IMPACT OF REAGAN (1981-89) ON THE US (1981-96)
Table of Contents
1. THE EFFECT OF REAGAN’S ECON POLICIES ................................................... 1
2. THE EXTENT ‘BIG GOVERNMENT’ WAS REDUCED ........................................... 2
3. NATURE & EXTENT OF SOCIAL CHANGE ......................................................... 3
4. THE EXTENT PRESIDENCY and US POLITICS WERE REVITALISED ..................... 5
5. ESSAY TECHNIQUE ....................................................................................... 6
1. THE EFFECT OF REAGAN’S ECON POLICIES
REAGANOMICS: KEY TERMS
• Neoliberalism: ideology favouring free-market capitalism.
• Supply-side economics: theory that increased productivity and investment would offset the
reduction in federal income caused by tax cuts.
• Trickle-down economics: theory that tax cuts and deregulation for the wealthy = overall
economic growth. Key part of supply-side.
• Deregulation: removal of federal restrictions from businesses.
• Money-supply restriction: to help control inflation (FRB).
POSITIVE
• Taxation aimed to benefit the working class’s personal wealth: Tax Reform Act (1986)
removed the working poor from federal income taxation – tax burden on working mothers
fell by 7.94% as a direct result – BUT many were even hit harder by family credit regulation
changes / increased interest rates which led to increased housing, mortgage, and rent costs
– average mortgage debt increased by 30% from 1980-87.
• Drop in unemployment: 9.6% (1983) -> 5.5% (1988) – BUT the no. in part-time or temporary
work (not earning to full capacity) rose – meaning the figures are less accurate.
• Falling inflation: 13.5% (1980) to 4.8% (1989) – LT (did not reach double-figures by 1996 and
mostly under 5%) – helped restore public confidence in policy.
• Long-term ideological realignment of US politics: by 1990s, Democrats under Clinton
accepted key Reaganite principles – e.g. Welfare reform (1996) ended AFDC, thus cutting
, welfare benefits – changes were highly sustained (shaped policy beyond presidency)
– CONTRADICTS public disagreement with key policies – BUT the 1990s Democrats offered
supported to areas not yet revitalised (e.g. improved some healthcare access for children in
low-income families – Reagan opposed such federal healthcare expansions).
NEGATIVE
• Rich got richer: the Economic Recovery Tax Act (1981) cut the top marginal income tax rate
from 70% to 50% – increased high-earners' disposable income.
• Deficit significantly rose: $59B (1980) -> $208B (1983) – resultant of supply-side economics
failure, rising defence spending, and department cuts being resisted – US became a
significant borrowing nation for the 1st time – WHILE the budget bill aimed to cut deficit
from 22% of GNP (1981) to 19% (1986), it was hasty (significant no. of errors and a footnote
admitting to including $74B unidentified cuts yet to be decided on – long-term failure (Bush
promised to continue policies – had to increase taxes despite promising X in campaign).
• Savings & Loan collapse: deregulation led to the financial environment becoming
increasingly unsafe as organisations took dangerous risks to attract customers – the federal
gov. was forced to pass the Competitive Equality Banking Act (Aug. 1987) – to provide
money to cover money lost by closed S&Ls / Oct 1987 stock market crash – LT negative as
Bush had to sign Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA,
1989) to bail out failing organisations and set up new federal regulators – cost $150B.
• Sharp rise in interest rates: caused by money-supply restriction (gov pressure on Federal
Reserve Board) – hurt industries buying supplies on credit (farming) or requiring long pay-
back loans (construction) – WIDESPREAD as many businesses badly hit across diff fields.
2. THE EXTENT ‘BIG GOVERNMENT’ WAS
REDUCED
OVERVIEW
• Core focus: stripped away interventions – signalled return to 1920s laissez-faire (sig. tax
reductions, hardline anti-union, encouraged financial speculation -> 1987 crash).
• Overall: would produce less federal interference in state and local matters – GOOD because
population suspicion of gov intervention / BAD because less funding for projects, social
welfare and less regulation of business expansionism.
DEREGULATION
• Success: Federal Register was reduced almost by ½ (23,000 pages removed) – deregulation
encouraged business growth – longest run of econ expansion in US history began 1983,
lasted well into 1990s.
Table of Contents
1. THE EFFECT OF REAGAN’S ECON POLICIES ................................................... 1
2. THE EXTENT ‘BIG GOVERNMENT’ WAS REDUCED ........................................... 2
3. NATURE & EXTENT OF SOCIAL CHANGE ......................................................... 3
4. THE EXTENT PRESIDENCY and US POLITICS WERE REVITALISED ..................... 5
5. ESSAY TECHNIQUE ....................................................................................... 6
1. THE EFFECT OF REAGAN’S ECON POLICIES
REAGANOMICS: KEY TERMS
• Neoliberalism: ideology favouring free-market capitalism.
• Supply-side economics: theory that increased productivity and investment would offset the
reduction in federal income caused by tax cuts.
• Trickle-down economics: theory that tax cuts and deregulation for the wealthy = overall
economic growth. Key part of supply-side.
• Deregulation: removal of federal restrictions from businesses.
• Money-supply restriction: to help control inflation (FRB).
POSITIVE
• Taxation aimed to benefit the working class’s personal wealth: Tax Reform Act (1986)
removed the working poor from federal income taxation – tax burden on working mothers
fell by 7.94% as a direct result – BUT many were even hit harder by family credit regulation
changes / increased interest rates which led to increased housing, mortgage, and rent costs
– average mortgage debt increased by 30% from 1980-87.
• Drop in unemployment: 9.6% (1983) -> 5.5% (1988) – BUT the no. in part-time or temporary
work (not earning to full capacity) rose – meaning the figures are less accurate.
• Falling inflation: 13.5% (1980) to 4.8% (1989) – LT (did not reach double-figures by 1996 and
mostly under 5%) – helped restore public confidence in policy.
• Long-term ideological realignment of US politics: by 1990s, Democrats under Clinton
accepted key Reaganite principles – e.g. Welfare reform (1996) ended AFDC, thus cutting
, welfare benefits – changes were highly sustained (shaped policy beyond presidency)
– CONTRADICTS public disagreement with key policies – BUT the 1990s Democrats offered
supported to areas not yet revitalised (e.g. improved some healthcare access for children in
low-income families – Reagan opposed such federal healthcare expansions).
NEGATIVE
• Rich got richer: the Economic Recovery Tax Act (1981) cut the top marginal income tax rate
from 70% to 50% – increased high-earners' disposable income.
• Deficit significantly rose: $59B (1980) -> $208B (1983) – resultant of supply-side economics
failure, rising defence spending, and department cuts being resisted – US became a
significant borrowing nation for the 1st time – WHILE the budget bill aimed to cut deficit
from 22% of GNP (1981) to 19% (1986), it was hasty (significant no. of errors and a footnote
admitting to including $74B unidentified cuts yet to be decided on – long-term failure (Bush
promised to continue policies – had to increase taxes despite promising X in campaign).
• Savings & Loan collapse: deregulation led to the financial environment becoming
increasingly unsafe as organisations took dangerous risks to attract customers – the federal
gov. was forced to pass the Competitive Equality Banking Act (Aug. 1987) – to provide
money to cover money lost by closed S&Ls / Oct 1987 stock market crash – LT negative as
Bush had to sign Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA,
1989) to bail out failing organisations and set up new federal regulators – cost $150B.
• Sharp rise in interest rates: caused by money-supply restriction (gov pressure on Federal
Reserve Board) – hurt industries buying supplies on credit (farming) or requiring long pay-
back loans (construction) – WIDESPREAD as many businesses badly hit across diff fields.
2. THE EXTENT ‘BIG GOVERNMENT’ WAS
REDUCED
OVERVIEW
• Core focus: stripped away interventions – signalled return to 1920s laissez-faire (sig. tax
reductions, hardline anti-union, encouraged financial speculation -> 1987 crash).
• Overall: would produce less federal interference in state and local matters – GOOD because
population suspicion of gov intervention / BAD because less funding for projects, social
welfare and less regulation of business expansionism.
DEREGULATION
• Success: Federal Register was reduced almost by ½ (23,000 pages removed) – deregulation
encouraged business growth – longest run of econ expansion in US history began 1983,
lasted well into 1990s.
