Key Economic Policies in Reaganomics (Program for Economic Recovery)

  • Created by: lwilson23
  • Created on: 08-12-18 11:13

Economic Advisory Board - Mar 1981

- economic advisory board set up to investigate economic choices.

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Economic Recovery Tax Act (ERTA) - Aug 1981

Cut taxes by $33 billion, the biggest US tax cut up to this point.

POSITIVE - was integral to Reagan's immense popularity (lowering taxes is always popular with everyone) and stimulated supply-side economics, sparking investement in businesses that would hopefully 'trickle down',benefitting all. 

NEGATIVE - was a massive contributor to the deepening of the national debt as the US was forced to become a borrowing nation, ($738 billion to $2.1 trillion by the end of his tenure). Also deepened the divide between the rich and the poor, and caused long-term issues for Bush and Clinton.

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Omnibus Budget Reconciliation Act (ORA) - Aug 1981

Revised the federal budget, removing $35 billion from it in order to reduce government spending and save money.

POSITIVE - saved government money and was important in reducing the severity of the national debt, reduced dependency on the state. 

NEGATIVE - reduction in federal welfare schemes is not beneficial for the poor.

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TEFRA - Sep 1982

Tax Equity and Financial Responsibility Act

Rose corporate taxes and temportarily rose tax on certain services and goods such as cigarettes and payphones in response to economic downturn caused by ERTA and ORA.

POSITIVE - A smart policy that showed Reagan's adaptability, its effectiveness was displayed as the economy was thriving by 1984

NEGATIVE - Was contradictory to one of the key constituents of Reagan's economic policy, tax reduction, showing the principles of his economic policy were maybe not as strong as he believed they were. 

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COBRA - Apr 1986

Consolidated Omnibus Budget Reconciliation Act

Further revisions were made to the federal budget in order to save government funds, (shifting payment of healthcare from the state to the employer for example).

POSITIVE - Reduced the national debt, but not enough. 

NEGATIVE - The national debt was still incredibly high, also further deepened the divide between rich and poor. 

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Tax Reform Act - Oct 1986

Reduced the number of tax brackets from 14 to 2, with the highest tax rate being reduced from 50 to 28%.

POSITIVE - exempted millions of low income families from tax payment - worked wonders for his popularity as a president. 

NEGATIVE - increased the national debt further. 

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Deregulation of oil/fuel - 1981

Reagan's first executive order involved eliminating price controls on oil and natural gas. 

POSITIVE - the price of oil declined by more than 50%, and in six months oil was in abundance rather than a scarcity. A marked difference to the oil crises which plagued Carter's presidency. 

NEGATIVE - US were still dependent on foreign oil, Reagan should have imported foreign oil whilst prices were cheap.

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Deregulation of wages/prices/banks - 1981

Promoted growth in the economy, supporting Reagan's supply-side economics system.

POSITIVE - deregulation promoted growth in the economic sector, as it stimulted industry. 

NEGATIVE - causes companies to take unecessary risks and possibly exploit their workers, also caused a stock market crash in 1987.

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Shipping Act - Mar 1984

Promoted the growth of the marketplace via competitive and efficient transportation. 

POSITIVE - stimulated the marketplace and as a result of this the economy, increasing foreign exports.

NEGATIVE -  success dependent on the state of the international trade markets.

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OFTCA - Aug 1988

Omnibus Foreign Trade and Competitiveness Act

Countries with large trade surpluses with the US would be affected by a 10% bilateral surplus reduction requirement.

POSITIVE - ensured money wasn't unecessarily spent, keeping the US economy strong.

NEGATIVE - could potentially damage future US relations with other countries. 

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President's Commission on Housing - Jun 1981

- set up to investigate low-cost housing schemes.

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