Reaganomics Essay Research Paper ReganomicsThe election of

Reaganomics Essay, Research Paper

Reganomics

The election of the Regan-Bush Republican ticket of 1984 brought many unprecedented and controversial policies to the US economy. Many of these policies,including Reganomics still affect our economy as a whole and are still major points of debates today.

Reganomics was not solely based on economics, but rather the included a sense of having moral foundations. Government intervention and regulation of the economy were seen as economically harmful and furthermore morally wrong. It was believed that economic affairs should be left to the wisdom of God and his guidance would produce a successful market and economy.

The moral obligation together with extreme Kenseyan theories were the guide to the basic principles of Reganomics. Their objective was to follow a laissez faire attitude,or a hands off government policy. They also wanted to rely on the wisdom of the of the market, meaning that the market is smart enough to take care of and troubleshoot itself,and they tried to use a policy of deregulation which would allow companies to make their own economic decisions with out the government limiting their choices. The administration was also weary of anti-trust laws which did not allow for monopolies in our society.

The .deregulation of businesses. mentality was simple and encompassed two major points. The points were to lower taxes and allow businesses to make their own decisions without fear of government intervention. Their idea was that if you lowered taxes in general, business would have more money to produce more, to more they would hire more workers, and consequently due to the surplus of money, their would be more spending, investing, and saving. This proves that individuals would gain along with the business. Ronald Regan said, .Lower takes would spur business to invest, and send Americans rushing to stores to spend. (Regan). In the short run deregulation produced greater competition and lower prices for consumers. The long term effects were that the savings and loan industry collapsed due to fraud and mis-management. Regan knew that deregulation could possibly have adverse effects if there was no degree of regulation at all, so preventative measures were set in place. One such preventative measure was the Office of Information and Regulatory Affairs (O.I.R.A) which insured that deregulation

adhered to cost benefit principles to the maximum extent possible. .If government is the problem, not the solution, you do not solve problems by applying a bigger problem to them. (Regan).

Another notion behind Reganomics was the Laffer Curve, which conveyed the idea that tax cuts would increase tax revenue. The Laffer Curve is based on the ideology that government should provide a climate in which the incentives for individuals to pursue their own economic progress wouldn.t be hindered by governmental taxing, spending, regulations, and/or monetary policies. It is also based on supply side economics. Supply side economics was an economic policy

designed to stimulate output and lower unemployment by increasing production in the economy. It allowed the free market to play a greater role in the economy while the government took on a lesser role. .If government is the problem, not the solution, you do not solve problems by applying a bigger problem to them. (Regan). The Regan administration believed tax and spend policies led to a weak economy. Accordingly, they passed the Tax Reform Act of 1986 (TRA86) which reduced individual income tax liabilities and raised corporate income tax liabilities. They also passed ERTS. ERTA gave a 25% cut in individual marginal tax rates over a three year period. It set an indexing of individual brackets, personal exemptions, and standard reductions; it reduced all individual taxpayers taxes, and gave percentage reductions for lower and middle class incomes exceeding those given for the rich. Bill Clinton said, .For 12 years the driving idea behind American economic policy has been cutting takes on the richest individuals and corporations….. This is true, with the exception of ERTA, all the tax changes during the eight years of Reagan.s administration were unmistakably pro-business and pro-rich-individuals.

When Reagan cut the taxes for wealthy individuals and business. he believed that it would contribute to a stronger base economy, in turn the benefits of a strong base economy would .trickle down. to reach everyone, even the poorest Americans. Ronald Reagan said, .Lower taxes would spur business to invest, and send Americans rushing to stores to spend. (Regan). The Reagan Administration believed lower taxes were beneficiary in this manor and high tax rates only further darkened the lines on how our society was typecast, rather than break down those barriers. Furthermore high tax rates inhibited social mobility into the upper class. .The real losers from soak the rich tax are not the rich, but the would be rich.. This is true because there would be no trickle down effect if tax rates were high.

Major elements in the initial Regan policies were spending slow downs aimed at eliminating budget deficits in 1984 and producing budget surpluses thereafter. As well it was aimed to slow down the growth of federal outlays and change their composition. However the initial policies of the Reagan administration coupled with stock market changes wer