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Reaganomics

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Submitted By kigz
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How Reaganomics Will Affect My Life
Reaganomics was economics policies which were propelled by United States President, Ronald Reagan during 1980s. These policies were based on fours pillars namely; reduction of the growth of government spending, reduction of income and capital gains marginal tax rates, reduction of government regulation of economy, and controlling of the money in supply so as to reduce inflation. Their basic aims were to lower taxes and create a leaner government. According to Reagan his decision was informed on stimulation of the economy taxes, financed by borrowing. Lowering taxes was aimed at reviving the economy, which in turn would see the increased tax revenues being used to offset the debts incurred (Niskanen 1988).
By excluding military, Reagan argued for the broad slicing in government spending which to him were the main drains of the economy. Reagan went further to raise military spending which he considered an integral part of the government undertakings, especially in relation to the cold war. Although there was great taxes cut, a neoclassical theory, the enormous spending in the Reagan era created an enormous budget deficit. This kind of deficit spending defied neoclassic economic theory which emphasized on a balanced budget (Niskanen 1988). Reaganomics comes in two types; actual historical experience, and two the theory. Historical experience is based on an increased defense spending and large federal deficits. For the theory part, initiative of smaller government and cut in spending was never implemented, majorly due to lack of political will. Reaganomics idea was influenced by Laffer curve, a theoretical taxation model that was particularly in trend among some American conformists during 1970s. This model forecasts that excessive tax rates usually reduce the potential tax revenues. This is by lowering the motivation to…...

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