what is reaganomics 
reaganomics refers to the economic policies of ronald reagan the 40th u s president serving from 1981 1989 his economic policies called for widespread tax cuts decreased social spending increased military spending and the deregulation of domestic markets these policies were introduced in response to a prolonged period of economic stagflation that began under president gerald ford in 1976 understanding reaganomicsthe term reaganomics was used by both supporters and detractors of reagan s policies based on the principles of supply side economics and the trickle down theory reaganomics proposed that decreases in taxes especially for corporations stimulate economic growth if the expenses of corporations are reduced the savings then trickle down to the rest of the economy spurring overall growth reagan believed that by reducing the tax burden on individuals and corporations they would be incentivized to invest innovate and generate economic growth this approach was rooted in the belief that a strong private sector would ultimately benefit all levels of society reagan also pursued deregulation across various industries believing that reducing government intervention would spur competition innovation and efficiency objectives of reaganomicsas reagan began his first term the country suffered through several years of stagflation where high inflation was accompanied by high unemployment to fight high inflation the federal reserve board increased the short term interest rate reaching a peak in 1981 reagan proposed a four pronged economic policy intended to reduce inflation and stimulate economic and job growth measures introduced by reaganomicsa proponent of supply side economics reagan regarded government intervention as a damper on economic growth that reduced economic incentives and distorted market signals to spur the free market he introduced several measures to reduce government interference to curtail government intervention reagan cut or reduced funding to multiple domestic welfare programs including social security medicaid food stamps education and job training programs in a deeply controversial move he also ordered the social security administration to tighten enforcement on disabled recipients ending benefits for more than a million recipients though reagan ordered government spending cuts to domestic programs he increased defense spending by 35 to achieve peace through strength in his opposition to communism and the soviet union 1in the first year of his presidency reagan lowered taxes significantly income taxes on the top marginal tax bracket dropped from 70 to 50 in 1982 along with sharp cuts to corporate and estate taxes in 1986 gdp stood at 3 5 but the unemployment rate was at a high of 6 6 reagan cut the tax rate to 38 5 in 1987 and unemployment fell to 5 7 2the goal of these reforms was not only to reduce tax burdens but also to simplify the tax code some of reagan s reforms eliminated write offs exceptions and other loopholes for favored businesses they also changed the way companies accounted for expenditures which encouraged them to invest in equipment reagan removed price controls on oil and gas reduced restrictions on the financial services industry and relaxed the enforcement of the clean air act the department of the interior also opened large areas of public land for oil drilling 3in 1982 congress passed the garn st germain depository institutions act for savings and loan banks to deal with rising inflation and interest rates by further deregulating deposit rates as president reagan encouraged the federal reserve to tighten the money supply as federal reserve chairman paul volcker had steadily raised the federal funds rate to 20 by 1980 and these high interest rates helped end double digit inflation 4 the reaganomics monetary policy was developed to complement the federal reserve s policy of raising interest rates to reduce borrowing and spending some of the deregulation and monetary reforms associated with ronald reagan were initiated under president carter to the extent that these policies were consistent with reagan s laissez faire worldview they are generally included with reaganomics advantages and disadvantages of reaganomicsadvocates of president reagan s policies cite from december 1982 to june 1990 reaganomics created over 21 million jobs more jobs than have been added since wrote arthur laffer whose work heavily influenced reagan s tax cuts the top marginal tax rate on individual income was slashed from 70 to 28 and the corporate tax rate was reduced from 48 to 34 inflation was reduced to 4 and the unemployment rate fell below 6 5between 1982 and 2000 the dow jones industrial average djia grew nearly 14 fold and the economy added 40 million new jobs however nobel laureate paul krugman downplayed the success of reagan s policies yes there was a boom in the mid 1980s as the economy recovered from a severe recession krugman wrote in the new york times but while the rich got much richer there was little sustained economic improvement for most americans by the late 1980s middle class incomes were barely higher than they had been a decade before and the poverty rate had risen 6although reagan reduced the economic regulation that began under president jimmy carter and eliminated price controls on oil and natural gas long distance telephone services and cable television critics argue that the deregulation of the financial services industry during the reagan administration played a part in the savings and loan crisis as well as the financial collapse of 2008 the inflation level decreased significantlyindividual corporate and investment taxes were reducedderegulation encouraged a more open and free marketpublic and social programs were curtailedboth the national deficit and national debt increasedthe divide increased between the wealthy and middle and lower classes