In the 1970s, the Supply Side Economics was developed as an alternative to the famous Keynesian economic policy (Feldstein 35). The Supply Side Economics promoted reduction in government regulations and tax rates in the argument that it would lead to economic growth. The policy claimed that producers would be able to supply low-priced goods to consumers who in turn had a high disposable income to spend on the goods and services in the market (Feldstein 38-39). Reaganomics was not different from the Supply Side Economics. During Ronald Reagan’s campaign for presidency in the 1980s, he announced a recipe to save the United States economics mess. He promised to cut tax burden, government spending and increased government control as they hampered
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Firstly, Ronald Reagan focused on sound money as he was interested in reducing inflation by reducing money supply. In the 1980s, the US economy experienced rising inflation rates that were hurting the economy and its people. Reducing money supply would deter inflation (Reagan and Frost). Secondly, Reagan vowed to reduce corporate tax, capital gains tax and income tax. He proposed to cut taxes by thirty percent in the first three years of his presidency. The individual income marginal tax rate fell from 70% to 28% while corporate taxes were reduced by 14% from 48% to 34% (Niskanen). However, this policy was offset by an increase in social security tax rates that were legislated in 1977 but would be implemented in the eighties (Niskanen). The third pillar was reducing government regulations as he claimed that federal regulations stifled the growth of the US economy. The price control on domestic gas and oil common in the Nixon-era were eliminated by President Reagan in 1981. Reagan also eradicated controls on long-distance telephone services, cable TV, ocean shipping and interstate bus service (Hulten and Sawhill). Lastly, President Reagan focused on lowering government expenditure. He wanted the federal government to perform the basic functions that were beneficial to the economy rather overspending and making the economy suffer from extensive deficits. Therefore, Reagan promised to cut the federal spending that he saw unnecessary (Reagan and
Firstly, Ronald Reagan focused on sound money as he was interested in reducing inflation by reducing money supply. In the 1980s, the US economy experienced rising inflation rates that were hurting the economy and its people. Reducing money supply would deter inflation (Reagan and Frost). Secondly, Reagan vowed to reduce corporate tax, capital gains tax and income tax. He proposed to cut taxes by thirty percent in the first three years of his presidency. The individual income marginal tax rate fell from 70% to 28% while corporate taxes were reduced by 14% from 48% to 34% (Niskanen). However, this policy was offset by an increase in social security tax rates that were legislated in 1977 but would be implemented in the eighties (Niskanen). The third pillar was reducing government regulations as he claimed that federal regulations stifled the growth of the US economy. The price control on domestic gas and oil common in the Nixon-era were eliminated by President Reagan in 1981. Reagan also eradicated controls on long-distance telephone services, cable TV, ocean shipping and interstate bus service (Hulten and Sawhill). Lastly, President Reagan focused on lowering government expenditure. He wanted the federal government to perform the basic functions that were beneficial to the economy rather overspending and making the economy suffer from extensive deficits. Therefore, Reagan promised to cut the federal spending that he saw unnecessary (Reagan and