Reagan
KQ1: The Effect of Reagan’s economic policies
AIMS:
- Tax cuts
- Reduce size and role of government (cut $40 b from proposed 1982
federal budget of $740 billion and minimise and eliminate welfare state
arrangements
- Deregulation of state and federal government requirements
INFLUENCES
- Supply side economics
- Economy wasn’t driven by consumer demand but by keeping up
production and encouraging saving and investment
- Trickle down theory
REAGAN’S ACTIONS
In first 3 days
- Put federal government departments on hiring freeze
- Ended depts of freeze on office furnishing
- Sacked White House staff
- Reduced travel expenses by 15%
- Set up new advisory groups
- Cuts made in funding of 211 federal programmes
His budget
- His budget was passed as a whole bill when he met with Congress on
18 Feb 1984
- Usually put through as a series but instead passed it as a whole, which
forced Congress to approve of the whole thing
- Able to do so because
o Administration handled Congress well
o Cultivated a swing voters in the House
o Increased pressure on Congressmen
o Willing to compromise
o High poll ratings due to the attempted assassination in 1981
ECONOMIC POLICIES AIMS
- Cutting the federal deficit
o Accompanied by budget bill + proposal for domestic spending
cut
o Plan put together quickly and included footnote of not yet
identified cuts of $74 billion
o Wanted to reduce federal deficit from 22% of GNP in 1981 to
19% in 1986
- Personal and business tax reductions
o Accompanied by Economic Recovery Tax Act
- Deregulation
, o Wanted to remove federal government control
o Cut expenditure and decrease size of ‘big government’
o Cut backs averaged 29% and included 38% cut in number of
personnel of Consumer Product Safety Commission
- Planned control of Money
o Keep inflation low while expanding economy
o Cuts in domestic spending
o From welfare and federal grant projects set up under LBJ Great
Society
- Increase defence spending
o Decreased federal spending on human resources from 28% in
1980 to 22% in 1987
o Increased defence spending from 23% in 1980 to 28% in 1987
ECONOMIC POLICIES
Omnibus Reconciliation Act
- 1981
- Cut tax reduction for personal tax fro m30% to 25%
- Democrats felt manipulated and saw as fight of control
- WH offered tax concessions to sway Democrats
Economy Recovery Tax Act
- 1981
- Cut marginal income tax band rate by 23% over 3 years
- Reduced highest tax band rate from 70% to 50%
- Reduced smallest tax band rate from 14% to 11%
Tax Reform Act
- 1986
- Increased permissible amount of tax free income
- 6 million removed from tax rolls
(Passing bills was made easier as Reagan had ‘reaganised’ the judiciary and
only needed the support of 26% democrats to pass bills and policies)
EFFECTS OF ECONOMIC POLICIES
Unemployment rates
- 1980: 7.1%
- 1983: 9.6%
Inflation
- 1979: 11.3%
- 1980: 13.5%
- 1982: 6.2%
Personal wealth
- Rich became richer
- Taxes paid were less
- Increased number of millionaires
KQ1: The Effect of Reagan’s economic policies
AIMS:
- Tax cuts
- Reduce size and role of government (cut $40 b from proposed 1982
federal budget of $740 billion and minimise and eliminate welfare state
arrangements
- Deregulation of state and federal government requirements
INFLUENCES
- Supply side economics
- Economy wasn’t driven by consumer demand but by keeping up
production and encouraging saving and investment
- Trickle down theory
REAGAN’S ACTIONS
In first 3 days
- Put federal government departments on hiring freeze
- Ended depts of freeze on office furnishing
- Sacked White House staff
- Reduced travel expenses by 15%
- Set up new advisory groups
- Cuts made in funding of 211 federal programmes
His budget
- His budget was passed as a whole bill when he met with Congress on
18 Feb 1984
- Usually put through as a series but instead passed it as a whole, which
forced Congress to approve of the whole thing
- Able to do so because
o Administration handled Congress well
o Cultivated a swing voters in the House
o Increased pressure on Congressmen
o Willing to compromise
o High poll ratings due to the attempted assassination in 1981
ECONOMIC POLICIES AIMS
- Cutting the federal deficit
o Accompanied by budget bill + proposal for domestic spending
cut
o Plan put together quickly and included footnote of not yet
identified cuts of $74 billion
o Wanted to reduce federal deficit from 22% of GNP in 1981 to
19% in 1986
- Personal and business tax reductions
o Accompanied by Economic Recovery Tax Act
- Deregulation
, o Wanted to remove federal government control
o Cut expenditure and decrease size of ‘big government’
o Cut backs averaged 29% and included 38% cut in number of
personnel of Consumer Product Safety Commission
- Planned control of Money
o Keep inflation low while expanding economy
o Cuts in domestic spending
o From welfare and federal grant projects set up under LBJ Great
Society
- Increase defence spending
o Decreased federal spending on human resources from 28% in
1980 to 22% in 1987
o Increased defence spending from 23% in 1980 to 28% in 1987
ECONOMIC POLICIES
Omnibus Reconciliation Act
- 1981
- Cut tax reduction for personal tax fro m30% to 25%
- Democrats felt manipulated and saw as fight of control
- WH offered tax concessions to sway Democrats
Economy Recovery Tax Act
- 1981
- Cut marginal income tax band rate by 23% over 3 years
- Reduced highest tax band rate from 70% to 50%
- Reduced smallest tax band rate from 14% to 11%
Tax Reform Act
- 1986
- Increased permissible amount of tax free income
- 6 million removed from tax rolls
(Passing bills was made easier as Reagan had ‘reaganised’ the judiciary and
only needed the support of 26% democrats to pass bills and policies)
EFFECTS OF ECONOMIC POLICIES
Unemployment rates
- 1980: 7.1%
- 1983: 9.6%
Inflation
- 1979: 11.3%
- 1980: 13.5%
- 1982: 6.2%
Personal wealth
- Rich became richer
- Taxes paid were less
- Increased number of millionaires
