Reaganomics: a two sided coin

Reaganomics: a two sided coin

The 1977-1981 presidency under Jimmy Carter was, as many historians say, one of the most misfortunate presidencies through American History. From oil crisis’ to massive increases in poverty, this era was unsuccessful in achieving any of the goals set by President Carter. By the end of this era there was consistent “stagflation”, or high poverty and high inflation coupled with little to no economic progress. At the end of his presidency his popularity had eroded so much that his running mate, President Ronald Reagan managed to win 44/50 states.

Coming into this setting, President Reagan found himself in a precarious position. Luckily for him, congress was willing to try anything new to try and stop the rising inflation and unemployment. The main policies that Reagan preached were less government spending, a 30% tax cut, as well as decreased spending on social welfare programs. This policy of tax breaks became known as Reaganomics.

At first this massive tax cut increased inflation and sparked a heavy recession in 1881. However, after this initial cut, the nation’s economy seemed to be growing. Rather than stagflation, there was steadily increasing productivity. Many historians credit Reagan with saving America in a time of heavy deposits, but what many do not take into consideration is the massive changes he made in the class system. Under Reagan, the upper middle class and the rich were given a 25% tax cut. This was put into action with the thought that allowing the upper class to have a tax break would allow for increased spending by this class, which would put money back into the system. This would allow for some movement in the consumer economy, but the immediate effects were felt not by the upper classes, but rather by the lower class as a massive recession hit the country. While the economy was able to stabilize by 1883, the unemployment rate had already risen to 10%. Reagan was also a heavy advocate for less government welfare programs. He believed that they took up too much of government spending which could be used for the military or to count against the massive debt he had stockpiled in his years in office. Overall, which Reagan’s policies were able to kickstart the American economy back to a place where it could compete on the global scale as a world power, his policies were merely supportive of the rich, and we can attribute at least some of modern day’s socio economic gap to these policies.