Reaganomics: A portmanteau of "Reagan" and "economics" attributed to Paul Harvey, referring to the neoliberal economic policies promoted by U.S. President Ronald Reagan during the 1980s.
Focus on supply-side economics; advocates referred to it as "free-market economics."
Opponents dubbed it "trickle-down economics" or "voodoo economics."
Key Pillars of Reaganomics
Defense Spending: Increase in military expenditure.
Tax Reductions: Focus on reducing federal income tax and capital gains tax.
Regulation: Reduction of government regulation.
Monetary Policy: Tightening of the money supply to control inflation.
Federal Budget: Balancing and slowing the growth of government spending.
Economic Context and Challenges
Prior to Reagan, the U.S. experienced stagflation—high inflation combined with high unemployment.
Previous administrations employed Keynesian economic policies and faced challenges with wage and price controls.
Results and Impact
Supporters: Credited with ending stagflation, fostering GDP growth, and triggering an entrepreneurial boom.
Critics: Highlighted issues such as increased income disparity, higher national debt, reduced economic mobility, and tripling of the national debt.
Tax Policy and Changes
1981 Economic Recovery Tax Act: Lowered top marginal tax rate from 70% to 50% and lowest bracket from 14% to 11%.
1982 Tax Increase: Partially rolled back tax cuts to address deficits.
1986 Tax Reform Act: Simplified the tax system, reduced deductions, and adjusted tax brackets.
Government Spending and Budget
Federal revenue fell initially but recovered by the end of Reagan’s term.
Public debt increased significantly, transitioning the U.S. from a creditor to a debtor nation.
Economic Growth and Employment
Real GDP growth of 3.5% on average during Reagan’s presidency.
Unemployment fell from 7% in 1980 to 5% in 1988.
Productivity growth and increased labor force participation.
Criticisms and Controversies
The rise in income inequality and poverty rates.
Concerns over homelessness and social service cuts.
Debate over the long-term effects on economic mobility and wage stagnation.
Legacy and Evaluation
Reaganomics is still debated: praised for reigniting economic growth and critiqued for increasing inequality and debt.
Key figures like Milton Friedman praised the implementation of lower taxes and less regulation, though not all objectives were fully achieved.
The policies set a precedent for future economic strategies but raised questions about sustainable fiscal management and social impacts.