nd Economic recovery tax act cut personal income tax by 25%
  • GNP rose by 11% between 1981 and 1984
  • increased military spending from $171bn to $242bn by 1986
  • 1983 federal spending on defence reached 23.5% of GDP
  • decreased trade union militancy e.g. deregulation of air traffic control, 11,300 PATCO members strike and sacked after 48 hours of not returning
  • mirrored by large companies e.g. 1983 Greyhound bus company and Eastern Airlines
  • benefited the upper and middle classes who saw increased spending and purchasing power
  • inflation as halted

Disadvantages

  • 1981 Omnibus Reconciliation Act cut federal spending on 300 government programmes
  • ADFC cut, 3.7 million families relied on this
  • food stamps cut by 13% between 1982 and 1985 in which 20 million families relied on
  • child nutrition programmes cut by 28%
  • number of people defined as poor increased from 11.7% to 15% between 1979 and 1982
  • introduced workfare where families using AFDC had to do community service enforced in 42/51 states in 1987
  • de regulation = unemployment e.g. 1981-1982 Office of surface mining lost 40% of its workforce
  • appointment of pro business leaders to national labour relations board which made pro business decisions rather than trade union decisions
  • 1985 balanced budget and emergency deficit control act failed
  • debt rose by $321 billion to over 1 trillion dollars
  • every one of Reagan's budgets had a deficit of excessive $100bn
  • national debt rose from $914bn to $2.7trillion between 1980-89
  • 1986 trade deficit reached $170bn

Evaluation

inherited unemployment at 6.2% and inflation in double figures - abandoned demand management as used by predecessors like Carter and introduced supply side economics which stimulated economic growth through increased production. He was not successful in solving the economic problems of the USA shown by Bush inheriting a national debt of $2.7 trillion (3 times higher than it was in 1980)

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